Final Results
Ocean Wilsons Holdings Limited
Ocean Wilsons Holdings Limited ("Ocean Wilsons" or the "Company") is a Bermuda based investment holding company, and, through its subsidiaries, operates a maritime services company in Brazil and holds a portfolio of international investments. 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, (together with the Company and their subsidiaries, the "Group").
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 the Group accounts with a 41.75% non-controlling interest. Wilson Sons is one of the largest providers of maritime services in Brazil. Wilson Sons activities includeharbour and ocean towage, container terminal operation, offshore support services, logistics, small vessel construction and ship agency. Wilson Sons has over six thousand employees.
Ocean Wilsons Investments Limited is a wholly owned Bermuda investment company. The company holds a portfolio of international investments.
Objective
Ocean Wilsons Holdings Limited is run on a long term basis. This applies to both the investment portfolio and our investment in Wilson Sons. The long term view taken by the Board has allowed Wilson Sons to grow and develop its businesses without being pressured to produce short term results at the expense of long term value creation. The same long term view allows our investment managers to make investment decisions that create long-term capital growth.
The success of this strategy is reflected in the growth in the Ocean Wilsons share price and total returns to shareholders. In the 10 years to 31 December 2012 the share price has risen 1,404% from 64.5p to 970p and total returns to shareholders in the period (assuming dividends are reinvested in Ocean Wilsons shares) of 1,989%.
Chairman's Statement
Introduction
2012 produced another solid performance for the Group. Following a challenging first half at Wilson Sons, operating results recovered significantly in the second half of the year as a result of improved operational efficiencies. Wilson Sons continues to invest heavily in growing its businesses with the expansion of the Tecon Salvador container terminal successfully concluded in the year and the new shipyard in Guarujá close to completion. Both these projects deliver important additional capacity and leave the Group well positioned for the many market opportunities in Brazil. Following the fall in global equity markets in 2011 the investment portfolio generated positive returns in the year under review and continues to create significant value in the longer term.
Group Results
Group revenue was 8% lower at US$645.3 million (2011: US$698.0 million) due principally to lower port terminal and logistics revenue and the higher average USD/BRD exchange rate during the year which is used to convert the income statement. Approximately two thirds of the Group's revenue is denominated in BRD.
Operating profit for the year at US$79.4 million was US$17.5 million lower than 2011 (US$96.9 million) principally due to the lower revenue and to lower operating profit margins for the year which at 12% were 2% lower than prior year (2011: 14%). After adjusting for the impact of the long-term incentive plan, operating margins at 13% were in line with 2011 (13%). Costs benefitted from the higher average USD/BRD exchange rate during the year
Profit before tax increased by US$28.6 million from US$58.6 million to US$87.2 million due principally to higher gains in the investment portfolio of US$16.4 million (2011: US$27.8 million loss).
The income tax expenses of US$25.5 million and profits attributable to non-controlling interests of US$20.4 million resulted in a profit attributable to equity holders of the parent of US$41.3 million. (2011: US$8.6 million)
Profit per share based on ordinary activities after taxation and non-controlling interests were 116.7 cents (2011: loss 24.4 cents).
Investment portfolio performance
The trading investment portfolio and cash under management increased by US$8.3 million after capital redemptions of US$8.5 million from US$229.4 million at 31 December 2011 to US$237.7 million at 31 December 2012. The portfolio generated a time weighted return of 8.8% in the year. The long only equity segment of the portfolio performed particularly well returning 15.1% in the period. As expected returns from the Private Assets portfolio remain low as it is at a relatively immature stage of value creation. However we expect returns and distributions to increase from 2016 onwards as investments mature, confident that over the investment cycle these investments will generate valuable returns for the portfolio. The investment portfolio is run on a long-term basis and its long term performance remains strong with a time weighted return of 139.6% in the last 10 years against a performance benchmark of 34% and a MSCI cumulative world index of 116.0%.
The portfolio at year end was principally invested in global equities, 52%, with 21% in private assets, 10% in market neutral funds and the balance of 17% in bonds, cash and liquidity funds. The percentage of the portfolio invested in bonds, cash and liquidity funds increased from 12% at last year end due to investments in BlueBay EM Corporate Alpha Fund and Stratton Street Renminbi Bond Fund plus higher cash balances arising from disposals settled near the yearend. The percentage of the portfolio held in market neutral funds declined to 10% from 20% at last year end as disposals were made to fund private asset investments and changes in the underlying investment fundamentals at some funds.
