Ardmore Shipping Corporation — FY2018 Form 20-F
Reporting period: Fiscal year ended December 31, 2018. This is an annual report, not a standalone Q4 filing; quarterly financial results are not provided clearly in the supplied filing text. Ardmore transports petroleum products and chemicals worldwide with a fleet of mid-size tankers. All figures below are in U.S. dollars unless stated otherwise.
Financial and operating performance
| Metric | FY2018 | FY2017 |
|---|---|---|
| Revenue | $210.2 million | $195.9 million |
| Operating income (loss) | ($9.6 million) | $8.5 million |
| Net income (loss) | ($42.9 million) | ($12.5 million) |
| Basic and diluted EPS | ($1.31) | ($0.37) |
| Cash from operations | $9.4 million | $18.4 million |
| Cash and cash equivalents at year-end | $56.9 million | $39.5 million |
| Senior debt and finance leases | $469.8 million | $446.9 million |
Revenue increased 7%. Operating margin was approximately negative 4.6% and net margin approximately negative 20.4%, calculated from reported figures. Fleet-weighted TCE fell to $11,529 per day from $12,709. Fleet operating costs, including technical management, rose to $6,456 per day from $6,298. On-hire utilization was 99.30%, versus 99.61%.
Total assets were $844.8 million and equity was $346.6 million at year-end. Current assets of $109.5 million exceeded current liabilities of $75.5 million by approximately $33.9 million. Minimum cash required under financing covenants was $23.5 million; the company reported compliance with all financing covenants at December 31, 2018.
Investing cash outflow was $17.6 million and financing cash inflow was $25.6 million. Financing included $209.7 million of finance-lease proceeds, primarily used to repay debt; $184.3 million of debt repayments; and $7.3 million of equity proceeds. No dividends were paid in 2018 or 2017.
Material changes versus FY2017
- Revenue rose $14.2 million, while operating expenses increased 17% to $219.8 million; the company moved from operating profit to operating loss.
- Spot-market revenue days increased to 8,746 from 6,754, while revenue days from time-charter and pool arrangements fell to 1,179 from 2,987. At year-end, all 28 operating vessels were employed in the spot market.
- Commissions and voyage costs rose $25.4 million, reflecting greater direct spot-market activity. The lower TCE rate indicates weaker average fleet earnings despite higher revenue.
- Interest expense and finance costs rose to $27.4 million from $21.4 million, driven by higher average LIBOR, changes in financing structure, and a $2.3 million write-off of deferred finance fees related to refinancing.
- Net loss widened by $30.4 million. It included a $6.4 million loss on the Ardmore Seatrader, classified as held for sale and delivered to its buyer in January 2019.
- Cash from operations declined by $9.0 million. Year-end cash increased, supported in part by sale-and-leaseback financing rather than stronger operating cash generation.
Outlook, commentary and risks
Management said it believed the product and chemical tanker markets were recovering from cyclical lows, citing underlying demand and reduced ordering activity; it also reported that the product tanker market remained weak in 2018, with rates improving markedly in the closing month. The filing gives no quantified earnings or rate guidance. Management stated that working capital, expected operating cash flows and available credit facilities would be sufficient for present requirements.
- Spot exposure: As of January 31, 2019, none of the vessels was on a time charter, leaving earnings and cash flow exposed to volatile spot rates. The company identified tanker oversupply and weak rates as material risks.
- Debt and interest: Borrowings and finance leases are largely LIBOR-linked, and the company had no interest-rate hedges in place. Management estimated a 100-basis-point rate change would alter annual interest expense by about $4.0 million, based on 2018 average balances. Vessels secure the financing, and covenant breaches could trigger acceleration or loss of vessels.
- Regulation and investment: The IMO low-sulfur fuel limit was scheduled to take effect in 2020. As of January 31, 2019, 17 vessels were not yet compliant with the applicable ballast-water treatment standard expected to begin applying from September 2019. Compliance spending could affect costs and vessel availability.
- Asset values and impairment: Management estimated that fleet carrying value exceeded aggregate basic market value by approximately $48 million at year-end. No impairment was recorded after testing estimated undiscounted cash flows; those estimates depend on uncertain future rates, utilization, costs and vessel values.
- Customer concentration: Vitol accounted for more than 10% of revenue in 2018, at $27.0 million. The company also cited counterparty performance, fuel costs, drydocking and operating risks, and environmental liabilities as exposures.
- Other events: On February 1, 2019, Ardmore agreed to sell the Ardmore Seamaster for $9.7 million, with delivery expected in February. The company reported no material pending legal proceedings. Auditors issued unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- Confirm the distinction between the annual FY2018 figures summarized here and any Q4-specific results; the supplied filing does not provide clear standalone quarterly figures.
- Track spot TCE rates, revenue days and operating cash flow, and assess whether the market recovery described by management translated into improved realized earnings.
- Review debt and lease maturities, refinancing terms, covenant headroom and exposure to LIBOR changes, including the impact of sale-and-leaseback transactions.
- Check actual costs and installation progress for ballast-water systems and compliance with the 2020 sulfur rules.
- Verify final proceeds and accounting effects from the Seatrader and Seamaster sales, and monitor vessel market values against carrying values and impairment assumptions.