Final Results

Ocean Wilsons Holdings Ld 24 April 2001 Ocean Wilsons Holdings Limited Preliminary Announcement At a board meeting held today the following announcement of the unaudited results of the Company and its subsidiary companies for the year ended 31st December 2000 was approved by the directors. Consolidated Profit and Loss Account Year to 31st Year to 31st December December 2000 1999 £'000 £'000 Turnover Turnover and share of joint ventures 81,382 73,395 less share of joint venture turnover (7,007) - Existing operations 71,461 73,395 Acquisitions 2,914 (5,800) Group turnover 74,375 67,595 Operating costs (60,117) (53,936) Depreciation (5,684) (4,398) Operating profit Existing operations 9,383 9,261 Acquisitions (809) - Group operating profit 8,574 9,261 Share of operating profit in joint ventures 1,232 1,443 Share of operating loss in associates (160) (246) Income from fixed asset investments 189 422 Realised surpluses on sales of investments 1,953 3,691 Profit on disposals of fixed assets - 48 Other interest receivable and similar income 3,390 4,795 Interest payable (2,915) (3,351) Net exchange loss on foreign currency borrowings (4,114) (5,612) Profit on ordinary activities before taxation 8,149 10,451 Taxation on profit on ordinary activities (2,603) (3,031) Profit on ordinary activities after taxation 5,546 7,420 Minority interests (585) (986) Profit for the financial year 4,961 6,434 Dividends Interim - 1.00p per share (1999 1.00p) (375) (393) Final - 5.00p per share (1999 5.00p) (1,830) (1,965) Retained by group companies 2,756 4,076 Earnings per share basic and diluted 12.93p 16.37p Ocean Wilsons Holdings Limited Preliminary Announcement Consolidated Balance Sheet As at 31 As at 31 December December 2000 1999 £'000 £'000 Intangible Assets 1,496 - Tangible assets 70,029 59,354 Investments 17,017 17,813 Current Assets Stocks 1,233 884 Debtors 19,627 18,524 Cash at Bank 36,370 36,765 57,230 56,173 Creditors (amounts falling due within one year) (24,843) (21,510) Net current assets 32,387 34,663 Total assets less current liabilities 120,929 111,830 Creditors (amounts falling due after one year) (50,467) (42,240) Provisions for liabilities and charges (4,238) (5,006) Minority interests (4,545) (3,607) Net assets 61,679 60,977 Capital and reserves Called up share capital 7,489 7,859 Profit and loss account 29,199 26,737 Capital reserves 20,642 20,495 Revaluation reserve 4,349 5,886 Equity shareholder funds 61,679 60,977 Net assets per share 164.73p 155.18p Ocean Wilsons Holdings Limited Consolidated Cashflow Statement Year to 31 Year to 31 December December 2000 1999 £'000 £'000 Net cash inflow from operating activities 13,798 12,379 Dividends from joint ventures 961 1,052 Returns on investments & servicing of finance 1,312 1,900 Taxation (2,771) (5,025) Capital expenditure and financial investment (10,979) (17,178) Acquisitions and disposals (5,203) (2,152) Equity dividends paid (2,340) (2,260) Cash outflow before management of liquid resources (5,222) (11,284) and financing Management of liquid resources (1,176) (1,796) Financing 4,961 12,778 Decrease in cash in the year (1,437) (302) The final dividend of 5.00p per share will be paid on the 8th June, 2001, if approved by shareholders at the Annual General Meeting to be held on 8th June 2001, to shareholders on the register at close of business on 11th May, 2001. Additional copies of this announcement can be obtained from the company's registered office Clarendon House, Church Street, Hamilton, Bermuda or from the Company's UK transfer agent, Independent Registrars Limited, Balfour House, 390-398 High Ilford, Essex IGI 1NQ. Chairman's Statement Accounts and Results Turnover including joint ventures for the year grew 11% to £81.4 million. This compares with £73.4 million in the previous year. Included in this total is £2.9 million in turnover attributable to the Tecon Salvador acquisition. Group operating profit excluding acquisitions remained flat at £9.4 million. After including losses from the Tecon Salvador acquisition, operating profit fell marginally in the year to £8.6 million from £9.3 million in 1999. This is a satisfactory result considering the intense competition in our traditional markets. The realised surplus on sales of investments was lower in the year at £2.0 million (1999 £3.7 million), as the prior year benefited from the disposal of our investment in Rea Brothers Group Plc and in Finsbury Technology Trust. Excluding income from the investment portfolio, profit for the year from the Brazilian operations increased 21 % to £2.8 million from £2.3 million in 1999. This is principally due to lower exchange losses on Brazilian foreign currency borrowings that were £1.5 million lower at £4.1 million. Taxation The effective tax rate for the period was 32.0 % compared to 29.0% for 1999. The increase in the Group's rate of tax is due to a decrease in investment portfolio income in the year, which is not subject to tax. The corporate tax rate