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Gulf Marine Services PLC
Annual Report 2023
GULF MARINE SERVICES PLC Annual Report 2023
HIGHLIGHTS
Our Vision
To be the best SESV
operator in the world
2023 Overview
Revenue
US$ 151.6m
(2022: US$ 133.2m)
Adjusted EBITDA
US$ 87.5m
(2022: US$ 71.5m)
Net profit for the year
US$ 42.1m
(2022: US$ 25.4m)
2023 Financial Highlights
— Group net profits of US$ 42.1 million (2022: US$ 25.4 million), reflecting
the strength of the Group’s recovery.
— Adjusted EBITDA
1
increased to US$ 87.5 million (2022: US$ 71.5 million)
driven by an increase in revenue. Adjusted EBITDA margin
5
also
increased to 58% (2022: 54%).
— Net bank debt
2
reduced to US$ 267.3 million (2022: US$ 315.8 million).
Net leverage ratio
3
reduced to 3.05 times (2022: 4.4 times).
— Revenue increased by 14% to US$ 151.6 million (2022: US$ 133.2 million)
driven by increased utilisation on E-Class and K-Class vessels and higher
average day rates across all vessel classes, particularly E-Class.
— Cost of sales as a percentage of revenue
6
reduced by five percentage
points to 54% (2022: 59%).
— Underlying general and administrative expenses
4
as a percentage of
revenue reduced to 7% (2022: 8%).
— Net reversal of impairment of US$ 33.4 million (2022: US$ 7.8 million)
reflecting continued improved market conditions.
— Finance expenses have increased to US$ 31.4 million (2022: US$ 17.7
million) driven by an increase in LIBOR/SOFR rates, the temporary
introduction of both a 250 bps PIK in Q1 as well as the increase on the
margin rate of the loan from 3.1 to 4.0%, both triggered by the net
leverage ratio exceeding 4:1 times as at 31 December 2022. On achieving
net leverage ratio below 4:1 times, PIK ceased to accrue in the second
quarter of the year, and the margin was thereafter reduced by 90 basis
points to 3.1%. This resulted in a reduction in the cost of financing of
340 basis points.
— Impact of changes in the fair value of the derivative increased to US$ 11.1
million (2022: US$ 2.5 million), primarily due to the increase in the
Group’s share price.
Average fleet utilisation
94%
(2022: 88%)
Underlying G&A
expenses as
percentage of revenue
7%
(2022: 8%)
In this report
Strategic Report
Highlights IFC
2023 Financial Highlights IFC
2023 Operational Highlights 1
2024 Highlights and Outlook 1
Non-Financial and Sustainability
Information Statement 1
Chairman’s Review 2
Business Model and Strategic Objectives 4
Section 172 Statement 8
Market Analysis 10
Risk Management 12
Key Performance Indicators 20
Financial Review 22
Long-term Viability Statement 24
People and Values 26
Governance
Chairman’s Introduction 42
Board of Directors 44
Report of the Board 46
Audit and Risk Committee Report 51
Nomination Committee Report 54
Remuneration Committee Report 57
Directors’ Remuneration Policy Report 59
Annual Report on Remuneration 67
Directors’ Report 72
Statement of Directors’ Responsibilities 76
Financial Statements
Independent Auditor’s Report 77
Group Consolidated
Financial Statements 84
Company Financial Statements 127
Glossary 138
Other Definitions 140
Corporate Information 142
Also online at
https://www.gmsplc.com/Results-and-
Presentations.aspx
HIGHLIGHTS
1Annual Report 2023
Strategic Report
2024 Highlights and Outlook
— Adjusted EBITDA guidance is set at US$ 92 million
to US$ 100 million for 2024.
— Target utilisation for 2024 is 95% of which 83%
is already secured.
— Anticipate continued improvement on day rates
as our vessel demand outstrips supply on the
back of a pipeline of opportunities.
— Average secured day rates of over 10% higher
than 2023 actual levels.
— Reversal of impairment recognised with a value
of US$ 33.4 million indicative of continued
improvement of long-term market conditions.
— Group anticipates net leverage ratio to be
below 2.5 times before the end of 2024.
See Glossary.
1 Represents operating profit after adding back depreciation, amortisation,
non-operational items and impairment charges or deducting reversal of
impairment. This measure provides additional information in assessing the
Group’s underlying performance that management can more directly influence
in the short term and is comparable from year to year. A reconciliation of this
measure is provided in Note 31 to the consolidated financial statements.
2 Represents total bank borrowings less cash.
3 Represents the ratio of net bank debt to adjusted EBITDA.
4 Represents general and administrative costs excluding depreciation,
amortisation and other exceptional costs. A reconciliation of this measure is
provided in Note 31 to the consolidated financial statements
5 Represents adjusted EBITDA divided by revenue.
6 Represents reported cost of sales divided by revenue.
7 Represents the percentage of available days in a relevant period during which
the fleet of Self Elevating Support Vessels (SESVs) is under contract and in
respect of which a customer is paying a day rate for the charter of the SESVs.
2023 Operational Highlights
— Average fleet utilisation
7
increased by six percentage points to 94% (2022: 88%) with an improvement
in E-Class and K-Class vessels at 92% (2022: 82%) and 95% (2022: 87%) respectively.
— Average day rates increased to US$ 30.3k (2022: US$ 27.5k) with improvements across all vessel classes,
particularly for E-Class.
— New charters and extensions secured in the year totalled 8.4 years (2022: 19.4 years).
— Operational downtime decreased to 0.8% (2022: 2.2%).
NON-FINANCIAL AND SUSTAINABILITY INFORMATION STATEMENT
The Group has complied with the requirements of section 414C7B of the Companies Act 2006 by including certain non-financial
and sustainability information within the strategic report. We welcome the introduction of LR 9.8.6(8)R, which requires premium listed
companies like GMS, to include TCFD statements in their annual reports. The table below sets out where relevant information can be
found within this report*:
Reporting requirement and policies and standards which govern our approach: Information necessary to understand our business and its impact,
policy due diligence and outcomes:
Environmental matters
• Greenhouse Gas (GHG) Emissions Policy
• Climate change strategy
• Carbon emission reporting
• Task Force on Climate-related Financial Disclosures (TCFD)
• Carbon emission reporting, page 35
• People and values section, page 26
• Carbon emission reporting, page 35
• TCFD, page 26
Employees
• Anti-Corruption and Bribery Policy
• Social Responsibility Policy
• Whistleblowing Policy
• Health and safety standards
• Diversity and equal opportunities
• Employee engagement and welfare
• Ethical practises, page 38
• Ethical practises, page 38
• Ethical practises, page 38, and Audit and
Risk Committee report, page 53
• Health and safety, page 39
• Diversity, page 37, and Directors’ Report, page 72
• Employee engagement and welfare, page 37
• People as at 31 December 2023, Page 38
Human rights
• Disability Policy
• Anti-Slavery Policy
• Code of Conduct Policy
• Employees and policies, Directors’ Report, page 74
• Ethical practises, page 38
• Ethical practises, page 38, Risk management page 17
Principal risks and impact on business activity • Risk management, pages 12
Remuneration Policy • Remuneration Policy, page 59
Description of the business model • Our business model, page 6
Key Performance Indicators (KPIs) • KPIs, page 20
* Further details on policies and procedures are available on our corporate website: www.gmsplc.com
2 Gulf Marine Services PLC
CHAIRMAN’S REVIEW
Group Performance
In 2023, the Group demonstrated
improvement in its financial performance,
attributed to an increase in both utilisation
and average day rates across the fleet.
Average utilisation was up six percentage
points to 94% and the average day rates
across the fleet increased to US$ 30.3k
compared to the previous year's US$ 27.5k.
It is important to highlight that these figures
represent averages for the entire fleet, and
considering some contracts carried over
from previous years at lower rates, the actual
increase for new contracts surpassed the
reported average. This signals a positive
trend in securing new contracts at rates
higher than the fleet's overall average,
contributing to the overall revenue growth.
The improvement in revenue translated into
an improved adjusted EBITDA of US$ 87.5
million (2022: US$ 71.5 million). This
exceeded both our initial guidance range of
US$ 75 million to US$ 83 million, as well as
surpassing the revised guidance of US$ 86
million. This accomplishment highlights the
success of our operational performance in
maximising financial results.
Capital Structure and Liquidity
As a result of our commitment to
deleveraging, the net leverage ratio on
31 December 2023 was reduced to 3.05
times (31 December 2022: 4.4 times), driven
by a reduction in the net bank debt to
US$ 267.3 million (31 December 2022:
US$ 315.8 million) and with improved
EBITDA for the year. Attaining a net leverage
ratio below 4:1 was crucial, allowing us to
limit the number of quarters we were
charged PIK interest to one quarter.
In 2023, our business thrived amid industry tailwinds, showcasing year-over-year growth in
revenues, utilisation, and day rates. We successfully reduced our net leverage ratio to 3.05 times
from 4.4 times as of 31 December 2022. Looking forward, we will continue our deleveraging
journey as we spare no efforts to continue to increase shareholders value.
During the year, we lowered the cost of
financing by 340 basis points. Key benefits of
being below 4:1 times includes GMS meeting
its covenants, being able to pay dividends
and cutting some debt monitoring fees. This
achievement not only highlights our financial
resilience but also positions us to effectively
address other challenges, as highlighted
in the risk management section, while
advancing on our deleveraging journey.
Concurrent with our deleveraging efforts
aimed at shifting value from lenders to
shareholders, we are initiating plans to
reward our shareholders. Recently approved
by the Board, our residual dividend policy
seeks to strike a balance between investing
in the business and providing returns to
shareholders. Management is currently
evaluating the timing for its implementation,
a consideration that has only recently come
to the forefront.
The Group is in the process of refinancing its
term facility in advance of the bullet payment
becoming due in June 2025. Management’s
ongoing discussions with various lending
entities are aimed at securing terms that
align with our long-term strategic objectives,
ensuring continued financial stability. We are
optimistic about the outcome of these
negotiations and will keep shareholders
updated as we navigate this pivotal phase in
our financial planning. The Board expresses
confidence in our ability to secure favourable
terms that will contribute to the sustained
success and growth.
Governance
In August 2023, we announced the
departure of Rashed Al Jarwan, a non‐
executive Director of the Group, who retired
from the Board. I extend my sincere gratitude
to Rashed for his contributions during the
pivotal period since joining the Board in
2020. Following Rashed’s retirement, we
were pleased to welcome Haifa Al Mubarak
who joined the Board as an independent
non‐executive Director in October 2023.
Haifa brings over 40 years of oil and gas
experience to the business and also reflects
our efforts to create a more representative
Board, demonstrating our commitment to
promoting diversity in all aspects of our
organisation. I look forward to continuing to
benefit from Haifa's insights and expertise.
As a Board, we have continued to emphasise
the development of effective risk
management and internal control systems,
including regular audits and reporting to
ensure accountability and transparency.
Demonstrated by over 50 meetings with
investors and other stakeholders, we have
open lines of communication on relevant
information. We conducted sessions on
transparent and ethical business practices,
including a Code of Conduct review for
employees and stakeholders, and ensuring
compliance with relevant regulations
and laws. This is an example of our
continuous commitment towards
environmental, social, and governance
(ESG) initiatives, including sustainability
practices and community engagement.
Committed
to Maximising
Shareholder Value
3Annual Report 2023
Strategic Report
change is now integrated into our enterprise
risk assessment process. Risk management
workshops are held at least annually and
attended by the Executive Chairman and
other Directors. Full details are provided in
our TCFD report on page 26.
Outlook
The offshore industry is dynamic, and today
we are more agile to adapt and ensure
sustained relevance in the future. I take pride
in our successful deleveraging efforts, which
along with our much improved operational
and financial performance, underscores our
commitment to enhancing shareholder value.
Concurrently, we are actively exploring
avenues for future growth, aligning ourselves
with emerging trends and positioning for
sustained success.
Given the current high levels of utilisation
secured, combined with higher day rates,
the Group expects the financial performance
to continue to improve and reiterates its
adjusted EBITDA guidance for 2024
between US$ 92 million to US$ 100 million.
This reflects our confidence in sustaining
positive momentum.
Finally, I would like to thank our employees,
shareholders and other stakeholders for their
continued support in achieving the Group’s
ongoing success.
Mansour Al Alami
Executive Chairman
03 April 2024
Commercial and Operations
The Group successfully secured four
new contracts and extended four existing
ones, totalling 8.4 years in aggregate (2022:
19.4 years in aggregate). Our operational
performance also demonstrated continued
improvement, as evidenced by a reduction in
operational downtime to 0.8%, compared to
2.2% in 2022.
Safety
The Group improved its Lost Time Injury Rate
(LTIR) going from 0.1 in 2022 to zero in 2023.
However, two medical treatment cases were
recorded taking the Total Recordable Injury
Rate (TRIR) from 0.1 in 2022 to 0.18 in 2023.
These levels continue to be below industry
average. We continue to look at areas of
improvement in our systems and processes
and engaging our employees to ensure that
our offshore operations continue to be as
safe as possible in line with the expectations
of our customers and stakeholders.
Task Force on Climate-Related
Financial Disclosures
We continue to comply with LR 9.8.6(8)R
requirements by including climate-related
financial disclosures consistent with Task
Force on Climate related Financial
Disclosures (TCFD) recommendations and
recommended disclosures. The TCFD
recommendations focus on how companies
respond to the risks and opportunities
associated with climate change. Consistent
with the recommendations, a climate
scenario analysis was used to understand
the potential climate-related transition and
physical risks to our operations over the
short, medium, and long term. Climate
4 Gulf Marine Services PLC
BUSINESS MODEL AND STRATEGIC OBJECTIVES
Our business model revolves around providing a practical and cost-effective
solution to customers in the offshore oil, gas, and renewable energy sectors.
We achieve this through a fleet of self-propelled Self-Elevating Support Vessels
(SESVs), designed to meet the specific needs of our clients in challenging
marine conditions.
Prioritising Health,
Environment and Quality
Safety remains our foremost priority,
supported by a resilient Health, Safety,
Environment and Quality (HSEQ)
management framework and a
pervasive safety-centric culture.
Meeting Client Demands
for Efficiency and
Cost Reduction
As clients increasingly prioritise vessels
that reduce costs and improve operational
efficiencies for their projects. Our fleet of 13
SESVs, with an average age of 13 years, is
designed to meet the operating standards
our clients require.
Empowering a Diverse
Workforce for Success
Our workforce, rich in diversity and global
experience, personifies excellence in the
SESV sector. GMS cultivates talent to
unmatched standards by empowering
individuals to grow, develop and realise
their utmost potential, thereby driving
success for our organisation.
Leveraging Flexibility
for Market Resilience
GMS operates across various industries and
geographical regions, leveraging the
adaptability of its fleet to deliver highest
quality services to a diverse clientele. This
strategic flexibility enables us to maintain a
market presence across different business
sectors and geographies, positioning us as a
resilient entity in times of fluctuating demand.
Operates a Fleet of
Self-propelled SESVs
GMS owns and operates a fleet of SESVs,
which are chartered to our clients, providing
cost-effective and safe offshore support
solutions. With an average age of 13 years,
the fleet is well positioned within the market.
GMS currently supports oil, gas and
renewable energy clients in the Arabian
Peninsula region and North-West Europe.
Delivering
Operational Excellence
GMS is dedicated to achieving excellence
across all operational activities, providing
clients with a comprehensive suite of services
aimed at enhancing operational efficiency
while delivering time and cost benefits. Our
commitment to maintaining excellent safety
standards not only safeguards the well-being
of clients, employees and contractors but also
minimises our environmental footprint.
To align with the in-country value
requirements mandated by several of our
Arabian Peninsula-based clients, GMS
collaborates closely with local suppliers.
This strategic partnership maximises
in-country expenditures, thereby fostering
economic growth within the region.
Additionally, we encourage our partners to
similarly prioritise in-country spending within
their own supply chains whenever feasible.
Our Resources Our Operations
Drives Performance
Through Reportable Metrics
GMS assesses productivity across the Group
by ensuring reportable metrics are clear,
aligned, communicated and regularly
reported. The annual Short-Term Incentive
Plan incorporates a scorecard focused
on performance, and thereby productivity,
for all employees.
5Annual Report 2023
Strategic Report
Shareholders
Generating higher and sustainable profits
through improving utilisation and charter day
rates, reduction in operational cost base.
Transfer of value to shareholders via improved
capital structure through continued
deleveraging of the Group’s balance sheet.
Customers
GMS delivers services that prioritise safety,
reliability and cost-effectiveness, empowering
clients to optimise their operations. Our
commitment to safety highlights our
exceptional track record in consistently
providing clients with market leading services.
