FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of March 2000
CENARGO INTERNATIONAL PLC
(Translation of registrant's name into English)
Puttenham Priory
Puttenham
Surrey GU3 1AR
United Kingdom
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will
file annual reports under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
Indicate by check mark whether the registrant by furnishing
the information contained in this Form is also thereby furnishing
the information to the commission pursuant to Rule 12g3-2(b)
under the Securities Exchange Act of 1934.
Yes No X
INFORMATION CONTAINED IN THIS FORM 6-K REPORT
Enclosed is the earnings report of Cenargo International plc for
its first fiscal quarter of 2000, ended December 31, 2000.
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CENARGO INTERNATIONAL PLC
QUARTERLY REPORT
DECEMBER 31, 1999
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Cenargo, an English company, is a diversified international
transportation group specialising in European freight and
passenger ferry services, international ship owning and
chartering, the movement of surface and airfreight and the
management of freight logistics.
RESULTS OF OPERATIONS
Three months ended December 31, 1999 compared to three months
ended December 31, 1998.
Operating Revenues
Operating revenues increased in the first quarter ended December
31, 1999 (the '1999 quarter') by $15.6 million to $41.9 million
compared to $26.3 million in the first quarter ended December 31,
1998 (the '1998 quarter'). The increase comprises a $2.8 million
decrease in charter hire revenues, a $16.6 million increase in
ferry service revenues and a $1.8 million increase in logistics
and other revenues. The increase in ferry service revenues was
mainly due to the inclusion of Merchant Ferries' new Liverpool -
Dublin RoPax service which commenced operation in late February
1999, and the inclusion of revenues from Norse Irish Ferries
Limited ('NIF') acquired on October 1, 1999. Decrease in charter
hire revenue represents the loss of charter hire previously
generated by the Company's deepsea vessels disposed of in the
1998 quarter and the end of fiscal 1999. The increase in
logistics and other revenue was due to the inclusion of revenue
from Freightwatch Limited ('Freightwatch') acquired on March 2,
1999.
Operating Expenses
Vessel and other operating costs increased in the 1999 quarter by
$10.1 million to $29.2 million compared to $19.1 million in the
1998 quarter, primarily as the result of the inclusion of NIF and
Freightwatch results and the operating costs of the Liverpool -
Dublin RoPax service in the 1999 quarter offset by decreased
deepsea operating costs as a result of the vessels sold.
Depreciation for the 1999 quarter has increased by $0.9 million
to $2.7 million compared to $1.8 million in the 1998 quarter,
which represents depreciation on the two RoPax vessels delivered
to the Company in September 1998 and January 1999, the ferry
Mistral purchased by the Company in July 1999 together with
depreciation on the assets and equipment of NIF in the 1999
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quarter offset by the reduction of depreciation on deepsea
vessels sold. Amortisation of dry-docking and special survey
costs for the 1999 quarter increased by $0.3 million to $0.6
million compared to $0.3 million in the 1998 quarter due to
increased amortisation of dry-docking on the vessels acquired,
offset by reduced amortisation of deep sea vessels sold. Goodwill
amortisation increased in the 1999 quarter by $0.4 million to
$0.4 million as a result of amortisation of goodwill on the
acquisition of NIF acquired October 1, 1999.
General administrative expenses for the 1999 quarter increased by
$0.4 million to $3.8 million compared to $3.4 million in the 1998
quarter primarily due to the inclusion of Freightwatch and NIF
costs in the 1999 quarter.
Foreign exchange loss for the 1999 quarter has increased by $1.3
million to $1.0 million compared to a gain of $0.3 million in the
1998 quarter. The majority of the losses represents unrealised
non-cash losses on re-translation of monetary sterling-based
assets and liabilities within the US Dollar-reporting subsidiary
companies.
Primarily as a result of these developments, the total operating
expenses increased by $13.4 million to $37.8 million for the 1999
quarter compared to $24.4 million for the 1998 quarter.
Net Operating Income
As a result of the foregoing factors, net operating income
increased by $2.2 million to $4.2 million for the 1999 quarter
compared to $2 million for the 1998 quarter.
