Final Results
OCEAN WILSONS HOLDINGS LIMITED
Preliminary announcement
CHAIRMAN'S STATEMENT
Overview
Ocean Wilsons Holdings Limited ("Ocean Wilsons or the Company") is a Bermuda based investment Company and through its subsidiary operates as a maritime services company in Brazil. The Company is listed on both the Bermuda Stock exchange and the London Stock Exchange. It has two principal subsidiaries: Wilson Sons Limited and Ocean Wilsons Investments Limited.
Wilson Sons Limited ("Wilson Sons") is an autonomous Bermuda company listed on the Sao Paulo Stock Exchange (BOVESPA) and Luxembourg Stock Exchange. Ocean Wilsons holds a 58.25% interest in Wilson Sons, which is fully consolidated in its accounts with a 41.75% non-controlling interest. Wilson Sons is one of the largest providers of maritime services in Brazil. Wilson Sons activities include harbour and ocean towage, container terminal operation, offshore support services, logistics, small vessel construction and ship agency.
Ocean Wilsons Investments Limited is a wholly owned Bermuda investment company. The company holds a portfolio of international investments.
Introduction
I am pleased to report another good year of trading for Ocean Wilsons Holdings Limited. Our maritime services business continued to experience strong demand across all business segments and the investment portfolio generated significant returns in the period. During the year we continued to invest heavily in our core businesses and the Group remains well positioned to meet our customers evolving needs and benefit from the strong growth in Brazil.
Group Results
Revenue for the Group grew by 20% to US$575.6 million (2009: US$477.9 million) principally due to increases in port terminal and logistics revenue. Operating profit margins for the Group were 5 % lower at 12% (2009: 17%) reflecting the change in sales mix, the adverse impact of a stronger Brazilian Real against our reporting currency the US Dollar, higher employee expenses and increased depreciation.
Profit before tax decreased by US$22.6 million from US$139.8 million to US$117.2million principally due to the decrease in operating profit US$67.9 million (2009: US$79.3 million) lower gains from the investment portfolio of US$22.5 million (2009: US$34.3 million) and exchange gains on cash balances of US$4.0 million.(2009: US$23.7 million). These were partially offset by the profit realised on formation of the joint venture of US$20.4 million.
Earnings per share based on ordinary activities after taxation and non-controlling interests were 160.8 cents (2009: 198.5 cents).
Offshore Joint Venture
In June 2010 we were pleased to announce the formation of our offshore joint venture between Wilson Sons Limited, through two of its subsidiaries in Brazil, and Remolcadores Ultratug Ltda., a company owned by the Chilean maritime group, Ultratug.
The joint venture vehicle named Wilson, Sons Ultratug Participações S.A. ("Wilson Sons Ultratug") is a 50/50 company set up between Wilson Sons and the Ultratug groups that owns and operates offshore vessels to support oil and gas exploration and production activities in Brazil.
Both Wilson Sons and Ultratug transferred their existing Brazilian offshore businesses into the new joint venture. The principal objective of the joint venture is to take advantage of the growing opportunities in Brazil's oil and gas industry and expand both groups' operations in the offshore segment.
Tecon Salvador
In September 2010 Tecon Salvador signed an amendment to the terminal lease agreement with the Companhia das Docas do Estado da Bahia (CODEBA). The amendment granted the company the area adjacent to Tecon Salvador known as Ponta Norte for an initial payment of US$14.5 million and amendments to the rental and container handling fee agreements. This additional area will allow Tecon Salvador to extend the quay and back area while deepening the draft to accommodate the larger container vessels operating in Brazil.
Brasco
In June 2010 we acquired the remaining 25% non-controlling interest in our onshore base manager and logistics business, Brasco Logistica Offshore Ltda for US$9.0 million. The acquisition of the non-controlling interest increases our exposure to the growing offshore oil and gas industry.
Investment Portfolio
Investment managers
The Group's investment portfolio is held by Ocean Wilson Investments Limited ("OWIL") a wholly owned subsidiary registered in Bermuda. OWIL appointed Hanseatic Asset Management LBG a Guernsey registered and regulated investment group as its Investment Manager in November 2000.
Investment strategy
The Board of OWIL determines investment guidelines and restrictions in conjunction with the investment manager, these together with the investment managers reports are reviewed at the OWIL board meetings.
The investment strategy agreed with the Company's investment managers is to maximise the total return on assets, by investing in a portfolio of diversified assets including global equities, fixed income and alternative assets with a particular emphasis on emerging markets. Investments are intended to add value over the medium to longer-term through a non-market correlated, conviction based investment style.
Investment portfolio performance
Following the fall in equity markets in the second quarter, share prices rose across the board in the second half of the year generating satisfactory returns for the period. The trading investment portfolio and cash under management increased US$18.2million (after capital redemptions of US$5million), from US$245.2 million at 31 December 2009 to $263.4million at year end.
Approximately 50% of the investment portfolio is invested in global equities, 31% in alternative assets, 9% in bonds and the balance in cash and liquidity funds. The investment managers continued to deploy the portfolio's cash and liquidity funds in new investments and at year end the investment portfolio held US$24.7 million in cash and liquidity funds, down from US$67 million in 2009. Details of the individual investment holdings at 31 December 2010, new investments made during the period and performance, are contained within the Investment Managers report.
Wilson Sons Limited
At the close of business on the 21 March 2011, the Wilson Sons share price was Real 27.80 resulting in a market value for the Ocean Wilsons holding of 41,444,000 shares (58.25% of Wilson Sons) of approximately US$689.9 million which is the equivalent of US$19.51per Ocean Wilsons Holdings Limited share.
Brazil
In 2010 GDP grew in excess of 7%. 2010 was also an election year in Brazil and Dilma Rousseff was elected president. The new government so far has not implemented any major changes in policy except to announce a R$50 billion reduction in government expenditure to remove some of the fiscal stimulus in the economy.
Brazil continues to boom thanks in large part to commodity prices and the economic stability of the last decade. China became the most significant trade partner and investor in Brazil. The consensus forecast for growth in 2011 is 4-5% although the economy is showing signs of overheating with high capacity utilisation and a tight labour market. The currency remains strong pushed by high commodity prices and foreign capital inflows attracted by the high real interest rates. The government is tightening monetary policy with interest rates rising to 11.75 % in an attempt to control inflationary pressures. Inflation as measured by the CPI (consumer price index) is currently running at 6% per annum. The country continues to invest in infrastructure and the development of the pre salt offshore oilfields.
Dividend
The Board is recommending a final dividend of 38 cents per share. In 2009 no final dividend was paid; instead a second interim dividend of 38 cents per share was paid in March 2010. Together with the interim dividend paid in October 2010, this will give a total dividend for the year of 42 cents per share (2009: 42 cents per share).
The dividend for the year represents the full dividend to be received from Wilson Sons relating to 2010 plus approximately 1.7% of the average capital employed in the investment portfolio consistent with the Board's dividend policy in respect of each financial year of paying the Company's full dividend to be received from Wilson Sons in the period plus a percentage of the average capital employed in the investment portfolio to be determined annually by the Board.
Dividends are set in US Dollars and paid twice yearly. Shareholders will continue to receive dividends in Sterling by reference to the exchange rate applicable to the US Dollar on the dividend record date, except for those shareholders that elect to receive dividends in US Dollars.
The Board of Directors may review and amend the dividend policy from time to time in light of our future plans and other factors. The payment of dividends cannot be guaranteed and may be discontinued or varied at the discretion of the Board.
Long term incentive plan
Ocean Wilsons Holdings Limited "OWHL" implemented a cash settled phantom option scheme that was approved by shareholders at the Special General Meeting held on 19 April 2007. The scheme is for selected senior management and the options provide for the option holder to receive on exercise the difference between the option price and the market value of Wilson Sons per OWHL share at the time of exercise.
During 2010 participants exercised 280,280 options. The maximum remaining liability under the plan is US$8.3 million based on the Wilson Sons IPO offer price. An accrual of US$6.7 million (2009: US$7.0 million) has been included in the 2010 accounts for benefits accruing under the plan.
Charitable donations
Around the Group our offices are widely engaged with the local community. Through our corporate programme 'Criando Lacos" (Creating ties), the Group provides financial support and promotes employee involvement in social initiatives.
We are also proud to support a number of local causes and during the year the Group made contributions of US$105,000 (2009: US$102,000) to charitable causes. The Group makes one off contributions as well as supporting some charities on an on-going basis. The Group's principal contributions in 2010 were:
Task Brasil - Casa Jimmy project to improve the lives and supports the needs of children and pregnant teenage girls living on the streets of Brazil. The institution is located in Santa Teresa, Rio de Janeiro.
Website: www.taskbrasil.org.uk
Brigada Mirim Ecologica - maintaining the ecology of Ilha Grande in the state of Rio de Janeiro and raising the awareness of visitors and the local population about the environment.
Website:www.brigadamirim.org.br
Rio Voluntario - Supports and provides assistance to voluntary organisations.
Website: Riovoluntario.org.br
Board of Directors
It was with deep regret that we announced the death of our fellow director and colleague Mr. Francisco Gros in May 2010. Mr. Gros served as a Director of Ocean Wilsons Holdings Limited since 2004 and was the Chairman of Wilson Sons Limited. On behalf of your Board I would like to acknowledge and express our gratitude for his valued contribution to the Group.
Outlook
The Brazilian economy remains strong with forecasts predicting growth of 4-5% in 2011 The Group continues to grow and invest in our core maritime businesses which are experiencing strong demand across all segments.
In 2011 we will continue the expansion of our shipyard at Guaruja to service the increasing demand for offshore support vessels. So far in 2011 we have already delivered the Platform Supply Vessel (PSV), Torda to our offshore joint venture and during the year we expect to deliver a further two PSVs to the joint venture and seven new tugboats for our own fleet. We have started work on expanding the terminal at Tecon Salvador and are already operating the extended back area granted in September 2010.
Management and staff
On behalf of your Board, I would like to thank our management, staff and partners for their hard work and dedication throughout the year.
J. F. Gouvêa Vieira
Chairman
25 March 2011
FINANCIAL REVIEW
Revenue
Revenue for the year increased 20% to US$575.6 million (2009: US$477.9 million) driven by growth in our Brazilian maritime services business, principally port terminals, logistics and shipbuilding. Port terminal revenue benefitted from increased container volumes, improved sales mix and strong growth at our Oil and Gas terminal business, Brasco. New business and higher imports increased Logistics revenue 35% in the year to US$102.4 million (2009: US$75.8 million). The fall in offshore revenue attributable to the creation of our new joint venture, Wilson Sons Ultratug (Previously we consolidated 100% of offshore revenue, now we consolidate 50% of the joint venture revenue) was partially offset by the recognition of what were previously intercompany sales to Wilson Sons Ultratug. All Group revenue is derived from Wilson Sons operations in Brazil.