People
A dedicated workforce committed to
performance and well-being flourishes within
an environment characterised by positivity
and openness. This engaged workforce
remains a cornerstone of our operations,
fostering a culture of excellence and
continuous improvement.
Suppliers
Long-term partnerships focusing
on local content.
What We Deliver
6 Gulf Marine Services PLC
Strategic Priority What it Means 2023 Progress Future Priorities
#1
Revenue
Maximisation
Increase charter day rates driven by the improving
supply/demand dynamics in our core markets.
Maximise utilisation through best-in-class operations.
Continually enhance operating capability while offering
new and improved offshore support solutions, to
anticipate client needs.
Utilisation increased by six percentage points to 94% from the
2022 figure of 88%. This continues to be the highest level of
utilisation achieved since 2014.
Average day rates across the fleet increased by 10%
compared to the previous year’s increase of 7%.
New contracts and extensions secured in the year totalled
8.4 years (2022: 19.4 years).
Focus on local content requirements demanded by our clients across
the Arabian Peninsula region to ensure we are well placed to secure
new contracts.
Maintaining strong relationships with our core customers to win
and secure contracts that add to our backlog.
Renegotiate contractual terms when existing contracts come to an end with
the precursor to day rate improvement and longer-term contracts.
Continue to explore new opportunities in other markets.
#2
Cost management
Deliver safe and cost-effective operations.
Optimise capital expenditure.
Focused efficiencies in operational costs.
Total Recordable Injury Rate (TRIR) slightly increased from
0.1 in 2022 to 0.18 in 2023 which continues to remain below
industry average.
Limiting capital expenditure to maintaining the fleet to a level
that ensures safe operations and meets client requirements.
The adjusted EBITDA has improved to US$ 87.5 million
(2022: US$ 71.5 million), through cost control measures.
Ensure key safety Key Performance Indicators (KPIs) are monitored
frequently to allow safe and reliable operation of fleet.
Managing inflationary pressures through negotiating terms with current
key suppliers.
Focus on maximising cash generation with a continued emphasis on
reducing our leverage.
#3
Working capital
management
Improved cash management across the Group to help
reduce debtor days whilst improving credit terms with
our key suppliers.
Maximise cashflows from operations to help reduce
leverage levels.
Reduced leverage levels from 4.4 times at the end of 2022
to 3.05 times at the end of 2023, through effective working
capital management as highlighted by a reduction in the
trade debtors to US$ 30.6 million (2022: US$ 33.2 million).
Group has continued to deleverage by making repayments
of US$ 56.2 million (2022: US$ 51.4 million) towards its
borrowings, of which, US$ 26.2 million (2022: US$ 3.8
million) were over and above its contractual obligations.
A total of US$ 33.7 million (2022: US$ 3.8 million) was
prepaid during 2023.
Closely monitoring the ageing of receivables to ensure sufficient
liquidity to meet our operational and banking requirements.
Make additional prepayments towards the bank loans to
continue to deleverage, thus reducing the finance cost.
Refinancing its term facility in advance of the bullet
payment becoming due in June 2025.
#4
Controls
Maintain an efficient and effective control environment.
Develop and maintain a robust internal controls manual.
Equip our staff with greater skills to deliver
quality performance.
Monitoring the implementation of controls with close
exception reporting.
The Group has to comply with International Maritime
Organization (IMO) regulations and during the year
undertook Internal Audits Marine training in ISM, ISPS and
MLC to fulfil IMO compliance. As such, all offshore staff have
continued to comply with the training requirements to fulfil
our accreditation.
Internal auditors conducted audits of the HR and IT
functions during the year. The IT audit is at its final stages
with observations being discussed with the IT team, while
the HR audit report has been completed. The report
identified control weaknesses, which were assessed as not
representing significant risks.
Maintaining an internal control environment to appropriately mitigate the
operating risks inherent in the sector, whilst allowing the Group to achieve its
strategic objectives and deliver value to shareholders.
Monitoring progress of the internal audit and implementing
required controls to ensure a robust controls environment.
BUSINESS MODEL AND STRATEGIC OBJECTIVES
continued
Securing Sustainable Value
Creation for Shareholders
Management's primary aim is to deliver resilient shareholder value by swiftly and efficiently
deleveraging the Group. The following strategic priorities are entirely geared towards
accomplishing this key objective.
7Annual Report 2023
Strategic Report
Strategic Priority What it Means 2023 Progress Future Priorities
#1
Revenue
Maximisation
Increase charter day rates driven by the improving
supply/demand dynamics in our core markets.
Maximise utilisation through best-in-class operations.
Continually enhance operating capability while offering
new and improved offshore support solutions, to
anticipate client needs.
Utilisation increased by six percentage points to 94% from the
2022 figure of 88%. This continues to be the highest level of
utilisation achieved since 2014.
Average day rates across the fleet increased by 10%
compared to the previous year’s increase of 7%.
New contracts and extensions secured in the year totalled
8.4 years (2022: 19.4 years).
Focus on local content requirements demanded by our clients across
the Arabian Peninsula region to ensure we are well placed to secure
new contracts.
Maintaining strong relationships with our core customers to win
and secure contracts that add to our backlog.
Renegotiate contractual terms when existing contracts come to an end with
the precursor to day rate improvement and longer-term contracts.
Continue to explore new opportunities in other markets.
#2
Cost management
Deliver safe and cost-effective operations.
Optimise capital expenditure.
Focused efficiencies in operational costs.
Total Recordable Injury Rate (TRIR) slightly increased from
0.1 in 2022 to 0.18 in 2023 which continues to remain below
industry average.
Limiting capital expenditure to maintaining the fleet to a level
that ensures safe operations and meets client requirements.
The adjusted EBITDA has improved to US$ 87.5 million
(2022: US$ 71.5 million), through cost control measures.
Ensure key safety Key Performance Indicators (KPIs) are monitored
frequently to allow safe and reliable operation of fleet.
Managing inflationary pressures through negotiating terms with current
key suppliers.
Focus on maximising cash generation with a continued emphasis on
reducing our leverage.
#3
Working capital
management
Improved cash management across the Group to help
reduce debtor days whilst improving credit terms with
our key suppliers.
Maximise cashflows from operations to help reduce
leverage levels.
Reduced leverage levels from 4.4 times at the end of 2022
to 3.05 times at the end of 2023, through effective working
capital management as highlighted by a reduction in the
trade debtors to US$ 30.6 million (2022: US$ 33.2 million).
Group has continued to deleverage by making repayments
of US$ 56.2 million (2022: US$ 51.4 million) towards its
borrowings, of which, US$ 26.2 million (2022: US$ 3.8
million) were over and above its contractual obligations.
A total of US$ 33.7 million (2022: US$ 3.8 million) was
prepaid during 2023.
Closely monitoring the ageing of receivables to ensure sufficient
liquidity to meet our operational and banking requirements.
Make additional prepayments towards the bank loans to
continue to deleverage, thus reducing the finance cost.
Refinancing its term facility in advance of the bullet
payment becoming due in June 2025.
#4
Controls
Maintain an efficient and effective control environment.
Develop and maintain a robust internal controls manual.
Equip our staff with greater skills to deliver
quality performance.
Monitoring the implementation of controls with close
exception reporting.
The Group has to comply with International Maritime
Organization (IMO) regulations and during the year
undertook Internal Audits Marine training in ISM, ISPS and
MLC to fulfil IMO compliance. As such, all offshore staff have
continued to comply with the training requirements to fulfil
our accreditation.
Internal auditors conducted audits of the HR and IT
functions during the year. The IT audit is at its final stages
with observations being discussed with the IT team, while
the HR audit report has been completed. The report
identified control weaknesses, which were assessed as not
representing significant risks.
Maintaining an internal control environment to appropriately mitigate the
operating risks inherent in the sector, whilst allowing the Group to achieve its
strategic objectives and deliver value to shareholders.
Monitoring progress of the internal audit and implementing
required controls to ensure a robust controls environment.
Securing Sustainable Value
Creation for Shareholders
8 Gulf Marine Services PLC
SECTION 172 STATEMENT
How GMS Engages
with Stakeholders
Stakeholder
Objectives
How did Engagement Support
Board Decision Making?
Shareholders
GMS shareholders are institutional investors and private
shareholders located across the world. We recognise
the importance of the activities and outcomes of
stewardship and regularly engage with investors on
our financial performance, strategy and business
model and our Environmental, Social and Governance
(ESG) performance.
The Executive Chairman holds regular meetings with
the representatives of major shareholders and an update
on these meetings is provided at each of the main
Board meetings.
GMS’ website has a dedicated section with a specific
email address for all shareholders to use, which is
monitored daily, and all emails receive a response.
There is also an investor presentation that accompanies
the full and half-year results, which shareholders can
dial into. Our Annual General Meeting (AGM) provides
another forum for our shareholder base to engage.
GMS also has an active social media presence on
LinkedIn and posts updates on major developments
in the Group.
Two of our non-executive Directors are nominated by
our two largest shareholders.
Refer to the Board Report on page 46 regarding
protocols to manage information shared with the
Group’s non-independent non-executive Directors.
Investors are interested in
a broad range of matters
including, share price,
financial and operational
performance, strategic
execution, management
of corporate risk and
capital allocation
(including bonus
payments for
management and
returns for investors)
and ESG performance
of the Group.
The Directors of GMS regularly received reports
on the Group’s major shareholders from the registrar.
They also received reports on engagements
with shareholders.
The Executive Chairman engaged with major
shareholders throughout the year. The Executive
Team interacted with shareholders on over 40
occasions during 2023.
The Board continued to have input to the Group’s
communication with its shareholders. There continued
to be a regular flow of trading updates including all
major contract wins and information posted on the
Group’s website and social media to provide
transparency to all current shareholders in the business
and any potential investors.
The Board continued to engage with the major
shareholders as a special resolution was not
passed at the AGM in 2023. The Board hopes
that the shareholders would support all the resolutions
recommended and proposed at the AGM in 2024.
Clients
GMS works closely with its customers to deliver an
industry-leading offering. The Board is informed of
all tender activity at each Board meeting. Senior
Management engage regularly with clients via face-to-
face meetings to ensure GMS fully understands
operational performance; client service and safety are
the key drivers of meetings. Through this engagement,
GMS learns about, immediate and ongoing tender
requirements and future demand, and changes to
strategy and/or technical or operational requirements.
This informs critical business decisions associated
with fleet deployment, prioritising future business
development activity and resource and local content
investment (HR, Procurement and Local Partnerships).
It also helps with overhead sizing and allocation and
capital expenditure planning, while meeting client needs.
Clients are mainly
concerned with ensuring
value for money in the
services received.
They also wish to ensure
that services meet their
specifications and are
delivered efficiently
and safely.
The Board combines strong relationships with key
clients in the Arabian Peninsula region and a high level
of industry knowledge. Engagement with clients was
crucial in providing the information the Board needed to
drive the Group’s long-term plans, which was key to the
long-term delivery of GMS’ strategy.
Engagement with our clients helped the Group to make
informed decisions on capital expenditure, which remain
limited to keeping vessels in class and equipment in
good condition to meet specific client requirements.
GMS’ focus over the coming years is on delivering a
sustainable capital structure by deleveraging the
balance sheet. Once this is sufficiently progressed,
capital allocation and resources will be reviewed
assuming resources are available. Refer to the
Financial Review for more details.
The Directors of Gulf Marine Services Plc, as individuals and together, consider that they have acted in a way that would most likely promote
the success of the Group and for the benefit of its members as a whole and its other stakeholders. The key matters considered by the Board
include the following:
• the need to act fairly between members of the Group;
• the need to maintain the Group’s business relationships with suppliers, customers and other stakeholders;
• the interests and safety of the Group’s employees;
• the impact of the Group’s operations on the community and the environment;
• the desirability of the Group maintaining a reputation for high standards of business conduct; and
• the likely consequences of any decision in the long term.
The Board has always taken into account its obligations under Section 172(1) of the Companies Act 2006 (Section 172), including during the
year, in line with current reporting requirements. Key decisions have been specifically confirmed at each Board meeting to take into account
these matters. This has been supplemented by the roles of the individual Directors giving due regard and consideration for each element of
the Section 172 requirements. The Board has always maintained an approach to decision-making that promotes the long-term success of the
business and is in line with the expectations of Section 172. The disclosures set out here demonstrate how GMS deals with the matters set
out in Section 172(1)(a) to (f). Cross-references to other sections of the report for more information are also included.
9Annual Report 2023
Strategic Report
How GMS Engages
with Stakeholders
Stakeholder
Objectives
How did Engagement Support
Board Decision Making?
Lenders
GMS continued to have extensive interaction with its
lenders and respective teams. Capital structure is
always kept under consideration in any decision making
to ensure that the Group stays within its covenants.
Lenders are primarily
concerned with ensuring
that the capital value
of their loans are
protected, and that
interest is paid. They also
wish to ensure that other
material provisions of the
lending agreements are
complied with.
The increase in adjusted EBITDA meant that the Group
continues to successfully repay significant amounts of
principal and this resulted in a reduction in leverage to
3.05 times (2022: 4.4 times). This was one of the main
priorities for the Board, which Management
successfully delivered.
Refer to the Financial Review on pages 22 to 24 for
further details.
Suppliers
GMS’ supply chain is fundamental to the ability to
deliver reliable operations. The Group has a strategy
of long-term partnerships with key suppliers based on
regular and transparent communication with suppliers
through site visits, calls and surveys. The Group
continuously reviews its existing supply chain which
ensures continuity of supply.
The Board received regular updates on this during
the year.
Suppliers are primarily
focused on fair and timely
payment terms as well a
collaborative approach
and open terms of
business.
GMS works to maximise
in-country spending,
which is a requirement
from National Oil
Company (NOC) clients.
The Board was given regular presentations and
updates on the Group’s procurement activities
including development of key focus areas for
procurement in future. The Group continues to look
into cost savings initiatives and maximising in-country
value and renegotiate the terms of major supply
contracts to improve efficiency.
People
Our employees are our most important asset.
They want to work in an environment where they are
safe and respected, and have the opportunity to learn,
reach their potential and develop successful careers in
a Company they can be proud of. The quality of the
workforce is crucial to the success of GMS. We regularly
communicate with both on and offshore staff via weekly
email updates, meetings and video communication from
the Executive Chairman to all offshore staff.
All non-executive Directors have visited our offices in
Abu Dhabi and engaged with staff during their visit.
Lord Anthony St John of Bletso is our dedicated
workforce engagement non-executive Director. An end
of year celebration event was held at the Abu Dhabi HQ
office to celebrate the collective wins as a team in 2023.
During this event, long service employees were also
recognised with awards for 10, 15, 20 and 25 years
of service.
Employees are
concerned with job
security, opportunities
for training, a culture of
fairness, inclusion and
communication,
compensation
and benefits.
Regular updates on Health and Safety and
HR activities and its future plans are provided
at main Board meetings.
Refer to page 37 for more details on
engagement with our people.
10 Gulf Marine Services PLC
MARKET ANALYSIS
Markets
Arabian Peninsula Region
In the Arabian Peninsula region, Offshore Oil
and Gas (O&G) production is expected to
increase over the next decade, driven by a
planned 29% increase in production capacity.
Self-Elevating Support Vessels (SESV’s)
demand across the Arabian Peninsula region
was at c.21,300 vessel days in 2023, an
increase by 22% year-on-year, with an
implied utilisation of 82%. Over the next five
years, demand across the Arabian Peninsula
markets is expected to grow rapidly and
reach a height of 37,930 vessel days by 2027.
This growth would effectively exceed
available supply, leading to exploration and
production contractors across the region to
attempt to lock in capacity early to secure
SESVs to support committed field
development work. The high utilisation rates
spurred several new build orders in 2022,
which were fulfilled in 2023, consequently
increasing the overall number of SESVs in
the region. Additional orders for SESVs were
placed in 2023, with anticipated delivery
dates in 2024, however a portion of these
new builds are earmarked for contracts
already awarded. Increasing supply tightness
as well as the importance of SESVs to
support major offshore field developments
has seen a uptick in day rates over the past
few years. While day rates averaged US$ 30k
over the 2017-2021 period, new tenders in
2023 drove the average rates to just over
US$ 44k.
In 2023, the Arabian Peninsula region
revenue contributed 91% (2022: 89%) of the
total Group revenue. During the year, the
Group secured eight new contracts and
extensions to current contracts with a total
duration of 8.4 years. The Arabian Peninsula
region saw an increase in fleet average
utilisation from 88% to 95%, driven by the rise
in demand for E-Class and K-Class vessels.