Other Income/Expenses
Interest income decreased by $1.0 million to $0.3 million for the
1999 quarter compared to $1.3 million for the 1998 quarter. In
the 1998 quarter the majority of interest income was attributable
to cash deposits from the proceeds of the sale of vessels which
were largely disbursed in July and October 1999 on the purchase
of vessels and on October 1, 1999 on the acquisition of NIF and
Eaglescliffe.
Interest expense increased by $0.1 million to $5.1 million for
the 1999 quarter compared to $5.0 million for the 1998 quarter.
The breakage costs on termination of capital leases in the 1999
quarter relates to the termination of capital leases for the
vessels River Lune and Saga Moon which were purchased by the
Company in October 1999 from escrowed funds.
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Net Income (loss)
As a result of the foregoing, net income decreased by $1.9
million to a net loss of $1.7 million for the 1999 quarter
compared to net income of $0.2 million for the 1998 quarter.
EBITDA generated was $8.1 million for the 1999 quarter compared
to $6.1 million for the 1998 quarter.
LIQUIDITY AND CAPITAL RESOURCES
Total shareholders' equity at December 31, 1999 was $43.7 million
compared to $53.6 million at December 31, 1998. The decrease of
$9.9 million is represented by a net loss for the twelve months
of $9.8 million and a cumulative translation adjustment of $0.1
million on translation of sterling-based subsidiary companies.
Long term debt at December 31, 1999 consists of $172.7 million of
9-3/4% First Priority Ship Mortgage Notes ("Notes") and $68.3
million currently drawn down from a $85 million facility to
finance building contracts for two further RoPax vessel
newbuildings together with other secured debt and obligations
under capital leases.
At December 31, 1999 the Company had cash and cash equivalents of
$7.8 million compared with $104.5 million at December 31, 1998.
Cash and cash equivalents decreased by $96.7 million primarily as
a result of the acquisition of NIF, the vessels Mistral, Saga
Moon and River Lune, the purchase of Eaglescliffe, the delivery
instalment paid on delivery of the RoPax vessel newbuilding in
January 1999 and funding an increase in trade accounts receivable
primarily as a result of the Company's new Liverpool - Dublin
RoPax ferry service. The Company's free cash at December 31, 1999
was $7.2 million, after taking into account the semi-annual
interest payment on the Notes of $8.5 million in December 1999.
SEGMENT ANALYSIS
Irish Sea
Regarding the Irish Sea, the quarter includes the results of NIF
for the first time. NIF was acquired on 1 October 1999 and is
operated between Liverpool and Belfast with two chartered-in
RoPax vessels.
All the Company's four services on the Irish Sea performed very
strongly during the quarter. Trade was very strong pre-
Christmas and the millennium, and consequently all the services
had strong carryings despite very heavy gales particularly during
November which adversely affected the reliability of the two RoRo
services. The two RoPax services performed very well mainly due
to the greater size and power of the vessels concerned.
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The ETU's (equivalent trailer units) carried during the quarter
were as follows:
Liverpool - Belfast 31643
Liverpool - Dublin 25608
Heysham - Belfast 32088
Heysham - Dublin 14743
The new berth in Dublin should be completed by the end of March
2000. This will bring significant benefit to the Heysham-Dublin
service as the new berth will mean that this service can arrive
in Dublin at 0600 hrs. This was the schedule previously
maintained by the service until the Company started the Liverpool
Dublin service which took this prime slot forcing the Heysham
Dublin service to berth post 0930 hrs. Commercially the 0930
hrs arrival is not liked by customers as the trailers are
arriving too late. The new berth should allow the Company to
attract business lost to other operators and also enable the
Company to charge 'A' tariffs again rather than the lower 'B'
tariffs which the Company had to accept to retain business.
The new river berth in Liverpool should be completed by end of
the first quarter 2000.
The second quarter 2000 has started very slowly mainly due to
overstocking by business pre-Christmas and the millennium. There
were also severe gales throughout the month. February has been
much stronger and back in line with budget.
The Company has introduced rate increases for all its customers.
