Interim Report 2016
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Interim Report 2016 Royal Arctic Line A/S (reg. nr. A/S 209.527) 2 This document is an unofficial translation of the Danish original. In the event of any inconsistencies the Danish version shall apply. Financial Highlights Developments of the group over a two-year period can be described with the following high-lights and key figures for H1 2016: DKK million 2016 2015 Income statement Net revenue 327 306 Total revenue 360 339 Operating profit 21 (17) Net financials (3) 2 Profit for the year before tax 17 (15) Profit for the year 11 (11) Dividend 0 0 Balance sheet Balance sheet total 1,222 1,126 Investments, fixed assets 186 (238) Net working capital 254 83 Long-term debt 236 364 Equity 562 480 Cash flow statement Cash flow from operating activities (131) 12 Cash flow from investment activities 186 (236) Cash flow from financial activities 4 216 Increase/decrease in cash and cash equivalents 59 (8) Cash at year end 294 166 Ratios * Profit margin (%) 6.3 % (5.6) % Return on capital (%) 1.7 % (1.5) % Return on equity (ROE) 2.0 % (2.2) % Solvency ratio (%) 46.0 % 42.7 % Return on invested capital (ROIC) 3.3 % (2.0) % Gearing operating assets 1.1 1.8 Average number of full-time employees 619 658 Pre-tax profit per employee (DK’000) 28 (23) Revenue per employee 0.53 0.47 * Financial ratios are calculated in accordance with the Danish Society of Financial Analysts’ “Recommendations and Financial Ratios 2010” Definition of ratios Net working capital = Current assets – short-term debt Profit/loss before financial income and expenses x 100 Profit margin = Revenue Profit/loss before financial income and expenses x 100 Return on capital employed = Total assets Profit/loss for the year x 100 Return on equity (ROE) = Average equity Equity at year-end x 100 Solvency ratio = Total assets 3 Profit/loss before financial income and expenses x 100 Return on invested capital (ROIC) = Average invested capital including goodwill Invested capital including goodwill Operating asset gearing = Equity at year-end Net working capital is defined as inventories, receivables and other operating current assets net of trade payables and other short-term liabilities. Receivables and corporate taxes due as well as cash and cash equivalents are not included in the net working capital. Management Review, Interim Report 2016 Cargo volume for H1 2016 showed a positive trend, with a The effect of restructuring at the end of 2015 has had a total increase of 21 % compared to the same period in positive outcome for costs in 2016. The sale of Aalborg 2015. Imports to Greenland went up by 24 % to 190,000 m3 Stevedore Company A/S, Nordjysk Kombi Terminal A/S and and export of fish products in particular increased by 22 % Aalborg Toldoplag A/S, the merger of Royal Arctic Bygde- to 114,000 m3. Internally in Greenland, cargo volume rose service into Royal Arctic Line and the liquidation of Arctic by 7 % to 48,000 m3. Almost 17,000 m3 of project cargo Base Supply A/S after taking over Danbor’s share have was carried to Greenland, an increase of 22 %. resulted in a simpler group structure and a reduction in the group’s workforce. Royal Arctic Logistics A/S (RALOG) The increase in cargo volume to Greenland and in project changed its name to Royal Arctic Line Danmark A/S and cargo is due to a high level of construction activity with large activities under RALOG in Greenland were moved to Royal projects such as the new port in Nuuk, the new correctional Arctic Line in Greenland. Freight forwarding, logistics and facility in Nuuk and new housing. The increased volume can removal services in Aalborg were discontinued. This focus also be attributed to Arctic Winter Games, the LIVEX exer- enabled a reduction in administration and removed the cise and an increase in imports of consumer goods, includ- need for a RALOG Group executive board and manage- ing motor vehicles and boats. The positive development in ment team in Aalborg. The total result of this is evident in the fishing industry is believed to have contributed to this the group’s personnel costs for the period which have been increase. reduced by more than 5 %, despite increased activity and general increases in costs. The changes have also had a Since the autumn of 2013, the shipping company has had a positive effect on the other administration costs. It should contract with the Polish shipyard Remontowa to build four also be noted, that the changes have not affected earnings, settlement vessels and an ocean-going, Mary-class vessel. since all the discontinued fields operated at a loss or only The vessels should originally have been delivered in the made marginal profits. spring of 2015, but following renegotiations during the summer of 2015, delivery was moved to 4Q 2015 and 1Q On 30th June 