As of 31 December 2023, GMS operates
three vessels in Qatar, three vessels in KSA
and six vessels in the UAE.
North-West Europe
Offshore wind farms in Europe remains
a pivotal market for GMS across both
operation and maintenance sectors, as
well as in supporting the construction
and commissioning of new wind farms.
Anticipated overall activity is projected to
average 9,150 vessel days annually from
2024 to 2027, with c.40% yoy surge
expected in 2027-2028.
In 2023, the North-West Europe region
revenue contributed 9% (2022: 11%) of the
total Group revenue. GMS currently has one
of its large class vessels working in Europe
engaged in the ongoing maintenance and
operation of existing windfarms. The vessel
is engaged on a long-term contract with
options extending up to 2029.
Market Outlook
Global energy demand is the principal
indicator of all O&G related investments,
driving support for hydrocarbon exploration,
and production and consequently demand
for supply chain services such as SESVs.
The BP Energy Outlook 2023 forecasts
primary energy demand to increase by c.13%
between 2020-2040. The Arabian Peninsula
region is expected to provide the largest
incremental demand of 4.8 mmboe in
offshore O&G production – growing 29%
from 16.6 mmboe to 21.4 mmboe over the
next decade. In addition, it is likely that the
offshore wind industry investment will
generally exceed that of O&G for the
foreseeable future accounting for c.45% of
total offshore energy spending expected
over the 2024-2027 period.
11Annual Report 2023
Strategic Report
E-Class
S-Class K-Class
Map legend
KSA
Enterprise
Kudeta
Sharqi
Qatar
Endurance
Evolution
Kikuyu
Europe
Endeavour
UAE
Kawawa
Kamikaze
Keloa
Pepper
Scirocco
Shamal
12 Gulf Marine Services PLC
Senior Management
The Executive team implements the risk management process from risk identification
to management and mitigation.
RISK MANAGEMENT
Ensuring the effective identification, management and mitigation of business risks, as well as
the pursuit of opportunities, are pivotal for achieving the Group’s strategic goals. A robust risk
management system is established to facilitate the identification, analysis, evaluation, mitigation
and continuous monitoring of risks, as outlined in the framework below.
Board of Directors
The Board has overall responsibility for the Group’s strategy and ensuring effective risk management.
Audit and Risk Committee
Responsibilities include reviewing the Group’s internal control and risk management systems
as well as monitoring the effectiveness of the Group’s internal audit function.
Internal Audit
There are clear
reporting lines from
the internal audit
function to the Audit
and Risk Committee
and the
Executive team.
The framework incorporates the policies,
culture, organisation, behaviours, processes,
systems and other aspects of the Group that,
when combined, facilitate its effective and
efficient operation. Business risks across the
Group are addressed in a systematic way
through the framework, which has clear lines
of reporting to address the management of
risks, and improvement of internal controls
were considered appropriate.
The Board has overall responsibility for
ensuring that risks are effectively managed.
As an integral part of their regular risk
assessment procedures, the Board evaluates
the relevance of Environmental, Social and
Governance (ESG) issues to GMS'
operations. The Audit and Risk Committee
oversees the evaluation of the Group's
internal control system and procedures.
Following its assessment, the Audit and Risk
Committee has determined that GMS'
operational internal control system, including
risk management practices, remains
effective for day-to-day operations.
The Audit and Risk Committee is responsible
for reviewing the effectiveness of the
Group’s financial controls and the financial
reporting process, which include the timely
identification and resolution of areas of
accounting judgement, and the quality
and timeliness of papers analysing
those judgements.
The Audit and Risk Committee reviewed
control deficiencies identified during the prior
year end and are satisfied that management
have improved areas where control
deficiencies were identified. There were no
significant weaknesses identified by the
Board as part of their review during the year.
The enterprise risk assessment process
begins with identifying risks through quarterly
reviews by individual departments. This
contains an assessment of the principal risks
facing the Group. Mitigating controls are
then identified.
The departmental reviews are then
consolidated by the Executive team to
identify an overall heatmap. Emerging risks
are also identified through these discussions
and included in reporting to the Audit and
Risk Committee, which reviews the risk
profile at least quarterly. The Board reviews
the risk profile formally on an annual basis
(see page 52 for details of the Board’s
actions as part of their review).
13Annual Report 2023
Strategic Report
IMPACT
LIKELIHOOD
K3
K4
K5
K11
K8
K10
K6
K7
K1
K2
K1 Utilisation
K2 Inability to secure appropriate
capital structure
K3 Arabian Peninsula region local
content requirements
K4 Inability to deliver safe and
reliable operations
K5 Liquidity and covenant compliance
K6 People
K7 Legal, economic and political conditions
K8 Compliance and regulation
K9 COVID-19 pandemic (Removed in 2023)
K10 Cyber-crime – security and integrity
K11 Climate change
Residual Risk Heat Map
14 Gulf Marine Services PLC
Principal Risks and Uncertainties
Future results are uncertain due to factors beyond our control. Operating vessels
offshore involves varying levels of uncertainty influenced by weather conditions, sea state and
navigational hazards. Despite advanced technology and experienced crews, there’s always
some uncertainty. Our operations follow strict safety regulations to minimise risks.
It's important to plan and remain adaptable as circumstances change, impacting our
results and investment value. The principal risks facing the Group in the next five years,
along with mitigation measures, are outlined below, though not exhaustive.
Risk Mitigating Factors and Actions
1 Utilisation
Utilisation levels may be reduced by the
following underlying causes:
• Customer concentration leading to
potential changes in our contract profile
and pipeline. Risks of potential loss of
some clients to competitors.
• ADNOC continues to expand its fleet
thus controlling the UAE market.
• Fleet capabilities may no longer match
with changing client requirements.
Clients may increase the standard
specification required for a Self-Elevating
Support Vessel (SESV), which might require
the Group to upgrade some of its fleet to
be compliant.
Strengthening Client Engagement and Foster Loyalty
The Group maintains strong client relationships through consistent communication and
a demonstrated history of delivering secure and reliable services. GMS has formulated
strategies for fleet upgrades aligned with anticipated client needs in the future. These
initiatives aim to craft commercial proposals that foster loyalty, encouraging customers
to commit to longer-term contracts involving a greater utilisation of vessels
through incentivisation.
Diversification Strategies Across Business Segments and Geographies
The Group actively seeks opportunities to optimise vessel utilisation and consistently
evaluates avenues for diversifying its market presence by expanding its client portfolio.
Customisation Capabilities for Client Needs
The Group is capable of modifying assets in order to satisfy client requirements.
Further, GMS’ vessels are adaptable to compete for a wider market share, enabling
the Group to maximise the utilisation level and charter day rates.
To comply with LIMS (Lifting Integrity Management System) the Group has involved
engineering companies to perform technical studies on existing equipment to extend
the life of equipment (time limited).
RISK MANAGEMENT
continued
Key
Revenue Maximisation
Cost Management
Working Capital Management
Controls
15Annual Report 2023
Strategic Report
Risk Mitigating Factors and Actions
2 Inability to Secure an Appropriate Capital Structure
Poor financial performance, such as declining
revenues or profitability, can make it more
difficult for the Group to attract financing or
negotiate favourable terms.
A low share price may prevent GMS from
raising sufficient levels of equity to recapitalise
the business.
As warrants were issued in January 2023, this
may impact the Group’s ability to attract new
investors as there would be a potential dilution
if these warrants are exercised.
Focus on Deleveraging
Conscious focus on deleveraging has resulted in reduction in leverage levels to 3.05 times
compared to 4.4 times in 2022. Group anticipates net leverage ratio to be below 2.5 times
before the end of 2024.
Investors Relationship Management
Maintain strong investor relations and ensure timely dissemination of Regulatory News
Service (RNS) updates.
Increased share price
The share price has increased from 4.65 pence as of 31 December 2022 to 14.5 pence as of
31 December 2023, reflecting investors’ confidence in the Group’s business strategy.
3 Arabian Peninsula Local Content Requirements
Arabian Peninsula region National Oil
Companies (NOCs) have local content
requirements as part of their tender
processes, which varies for each country,
designed to give preference to suppliers that
commit to improving their local content and
levels of spend and investment in-country.
This may prevent GMS from winning new
contracts or lead to financial loss and/or a
reduction in profit margins on existing
contracts, which will ultimately impact
operating cash flows and net profitability.
Local Content Requirements
GMS fully embraces local content regulations, reflecting its extensive experience
in serving NOCs in the Arabian Peninsula region. The Group maintains offices in Arabian
Peninsula region countries where it operates, actively overseeing its supply chain to prioritise
the enhancement of local content. When required, GMS collaborates with local partners in
targeted markets to strategically position itself for project acquisition. Notably, during the
tendering phase, companies with superior audited local content scores are typically offered
first refusal to match any lower bids.
Market Knowledge and Operational Expertise
The Group has well-established long-term relationships in the Arabian Peninsula region
which provides an understanding of clients’ requirements and operating standards.
Local Content
The Group continues to explore ways to improve its local content scores in all the regions in
which it operates. We are tracking the scores in two jurisdictions.
4 Inability to Deliver Safe and Reliable Operations
Geo-political events or pandemic may impact
ability to safely operate assets due to
restricted crew travel in certain countries.
The Group may suffer commercial and
reputational damage from an environmental
or safety incident involving employees, visitors
or contractors.
Inadequate preparation for situations, such
as sudden equipment failure, inability to fulfil
client requirements and unpredictable weather
could have a negative impact on the business.
Incomprehensive insurance coverage may
lead to financial loss.
Safety Commitment and Operational Reliability
Our highest priority is providing safe and reliable operations. This is achieved through a
resilient Health, Safety, Environment and Quality (HSEQ) management system and a strong
safety-focused culture. Management has appropriate safety practices and procedures
including disaster recovery plans and comprehensive insurance cover across our fleet.
Training and Compliance
Our employees undergo continuous and rigorous training on operational best practices.
Scheduled Maintenance
The Group adheres to regular maintenance schedules on its vessels to ensure compliance
with the highest safety standards.
Business Continuity Plan
The Group has implemented a business continuity management plan, which it regularly
updates to ensure the reliability of its operations, including the capability to transfer crew
and source spares from different regions to maintain safe operations.
Management continues to review and improve the current management systems
and monitors the performance of HSEQ.
16 Gulf Marine Services PLC
Risk Mitigating Factors and Actions
5 Liquidity and Covenant Compliance
The business is exposed to short-term liquidity
management risks due to high interest rates
and inflation, which could impact the debt
service obligations and the Group’s bank
facilities covenants.
Reduced liquidity could impact future
operations and lead to an event of default.
This would give lenders the right to accelerate
repayment of the outstanding loans, and then
exercise security over the Group’s assets.
Breach of covenant – All covenants are closely
monitored due to the Group’s performance
being very sensitive to many internal and
external factors such as utilisation, operational
downtime, interest rates and other variables.
Liquidity Management
The Group continues to manage liquidity carefully through focusing on cash collection from
its customers.
Optimising Capital Expenditure
The Group continues to restrict capital expenditure to essential spending as well as specific
client requirements, but without jeopardising the safe and reliable operations of its vessels.
Covenant Compliance
The management team and Board regularly examine future covenant compliance based
on the latest forecasts and take necessary measures to avoid any potential where a future
breach of covenant is at risk. The Group monitors its various covenants throughout the
remaining period of the loan.
Focus on Deleveraging
Management continues to focus on making early repayments of the bank loans to reduce
the interest costs, improve our leverage position and meet our covenant requirements.
6 People
Attracting, retaining, recruiting
and developing a skilled workforce.
Losing skills or failing to attract new
talent to the business has the potential
to undermine performance.
Effective Communication, Training and Engagement Initiatives
Communication has remained a key practice of management. GMS held a full two-day
strategy meeting at the Group’s headquarters in Abu Dhabi. This brought together the
Board and Senior Management in a productive forum discussing longer-term plans for the
business. It included presentations and discussion on each key aspect of the Group’s
operations, recent and future industry developments and ongoing and future strategic plans.
Further, events like our recent Abu Dhabi headquarters celebration, recognising employee
milestones from 10–25 years of tenure, reinforce our united culture. As the Group matures
and longtime experts pass their torches, we are committed to developing the next generation
of leaders equipped to guide our mission.
Remuneration Policy
The Short-Term Incentive Plan (STIP) is based on a single Business Corporate Scorecard to
ensure all staff are aligned and incentivised around delivering a single set of common goals.
Equal Opportunities
GMS is engaged in fair and transparent recruitment practices. It has a zero-tolerance policy
towards discrimination and provides equal opportunities for all employees.
Further, GMS adds value through development programs, promotion from within the
organisation and focus on growing talent.
Resource Planning
The Group has identified all critical roles held by individuals and have adopted processes
to ensure the smooth transition in the event of changes in those personnel. Also, in the short
term, the Group utilised recruitment specialists and head-hunters to fulfil key positions as
the need had arisen.
RISK MANAGEMENT
continued
17Annual Report 2023
Strategic Report
Risk Mitigating Factors and Actions
7 Legal, Economic and Political Conditions
Political instability in the regions in which
GMS operates (and recruit from) may
adversely affect its operations.
As the majority of crew for certain key
positions come from Eastern Europe and
Southeast Asia, political instability may
hamper the recruitment, retention and
deployment of personnel.
Emergency Response Planning and Insurance
For all our major assets and areas of operation, the Group maintains emergency
preparedness plans. Insurance cover over the Group’s assets is reviewed regularly
to ensure sufficient cover is in place.
Workforce Planning and Monitoring
Workforce planning and demographic analysis is undertaken in order to increase diversity
within the Group. Multiple new recruitment agencies registered to source and diversify
crew composition across different geographies.
Monitoring Inflation and Interest Rates
Management is continually monitoring the liquidity position from changes in inflation and a
focus on cost reduction. During the year, GMS has recruited a Cost Controller to monitor
and manage financial expenditures to ensure adherence to budgetary constraints and
optimise cost efficiency. The key aim of the Group is to deleverage through early repayments,
which will reduce the impact of interest.
8 Compliance and Regulation
Non-compliance with anti-bribery and
corruption regulations could be detrimental
to stakeholder relations and lead to
reputational and financial loss.
GMS’ operations are subject to international
conventions on – and a variety of complex
federal and local laws, regulations and
guidelines relating to – health, safety and the
protection of the environment. Compliance
with these has become increasingly costly,
complex and stringent. Failure to appropriately
identify and comply with laws and regulations,
could lead to regulatory investigations.
Compliance with recently introduced UAE
Corporate Tax Regulations, including
adherence to transfer pricing requirements,
poses potential administrative and financial
obligations for the Group.
Code of Conduct
The Group has a Code of Conduct which includes anti-bribery and corruption policies, and
all employees are required to comply with this Code when conducting business on behalf
of the Group. It is mandatory for employees to undergo in-house training on anti-corruption.
All suppliers are pre-notified of anti-bribery and corruption policies and required to confirm
their compliance with these policies.
Regulations
A central database is maintained which documents all of GMS’ policies and procedures
which comply with laws and regulations within the countries in which GMS operates.
A dedicated Company Secretary is in place to help monitor compliance, in particular
for UK legal and corporate governance obligations.
External Review
The internal auditors help ensure compliance with GMS policies, procedures, internal
controls and business processes.
Engagement of Tax Consultant
A reputed tax consultant has been engaged to assist with a Group tax health check, a
review of Group's transfer pricing policy and implementation of corporate tax in the UAE.
9 COVID-19 Pandemic – Removed During 2023
18 Gulf Marine Services PLC
Emerging Risks
GMS operates an emerging risk framework as
a tool for horizon scanning, with developments
reported to the Audit and Risk Committee on
a routine basis. Emerging risks are defined as
a systemic issue or business practice that has
either not previously been identified, has been
identified but dormant for an extended period
of time (five years); or has yet to arise to an
area of concern. There is typically a high
degree of uncertainty around the likelihood of
occurrence, severity and/or timescales.
Emerging risks are identified and/or monitored
through internal debate by management and
the Audit and Risk Committee, as well as
discussions with key stakeholders (see the
Group’s Section 172 statement), industry-
specific journals, and reviews of reporting
published by peer companies.
Examples of emerging risks include
unexpected changes in the demand for oil,
technological advancements, monitoring of
suppliers’ performance, changes to tax
landscape in regions GMS operates in and
potential client insolvencies.
Risk Mitigating Factors and Actions
10 Cyber-crime – Security and Integrity
Phishing attempts result in inappropriate
transactions, data leakage and financial loss.
The Group is at risk of loss and reputational
damage through financial cyber-crime.
Cybersecurity Monitoring and Defence
GMS operates multi-layer cyber-security defences which are monitored for effectiveness to
ensure they remain up to date.