Operating profit
Operating profit for the year remained strong at US$67.9 million although US$11.4 million lower than 2009, US$79.3 million. Operating costs increased US$108.7 million to US$507.7 million from US$399.0 million in 2009 due to an increase in business volume, the continued strength of the Brazilian Real against our reporting currency, the US Dollar, higher employee expenses and depreciation. In addition no fiscal credits relating to prior periods were recognised in the year while 2009 benefitted by US$6.5million.
Employee expenses for the year rose 27% to US$205.5 million (2009: US$162.4 million) as a result of increased headcount to attend new business, collective labour agreements and the exchange rate effect on Real denominated expenses. Wages were driven higher by Brazilian domestic inflation and shortages of skilled labour in the booming offshore sector. The share based payment expense from the Group's two long term incentive schemes remained broadly unchanged at US$16.5 million (2009: US$17.2 million).
Depreciation in the year has increased to US$42.4 million from US$31.9 million in 2009 reflecting the significant capital expenditure undertaken by the Group in port operation, towage and offshore businesses last year.
Raw materials increased from US$49.6 million to US$67.2 million due principally to the increase in shipyard sales.
Exchange rates
The Group reports in US Dollars and has revenue, costs, assets and liabilities in both Brazilian Real and US Dollars. Therefore movements in the US Dollar / Brazilian Real exchange rate can impact the Group both positively and negatively from year to year. In 2010 the Brazilian Real appreciated 4.8% against the US Dollar from R$1.74 at 1 January 2010 to R$1.66 at the year end.
The main impacts from the appreciation of the Brazilian Real against the US Dollar at year end was a net exchange gain of US$3.8 million (2009: US$24.0 million) on the Group's Real-denominated cash balances reported in the income statement and a currency translation adjustment gain to net equity of US$4.6 million (2009 US$16.1 million).
Although the Brazilian Real appreciated 5% against the US Dollar at yearend, the average Real/US Dollar exchange rate during the year at 1.76 was 12% lower than the comparative period in 2009, 2.00. The lower average exchange rate adversely impacts Real denominated costs when converted into our reporting currency, US Dollars.
Profit realised on formation of joint venture
A gain of US$20.4 million was realised on formation of the offshore joint venture with Ultratug.
Investment revenues
Investment revenue in 2010 decreased US$17.6 million to US$18.0 million from US$35.6 million in 2009. This decrease was primarily due to lower exchange gains on cash and cash equivalents of US$ 4.0 million (2009: US$23.7 million) Exchange gains arise principally on Brazilian Real denominated cash balances and the significant gain in 2009 was due to the 25% appreciation of the Brazilian Real against the US Dollar in 2009. Interest from bank deposits at US$10.2 million was in line with prior year (2009: US$10.4 million). The investment portfolio received dividends from equity investments in the year of US$3.8 million (2009: US$1.5 million).
Other gains and losses
Other gains at US$22.5 million were US$11.8 million lower than 2009, US$34.3 million reflecting the lower returns in 2010 from world equity markets. Other gains arise from the Group's portfolio of trading investments and represent increases in the fair value of trading investments held at year end and profits on the disposal of trading investments during the year.
Finance costs
Finance costs in 2010 increased by US$2.2 million to US$11.6 million from US$9.4 million. . The increase is principally attributable to higher interest payments as a result of increased borrowings.
Profit before tax
Profit before tax for the year was US$117.2 million compared with US$139.8 million for 2009. The decrease in profit before tax is principally due to the fall in operating profit, decreased investment revenue in the period and lower returns from the investment portfolio. Profit realised on formation of the offshore joint venture positively impacted profit before tax by US$20.4 million.
Taxation
The tax charge in the year of US$30.6 million is marginally lower than 2009, US$31.2 million. Current tax in Brazil decreased by US$12.3 million to US$31.2 million (2009: US$43.5 million) as the profit on the realisation of the joint venture is not included in determining taxable profit. The decrease in the current tax charge was partially offset by a lower deferred tax credit in the period of US$0.7 million (2009: US$12.4 million). The lower deferred tax credit is principally attributable to a reduced IFRS deferred tax credit of US$6.6 million (2009: US$35.1 million) arising on the retranslation of the non-current assets caused by the appreciation of the Real against the US Dollar. This IFRS deferred tax effect is partly offset by a deferred tax charge of US$1.5 million (2009: US$15.2 million) arising from the exchange variance on borrowings.
Net income arising in our Bermudian companies that are not subject to income or capital gains tax and deferred tax movements were US$10.7 million lower at US$0.9 million. (2009: US$11.6 million). The lower net income primarily reflects decreased returns from our Bermudian investment portfolio as the share based payment expense from the Group's two long term incentive schemes remained broadly unchanged. The combined effect of these movements increased the effective tax rate for the period to 26% compared with 22% in 2009.The corporate tax rate prevailing in Brazil is 34%.
Earnings per share
Basic earnings per share for the year were 160.8 cents, compared with 198.5 cents in 2009.
Cash flow
Net cash flow from operating activities was US$85.5 million (2009: US$52.2 million). The improved cash movement in the year reflected the benefits of better working capital management and lower income taxes paid.
Capital expenditure of US$162.0 million was mainly invested on vessel construction and equipment for port operations and logistics (2009: US$139.7 million). During the year the Group also invested in the expansion of Tecon Salvador and our shipyard in Guaruja.
New loans of US$77.7 million (2009: US$83.9 million) were raised in the period to finance capital expenditure. Repayments of borrowings in the year in accordance with debt repayment schedules were US$19.0 million (2009: US$16.8 million).
At 31 December 2010 the Company and its subsidiaries had US$130.1 million in cash and cash equivalents (31 December 2009: US$196.4 million) of which US$41.4 million was in US Dollar denominated assets and US$85.8 million in Brazilian Real denominated assets.
Balance sheet
Equity attributable to equity holders of the parent increased from US$493.0 million at the beginning of the year to US$535.1 million principally due to the profit in the period attributable to equity holders of the parent less dividends paid. On a per share basis this is the equivalent of US$15.13 per share (31 December 2009: US$13.94 per share). Within this trading investments plus cash held by Ocean Wilsons Investments Limited of US$263.4 million equates to US$7.45 per share.
Included in the Group's trading investments of US$297.3 million at 31 December 2010 is US$36.7 million in US Dollar denominated fixed rate certificates held by Wilson Sons Limited. These investments are not part of the Group's investment portfolio managed by Hanseatic Asset Management LBG and are intended to fund Wilson Sons Limited operations in Brazil.
Debt
The Group uses debt principally to finance vessel construction, the development of the container terminals at Rio Grande and Salvador and equipment for logistic operations. The majority of debt has long maturity profiles with fixed debt repayment schedules. At 31 December 2010 the Group's borrowings (including obligations under finance leases) were US$325.3 million (31 December 2009: US$268 million) of which US$294.9 million is non-current.
All debt at year end is held in the Wilson Sons Limited Group and has no recourse to the parent company, Ocean Wilsons Holdings Limited or the investment portfolio held by Ocean Wilsons Investments Limited.
INVESTMENT MANAGERS REPORT
Hanseatic Asset Management LBG that manages the Group's Investment portfolio reports as follows:
MARKET BACKGROUND
Global equity markets recovered from a second quarter slump and rallied strongly in the second half of 2010. Many indices ended the year at or above their levels at the time of the Lehman Brothers bankruptcy in September 2008. The MSCI World Index of Developed Markets gained 11.8% over the period and the MSCI Emerging Markets Index gained 18.9%.
In the first half of the year, investors became anxious as China introduced tightening measures to combat rising inflation and intensified concerns over Greece led to a significant Greek rescue package and the introduction of a €750bn regional bailout facility. Market jitters heightened in May when the Dow Jones plunged 700 points in eight minutes following a system failure and BP's oil spill in the Gulf of Mexico wiped off £60bn from the company's market capitalisation. In the second half of the year, a significant rally in risk assets commenced ahead of the US Federal Reserve's announcement of an additional $600bn round of quantitative easing in November. The US economy developed some positive momentum in the fourth quarter as corporations continued to beat earnings estimates and manufacturing activity remained strong.
With the exception of some European indices, Developed Markets rallied strongly in the second half of the year to finish 2010 at post crisis highs. The S&P 500 Index in the US rose 15.1%, the FTSE 100 Index in the UK rose 9.2% and the DAX Index in Germany was a standout performer amongst continental European markets gaining 8.5% whilst the CAC Index in France fell by 6.0%. The Topix Index in Japan posted a significant gain of 15.9%; nevertheless performance was flat on a local currency basis.
Amongst Emerging Markets, the strongest performances came from the RTS Index of Russia which gained 22.6% and the Bombay Sensex Index of India which rose 22.2%. The Bovespa Index of Brazil, which had posted the largest gains of the BRIC countries in 2009, saw a comparatively modest rise of 6.1% in 2010, most of which was attributable to currency appreciation. The MSCI Asia Pacific ex-Japan Index rose 16.9%, driven by South-East Asian economies including Indonesia, Thailand and the Philippines, whilst the Chinese market was a notable laggard as the domestic A-share CSI 300 Index lost 8.4% over the year.
Commodity prices rallied during the year, driven by continued strength of demand from Emerging Markets and supply constraints resulting from extreme global weather events and continued political instability in certain supplier countries. Precious Metals and Agriculture posted the largest gains. Gold rose 29.5%, ending the year at $1,420 per ounce on the back of continued concerns about the increasing supply of paper money and agricultural commodities rebounded with Corn prices increasing by 30.7%, Soybeans 34.9% and Wheat 21.2%. The price of West Texas Intermediate crude oil gained 8.5%, ending the year at $92 per barrel. Industrial metals rallied on the back of further quantitative easing as Copper prices increased by 29.7%.
In currency markets, the US Dollar reversed some of its 2009 losses, appreciating 3.4% against Sterling and 7.1% against the Euro. However it depreciated against the Yen by 12.9% and weakened against commodity currencies, losing 12.2% against the Australian Dollar, 4.6% against the Canadian Dollar and 4.8% against the Brazilian Real. The notion of competitive currency devaluations amongst nations to improve their growth prospects gained impetus during the year as significant currency interventions were seen from the central banks of Brazil and Japan. In June the People's Bank of China announced that it would manage the Renminbi exchange rate more flexibly, allowing the currency to appreciate or depreciate by up to 0.5% against the US Dollar in a single day. This move saw a slight appreciation of the Renminbi by approximately 3% versus the US Dollar. China's refusal to let its currency appreciate more significantly remains at the centre of global imbalances.
