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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 September, 1999
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
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INFORMATION CONTAINED IN THIS FORM 6-K REPORT
Set forth herein is a copy of the report to shareholders
for the quarter ended June 30, 1999 containing certain unaudited
financial information and a Management's Discussion and Analysis
of Financial Condition and Results.
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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 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 JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED
JUNE 30, 1998.
OPERATING REVENUES
Operating revenues increased in the third quarter ended June 30,
1999 (the '1999 quarter') by $0.3 million to $27.5 million
compared to $27.2 million in the third quarter ended June 30,
1998 (the '1998 quarter'). The increase comprises a $5.6 million
decrease in charter hire revenues, a $4.6 million increase in
ferry service revenues and a $1.3 million increase in logistics
and other revenues. The increase in ferry service revenues was
due to the inclusion of Merchant Ferries new Liverpool - Dublin
RoPax service which commenced operation in February 1999. The
decrease in charter hire revenue represents the loss of charter
hire previously generated by three of the Companies deep sea
vessels disposed of in the first quarter of 1999. The increase
in logistics and other revenue was due to the inclusion of
revenue from Duncan International Trading Limited ("Duncan")
acquired in May 1998 and Freightwatch Limited ("Freightwatch")
acquired on 2 March 1999.
OPERATING EXPENSES
Vessel and other operating costs increased in the 1999 quarter by
$3.1 million to $22.6 million compared to $19.5 million in the
1998 quarter, primarily as a result of the inclusion of Duncan
and Freightwatch results and the operating costs of the Liverpool
- - Dublin RoPax service in the 1999 quarter off set by decreased
deep sea operating costs as a result of the three vessels sold.
Depreciation for the 1999 quarter has decreased by $0.3 million
to $2.5 million compared to $2.8 million in the 1998 quarter,
which represents a reduction of depreciation on vessels sold off
set by the inclusion of depreciation on the two RoPax vessels
delivered to the company in September 1998 and January 1999.
Amortisation of dry docking and special survey costs for the 1999
quarter increased by $0.3 million to $0.7 million compared to
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$0.4 million in the 1998 quarter due to costs associated with the
Company's Ferrimaroc Service.
General administrative expenses for the 1999 quarter decreased by
$0.6 million to $2.8 million compared to $3.4 million in the 1998
quarter due to reductions in Head Offices costs in the 1999
quarter partially off set by the inclusion of Freightwatch and
Duncan costs in the 1999 quarter.
Foreign exchange loss for the 1999 quarter has decreased by $0.2
million to $0.5 million compared to $0.7 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 US Dollar reporting subsidiary companies.
Primarily as a result of these developments total operating
expenses increased by $2.4 million to $29.2 million for the 1999
quarter compared to $26.8 million for the 1998 quarter.
NET OPERATING INCOME (LOSS)
As a result of the foregoing factors, net operating result
decreased by $2.1 million to a net loss of $1.7 million for the
1999 quarter compared to operating income of $0.4 million for the
1998 quarter.
OTHER INCOME/EXPENSES
Interest income increased by $0.6 million to $0.9 million for the
1999 quarter compared to $0.3 million for the 1998 quarter due to
increased interest income mainly attributable to cash deposits
from the proceeds of the sale 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 Company's 9-3/4 % First Priority Ship
Mortgage Note ("Notes") in June 1998.
The exceptional charge of $4.6 million in the 1998 quarter
represents a non recurring non cash charge based on the mark to
market value of certain interest rate swap contracts relating to
floating rate facilities repaid from the proceeds of the issuance
of the Notes.
NET INCOME (LOSS)
As a result of the foregoing net loss decreased by $0.7 million
to $3.8 million for the 1999 quarter compared to $4.5 million for
the 1998 quarter. EBITDA generated was $1.6 million for the 1999
quarter compared to $3.7 million for the 1998 quarter.