Generally speaking these have been accepted without too much loss
of business. The Company expects the overall increase to be
approximately 3%. The full benefit of this has been adversely
affected by the weakness of the Euro. Much of the revenues on the
two Dublin services are collected in Euros, which has continued
to weaken against Sterling and the US Dollar. The Company
estimates that the monthly shortfall of revenues because of the
weakness of the Euro to be approximately $0.1 million.
The Company is concentrating on rationalising costs in its Irish
Services following the acquisition of NIF. Annualised overhead
savings of approximately $0.5 million have already been achieved.
The Company is now examining the purchase of the two chartered in
RoPax vessels currently operated on the Norse Irish service. The
potential savings from owning these two vessels compared to
paying their current chartered in rate are substantial.
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Logistics
Eaglescliffe was purchased in October 1999. The Company has
been actively seeking long term contracts for the site with some
success. A contract has recently been won from Rothman for the
storage and distribution of finished products. To date the
Company has only handled packaging materials for Rothman. This
marks a major boost for the site emphasising the high security
maintained there. A five year contract has also recently been
won from Virgin Vie, the Virgin cosmetics company, for pick, pack
and distribution of their products. This contract is the first
the Company has won in this area and will hopefully lead to other
similar business from internet suppliers looking for similar
pick, pack and distribution services from a central storage base
in the UK.
Ferrimaroc
Ferrimaroc, the passenger, car and freight service operated by
the Company between Southern Spain and Eastern Morocco, has had
its usual quiet quarter post summer. Results are in line with
budget. The Company is facing more intense competition in the
future following the start up of a new joint service on the route
by Limadet (Moroccan), Trasmediterranea (Spanish) and Comarit
(Moroccan). The Company has not yet been able to reach any
agreement with the new joint service. During the quarter the
service carried passengers and cars, which approximated a 38%
market share.
Head Office
Head office EBITDA of $1.4 million comprises $0.7 million head
office costs and $0.7 million unrealised foreign exchange loss
following translation of the Company's Sterling accounts into US
Dollars.
New Vessels
The third new RoPax vessel was delivered from the Spanish yard on
9 March 2000. The government partial court settlement due on
delivery of the ship has been received. The vessel has been
time chartered to Norfolk Line (part of Maersk) for 18 months,
with two further nine-month options. The ship is to go onto a
new cross channel service being started by Norfolk Line between
Dover and Dunkerque. Norfolk Line has expressed interest in
time chartering the fourth vessel which will be delivered in June
2000.
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YEAR 2000 COMPUTER PROBLEM
The Company announced prior to December 31, 1999 that the tasks
identified in its Year 2000 program had been completed and that,
as a result, all reasonable steps have been taken to achieve Year
2000 readiness. No significant disruption to the Company's
business occurred on the date change roll over to January 1,
2000.
The overall objective of its Year 2000 program is to minimise the
chance of disruption to the services the Company provides to its
customers up to, during and after the turn of the millennium. For
the Company systems, equipment and services obtained from third
parties we have sought and received details of Year 2000
compliance from those parties and where appropriate obtained
details of testing and work done. Risks that the Company deemed
particularly crucial to business processes resulted in its own
testing of the relevant systems and equipment. The Company
intends to take appropriate further action including re-testing
of its systems and rechecking of its contingency plans during of
2000.
The completion of its program helped the Company to confirm that
it believed that an acceptable state of readiness had been
reached for the turn of the millennium. But, given the complexity
of the problem it is not possible for any organisation to
guarantee that no Year 2000 problem will remain because at least
some level of failure may still occur.
EUROPEAN MONETARY UNION - EURO
On January 1, 1999, the eleven member countries of the European
Union established fixed conversion rates between their existing
sovereign currencies, and adopted the Euro as their new common
currency. The Euro is currently trading on currency exchanges
and the legacy currencies will remain legal tender in
participating countries for a transition period between
January 1, 1999 and January 1, 2002. During the transition
period, non-cash payments can be made in the Euro and parties can
elect to pay for goods and services and transact business using
either Euro or a legacy currency. Between January 1, 2002 and
July 1, 2002 the participating countries will introduce Euro
notes and coins and will withdraw all legacy currencies so that
they will no longer be available.
