LONDON (ShareCast) - (ShareCast News) - Energy holding company Thalassa announced on Monday that it expects profit for the year ended 31 December 2016 to exceed market expectations.
The AIM-traded firm said it estimates that it will report revenue of approximately $14m and profit before tax - excluding consolidation of the holding in The Local Shopping REIT using the equity method - of approximately $2.2m.

It said its 2016 year-end cash position was estimated at $7.7m.

The above-expectation performance was primarily put down to the partial release of contingencies, which the board said were no longer necessary, and non-operating gains from currency and commodity hedging of in excess of $1m.

In addition, the group said it still has a self insured reserve - which covers any eventual excess payment due on insurance claims - of $0.25m, and a further reserve in the region of $0.5m to cover maintenance, refurbishment and upgrades to fixed assets.

The exact amount of such further expenditure would not be known until closer to the date of the first mobilisations in 2017, Thalassa added, and may result in reserves being released to profit.

"Given conditions in the industry at the beginning of 2016, the board is extremely pleased to be able to announce successful operational and financial results for 2016, which may increase further following the conclusion of our review of reserves," said chairman Duncan Soukup.

"As result of which, the board has resolved to replace the current stock buyback programme, once completed, under which the company has bought back a total of 3,108,657 of its own shares since February 2015 at a cost of £1,343,257.80, with a new plan to repurchase up to £2m of the company's shares."

Soukop said the board's current view for 2017 was one of "cautious, but unpredictable" optimism.

"The price of oil has recovered to current levels of around $52 and riding the coattails of the largest reflationary intervention in the history of mankind, global economic activity is improving ... slowly.

"However, the global recovery is not convincing as it is not associated with substantially higher employment.

"In fact, given how far behind the curve the central banks of the USA, UK and Germany are, the current recovery looks to us to be far weaker than meets the eye."

Soukop said that worried Thalassa significantly as it could result in one of two scenarios.

"The first alternative is that central bankers ignore the bond markets and leave interest rates at historic lows for too long; the result would be a bout of short term, higher inflation followed by excessive tightening which could derail the current recovery.

"The second alternative is that central bankers tighten too quickly and cut the recovery off before it is firmly established."

Soukop explained that, given the recent US presidential and Brexit results, upcoming elections in France and Germany, continued economic problems in Greece and Italy, and potentially heightened political tension between the Trump Administration and China, "or should I say the USA and every other country in the world", 2017 was shaping up to be even more unpredictable than 2016.

"Holding one's breath and jumping is not a prudent economic or business model which is why the board is reticent to present any long term forecasts in the current political and economic environment.

"In fact, given the upcoming elections in France and Germany and the inauguration of President Trump, we would go so far as to say that even short-term predictions are nothing more than speculative guesses."

Soukop said, given that perspective, the board was strongly of the opinion that cash, cash generation and caution were the appropriate tenants of group management in 2017, as they were in 2016.

Thalassa said it expects to announce the results for the year during the week commencing 10 April, subject to the timely completion of the audit.

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