Emerging markets accounted for 44% of the portfolio net asset value.
Net asset value
At the close of business on the 31 December 2012, the Wilson Sons share price was R$31.99, resulting in a market value for the Ocean Wilsons holding of 41,444,000 shares (58.25% of Wilson Sons) of approximately US$648.6 million which is the equivalent of US$18.34 (GBP11.25) per Ocean Wilsons Holdings Limited share.
The investment portfolio valuation at 31 December 2012 of US$237.7 million is equivalent to US$6.72 (GBP 4.12) per Ocean Wilsons Holdings Limited share.
Adding together the market value of Wilsons Sons and the investment portfolio results in a net asset value per Ocean Wilsons Holdings Limited share of approximately US$25.06 (GBP 15.38). The Ocean Wilsons Holdings Limited share price of GBP 9.53 at 31 December 2012 represents an implied discount of 38%.
While I am disappointed by the current implied discount this has fluctuated significantly since the IPO in May 2007. The Wilson Sons component of the balance sheet makes the relationship between market capitalisation and NAV considerably more complex than would be the case for a passive investment company. We do not seek to manage the discount but believe long term shareholder value will best benefit from the continued strong performance of our underlying businesses.
Dividend
The Board is declaring a final dividend of 38 cents per share (2011: 29 cents per share) to be paid on the 31 May 2013, to shareholders of the Company as of the close of business on 3 May 2013. The total dividend for the year of 42 cents per share (2011: 33 cents per share) represents a 27% increase over 2011.
The dividend for the year represents the full dividend to be received from Wilson Sons relating to 2012 plus 1.85% of the average capital employed in the investment portfolio. This is consistent with the Board's dividend policy in respect of each financial year which is to pay 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 USD and to date have been paid twice yearly. From 2013 onwards the Directors have decided to no longer pay an interim dividend and combine the normal interim dividend payment of 4 cents a share into the final dividend for 2013. This change will not impact the total dividend paid in the year.
Shareholders receive dividends in Sterling by reference to the exchange rate applicable to the USD on the dividend record date, except for those shareholders who elect to receive dividends in USD.
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 implemented a cash settled phantom option scheme that was approved by shareholders at the Special General Meeting held on 19 April 2007. The scheme was 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 Ocean Wilsons share at the time of exercise.
The final tranche of options issued under the scheme vested in April 2012 and the total options outstanding under the scheme, (296,038) were exercised by participants during 2012. There is no remaining liability under the plan and no accrual (2011: US$3.7 million) has been included in the 2012 accounts for benefits accruing under the plan.
Charitable donations
Throughout the Group, our offices are actively engaged with the local community. We are proud to support a variety of Brazilian causes. Group donations for charitable purposes amounted to US$113,000 (2011: US$42,000). The Group's principal contributions in 2012 were:
Criando Lacos - Through our corporateprogramme'Criando Lacos" (Creating ties), the Group provides financial support and promotes voluntary employee involvement in social initiatives.
Escola de Gente - raising awareness and promoting social inclusion for all parts of the community. Located in Barra da Tijuca, Rio de Janeiro.
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.
Corporate governance
The Board has put in place corporate governance arrangements which it believes are appropriate for the operation of your Company. The Board has considered the principles and recommendations of the 2010 UK Corporate Governance Code ("the Code") issued by the Financial Reporting Council and decided to apply those aspects which are appropriate to the business. This reflects the fact that Ocean Wilsons Holdings Limited is an investment holding company incorporated by an act of parliament in Bermuda with significant subsidiary operations in Brazil. The Company complies with the Code where it is beneficial for both its shareholders and its business to do so, and has done so throughout the year and up to the date of this report, but it does not fully comply with the Code. The areas where the Company does not comply with the Code, and an explanation of why we do not comply, are contained in the section on corporate governance in the Annual Report. The position is regularly reviewed and monitored by the Board.