In fixed income markets, positive performance continued across all sectors, however at a declining pace after significant spread contraction in the prior year. The broad global indices of Sovereign Debt, Investment Grade Corporate Debt, High Yield Corporate Debt and Emerging Markets Debt all posted gains over the period. Additional quantitative easing in the US led treasury yields on a continued downwards trajectory. US ten year treasury yields fell to 3.3% from 3.9%, albeit having posted a significant rebound from a low of 2.4% in October, UK ten year gilt yields fell to 3.4% from 4.0% and the European Central Bank ten year yield fell to 3.0% from 3.4%. Elsewhere, yields on Japanese 10 year government bonds continued to tighten, moving to 1.13% from 1.30%, despite snowballing government debt approaching 200% of GDP.
MARKET OUTLOOK
Economists are anticipating a two tier economy in 2011. The International Monetary Fund is forecasting economic growth of 2.2% in the developed economies and 6.4% in the developing world with world GDP expanding at 4.2% overall. It is an environment where the developing world is doing the bulk of the 'heavy lifting'. For example, car sales and oil imports in these economies have exceeded the developed world for the first time.
Although there have been some muted signs of growth in the US, it has tended to be focused on technology and productivity improvement and has not necessarily been beneficial for job creation. The ongoing deleveraging cycle in the West is a huge headwind for growth. US total debt as a percentage of GDP peaked during the first quarter of 2009 at 373% (its previous peak being 300% in 1933). This exponential rise in total outstanding debt in the US economy is clearly unsustainable and correcting it will be a serious constraint on their economic growth prospects. The other central issue undermining growth in the West is the collapse in the velocity of money. Despite the scale of the increase in the monetary base, banks have been guilty of 'monetary constipation', sitting on an improved reserve position with no benefit to the real economy. As a result of the two tier nature of the world economy, governments and central banks are pursuing differing agendas with the West keen to avoid slumping into Japanese style deflation while policy makers in the developing world are confronted by either rising inflationary pressures or unwanted strength in their currencies, which threatens to undermine their competitiveness.
Following the recovery in the capital markets from the 2008 crisis, there remains significant unease amongst investors about the lasting legacy of the policy response to the crisis and the deep rooted structural challenges many economies are facing. 'Quantitative Easing' has succeeded in supporting asset prices but it defies investor logic to assume the creation of excess liquidity will bring structural benefit to problems created by an excess of liquidity. The unintended consequences and distortions caused by current policy settings will become clearer over time but there can be little doubt that they will occur.
Much of the developed world has to confront a poor demographic profile and deteriorating dependency ratios as fewer people in work support increasing numbers of people who are not. In terms of investment strategy, the 'big picture' still favours the Emerging Markets which have superior growth prospects and a lower debt burden at both public and private levels. However, the case for their capital markets outperforming those of the developed world is not as clear cut in 2011 as it has been through much of the last decade.
For one thing, inflation is increasingly a concern for many Emerging Markets as a consequence of rapid GDP growth, strong capital inflows and higher food and raw material prices. In India, for instance, core inflation is running at 8.5% and food price inflation at close to 17%. The Food and Agriculture Organisation price index is at an all-time high following a very strong increase in a range of agricultural commodities resulting from weather related crop losses, rising demand and high input costs such as fertiliser. In China, inflationary pressures are also returning, exacerbated by an artificially low level for the currency and wage settlements are rising. Ultimately, it is hard to see how the Chinese and other Asian economies with US Dollar pegs can avoid allowing their undervalued currencies to float freely. Any tightening of monetary policy has historically been negative for Emerging Markets. Emerging Market equities tend to be much more closely correlated with their fixed income markets and therefore a rise in bond yields is likely to be more threatening than it would be in stock markets in more mature economies where a rise in bond yields would signal improved economic vitality.
Emerging Markets are much more fashionable with investors than they were a decade ago and capital flows from both institutional and retail investors have grown markedly. This greater weight of investor exposure also makes them more vulnerable to any potential setbacks. By contrast, the US stock market has recently experienced the worst decade in its history with the annualised real rate of return in the ten years to March 2010 being -6%. In this context, US fund flows have seen high inflows into bond funds and Emerging Market equity funds, largely at the expense of neglected domestic equities. Despite the softness of the US economy and a consumer undermined by poor job prospects and a weak housing market, Corporate America is in strong shape. Profit margins for the S&P 500 Index exceeded 8% for the first time in over 30 years. Balance sheets are strong and many US corporations enjoy dominant global franchises.
For much of 2010, capital markets were focused on the significant strains evident within the Euro project and the peripheral European countries in particular stumbled under the weight of their debt burden. These concerns are still likely to be high on the list of investor unease in 2011. What is apparent, however, is a divergence within Europe. Germany for instance, is experiencing significant strength in its industrial sector buoyed by capital good sales to the Emerging Markets. Unemployment is now at its lowest level since re-unification and consumer sentiment has recovered. The German IFO business survey, which reflects general business confidence, is at its highest level since it was started in 2000. Elsewhere in Europe the picture is not as bright as policy makers seem reluctant to grapple with serious structural negatives such as deteriorating dependency ratios and an 'entitlement culture' that seems to be on a collision course with reality.
Notwithstanding the complexity of the current investment landscape and conflicting policy agendas, there is still a strong central case to be made for a diversified portfolio of international equities. With effectively zero available on cash deposits and extremely low nominal bond yields (close to negative in real terms), the balance of risk / reward favours shares. Analyst forecasts for the MSCI (Developed) World Index suggest a forward price earnings multiple of 12x and a price to book ratio of less than two. These are amongst the lowest valuations seen in the last 20 years. Furthermore, with dividends in many cases exceeding bond yields, shares are a competitive asset as a source of income as well as having long term appreciation prospects. Interest rates at either the short or long end would have to spike upwards much more than seems likely in the current scenario to undermine this fundamental valuation support for equities.
At the time of writing, recent headlines have been dominated by events in the Middle East. Unrest against the long-term undemocratic regimes originated from widespread concerns including food price inflation, unemployment and corruption, with the people of Tunisia and Egypt and subsequently Bahrain, Yemen and Libya attempting to enact political change to differing degrees. These popular uprisings could represent the vanguard of democracy in a volatile region long starved of political freedoms. Alternatively, it remains to be seen to what extent power vacuums will be filled by religious extremists. The impact on risk assets has not been inconsiderable, with oil prices spiking to two year highs and equities, especially Emerging Markets, generally retrenching. Given the portfolio's relatively low geographic exposure to the region, and far greater exposure to oil related entities, the direct impact on portfolio performance should be relatively muted. However, the Investment Manager is conscious that further geopolitical tensions have the potential to cause oil prices to rise further and, should they approach the highs of 2008, could be capable of destabilising a fragile global economic recovery.
ANALYSIS OF INVESTMENT SILOS
There are four main 'silos' in the OWIL portfolio: (i) Global Equities, (ii) Alternative Assets, (iii) Bonds and (iv) Cash.
'Global Equities' (50.2% of NAV as at 31 December 2010) is comprised of holdings that are sensitive to stock market movements and may take the form of investments in open-ended funds, closed-ended list funds (such as Investment Trusts), UCITS funds, long / short directional hedge funds as well as direct quoted equities. Global Equities achieved performance of +16.2% in 2010.
'Alternative Assets' (31.2% of NAV) is comprised of three constituents: (i) Private Assets, (ii) Market Neutral Funds and (iii) Liquid Real Assets.
Private Assets (10.1% of NAV) contains fixed life investments typically with lives of approximately ten years and often structured through commitments to Limited Partnership vehicles that make investments in private equity, private real assets (such as property and natural resources) and private debt (such as distressed debt and mezzanine financing). These investments offer access to longer cycle plays, typically with less volatility than and lower correlation to public security markets. Phased drawdown of capital reduces market timing risk. The first commitment to Private Assets was made in 2007. A total of 14 commitments (totalling $61.6m) have been made as at 31 December 2010. $31.0m has been drawn down to date, indicating that this silo is at an immature stage of value realisation. Private Assets achieved performance of +3.5% in 2010.
Market Neutral Funds (18.5% of NAV) contains 'all-weather' holdings in funds which exhibit low correlation to public security markets and have the ability to generate positive absolute returns regardless of the prevailing market environment. Several of the underlying holdings are hedge funds which engage in shorter term trading across asset classes. Market Neutral Funds achieved performance of +11.5% in 2010.
Marketable Real Assets (2.6% of NAV) contains real asset investments (such as property and natural resources) which are quoted on a stock market. Liquid Real Assets achieved performance of +24.9% in 2010.
'Bonds' (9.2% of NAV) is comprised of two constituents: (i) High Yield Bonds and (ii) Corporate Bonds. Returns may be generated from an increased capital value, coupons as well as currency exposure.
High Yield Bonds (9.2% of NAV) contains investments in Emerging Market (both sovereign and corporate debt) and other high yield corporate debt. High Yield Bonds achieved performance of +12.9% in 2010.
Investment Grade Bonds (0% of NAV) contains investments in sovereign (government) bonds as well as corporate bonds with high credit ratings (typically at least 'BBB' as defined by Standard & Poor's). Investment Grade Bonds achieved performance of +1.8% in 2010.
'Cash' (9.4% of NAV) is comprised of cash and cash equivalents including money market / liquidity funds. Cash may be held in currencies other than the US Dollar. Cash achieved performance of +1.8% in 2010.
INVESTMENT PORTFOLIO PERFORMANCE for the Year ended 31 December 2010
(excluding cash and cash funds)
|
Sector |
Average Portfolio Weighting |
|
Time Weighted Return |
|
*MSCI Index Returns |
|
|
% |
|
% |
|
% |
|
North America |
11.4 |
|
6.5 |
|
15.3 |
|
Developed Europe ex UK |
4.4 |
|
19.4 |
|
1.6 |
|
UK |
6.0 |
|
14.7 |
|
8.8 |
|
Japan |
4.0 |
|
8.4 |
|
15.4 |
|
Developed Asia ex Japan |
4.8 |
|
16.2 |
|
16.9 |
|
Emerging Asia |
20.1 |
|
13.3 |
|
19.0 |
|
Latin America |
3.9 |
|
14.2 |
|
14.7 |
|
Emerging Europe |
6.6 |
|
18.9 |
|
16.7 |
|
Africa* |
1.8 |
|
(6.4) |
|
14.6 |
|
Middle East* |
1.2 |
|
12.8 |
|
15.7 |
|
Global Themes |
14.7 |
|
20.3 |
|
12.7 |
|
Market Neutral |
21.1 |
|
11.2 |
|
3.0 |
*Notes:
(i) The MSCI EFM Africa Index was launched during 2010 hence the FTSE/JSE Africa Top 40 Index has been used on a one off basis in its place.
