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, 1999
CENARGO INTERNATIONAL PLC
(Translation of registrant's name into English)
Puttenham Priory
Puttenham
Surey 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
Set forth herein is the quarterly report of Cenargo
International Plc ("Cenargo" or the "Company") for the quarter
ended December 31, 1998, consisting of a Management's Discussion
and Analysis of Financial Condition and Results of Operations and
Unaudited Consolidated Financial Statements for the three month
period ended December 31, 1998.
2
CENARGO INTERNATIONAL PLC
QUARTERLY REPORT
31 DECEMBER 1998
3
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 and deep sea dry cargo shipping, as well
as the movement of surface and air freight and the management of
freight logistics.
Results of Operations
Three months ended December 31, 1998 compared to three months
ended December 31, 1997.
Operating Revenues
Operating revenues increased in the first quarter ended
December 31, 1998 (the "1999 quarter") by $3.4 million to
$26.4 million compared to $23 million in the first quarter ended
December 31, 1997 (the "1998 quarter"). The increase comprises a
$7.1 million decrease in charter hire revenues, a $9.4 million
increase in ferry service revenues and a $1.1 million increase in
logistics and other revenues. The increase in ferry service
revenues was due to the inclusion of Belfast Freight Ferries
("BFF") results (acquired as part of the Scruttons Plc Group in
the second quarter of 1998) and the inclusion of charter hire
from the Dawn Merchant (RoPax vessel) employed under a short term
time charter during the 1999 quarter. The decrease in charter
hire revenue represents the loss of charter hire previously
generated by nine of the Companies deep sea vessels disposed of
in the first and second quarters of 1998 and the first quarter of
1999 and the inclusion of $1.1 million liquidated damages
received from the shipyard for the late delivery of the Brave
Merchant. The increase in logistics and other revenue was due to
the inclusion of revenue from Duncan International ("Duncan")
acquired in May 1998.
Operating Expenses
Vessels and other operating costs increased in the 1999 quarter
by $4.5 million to $19.1 million compared to $14.6 million in the
1998 quarter. Primarily as a result of the inclusion of BFF and
Duncan results in the 1999 quarter offset by decreased deep sea
operating costs as a result of the nine vessels sold.
Depreciation for the 1999 quarter has decreased by $1.3 million
to $1.8 million compared to $3.1 million in the 1998 quarter,
which represents a reduction of depreciation on vessels sold off
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set by the inclusion of depreciation on BFF vessels in the 1999
quarter. Amortisation of dry docking and special survey costs
for both 1999 and 1998 quarters was $0.3 million reflecting an
increase due to the inclusion of BFF vessels off set by a
decrease due to the vessels sold.
General administrative expenses for the 1999 quarter increased by
$0.8 million to $3.4 million compared to $2.6 million in the 1998
quarter representing inclusion of BFF and Duncan costs in the
1999 quarter. Primarily as a result of these developments total
operating expenses increased by $4.0 million to $24.4 million for
the 1999 quarter compared to $20.4 million for the 1998 quarter.
Net operating income
As a result of the foregoing factors, net operating income
decreased by $0.6 million to $2.0 million for the 1999 quarter
compared to operating income of $2.6 million for the 1998
quarter.
Other income/expenses
Interest income increased by $1.2 million to $1.2 million for the
1999 quarter compared to $0 million for the 1998 quarter due to
increased interest income from cash deposits from the proceeds of
the disposal of vessels.
Interest expense increased by $2.2 million to $5.0 million for
the 1999 quarter compared to $2.8 million for the 1998 quarter.
The increase was due to the increased interest costs as a result
of the issue of the Ship Mortgage Notes and the inclusion of
interest on BFF vessel capital leases.
The gain on disposal of assets was $2 million in the 1999 quarter
compared to $9.6 million in the 1998 quarter, the gain in the
1999 quarter represents the profit on sale of the Merchant Prince
and the Moondance.
Net Income
As a result of the foregoing net income decreased by $6.1 million
to $0.4 million for the 1999 quarter compared to $6.5 million for
the 1998 quarter. EBITDA generated was $6.2 million for the 1999
quarter compared to $15.7 million for the 1998 quarter.
Liquidity and capital resources
Total shareholders equity at December 31, 1998 was $53.6 million
compared to $63.3 million at December 31, 1997. The decrease of
$9.7 million is represented by net loss of $10.0 million and a
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cumulative translation adjustment of $0.3 million on translation
of sterling based subsidiary companies.
Long term debt at December 31, 1998 consists of $172.4 million of
9.75% First Priority Ship Mortgage Notes and $51.2 million
currently drawn down from an $85 million facility to finance
building contracts for two further RoPax vessel new buildings
together with other secured debt and obligations under capital
leases.
At December 31, 1998 the Company had cash and cash equivalents of
$104.4 million compared with $12.5 million at December 31, 1997.
Cash and cash equivalents increased by $91.9 million principally
as a result of disposition of vessels and proceeds from the
offering of the Ship Mortgage Notes. At December 31, 1998
$70.7 million is held in escrow and blocked deposit accounts.