prevailing in Brazil is 35% although there is no Group tax relief so that losses and profits in separate companies cannot be offset. Dividends The board is recommending that the final dividend remain unchanged at 5.00p (1999 5.00p). If approved by shareholders at the forthcoming Annual General Meeting this will make a total dividend for the year of 6.00p (1999 6.00p). The full year dividend is 2.2 times covered by profit for the financial year (1999 2.7 times) and will absorb £2,205,000 (1999 £2,358,000). Share repurchase programme During 2000 the company carried out an 'on market repurchase programme to acquire and subsequently cancel, 1.85 million of its ordinary shares at an average price of 88.6 pence per share. From November 1998 to January 2001 the company has repurchased in total, 3.1 million shares at an average price of 88 pence each. In total £2.7 million was returned to shareholders. Balance Sheet Group net assets were in line with last year at £62.0 million (1999 $61.0 million). On a per share basis the Group's net assets increased 9.55p to 164.73p (1999 155.18p). This increase reflects the impact of the Groups share repurchase programme, Net assets located in Brazil account for 86.08p per share (1999 84.80p) and net assets outside Brazil 78.65p(1999 70.38p). The total of cash and investments held by the Group outside Brazil was 85.3p per share at year-end. Cash flow Net cash inflow from operating activities during the year was £13.8 million (1999 £12.4 million). The principal outflow was gross capital expenditure in the year of £15.8 million, invested mainly in Tecon Rio Grande. Year end cash balances amounted to £36.4 million (1999 £36.6 million) of which £21.0 million (1999 £19.1 million) was held outside Brazil being 56.0p per share. The portfolio at that date was £11.0 million, being 29.3p per share. Borrowings and Interest Net debt increased £11.1 million from £9.4 million to £20.5 million, The Group's borrowings rose from £46.0 million to £56.8 million to finance tug construction and the expansion of the Tecon Rio Grande container terminal, The increase in net debt resulted in an increase in gearing from 15.2% at 31 December 1999 to 33.2% at year end. Net debt is expected to increase further in 2001 as new loans are being arranged to finance future capital investment. The Group's net interest earned in the profit and loss was £0.5 million (1999 $1.4 million). This excludes the net exchange movements on foreign currency borrowings held by the Brazilian subsidiaries, which are shown separately in the profit and loss account and £1.0 million of interest capitalised in fixed assets, principally at our subsidiary Tecon Rio Grande. The Group's Brazilian subsidiaries have significant US dollar loans and $Real denominated loans that are monetarily corrected by the movement in the US dollar / $Real exchange rate. While the liability in US dollar terms remains unchanged a devaluation in the $Real generates exchange losses when these loans are converted into $Reals which under UK GAAP the Group is required to recognise in the Profit and Loss account in the period in which it occurs. Net exchange losses on foreign currency loans for the period were £4.8 million (1999 £5.6 million.) Lower exchange losses were incurred in the period as the $Real devalued less against the US dollar in the year than in 1999. The total cost of debt in the period made up of interest and exchange losses on foreign currency borrowings was £8.9 million. Exchange rates In the year to 31 December 2000 the $Real devalued 9% against the US dollar (from 1.79 to 1.95) and 1 % against sterling (from 2.89 to 2.91). In 1999 the $Real devalued 49% against the US dollar (from 1.21 to 1.79) and 44% against sterling (from 2.01 to 2.89). Investment Portfolio The invested portfolio produced a return of 14.6% in the year. Management of the investment portfolio was transferred on the 31 October 2001 from Close Private Asset Management to Hanseatic Asset Management LBG. Hanseatic Asset Management LBG is an independent fund management house specialising in asset allocation with which Mr W Salomon who was previously responsible for our fund management at Close Brothers Group plc is associated. Close Private Asset Management who managed the portfolio until 31 October 2000 report as follows: 'After the initial euphoria of Y2K passing pretty much without incident, the strong rising trend in equity markets broke down in March, as investor enthusiasm for the Technology, Media and Telecoms sectors (TMT), which had been the key driver behind the market rise, suffered a sudden reversal. The two quarters that followed saw global markets decline as sentiment gradually shifted from one of concern over exuberance and unsustainable growth to one of concern about a dramatic slowdown in global growth. These fears were compounded by a struggling Euro and rapidly rising oil prices, the combined effects of which looked likely to derail the shoots of economic recovery in