GMS engages with third-party specialists to provide security services.
11 Climate Change
Climate change poses both transition and
physical risks to the Group.
The transition risks come from the
decarbonisation of the global economy.
This could result in changing investor
sentiment making new investors harder to find.
It may bring changing client preferences
leading to reduced demand for our services.
New legislation could require us to increase
reporting and possibly substitute our products
and vessels for greener alternatives.
Physical risks include rising temperatures,
which could further impact working hours,
and rising sea levels, which could affect
where our vessels can operate.
The physical risks also interact with principal
risk 4 – Our inability to deliver safe and
reliable operations.
Legal and Policy Monitoring
The Group carefully monitors legislative developments to ensure compliance with all
relevant laws both in the UK and the Arabian Peninsula region. The TCFD disclosure in this
report explains our assessment and response to climate-related risks to be transparent
with our stakeholders.
Physical Infrastructure
The Group monitors weather patterns to ensure conditions are suitable for our offshore
employees and vessels. Onshore buildings and offshore vessels are designed to withstand
the heat in the Arabian Peninsula region.
Environmental Impact
GMS aims to minimise its environmental impact by installing energy and water efficiency
measures. We also ensure our machinery and engines are regularly maintained so they
operate efficiently.
Long-term Planning
GMS has a proven track record in the renewables sector which provides versatility in our
business model. Our vessels are built to be as flexible as possible to maximise utilisation.
We are aware that we may need to consider changing sea levels and environmental
legislation when replacing vessels that are being retired in the long term.
RISK MANAGEMENT
continued
19Annual Report 2023
Strategic Report
20 Gulf Marine Services PLC
KEY PERFORMANCE INDICATORS
Key Performance Indicators (KPIs) serve as vital metrics for
evaluating performance of the Group in relation to our strategic
objectives. These KPIs comprise of financial and operational
measures and each links to the four pillars of our strategic
framework. Refer to the Glossary for the definition of each
Alternative Performance Measure (APM).
KPI Description 2023 Performance
Revenue and utilisation
Revenue reflects the amounts recognised
from operating activities with clients during
the year. It is driven by charter day rates and
utilisation levels.
Utilisation is the percentage of days that our fleet
of Self-Elevating Support Vessels (SESVs) are
chartered on a day rate out of total calendar days.
The Group demonstrated an improved financial
performance leading to an increase in revenue
by 14% which is attributed to increase in
both utilisation and average day rates
across the fleet.
Average utilisation was up six percentage
points to reach 94% and the average day rates
across the fleet increased to US$ 30.3k
compared to the previous year’s US$ 27.5k.
US$ 109m
US$ 102m
US$ 115m
US$ 133m
US$ 152m
2023
2022
2021
81%
69%
84%
94%
88%
2020
2019
% – SESV utilisation Bars – Revenue
Adjusted EBITDA
1
and
adjusted EBITDA Margin
2
Adjusted EBITDA (Earnings before Interest,
Tax, Depreciation and Amortisation), excluding
exceptional items and non-cash transactions
such as impairments or reversal of
impairments. It is a key measure of the
underlying profitability of GMS’ operations.
Adjusted EBITDA margin demonstrates the
Group’s ability to convert revenue into profit.
The improvement in revenue translated into an
improved adjusted EBITDA of US$ 87.5 million.
This exceeded both our initial guidance range of
US$ 75 million to US$ 83 million, as well as
surpassing the revised guidance of US$ 86
million. The adjusted EBITDA margin has
also increased to 58% (2022: 54%).
US$ 51m
US$ 50m
US$ 64m
US$ 72m
US$ 88m
2023
2022
2021
49%
47%
56%
54%
58%
2020
2019
% – Adjusted EBITDA Margin Bars – Adjusted EBITDA
Adjusted profit and adjusted DLPS/DEPS
3
Adjusted profit or loss measures the net
profitability of the business adjusted for
exceptional items and non-cash transactions
such as impairment.
Adjusted DEPS means fully diluted earnings
per share and adjusted DLPS means diluted
loss per share, which measures the level of
net profit/loss, including adjusting items,
per ordinary share outstanding.
Adjusted profit was US$ 9.8 million
(2022: US$ 17.6 million). The decrease reflects
higher finance expenses by US$ 13.8 million
due to increase in interest rates and higher
impact of changes in fair value of derivative
by US$ 8.6 million.
US$ 18m
US$ 18m
US$ 10m
ADEPS US$ 0.02
ADEPS US$ 0.01
ADLPS US$ (0.04)
ADEPS US$ (0.03)
ADLPS US$ (0.06)
US$ -20m
US$ (20)m
US$ (15)m
2023
2022
2021
2020
2019
Numbers – Adjusted DLPS/DEPS
Bars – Adjusted profit/loss
Net bank debt
4
to adjusted EBITDA
Net debt to adjusted EBITDA is the ratio of net
debt at year end to earnings before interest,
tax, depreciation and amortisation, excluding
adjusting items (see Glossary for details),
as reported under the terms of our bank
facility agreement.
Maintaining this covenant below levels set out in
the Group’s bank facilities is necessary to avoid
an event of default.
As a result of our commitment to deleveraging,
the net leverage ratio on 31 December 2023
was reduced to 3.05 times (31 December 2022:
4.4 times), driven by a reduction in the net debt
to US$ 267.3 million (31 December 2022:
US$ 315.8 million) combined with improved
EBITDA for the year.
7.6
8.0
5.8
4.4
3.1
2023
2022
2021
2020
2019
Key
Revenue Maximisation
Cost Management
Working Capital Management
Control
See Glossary.
1 Represents operating profit after adding back depreciation, amortisation, non-operational items and impairment charges or deducting reversal of impairment. This measure
provides additional information in assessing the Group’s underlying performance that management can more directly influence in the short term and is comparable from year to
year. A reconciliation of this measure is provided in Note 31 to the consolidated financial statements.
2 Represents adjusted EBITDA divided by revenue. This measure provides additional information on underlying performance as a percentage of total revenue derived from the Group.
21Annual Report 2023
Strategic Report
KPI Description 2023 Performance
Backlog
Backlog shows the total order book of
contracts (comprising firm and option periods)
at the relevant date. This is a leading indicator
of future revenue and utilisation levels.
Backlog increased in the year driven by new
long-term contracts secured, partially offset by
the unwinding of existing long-term contracts.
US$ 240
US$ 199
US$ 179
US$ 342
US$ 459
2023
2022
2021
2020
2019
The backlog figures shown above are as at 1 April.
Average FTE retention
(Onshore and Offshore)
Employee retention shows the percentage of
staff who continued to be employees in the
year. The percentages shown do not take into
account retirements or redundancies.
Average FTEs (Full Time Equivalent employees)
throughout the year provides an indication of the
Group’s service capacity, scale of operations,
and manpower cost base.
Group staff retention increased to 88% from
84% reported in 2022.
Average onshore FTEs over the year have
increased to 59 from 55 reported in 2022.
While for offshore FTEs, the average number
throughout the year increased from 511 in 2022
to 569. The total Group headcount increased
from 594 at 31 December 2022 to 660 at
31 December 2023, which was driven by
increased utilisation of our vessels, which required
an increase in recruitment of offshore FTEs.
482
496
534
567
628
2023
2022
2021
84%
83%
86%
88%
92%
2020
2019
% – Employee retention
Bars – Average FTEs
TRIR and LTIR
TRIR is the Total Recordable Injury Rate per
200,000 man hours, which provides a measure
of the frequency of recordable injuries.
LTIR is the Lost Time Injury Rate per 200,000
man hours which is a measure of the frequency
of injuries requiring employee absence from
work for a period of one or more days.
Offshore man hours are calculated based on a
12-hour working period per day.
The Group improved its LTIR going from 0.1
in 2022 to zero in 2023 as there was no Lost
Time Injury incident.
However, two medical treatment cases were
recorded taking the TRIR from 0.10 in 2022 to
0.18 in 2023.
0.19
0.20
0.10
0.10
0.10
0.18
0.00
0.00
0.00
= TRIR = LTIR
Underlying G&A
5
as percentage of revenue
The underlying G&A to revenue expense ratio
compares revenue to the amount of expenses
incurred in onshore support operations.
The underlying G&A has slightly increased from
US$ 10.4 million in 2022 to US$ 10.7 million in
2023. However, underlying G&A as percentage
of revenue has decreased from 8% in 2022 to
7% in 2023.
US$ 14m
US$ 10m
US$ 10m
US$ 10m
US$ 11m
10%
13%
9%
7%
8%
2023
2022
2021
2020
2019
Underlying General and Administrative (G&A) expenses
excluding depreciation and amortisation, and
exceptional costs.
% – G&A to revenue
Bars – Underlying G&A
Secured utilisation at 1 January after each
reporting date
Secured utilisation at 1 January represents the
level of secured contracts we have in place for
the year ahead across our fleet of vessels.
The position is as at 1 January after each
reporting date and is an important indicator to
management and the Board of the risks to
delivery of the business plan. The higher the
level of secured work, the less reliant the Group
is on identifying and securing future contracts.
Secured utilisation has decreased by 10
percentage points compared to the prior year.
The decrease is due to three K-Class vessel
and one E-Class contracts coming to an end in
2024. These contracts are in the process of
being renewed.
67%
73%
77%
84%
74 %
2023
2022
2021
2020
2019
3 Represents the adjusted earnings/loss attributable to equity holders of the Company for the period divided by the weighted average number of ordinary shares in issue
during the period, adjusted for the weighted average effect of warrants and LTIP’s outstanding during the period. The adjusted earnings/loss attributable to equity
shareholders of the Company is used for the purpose of basic gain/loss per share adjusted by adding back any exceptional costs, impairment charges or deducting
reversal of impairment. This measure provides additional information regarding earnings per share attributable to the underlying activities of the business.
A reconciliation of this measure is provided in Note 32 to the consolidated financial statements.
4 Represents total bank borrowings less cash.
5 Represents general and administrative expenses excluding depreciation and amortisation, and other exceptional costs. A reconciliation of this measure is provided in
Note 31 to the financial statements.
22 Gulf Marine Services PLC
Cost of Sales, Reversal
of Impairment and
Administrative Expenses
Cost of sales as a percentage of revenue
decreased by five percentage points to 54%
compared to 59% reported in 2022.
As a result of continued improved market
conditions, an impairment assessment of the
Group’s fleet was conducted which resulted
in a net impairment reversal of US$ 33.4
million (2022: net impairment reversal of
US$ 7.8 million). Refer to Note 5 to the
consolidated financial statements for
further details.
Underlying general and administrative
expenses
3
(which excludes depreciation,
amortisation and other exceptional costs)
reduced as a percentage of revenue to 7%
in 2023 from 8% in 2022. Reported general
and administrative expenses amounted to
US$14.6 million, up from US$13.2 million in
2022, driven by increased staff costs and
professional fees.
Adjusted EBITDA
The adjusted EBITDA increased to US$
87.5 million (2022: US$ 71.5 million) which
exceeded both our initial guidance range
of US$ 75 million to US$ 83 million as well
as surpassed the revised guidance of
US$ 86 million. The increase reflects
improvement in market conditions leading
to higher utilisation and day rates.
The adjusted EBITDA margin has also
increased to 58% (2022: 54%). Adjusted
EBITDA is considered an appropriate and
comparable measure showing underlying
performance, that management are able to
influence. Please refer to Note 31 to the
consolidated financial statements and
Glossary for further details.
Revenue
US$’000
Gross Profit
US$'000
Adjusted gross profit
US$’000
Vessel Class 2023 2022 2023 2022 2023 2022
E-Class vessels 60,955 51,135 43,070 18,525 26,730 15,205
S-Class vessels 35,018 33,986 21,327 12,600 16,865 17, 2 31
K-Class vessels 55,630 48,036 38,440 29,409 25,814 20,310
Total 151,603 133,157 102,837 60,534 69,409 52,74 6
FINANCIAL REVIEW
Revenue and Segmental
Profit/Loss
The Group posted 14% increase in revenue,
reaching US$ 151.6 million compared to the
previous year’s US$ 133.2 million. This
growth was a result of combination of an
increase in both utilisation and average
day rates.
Utilisation increased by six percentage points
to 94% from the 2022 figure of 88%.
This continues to be the highest level of
utilisation achieved since 2014. Notable
improvements in the utilisation rates were
observed in the E-Class and K-Class vessels,
reaching 92% (2022: 82%) and 95% (2022:
87%) respectively. S-Class vessels utilisation
was slightly lower at 94% (2022: 97%).
Average day rates across the fleet increased
by 10% to US$ 30.3k compared to the
previous year's US$ 27.5k with improvements
across all vessel classes, particularly for
E-Class whereby, the day rates improved
by 17% to US$ 41.4k (2022: US$ 35.4k).
K-Class and S-Class rates increased by
7% and 5%, respectively.
The United Arab Emirates (UAE), Qatar and
Saudi Arabia combined region continue to be
the largest geographical market representing
91% (2022: 89%) of total revenue. The
remaining 9% (2022: 11%) of revenue was
earned from the renewables market
in Europe.
The table below shows the contribution to
revenue, gross profit and adjusted gross
profit
2
made by each vessel class during
the year.
2023
US$m
2022
US$m
2021
US$m
Revenue 151.6 133.2 115.1
Gross profit 102.8 60.5 60.6
Adjusted EBITDA
1
87.5 71.5 64.1
Net impairment reversal 33.4 7. 8 15.0
Net profit for the year 42.1 25.4 31.2
1 Represents operating profit after adding back depreciation, amortisation, non-operational items and impairment charges or deducting reversal of impairment. This
measure provides additional information in assessing the Group’s underlying performance that management is more directly able to influence in the short term and on a
basis comparable from year to year. A reconciliation of this measure is provided in note 31 to the financial statements.
2 Represents gross profit after deducting reversal of impairment/adding back impairment charges. This measure provides additional information on the core profitability of
the Group. A reconciliation of this measure is provided in Note 31.
3 Represents general and administrative expenses excluding depreciation and amortisation, and other exceptional costs. A reconciliation of this measure is provided in
Note 31 to the financial statements.
23Annual Report 2023
Strategic Report
Finance Expense
Finance expenses increased to US$ 31.4
million (2022: US$ 17.7 million) which is
mainly driven by an increase in LIBOR/SOFR
rates. Further, 250 basis points of PIK
interest costs were also applied and the
margin rate on the loan increased from 3%
to 4% for first quarter of the year which were
triggered by the net leverage ratio exceeding
4.0 times as at 31 December 2022. On
achieving a net leverage ratio below 4:1
times, PIK interest ceased to accrue in the
second quarter of the year, and the margin
was thereafter reduced by 90 basis points to
3.1%. This has resulted in reduction in cost of
financing by 340 basis points. Attaining a net
leverage ratio below 4:1 times was crucial,
allowing us to limit the number of quarters
we were charged a PIK interest to one
quarter only. Key benefits of being below 4:1
times is it allows GMS to meet its covenants,
to pay dividends and to cut some debt
monitoring fees.
The accounting driven impact of changes
in fair value of the derivative (the warrants
issued to the lenders) increased to US$
11.1 million (2022: US$ 2.5 million) in 2023,
due to the increase in the share price of the
Company. Company expects valuation
charges over par value to get reversed when
the warrants are either exercised or when
they will expire, on 30 June 2025.
Earnings
Net profit for the year increased to US$ 42.1
million compared to US$ 25.4 million
reported in 2022. The 65.7% increase in net
profit was mainly driven by higher revenue
and the reversal of impairments charged in
the previous years. The increase was partially
offset by an increase in finance expenses
and the accounting impact of changes in the
fair value of derivative (the warrants issued to
the lenders) as explained above.
Capital Expenditure
The Group’s capital expenditure relating
to drydocking and improvements of the
vessels increased to US$ 11.3 million
(2022: US$ 9.1 million).
Cash Flow and Liquidity
During the year, the Group delivered higher
operating cash flows of US$ 94.4 million
(2022: US$ 82.6 million). This increase is
primarily from higher revenues generated
during the year. The net cash outflow
from investing activities increased to
US$12.8million (2022: US$ 6.3 million).
The Group’s net cash outflow from financing
activities was US$ 85.2 million (2022: US$
72.3 million) mainly comprising of
repayments to the banks of US$ 56.2 million
(2022: US$ 51.4 million) and interest paid of
US$ 27.4 million (2022: US$ 17.5 million). The
repayments towards the bank loan of US$
56.2 million were almost double the Group's
obligation to its lenders for 2023.