(ii) There is no longer an appropriate MSCI Index for the Middle East so the S&P Pan Arab Index is shown instead.
(iii) Market Neutral Funds are compared with the performance benchmark.
Excluding cash, the invested portfolio generated a time weighted return of +13.0% in 2010. Cash represented approximately 9.4% of the portfolio's NAV at the end 2010 with an average level of 20.9% throughout the year. In comparison, the MSCI All Country World Index (includes Developed, Emerging and Frontier Markets - weighted by market capitalisation) was +12.7%.
Overall performance was enhanced by top-down asset allocation as compared to the MSCI All Country World Index. Within the portfolio, 11 out of the 12 sectors generated positive returns with Global Themes (driven by commodity exposure), Emerging Asian and Market Neutral investments the top three contributors. Only African investments (1.8% of overall NAV) generated a negative return due largely to the effect of fees (early stage in the 'J-curve') on the two commitments to private equity funds.
Approximately 33% of performance stemmed from Emerging Markets, 27% from Developed Markets, 22% from Global Themes and 18% from Market Neutral funds (see summary of these holdings below). As at 31 December 2010, approximately 10% of OWIL's NAV was held in Private Assets (predominantly Emerging Markets private equity limited partnerships) towards the beginning of their investment lives. The portfolio also benefited from its considerably underweight exposure to Developed Europe ex UK (4.4% versus 16.5% for the MSCI All Country World Index), which was the weakest geographical region in 2010.
The top performing investments included several Emerging Market funds: Pacific Alliance China Land Ltd +50.9%, ARC Capital Holdings Ltd +30.0%, Neptune Russia & Greater Russia Fund +29.3% and Aberdeen Global - Asia Pacific +26.8%. Global sector focused funds such as BlackRock World Mining Trust Plc +43.5% and Phaunos Timber Fund Ltd +34.3% also posted strong gains. In Developed Markets, the standout performers were Jupiter European Opportunities Trust Plc +37.2% and BlackRock UK Emerging Companies Hedge Fund +25.5%.
The top contributors were:
|
Top Contributors (in USD) |
Contribution |
Performance |
|
Gain |
|
|
% |
% |
|
$m |
|
BlackRock World Mining Trust Plc |
1.6 |
43.5 |
|
3.5 |
|
Findlay Park American Smaller Companies Fund |
0.8 |
22.6 |
|
1.8 |
|
Jupiter European Opportunities Trust Plc |
0.8 |
37.2 |
|
1.8 |
|
AR New Asia Fund * |
0.6 |
18.6 |
|
1.4 |
|
BlackRock UK Emerging Companies Hedge Fund |
0.6 |
25.5 |
|
1.4 |
|
Aberdeen Global - Asia Pacific |
0.6 |
26.8 |
|
1.4 |
|
Pacific Alliance China Land Ltd |
0.6 |
50.9 |
|
1.3 |
|
Capital International Emerging Markets Debt Fund |
0.6 |
11.8 |
|
1.2 |
|
BlueCrest AllBlue Leveraged Feeder Fund |
0.5 |
11.0 |
|
1.2 |
|
Neptune Russia & Greater Russia Fund |
0.5 |
29.3 |
|
1.1 |
|
TOTAL |
|
|
|
16.1 |
Note: * Purchased during 2010.
In terms of negative performance, the most disappointing performance came from Prusik Asia Fund -9.4% (sold in August), where the manager continued its poor performance of 2009 and RWC US Absolute Alpha -4.5% which ended in negative territory against a positive environment for US equities. ETFS Natural Gas -25.6% (sold in March) was a significant detractor due mainly to the underlying commodity remaining in contango, a situation which, given the negative 'roll yield', provides a significant headwind for positive returns. Elsewhere, SR Global - Asia and SR Global - Emerging Markets were laggards and only just in positive territory despite strong performance from Asian and Emerging Market equities.
PORTFOLIO ACTIVITY - for the Year to 31 December 2010
At the beginning of the year, the portfolio had cash and liquidity funds of $75.1m. During 2010, excluding transactions relating to cash and liquidity funds, there were total purchases of $61.4m and total sales of $30.9m. Within the portfolio's illiquid investments, there were new commitments to Private Assets of $20.7m and capital contributions to Private Asset investments of $15.1m.
Purchases
There were purchases totalling $61.4m during 2010.
|
New Positions |
|
$ |
|
AR New Asia Fund |
|
7,500,000 |
|
Investec GSF Enhanced Global Energy Fund |
|
6,273,295 |
|
QFR Victoria Fund Ltd |
|
5,000,000 |
|
Winton Futures Fund |
|
5,000,000 |
|
Schroder ISF Emerging Markets Debt Fund |
|
5,000,000 |
|
Schroder ISF Global Energy |
|
5,000,000 |
|
Prosperity Quest Fund |
|
5,000,000 |
|
BlueBay Macro Fund |
|
5,000,000 |
|
Prusik Asian Smaller Companies Fund Plc |
|
2,497,909 |
|
Jupiter Global India Select Fund |
|
2,000,000 |
|
Jupiter Absolute Return Fund |
|
1,810,544 |
|
|
|
|
|
Additions to Existing Investments |
|
|
|
Findlay Park American Fund |
|
5,472,637 |
|
ARC Capital Holdings Ltd |
|
2,805,178 |
|
Atlantis China Fund |
|
2,000,000 |
|
SR Global Emerging Markets Fund |
|
905,109 |
|
Pacific Alliance China Land Ltd |
|
162,766 |
|
|
|
|
|
|
|
61,427,438 |
New Positions
AR New Asia Fund makes investments in Asian ex-Japan equities via a long-only absolute return concentrated (c30 stocks) portfolio, supported by a macro overlay to manage risk. AR Capital was founded in 2005 by Leong Wah Kheong, formerly CIO for Schroder's Asia ex-Japan equities for eight years.
Investec GSF - Enhanced Global Energy Fund was purchased from the proceeds of the sale from Investec Global Energy Long/Short Fund (market neutral fund) into a new hedged UCITS III vehicle. The Fund is long biased but with downside protection through the use of derivative instruments.
QFR Victoria Fund is a global macro market neutral hedge fund, investing in fixed income, currencies and credit securities in Emerging Markets.
Winton Futures Fund is a market neutral 'trend following' hedge fund, trading in futures, options and forwards on approximately 100 global equity, currency, bond commodity and short-term interest rate markets.
Schroder Emerging Markets Debt Absolute Return Fund is a long-only absolute return market neutral fund investing in Emerging Markets debt through local and external (USD) cash bonds, with significant thought given to currency positioning as a meaningful contributor to performance.
Prosperity Quest Fund invests in Russian equities with a bias towards small and mid-capitalisation companies. The Fund specialises in restructuring and consolidation opportunities and may have a small percentage invested in unlisted assets.
Schroder Global Energy Fund is a long-only fund, investing in a concentrated portfolio of listed energy (oil, gas and coal) equities through both direct exploration and production companies as well as related energy services and equipment companies. The portfolio has a high exposure to mid-capitalisation companies.
BlueBay Macro Fund - is a global macro absolute return hedge fund, investing in fixed income, currency, equity and other liquid markets, typically with a high exposure to Emerging Markets.
Jupiter Global India Select Fund invests across market capitalisations in a portfolio of Indian equities. The focus in on under-researched companies in the mid-capitalisation space.
Prusik Asian Smaller Companies Fund was purchased using approximately half of the proceeds from the sale of the Prusik Asia Fund. The transaction reflects the manager's better track record in the Smaller Companies Fund and higher conviction ideas.
Jupiter Absolute Return was purchased with proceeds from the sale of Jupiter Financial Opportunities Fund. The new UCITS III Fund is an unconstrained fund, investing across asset classes with a bias towards equities. Given the manager's area of expertise, equities in financials may constitute a significant part of the portfolio. It is anticipated that the returns will offer greater downside protection and exhibit lower volatility than the Jupiter Financial Opportunities Fund.
Additions to Existing Investments
Findlay Park American Fund was increased to reflect the Investment Manager's high conviction in this long-term holding and some selective value in a largely out of fashion stock market.
ARC Capital Holdings Ltd was increased to take advantage of a significant discount to NAV (approximately 18%) and greater exit visibility on a maturing portfolio. Furthermore, one (profitable) follow-on investment was made ahead of the January 2011 tender offer where the Company made a one-off distribution equal to 10% of NAV.
Atlantis China Fund - tactical increase of exposure to high conviction China fund following a weak local market in 2010.
Pacific Alliance China Land Ltd was increased ahead of the October tender offer where the Company made a third (and final) distribution equal to 6% of NAV. The Investment Manager has participated in all three of these tender offers, purchasing an equal amount of shares in advance of the tender and then tendering these shares at NAV - this has proved a profitable strategy.
SR Global - Emerging Markets was increased with proceeds from the sale of SR Phoenicia following disappointing performance despite significant crossover of ideas with the Emerging Markets Portfolio.
Switches
There were three switches during 2010.
Lansdowne UK Equity Fund Ltd ($10.6m) was switched from the GBP class to the USD (hedged) class.
Prior to its sale, Prusik Asia Fund ($4.8m) was switched at the start of 2010 from the USD class to the SGD class, reflecting the manager's positive outlook for Asian currencies in general and more specifically the Singapore Dollar.
RWC Biltmore (hedge fund, $2.9m) was switched into RWC US Absolute Alpha Fund, a UCITS III fund with a very similar portfolio. The RWC US Absolute Alpha Fund benefits from daily liquidity versus monthly for RWC Biltmore.
Sales
There were sales with proceeds totalling $30.9m during 2010.
Commitments
There were five new commitments to illiquid private limited partnerships in the year:
|
|
|
$ |
|
Avigo SME Fund III, LLC |
|
5,000,000 |
|
Capital International Private Equity Fund V, LP |
|
5,000,000 |
|
China Harvest Fund II, LP |
|
5,000,000 |
|
Greenspring Global Partners IV, LP |
|
5,000,000 |
|
L Capital Asia Private Investors Offshore, LP |
|
4,650,000 |
|
|
|
|
|
TOTAL |
|
24,650,000 |
Avigo SME Fund III, LLC invests in Indian Small and Medium Enterprises with a focus on the industrial sector.