Board of Directors
In January 2013 we were pleased to welcome Mr Colin Maltby as a non-executive director of the Company. Mr Maltby is 62, British and is resident in Switzerland. He is Chairman of BlackRock Absolute Return Strategies Limited and of HarbourVest Senior Loans Europe Limited, a Director of BACIT Limited and Abingworth BioEquities Fund Limited, and a member of the Supervisory Board of Bilfinger Berger Global Infrastructure SICAV SA. He was Head of Investments at BP from August 2000 to June 2007 and was previously Chief Investment Officer of Equitas Limited from its formation in 1996 and Chief Executive of Kleinwort Benson Investment Management from 1988 to 1995.
Outlook
The Group continues to grow and invest in a range of markets. The additional capacity at our shipyard at Guarujá is forecast to be completed in April 2013 doubling our shipbuilding capacity and significantly enhancing our ability to maintain our joint venture offshore fleet. Five platform supply vessels are expected to be delivered to our joint venture during the coming year, one of which is under construction in a third party shipyard. The acquisition of the Briclog offshore supply base announced in June 2011 is expected to be completed in 2013. The recently inaugurated logistics centre in Suape, Pernambuco state is bidding to become a bonded warehouse and if successful is expected to commence operations by the end of the year.
The strength in world equity markets in the latter part of 2012 has continued into 2013 which are supported by very loose monetary policy and favourable valuation metrics compared to bonds. However, the world economy remains in a fragile state and could easily be derailed by policy error in an environment of fiscal retrenchment. The world continues to face serious economic problems however there is potential for further upside in equities at the beginning of a new cycle.
Management and staff
On behalf of your Board and shareholders, I would like to thank our management and staff for their efforts and hard work during the year.
J F Gouvêa Vieira
Chairman
19 March 2013
Financial Review
Profit before tax
Profit before tax increased by US$28.6 million to US$87.2 million (2011: US$58.6 million) due to improved returns from the investment portfolio (US$44.2 million positive movement compared to prior year) and lower finance costs (US$5.6 million lower). This was partially offset by the US$17.5 million fall in operating profit and lower investment revenues in the period (US$3.7million lower).
Investment revenues
Investment revenue for the year fell by US$3.7 million from US$10.2 million to US$6.5 million in 2012, principally due tounfavourableforeign exchange movements on cash and cash equivalents of US$11.6 million (2011: US$7.3 million). Foreign exchange movements arose principally on BRD denominated cash balances. Interest on bank deposits in the year increased by US$1.8 million to US$15.3 million (2011: US$13.5 million).
Investment gains and losses
Other gains of US$16.4 million (of which US$13.4 million were realised) arose from the Group's portfolio of trading investments and reflect the improved investment performance during the year (2011: US$27.8 million loss).
Revenue from Maritime Services
Group revenue for the year was US$645.3 million, an 8% decrease on 2011 (US$698 million) principally due to the higher average USD/BRD exchange rate in the period (which is used to convert the income statement) which at 1.96 was 17% higher than the comparative period in 2011 (1.67). Approximately two thirds of the Group's revenue is denominated in BRD. In addition to the adverse currency effect, revenue at our port terminal business was impacted by the end of the Brasco public port operation for Petrobras. Towage revenue increased 6% in USD terms due to improved pricing and product mix and as approximately 75% of towage pricing is denominated in USD, this revenue is less sensitive to movements in the USD/BRD exchange rate. Offshore revenue increased reflecting the benefits of our expanded fleet and higher average daily rates due to new contracts and price renegotiations on some existing contracts in 2011. Logistics revenue (which is BRD denominated) declined as some low margin operations were concluded and the weaker BRD impacted revenues. Shipyard revenue in for the year was ahead of 2011 as the new drydock started operations in the fourth quarter. All Group revenue is derived from Wilson Sons operations in Brazil.
Operating profit
Operating profit for the year at US$79.4 million was US$17.5 million lower than the prior year (US$96.9 million) principally due to the fall in revenue and the impact of the share based payment expense. In 2012 the share based payment expense was US$2.2 million compared with a credit of US$7.9 million in the previous year, a difference of US$10.1 million. The share based payment expense rose due to the increase in the Wilson Sons share price at 31 December 2012 (R$31.99) compared with the share price at 31 December 2011 of R$25.40. Operating margins for the year at 12% were 2% lower than 2011 (14%). After adjusting for the impact of the long-term incentive plan, operating margins at 13% were in line with 2011 (13%).