The Group has US$ 8.7 million of available
resources comprising cash and cash
equivalents at the reporting date. Further, it
has an available working capital facility of
US$ 15.0 million (2022: US$ 20.0 million)
which can be utilised to draw down cash, of
which US$ 2.0 million (2022: Nil) was utilised,
leaving US$ 13.0 million (2022: US$ 20.0
million) available for drawdown. During the
period, the working capital facility was
reduced by US$ 5.0 million. The facility
expires alongside the main debt facility
in June 2025.
Balance Sheet
Total non-current assets at 31 December 2023
were US$ 621.0 million (2022: US$ 605.3
million), following a net impairment reversal
of US$ 33.4 million (2022: US$ 7.8 million)
on some of the Group’s vessels.
The total current liabilities increased to
US$ 99.5 million from US$ 69.3 million in
2022, primarily due to higher scheduled
repayments under the loan agreement for
2024. Additionally, trade payables and accrued
expenses increased to US$ 13.2 million
(2022: US$ 12.6 million) and US$ 16.1 million
(2022: US$ 11.2 million), respectively.
The Group was in a net current liability position
as of 31 December 2023, amounting to US$
52.1 million (2022: US$ 15.8 million). Total
current assets have decreased as receivables
are converted into cash that was used to
repay the debt. Management closely monitors
the Group's liquidity position including focus
on the forecasted short-term cash flows which
would be sufficient to meet the Group’s
current liabilities, including the current portion
of the bank borrowings which represents the
principal repayments due over the next 12
months. The loan prepayments were also
made after ensuring that forecasted cash
inflows are sufficient to meet the Group's
short-term obligations.
Total non-current liabilities decreased as a
result of reduction in bank borrowings. The
increase in equity reflects the net profit
achieved during the period.
24 Gulf Marine Services PLC
FINANCIAL REVIEW
continued
How We Assess Our Prospects
In assessing the Group’s long-term
prospects, the Directors regularly evaluate
the key risks of the Group including the
factors likely to affect the Group’s future
performance, financial position, cash flows,
liquidity position and debt facilities. These
assessments rely on established risk
management procedures and involve
analysing the Group's exposure to
significant risks and uncertainties.
The Group’s customers are principally
involved in the exploration for and
production of Oil and Gas and installation
of windfarms. The Directors closely monitor
its customers’ operational plans and related
capital expenditure programmes,
particularly in the short term in which
projects will be in progress and for
which requirements for services from
GMS will be more certain.
Assessment Period
In line with Provision 31 of the 2018 UK
Corporate Governance Code, the Directors
have carried out a comprehensive review of
the Group’s prospects and its ability to fulfil
its obligations over a three-year period,
similar to the timeframe assessed in the
2022 long-term viability evaluation.
This period was selected with reference
to the current backlog and business
development pipeline, both of which
offer limited visibility beyond this
point, particularly in light of current
macroeconomic volatility. Taking these
factors into consideration, the Directors
believe that a three-year forward-looking
period, commencing on the date the annual
accounts are approved by the Directors, is
the appropriate length of time to reasonably
assess the Group’s viability. This
assessment is based on management’s
reasonable expectations of the position and
performance of the Group over this period,
forecasts, and its planning timeframes.
The Group is in the process of refinancing
its term facility in advance as the bullet
payment becoming due in June 2025, i.e.
within the long-term viability assessment
period. Management’s ongoing discussions
with various lending entities are aimed at
securing terms that align with our long-term
strategic objectives, ensuring continued
financial stability. Given the improved
financial performance reported during 2023
and the current high levels of utilisation
secured, combined with higher day rates,
the Group expects the financial
performance to continue to improve during
the assessment period. As a result,
management is optimistic about the
outcome of these negotiations and expect
to complete the process on improved
terms in later half of 2024.
LONG-TERM
VIABILITY STATEMENT
Net Bank Debt and Borrowings
Net bank debt reduced to US$ 267.3 million
(2022: US$ 315.8 million). This was a result of
management’s commitment to accelerate
deleveraging. The Group repaid US$ 56.2
million (2022: US$ 51.4 million) towards its
term loan, of which, US$ 26.2 million (2022:
US$ 3.8 million) were over and above its
contractual obligation for 2023. A total of
US$ 33.7 million (2022: US$ 3.8 million)
was prepaid during 2023.
Going Concern
The Group is in the process of refinancing its
term facility in advance as the bullet payment
becoming due in June 2025. Management’s
ongoing discussions with various lending
entities are aimed at securing terms that align
with our long-term strategic objectives,
ensuring continued financial stability. Given
the improved financial performance reported
during 2023 and the current high levels of
utilisation secured, combined with higher
day rates, the Group expects the financial
performance to continue to improve during the
assessment period. As such, we are optimistic
about the outcome of these negotiations.
The Group’s forecasts indicate that its
anticipated refinanced debt facility will provide
sufficient liquidity for its requirements for at
least the next 12 months and accordingly,
the consolidated financial statements for the
Group have been prepared on the going
concern basis. For further details please refer
the Going Concern disclosure in Note 3 to
the consolidated financial statements.
Related Party Transactions
During the year, there were related party
transactions for catering services of
US$ 0.6 million (2022: US$ 1.2 million),
overhauling services of US$ 2.4 million
(2022: US$ 1.9 million) and laboratory
services of US$ 18k (2022: US$ 7k) with
affiliates of Mazrui International LLC, the
Group’s second largest shareholder (25.6%).
All related party transactions disclosed
herein have been conducted at arm’s length
and entered into after a competitive bidding
process. This process ensures that the terms
and conditions of such transactions are fair,
reasonable, and comparable to those that
would be available in similar transactions
with unrelated third parties.
The Group is not allowed to have any
transactions with its largest shareholder,
Seafox International (29.99%) as agreed with
Lenders. Further details can be found in the
Directors Report on page 73 and Note 24
of the consolidated financial statements.
Adjusting Items
The Group presents adjusted results, in
addition to the statutory results, as the
Directors consider that they provide a useful
indication of performance. A reconciliation
between the adjusted non-GAAP and
statutory results is provided in Note 31 to
the consolidated financial statements with
further information provided in the Glossary.
Alex Aclimandos
Chief Financial Officer
03 April 2024
25Annual Report 2023
Strategic Report
Consideration of Principal Risks
The nature of the Group’s operations
exposes the business to a variety of risks.
The Directors regularly review the principal
risks to the business and assess the
appropriate controls and the key mitigating
actions used to address them. The Directors
have further considered their potential
impact within the context of the Group’s
viability. The risk assessment process,
principal risks, and the actions being taken
to manage or mitigate them, are explained
in detail on pages 12 to 18 of this
Annual Report.
Sensitivity Analysis
To assess the Group’s viability, the Directors
have performed analysis considering the
following scenario:
• no work-to-win in 2024 and 2025;
• a 12%, 26% and 17% reduction
in utilisation in 2024, 2025 and
2026 respectively;
• a reduction in day-rates of an E-Class
and two S-Class vessels by 20% and
25% respectively after expiry of their
currently secured contracts; and
• interest rate to remain at current levels
instead of a forecasted decline of 25
basis points commencing second
quarter of 2024.
Based on the above scenario, the Group
would not be in breach of its current term
loan facility. The downside case is
considered to be severe but would still leave
the Group in compliance with the covenants
under the Group’s banking facility until
its maturity.
Reverse Stress Testing
In addition to the above downside sensitivity,
the Directors have also conducted a reverse
stress test, wherein EBITDA has been
reduced to the extent of breaching the debt
covenant. This scenario assumes a notable
increase in operational downtime to 7%,
which is in addition to the sensitivities
applied in the downside case above. The
4.5% increase in operational downtime for
FY24 would lead to a breach of the Finance
Service Cover ratio as of 31 December 2024.
Given the recent performance of the Group,
improved market conditions and
strengthening of the demand for GMS
vessels, above breach scenario is highly
unlikely to occur. However, should
circumstances arise that differ from the
Group’s projections, the Directors believe
that a number of mitigating actions can be
executed successfully in the necessary
timeframe to meet debt repayment
obligations as they become due and in order
to maintain liquidity. Potential mitigating
actions include the vessels off hire for
prolonged periods could be cold stacked to
minimise operating costs on these vessels
which has been factored into the downside
case. Additional mitigations could be
considered including but not limited to
reduction in overhead costs, relaxation/
waiver from covenant compliance and
rescheduling of repayments with lenders.
Management is aware of the broader
operating context and acknowledges the
potential impact of climate change on the
Group’s financial statements. However, it is
anticipated that the effect of climate change
will be negligible during the going concern
assessment period.
Conclusion
Considering the Group’s current position
and its principal risks, the Directors have
reasonable expectation for the Group to
sustain operations and fulfil its obligations
as they arise throughout the assessment
period. The principal basis for this
conclusion revolves around management’s
strategic focus on deleveraging existing
bank obligations and securing refinancing
for the balloon payment due in June 2025,
which continues to remain a key priority.
Mansour Al Alami
Executive Chairman
03 April 2024
26 Gulf Marine Services PLC
PEOPLE AND VALUES
2023 TCFD & CFD
Annual Report for
Gulf Marine Services PLC
TCFD Overview
Executive Statement
“At GMS, we have acknowledged climate
change as an emerging risk since 2019
and a principal risk since 2021. This is in
recognition of the challenges it will pose to
our business and the need for us to respond
to this in our operations. In 2022, we set our
targets for net-zero and developed our
strategy for reaching them. Throughout
2023, we continued our work towards our
commitments to reducing our environmental
impact and limiting our contribution to
climate change. COP28 this year was
hosted close to home, and we were excited
to follow and analyse the outcomes and
future opportunities it brings to our business.
We look forward to reporting back in 2024
on our further developments.”
Mansour Al Alami
Executive Chairman
TCFD Compliance Statement
GMS has complied with the requirements
of LR 9.8.6(8)R by including climate-related
financial disclosures consistent with the
Task Force on Climate-related Financial
Disclosures (TCFD) recommendations and
recommended disclosures. The current
regulations require reporting on a ‘comply
or explain’ basis. This year, we have
complied with all 11 of the recommendations.
The Companies (Strategic Report) (Climate-
related Financial Disclosure) Regulations
2022 require publicly quoted and large
private companies to integrate climate
disclosures into their annual reports. We
have complied with the eight reporting
disclosure requirements of Climate-related
Financial Disclosure (CFD), details of which
can be found below.
Table 1: GMS Compliance Statement
TCFD Recommendation Climate-related Financial Disclosure Compliance
Governance
a) Describe the Board’s oversight of climate-
related risks and opportunities.
(c) a description of the governance arrangements of the
company in relation to assessing and managing climate-related
risks and opportunities.
Compliant
b) Describe management’s role in assessing
and managing climate-related risks and
opportunities.
Compliant
Strategy
a) Describe the climate-related risks and
opportunities the organisation has identified
over the short, medium and long term.
(d) a description of:
(i) the principal climate-related risks and opportunities arising
in connection with the operations of the company and,
(ii) the time periods by reference to which those risks
and opportunities are assessed.
Compliant
b) Describe the impact of climate-related risks
and opportunities on the organisation’s
businesses, strategy and financial planning.
(e) a description of the actual and potential impacts of the principal
climate-related risks and opportunities on the business model
and strategy of the company.
Compliant
c) Describe the resilience of the organisation’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C
or lower scenario.
(f) an analysis of the resilience of the business model and
strategy of the company, taking into consideration of
different climate-related scenarios.
Compliant
27Annual Report 2023
Strategic Report
TCFD Recommendation Climate-related Financial Disclosure Compliance
Risk Management
a) Describe the organisation’s processes for
identifying and assessing climate-related risks.
(d) a description of how the company identifies, assesses,
and manages climate-related risks and opportunities.
Compliant
b) Describe the organisation’s processes for
managing climate-related risks.
Compliant
c) Describe how processes for identifying,
assessing, and managing climate-related
risks are integrated into the organisation’s
overall risk management.
(e) a description of how processes for identifying, assessing,
and managing climate-related risks are integrated into the
overall risk management process in the company.
Compliant
Metrics and Targets
a) Disclose the metrics used by the
organisation to assess climate-related risks
and opportunities in line with the strategy
and risk management process.
(d) the key performance indicators used to assess progress
against targets used to manage climate-related risks and realise
climate-related opportunities and a description of the calculations
on which those key performance indicators are based.
Compliant
b) Disclose Scope 1, Scope 2, and, if
appropriate, Scope 3 greenhouse gas
(GHG) emissions, and related risks.
Compliant
c) Describe the targets used to manage
climate-related risks and opportunities
and performance against targets.
(e) a description of the targets used by the company to manage climate-
related risks and to realise climate-related opportunities and performance
against those targets.
Compliant
Introduction – About TCFD
TCFD provides a framework for assessing
and reporting how climate change will impact
our business. Its recommendations are
divided into four areas, aligned with existing
business processes (governance, strategy,
risk management, and metrics and targets).
We welcome the introduction of LR 9.8.6(8)
R, which requires premium companies like
GMS to include TCFD statements in their
annual reports. It provides a structure to
assess and report our climate-related risks.
As a business focused on supporting various
offshore operations, we are aware of our
impact on the environment and the potential
risks of climate change to our operations. We
believe we have a responsibility to ensure a
sustainable future. We are constantly
researching opportunities to reduce our
impact on the environment. In 2022, we
calculated our Scope 3 emissions for the first
time, which are those associated with our
value chain. Based on those findings, in
2022, we set a net-zero
1
target of 2050 and
interim targets to guide our progress. In
2023, we are proud to be making progress
against these targets, which are outlined in
the Metrics and Targets section of the report.
Governance
Overview
The effective identification, management and
mitigation of business risks and opportunities
are essential to successfully delivering the
Group’s strategic objectives. A risk
management system is in place to support
the identification, analysis, evaluation,
mitigation and ongoing monitoring of risks,
as shown in the framework below. The
Group recognises that as part of our
long-term business strategy, we need to
operate responsibly. Therefore, climate
change is an area of interest for the Board,
Senior Management and GMS stakeholders.
It was recognised as an emerging risk in
2019 and classified as a principal risk in
2021. The Board has seven principal
meetings per year, and risk management and
the key risks facing the Group are discussed
at each of these meetings. Environmental,
social and governance (ESG), including
climate change, is a specific agenda item
for the December Board meeting each year.
Following through on the potential risks that
climate change can pose to our business,
we review and evaluate the levels of potential
impacts on an annual basis. Our overall
climate-related risks are assessed as low
likelihood and low impact. We do not believe
climate change will impact demand for our
vessels in the near term.
This is because demand for oil and gas
production in the Group’s core market of the
Arabian Peninsula region is forecasted to
continue. However, should demand change,
we can mobilise more of the fleet to offshore
renewables without significant additional
capital expenditure. We aim to ensure that
we are aware of future developments in the
potential risks and opportunities posed by
climate change. Hence, we have designated
it a principal risk. We have used the TCFD
recommendations to improve our
assessment of climate-related risks and
guide our reporting on the findings. This
financial year, we have conducted our third
climate-scenario analysis, to review any
recent changes in the risk levels and expand
our understanding of our supply chain risks.
Overall responsibility for risk management
lies with the Board, supported by the
Audit and Risk Committee. Our Senior
Management team assists in implementing
the risk management process, including risk
identification, management and mitigation.
This is all overseen by the internal audit
function. Climate change, as a principal risk,
is integrated into each stage of this process.
28 Gulf Marine Services PLC
Board of Directors
The Board has overall responsibility for the Group’s strategy
and ensuring effective risk management.
Internal Audit
There are clear reporting lines from
the internal audit function to the
Audit and Risk Committee and
the Senior Management team.
The Audit and Risk Committee
Responsibilities include reviewing the Group’s internal control and risk management
systems as well as monitoring the effectiveness of the Group’s internal audit function.
Senior Management
The Senior Management team implements the risk management process
from risk identification to management and mitigation.
Figure 1: Risk Management Structure Within GMS
PEOPLE AND VALUES
continued
1
The standard defines net-zero targets as emission reductions of at least 90% across all scopes before 2050 and only a very small number of residual emissions
(up to 10%) can be neutralised with carbon removals.
The Board’s Oversight
The Board has overall responsibility for
ensuring that risks are effectively managed.
ESG topics, including climate change, are
included in the regular risk assessment
procedure. The Board reviews the risk profile
formally on an annual basis and monitors
and oversees progress against goals and
targets for addressing climate-related issues.
Each year, the latest updates to the climate
scenario analysis and climate-related risk
assessment are presented to the Board in
a workshop session. The session also aims
to continue to build the Board’s climate-
related competence.