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NINE MONTHS ENDED JUNE 30, 1999 COMPARED TO NINE MONTHS ENDED
JUNE 30, 1998
OPERATING REVENUES
Operating revenues increased in the nine months ended June 30,
1999 (the '1999 period') by $1.3 million to $79.9 million
compared to $78.6 million in the nine months ended June 30, 1998
(the '1998 period'). The increase comprises a $20.6 million
decrease in charter hire revenues, a $16.1 million increase in
ferry service revenues and $5.8 million increase in logistics and
other revenues. The increase in ferry service revenues was due
the inclusion of Belfast Freight Ferries ('BFF') results
(acquired as part of the Scruttons Plc Group in the second
quarter of 1998), the inclusion of charter hire from the Dawn
Merchant (RoPax vessel) employed under a short term time charter
during the first quarter of 1999 and income from Merchant Ferries
Liverpool - Dublin RoPax service which commenced operations in
February 1999. The decrease in charter hire revenue represents
the loss of charter hire previously generated by nine of the
Company's deep sea vessels disposed of in the first and second
quarters of 1998 and the first quarter of 1999 and the inclusion
of $1.3 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 the
results of Duncan acquired in May 1998 and Freightwatch
acquired on 2 March 1999.
OPERATING EXPENSES
Vessel and other operating costs increased in the 1999 period by
$6.9 million to $61.0 million compared to $54.1 million in the
1998 period, primarily as a result of the inclusion of BFF,
Duncan and Freightwatch results and the operating costs of the
Liverpool - Dublin Ropax service in the 1999 period off set by
decreased deep sea operating costs as a result of the nine
vessels sold.
Depreciation for the 1999 period has decreased by $2.0 million to
$6.4 million compared to $8.4 million in the 1998 period, which
represents a reduction of depreciation on vessels sold off set by
the inclusion of depreciation on BFF vessels for the whole of the
1999 period and the two RoPax vessels delivered in September 1998
and January 1999. Amortisation of dry docking and special survey
costs has increased by $ 0.2 million to $1.4 million for the 1999
period compared to $1.2 million for the 1998 period, reflecting
an increase due to the inclusion of BFF vessels and increased
costs associated with the Company's Ferrimaroc Service off set by
a decrease due to the vessels sold.
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General and administrative expenses was $9.5m in both 1999 and
1998 periods representing the inclusion of BFF, Duncan and
Freightwatch costs for the 1999 period offset by reductions in
Head Office costs.
Foreign exchange loss increased by $0.5 million to a loss of $0.9
million in the 1999 period compared to $0.4 million in the 1998
period, primarily reflecting the unrealised losses in the 1999
period on re-translation of sterling monetary assets and
liabilities within US Dollar reporting subsidiary companies.
Primarily as a result of these developments total operating
expenses increased by $5.8 million to $79.5 million for the 1999
period compared to $73.7 million for the 1998 period.
NET OPERATING RESULT
As a result of the foregoing factors, net operating income
decreased by $4.7 million to $0.3 million for the 1999 period
compared to $5.0 million for the 1998 period.
OTHER INCOME/EXPENSES
Interest income increased by $2.5 million to $3.1 million for the
1999 period compared to $0.6 million for the 1998 period due to
increased interest income mainly attributable to cash deposits
from the proceeds of the sale of vessels.
Interest expense increased by $6.6 million to $14.8 million for
the 1999 period compared to $8.2 million for the 1998 period.
The increase was due to the increased interest cost as a result
of the issue of the Notes and the inclusion of interest on BFF
vessels' capital leases for the whole of the 1999 period.
The exceptional charge of $4.6 million in the 1998 quarter
represents a non recurring non cash charge based on the mark to
market value of certain interest rate swap contracts relating to
floating rate facilities repaid from the proceeds of the issuance
of the Notes.
The gain on disposal of assets was $2.0 million in the 1999
period compared to $14.1 million in the 1998 period. The gain in
the 1999 period represents the profit on sale of the Merchant
Prince and the Moon Dance and the gain in the 1998 period
represents the profit on disposal of nine of the company's deep
sea vessels.