2016, the shipping company took over Air 2016. These delivery dates have unfortunately not been Greenland’s share of the jointly-owned Arctic Umiaq Line kept and only one vessel was delivered in 1H 2016. The (AUL). The alternative, following the end of the government’s uncertainty concerning delivery made it necessary to evalu- deficit guarantee, would have been the closure of AUL. The ate alternative solutions for settlement services and as a shipping company will use its core competences and syner- consequence of this evaluation, it was decided to exploit gies within shipping to ensure passenger traffic with Sarfaq the option to cancel two of the vessels. Negotiations with Ittuk based on the new service-contract-like fixed subsidy the shipyard are taking place regarding the last ship and arrangement with the government and thereby assume regarding reimbursement of the instalments that have been more responsibility for continuing to enhance the efficiency paid on the cancelled ships. These are covered by refund of the service. guarantees. 4 Interim Financial Report Royal Arctic Line’s group result for first half of 2016 shows a Sales and administration costs fell from approx. DKK 28 profit before tax of approx. DKK 17 million and profits after million in 2015 to approx. DKK 22 million in 2016, a reduc- tax and minority interests of approx. DKK 11 million. The tion of almost DKK 6 million. The reduction is mainly due to same period in 2015 showed a loss of approx. DKK 15 consultants’ fees, travel costs, bad debts etc. million before tax and approx. DKK 11 million after tax. Human resource costs have also been affected by restruc- In all, the group’s turnover has increased from DKK 339 turing and cut-backs, primarily in the subsidiary companies. million in 2015 to approx. DKK 360 million in 2016 which, In all, human resource costs have been reduced from ap- taken in isolation, is an increase of approx. DKK 21 million, prox. DKK 150 million in 2015 to approx. DKK 142 million in primarily attributable to increased cargo volume. Included in 2016. the total increase in revenue are a drop in the CAF/BAF of approx. DKK 10 million and a reduction in non-concession Approx. DKK 26m have been entered under other operating revenue of around DKK 5 million. With adjustments for costs. This amount consists of impairment of capitalized these reductions, the total increase in concession turnover expenses regarding the two cancelled vessels which are was approx. DKK 36 million. part of the total building programme that the company implemented some years ago. With regard to costs, the first half of 2016 was characterized by re-organization and consequent savings, but a fall in the Net financing, including a write down of shares in Arctic price of bunkers contributed to lower costs, with a reduc- Umiaq Line A/S to net asset value, constitutes an expendi- tion of approx. DKK 13 million which for the most part has ture of approx. DKK 3.3 million against corresponding been passed on to our customers via the BAF/CAF charge. income in 2015 of DKK 1.9 million. The fall is primarily due a considerable sum concerning dividends, which was not the Costs have fallen in total from approx. DKK 335 million in case in 2016 and to the abovementioned write down of 2015 compared to approx DKK 323 million in 2016, a re- shares. duction of approx. DKK 12 million. Adjusted for other oper- ating costs of approx. DKK 26 million, this constitutes a total The company continues to be financially solid and the reduction in costs of approx. DKK 38 million. evaluation of the cash flow for the period from operating activities includes increased funds tied up in receivables The reduction in costs can be attributed to several things. from outstanding refund guarantees. Ship operating costs fell by approx. DKK 20 million, from approx. DKK 77 million in 2015 to approx. DKK 57 million in Expectations for 2016 2016. The major part of the reduction can be found, as Profits are expected to be on a level with 2015, with the mentioned above, in the fall in bunker costs of approx. DKK chance of a slight improvement, despite the fact that other 13 million. expenditure includes costs for new ships of DKK 25.7 mil- lion that cannot be amortized over 20 years. The greatest uncertainties for the expected result lie in variations in volume for both imports and exports, where volume is expected to be slightly below that of second half of 2015. 5 Management Statement on the Interim Report The Board of Directors and the Executive Board have today We consider the applied accounting policies appropriate for examined and adopted the unaudited interim report of the interim report to provide a true and fair view of the Royal Arctic Line A/S for the period 1st January to 30th Group and the Parent Company’s financial position and June 2016.