Although the United Kingdom is currently not participating in the
Euro, the Company's businesses trade extensively within the Euro
Zone. The Company will continue to evaluate all pricing,
currency risk, accounting, tax, governmental, legal and
regulatory issues as guidance becomes available. Based on
current information the Company does not expect that Euro
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conversion will have a material adverse affect on its business or
financial condition.
FORWARD LOOKING STATEMENTS
This release contains forward looking statements (as defined in
Section 21E of the Securities Act 1934, as amended) which reflect
management's current views with respect to certain future events
and performance, including statements relating to multi-purpose
vessel charters and Irish sea freight ferry volumes and rates,
logistics and cash. The following factors are among those that
could cause actual results to differ materially from the forward
looking statements, which involve risks and uncertainties, and
that should be considered in evaluating any such statements:
changes in the political environment in Northern Ireland and
Eire, Spain and Morocco, changes in the level of competition in
the Irish Sea and Mediterranean, changes in the ability to
provide a regular scheduled service on the Irish sea and the
Company's Mediterranean service.
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Unaudited Consolidated Statements of Income
Three Months Ended December 31, 1999, 1998
(Expressed in US $000)
1999 1998
Operating revenues
Charterhire income - 2,945
Ferry service income (Note 3b) 35,744 19,123
Logistics and other income 6,242 4,452
Brokers' commission - (133)
_____________ _____________
41,986 26,387
_____________ _____________
Operating expenses
Vessel and other operating costs 29,251 19,145
Depreciation 2,753 1,822
Amortisation of drydocking 557 320
Goodwill amortisation 452 23
General and administrative exps 3,802 3,399
Foreign exchange (gain) loss 969 (305)
_____________ _____________
37,784 24,404
_____________ _____________
Operating income 4,202 1,983
Other income (expense)
Interest income 266 1,260
Interest expense (5,080) (5,031)
Breakage costs on termination
of capital leases (1,236) -
Gain on disposal of assets 133 2,004
_____________ _____________
(5,917) (1,767)
_____________ _____________
Income (loss) before income taxes (1,715) 216
Income taxes 450 195
Minority Interests (19) (39)
_____________ _____________
Net income (loss) (1,284) 372
_____________ _____________
Additional financial information
EBITDA (note 4) 8,097 6,152
11
EBITDA to interest expense,
net (excluding finance lease
breakage costs) 1.7x 1.6x
See accompanying notes to unaudited consolidated financial
statements
12
Unaudited Consolidated Balance Sheets
As of December 31, 1999, 1998
(Expressed in US$000)
1999 1998
Assets
Current assets
Cash and cash equivalents 7,186 33,763
Cash held in escrow and blocked deposits 590 70,669
Trade accounts receivable 30,217 17,697
Other receivables 2,397 3,678
Due from joint ventures 132 455
Inventories 1,854 1,077
Prepaid expenses and accrued income 6,071 3,043
_____________ _____________
48,447 130,382
Land and buildings 18,704 12,641
Vessels and equipment 142,719 92,139
Vessels under construction 71,235 85,665
Loans to joint ventures 4,083 4,039
Other investments 565 584
Goodwill, net 30,933 1,368
Deferred charges, net 8,168 7,271
Pension fund debtor 5,385 5,101
_____________ _____________
Total assets 330,239 339,190
_____________ _____________
Liabilities and shareholders' equity
Current liabilities
Current maturities of long-term debt 1,587 2,241
Capital lease obligations 593 3,300
Trade accounts payable 9,753 10,921
Accrued expenses 4,823 3,204
Accrued interest - ship mortgage notes 710 710
Other creditors 4,703 2,343
_____________ _____________
22,169 22,719
_____________ _____________
Long-term liabilities
Long-term debt 73,917 58,028
Ship mortgage notes 172,687 172,415
Capital lease obligations 3,172 14,620
Other creditors 1,993 1,913
Deferred taxation 12,650 15,857
Total liabilities _____________ _____________
286,588 285,552
_____________ _____________
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Shareholders' equity
Share capital 21 21
Accumulated other comprehensive income:
cumulative translation adjustment 184 312
Retained earnings 43,446 53,305
_____________ _____________
Total shareholders' equity 43,651 53,638
_____________ _____________
Total liabilities and