$15.7 million to fund the delivery instalment on the RoPax new
building Brave Merchant, delivered on 26th January 1999,
$53.8 million to secure the Ship Mortgage Notes on the sale of
mortgaged vessels and $1.2 million to secure other guarantees.
Free cash balances total $33.7 million at December 31, 1998.
SEGMENT ANALYSIS
Irish Sea
The results of the first quarter have been adversely affected by
bad weather and engine breakdowns to one of the Company's vessels
and also to a vessel, which was chartered in to provide extra
capacity during the pre Christmas period. The chartered in
vessel was immediately off hired. The Company's own vessel was
dry-docked. The Company has loss of hire insurance covering the
period that the vessel will be out of service amounting to
approximately US$8,000 per day after the first fifteen days.
The second of the new RoPax vessels, the Brave Merchant, was
delivered from the yard on 26th January 1999. Penalties for late
delivery amounting to approximately US$1.8 million were received
from the yard on delivery which have offset the cost arising from
the late start of the new service, which was originally scheduled
for 1st January 1999. An additional sum of approximately
US$0.8 million has, as expected, been disputed by the yard on the
grounds that this element of the delay in the delivery was due to
"force majeure". The US$0.8 million has been paid into an escrow
account and will now result in a High Court Action in London.
The cost of the legal action is covered by insurance. We do not
believe that the yard has a sustainable "force majeure" claim.
The new Liverpool/Dublin service started on 15th February 1999.
There was a minor technical problem resulting in damage to one of
the new vessels. As a result the vessel had to be taken out of
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service for 10 days to effect repairs. This vessel has now
returned to the service and volumes and the freight rates being
achieved are in line with expectations.
Logistics
Results for the quarter are marginally less than expected due to
set up costs attributable to the new warehousing leased in the
Heathrow area. Otherwise the results from the Company's
logistics businesses are in line with budget.
The completion of the purchase of Eaglescliffe continues to be
delayed by the bureaucracy of the Ministry of Defence. We are
hopeful that completion of the purchase will take place within
the next three months.
Deep Sea
Deep sea markets generally remain depressed. New building prices
continue to fall. There has been some improvement in the short-
term charter rates recently but this is mainly attributable to
short term grain movements. We see no improvement in the
fundamentals and remain of the view that the markets will fall
further.
Ferrimaroc
The results for the quarter are marginally below budget. Since
the end of December 1998 we have seen a significant improvement
in the volume of passengers, cars and freight being carried on
the Ferrimaroc service and the shortfall against budget has been
made-up by end February 1999. Our competitor, Limadet, has
changed schedule in February and now sails later than Ferrimaroc
thereby reducing their competitive effect.
FORWARD LOOKING STATEMENTS
This release contains forward looking statements (as defined in
Section 21E of the Securities Exchange Act of 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. 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, 1998, 1997
(Expressed in US $000)
1998 1997
Operating revenues
Charterhire income 2,945 10,335
Ferry service income 19,123 9,769
Logistics and other income 4,452 3,300
Brokers' commission (133) (396)
______ ______
26,387 23,008
______ _______
Operating expenses
Vessel and other operating costs 19,145 14,644
Depreciation 1,822 3,094
Amortisation of drydocking 320 388
Goodwill amortisation 23 23
General and administrative exps 3,399 2,588
Foreign exchange (gain) loss (305) (378)
______ ______
24,404 20,359
______ _______
Operating income 1,983 2,649
Other income (expense)
Interest income 1,260 29
Interest expense (5,031) (2,824)
Gain on disposal of assets 2,004 9,593
______ _______
(1,767) 6,798
______ _______
Income before income taxes 216 9,447
Income taxes 195 (2,871)
Minority Interests (39) (68)
______ _______
Net income 372 6,508
______ _______
Additional financial information
EBITDA (note 4) 6,152 15,747
EBITDA to interest expense, net 1.6x 5.6x
See accompanying notes to unaudited consolidated
financial statements
8
Unaudited Consolidated Balance Sheets
As of December 31, 1998, 1997
(Expressed in US$000)
1998 1997
Assets
Current assets
Cash and cash equivalents 33,763 12,549
Cash held in escrow and blocked deposits 70,669 -
Trade accounts receivable 17,697 10,634
Other receivables 3,678 15,721
Due from joint ventures 455 4,182
Inventories 1,077 1,598
Prepaid expenses and accrued income 3,043 610
_______ ______
130,382 45,294
Land and buildings 12,641 8,308
Vessels and equipment 92,139 169,579
Vessels under construction 85,665 52,153
Investment in joint ventures - 108
Loans to joint ventures 4,039 -
Other investments 584 -
Goodwill, net 1,368 912
Deferred charges, net 7,271 1,395
Pension fund debtor 5,101 -
_______ _______
Total assets 339,190 277,749
