Tufton Oceanic Assets Limited
Interim Report and Condensed Interim Financial
For the period ended 31 December 2020
Chairman's Statement 3
Board Members 6
Investment Manager's Report 8
Principal and Emerging Risks and Uncertainties 20
Interim Report of the Directors 21
Condensed Financial Statements
Statement of Comprehensive Income 25
Statement of Financial Position 26
Statement of Changes in Equity 27
Statement of Cash Flows 28
Notes to the Financial Statements 29
Corporate Information 45
• During the financial period, Tufton Oceanic Assets Limited (the "Company") had a profit of US$21.9m, or US$0.086 per Share.
• Encouraged by the resilient performance in 2020 and newly increased charter coverage, in January 2021 the Company raised its target annual dividend to $0.075 per Share from $0.07 per Share. The Company therefore paid a 3Q20 dividend of $0.0175 and a 4Q20 dividend of $0.01875 per Share.
• The NAV per Share increased from US$0.931 as at 30 June 2020 to US$0.982 as at 31 December 2020. The NAV total return for the financial period was 9.3%.
• As at 26 February 2021, the Company's Shares traded at a premium of 1.7% to ex-dividend 31 December 2020 NAV.
• The Company divested Bear, a crude oil tanker. This was the fourth vessel divested by the
Company. The return greatly exceeded the Company's target.
• During the financial period, the Company agreed to acquire five vessels of which two were delivered during the financial period and three were delivered after the period.
• As at 31 December 2020, all delivered vessels were employed on fixed rate charters. Vessels expected to come off charter in the first half of 2021 represent circa ("c.") 3.5% of NAV, so the portfolio remains largely insulated from geopolitical and macroeconomic shocks.
• EBITDA-weighted average length of charter was c. 2.8 years based on expected charter duration as at 31 December 2021.
• The Company's fleet had no commercial idle time (voids) across the fleet during the financial period.
• The Company agreed to acquire a chemical tanker after the financial period. With the acquisitions announced in January 2021, the Company is fully invested but nonetheless the Investment Manager continues to identify an attractive pipeline of opportunities across a range of the Company's target sectors.
• The Investment Manager took active measures to expedite crew relief on the Company's vessels. As a result, only c.6% of the crew on board the Company's vessels were overdue for rotation at the end of December 2020 compared to c.40% in July 2020. The International Maritime Organization ("IMO") estimates that globally 400,000 seafarers (c.40%) were overdue for rotation as at December 2020.
• The average energy efficiency of the Company's fleet in 2020, as measured by the Energy Efficiency Operational Indicator ("EEOI"), improved by c.2% compared to 2019.
• On 5 January 2021, the Company announced that the long-planned ownership change at the Investment Manager, where senior management took a larger stake and a family office bought out most other shareholders, was completed.
On behalf of the Board, I present the Interim Financial Statements of the Company for the period ended 31 December 2020.
Since I last communicated with you in September 2020 there has been a great deal of change in the global economic markets which have largely had a positive impact on shipping, although this has varied between individual sectors which is discussed in the Investment Manager's Report on pages 14 to 16.
It has been an active second half of 2020 and that activity has continued into 2021 with the Company now fully invested as of early February 2021. During the financial period, the Company agreed to acquire five vessels of which two were delivered during the period and three were delivered after the period. The fleet as at the end of the financial period consisted of three handysize bulkers, seven containerships and seven tankers, and one handysize bulker and two containerships pending delivery. There is a further breakdown of the portfolio in the Investment Manager's Report starting on page 13. After the financial period, the Company agreed to acquire a chemical tanker in January 2021 which will be delivered in April, bringing the total number of vessels to twenty-one.
The NAV per Share increased from US$0.931 as at 30 June 2020 to US$0.982 as at 31 December 2020. The NAV total return for the financial period was 9.3%.
The global economy started recovering from the impacts of Covid-19 from the end of 1H20. The market for containerships and bulkers has recovered but capacity in floating storage returning to the market remains an overhang for tankers.
The Company benefited from diversification between different segments of shipping. The tanker market was strong in the first half of 2020 while the containership market was weak. The roles were reversed in the second half of 2020.
The Investment Manager has mitigated the impact of the global humanitarian crisis of crew members stranded on board commercial vessels due to Covid-19 related travel restrictions. The Investment Manager took active measures to expedite crew relief on the Company's vessels. As a result, only c.6% of the crew on board the Company's fleet were overdue for rotation at the end of December 2020 compared to c.40% in July 2020. The IMO estimates that globally 400,000 seafarers (c.40%) were overdue for rotation as at December 2020.
As at 31 December 2020, the Company's NAV was US$250.43m being US$0.982 per Share (US$0.931 per Share as at 30 June 2020). The NAV total return over the period was 9.3%. The Company declared a profit of US$21.9m or US$0.086 per Share for the period.
The Investment Manager forecasts that the dividend cover1 over the next 12-18 months will average c.1.5x. The EBITDA-weighted average charter length is c.2.8 years.
1 EBITDA less capex less debt service, divided by dividends for the period
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