Euroland. Political uncertainty also played its part in unsettling investors: in Japan the administration's credibility in being able to steer the economy out of its deflationary trend slipped further, whilst the US Presidential Election remained too close to call even beyond the initial counting process. Meanwhile in Europe politics of another nature were seen with the ECB deciding to intervene in the Forex market in a move to support the ailing Euro just ahead of the Danish Referendum on entering the single currency, the result of which was a clear 'no'. Over the 10 month period to 31 October 2000 the FTSE All Share declined 5.1%, whilst the FTSE 100 fell 7.1%. In the US the Dow Jones suffered a 4.6% fall, whilst the broader MSCI World index stood 9.8% below the value at which it had closed 1999. The Nasdaq, having peaked in March above 5000, had fallen 17.2% to 3369.63 at the end of October. Against this volatile backdrop of declining global equity markets, the portfolio of investments performed well, posting a return of +19.3% (in capital terms, excluding uninvested cash). During the first quarter of 2000 the overall exposure to TMT was reduced further, with profits being taken in a number of stocks including Vodafone, Intel and Marconi. In addition the remaining holding in Finsbury Technology Trust was sold. The portfolio benefited from the strong rise in Finsbury Worldwide Pharmaceutical Trust, the holding in which was subsequently sold in the fourth quarter at an average price in excess of £6. The portfolio also benefited from the strong rise in the Alternative Investment Strategies Trust (+21.7% in US Dollar terms over the 10 month period). Other strong contributions came from the NatWest FRNs that were called at par in Q1 and from the HSBC FRNs that not only saw some spread tightening but also generated additional return through the currency gains on the US Dollar. Elsewhere in the portfolio the period saw Royal Bank of Scotland post a 52.1 % gain, and trading gains were made through positions in Spirent (previously Bowthorpe) and Provident Financial. Hanseatic Asset Management report as follows. 'Following the transfer of the portfolio to Hanseatic Asset Management, the position in the Finsbury Worldwide Pharmaceutical Fund was sold. The manager decided to lock in what had been significant gains against the background of a deteriorating market. It has been the manager's policy to hold high cash balances to help protect the fund's value against the sharp falls in equity prices which occurred during the first quarter of 2001. More recently some of this cash has been put to work in high yielding bonds, Japanese stocks and a position has been re-established in the pharmaceutical and life sciences sector when share prices were on average 30% cheaper than at the time of the sale in November. Market conditions continue to be extremely volatile and while the aggressive actions taken by the Federal Reserve to avert recession in the United States will help to contain further downside broad based market gains are likely to remain elusive until greater visibility exists on corporate profits.' Lloyds Insurance The Group started a new subsidiary, Ascension Underwriting Limited to underwrite insurance through the Lloyds insurance market during the year. The intention is to generate additional income using the non-Brazilian assets as collateral for insurance underwriting when the board feels that market conditions are favourable. The company underwrites on a range of syndicates and is advised by Cathedral Capital Management Ltd and Anton Private Capital Limited. The Group has committed to underwrite premium income of up to £2.5 million of business on a limited liability basis for the year commencing 1 January 2001. The Group's potential liability is currently limited to approximately £1 million. It is the intention of the board to limit our future liability to a maximum of £2.0 million. Future Prospects Trading results for the first quarter in 2001 are down on the corresponding period for 2000, principally due to a decline in port movements in Brazil. Since the year end the $Real has devalued a further 16% against the US dollar to 2.26. The results for the current year may be very adversely impacted if the current unexpected weakness in the currency persists. New investments for 2001 include a new distribution centre under construction at Campinas in the state of Sao Paulo. The booming oil and gas market in Brazil continues to present opportunities for the Group. We were successful in a public tender to operate a platform supply vessel (PSV) for Petrobras, the Brazilian state oil company. Our associate company Brasco with our Scottish partner, ASCO plc., which provides logistic services to the oil industry is producing encouraging results. Finally I would like to express my appreciation for the support of my fellow Directors and on their behalf, the appreciation of the Board to our staff for their efforts in helping to build and