shareholders' equity 330,239 339,190
_____________ _____________
See accompanying notes to unaudited consolidated financial
statements
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Unaudited Consolidated Statements of Cash Flows
Three Months Ended December 31, 1999, 1998
(Expressed in US$000)
1999 1998
Operating Activities
Net income (loss) (1,284) 372
Amortisation of drydocking and
deferred charges 768 443
Amortisation of ship mortgage
notes discount 68 70
Depreciation 2,753 1,822
(Gain) loss on disposition of
fixed assets (133) (2,004)
Foreign exchange (gain) loss (387) (1,304)
Goodwill amortisation 452 23
(Increase) decrease in pension debtor (54) 35
(Increase) decrease in trade debtors (101) (450)
(Increase) decrease in other debtors 3,231 2,214
(Increase) decrease in stock (58) 727
(Increase) decrease in prepayments
and accrued income (5,211) 859
Increase (decrease) in trade creditors 158 (234)
Increase (decrease) in other creditors 519 (9,485)
Increase (decrease) in accrued expenses (8,013) (8,135)
Increase (decrease) in deferred
tax liability (450) (196)
_____________ _____________
Net cash (used) in operating activities (7,742) ( 15,243)
_____________ _____________
Investing activities
Additions to vessels and equipment (410) -
Additions to vessels under construction (8,550) (8,550)
Additions to land and buildings (6,000) -
Purchase of subsidiary companies,
net of cash acquired (34,732) (259)
Proceeds from sale of capital assets 133 66,550
_____________ _____________
(49,559) 57,741
_____________ _____________
Financing activities
Proceeds from long-term debt 8,550 8,550
Repayment of long-term debt (73) -
Due to joint ventures 451 1,587
Repayments of capital leases (12,994) (1,074)
Proceeds from capital leases - -
Deferred charges paid (184) (68)
_____________ _____________
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(4,250) 8,995
_____________ _____________
Net increase (decrease) in cash
and cash equivalents (61,551) 51,493
Cash and cash equivalents at
beginning of period 69,327 52,939
_____________ _____________
Cash and cash equivalents at end
of period 7,776 104,432
_____________ _____________
See accompanying notes to unaudited consolidated financial
statements
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Notes to Unaudited Consolidated Financial Statements
December 31, 1999, 1998
1. Interim accounting policy
In the opinion of management of Cenargo International Plc
(the "Company") the accompanying unaudited consolidated
financial statements include all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly
in accordance with accounting principles generally accepted
in the U.S. the financial position of the Company and the
results of operations and cash flows for the three months
ended December 31, 1999 and 1998. Although the Company
believes that the disclosure in these financial statements is
adequate to make the information presented not misleading,
certain information and footnote information normally
included in interim financial statements prepared in
accordance with generally accepted accounting principles has
been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission.
Results of operations for the three months ended December 31,
1999 and 1998 are not necessarily indicative of what
operating results may be for the full year.
2. Changes in shareholder's equity
Cumulative Ordinary
translation share Retained
adjustment capital earnings
Balance at September 30, 1998 $ 384 $ 21 $ 52,933
Net income (loss) (72) - 372
_________ ________ ________
Balance at December 31, 1998 $ 317 $ 21 $ 53,305
========= ======== ========
Balance at September 30, 1998 $ 428 $ 21 $ 44,730
Net income (loss) (244) - (1,284)
_________ ________ ________
Balance at December 31, 1999 $ 184 $ 21 $ 43,446
========= ======== ========
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3. Contingent liabilities and assets
(a) The Company insures the legal liability risks for its
shipping activities with the Steamship Mutual, UK Mutual
and North of England mutual protection and indemnity
associations. As a member of mutual associations, the
company is subject to calls payable to the associations
based on the Company's claims record in addition to the
claims record of all other members of the associations.
A contingent liability exists to the extent that the
claims records of the members of the associations in the
aggregate show significant deterioration which result in
additional calls on the members.