Capital International Private Equity Fund V, LP makes private equity investments in market-leading local companies and well-positioned exporters across the global emerging markets. This was a secondary transaction where a $5m commitment was acquired from an existing Limited Partner. The price paid was a 12.5% discount to the drawn portfolio's valuation.
China Harvest Fund II, LP provides growth capital to leading mid-market companies (typically with top five market positions) in mainland China, Hong Kong, Macau and Taiwan.
Greenspring Global Partners IV, LP is a venture capital fund of funds, aiming to provide access to top-tier funds, principally in the United States. In addition, approximately 25% of commitments will be used to make direct investments in private companies.
L Capital Asia Private Investors Offshore, LP is a private equity fund sponsored by French luxury conglomerate, the LVMH Group, to provide growth capital through minority stake investments in Asian 'aspirational' brands (affordable alternatives to luxury brands), directed at the growing middle class and discretionary consumption.
Hanseatic Asset Management LBG
February 2011
WILSON SONS LIMITED OPERATING REVIEW
We have summarised the following highlights from the Wilson Sons 2010 Earnings Report released on 25 March 2011. Wilson Sons represents one segment for IFRS 8 segmental reporting purposes in the Ocean Wilsons Holdings Limited accounts. The full report is available on the Wilson Sons Limited website: www.wilsonsons.com:
Cezar Baião CEO of Operations in Brazil said:
"We are pleased to deliver another strong year to our shareholders. Wilson, Sons' record investment of US$190.3 million in 2010 demonstrates our commitment to developing port, maritime, and logistics infrastructure for the service of our clients. The Company is experiencing outstanding demand in the areas of international trade, oil and gas, and the Brazilian domestic economy.
In 2011, we are expanding our container terminal in Salvador and doubling our shipbuilding capacity in Guarujá, together with the on-going fleet expansion in Offshore and Towage. As such, we have unprecedented confidence that Wilson, Sons' investments will set the stage for a successful future."
Net Revenues
Port Terminal revenue for the year is up 30% due to higher volumes, the strong Brazilian Real stimulating higher-yielding imports which, in turn, favoured warehousing revenues and increased activity at Brasco. Towage revenue grew 7%, with strong demand for special operations which accounted for 16% of towage revenue in the year. Offshore revenue is down 27% as a result of the formation of WSUT joint venture in May 2010 and the migration of 4 vessels from spot market operations to long-term contracts.
Capital Expenditure
The Group invested record capital expenditure in the year. The capital expenditure is a result of the Company's fleet expansion in offshore and towage, new equipment for Tecon Rio Grande, the expansions of both Tecon Salvador and the shipyard in Guarujá. Equipment for port terminals included 2 new ship-to-shore cranes (portainers) and 4 rubber-tyre gantry cranes (transtainers) at Tecon Rio Grande, and the aforementioned expansion of Tecon Salvador. Equipment was also purchased for logistics to attend new client in-house operations.
Port Terminals
Wilson Sons port terminals operates two container terminals, located in Rio Grande, Rio Grande do Sul and Salvador in Bahia, Brazil (Tecon Rio Grande and Tecon Salvador). Both terminals, offer assistance in port operations for loading and unloading of vessels, storage, and auxiliary services. Wilson Sons also operates Brasco, located in Rio de Janeiro, which provides support services to the oil and gas industry
Total port terminal revenue grew 30% from US$175.4 million to US$228.0 million due to increased container volumes and revenue from Brasco. Revenue also benefitted from an improved container sales mix and increased warehousing revenues. Brasco had a particularly strong year with revenue growing 84% to US$49.2 million (2009: US$26.7 million). Revenue growth reflects the higher demand for auxiliary services, such as warehousing, transportation, waste management, container rental, and utilisation of manpower and equipment. The Company experienced strong demand at all our facilities in Rio de Janeiro, Niterói, and Vitória.
Container terminal volumes for the year were 5% higher at 928,700 TEUs (Twenty foot equivalent units) benefitting from the strong domestic economy and growth in cabotage volumes. Deep sea volumes in the period were lower due to the negative effect of the strong Brazilian Real on our predominantly export-driven ports although this was mainly reflected in a fall in low value empty container movements. Imports of parts and machinery, chemicals, and plastics at Tecon Rio Grande partially offset the fall in export volumes at this terminal. The Full-to-Empty container mix improved with full containers up 15.1% for the year. Warehousing revenues benefitted from greater import volumes.
Volumes at Tecon Salvador were up 13% at 262,500 TEUs with increases in transhipment, inland navigation and cabotage volumes. Chemicals, ores, grains, pulps, and rubber were particularly strong.
The increase in revenue was reflected in increased EBITDA which improved 31% to US$76.3 million from US$58.3 million. Within this Brasco EBITDA improved 63% to US$14.9million (2009: US$9.1 million).
Towage
Wilson Sons offers harbour towage, ocean towage, salvage support and maritime support to the offshore oil and gas industry.
Towage revenues increased 7% to US$156.0 million from US$145.7million helped by better volumes in both harbour towage and special operations. The Company continues to focus on developing our higher margin special operations business which accounted for 16% of towage revenue in the year (2009: 14%). Special operations are mainly support to offshore oil & gas platforms and FPSO (Floating, Production, Storage and Offloading vessels) construction. Special Operations accounted for 35% of Towage EBITDA in the year (2009: 25%).
We continue to invest in renewing and expanding our fleet with the addition of 5 tugboats during the year. (Lyra, Regulus, Sculptur, Carina, and Vela) Currently, the company has 3 tugboats in different stages of construction at our shipyard in Guarujá.
Offshore
Through our 50/50 joint venture Wilson, Sons Ultratug (WSUT),Wilson Sons operates platform supply vessels (PSVs), to transport equipment and supplies to and from offshore oil and gas installations.
The Wilson, Sons Ultratug joint venture results are proportionally consolidated since the formation of the joint venture in May 2010. Prior to this the Group reported 100% of our subsidiary results.
Offshore revenue at US$28 million decreased 27% compared to prior year (2009 US$38.1 million) due to the formation of the joint venture and the migration of four PSVs operating in the high value spot market to long-term contracts with Petrobras during the year.
Operating profit is down 53% for the year to US$6.5 million (2009: US$13.7 million) because of the joint venture formation, lower spot market rates, the migration of four vessels from spot contracts to 8-year, long-term contracts with Petrobras (long-term contracts bring guaranteed revenue but carry lower daily rates than riskier spot market rates). Operating costs were adversely impacted by higher depreciation due to the expansion of our fleet and higher personnel costs driven by collective labour agreements and increased headcount.
The Groups shipyard delivered two new PSVs during the year (Fulmar and Talha-Mar). At the end of 2010 the joint venture operated 10 PSVs of which 9 were on long-term contract to Petrobras. The PSV Torda was delivered in March 2011 and the company has a further 3 PSVs in different stages of construction at the Wilson, Sons Guarujá Shipyard.
Shipyards
Shipyard revenues were up 58% in the year as a result of faster build programs and completion of higher specification vessels during 2010. EBITDA at US$ 6.0million was US$3.8 million lower than 2009 (US$9.8 million) principally due to higher start-up costs associated with the new shipyards in Guarujá and Rio Grande.
Following the formation of the WSUT joint venture, 50% of shipyard construction for WSUT is treated as third-party revenues in the Wilson Sons Limited accounts with the remaining 50% treated as fixed asset investment. Any profits generated by the shipyard relating to the 50% treated as fixed asset investment is considered intercompany and therefore eliminated on consolidation.
All tugboats constructed for Wilson, Sons towage business are considered intercompany and recorded at cost in the consolidated balance sheet.
Ship Agency
Wilson Sons acts as the ship owners' representative as well providing the following services to ship owners: commercial representation, cargo documentation, container control and vessel support.
Ship Agency revenues increased 16% to US$17.6 million compared to 2009 (US$15.2 million) as a result of strong volumes. The number of vessel calls attended increased 11% to 7,258 with increases also in the number of bill of ladings issued and containers controlled. Volumes benefitted from both higher domestic and international shipping demand.
EBITDA margins decreased as a result of higher personnel costs and the strength of the Brazilian Real against the US Dollar. A stronger Brazilian Real erodes ship agency margins as the 100% of costs are Real-denominated and the majority of revenues are USD-denominated.
Logistics
Wilson Sons develops and provides differentiated logistics solutions for the management of the supply chain of our clients and the distribution of products, including a number of logistics services, such as, storage, customs storage, distribution, highway transportation, multimodal transportation and NVOCC - Non Vessel Operating Common Carrier.
Revenue from our logistics business increased 35% to US$102.4 million from US$75.8million principally due to new operations in the steel, mining and pulp and paper industries.
Logistics EBITDA improved 86% to US$13.1 million (2009: US$7.1 million) due to the ramp up in new operation volumes and improved performances across the in-house logistics operations. The Company's bonded-warehouse operations in Santo André (SP) performed particularly strong benefitting from robust import volumes driven by the strong Brazilian Real.