Employee expenses excluding share based payment expenses increased in BRD driven by higher headcount and collective labour agreements. Headcount rose at our towage and offshore businesses to crew our expanded fleet while shipyard headcount grew in preparation for the opening of our new shipyard in Guarujá. Collective labour agreements continue ahead of inflation driven by low unemployment and strong demand for skilled labour in Brazil. However in USD terms employee expenses excluding share based payment expense for the year fell 4% to US$238.2 million (2011: US$247.4 million) due to the higher average USD/BRD exchange rate during the year.
Depreciation and amortisation in the period increased 12% to US$66.6 million from US$59.5 million in 2011 reflecting the investment undertaken by the Group in recent years. The majority of the Group's depreciation charge is denominated in USD and therefore not affected by movements in the average USD/BRD exchange rate.
Other operating expenses decreased US$40.6 million to US$180.6 million from US$221.2 million in 2011 due to a weaker average BRD against our reporting currency, the USD, the termination of the Brasco public port operation, the phasing out of some low margin logistic operations and lower stevedoring costs at both container terminals.
Depreciation
As part of the continuing review of the useful economic life of vessels, during the period the Group concluded an assessment of its fleet of tugboats and Platform Supply Vessels. Following the review the Group increased the economic life of our vessels from 20 years to 25 years for all vessels built since 1986. Vessels built prior to 1986 which have received new motors are depreciated over periods from 30 to 35 years. As a result of these changes, the depreciation expense for the year is US$4.1 million lower at US$ 61.2 million. Had the change not occurred, the depreciation charge would have been US$65.3 million.
Exchange rates
The Group reports in USD and has revenue, costs, assets and liabilities in both BRD and USD. Therefore movements in the USD/BRD exchange rate can impact the Group both positively and negatively from year to year. In 2012 the BRD depreciated 9% against the USD from R$1.88 at 1 January 2012 to R$2.04 at the year end.
The principal effects from the depreciation of the BRD against the USD at year end on the income statement are a net exchange loss of US$11.6 million (2011: US$7.3 million) on the Group's BRD denominated cash balances and a US$0.7 million net exchange gain on USD loansin BRD functional currency businesses (2011: US$5.3 million loss). A currency translation adjustment loss of US$7.0 million (2011: US$12.3 million) on the translation of operations with a functional currency other than USD is included in other comprehensive income and charged to equity.
The average USD/BRD exchange rate during the year was 17% higher at 1.96 (2011: 1.67). A higher average exchange rate adversely impacts BRD denominated revenues and benefits BRD denominated costs when converted into our reporting currency.
Finance costs
Finance costs for the year decreased by US$5.6 million from US$20.7 to US$15.1 million as exchange movements on foreign currency borrowings generated a gain of US$0.7 million in 2012 compared with a US$5.3 million loss in 2011. Interest payments on overdrafts and loans increased US$1.3 million to US$14.3 million (2011: US$13.0 million) due to higher debt levels to fund capital expenditure.
Taxation
The US$25.5 million tax charge for the year (2011: US$51.6 million) represents an effective tax rate for the period of 29% (2011: 88%). The corporate tax rate prevailing in Brazil is 34%. The difference in the effective tax rate principally reflects profits arising in our Bermudian companies that are not subject to income or capital gains tax and movements in Brazilian deferred tax.
The high effective tax rate in 2011 was due principally to losses in our Bermudian companies in 2011 of US$26.6 million and the deferred tax charge at US$10.3 million against a deferred tax credit in 2012 of US$10.1 million. The Group recognised a deferred tax asset in 2012 of US$8.1 million in respect of unused tax losses from prior periods as there is now associated foreseeable future taxable profit streams. This together with deferred taxes credits arising from exchange losses on loans and further unused tax losses recognised in the period were partially offset by the deferred tax charge arising on the retranslation of non-current asset values caused by the depreciation of the BRD against the USD at year end and accelerated depreciation.
Profit for the year
Profit attributable to equity holders of the parent is US$41.3 million after deducting profit attributable to non-controlling interests of US$20.4 million.