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NET INCOME (LOSS)
As a result of the foregoing net result decreased by $10.7
million to a net loss of $6.1 million for the 1999 period
compared to net income of $4.6 million for the 1998 period.
EBITDA generated was $10.3 million for the 1999 period compared
to $28.8 million for the 1998 period.
LIQUIDITY AND CAPITAL RESOURCES
Total shareholders equity at June 30, 1999 was $47.0 million
compared to $61.9 million at June 30, 1998. The decrease of
$14.9 million is represented by a net loss of $14.6 million and a
cumulative translation adjustment of $0.3 million on translation
of sterling based subsidiary companies.
Long term debt at June 30, 1999 consists of $172.5 million of
9.75% First Priority Ship Mortgage Notes and $59.8 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 June 30, 1999 the company had cash and cash equivalents of
$74.5 million compared with $63.8 million at June 30, 1998. Cash
and cash equivalents increased by $10.7 million primarily as a
result of the disposition of vessels. The Company's free cash at
June 30, 1999, was US$19.5 million. This was after taking into
account the semi-annual interest payment on the Notes of US$8.5
million in June 1999. Cash held in escrow or blocked deposits
amounted to US$55 million, which included US$53.8 million
relating to the sale proceeds of vessels serving as collateral
for the Notes sold since the date of the issuance of the Notes.
On July 30, 1999, US$16 million of these proceeds was used to
purchase the Mistral based on the Company's current performance
the Company currently estimate that free cash at September 30,
1999, before taking into account the purchase of NIF, will be at
least US$25 million.
SEGMENT ANALYSIS
IRISH SEA
The Company started its new Liverpool/ Dublin service on February
19, 1999. The results of the Company's Irish Sea operations, and
therefore the Company as a whole, are distorted by the start up
costs relating to this new service amounting to $1.8 million
being offset against the trading results of the Company's Irish
Sea services over Quarters 2, 3 and 4 of fiscal 1999.
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Set out below is a restatement of EBITDA on the basis that the
full amount of the 1.8 million pounds sterling start up costs relating
to the Liverpool/ Dublin service were charged against Quarter 2 results
only.
This restatement shows the improvement from Quarter 2 to Quarter
3 as the new service's trading results improve.
Restated EBITDA in $ millions
Q1 Q2 Q3 TOTAL
Irish Sea
As reported 4.2 0.9 0.4 5.5
Restated 4.2 (0.9) 1.3 4.6
Company Total
As reported 5.7 3.0 1.6 10.3
Start up costs 5.7 1.2 2.5 9.4
LIVERPOOL/ DUBLIN SERVICE
The freight volumes on the new Liverpool/ Dublin service have
continued to rise steadily. Month by month to the end of July
1999 they have been as follows:
Units
February 1999 (month of start up) 993
March 4,050
April 5,069
May 5,686*
June 6,045
July 6,328
* plus additional 1,422 units for 5th week in May
The Company has now established a regular and reliable service
between Dublin and Liverpool. Westbound night time sailings are
now regularly full on mid-week sailings. Day time sailings are
operating at about 50% of capacity and the Company is now
concentrating attention on building up the volumes on these day
time sailings. Freight rates are higher than budgeted, due, in
part, to a more favourable freight mix. This is attributable to
a higher percentage of the better paying driver accompanied
trailers than we had anticipated.
Volumes in July 1999 equate to over 82,000 units on an annualised
basis. The Company's target is an annualised rate of 92,000 units
by the end of September 1999.
After a very slow start, tourist passenger numbers are now
beginning to increase. This follows an intensive advertising
campaign. Passenger carryings in July 1999 were approximately
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2,100. The Company expects to carry over 3500 passengers in
August 1999.
HEYSHAM/ DUBLIN SERVICE
As the Company stated in its report for the Second Quarter of
1998, it was not able to secure additional berthing slots in
Dublin at the time that the new Liverpool/Dublin service started.