Board Committees
Risk and Audit Committee
The Audit and Risk Committee consists of
at least two independent non-executive
Directors, of which one is appointed as
Chair. It meets at least twice a year, at
appropriate times in the Company’s financial
reporting and audit cycle. Also, it
communicates (as needed) throughout the
year with key individuals involved in the
Company’s governance, including the
Executive Chairman, the Chief Financial
Officer, the external audit lead partner and
the Head of Internal Audit.
The Board is assisted in its responsibility for
reviewing the effectiveness of the Group’s
system of internal control and procedures
by the Audit and Risk Committee.
The Audit and Risk Committee receives
reports from external advisors (as required)
to ensure sufficient insight into the relevant
issues to enable it to discharge its duties.
An external consultant has been engaged
to provide guidance on climate-related risks
and conduct climate-scenario analysis.
This information is considered when
developing the Company’s strategy and risk
management policies and while setting
budgets. The Financial Controller reviews
the risk register and feeds it back to the
Audit and Risk Committee.
Remuneration Committee
The Remuneration Committee consists
of at least two independent non-executive
Directors, of which one is appointed as Chair.
The Committee meets at least twice a year
and at other times, as required. It is
responsible for designing remuneration
policies and practices for the Company’s
Chair, executive Directors, Company Secretary
and senior executives. The remuneration plan
must support the Company’s long-term
strategy, purpose, and values.
The Committee considers corporate
performance on ESG issues when setting the
executive Directors’ remuneration. The
Committee ensures that the incentive structure
for Senior Management does not raise ESG
risks by inadvertently motivating irresponsible
behaviour. Whilst there are currently no direct
links between Board remuneration and
meeting our climate strategy or targets, we will
revisit the possibility of adding climate strategy
and targets as part of the remuneration
process in the next two reporting years.
Senior Management’s Role
The Senior Management team comprises the
Executive Chairman, Chief Financial Officer,
Business Development & Commercial
Director, Head of HSE & Quality, Director
Operations and Chief Shared Services
Officer. Together, they are responsible for
identifying, managing and mitigating potential
risks, including those associated with climate
change and the transition to a low-carbon
economy. The Senior Management team
discusses climate-related issues a minimum
of twice a year where climate change is an
agenda item and routinely throughout the
year as needed. The Senior Management
team reports to the Board and the Risk and
Audit Committee twice a year, with the main
update prior to the Board’s annual update
meeting. The update consists of information
about climate-related strategy updates,
progress against set targets, an overview
of the workshop agenda and plans for the
upcoming financial year. It meets with the
Executive Chairman at least twice a year to
conduct risk management workshops.
Senior leadership is actively engaged with
an external consultancy, to help guide
climate-related agenda for GMS. They have
participated in December’s climate-risk
workshop along with the Board of Directors.
This financial year, GMS full Scope 3
emissions have been calculated for the third
time, allowing comparisons and measured
progress tracking. Our Senior Management
team will use this information to improve its
understanding of GMS’ GHG emissions,
guided by the Head of HSE & Quality, who
manages Health, Safety and the Environment
(HSE). This will help monitor progress against
our reduction targets and net-zero strategy
and appropriately assess the Group’s
operational risk from climate change in line
with climate-related scenarios.
29Annual Report 2023
Strategic Report
Strategy
GMS wants to ensure the long-term
sustainable success of the Company,
which requires responding appropriately to
all relevant risks and adapting our business
strategy, as necessary. As the risks of
climate change become more apparent and
are of increasing interest to our stakeholders,
we have developed how we assess
climate-related risks. Climate change is
considered as our principal risk and we have
a separate climate risk register, which
provides details on the 18 associated risks,
guided by the TCFD recommendations.
Climate Scenario Analysis
To understand the climate change risks,
both physical and transitional, we conduct an
annual climate scenario analysis. Physical risks
are those associated with the physical impacts
of climate change, for example, increased
average temperatures and rising sea levels.
Transition risks arise from the shift to a lower
carbon economy, including increased
regulation, moving to lower emissions
technology and changing consumer demands.
Climate scenario analysis uses possible
representative futures, to model these
potential impacts and the changes that will
need to be made to limit global warming and
reach net-zero. We have rerun the climate
scenario analysis on our key sites and
operations this financial year and have started
to consider their financial impacts. Further
financial modelling will be conducted during
the next financial year, as we continue to
research the medium and long-term actions
in our net-zero strategy.
The Scenarios
Three warming pathways were modelled
using data from several established models,
including CORDEX (Coordinated Regional
Climate Downscaling Experiment), CLIMADA
(Climate Adaptation) and IAM (Integrated
Assessment Models). The pathways
represent a broad range of potential futures,
to ensure that all risks are considered.
The climate scenarios used in the risk
assessment process make projections on
hypothetical futures and as such come with
a degree of uncertainty. While most of the
information is obtained from existing climate
models which have a high degree of
accuracy, there is still a level of uncertainty.
As such, the results of the analysis should
only be used as a guide for the climate-
related risks and opportunities facing Gulf
Marine Services. Ten climate indicators were
modelled for each site and scenario, for
example, precipitation, aridity, temperature
and water stress. Outlined below are the
three warming pathways.
<2°C by 2100: aligned with the Paris
Agreement target of a maximum 1.5°C of
warming above pre-Industrial levels. This
scenario requires coordinated efforts by
governments and businesses, to rapidly
reduce carbon emissions through policy and
operational changes, leading to high levels of
transitional risks, but limited physical risks.
2–3°C by 2100: this scenario is envisaged
as the outcome of reactive action from
governments, with policies being introduced
on an ad-hoc basis, whilst only the most
committed businesses take serious action.
It is associated with the highest level of
transitional risks, due to the uncoordinated
approach, and some physical risks.
>3°C by 2100: this scenario will occur if
limited action is taken over the next few
decades. Although, this limits the transitional
risks, particularly in the short and medium
term, it has the highest degree of physical
risk, due to increased global temperature
rise. Under this scenario, climate tipping
points are projected to be breached, leading
to irreversible damage to our planet.
The Time Horizons
The impacts of climate change expand
beyond our traditional horizons of business
planning. The UK and UAE have set a
net-zero date of 2050, and climate modelling
is often based on temperature changes by
2100. As a result, and to align with our
net-zero strategy, we have decided to use
the following time horizons to assess our
climate-related risks and opportunities.
Table 2: Time Horizons Used for
Climate Scenario Analysis
Short-term: Medium-term: Long-term:
2023–2027 2028–2037 2038–2052
The Results
Overall, the physical risk level is considered
low for GMS’ operations and buildings.
As most of the Group’s operations are
already in extreme climate conditions, the
infrastructure we own and use has been built
accordingly. Our office buildings in the
Arabian Peninsula region are already
exposed to temperatures above 40°C for
consecutive days. Therefore, the region’s
infrastructure design and our working
schedules consider these extreme
weather conditions.
Our risk management process classifies
risks with an overall rating of red, amber or
green based on a combination of the
inherent risk and the control rating. Across all
timelines and scenarios, no red ratings were
assigned to climate-related transition risks.
Most transition risks were determined to
have a green rating. The number of risks
rated significant increases over time, with
tables 4 to 7 below presenting the scenario
and timeline in which a significant rating is
assigned. All physical risks were assigned
a green risk rating.
Table 3: Risk Rating Criteria
Likelihood Factor Rating Impact Factor Rating Control Effectiveness Rating
Almost Certain 5 Major 5 Very Good 5
Likely 4 Significant 4 Good 4
Possible 3 Moderate 3 Satisfactory 3
Unlikely 2 Minor 2 Weak 2
Rare 1 Insignificant 1 Unsatisfactory 1
Inherent risks
Green – Inherent risk is equal to or lower than 9, regardless of the control rating.
Amber – Inherent risk is greater than 9 but Controls are either 4 or above, qualifies as material.
Red – Inherent risk is greater than 9 and Controls are 3 or below, qualifies as material.
The steps we have taken to identify and
manage each climate-related issue have
been based on our existing risk management
framework to ensure a consistent and
efficient assessment and categorisation.
Each climate-related issue is classified using
our rating system. Our process ranks risks
initially by their likelihood, then, each issue is
ranked according to its impacts on GMS to
determine an inherent risk score. We then
rank each issue against our control
effectiveness to determine the overall risk
value. Risks scored with an overall score of
greater than 9 are deemed as material.
The findings of the updated climate scenario
analysis were presented to key GMS staff
and the Board in December 2023. As this
was the third year of running this workshop,
it included a discussion of how the risks were
impacted by changes at GMS, within the
broader macroeconomic landscape and by
updates to the underlying data sets. Each
risk was discussed to determine whether the
impact and likelihood ratings needed
amending. It was decided that no updates
were needed from the 2022 ratings, as there
had been no material changes in the past
financial year.
30 Gulf Marine Services PLC
PEOPLE AND VALUES
continued
Transition Risks – Policy & Legal
Table 4. Policy & Legal risks with a description, the Timeline and Scenario of Highest Impact and
Our Response
Risk Description Scenario Our Response
Enhanced
emissions
reporting
obligations
As a premium listed company on the London
Stock Exchange, with operations primarily in
the Arabian Peninsula region, GMS is subject to
UK and UAE climate change and environmental
reporting regulations. Changes to policy and
reporting requirements are almost certain to
occur in the short term with the UK committing
to net-zero by 2050. However, only one of the
Group’s vessels is currently located in Europe,
which means that the potential operational/
financial impact of such changes would be
limited to Moderate. In the short term, fewer
climate-related policy obligations are
anticipated for operations in the Arabian
Peninsula region sites (as compared to the UK
reporting regulations noted above); however,
the UAE has its own 2050 net-zero target.
Therefore, the potential likelihood of this risk is
deemed to be lower (possible as compared to
almost certain). However, if such policies and
increased regulations were to be introduced
over a longer period, the concentration of GMS’
fleet in the Arabian Peninsula region would
result in a higher (Significant) potential impact.
<2ºC, 2–3°C
Short, Medium
2023 Risk
rating – amber
The Group aims to mitigate this risk by carefully
monitoring legislative developments to minimise
non-compliance with all relevant laws in the UK
and the Arabian Peninsula region. Our Annual
Report includes all the legally required information.
We provide additional updates on our website
as appropriate.
There is potential for increased mandates and
regulation of our existing products and services. In
the long term, this is expected to be associated with
the carbon emissions of our vessels. More detail on
this is provided in Table 7 below.
Financial impact: Increased opex.
There are costs associated with this compliance,
including engaging external specialists internal
resources, and potential penalties if regulations are
not followed. Non-compliance could result in fines of
a minimum of £2,500 and a maximum of £50,000.
These costs have been assessed and factored into
the budget, which is currently considered negligible.
A central database is maintained to document
our legally required and regulated policies and
procedures. We are ISO 14001 certified, which
provides a framework for managing the
environmental legislation that applies to
our operations.
Exposure to
carbon pricing
In the short term, this risk is unlikely and would
have a minor impact. In the longer term, the
impact would be minor in the 2–3°C scenario.
However, this risk could be more likely and have
a greater impact in the medium term. It is likely
that in a <2°C scenario, carbon pricing and
taxes could be introduced in the short term,
and the potential cost impacts could be
moderate to significant.
2–3ºC
Medium
2023 Risk
rating – amber
There is no indication that carbon pricing will be
introduced, which would affect GMS’ operations in
the short term. In the interim, we have developed
our net-zero strategy, which will reduce our carbon
emissions and minimise the impact should a carbon
tax be introduced. Changes in tax legislation will be
closely monitored, and internal models can be used
to factor this into the business strategy.
Financial impact: increased capex and opex.
Based on our 2023 Scope 1 emissions, our
net-zero target and current projections for global
carbon prices per tCO
2
e, a carbon tax could have
various financial impact ranges; please see the table
below. This is based on data from The World Bank,
NGFS, IPCC, OECD and Reuters.
Scenario
2027 (£) 2037 (£) 2052 (£)
Proactive 1,875,301 1,531,786 –
Reactive 605,172 3,784,860 –
Inactive 692,417 981,942 1,252,694
31Annual Report 2023
Strategic Report
Transition Risks – Reputation
Table 5. Reputation Risks with a Description, the Timeline and Scenario of Highest Impact and
Our Response
Risk Description Scenario Our Response
Increased
stakeholder
concern
In the short term, increased stakeholder
concern may be seen, including from
employees who may start to take company
environmental action and preparedness into
account. This could impact the Group’s revenue
and employee retention. This concern would be
greater in a <2°C scenario, where there is
greater awareness and more action required.
It would be lower in a 2–3°C scenario, where
action is being taken sporadically.
<2ºC, 2–3ºC
Short, Medium
Risk rating – amber
The Group’s workforce requirement is concentrated
in its core market of the Arabian Peninsula region,
which is currently reliant on and supported by the oil
and gas industry. It is expected to remain so in the
near future. GMS does not anticipate struggling to
retain suitably experienced and qualified staff.
We are committed to acting responsibly towards
the environment, as demonstrated by our net-zero
targets and strategy. This will help mitigate this risk
by showing that we are a proactive company in
regard to climate change and environmental
responsibility.
Financial impact: reduced revenue, cost to recruit
new employees if there is increased turnover.
Shifts in
consumer
preferences
As climate change becomes increasingly
important and urgent, it will impact investment
decisions. This is especially important following
the outcomes of COP28, as we expect the
general sentiment towards environmental and
climate change matters to become more
prominent. This could impact future access
to capital for businesses that do not
respond appropriately.
<2ºC, 2–3ºC
Short, Medium
Risk rating – amber
There is increasing concern over fossil fuel use in
the UK/EU, although demand for oil and gas is
predicted to grow. As a result, new investors may
become more challenging to find. However, current
shareholders are heavily invested in the Company’s
existing strategy and business model. Therefore,
the likelihood of a significant impact is only
considered possible in the short term under the
most optimistic scenario (<2ºC), which is not
currently in line with the UAE’s approach.
Financial impact: reduced ability to raise capital.
Stigmatisation
of sector
Increased climate concerns can lead to the
stigmatisation of certain sectors and industries.
<2ºC, 2–3ºC
Short, Medium
Risk rating – amber
This risk would significantly impact the business if
realised, but we do not expect to experience an
impact on demand for or production of oil and gas
in the Arabian Peninsula region within the short to
medium term. The amber rating is first given in the
medium term for the <2ºC scenario, which is not the
current trajectory for the Arabian Peninsula region.
Financial impact: reduced revenue from
decreased demand for services.
Climate opportunities, for example, using our
vessels for the maintenance of offshore renewable
projects, offer versatility and resilience to our
business model.
As part of our vision of being the best self-elevating support vessel (SESV) operator in the world, it is important that GMS is seen to be acting
responsibly and contributing to a sustainable future. We are aware that a suitable response to the challenges of climate change is increasingly
important to our investors and shareholders. We believe that through our TCFD reporting and net-zero strategy, we are responding to this
area of risk by proving our commitment to responding appropriately to climate change.
32 Gulf Marine Services PLC
PEOPLE AND VALUES
continued
Transition Risks – Market
Table 6. Market Risks with a Description, the Timeline and Scenario of Highest Impact and Our Response
Risk Description Scenario Our Response
Changing
customer
behaviour
In a <2°C scenario, where
urgent action is being taken,
it is possible that there could
be changing customer
preferences resulting in
reduced demand for goods
and services. This could have
a significant impact in the
medium term.
<2–3ºC
Medium
Risk rating – amber
The Group will continue to monitor any shift in consumer demand
across the regions in which it operates. However, oil and gas have
always been the mainstay of our business. It is only considered
possible for a significant impact to be felt in a <2ºC scenario, which
is not currently considered in the UAE. Globally, the Westwood
Global Energy Group report predicts an increase in demand for
oil and gas over the next 40 years, including in the Group’s core
markets. However, the Group is aware that the UAE, along with
many other governments, has set a net-zero target and, in the long
term, will need to make changes to meet these targets.
GMS has a proven track record in the renewables sector and an
ongoing presence in Europe for offshore wind projects. This
provides versatility in our business model, and vessels are suitable
for use in this sector without major additional capital expenditure.
We are on a six-year contract for one of our vessels on a renewables
project in Europe.
We are researching a business management system that can
support us in identifying potential areas for financial loss and help
us adapt if our strategy needs to change.
Financial impact: reduced revenue.
Given the concentration of revenue in National Oil Companies
in the Arabian Peninsula region, the impact could be significant
if materialised.
Increased cost
of raw
materials
Climate policies could
lead to additional abrupt
and unexpected shifts in
energy costs.
<2–3ºC
Medium
Risk rating – amber
This is considered a low risk, with only minor financial impact for
the Group, as our clients pay for the fuel costs. However, we are
always working to improve the efficiency of our vessels to meet
our clients’ expectations, as they expect value for money in the
services they receive.