Earnings per share
Basic earnings per share for the year were 116.7 cents, compared with losses per share of 24.4 cents in 2011.
Cash flow
Net cash flow from operating activities for the year at US$115.6 million was US$45.1 million higher than prior year (2011: US$70.5 million) principally due to improved working capital movements during 2012 of US$16.6 million (2011. US$24.9 million adverse movement).
Investments in capital expenditure during the year at US$162.5 million was US$71.5 million lower than 2011 (US$234.0 million). Investment was mainly on the expansion of Tecon Salvador, the development of the new shipyard in Guarujá and new vessels for offshore and towage.
The Group raised new loans of US$108.0 million (2011: US$196.0 million) to finance capital expenditure. Capital repayments on existing loans in the year in accordance with debt repayment schedules were US$37.6 million (2011: US$28.4 million).
At 31 December 2012 the Group had US$141.3 million in cash and cash equivalents (31 December 2011: US$119.3 million).
Balance sheet
Net equity attributable to equity holders of the parent company increased US$25.7 million from US$506.2 million at the beginning of the year to US$531.9 million at year end due principally to profits in the period of US$41.2 million, less a negative currency translation adjustment of US$4.0 million and dividends paid of US$11.7 million. The currency translation adjustment arises from exchange differences on the translation of operations with a functional currency other than USD. On a per share basis net equity is the equivalent of US$15.04 per share (31 December 2011: US$14.31 per share).
Included in the Group's trading investments of US$241.6 million at 31 December 2012 is US$20.0 million in USD 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
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.
The Group's borrowings are used principally to finance vessel construction, the development of the container terminals at Rio Grande and Salvador and equipment for logistic operations. Of the debt 92% is long term and 95% is USD denominated or linked to the USD. At 31 December 2012 the Group's borrowings (including obligations under finance leases) were US$572.1 million (31 December 2011: US$491.1 million).
Keith Middleton
Finance Director
Wilson Sons Limited
The Wilson Sons 2012 Earnings Report released on the 19th March 2013 is available on the Wilson Sons Limited website: www.wilsonsons.com:
In it Cezar Baião, CEO of Operations in Brazil said:
"We will remember 2012 as the year Wilson Sons celebrated its 175th Anniversary, and for the conclusion of important projects which significantly improved capacity.
In response to a challenging economic environment with reduced trade flow, we advanced by successfully inaugurating the expansion of Tecon Salvador, and recently completed works of the Company's new shipyard facility, both of which will help achieve economies of scale fundamentally important for increasing service levels to our clients.
We remain optimistic with the opportunities brought with new capacity, and conscious of the challenges ahead. Our team will continue to analyse new projects with responsibility and diligence ensuring appropriate returns to our shareholders.
In 2013, we will be looking at return on investments made in recent years and for this we wish to thank our truly talented employees for their professionalism and determination. Thank you."
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 objective
The Board of OWIL determines investment guidelines and restrictions in conjunction with the investment manager, these together with the investment manager's reports are reviewed at the OWIL board meetings.
The investment objective is to achieve real returns through long-term capital growth, whilst emphasisingpreservation of capital. Investment views are expressed through an unconstrained globally diversified portfolio, without regard to short-term moves in equity markets or any benchmark allocation. Individual opportunities are considered on the contribution that the investment's expected returns would make to the overall portfolio set against the potential impact of a permanent loss of capital.
Performance is measured against an absolute benchmark of one-year US Dollar LIBOR (prevailing on 1 January each year) plus 2%. This benchmark reflects the portfolio's long-term time horizon and unconstrained mandate where there is no compulsion to invest in any specific asset class or geographic region. Moreover, the Investment Manager is more concerned about absolute loss of capital rather than any short-term underperformance versus an index.
Investment Policy
The Investment Manager will seek to achieve the Investment Objective through investments in publicly quoted and private (unquoted) assets across four 'silos': public equities, private assets (predominantly private equity), market neutral funds and bonds. Cash levels will be managed to meet future commitments (e.g. to private assets), whilst maintaining an appropriate balance for opportunistic investments.
Commensurate with the long-term horizon, it is expected that the majority of investments will be concentrated in equity, across both 'public' and 'private' markets. In most cases, investments will be made either through collective funds or limited partnership vehicles, working alongside expert managers in specialised sectors or markets to access the best opportunities.