This was despite promises from the Dublin Port Authority to
provide additional facilities. As a result the Company was not
able to offer prime arrival and sailing times to and from Dublin
on the Heysham/Dublin service. The Company is pleased to announce
that the Port of Dublin has agreed to build a further linkspan.
This is adjacent to our existing terminal and is scheduled to be
completed by the end of November 1999. This new facility will
enable the Company to offer prime slots again and win back the
freight that it had lost. More importantly, it will enable the
Company to reintroduce higher 'A' tariff rates, rather than the
lower 'B' tariff rates which the Company was forced to charge
through not being able to offer a prime time service.
Largely as a result of the berthing difficulties, unit carryings
in Quarter 3 were only 14,269 units, compared to 21,488 unit
carryings in Quarter 2.
HEYSHAM/ BELFAST SERVICE
During Quarter 3, this service carried 31,317 equivalent freight
units. Historically, July in Belfast has been marked by civil
unrest during the so-called "marching" season. This year the
marching season has passed with relatively little disturbance.
The service continues to operate satisfactorily.
LIVERPOOL/ BELFAST SERVICE
The Company has recently announced that it has reached an
agreement to acquire Norse Irish Ferries ("NIF") which operates
an established RoPax service between Liverpool and Belfast.
During the calendar year 1998, NIF carried approximately 116,000
equivalent trailer units. The Company has commenced a Consent
Solicitation of the holders of its Notes relating to this
proposed acquisition.
It has been the Company's stated intention to operate a
Liverpool/ Belfast route, thereby completing its strategic plan
for a matrix of the services cross-linking four major Irish Sea
ports. This final route should enable the Company to achieve
significant cost benefits and synergies.
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DUTY FREE
Duty Free shopping on Irish Sea ferry services was abolished in
the European Union at the end of June 1999. The impact on the
Company is minimal as the Company is predominantly a freight
carrier and has not relied on duty free sales. The impact on
other Irish Sea ferry operators has, however, been significant.
The Company believes that passenger numbers overall have dropped
by 20% in July as a result of the withdrawal of Duty Free.
This, together with the loss of profitability following the
cessation of duty free, should lead to a need to raise passenger
fares and freight rates in order to compensate for the loss of
revenue and profitability. The Company believes it would benefit
from such an increase.
FERRIMAROC
As previously reported Ferrimaroc is a seasonal business. The
summer season is now under way and the business has seen strong
July passenger carryings which have continued in August 1999. The
service is being covered this year by two vessels, the Mistral
and Scirocco, compared to only the Mistral last year. There has
been increased competition, with the Moroccan line, Limadet,
operating with two ships, compared to one last year. The
increase in capacity has, however, been offset by a significant
increase in passengers and cars transiting the port of Almeria.
Based on Almeria Port statistics, passenger and car carryings to
Morocco transiting the port of Almeria have increased by 22% and
27%, respectively, in the period June 15, 1999 to August 2, 1999
compared to the same period last year. Ferrimaroc's market share
over this same period has been approximately 50%.
On July 30, 1999 the Company purchased Mistral for US$16 million
using funds on deposit with the trustee for the holders of the
Notes. The Mistral had previously been on an operating lease.
The Company expects the benefit to EBITDA to be approximately
US$3.2 million in a full year.
There have been reports that the border between Algeria and
Morocco is about to be opened. The Company believes this should
lead to a further significant increase in the number of cars and
passengers through Nador and Almeria.
LOGISTICS
Draft contracts have now been agreed for the purchase of
Eaglescliffe with the present owners, the UK Ministry of Defence.
Contracts are expected to be exchanged during the first week of
September 1999. The Company intends then to be able to market
the use of the site to customers seeking long term logistic
arrangements at Eaglescliffe.
