Our Performance and Business Highlights
Our PB Towage division generated a net loss of US$15.1 million in 2014 reflecting the impact on our revenues of an increasingly competitive landscape. Additionally, the Group's consolidated results were affected by towage-related one-off items including:
- non-cash impairments and provisions of US$70.5 million mainly comprising the US$63.9 million impairment and provision we booked in the first half; and
- business disposal losses of US$7.6 million and related exchange losses of US$12.7 million. These comprised the sale of i) our harbour towage business (US$9.9 million net book loss and US$9.3 million exchange loss) and ii) our interest in the OMSA joint venture (US$2.3 million net book gain and US$3.4 million exchange loss).
Segment Operating Performance
|Offshore & Infrastructure projects||(2.6)||4.1||1.5||21.3||-93%|
|Segment operating performance before overheads||(0.2)||2.3||2.1||29.5||-93%|
|Segment net (loss)/profit||(9.2)||(5.9)||(15.1)||10.5||-244%|
|Segment vessel net book value||126.1||41.5||41.5||181.6||-77%|
|Segment net assets||136.8||106.7||106.7||203.9||-48%|
In the offshore towage sector, the wind-down of the construction of Gorgon and other gas projects resulted in increasing competition for fewer employment opportunities, which reduced the revenue of our fleet.
As announced on 17 November 2014, we sold our 50% interest in the Gorgon-focused OMSA joint venture to our joint-venture partner resulting in an expected US$3.5 million gain on disposal and US$3.4 million non-cash charge from foreign exchange reserves. US$1.2 million of the gain has been reclassified as consultancy fees most of which will arise in 2015. Sale proceeds equivalent to US$9.4 million have been received including an amount of US$6 million which we received in January 2015.
Our barging project for Western Desert Resources (WDR) was restructured resulting in unrecoverable project costs of US$3.5 million in the first half of 2014. WDR entered into voluntary administration in September. The administrator has not yet been able to find a buyer for the business, and so we have booked additional charges of US$5.7 million (based on year-end exchange rates) against the debts owing from WDR and the impaired value of vessels, as described in our announcement dated 11 September 2014.
Our harbour towage activity was affected by reducing port volumes and increased competition in open ports, and our discussion with PSA Marine did not produce an offer for our harbour towage business. This led us to reassess the prospects for PB Towage necessitating a non-cash impairment charge and a provision in our interim results.
We reached agreement in December to sell our harbour towage business to Smit Lamnalco. The transaction has completed, generating in our consolidated 2014 results: (i) a net book loss of US$9.9 million (US$0.9 million higher than previously announced due to the weaker Australian Dollar and the change in working capital at disposal), and (ii) a US$9.3 million non-cash charge from foreign exchange reserves (US$0.6 million higher than previously announced due to the weaker Australian Dollar).
The disposal of the business as a going concern ensured that the staff and crew transferred as an integral part of the transaction and saves us the significant cost of vessel dockings scheduled for this year. The disposal, along with the sale of a tug and a barge to the same buyer, generated proceeds equivalent to US$63 million which we received on completion in February 2015.
Towage Outlook & Strategy
The completion of this harbour towage transaction and other asset sales leaves Pacific Basin with a towage vessel net book value of US$41.5 million including 13 offshore tugs and 6 barges.
We have downsized our New Zealand and Australian offshore towage organisation significantly, with 2015 direct overheads of the remaining towage operations expected to be below US$5 million. Our remaining towage presence is primarily in the Middle East where we have repositioned some of our offshore tugs from Australia and employment prospects are better. However, the outlook for offshore towage remains challenging and is worsened by the fall in oil prices, which is affecting oil and gas projects.
Our remaining fleet in Australasia includes a few offshore tugs still on charter to OMSA and the laid-up vessels released from the defunct WDR project, which we are looking to sell.