The Investment Manager maintains a global network to find the best opportunities across the four silos worldwide. The portfolio contains a high level of investments which would not normally be readily accessible to investors without similar resources. Furthermore, a large number of holdings are closed to new investors. There is currently no gearing although the Board would, under the appropriate circumstances, be open-minded to modest levels of gearing. Likewise, the Board may, from time to time, permit the Investment Manager to opportunistically use derivative instruments (such as index hedges using call and put options) to actively protect the portfolio.
Investment Process
Manager selection is central to the successful management of the investment portfolio. Potential individual investments are considered based on their risk-adjusted expected returns in the context of the portfolio as a whole.
Initial meetings are usually a result of: (i) a 'top-down' led search for exposure to a certain geography or sector, (ii) referrals from the Investment Manager's global network or (iii) relationships from sell-side institutions and other introducers. The Investment Manager reviews numerous investment opportunities each year,favouringactive specialist managers who can demonstrate an ability to add value over the longer-term, often combining a conviction-based approach, an unconstrained mandate and the willingness to take unconventional decisions (e.g. investing according to conviction and not fear of short-term underperformance versus an index).
Excessive size is often an impediment to continued outperformance and the bias is therefore towards managers who are prepared to restrict their assets under management to a level deemed appropriate for the underlying opportunity set. Track records are important but transparency is an equally important consideration. Alignment of interest is essential and the Investment Manager will always seek to invest on the best possible terms. Subjective factors are also important in the decision making process - these qualitative considerations would include an assessment of the integrity, skill and motivation of a fund manager.
When the Investment Manager believes there is a potential fit, thorough due diligence is performed to verify the manager's background and identify the principal risks. The due diligence process would typically include visiting the manager in their office (in whichever country it may be located), onsite visits to prospective portfolio companies, taking multiple references and seeking a legal opinion on all relevant documentation.
Investment Managers Report
Hanseatic Asset Management LBG the manager of the Group's investment portfolio reports as follows:
MARKET BACKGROUND
The start of 2012 was characterised by an uptick in risk appetite, spurred by strengthening data in the US, which momentarily masked the deteriorating fundamentals in most major economies. Investor focus soon tilted towards the generally negative economic data, as the ongoing threat of derailing events, such as a potential Greek exit from the European Union and a hard landing in China, became more of a concern in the second quarter.
The notable turning point in investor confidence occurred in July, when Mario Draghi stated that he would do "whatever it takes" to protect the eurozone from collapse. This prompted a significant rally in equity markets in the latter half of the year, despite growing concerns surrounding the US fiscal cliff and US presidential election. Economic momentum in both China and the Eurozone began to improve on the back of policy initiatives, resulting in strong gains across most major indices. The MSCI All Country World Index finished the year with a strong return of +16.1%.
The MSCI World (Developed) Index rose +15.8% over the year. Europe was a notable strong performer, with the MSCI Europe ex UK Index rising +21.3%, benefiting from a strong fourth quarter, which saw gains of +8.6%. The S&P 500 Index finished the year up +16%, despite being one of the few Developed Market indices to register a loss during the fourth quarter, falling -0.4%. The NASDAQ ended the year up +15.9%, whilst the Dow Jones Industrial Average rose by +7.3%. The MSCI Emerging Markets Index rose +18.2%, boosted by a +5.6% gain in the fourth quarter.
During the course of 2012, European equity markets experienced significant volatility, approaching multi-year lows at the start of the year and rebounding in the summer following the ECB's announcement of a bank recapitalisation package in June and an unlimited bond purchasing programme in September. This sparked a recovery in the bond markets, with yields on Spanish 10-year sovereign debt ending the year at 5.3%, having reached 7.8% in July. Similarly, the yield on Italian 10-year sovereign debt ended the year at 4.5%, having reached a 2012 high of 7.2% in January.
Increased risk appetite fed through to European equity markets, resulting in strong year-end performances across most major European indices, with the exception of the Spanish IBEX 35 Index, which ended the year down -2.9%, having risen +50.1% from its five-year low in July. The French CAC 40 Index rose +22.6% during the year, whilst the German DAX Index boasted the strongest performance of the major economies in the region, rising by +31.7%. Despite signs of a moderate recovery, the underlying economic picture remains grim. Germany's economy contracted in the fourth quarter, marking the worst quarterly performance since Germany fell into recession in 2008, whilst Eurozone unemployment hit a record high in the fourth quarter at 11.7%.