Ocean Wilsons Holdings Limited
Consolidated statement of comprehensive income
for the year ended 31 December 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year to |
|
Year to |
|
|
|
|
|
|
31 December |
|
31 December |
|
|
|
|
|
|
2010 |
|
2009 |
|
|
|
|
Notes |
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
|
|
|
|
Revenue |
3 |
|
575,551 |
|
477,888 |
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials and consumables used |
|
|
(67,222) |
|
(49,570) |
|
|
|
Employee benefits expense |
6 |
|
(205,486) |
|
(162,367) |
|
|
|
Depreciation & amortisation expense |
5 |
|
(42,923) |
|
(32,066) |
|
|
|
Other operating expenses |
|
|
(192,090) |
|
(155,042) |
|
|
|
Profit on disposal of property, plant and equipment |
|
|
90 |
|
470 |
|
|
|
Operating profit |
|
|
67,920 |
|
79,313 |
|
|
|
Profit realised on formation of joint venture |
14 |
|
20,407 |
|
- |
|
|
|
Investment revenue |
7 |
|
17,982 |
|
35,613 |
|
|
|
Other gains and losses |
8 |
|
22,460 |
|
34,305 |
|
|
|
Finance costs |
9 |
|
(11,611) |
|
(9,411) |
|
|
|
Profit before tax |
|
|
117,158 |
|
139,820 |
|
|
|
Income tax expense |
10 |
|
(30,564) |
|
(31,228) |
|
|
|
Profit for the year |
|
|
86,594 |
|
108,592 |
|
|
|
Other comprehensive income |
|
|
|
|
|
|
|
|
Exchange differences arising on translation of |
|
|
|
|
|
|
|
|
foreign operations |
|
|
4,644 |
|
16,072 |
|
|
|
Other comprehensive income for the year |
|
|
4,644 |
|
16,072 |
|
|
|
Total comprehensive income for the year |
|
|
91,238 |
|
124,664 |
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year attributable to: |
|
|
|
|
|
|
|
|
Equity holders of parent |
|
|
56,879 |
|
70,200 |
|
|
|
Non-controlling interests |
|
|
29,715 |
|
38,392 |
|
|
|
|
|
|
|
86,594 |
|
108,592 |
|
|
Total comprehensive income for the year attributable to: |
|
|
|
|
|
|
|
|
Equity holders of parent |
|
|
59,749 |
|
79,059 |
|
|
|
Non-controlling interests |
|
|
31,489 |
|
45,605 |
|
|
|
|
|
|
|
91,238 |
|
124,664 |
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
Basic and diluted |
12 |
|
160.8c |
|
198.5c |
|
|
Ocean Wilsons Holdings Limited Consolidated Balance Sheet As at 31 December 2010 |
|||||
|
|
|
|
|
|
|
|
|
|
|
As at |
|
As at |
|
|
|
|
31 December |
|
31 December |
|
|
|
|
2010 |
|
2009 |
|
|
|
|
US$'000 |
|
US$'000 |
|
Non-current assets |
|
|
|
|
|
|
|
Goodwill |
13 |
15,612 |
|
15,612 |
|
|
Other intangible assets |
|
16,841 |
|
2,239 |
|
|
Property, plant and equipment |
|
560,846 |
|
438,892 |
|
|
Deferred tax assets |
|
28,923 |
|
25,499 |
|
|
Trade and other receivables |
|
6,400 |
|
- |
|
|
Other non-current assets |
|
6,550 |
|
10,521 |
|
|
|
|
635,172 |
|
492,763 |
|
Current assets |
|
|
|
|
|
|
|
Inventories |
|
20,147 |
|
20,687 |
|
|
Trading investments |
|
297,273 |
|
249,778 |
|
|
Trade and other receivables |
|
129,242 |
|
107,075 |
|
|
Cash and cash equivalents |
|
130,071 |
|
196,428 |
|
|
|
|
576,733 |
|
573,968 |
|
|
|
|
|
|
|
|
Total assets |
|
1,211,905 |
|
1,066,731 |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Trade and other payables |
|
(126,656) |
|
(98,690) |
|
|
Current tax liabilities |
|
(3,354) |
|
(853) |
|
|
Obligations under finance leases |
|
(4,847) |
|
(3,902) |
|
|
Bank overdrafts and loans |
|
(25,565) |
|
(18,146) |
|
|
|
|
(160,422) |
|
(121,591) |
|
|
|
|
|
|
|
|
Net current assets |
|
416,311 |
|
452,377 |
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
|
Bank loans |
|
(288,596) |
|
(237,271) |
|
|
Deferred tax liabilities |
|
(15,073) |
|
(16,140) |
|
|
Provisions |
|
(12,289) |
|
(9,831) |
|
|
Obligations under finance leases |
|
(6,305) |
|
(8,653) |
|
|
|
|
(322,263) |
|
(271,895) |
|
|
|
|
|
|
|
|
Total liabilities |
|
(482,685) |
|
(393,486) |
|
|
|
|
|
|
|
|
|
Net assets |
|
729,220 |
|
673,245 |
|
|
|
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
|
|
Share capital |
|
11,390 |
|
11,390 |
|
|
Retained earnings |
|
475,042 |
|
435,844 |
|
|
Capital reserves |
|
31,760 |
|
31,760 |
|
|
Translation reserve |
|
16,900 |
|
14,030 |
|
Equity attributable to equity holders of the parent |
535,092 |
|
493,024 |
||
|
Non-controlling interests |
|
194,128 |
|
180,221 |
|
|
|
|
|
|
|
|
|
Total equity |
|
729,220 |
|
673,245 |
|
Ocean Wilsons Holdings Limited
Consolidated Statement of Changes in Equity
As at 31 December 2010
|
|
|
|
|
|
Attributable |
|
|
|
|
|
|
|
|
to equity |
|
|
|
|
Share |
Retained |
Capital |
Translation |
holders of |
Non-controlling |
Total |
|
|
capital |
earnings |
reserves |
reserve |
the parent |
interests |
equity |
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
For the year ended 31 December 2009 |
|
|
|
|
|
|
|
|
Balance at 1 January 2009 |
11,390 |
376,253 |
31,760 |
5,171 |
424,574 |
139,517 |
564,091 |
|
Currency translation adjustment |
- |
- |
- |
8,859 |
8,859 |
7,213 |
16,072 |
|
Profit for the period |
- |
70,200 |
- |
- |
70,200 |
38,392 |
108,592 |
|
Total income and expense for the period |
- |
70,200 |
- |
8,859 |
79,059 |
45,605 |
124,664 |
|
Dividends |
- |
(10,609) |
- |
- |
(10,609) |
(6,682) |
(17,291) |
|
Increase in capital |
- |
- |
- |
- |
- |
1,781 |
1,781 |
|
Balance at 31 December 2009 |
11,390 |
435,844 |
31,760 |
14,030 |
493,024 |
180,221 |
673,245 |
|
|
|
|
|
|
|
|
|
|
For the year ended 31 December 2010 |
|
|
|
|
|
|
|
|
Balance at 1 January 2010 |
11,390 |
435,844 |
31,760 |
14,030 |
493,024 |
180,221 |
673,245 |
|
Currency translation adjustment |
- |
- |
- |
2,870 |
2,870 |
1,774 |
4,644 |
|
Profit for the period |
- |
56,879 |
- |
- |
56,879 |
29,715 |
86,594 |
|
Total income and expense for the period |
- |
56,879 |
- |
2,870 |
59,749 |
31,489 |
91,238 |
|
Dividends |
- |
(14,853) |
- |
- |
(14,853) |
(11,405) |
(26,258) |
|
Acquisition of non-controlling interest |
- |
(2,828) |
- |
- |
(2,828) |
(6,177) |
(9,005) |
|
Balance at 31 December 2010 |
11,390 |
475,042 |
31,760 |
16,900 |
535,092 |
194,128 |
729,220 |
|
Share capital The Group has one class of ordinary share which carries no right to fixed income. Capital reserves The capital reserves arise principally from transfers from revenue to capital reserves made in the Brazilian subsidiaries arising in the following circumstances:- (a) profits of the Brazilian subsidiaries and Brazilian holding company which in prior periods were required by law to be transferred to capital reserves and other profits not available for distribution; and (b) Wilson Sons Limited byelaws require the company to credit an amount equal to 5% of the company's net profit to a retained earnings account to be called legal reserve until such amount equals 20% of the Wilson Sons Limited share capital.
Translation reserve The translation reserve arises from exchange differences on the translation of operations with a functional currency other than US Dollars. Amounts in the statement of changes of equity are stated net of tax where applicable |
Ocean Wilsons Holdings Limited
Consolidated Cash Flow Statement
For the year ended 31 December 2010
|
|
|
|
Year to |
|
Year to |
|
|
|
|
31 December |
|
31 December |
|
|
|
|
2010 |
|
2009 |
|
|
|
Notes |
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
|
Net cash inflow from operating activities |
16 |
85,538 |
|
52,238 |
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
Interest received |
|
10,159 |
|
10,379 |
|
|
Dividends received from trading investments |
|
3,795 |
|
1,487 |
|
|
Proceeds on disposal of trading investments |
|
120,849 |
|
104,941 |
|
|
Income from underwriting activities |
|
- |
|
2 |
|
|
Proceeds on disposal of property, plant and equipment |
|
959 |
|
751 |
|
|
Purchases of property, plant and equipment |
|
(161,971) |
|
(139,742) |
|
|
Purchases of trading investments |
|
(145,884) |
|
(110,420) |
|
|
Net cash inflow arising from creation of joint venture |
|
5,040 |
|
- |
|
|
Net cash outflow arising on purchase of intangible asset |
|
(14,546) |
|
- |
|
|
Net cash inflow arising on increase in capital in non-controlling interest |
- |
|
1,781 |
||
|
Net cash used in investing activities |
|
(181,599) |
|
(130,821) |
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
Dividends paid |
11 |
(14,853) |
|
(10,609) |
|
|
Dividends paid to non-controlling interests in subsidiary |
|
(11,405) |
|
(6,682) |
|
|
Repayments of borrowings |
|
(18,953) |
|
(16,848) |
|
|
Repayments of obligations under finance leases |
|
(3,969) |
|
(3,844) |
|
|
New bank loans raised |
|
77,650 |
|
83,894 |
|
|
Increase in bank overdrafts |
|
6,252 |
|
114 |
|
|
Net cash outflow arising on purchase of non-controlling interest |
(9,005) |
|
- |
||
|
Net cash from financing activities |
|
25,717 |
|
46,025 |
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
(70,344) |
|
(32,558) |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
196,428 |
|
205,315 |
|
|
Effect of foreign exchange rate changes |
|
3,987 |
|
23,671 |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
130,071 |
|
196,428 |
|
|
|
|
|
|
|
|
|
Ocean Wilsons Holdings Limited |
|||||||||||||||
|
Notes to the Accounts |
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. |
General information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The financial statements have been prepared on the historical cost basis except for the revaluation of financial investments. The accounting policies are consistent with those set out in the 2009 Group annual report. |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2. |
Basis of Preparation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The financial information set out in this announcement does not constitute the Group's statutory financial statements for the years ended 31 December 2010 or 2009, but is derived from those accounts. The auditors have reported on those accounts and their reports were unqualified.