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DEEP SEA
The company has sold the last of its deep sea vessels. The
Merchant Premier and Merchant Principal were delivered to their
buyers on August 12, 1999. The selling price was $1.1 million
per vessel. The book loss on the sale is approximately US$ 3.1
million.
YEAR 2000 COMPUTER PROBLEM
The Year 2000 computer problem arises because many computer
hardware and software systems use only two digits to represent
the year. As a result, these systems and programs many not
process dates beyond 1999, which may cause errors in information
or systems failures resulting in widespread commercial
disruption. The operations of the Company depend on the computer
systems and other equipment, with embedded computer chips, of the
Company as well as systems and equipment of key suppliers,
customers, banks, advisors and other dependencies. This exposes
the Company to the risk of business interruption in the event
that there is a failure of the Company's computer systems or
equipment or failure by other parties to remedy their own Year
2000 issues.
The Company has formed a Year 2000 project team. The team
comprises Senior Management representatives from each business
within the company and is co-ordinated by an appointed Year 2000
Project Manager. The team meets on a regular basis to assess
progress of the project against a project timetable and the
Project Manager reports regularly to the Company Board.
The Company has developed an action plan to minimise the threat
of business disruption from Year 2000 non-compliance related
issues. The Company has largely completed the inventory and
assessment phases of the project and remediation, testing and
implementation phases of the project are well progressed and will
be completed as soon as possible after August 31, 1999 target
date. The Company believes that the costs of preparations for
the Year 2000 from calendar year 1998 through to 2000 is
approximately $0.75 million of which an estimated $0.65 million
has been spent as of June 30, 1999. The technical managers of
the Company's vessels have identified the Year 2000 issues in
regard to their own systems and the onboard systems of those of
the Company's vessels that each manager maintains and expect to
resolve any relevant issues prior to January 1 2000.
The company is developing contingency plans as part of the Year
2000 project.
The company continues to believe it is taking the necessary steps
to resolve the Year 2000 issues. However, the Year 2000 also
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presents a number of other risks and uncertainties that could
affect the company including utilities and telecommunications
failures, the lack of personnel skilled in the resolution of Year
2000 issues, and the nature of government responses to the
issues, amongst others. Given the possible consequences of
failure to resolve such Year 2000 issues, there can be no
assurances that any such failures would not have a material
adverse effect on the company's business, financial conditional
and results of operations.
EUROPEAN MONETARY UNION - EURO
On January 1 1999, 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
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 JUNE 30, 1999, 1998
(EXPRESSED IN US $000)
1999 1998
OPERATING REVENUES
Charterhire income 1,455 7,291
Ferry service income 20,768 16,145
Logistics and other income 5,320 4,043
Brokers' commission (57) (288)
-------- --------
27,486 27,191
-------- --------
OPERATING EXPENSES
Vessel and other operating costs 22,566 19,465
Depreciation 2,489 2,795
Amortisation of drydocking 768 392
Goodwill amortisation 72 23
General and administrative exps 2,822 3,387
Foreign exchange (gain) loss 457 689
-------- --------
29,174 26,751
-------- --------
OPERATING INCOME (LOSS) (1,688) 440
OTHER INCOME (EXPENSE)
Interest income 902 348
Interest expense (4,959) (2,783)
Exceptional charge (note 5) - (4,600)
Gain on disposal of assets (50) 41
-------- --------
(4,107) (6,994)
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES (5,795) (6,554)
Income taxes 2,044 2,094
Minority Interests (22) (55)
NET INCOME (LOSS) (3,773) (4,515)
