First Ship Lease Trust: 2nd Half 2025 Financial Results Analysis

First Ship Lease Trust (“FSL Trust”) released its unaudited financial results for the second half and full year ended 31 December 2025. The Trust operates in the volatile tanker market and has navigated a challenging macroeconomic environment marked by geopolitical tensions, a sanctioned fleet dynamic, and high market volatility. Below, we provide a structured analysis of the key financials, performance trends, and notable corporate actions.

Key Financial Metrics and Performance Overview

• Fleet utilisation: 100.0%
• Contracted future revenue: US\$17.1 million as at 31 December 2025
• Net profit (2H 2025): US\$5.1 million
• Net profit (FY 2025): US\$6.9 million
• Adjusted EBITDA (2H 2025): US\$2.1 million
• Adjusted EBITDA (FY 2025): US\$4.1 million
• Cash and cash equivalents: US\$20.8 million as at 31 December 2025
• All loans fully prepaid: as at 31 December 2025

Quarter-over-Quarter and Year-over-Year Financial Comparison

Historical Performance Trends

• Revenue and Profitability: The Trust has seen a decline in both revenue and adjusted EBITDA over the past year. Revenue for FY 2025 fell by 28.4% YoY, while adjusted EBITDA dropped by 36.3%. Net profit for FY 2025 was US\$6.86 million, down 17% from US\$8.26 million in FY 2024.
• Fleet Utilization & Operational Stability: Fleet utilization remains at 100%, and all vessels are now employed on period charters. Contracted revenue into 2029 provides visibility, though overall revenue has declined due to vessel disposals and market conditions.
• Balance Sheet Strength: FSL Trust has deleveraged significantly, with all loans prepaid as at year-end 2025 and cash reserves of US\$20.8 million against negligible payables and no outstanding loans.

Exceptional Items & Asset Revaluation

• Impairment Reversals: The 2H 2025 period saw a US\$3.7 million reversal of impairment on vessels, which supported the bottom line. This is up from US\$1.9 million in the prior year, indicating some recovery in vessel values or improved market outlooks for specific assets.
• Asset Sales: The product tanker Clyde Fisher was sold in February 2025, resulting in a gain on disposal of US\$0.7 million recognized in FY 2025, compared to US\$2.3 million in the prior year.

Fleet and Revenue Visibility

• Contracted revenue of US\$17.1 million provides medium-term earnings visibility.
• Charter maturities are well spread over the coming years, and options to terminate were removed from the charters of Shannon Fisher and Solway Fisher, fixing employment into 2029.

Macroeconomic and Industry Context

• The Trust operates in a highly volatile tanker market, impacted by macroeconomic uncertainties and geopolitical tensions.
• Sanctioned fleets and changing trading environments are reducing the pool of compliant vessels, which could support rates, but also introduces risks.
• The sale and purchase market for larger vessels is seeing some recovery, and newbuilding orders continue, potentially impacting future supply-demand balances.

Corporate Actions and Fund Flows

• Voluntary loan prepayment of US\$4.1 million during 2025, with all outstanding loans fully prepaid as at 31 December 2025.
• No mention of share buybacks, placements, or dilution.
• No proposed dividends disclosed for the reporting period.

Chairman’s Statement

No full Chairman’s Statement was included in this report. The overall tone of Management’s discussion is cautious but constructive, noting a healthy capital structure and positive liquidity, but acknowledging continued market volatility and macroeconomic headwinds.

Events with Potential Impact

• No mention of natural disasters, legal disputes, or tax changes.
• Ongoing geopolitical tensions and macroeconomic risks are highlighted as persistent threats to market stability and earnings visibility.

Conclusion & Investment Recommendation

The financial performance of FSL Trust in 2025 reflects a challenging environment for tanker operators. The Trust’s revenue and adjusted EBITDA have declined significantly on both a half-year and full-year basis, due primarily to vessel disposals and a weaker market. However, the Trust has maintained 100% fleet utilization, secured contracted revenue into the medium term, and strengthened its balance sheet by fully repaying all loans and increasing its cash reserves.

While the reversal of vessel impairments and asset sales has supported net profit, these are non-recurring items and suggest underlying operational earnings are under pressure. The lack of a disclosed dividend and a shrinking earnings base may concern income-focused investors.

Investor Guidance

• If you currently hold the stock: Consider maintaining a cautious stance. The Trust’s strong balance sheet and contracted revenue provide some downside protection, but declining earnings and no disclosed dividend reduce the immediate investment appeal. Monitor for improvements in the tanker market or strategic actions that could boost earnings.
• If you do not currently hold the stock: It may be prudent to wait for signs of recovery in operational earnings or improved market conditions before initiating a position. The Trust is financially stable but not currently showing strong growth or yield characteristics.

Disclaimer: This is not investment advice. All investments involve risks, including possible loss of principal. Please consult your financial advisor and refer to the company’s official filings before making investment decisions.

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