Global Ship Lease Confident on Prospects of Mid-Sized and Smaller Container Ships’ Market
Global Ship Lease, Inc., a containership charter owner, announced today its unaudited results for the three months ended March 31, 2018.
First Quarter Highlights
– Reported operating revenues of $36.1 million for the first quarter 2018
– Reported net income for common shareholders for the first quarter 2018 of $4.2 million, the same as normalized net income
– Generated $23.6 million of Adjusted EBITDA(1) for the first quarter 2018
– On February 20, 2018, announced agreement to an extension of our charter with OOCL for the OOCL Qingdao, a 2004-built, 8,063 TEU containership. The extension commences in direct continuation of the current charter with effect from March 11, 2018, at a fixed rate of $14,000 per day. Earliest redelivery is now January 1, 2019, with latest redelivery March 15, 2019 (at charterer’s option)
– On March 1, 2018, announced agreement to acquire a 2005-built, 2,800 TEU containership for $11.3 million. Following delivery, which is expected to be during the second quarter of 2018, once the existing charter terminates, the vessel will commence charter employment with CMA CGM for a period of 12 months at a fixed rate of $9,000 per day.
Ian Webber, Chief Executive Officer of Global Ship Lease, stated, “In the first quarter, we continued to maximize the value of our contract coverage with top-tier counterparties by maintaining full employment across our fleet of mid-sized and smaller containerships. As we have successfully extended charters that support our strong cashflows, we are beginning to capture the benefits of a marked strengthening that is underway in the market for mid-sized and smaller vessels. We have also returned to growth with our recently agreed acquisition of a 2,800 TEU feeder vessel at an attractive price with a pre-arranged charter to CMA CGM, demonstrating both the value of our close relationship with an industry leader and our confidence in the long-term dynamics of the mid-sized and smaller vessel classes.”
Mr. Webber continued, “The long-term market trends driving the appreciation in mid-sized and smaller containerships continue to be robust, with limited vessel ordering, a strong global economy, and idle capacity of the global fleet at a very low level of less than 1.5%. As we continue to pursue attractive growth opportunities, we remain confident that Global Ship Lease’s track record of high-quality operations, our strong contracted charter coverage, and our stable balance sheet put us in an excellent position to create lasting shareholder value in a strengthening market.”
Operating Revenues and Utilization
The fleet generated operating revenues from fixed-rate time charters of $36.1 million in the three months ended March 31, 2018, down $3.5 million or 8.9% on operating revenues of $39.6 million for the comparative quarter in 2017. The reduction in revenue is mainly due to lower rates on the renewals of the charters of (i) the 2002-built Julie Delmas and the 2003-built Delmas Keta, effective September 2017, (ii) the 2005-built GSL Tianjin effective October 2017 and January 2018 and (iii) the 2004-built OOCL Qingdao effective March 2018, offset by 33 days less offhire, due mainly to fewer drydockings. There were 1,620 ownership days in the quarter, the same as in the comparative quarter. In the first quarter 2018, there were 17 days offhire, of which 13 were for a scheduled drydocking, giving an overall utilization of 99.0%. In the first quarter 2017, there were 50 days offhire, 47 of which were for three scheduled drydockings, giving an overall utilization of 96.9%.
There was one regulatory drydocking in the three months ended March 31, 2018; one further regulatory drydocking is planned for the year. There were four regulatory drydockings in 2017, three of which were in the first quarter.
Vessel Operating Expenses
Vessel operating expenses, which include costs of crew, lubricating oil, spares and insurance, were $10.5 million for the three months ended March 31, 2018, up 1.1% from $10.4 million for the three months ended March 31, 2017. The average cost per ownership day for the three months ended March 31, 2018 was $6,498, an increase of $72 per day, or 1.1%, from $6,426 in the three months ended March 31, 2017. The increase is due to higher crew costs from a larger than normal number of crew changes offset by lower costs for insurance premiums and claim deductibles.
Depreciation for the three months ended March 31, 2018 was $8.2 million, compared to $9.6 million in the three months ended March 31, 2017, with the reduction due to the effect of lower book values for a number of vessels following impairment write downs in 2017.
The Company’s accounting policies require that tangible fixed assets such as vessels are reviewed individually for impairment in case of trigger events or changes in circumstances to assess whether their carrying amounts are recoverable.
In January 2018, the Company agreed with CMA CGM to extend the charter on GSL Tianjin by eight to 12 months (at the charterer’s option) at a fixed rate of $11,900 per day, commencing January 26, 2018. In February 2018, the Company agreed with OOCL to extend the charter of OOCL Qingdao to between January 1, 2019 and March 15, 2019 (at the charterer’s option) at a fixed rate of $14,000 per day, commencing March 11, 2018. These extensions triggered the performance of an impairment test on the two vessels. No impairment was identified.
General and Administrative Costs
General and administrative costs incurred were $1.9 million in the three months ended March 31, 2018, compared to $1.2 million in the three months ended March 31, 2017. The increase is mainly due to higher staff costs and professional fees.
Other Operating Income
Other operating income in the three months ended March 31, 2018 was $6,000, compared to $42,000 for the three months ended March 31, 2017.
As a result of the above, Adjusted EBITDA was $23.6 million for the three months ended March 31, 2018, down from $28.0 million for the three months ended March 31, 2017.
Debt at March 31, 2018 totaled $414.8 million, comprising $360.0 million outstanding on our 9.875% notes due 2022 and $54.8 million under the new secured term loan, both of which were closed in October 2017 as part of a re-financing. The net proceeds, together with cash on hand, were used to refinance our previous 10.000% notes due 2019. In addition, all outstanding borrowings under both the previous revolving credit facility and the previous secured term loan were repaid and terminated.
Debt at March 31, 2017 totaled $426.4 million, comprising $365.8 million outstanding on our previous 10.000% Notes, $39.2 million on the revolving credit facility and $21.4 million on the secured term loan.
Interest expense for the three months ended March 31, 2018, was $10.8 million, down $0.2 million on the interest expense for the three months ended March 31, 2017 of $11.0 million, mainly due to a slightly lower amount of bond outstanding and a slightly lower interest rate.
Interest income for the three months ended March 31, 2018 was $0.3 million and was $0.1 million for the three months ended March 31, 2017.
Taxation for the three months ended March 31, 2018 and 2017 was not material.
Earnings Allocated to Preferred Shares
The Series B preferred shares, issued on August 20, 2014, carry a coupon of 8.75%, the cost of which for the three months ended March 31, 2018 was $0.8 million, the same as in the comparative quarter.
Net Income Available to Common Shareholders and Normalized Net Income
Net income available to common shareholders for the three months ended March 31, 2018 was $4.2 million. For the three months ended March 31, 2017, net income was $6.8 million. This year-over-year decrease is mainly due to lower revenue following charter renewals, offset by lower depreciation.
Normalized net income for the three months ended March 31, 2018 and 2017 was the same as that reported.Full Report
Source: Global Ship Lease