_______ _______
Liabilities and shareholders' equity
Current liabilities
Current maturities of long-term debt 2,241 14,265
Capital lease obligations 3,330 -
Trade accounts payable 10,921 8,950
Accrued expenses 3,914 3,002
Other creditors 2,343 3,588
_______ _______
22,719 29,805
Long-term liabilities
Long-term debt 58,028 154,235
Ship mortgage notes 172,415 -
Capital lease obligations 14,620 -
Other creditors 1,913 2,856
Deferred taxation 15,857 27,554
_______ _______
Total liabilities 285,552 214,450
_______ _______
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Shareholders' equity
Share capital 21 -
Cumulative translation adjustment 313 (7)
Retained earnings 53,304 63,306
_______ ______
Total shareholders' equity 53,638 63,299
_______ ______
Total liabilities and shareholders'
equity 339,190 277,749
_______ _______
See accompanying notes to unaudited consolidated
financial statements
10
Unaudited Consolidated Statements of Cash Flows
Three Months Ended December 31, 1998, 1997
(Expressed in US$000)
1998 1997
Operating Activities
Net income (loss) 372 6,508
Amortisation of drydocking and deferred
charges 443 388
Amortisiation of ship mortgage notes
discount 70 -
Depreciation 1,822 3,094
(Gain) loss on disposition of fixed
assets (2,004) (9,593)
Foreign exchange (gain) loss (1,304) (378)
Goodwill amortisation 23 23
(Increase) decrease in pension debtor 35 -
(Increase) decrease in trade debtors (450) (2,024)
(Increase) decrease in other debtors 2,214 (12,218)
(Increase) decrease in stock 727 -
(Increase) decrease in prepayments and
accrued income 859 270
Increase (decrease) in trade creditors (234) 355
Increase (decrease) in other creditors (9,485) 417
Increase (decrease) in accrued expenses (8,135) (755)
Increase (decrease) in deferred tax
liability (196) 2,871
______ ______
Net cash (used) in operating activities (15,243) (11,042)
______ ______
Investing activities
Additions to vessels and equipment - (197)
Additions to vessels under construction 8,550) (10,079)
Additions to land and buildings - -
Purchase of subsidiary companies (259) -
Proceeds from sale of capital assets 66,550 20,638
_______ _______
57,741 10,362
_______ _______
Financing activities
Proceeds from long-term debt 8,550 9,244
Repayment of long-term debt - (4,296)
Due to joint ventures 1,587 (493)
Repayments of capital leases (1,074) (39)
Proceeds from capital leases - -
Deferred charges paid (68) (259)
_______ _______
8,995 4,157
_______ ______
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Net increase (decrease) in cash and
cash equivalents 51,493 3,477
Cash and cash equivalents at beginning
of period 52,939 9,072
_______ _____
Cash and cash equivalents at end of
period 104,432 12,549
_______ ______
See accompanying notes to unaudited consolidated
financial statements
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Notes to Unaudited Consolidated Financial Statements
December 31, 1998, 1997
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, 1998 and 1997. 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,
1998 and 1997 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, 1997 $ (47) $ - $56,798
Net income (loss) 40 - 6,580
_______ ___ _______
Balance at December 31, 1997 $ (7) $ - $63,306
======= === =======
Balance at September 30, 1998 $ 384 $21 $52,932
Net income (loss) (71) - 372
_______ ___ _______
Balance at December 31, 1998 $ 313 $21 $53,304
======= === =======
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3. Contingent liability
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.
4. EBITDA
EBITDA is defined as net income before taxes, interest
expense, interest income, depreciation, amortisation of dry
docking and special survey costs, amortisation of goodwill
and minority interest. EBITDA includes profits and losses on
disposition of vessels which management believes to be a
significant part of the Company's operating activities and
thus included within the EBITDA calculation.
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FLEET LIST AT DECEMBER 31, 1998
Year
Vessel Name Vessel Type Capacity Built Flag
MERCHANT PRINCIPAL Multipurpose 17,944 dwt
Container 504 TEU 1977 Hong Kong
MERCHANT PREMIER Multipurpose 17,944 dwt
Container 504 TEU 1977 Hong Kong
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 RoRo 49 cars 1983 Bahamas
93 trailer units
SAGA MOON RoRo 50 cars 1984 British
72 trailer units (Gibraltar
)
SPHEROID RoRo 53 trailer units 1971 British
(Isle of
Man)
MISTRAL * Passenger/Car 2,386 passengers 1981 Bahamas
Ferry 700 cars
SCIROCCO C Passenger/Car 1,315 passengers 1974 Bahamas
Ferry 296 cars
30 trailer units
DAWN MERCHANT C RoPax 250 passengers 1998 British
164 trailer units (Isle of
Man)
BRAVE MERCHANT C RoPax 250 passengers expected British
164 trailer units Nov 98 (Isle of
Man)
HULL 289 RoPax 250 passengers expected Bahamas
164 trailer units 2000
15
HULL 290 RoPax 250 passengers expected Bahamas
164 trailer units 2000
C Collateral vessel securing 9-3/4% Ship Mortgage Notes.
* Operated under an operating lease.
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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 25, 1999 By: /s/ Michael Hendry
___________________
Michael Hendry
Chairman
17
02442001.AQ1