(b) The Company has entered a claim for damaged in the
amount of Spanish Pesetas 3,800,000 ($25.5 million)
against Ministeria de Comunicaciones, Transportes y
Medio Ambiente now Ministreria De Fomento relating to
the company being prevented from operating a ferry
service between Spain and Morocco. The Company is
actively pursuing the case. The Company has an agreement
with the Spanish government that one billion pesetas
will be paid on each of the deliveries of RoPax three
and four as partial settlement of this claim.
4. Segment Information
The Company has adopted FASB Statement No. 131, "Disclosures
about Segments of Business Enterprise and Related
Information". The Company is managed in four operating
segments: International Shipowning and Operating, Irish Sea
Ferries, Ferrimaroc and Logistics and Other Activities. The
International Shipowning and Operating segment includes
certain central overhead costs, central financing costs and
other general corporate income and expenditure.
The Company utilises EBITDA as a measure of segmental
performance. The Company defines EBITDA as net income (loss)
before taxes, interest expense, interest income,
depreciation, provision for impairment in value of vessels,
amortisation of dry-docking and special survey costs,
amortisation of goodwill, gain or loss from joint ventures
and minority interest.
Certain financial information is presented below: amounts are
in thousands of US Dollars.
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International
Shipowning Irish Sea Logistics
and Chartering Ferries Ferrimaroc and Other Total
Three Months to December 31, 1999
Revenue - 33,809 1,935 6,242 41,986
EBITDA (1,422) 9,775 (543) 287 8,097
Tangible assets 11,745 195,541 16,672 8,698 232,656
Capital expenditures - 8,550 - 6,410 14,960
Three months to December 31, 1998
Revenue 2,812 17,112 2,011 4,452 26,387
EBITDA 1,881 5,721 (1,239) (211) 6,152
Tangible assets 29,492 156,738 3,033 1,182 190,445
Capital expenditures - 8,550 - - 8,550
EBITDA for all reportable segments differs from consolidated
income (loss) before income taxes reported in the
consolidated statements of income as follows: amounts are in
thousands of US Dollars:
Three months Ended December 31
1999 1998
EBITDA 8,097 6,152
Reconciling items:
Depreciation (2,753) (1,822)
Amortisation of goodwill (452) (23)
Amortisation of drydocking (557) (320)
Net interest expense (6,050) (3,771)
______________ _______________
(Loss) income before income taxes (1,715) 216
______________ _______________
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FLEET LIST AT DECEMBER 31, 1999
Year
Vessel Name Vessel Type Capacity Built Flag
MERCHANT BRAVERY C RoRo 40 cars 1978 Bahamas
100 trailer units
MERCHANT BRILLIANT C RoRo 40 cars 1979 Bahamas
100 trailer units
MERCHANT VENTURE C RoRo 55 trailer units 1979 British (Isle of
Man)
RIVER LUNE C RoRo 49 cars 1983 Bahamas
93 trailer units
SAGA MOON C RoRo 50 cars 1984 British (Gibraltar)
72 trailer units
SPHEROID RoRo 53 trailer units 1971 British (Isle of
Man)
MISTRAL C Passenger/ 2,386 passengers 1981 Bahamas
Car Ferry 700 cars
SCIROCCO C Passenger/ 1,315 passengers 1974 Bahamas
Car Ferry 296 cars
30 trailer units
DAWN MERCHANT C RoPax 250 passengers 1998 British (Isle of
136 trailer units Man)
BRAVE MERCHANT C RoPax 250 passengers 1999 British (Isle of
136 trailer units Man)
NORTHERN MERCHANT* RoPax 250 passengers 2000 British
136 trailer units
HULL 290 RoPax 250 passengers expected Bahamas
136 trailer units 2000
LAGAN VIKING** RoPax 330 passengers 1997 Italian
180 trailer units
MERSEY VIKING** RoPax 330 passengers 1997 Italian
180 trailer units
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C Collateral vessel securing 9-3/4% Ship Mortgage Notes
* Operated under an operating lease.
** Operated under time charters expiring in September 2001 and January 2002
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
CENARGO INTERNATIONAL PLC
(registrant)
Dated: March 14, 2000 By: /s/ Michael Hendry
___________________
Michael Hendry
Chairman
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02442004.AA6