-------- --------
ADDITIONAL FINANCIAL INFORMATION
EBITDA (note 4) 1,591 3,691
EBITDA to interest expense, net 0.4x 1.5x
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See accompanying notes to unaudited consolidated financial
statements
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UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED JUNE 30, 1999, 1998
(EXPRESSED IN US $000)
1999 1998
OPERATING REVENUES
Charterhire income 7,351 28,815
Ferry service income 56,929 40,820
Logistics and other income 15,907 10,154
Brokers' commission (302) (1,162)
-------- --------
79,885 78,627
-------- --------
OPERATING EXPENSES
Vessel and other operating costs 61,070 54,055
Depreciation 6,458 8,434
Amortisation of drydocking 1,419 1,174
Goodwill amortisation 125 69
General and administrative exps 9,514 9,529
Foreign exchange (gain) loss 956 404
-------- --------
79,542 73,665
-------- --------
OPERATING INCOME 343 4,962
OTHER INCOME (EXPENSE)
Interest income 3,078 631
Interest expense (14,794) (8,178)
Exceptional Charge (note 5) - (4,600)
Gain on disposal of assets 1,942 14,164
-------- --------
(9,774) 2,017
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES (9,431) 6,979
Income taxes 3,369 (2,164)
Minority Interests (81) (170)
NET INCOME (LOSS) (6,143) 4,645
-------- --------
ADDITIONAL FINANCIAL INFORMATION
EBITDA (note 4) 10,287 28,803
EBITDA to interest expense, net 0.9x 3.8x
See accompanying notes to unaudited consolidated financial
statements
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UNAUDITED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1999, 1998
(EXPRESSED IN US$000)
1999 1998
ASSETS
CURRENT ASSETS
Cash and cash equivalents 19,538 26,800
Cash held in escrow and blocked deposits 54,947 36,995
Trade accounts receivable 25,279 19,600
Other receivables 1,722 2,627
Due from joint ventures 389 -
Inventories 1,288 1,672
Prepaid expenses and accrued income 2,977 1,741
-------- --------
106,140 89,435
Land and buildings 13,603 12,546
Vessels and equipment 135,917 136,430
Vessels under construction 62,219 82,926
Loans to joint ventures 4,083 4,973
Investment in joint ventures - 108
Other investments 553 586
Goodwill, net 2,064 1,200
Deferred charges, net 7,565 6,812
Pension fund debtor 4,848 -
-------- --------
Total assets 336,992 335,016
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt 1,645 2,442
Capital lease obligations 3,070 2,562
Trade accounts payable 10,728 13,483
Accrued expenses 7,144 995
Accrued interest - Ship Mortgage Notes 710 710
Other creditors 2,281 5,009
Due to joint ventures - 644
-------- --------
25,578 25,845
-------- --------
LONG-TERM LIABILITIES
Long-term debt 65,730 24,363
Ship mortgage notes 172,550 172,278
Capital lease obligations 12,826 16,429
Other creditors 1,435 6,879
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Deferred taxation 11,839 27,283
-------- --------
Total liabilities 289,958 273,077
-------- --------
SHAREHOLDERS' EQUITY
Share capital 21 -
Cumulative translation adjustment 224 496
Retained earnings 46,789 61,443
-------- --------
Total shareholders' equity 47,034 61,939
-------- --------
Total liabilities and shareholders' equity 336,992 335,016
-------- --------
See accompanying notes to unaudited consolidated financial
statements
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UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1999, 1998
(EXPRESSED IN US$000)
1999 1998
OPERATING ACTIVITIES
NET INCOME (LOSS) (6,143) 4,645
Amortisation of drydocking and deferred charges 959 1,724
Amortisation of ship mortgage notes discount 205 -
Depreciation 6,458 8,434
(Gain) loss on disposition of fixed assets (1,942) (14,164)
Foreign exchange (gain) loss (623) 1,187
Goodwill amortisation 125 69
(Increase) decrease in pension debtor (41) -
(Increase) decrease in trade debtors (8,032) (5,308)
(Increase) decrease in other debtors 4,170 (11,675)
(Increase) decrease in stock 514 623
(Increase) decrease in prepayments
and accrued income 925 227
Increase (decrease) in trade creditors (427) 2,270
Increase (decrease) in other creditors (10,025) 5,963
Increase (decrease) in accrued expenses (4,195) (3,830)
Increase (decrease) in deferred tax liability (3,370) 2,341