The Group closely monitors and manages its liquidity risk. The Group has considerable financial resources including US$130.1 million in cash and cash equivalents and the Groups borrowings have a long maturity profile. Based on the Group's cash forecasts and sensitivities run the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the accounts.
|
||||||||||||||
|
|
Whilst the financial information included in this preliminary announcement has been prepared in accordance with International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. |
||||||||||||||
|
3. |
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended |
|
Year ended |
|
|
An analysis of the Group's revenue is as follows: |
31 December |
|
31 December |
|
|
|
|
|
2010 |
|
2009 |
|
|
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
|
|
Sales of services |
|
536,258 |
|
455,801 |
|
|
Revenue from construction contracts |
|
39,293 |
|
22,087 |
|
|
|
|
575,551 |
|
477,888 |
|
|
Investment income (note 7) |
|
17,982 |
|
35,613 |
|
|
|
|
593,533 |
|
513,501 |
|
|
All revenue is derived from continuing operations |
|
|
|
|
|
4. |
Business and geographical segments |
|
|
|
|
|
Business segments |
|
|
Ocean Wilsons Holdings has two reportable segments: Maritime services and investments. |
|
|
The maritime services segment provides towage, port terminals, ship agency, offshore, logistics and vessel construction services in Brazil. |
|
|
The investment segment holds a portfolio of international investments. |
|
|
Segment information relating to these businesses is presented below. |
|
For the year ended 31 December 2010 |
|
|
|
|
|
|
|
|
|
|
|
Maritime |
|
|
|
|
|
|
|
|
|
Services |
|
Investment |
|
Unallocated |
|
Consolidated |
|
|
|
Year ended |
|
Year ended |
|
Year ended |
|
Year ended |
|
|
|
31 December |
|
31 December |
|
31 December |
|
31 December |
|
|
|
2010 |
|
2010 |
|
2010 |
|
2010 |
|
|
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
575,551 |
|
- |
|
- |
|
575,551 |
|
Result |
|
|
|
|
|
|
|
|
|
Segment result |
|
78,456 |
|
(2,930) |
|
(7,606) |
|
67,920 |
|
Profit realised on formation of joint venture |
|
20,407 |
|
- |
|
- |
|
20,407 |
|
Investment revenue |
|
13,940 |
|
3,953 |
|
89 |
|
17,982 |
|
Other gains and losses |
|
- |
|
22,460 |
|
- |
|
22,460 |
|
Finance costs |
|
(11,611) |
|
- |
|
- |
|
(11,611) |
|
Profit before tax |
|
101,192 |
|
23,483 |
|
(7,517) |
|
117,158 |
|
Tax |
|
(30,564) |
|
- |
|
- |
|
(30,564) |
|
Profit after tax |
|
70,628 |
|
23,483 |
|
(7,517) |
|
86,594 |
|
|
|
|
|
|
|
|
|
|
|
Other information |
|
|
|
|
|
|
|
|
|
Capital additions |
|
(166,739) |
|
- |
|
- |
|
(166,739) |
|
Depreciation and amortisation |
|
(42,922) |
|
- |
|
(1) |
|
(42,923) |
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet |
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
Segment assets |
|
939,521 |
|
265,023 |
|
7,361 |
|
1,211,905 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Segment liabilities |
|
(472,309) |
|
(505) |
|
(9,871) |
|
(482,685) |
|
|
|
|
|
|
|
|
|
|
|
For the year ended 31 December 2009 |
|
|
|
|
|
|
|
|
|
|
|
Maritime |
|
|
|
|
|
|
|
|
|
Services |
|
Investment |
|
Unallocated |
|
Consolidated |
|
|
|
Year ended |
|
Year ended |
|
Year ended |
|
Year ended |
|
|
|
31 December |
|
31 December |
|
31 December |
|
31 December |
|
|
|
2009 |
|
2009 |
|
2009 |
|
2009 |
|
|
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
477,888 |
|
- |
|
- |
|
477,888 |
|
Result |
|
|
|
|
|
|
|
|
|
Segment result |
|
96,303 |
|
(2,605) |
|
(14,385) |
|
79,313 |
|
Investment revenue |
|
34,343 |
|
1,208 |
|
62 |
|
35,613 |
|
Other gains and losses |
|
- |
|
34,305 |
|
- |
|
34,305 |
|
Finance costs |
|
(9,411) |
|
- |
|
- |
|
(9,411) |
|
Profit before tax |
|
121,235 |
|
32,908 |
|
(14,323) |
|
139,820 |
|
Tax |
|
(31,140) |
|
(88) |
|
- |
|
(31,228) |
|
Profit after tax |
|
90,095 |
|
32,820 |
|
(14,323) |
|
108,592 |
|
|
|
|
|
|
|
|
|
|
|
Other information |
|
|
|
|
|
|
|
|
|
Capital additions |
|
(149,553) |
|
- |
|
- |
|
(149,553) |
|
Depreciation and amortisation |
|
(32,065) |
|
- |
|
(1) |
|
(32,066) |
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet |
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
Segment assets |
|
808,665 |
|
247,180 |
|
10,886 |
|
1,066,731 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Segment liabilities |
|
(383,247) |
|
(409) |
|
(9,830) |
|
(393,486) |
|
|
|
|
|
|
|
|
|
|
|
Finance costs and associated liabilities have been allocated to reporting segments where interest costs arise from loans used to finance the construction of fixed assets in that segment. |
|
Unallocated corporate costs, assets and liabilities include the Ocean Wilsons Holdings Limited long-term incentive plan. The long-term incentive plan is a cash settled phantom option scheme linked to the Wilson Sons Limited share price. The scheme is fair valued using a Binomial model at each reporting date.
|
|
Geographical Segments |
|
The Group's operations are located in Bermuda, Brazil, United Kingdom and Guernsey. |
|
All the Group's sales are derived in Brazil. |
|
The following is an analysis of the carrying amount of segment assets, and additions to property, plant and equipment, analysed by the geographical area in which the assets are located. |
|
|
|
|
|
|
|
|
|
|
Additions to |
|
|
|
|
|
Carrying amount of |
|
|
|
|
property, plant and equipment |
|
|
|
|
|
segment assets |
|
|
|
|
and intangible assets |
|
|
|
|
|
|
|
|
|
Year ended |
|
Year ended |
|
|
|
|
|
31 December |
|
31 December |
|
31 December |
|
31 December |
|
|
|
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
|
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
Brazil |
|
|
|
869,766 |
|
713,816 |
|
166,739 |
|
149,553 |
|
Bermuda |
|
|
|
340,527 |
|
350,736 |
|
- |
|
- |
|
Other |
|
|
|
1,612 |
|
2,179 |
|
- |
|
- |
|
|
|
|
|
1,211,905 |
|
1,066,731 |
|
166,739 |
|
149,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5. |
Profit for the year |
|
|
|
|
|
|
|
|
|
|
|
|
Year ended |
|
Year ended |
|
|
Profit for the year has been arrived at after charging: |
|
2010 |
|
2009 |
||
|
|
|
|
|
|
US$'000 |
|
US$'000 |
|
|
Net foreign exchange losses |
|
|
|
4,214 |
|
25,769 |
|
|
Depreciation of property plant and equipment |
|
|
|
42,435 |
|
31,917 |
|
|
Amortisation of intangible assets |
|
|
|
488 |
|
149 |
|
|
Operating lease rentals |
|
|
|
14,528 |
|
12,440 |
|
|
Auditors' remuneration for audit services (see below) |
|
894 |
|
837 |
||
|
|
Non-executive directors emoluments |
|
|
|
259 |
|
230 |
|
|
|
|
|
|
|
|
|
|
|
A more detailed analysis of auditors remuneration is provided below: |
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
Statutory audit |
|
|
|
806 |
|
752 |
|
|
Further assurance services |
|
|
|
75 |
|
72 |
|
|
Other services |
|
|
|
13 |
|
13 |
|
|
|
|
|
|
894 |
|
837 |
|
As a matter of routine, the Group reviews taxes and levies impacting its businesses with a view to ensuring that payments of such amounts are correctly made and that no amounts are paid unnecessarily. In this process, where it is confirmed that taxes and/or levies have been overpaid, the Group takes appropriate measures to recover such amounts. During the year ended 31 December 2007, the Group received a response to a consultation to tax officials confirming the exemption of certain transactions to taxes, which the Group had been paying through that date. This response permits the Group to recoup such amounts paid in the past provided the Group takes certain measures to demonstrate that it has met the requirements of tax regulations for such recovery. During 2009, the Group was able to meet such requirements and recognised US$6.5 million as a credit in the Consolidated Statement of Comprehensive Income for that year. The Group concluded the process in 2009 and no amounts were recognised in 2010.
|
|
6. |
Employee benefits expense |
|
|
|
|
|
|
Year ended |
|
Year ended |
|
|
|
31 December |
|
31 December |
|
|
|
2010 |
|
2009 |
|
|
|
US$'000 |
|
US$'000 |
|
|
Aggregate remuneration comprised: |
|
|
|
|
|
Wages and salaries |
149,582 |
|
117,095 |
|
|
Share based payment expense |
16,545 |
|
17,174 |
|
|
Social security costs |
38,474 |
|
27,370 |
|
|
Other pension costs |
885 |
|
728 |
|
|
|
205,486 |
|
162,367 |
|
7. |
Investment revenue |
|
|
|
|
|
|
|
|
Year ended |
|
Year ended |
|
|
|
|
31 December |
|
31 December |
|
|
|
|
2010 |
|
2009 |
|
|
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
|
|
Interest on bank deposits |
|
10,159 |
|
10,379 |
|
|
Exchange gains on cash |
|
3,987 |
|
23,671 |
|
|
Dividends from equity investments |
|
3,795 |
|
1,487 |
|
|
Investment revenues from underwriting activities |
41 |
|
76 |
|
|
|
|
|
17,982 |
|
35,613 |
|
8. |
Other gains and losses |
|
|
|
|
|
|
|
|
|
|
Year ended |
|
Year ended |
|
|
|
|
|
31 December |
|
31 December |
|
|
|
|
|
2010 |
|
2009 |
|
|
|
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
|
|
|
Increase in fair value of trading investments held at year end |
21,332 |
|
36,337 |
||
|
|
Profit / (loss) on disposal of trading investments |
|
1,128 |
|
(2,032) |
|
|
|
|
|
|
22,460 |
|
34,305 |
|
9. |
Finance costs |
|
|
|
|
|
|
Year ended |
|
Year ended |
|
|
|
31 December |
|
31 December |
|
|
|
2010 |
|
2009 |
|
|
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
|
Interest on bank overdrafts and loans |
9,354 |
|
7,580 |
|
|
Exchange gain on foreign currency borrowings |
(227) |
|
(2,098) |
|
|
Interest on obligations under finance leases |
1,848 |
|
1,254 |
|
|
Total borrowing costs |
10,975 |
|
6,736 |
|
|
Other interest |
636 |
|
2,675 |
|
|
|
11,611 |
|
9,411 |
|
Borrowing costs incurred on qualifying assets of US$1,889,000 (2009: US$728,000) were capitalised in the year. |
|
10. |
Taxation |
|
|
|
|
|
|
|
|
|
|
Year ended |
|
Year ended |
|
|
|
|
|
31 December |
|
31 December |
|
|
|
|
|
2010 |
|
2009 |
|
|
|
|
|
US$'000 |
|
US$'000 |
|
|
Current |
|
|
|
|
|
|
|
Brazilian taxation |
|
|
|
|
|
|
|
Corporation tax |
|
|
22,747 |
|
31,429 |
|
|
Social contribution |
|
|
8,492 |
|
12,031 |
|
|
Total Brazilian current tax |
|
|
31,239 |
|
43,460 |
|
|
UK corporation tax |
|
|
- |
|
187 |
|
|
Total current tax |
|
|
31,239 |
|
43,647 |
|
|
Deferred tax |
|
|
|
|
|
|
|
Charge for the year in respect of deferred tax liabilities |
7,353 |
|
23,507 |
||
|
|
Credit for the year in respect of deferred tax assets |
(8,028) |
|
(35,926) |
||
|
|
Total deferred tax |
|
|
(675) |
|
(12,419) |
|
|
|
|
|
|
|
|
|
|
Total taxation |
|
|
30,564 |
|
31,228 |
|
Brazilian corporation tax is calculated at 25 percent (2009: 25 percent) of the assessable profit for the year. Brazilian social contribution tax is calculated at 9 percent (2009: 9 percent) of the assessable profit for the year. At the present time, no income, profit, capital or capital gains taxes are levied in Bermuda and accordingly, no provision for such taxes has been recorded by the company. In the event that such taxes are levied, the company has received an undertaking from the Bermuda Government exempting it from all such taxes until 28 March 2016. |
|
11. |
Dividends |
|
|
|
|
|
|
|
|
Year ended |
|
Year ended |
|
|
|
|
31 December |
|
31 December |
|
|
|
|
2010 |
|
2009 |
|
|
|
|
US$'000 |
|
US$'000 |
|
Amounts recognised as distributions to equity holders in the period |
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Final dividend paid for the year ended 31 December 2009 of zero (2008: 26.0c ) per share |
- |
|
9,194 |
||||||||
|
Second interim dividend paid for the year ended 31 December 2009 of 38.0c (2008: zero) per share |
13,438 |
|
- |
||||||||
|
First interim dividend paid for the year ended 31 December 2010 of 4.0c per share (2009: 4.0c) |
|
1,415 |
|
1,415 |
|||||||
|
|
|
|
|
|
|
|
|
14,853 |
|
10,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proposed final dividend for the year ended 31 December 2010 of 38.0c (2009: zero) per share |
|
13,438 |
|
- |
|||||||
|
Second interim dividend for the year ended 31 December 2009 paid March 2010 of 38.0c per share |
|
- |
|
13,438 |
|||||||
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.