develop the Company. Operating Review Brazil The current account deficit persisted during 2000 as a result of a disappointing trade balance and adverse services balance. This deficit was easily covered by foreign direct investment but the dependence on external funding to finance shortfalls in the current account shows the vulnerability of the Brazilian economy in the medium term and makes it more susceptible to any contraction of liquidity in the international market. After relative stability during most of the year the $Real weakened against the US dollar in November and December on worries about a slowdown in world growth. The $Real weakened further in the first quarter of 2001 due to nervousness created by the Argentine crisis. Although the $Real is effectively a freely floating currency, the tension in relation to the Argentinean Peso which is linked to the US Dollar does spill over. The economic outlook for Brazil in 2001 remains quite favourable with forecasts of 4% growth and low inflation. However further progress is required in the area of pension and tax reform and the dependence of Brazil on foreign investment to cover the current account deficit means that it remains vulnerable to external shocks. Towage Revenue in sterling terms grew 5% on the previous year although revenue from harbour towage remained flat as our market share in some ports declined. Overall the number of vessels attended in the year was in line with prior year. Strong market pressures remain a concern and the prospects for tariffs and margins returning to historical levels in the short term are poor. Ocean towage for the offshore oil industry and towage support for cable laying operations had a successful year generating significant revenue. The booming offshore gas and oil industry offers further opportunities in this area in 2001. Revenue at the two towage joint ventures with Docenave, Consorcio Baia de Sao Marcos and Consorcio Barra dos Coqueiros rose 16% on prior year although increased operating costs adversely affected margins. Shipyard Results from the shipyard in Guaruja, Sao Paulo were poor in the year as the weak market for small vessel construction continued. In January 2001 the company was successful in a public tender to operate a PSV (platform supply vessel) for Petrobras, The vessel will be built at our shipyard in 2001. The Group is currently in discussion to build two PSVs for outside parties at our shipyard. These two vessels are larger than the PSV being constructed for the Petrobras contract and would require additional investment to expand our facilities. Ship Agency 2000 was a challenging year for the ship agency division although revenue remained in line with prior year. Additional revenue was obtained from tramp vessels and coastal services. However these gains were offset by a decrease in liner client revenue, as several major customers were lost due to consolidations in the shipping sector. Additionally the number of sugar vessels attended by our agency decreased in line with the reduction in sugar exports from Brazil during 2000. Overall the volume of vessels attended in 2000 was less than in 1999 but the change in sales mix increased revenue per vessel. Despite an increase in revenue per vessel margins were lower in 2000 as extra expenses were incurred in improving our service and obtaining new business. The new automated agency system - AGENSYS was implemented throughout our network of branches during the year and new sales representatives appointed for China and Greece. Port Operations and Logistics Turnover in sterling terms rose 23% on the previous year. This was attributable to continued revenue growth at Tecon Rio Grande and the acquisition of the container and heavy cargo terminal at Salvador. Tecon Rio Grande continued to perform ahead of expectations with volumes of containers handled growing 48% to 290,873 TEUs (twenty foot equivalent units) compared with 196,530 in 1999. The expansion of the terminal was completed during the year and two new portainers installed which will assist in increasing productivity in 2001. As mentioned in the Chairman's interim statement Tecon Salvador has been operating since March of this year. Results to date have been lower than anticipated due to poor sales mix and difficulty in attracting heavy cargo clients to the terminal. A new commercial strategy implemented at the end of the year is already producing positive results. The board anticipates that the terminal will become profitable in the medium term. The joint venture bonded warehouse, EADI Santo Andre made good progress with revenues increasing 145%. As part of our logistics business the Group opened distribution centres in Porto Alegre, Recife and Rio de Janeiro during the year. A new management structure was created to improve communication with the client and maximise synergy amongst our port operations and logistics subsidiaries. Our associate company Brasco which services the Brazilian oil and gas market had