FSL – BT

FSL Trust’s Q1 DPU falls 39% to 1.5 US cents

DPU, down from Q1 2009 2.45 US cents, in line with guidance

FIRST Ship Lease Trust (FSL Trust) saw first-quarter distribution per unit (DPU) plunge 39 per cent to 1.50 US cents from 2.45 US cents in the previous corresponding quarter.

But the DPU, which represents a distribution of US$9 million to unitholders, is in line with the DPU guidance provided previously and represents a payout of 55 per cent of the net cash from operations for the quarter ended March 31. The 1.50 US cent payout is also unchanged from the DPU of the preceding 2009 fourth quarter.

Net cash generated from operations for Q1 FY’10 held steady at US$16.3 million compared with US$16.2 million in the quarter before and is 4 per cent lower compared with US$17 million in Q1 FY’09.

‘FSL Trust’s lease portfolio continues to deliver steady cash flow that underpins the sustainability of regular distribution to unitholders. We continue to be encouraged by the positive signs of a demand recovery in the shipping industry, although the oversupply of new ships continues to be an overhang over the mid-term. Our focus for this year remains on growing and diversifying the portfolio. We believe that asset values in the shipping industry have begun to bottom out, and we see the second half of this year as an exciting period for growth,’ said Philip Clausius, chief executive officer of trustee-manager FSL Trust Management.

The financial performance for Q1 FY’10 was predictably similar to that in the previous four quarters as the number of vessels and lease terms of FSL’s lease portfolio have remained unchanged since October 2008.

Lease revenue in Q1 FY’10 declined marginally by 1.6 per cent to US$24.4 million compared with Q1 FY’09, due primarily to lower lease payments received from two vessels leased to Geden Lines which are pegged to the US$ three-month Libor and reset on a quarterly basis. The US$ three-month Libor has declined between Q1 FY’09 and Q1 FY’10.

Finance expenses for Q1 FY’10 increased 5.6 per cent due to higher interest margin on the outstanding indebtedness, following the credit facility amendment agreement with FSL’s lenders in September.

Commenting on the industry outlook, Mr Clausius said: ‘The shipping industry is not out of the woods yet, but prospects should get better with demand on a recovery path, asset values slowly improving and access to capital becoming more readily available. Against this background we are now making progress in finalising our first acquisition post-crisis. Such acquisition, when consummated, will further diversify our portfolio from a lessee and sector perspective.’

FSL is providing a DPU guidance of 1.50 US cents for the second quarter.