Financial impact: increased operating costs for clients.
Transitioning to a net-zero economy will require changes to the products and services sold globally. This poses risks and opportunities for
businesses. The main risk is the potential impact on the supply and demand for our services and changes
in our supply chain.
33Annual Report 2023
Strategic Report
Physical Risks
All the physical risks considered have been
assigned a green rating due to our existing
controls. Therefore, the impact is expected
to be low. Although physical impacts are
expected from climate change, our offices
and most vessels are in the Arabian
Peninsula region, which adapted to an
extreme climate with high temperatures,
low precipitation, and high water stress.
Infrastructure and workers’ rights regulations
have been designed to manage these risks.
The climate scenario analysis suggests that
more frequent sandstorms will occur due to
increased temperatures and decreased
precipitation. Our vessels are prepared for
sandstorms with specialised filtration devices
that reduce the risk of sediment damaging
the vessels’ engines. Decreased precipitation
will exacerbate water stress in the region.
Our vessels are equipped with desalination
equipment to mitigate water stress. We are
trialling machinery which can extract water
from the air.
Climate-related Opportunities
Responding to climate change offers two
major opportunities to GMS. From an
operational perspective, improving our
efficiency reduces our operating costs,
improves our resilience to potential new laws
around energy use and carbon emissions
and demonstrates our commitment to being
a sustainable business. In terms of business
strategy, there is the opportunity to mobilise
more vessels in the renewables sector. We
already have a proven track record in this
area and are keen to maintain an ongoing
presence in Europe, to enable us to continue
accepting offshore wind farm contracts.
Currently, the GMS financial value associated
with climate-related opportunities is 9.5% of
our 2023 revenue (10.8% of 2022 revenue)
as services provided to the renewable
energy sector.
Engaging with Our Clients
and Supply Chain
To manage our climate-related risks and
reduce our carbon emissions, we need to
engage with our clients and supply chain.
We will be introducing additional social and
environmental screening criteria for our
suppliers, which will be the responsibility of
our Procurement Manager. In 2023, we
started, and in 2024, we plan to continue
engaging with our suppliers on their carbon
footprint, asking whether they already collect
data on their Scope 1, 2 and 3 emissions,
which feed into our Scope 3 emissions, and
then starting to work with them to reduce
those emissions. Currently, ten of our top 30
suppliers have already published their
emissions on their websites or using the
annual CDP disclosure questionnaire.
This financial year, we have continued
considering the risks associated with our
suppliers directly and supply chain-
associated risks in general. These cover
three key areas: food, fuel and vessel parts.
As part of our commitment to local sourcing
and due to the in-country value schemes
endorsed by our major clients, our top
suppliers are all located in the Arabian
Peninsula region. They are subject to similar
transitional and physical risks as the Group.
As with GMS, they are already prepared
to cope with extreme conditions and
transitional risks are expected to be limited
in the short to medium term.
Transition Risks – Technology
Table 7. Technology Risks with a Description, the Timeline and Scenario of Highest Impact and
Our Response
Risk Description Scenario Our Response
Costs to
transition
to lower
emissions
technology
A requirement to transition to
lower emissions technology is
possible in the medium term,
under a <2°C scenario, which
could be associated with
additional costs for GMS. The
impact would be the same in a
2–3°C scenario, but this is
considered unlikely. The
likelihood of this risk will
increase over time.
<2ºC, 2–3ºC
Short, Medium
Risk rating – amber
Existing vessels will likely need to be retired or will have fully
depreciated across their remaining useful life before we are
required to replace them with greener options. These routine
replacements are factored into our budget and strategy. Therefore,
we do not consider that vessel replacement costs will significantly
impact our business at this point. This risk is higher in Europe, where
we currently have one vessel and is considered lower in the Group’s
core market of the Arabian Peninsula region. However, in the 2024
financial period, we will research the options for replacement vessels
using lower-carbon fuels. If a feasible option is identified, we will
replace our oldest vessel with a low-carbon alternative in 2030.
Planning for net-zero, will help to minimise these risks, as these
costs can be factored into our long-term business plan.
Financial impact: increased capex.
34 Gulf Marine Services PLC
PEOPLE AND VALUES
continued
Risk Management
Our Risk Management Approach
GMS has an established enterprise risk
assessment process into which climate-
related risk management has been integrated
(see Risk Management section on page 12).
Material risks identified in our climate risk
register are integrated into the main risk
register. This is in response to the increasing
importance placed on climate change by the
public, clients, investors and employees.
The first step in the risk management process
is identifying and assessing risks, which is
conducted through reviews by individual
departments. Mitigating controls are then
determined. In the case of climate-related
risks, we have engaged with a third party
to ensure a thorough and informed
understanding of the potential risks and
opportunities, guided by the TCFD framework.
Senior Management consolidates identified
risks into an overall heatmap for principal
risks. The Audit and Risk Committee review
the risk profile at least quarterly. The Board
discusses the Group’s risk register at its
principal meetings and formally reviews the
risk profile annually.
The following steps were taken to assess
climate-related risks through climate
scenario analysis:
Step 1 – Identifying the Risks:
External specialists used climate scenario
analysis in November 2023, for the third year
in a row, to assess 14 potential transitional
and four physical risks to the business over
three climate warming pathways and three
timelines. These were presented to Senior
Management and the Board at the climate-
risk workshop in December 2023 for their
input on the potential size/scale of the risk/
opportunity, which could impact the
business operations and strategy.
Step 2 – Assessing the Risks:
These provisional risks were presented to
relevant internal stakeholders, including the
Chief Financial Officer. The provisional risks
were presented at Group and site levels.
Following our existing enterprise risk
assessment process and drawing on the
relevant expertise of Senior Management,
each provisional climate-related risk and
opportunity was allocated a likelihood and
impact rating, which were combined to
provide the inherent risk rating for each
scenario and timeline.
Step 3 – Addressing the Risks:
Each potential risk is appraised to determine
the current mitigation measures and the
most appropriate approach for managing
residual risk. A provisional control
effectiveness rating was assigned. This was
combined with the inherent risk rating to
provide a provisional overall risk rating of
Red, Amber or Green for each scenario and
timeline. There were no changes to this
assessment from last financial year’s ratings.
Therefore, there are still eight risks assigned
an Amber rating in at least one scenario and
timeline. Risk management workshops are
held at least bi-annually between the
Executive Chairman and the Senior
Management team, where principal risks,
including climate change, are assessed for
impact and likelihood.
In 2022, we developed our net-zero targets
and strategy, which will mitigate some of the
policy, legal, reputation and technology risks
identified. Our net-zero targets and progress
against those targets also demonstrate to
interested stakeholders that we are taking
climate change seriously. The resulting
strategy will allow us to plan for the transition
to a low-carbon economy, especially around
our business travel, vessels and fuel use.
Table 8: 2023 Progress Against Targets
Target 2021 Baseline Value 2023 Value % Change Comments
2025: engage with the top ten suppliers by
spend on their carbon emissions and
reporting.
Zero suppliers
engaged.
One supplier engaged.
Additionally, ten of our top 30
suppliers have emissions data
published, either on their own
websites, reporting or through
C D P.
100% Achieved
2030: assessing the feasibility of upgrading
vessels’ engines and other equipment,
with lower carbon emission alternatives.
This will form an important part of our
long-term strategy, as it is essential to
reducing our Scope 1 emissions (those
associated directly with our operations,
primarily vessel fuel)
No feasibility
assessment
under-taken.
Work has begun to assess the
feasibility of novel energy system
jack-up barges.
14% In progress
2035: net-zero in absolute Scope 3
emissions from 1: Purchased goods and
services, 4: Upstream transport and
distribution, 5: Waste generated in
operations, 6: Business travel, 7: Employee
commuting and 8: Upstream leased assets.
22,959 tCO
2
e 9,015 tCO
2
e -60.7%
Driven by a large
decrease in our
purchased
goods and
services and
business travel
emissions.
On Track
A 2.4% annual reduction
is needed going
forward.
2050: net-zero emissions in absolute Scope
1 and Scope 3 (2: capital goods and 3:
fuel-related emissions)
58,114 tCO
2
e 68,378 tCO
2
e +17.6%
Due to a 15.5%
increase in fuel
consumed by
our vessels.
Off Track
We will continue to focus
on our 2030 target of
low-emission vessels to
tackle these emissions.
A 4.0% annual reduction
is needed.
35Annual Report 2023
Strategic Report
Metrics and Targets
We acknowledge that we have a
responsibility to reduce our environmental
impact as far as possible, while delivering
sustainable business growth. We have been
measuring our Scope 1 and 2 emissions
since 2014 and our Scope 3 emissions since
2021. Therefore, we selected financial year
2021 as our base year for our emission
reduction targets, as this was the first year of
our full emissions footprint. Our near-term
and net-zero targets were approved by our
Board in December 2022, and the progress
against each of them is outlined in Table 8.
Our ultimate net-zero deadline of 2050 is in
line with the national targets of the UK, UAE
and Qatar. Achieving net-zero requires us to
reduce our CO
2
e emissions by 90% or more
from our baseline year of 2021, offsetting the
remaining 10% in our net-zero year.
Our Scope 2 emissions account for 0.04% of
total emissions and are considered de-
minimis. Therefore, Scope 2 emissions have
been excluded from these net-zero targets.
Each year, we aim to improve the quality of
our data collection to ensure our reporting is
increasingly accurate. We acknowledge that
sometimes this will increase the figures in
some categories, and we will explain these in
our reporting, as required. We believe this
transparency is an important part of being a
responsible business.
Carbon Emissions
In compliance with the UK Government’s
Streamlined Energy and Carbon Reporting,
we have included our emission figures,
energy usage and intensity metrics for this
reporting year. GMS provided relevant data
to a third party which used this data to
calculate our Scope 1, 2 and 3 emissions.
No formal assurance was provided.
Scope 1 emissions result from the direct
combustion of gaseous and transportation
fuels during the reporting year. Scope 2
refers to the emissions associated with
purchased electricity used in our offices.
Scope 3 emissions are the indirect emissions
associated with operating our business.
Although we do not have direct control over
these emissions, we are taking steps to work
with our supply chain and employees to
develop an emission reduction strategy.
Table 9: 2021, 2022 and 2023 Full Carbon Footprint (tCO
2
e) and Progress since Our 2021 Baseline
Target 2023 2022 2021 Progress from 2021 Baseline
Scope 1 54,396 51,860 47,247 >15.1%
Scope 2 (location-based) 26 28 31 <16.1%
Total Scope 3 22,996 26,205 33,827 <32.0%
1. Purchased goods and services 4,811 6,088 11,970 <59.8%
2. Capital goods 2,264 1,141 687 >229.5%
3. Fuel-related Emissions 11,717 10,270 10,180 >15.1%
4. Upstream transportation and distribution 304 5,641 251 >21.1%
5. Waste generated in operations 1,271 667 654 >94.3%
6. Business travel 2,481 2,275 10,027 <75.3%
7. Employee commuting 136 124 57 >138.6%
8. Upstream leased assets 11 – – >10 0.0%
Total All Scopes 77,418 78,093 81,105 <4.5%
Scope 1 and 2 CO
2
e emissions data has been calculated using the GHG Protocol – A Corporate Accounting and Reporting Standard (World
Business Council for Sustainable Development and World Resources Institute, 2004); Greenhouse Gas Protocol – Scope 2 Guidance (World
Resources Institute, 2015); ISO 14064-1 and ISO 14064-2 (ISO, 2018; ISO, 2019a); Environmental Reporting Guidelines: Including Streamlined
Energy and Carbon Reporting Guidance (HM Government, 2019). Scope 3carbon emissions have been calculated in line with the GHG
Protocol Corporate Value Chain (Scope 3) Reporting Standard. There is no data for categories 9-15, as these are not applicable to GMS.
Category 8, upstream leased assets, became applicable in 2023, as we leased a small amount of shared office space in Qatar and Saudi
Arabia. The large reduction in business travel emissions since the baseline is due to the removal of quarantine requirements for offshore staff
due to COVID-19, which decreased the number of hotel nights. The large increase in capital goods in 2023, was due to an increase in
capital expenditure.
36 Gulf Marine Services PLC
PEOPLE AND VALUES
continued
Water
Water is the most important resource on the planet. We know that our workers must always have access to adequate, safe drinking water.
The water on our vessels is either sourced from desalination or single-use plastic bottles. Most water used on board is for drinking or
sanitation services. As our crew are working under extreme temperatures, we do not feel it is safe to set water reduction targets,
since a plentiful supply of water and electrolytes are always needed to reduce the risk of heat stroke or illness.
Energy Usage and Carbon Intensity
We use average carbon intensity data (tCO
2
e/$m revenue) to assess our performance against the Paris Agreement target. Our metrics use
location-based Scope 2 emissions. UK energy use and emissions in 2022 and 2023 were zero.
Table 10: Our 2021–2023 Energy Usage and Carbon Intensity Metrics
Year 2023 2022 2021
Progress from
2021 Baseline
Scope 1 Energy Usage MWh 198,063 190,060 171,165 >15.7%
Scope 2 Energy Usage MWh 63 67 72 <12.0%
Scope 1 and 2 tCO
2
e/$m revenue 360.41 389.47 398.78 <9.6%
Scope 1, 2 and 3 tCO
2
e/$m revenue 512.70 586.48 700.84 <26.8%
Efficiency Actions
We continually assess how to reduce energy use and the associated carbon emissions. This financial year, we have booked flights based on
carbon emissions, choosing lower-carbon flights when prices are similar.
Waste
Waste management is important in minimising our environmental footprint and will contribute to our net-zero journey. Our waste strategy is
centred around four principles: Reduction, Reuse & Recycle, Treatment and Disposal. Our vessels are fitted with separate waste bins for each
type of recyclable material or disposal method, which ensures that we have detailed data on waste materials. Waste is then emptied and
brought to shore, where it can be appropriately managed. It is securely stored before the treatment process, to ensure our waste does not
degrade, spill or get stolen. Due to the nature of our operations, we produce oil waste. Our oil waste is not contaminated or mixed, to ensure
it can be correctly treated and recycled. We send regular reports to the local governing bodies concerning the quality and quantity of oil
waste and its treatment methods. Table 11 summarises our waste produced and the percentage sent for recycling. Although we prioritise
reducing the volumes of waste produced on board our vessels, our customer's crew make up around 75% of the people on board, with our
crew making up the remainder. Therefore, we are unable to set formal waste reduction targets as our influence on this is limited.
Table 11: A Breakdown of the Waste Types from Our Vessels and Offices during the Financial Year 2023
Metric 2023 2022 2021
Total waste produced (tonnes) 6,676 4,572 7,5 6 6
% of waste recycled 58.5% 1.0% 0.0%
37Annual Report 2023
Strategic Report
Social
Values
Core values of Responsibility, Excellence
and Relationships are incorporated into all
aspects of the business. GMS is committed
to ensuring the health and safety of its
employees, subcontractors, clients
and partners and to upholding high
ethical standards.
Responsibility
GMS maintains a firm commitment to
the health, safety, and environmental
stewardship of all individuals and
communities connected to our operations.
We embed safety into everything we
operate and maintain.
Our sense of duty extends across all
business relationships – with employees,
subcontractors, clients, partners,
shareholders and beyond. We believe that
diligently managing risks and caring for
people are fundamental to creating
sustainable, long-term value.
As we explore opportunities for growth, we
remain guided by our foundational priorities
of safety and collective welfare. We strive to
deliver excellence while maintaining our
responsibilities to the people we serve, the
environments we protect, and the societies
that grant us license to operate. Our
commitments are ongoing and endured.
Excellence
At GMS, we pursue continuous improvement
and innovation to better serve client needs.
We build on past learnings and explore
new ideas that can enhance delivery for
our partners.
We hold ourselves to high performance
standards that exceed expectations. We set
ambitious targets around superior quality,
value, and outcomes to challenge our
organisation across all levels to deliver
positive impacts for clients and stakeholders.
Our reputation for integrity and transparency
underscores our business and guides
our conduct. We operate rigorously and
ethically to remain the preferred contractor
for clients who value our commitments to
sustainable quality.
As we explore avenues for future growth, we
stay rooted to our core priorities of service
excellence, stakeholder welfare, and a
continued commitment to delivering value
to our clients. These priorities have been
instrumental in establishing GMS as a
respected player in our sector. We work
diligently to uphold and strengthen that
foundation of trust.
Relationships
At GMS, our people drive our success.
We aim to attract and retain top talent and
empower employees to perform their duties
safely and impactfully.
We champion diversity and provide
environments where our team can thrive
and realise their full potential. We reward
excellence and integrity across all levels of
our organisation.