-------- --------
Net cash (used) in operating activities (21,442) ( 7,494)
-------- --------
INVESTING ACTIVITIES
Additions to vessels and equipment (2,744) (2,489)
Additions to vessels under construction (34,754) (40,852)
Additions to land and buildings - (92)
Purchase of subsidiary companies (1,029) (6,014)
Proceeds from sale of capital assets 66,550 84,931
-------- --------
28,023 35,484
-------- --------
FINANCING ACTIVITIES
Proceeds from long-term debt 17,100 227,423
Repayment of long-term debt (1,075)(194,524)
Due to joint ventures 1,609 (640)
Repayments of capital leases (3,096) (421)
Proceeds from capital leases 1,305 1,089
Deferred charges paid (878) (6,194)
-------- --------
14,965 26,733
-------- --------
18
<PAGE>
Net increase (decrease) in cash
and cash equivalents 21,546 54,723
Cash and cash equivalents at
beginning of period 52,939 9,072
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 74,485 63,795
-------- --------
See accompanying notes to unaudited consolidated financial
statements
19
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 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 nine months
ended June 30, 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 nine months ended June 30, 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, 1997 $ (47) $ - $ 56,798
Net income (loss) 543 - 4,645
--------- --------- ---------
Balance at June 30, 1998 $ 496 $ - $ 61,443
======== ======== ========
Balance at September 30, 1998 $ 384 $ 21 $ 52,932
Net income (loss) (160) - (6,143)
--------- --------- ---------
Balance at June 30, 1999 $ 224 $ 21 $ 46,789
======== ======== ========
20
<PAGE>
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.
21
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999, 1998
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.
5. EXCEPTIONAL CHARGE
The company was party to two interest rate swap contracts
with nominal value of $92.25 million, amortising to $51.75
million in August 2004, bearing a fixed rate of interest of
6.89%. On pre-payment of the company's existing bank credit
facility accounting convention dictated that these contracts
are recorded in the balance sheet at market value, accounting
for the change in market value in the income statement. The
value of the contracts was negative $4.6 million on June 30,
1998. These contracts were terminated in the last quarter of
1998 at a cost of $6.7 million.
6. SUBSEQUENT EVENTS
(a) On July 16, 1999 the company signed an agreement to
purchase Norse Irish Ferries Limited ("NIF"). The
purchase is subject to closing conditions including
regulatory approval and the consent of a majority of the
holders of the Company's Ship Mortgage Notes. NIF
operates freight and passenger ferry services on the
Irish Sea between Liverpool (England) and Belfast
(Northern Ireland).
(b) On July 30, 1999 the company purchased the passenger/car
ferry Mistral, formerly leased by the company, for a
purchase price of $16 million, upon purchase, the vessel
became part of the collateral securing the Ship Mortgage
Notes.
(c) On 12th August 1999, the company completed on the sale
of its two remaining deep sea vessels Merchant Premier
and Merchant Principal. The sale price of each vessel is
$1.1 million, generating a loss on disposal of
approximately $1.5 million per vessel.
22
<PAGE>
FLEET LIST AT JUNE 30, 1999
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 (Isle
164 trailer units of Man)
BRAVE MERCHANT C RoPax 250 passengers 1999 British (Isle
164 trailer units of Man)
HULL 289 RoPax 250 passengers expected Bahamas
164 trailer units 2000
HULL 290 RoPax 250 passengers expected Bahamas
164 trailer units 2000
23
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C Collateral vessel securing 9-3/4% Ship Mortgage Notes
* Operated under an operating lease.
24
<PAGE>
CENARGO INTERNATIONAL PLC
HEAD OFFICE
Puttenham Priory Puttenham Surrey GU3 1AR
Telephone + 44 1483 241000 Facsimile + 44 1483 241010
25
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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: September 16, 1999 By: /s/ Michael Hendry
___________________
Michael Hendry
Chairman
26
02442005.AA5