|
12. |
Earnings per share |
|||||||||||||
|
|
The calculation of the basic and diluted earnings per share is based on the following data: |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
Year ended |
|
Year ended |
||||
|
|
|
|
|
|
|
|
|
31 December |
|
31 December |
||||
|
|
|
|
|
|
|
|
|
2010 |
|
2009 |
||||
|
|
Earnings : |
|
|
|
|
|
|
US$'000 |
|
US$'000 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Earnings for the purposes of basic earnings per share being net profit attributable to equity holders of parent. |
56,879 |
|
70,200 |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Number of shares : |
|
|
|
|
|
|
|
|
|
||||
|
|
Weighted average number of ordinary shares for the purposes of basic and diluted earnings per share |
35,363,040 |
|
35,363,040 |
||||||||||
|
13. |
Goodwill |
|
|
|
|
|
|
|
|
2010 |
|
2009 |
|
|
|
|
US$'000 |
|
US$'000 |
|
|
Cost and carrying amount |
|
|
|
|
|
|
At 1 January and 31 December |
|
15,612 |
|
15,612 |
|
|
|
|
|
|
|
|
|
Goodwill attributed to Tecon Rio Grande |
|
13,132 |
|
13,132 |
|
|
Goodwill attributed to Tecon Salvador |
|
2,480 |
|
2,480 |
|
The Group tests annually for impairment or more frequently if there are indications that goodwill might be impaired.For the purposes of testing goodwill for impairment the Group prepares cash flow forecasts for the relevant cash generating unit (Tecon Rio Grande and Tecon Salvador) derived from the most recent financial budget for the next year and extrapolates cash flows for the remaining life of the concession based on an estimated annual growth of between 8% and 10% for Tecon Rio Grande (2009: 6% to 8%) and 7% to 10% for Tecon Salvador (2009: 5.5% to 7%). This rate does not exceed the average long-term historical growth rate for the relevant market. Management estimates growth rates based on past performance, current market conditions and expectations of future market changes.The rate used pre tax to discount forecast cash flows is 13 percent (2009: 15 percent). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14. |
Joint venture formation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On 28 May 2010 the Group finalised the offshore joint venture "Wilson, Sons Ultratug Participacoes S.A" with Remolcadores Ultratug Ltda, a subsidiary of Ultratug Ltda, a Chilean Group. The Group contributed its 50% participation of the joint venture with the issued shares of Wilson, Sons Offshore S.A., the company that owns and operates the Group's offshore supply vessels. The Ultratug Group contributed its 50% participation of the joint venture with the issued shares of Magallanes Navegacao Brasileira S.A., the owner of the Ultratug Group's offshore operations in Brazil and US$14.3 million in cash.
A gain of US$20.4 million was realised on formation of the joint venture as set out below.
|
||||||||||||
|
|
|||||||||||||
|
|
|||||||||||||
|
|
|||||||||||||
|
|
|||||||||||||
|
|
|||||||||||||
|
|
|||||||||||||
|
|
|
|
|
US$'000 |
|
|
|
|
|
|
|
Wilsons Sons share of fair value of the assets contributed by Magallanes |
16,165 |
|||
|
|
|
|
|
|
|
Less Carrying value of Wilsons Sons Offshore S.A. |
|
|
(6,208) |
|
|
Consolidation elimination of intercompany profit |
|
|
|
10,450 |
|
Wilsons Sons contribution at net book value |
|
|
|
4,242 |
|
|
|
|
|
|
|
Total gain on joint venture formation |
|
|
|
20,407 |
Consolidation elimination of intercompany profit represents profits on the construction of PSVs in the Groups shipyards previously eliminated
on consolidation.
|
Change in net assets due to the joint venture transaction. |
|
||
|
|
|
|
US$'000 |
|
|
|
|
|
|
Cash and cash equivalents |
|
|
5,040 |
|
Property plant and equipment |
|
|
(6,386) |
|
Other non-current assets |
|
|
49 |
|
Inventories |
|
|
(515) |
|
Trade and other receivables |
|
|
(2,639) |
|
Borrowings |
|
|
12,002 |
|
Other liabilities |
|
|
12,856 |
|
Total |
|
|
20,407 |
|
15. |
Acquisition of subsidiary |
|
|
On 16 June 2010, the Group acquired the remaining 25% non -controlling interest in our onshore base manager and logistics business, Brasco Logistica Offshore Ltda for a cash consideration of US$9.0 million. |
|
|
|
|
|
As there was no change in control of the subsidiary the difference between the consideration paid and the book value of the assets acquired has been recognised in equity. US$'000 |
|
Net assets acquired |
|
|
|
4,155 |
|
Total consideration paid |
|
|
|
9,005 |
|
Negative movement recognised in equity |
|
|
|
(4,850) |
|
Negative movement attributable to equity holders of parent |
|
(2,828) |
||
|
Negative movement attributable to non- controlling interest |
|
(2,022) |
||
|
Change in net assets due to the joint venture transaction.
|
|
|
||
|
16. |
Notes to the cash flow statement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended |
|
Year ended |
|
|
|
|
|
|
|
31 December |
|
31 December |
|
|
|
|
|
|
|
2010 |
|
2009 |
|
|
Reconciliation from profit before tax to net cash from operating activities |
US$'000 |
|
US$'000 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
Profit before tax |
|
|
|
|
117,158 |
|
139,820 |
|
|
Profit realised on formation of joint venture |
|
|
|
|
(20,407) |
|
- |
|
|
Investment revenues |
|
|
|
|
(17,982) |
|
(35,613) |
|
|
Other gains and losses |
|
|
|
|
(22,460) |
|
(34,305) |
|
|
Finance costs |
|
|
|
|
11,611 |
|
9,411 |
|
|
Operating profit |
|
|
|
|
67,920 |
|
79,313 |
|
|
Adjustments for: |
|
|
|
|
|
|
|
|
|
Depreciation of property, plant and equipment |
|
|
|
|
42,435 |
|
31,917 |
|
|
Amortisation of intangible assets |
|
|
|
|
488 |
|
149 |
|
|
Share based payment expense |
|
|
|
|
16,545 |
|
17,174 |
|
|
Gain on disposal of property, plant and equipment |
|
|
|
(90) |
|
(470) |
|
|
|
Increase in provisions |
|
|
|
|
2,458 |
|
1,377 |
|
|
Operating cash flows before movements in working capital |
|
|
129,756 |
|
129,460 |
||
|
|
|
|
|
|
|
|
|
|
|
|
Decrease /(increase) in inventories |
|
|
|
|
25 |
|
(11,286) |
|
|
Increase in receivables |
|
|
|
|
(28,487) |
|
(25,440) |
|
|
Increase in payables |
|
|
|
|
9,117 |
|
9,748 |
|
|
Decrease / (increase) in other non-current assets |
|
|
|
3,922 |
|
(2,456) |
|
|
|
Cash generated by operations |
|
|
|
|
114,333 |
|
100,026 |
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid |
|
|
|
|
(20,908) |
|
(38,550) |
|
|
Interest paid |
|
|
|
|
(7,887) |
|
(9,238) |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from operating activities |
|
|
|
|
85,538 |
|
52,238 |
|
Cash and cash equivalents Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates their fair value. |
|
Private investment funds The Group has investments in private investment funds that are consolidated in the financial statements as cash equivalents. The private investment funds are considered as cash equivalents as despite the certificates of deposit having maturities up to March 2015, 86% of funds invested are available on call and the balance on one day's notice. The intention of the Group is that these resources will be used in the trading activities of the Group. These private investment funds comprise certificates of deposit and equivalent instruments with final maturities ranging from January 2011 to September 2015. The securities included in the portfolio of the private investment funds have daily liquidity and are marked to market on a daily basis against current earnings. These private investment funds do not have significant financial obligations. Any financial obligations are limited to service fees to the asset management company employed to execute investment transactions, audit fees and other similar expenses.
Cash and cash equivalents held in Brazil amount to US$85.8 million (2009: US$ 94.9 million). Cash equivalents are held for the purpose of meeting short term cash commitments and not for cash investment purposes. Additions to plant and equipment during the year amounting to US$1.9 million (2009: US$8.9 million) were financed by new finance leases. |
Company Contact
Keith Middleton 1 441 295 1309
Seymour Pierce Limited 020 7107 8000
Guy Peters - Corporate Finance
David Banks - Corporate Broking
|
|
This information is provided by RNS
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