Core values of Responsibility, Excellence
and Collaborative Relationships anchor our
culture and decision-making. We maintain an
unwavering commitment to the health,
safety, and ethical treatment of employees,
subcontractors clients and partners.
Our people exemplify the spirit of world-class
service, expertise and leadership that makes
GMS a preferred partner. As we plan for the
future, we will continue investing in our
team’s growth across technical skills,
well-being and professional development.
Our vision depends on unleashing their
potential for long-term innovation.
GMS Organisation Structure
GMS maintains a robust yet agile
organisational structure that positions us
for sustained excellence. We have built a
foundation of Core functions in Operations,
Marine and Engineering, Maintenance and
project delivery that directly steer our
technical capabilities and performance.
Enabling support functions underpin and
amplify these strengths by driving strategy,
business development, procurement, finance
and other essential expert services.
This structure strikes an optimal balance –
sharpening our client delivery focus through
Core forces, while enabling teams streamline
the wider business. With seasoned
leadership guiding strategy, our model
fosters seamless collaboration to mobilise
the right talent for new opportunities.
As markets evolve, GMS remains equipped
for sustainable excellence. Our organisational
foundations will drive growth through
client-centric agility, operational discipline,
unified vision, and governance rigor.
Our structure serves as a robust platform
ready for sustainable growth trajectories in
the years ahead.
Turnover
Employee turnover decreased to 12% in
2023 from 16% in 2022. This decrease in the
turnover trend underscores the success of
various measures taken to retain talent such
as competitive day rates for senior officers
based on market benchmarking and
opportunity for growth for high-
performing employees.
Diversity
GMS boasts a global team of 660 personnel
representing 34 countries (2022: 594
personnel representing 36 countries) – with
diversity that fuels our innovation and
connects us closer to the markets we serve.
We leverage experience and specialised
skills to responsibly expand our
operational footprint.
The information on page 38 provides details
of the gender diversity and country of origin
of our personnel as of 31 December 2023.
GMS has a zero-tolerance toward
discrimination either directly or indirectly
on the grounds of gender, race, colour,
nationality, ethnic or racial origins, marital
status, religion or disability. GMS is an equal
opportunities employer committed to
seeking out and retaining the calibre of
human talent that is strategically aligned
with our business growth and performance.
Our business success reflects the quality
and skills of our people. Details of our Equal
Opportunities Policy can be found in the
Governance section of our website.
For cultural and legal reasons, the extent
to which the number of offshore female
personnel can be increased is limited.
Local labour laws, for example, in the
countries in which GMS currently operates
in the Arabian Peninsula region, stipulate
that women cannot work in an inappropriate
environment and hazardous jobs/industries,
meaning the Group is unable to employ them
offshore. As the provisions of the UK
Government’s Equality Act 2010, relating
to gender pay gap disclosure, are not
applicable to GMS, this information has
not been provided.
Employee Engagement
and Welfare
Our 2023 engagement survey garnered an
exceptional 91% participation rate. Results
indicated strong workplace solidarity, with
99% agreeing they can stop unsafe work and
95% feeling empowered and valued in their
roles. Another standout data point showed
99% confidence in our organisation's
commitment to safety-first operations
ensuring all personnel return home safe.
Key insights gained will inform our retention
and professional growth programs.
While 34% of respondents indicated they
may explore external opportunities, we aim
to expand internal mobility, upskilling and
career development initiatives.
While participation levels signal strong
workplace solidarity, closing experience
gaps remains a priority. We strive to foster an
environment where all team members feel
invested in long-term personal success,
enabling collective growth.
38 Gulf Marine Services PLC
Nationalities
34
(2022: 36)
Total Number of Directors
6
(2022: 6)
Total number of Direct Reports
to Executive Team
14
(2022: 21)
Total number
of Executive Team
3
(2022: 4)
Offshore
599
(2022: 539)
Total number of employees
660
(2022: 594)
People as at 31 December 2023
Voluntary turnover
12%
(2022: 16%)
Onshore
61
(2022: 55)
PEOPLE AND VALUES
continued
Male Female
Events like our recent Abu Dhabi headquarters
celebration, recognising employee milestones
from 10-25 years of tenure, reinforce our
united culture. They also highlight
accomplished role models to inspire emerging
talent. As our Company matures and longtime
experts pass their torches, we are committed
to developing the next generation of leaders
equipped to guide our mission.
Performance
The Short-Term Incentive Plan (STIP)
structure was redesigned during 2019 so
that all participants, including executive
Directors, are working towards the same
transparent targets. There is no guaranteed
variable pay awards at GMS, with all pay
being performance-based. The 2023 STIP
measures for employees are set out on
page 68.
This aligns with shareholder interests and
encourages a performance-based culture
to achieve Group objectives.
Succession Planning
GMS strives to provide growth opportunities
by promoting from within whenever possible.
We have structured succession planning
processes based on experience and
capabilities to fill key roles with internal
candidates first.
However, external recruitment is also utilised
for highly specialised or volume hiring needs
unsuitable for backfilling. All recruitment
follows fair and ethical practices aligned
with our values.
In 2023, 34 employees were promoted
across levels, a slight decrease from 37
in prior year. This stabilisation comes after
major pandemic-recovery scale-ups and
indicates prudent pace.
Positively, 20% of onshore promotions
granted last year advanced talented female
staff into expanded responsibilities, signify
efforts to uplift diversity are taking hold.
While external hiring fills key gaps,
our priority is nurturing talent internally.
We believe purposeful development not
only rewards employee investments – it
transforms individual growth into
collective gains.
Learning and Development
GMS aims to ensure that all employees
maintain the relevant technical and regulatory
training required to fulfil their roles. As
seafarers, all crew maintain their relevant
STCW (Standards of Training, Certification
and Watchkeeping – a worldwide convention
that ensures a lateral standard of training is
achieved across all countries in the world)
qualifications that license them to operate
the Group’s vessels, in accordance with
International Maritime Organisation
requirements. For vessels operating within
the offshore Oil & Gas sector, all crew also
complete additional training in areas such as,
but not limited to, offshore safety and
awareness and emergency response.
Ethical Practice
The Group operates responsibly, in
accordance with the formal legal and
regulatory disclosure requirements
expected of a UK listed company.
GMS’ Code of Conduct sets out the basic
rules of the Group. The Code’s purpose is to
ensure work is undertaken safely, ethically,
efficiently, and within the laws of the
countries in which GMS operates. All staff
receive Code of Conduct training as part of
their induction, and the Group’s reputation
and success are dependent on staff putting
the Code into practice in all dealings
with stakeholders.
GMS maintains an awareness of human
rights issues, which is reflected in its suite of
Group policies, including the Anti-Corruption
and Bribery Policy, Anti-Slavery Policy, Social
Responsibility Policy and Whistleblowing
Policy. All onshore employees and offshore
key personnel must complete annual
trainings focused on ethical business
practices mandatory for upholding our
standards globally.
Whistleblowing Reporting Service
An independent reporting service for
whistleblowing is in place. It operates
confidentially, is available 24 hours a day
and is staffed by highly skilled professional
call handlers. This service:
• gives a voice to employees, contractors,
suppliers and supply chain and
other stakeholders;
• helps maintain a culture of openness;
• demonstrates that GMS takes
malpractice seriously;
• provides the Executive team with an
overall temperature of the business; and
• supports employees who speak up.
The Whistleblowing Policy has a strict
non-retaliation commitment to support
any employees who speak up.
635 25
10
4
2
1
5
1
39Annual Report 2023
Strategic Report
475
95
27
2
0
2
35
8
11
5
GMS Employees – By Region Review – 2023
Offshore Onshore
MENA Asia Europe Africa Others (Canada, Venezuela, New Zealand)
Health and Safety
The Group adheres to the highest
international standards of health and safety
in operating its vessels. Our Management
Systems, which oversee all activities and
operations of the Group, are voluntarily
accredited to ISO 9001, ISO 14001, and ISO
45001. Additionally, all vessels operate in
compliance with the International Safety
Management (ISM) Code, meaning the
International Management Code for the
Safe Operation of Ships and for Pollution
Prevention, which is a legal requirement.
Regular assessments of risks stemming from
operations and activities are conducted to
ensure the implementation of mitigation
procedures, which are then communicated
to all employees. Comprehensive training
and employee engagement initiatives ensure
that all employees are well-informed about
operational risks. Annual training programs
are developed and periodically reviewed to
maintain efficacy.
The Group implemented a remote healthcare
system for all of its offshore workforce in
2021, providing access to onshore doctors
and mental health support 24/7.
In 2022, the Group implemented a
Group-wide Marine Enterprise Resources
Planning System to modernise and digitalise
its vessel operations. The system integrates
all aspects of vessel management through
one web-based platform hosted on the
cloud and accessed onshore and offshore.
Management now has access to a
centralised database used to enhance
efficiency and improve decision-making.
In 2023, the Group implemented an online
platform that delivered comprehensive safety
awareness trainings directly to individuals on
board the vessels, ensuring quick
comprehension and immediate application.
With this system, crew that is off rotation
do not miss important and relevant safety
updates that pertains to the Group when
they are back to the vessel. This is achieved
because the system acts as a repository
of safety information, guaranteeing access
to the latest safety information anytime
and anywhere.
There were two medical treatment cases but
no Lost Time Injuries. As a result, the Lost
Time Injury rate improved from 0.1 in 2022 to
zero in 2023. However, because of the other
recordable injuries, our Total Recordable
Injury Rate (TRIR) increased slightly from
0.1 in 2022 to 0.18 in 2023. These levels
continue to be below industry average and in
both cases, they maintained a downward
trajectory when measured over the last five
years. We continue to look at areas of
improvements in our systems and processes
and engaging our employees to ensure that
our offshore operations continue to be as
safe as possible in line with the expectations
of our customers and stakeholders.
Number of
work-related fatalities
0
(2022: 0)
Number of
recordable work-related injuries
2
(2022: 1)
Number of
high-consequence work-related injuries
2
(2022: 0)
Number of hours worked
2,378,216
(2022: 1,934,340)
The information below is intended to provide an overview of the Health and Safety performance over the reporting period.
40 Gulf Marine Services PLC
PEOPLE AND VALUES
continued
Measure Weighting Performance Range (from zero to full pay-out)
EBITDA 30% Less than US$ 75m – Greater than US$ 88.0m
EBITDA margin 15% Less than 53% – Greater than 60%
Securing contract % of 2024 budget revenue 15% Less than 60% – Greater than 85%
Securing contract % of 2025 budget revenue 15% Less than 35% – Greater than 55%
Achieving Leverage <4.0 (25%) 25% After 31 December 2023 – On or before 30 June 2023
Total 100%
The following results highlight key performance measures and their respective outcomes.
1
EBITDA* <US$ 75m US$ 75m–US$ 85m US$ 85.1m–US$ 88.0m
Score 0% 0.1– 24%* 24.1– 30%*
2
EBITDA Margin* <53% 53–57% 57.1– 6 0.0%
Score 0% 4.1- 12%* 12.1–15%*
3
Securing contracts % of 2024
budget revenue* <60% 60–80% 80.1– 85%
Score 0% 0.1–12%* 12.1–15%*
4
Securing contracts % of 2025
budget revenue* <35% 35–50% 50.1– 55%
Score 0% 0.1–12%* 12.1–15%*
5
Achieving Leverage < 4.0
After
31 December 2023
Between
1 July – 31 December 2023
On or Before
30 June 2023
Score 0% 15 –5%* 25%*
* Zero to full pay-out is not linear as bands operate within the performance ranges shown.
Governance
For Governance related considerations, please refer to the Governance section of this Annual Report.
Performance Evaluation Framework for 2023
As approved by the Remuneration Committee, the following table outlines the key performance measures and their respective weightings in
determining the overall performance of the Group for 2023.
41Annual Report 2023
Strategic Report
42 Gulf Marine Services PLC
The governance review in the pages that follow, including the reports
of the Board and its Audit and Risk, Nomination and Remuneration
Committees, summarise our work in these areas. Particular aspects
in relation to the past year are set out below:
1. We appointed Haifa Al Mubarak to the Board as an additional
independent non-executive Director. Haifa is based in the UAE and
has extensive business experience in the Arabian Peninsula region.
She was appointed following the retirement of Rashed Al Jarwan
from the Board. Her appointment, which was on merit, comes as a
first step towards building a gender diversified Board of Directors.
2. The diversity of the members of our Board, in terms of
background skill sets, experience and geographic location
ensures the right level of debate, challenge and encouragement
for management in relation to Group’s strategy after taking
account of the important factors in this. It also allows the
monitoring of that implementation in a way that enables
adjustments to be made as and when appropriate.
3. We held a full two-day strategy meeting at the Group’s headquarters
in Abu Dhabi. This brought together the Board and Senior
Management in a productive forum discussing longer-term plans
for the business. It included presentations and discussion on each
key aspect of the Group’s operations, recent and future industry
developments and ongoing and future strategic plans. The
conclusions reached are helping inform our continual planning for the
business with a focus on shareholder value and stakeholder interests.
4. We continued our engagement with stakeholders including
employees, lenders and shareholders to understand their views and
take these into account in the decisions we make. This sometimes
requires us to balance the interests of different stakeholder groups to
reach the most appropriate overall judgements. These judgements
are reached only after taking account of all relevant factors with the
aim of promoting success of the Group in the way that enhances
stakeholder interests on an ongoing basis.
5. The Audit and Risk Committee oversaw the Group’s 2022 annual
accounts and audit of these, the first following appointment of
KPMG as the Group’s new auditors following an audit tender. This
achieved both an improved process and earlier reporting of the
Group’s annual results and annual report. Learnings from this
process have been incorporated in the work on the 2023 annual
accounts and audit such that the Group has been able to finalise
and publish its annual results earlier again and enable plans to be
made to move to quarterly reporting in the second half of 2024.
I would like to thank Jyrki Koskelo as Chair of the Committee,
along with Alex Aclimandos as our Chief Financial Officer and
KPMG as our external auditors together with their teams. A
summary of this Committee’s work commences on page 51.
6. Our Remuneration Committee oversaw a transition in
remuneration in the Group from payment of no bonuses in
respect of 2022 (due to the imperative of achieving our leverage
target) and the lapse of the 2022 Long Term Incentive Plan (LTIP)
awards due to the leverage underpin not having been achieved to
a position where bonus payments have been awarded for the
2023 financial year. The Committee decided to defer further
awards of LTIPs until these could again be seen as valuable
incentives by participants in general and intends to consider
such awards again later this year. A summary of the Committee’s
work commences on page 57.
7. The Nomination Committee led the recruitment of an additional
independent non-executive Director which resulted in the
appointment of Haifa Al Mubarak to the Board. This followed a
process of consideration of a number of candidates based on
agreed search criteria. It also included interviews with all
members of the Nomination Committee including a face-to-face
meeting in London with the Senior Independent non-executive
Director and Company Secretary. The Committee also reviewed
the Senior Management team and developments within this.
8. The Board concluded that I should remain in the role of Executive
Chairman for the time being. This reflects the success of the
business, the ongoing development of the management team and
the challenges in attracting an external candidate of the appropriate
calibre to take over an executive role in the UAE of a London listed
UK PLC. Nonetheless, the Board intends to keep this under review
as the year progresses and intends that the Chairman and Chief
Executive role be split at the time appropriate for the Group.
9. The Board has continued to consider avenues for ongoing
enhancement to shareholder value. This includes plans to initiate
the payment of dividends at the appropriate time. Recently
approved by the Board, our residual dividend policy seeks to
strike a balance between funding growth initiatives and providing
returns to shareholders. Management is currently evaluating the
timing for its implementation, a consideration that has recently
In my commentary featured in the Chairman's Review on page 2, I highlighted the success our
business achieved in the past year. We witnessed year-over-year growth in revenues, utilisation, and
day rates, reflecting the resilience and strength of our operations. Notably, we executed successful
strategies to reduce our leverage ratio, reaffirming our unwavering commitment to deleverage and
prioritise value for shareholders above all else. As a company, we have evolved into a more agile
and adaptive entity, ensuring our continued relevance in the ever-changing landscape. This
transformation positions us well for the future, where we remain dedicated to navigating
challenges with versatility and delivering sustained value to our stakeholders.
The governance backdrop to this has been our ongoing focus on strategy, risk management
and internal control. This process reflects the Board’s continuing belief that sustained business
success is achieved by good governance; that shareholder value benefits from internal and
external transparency; and that the interests of all stakeholders are best served by ethical business
practices. Whilst this has always been the approach taken by this Board, it is gratifying to see this
now reflected in continuing improvement in financial performance.
CHAIRMAN’S INTRODUCTION