an encouraging year. New contracts were signed with Shell, BP, Exxon and TotalFinaElf to operate onshore bases to support their offshore drilling activities. As anticipated stevedoring revenues declined in 2000 as we lost business due to port privatisations and the closure of our smaller, less profitable operations Other Activities The two Dredgers operated by our associate company Dragaport began operations in 2000 operating in the states of Rio Grande and Bahia. Treasury The Group has a centralised Treasury operation in Brazil, which manages the investment of surplus funds and borrowings. Clear guidelines have been established relating to cash management authority levels and investment limits. The guidelines prohibit taking speculative financial instrument positions and regular financial management reports are supplied to senior management. The main financial risks facing the Group are those related to funding, interest rate, currency and, market price. Funding risk The Group trades principally in Brazil and holds a portfolio of internationally listed investments outside Brazil. The Group borrows to fund capital projects and look to cash flow from these projects to meet repayments. Working capital is funded through cash generated by operating revenues. There is limited long term commercial funding available in Brazil except from the Banco Nacional do Desenvolvimento Economico e Social (BNDES). All long term funding is obtained by our Brazilian subsidiaries from the BNDES or the International Finance Corporation (IFC, part of the World Bank) except for specific equipment supplier financing when available at favourable terms. The company will not consider short-term borrowing in the Brazilian commercial markets while prohibitive interest rates prevail. At year end the Group had £56.8 million in borrowings repayable over periods up to 12 years. At year-end the Group held approximately £15.4 million in $Real denominated cash deposits in Brazil and £21.0 million in sterling and US dollar denominated deposits outside Brazil. The company maintains these large cash balances as it continues to look for investment opportunities in Brazil. Interest rate risk During 2000 the Group did not use interest rate swaps, options or forward rate agreements to manage interest rate exposure on its debt positions. However the Group actively reviews risk profiles and considers undertaking interest rate swaps if necessary and only with board approval. The Group has three types of borrowings, $Real denominated, $Real denominated linked to the US dollar and US dollar borrowings. Currency risk The Group operates principally in Brazil with the majority of the Groups revenue, expenses and assets denominated in $Real. Consequently currency translation movements can significantly affect the Group's income and balance sheet and the Group faces significant currency exposures when translating results into sterling. Due to the prohibitive cost of hedging the $Real the Group does not hedge its net exposure to the $Real as the board considers it uneconomic. Our US dollar debt has defined repayments during the life of the loans. Management reviews hedging these repayments for periods up to one year by investing surplus funds in US dollar linked Brazilian Government bonds. The Group has significant long-term borrowings in US dollars and in $Real denominated loans linked to the US dollar. These are used to finance $Real denominated capital projects. This exposes the Group to a potential currency mismatch of costs and revenues. The Group undertakes this risk as there is no source of long term financing denominated in $Real available to the Group. The $Real denominated loans linked to the US dollar are monetarily corrected by the movement in the US dollar/$Real exchange rate and bear interest of between 1.5 - 4.5% per annum. The loans are repayable over periods up to 12 years. The board considers it uneconomic to hedge the loans in the long term, as the cost of hedging the debt would significantly increase the cost of borrowing in US dollars. While the Group may experience significant movements in the exchange rate in a short period, the board considers this to be an acceptable risk due to the low cost of the loans in US dollars terms and long maturity date. The majority of the Group's US dollar loans bear interest between Libor + 3.75 and Libor + 4.0 % and are repayable in periods up to 9 years. In addition the Group has loans, which bear interest linked to the performance of Tecon RG, that vary between Libor +2.0% and Libor +6.0%. Cash and investments held outside Brazil are principally in US dollar and sterling denominated assets . Market price risk The Group invests in internationally listed securities and funds principally for the long-term. The Group's exposure to market price risk arises mainly from potential loss the Group may suffer through holding market positions in the face of price movements.

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