The US was a significant outperformer at the start of the year, as a result of robust corporate earnings. However, uncertainty surrounded the US presidential election, and this, combined with the US fiscal cliff, weighed heavily on equity markets in the latter half. As expected, at the eleventh hour, a temporary agreement was reached regarding the fiscal cliff, although it is likely that further negotiations will be required, owing to significant omissions in the deal. US fundamentals strengthened throughout the year, with US housing starts recording their highest December reading in four years, whilst unemployment fell modestly. The S&P 500 Index ended the year slightly above its pre-crisis 2007 high, representing a rally of +129.0% from its March 2009 low.
During 2012, China experienced its slowest level of growth in more than a decade. Uncertainty surrounding the future policy direction of China's new leadership, which was announced in November, also played on market sentiment. However, the economy began to show signs ofstabilisingin the fourth quarter, which was reflected in a +12.9% rise in the MSCI China Index for the fourth quarter alone. The rebound was driven by government statements regarding future infrastructure spending. A loosening of monetary policy also saw two mid-year rate cuts, which fed into improved sentiment on property, accounting for more than 10% of GDP.
India benefited from an increase in global risk appetite in the latter half of the year and the BSE Sensex Index rose +21.8% in 2012. The government also moved towards a more proactive policy stance, implementing several executive changes which saw the replacement of India's finance minister, alongside initiatives to improve the government's budget deficit. In Brazil, the BOVESPA posted a loss of -2% over the year and was the worst performing index (in US Dollar terms) amongst the BRIC economies, impacted by a -8.9% depreciation of the Real against the US Dollar. In Russia, the RTS Index ended the year with a gain of +10.7%. A notable development occurred in August, when Russia joined the WTO following 18 years of negotiations. However, the economy began to stall in the third quarter, hit by the effect of drought as well as weaker demand from Western Europe and China for metals and energy exports.
Commodities generally suffered during the fourth quarter. Gold fell by -5.5%, finishing the year up +7.1% at $1,675/ounce, whilst Copper rose +21.7% over the year, ending the period at $365/lb. Despite a fall of -0.9% in the Brent Oil price over the year, 2012 marked the highest annual average Brent oil price ($111//barrel) on record. The oil price was been supported by ongoing tensions in the Middle East, including concerns regarding Western efforts to halt Iran's nuclear ambitions.
The yield on US Treasuries, German Bunds and UK Gilts rose slightly during the latter half of the year, as investor appetite shifted towards risk assets. The US 10-year sovereign debt yield ended the year at 1.8%, having reached a 2012 low of 1.4% in July. The 10-year UK Gilt yield and the 10-year German Bund yield closed the year at 1.8% and 1.3% respectively, having reached 2012 lows of 1.5% and 1.2% respectively. The Barclays Capital Global Treasury Index posted a gain of +1.8% for the year, whilst gains within high yield were significantly higher, as evidenced by the Barclays Capital Global High Yield Index rising +19.6%. In Emerging Markets, the JP Morgan Emerging Markets Bond Index (US Dollar denominated sovereign / quasi-sovereign bonds) performed strongly, posting a gain of +18.5% in 2012.
In a year of generally rising risk assets, the US Dollar depreciated against most freely traded currencies, with the exception of the Brazilian Real and the Japanese Yen, which saw significant depreciation against the US Dollar.
Note: All Index performance numbers are in US dollar terms, unless specifically stated in local currency terms.
Portfolio Construction
The portfolio's net asset value at the end of 2012 was $237.7m (2011: $229.4m), which is comprised of four 'silos:
i. Global Equities
ii. Private Assets
iii. Market Neutral Funds
iv. Bonds / Other
(i) 'Global Equities' $123.9m 52.1% of NAV (2011: $117.8m: 51.4% of NAV) is comprised of holdings that are sensitive to stock market movements and may take the form of 'long-only' or long / short funds, as well as direct quoted equities. There is a strong bias towards fundamental, research-driven stock-pickers with a proven ability to produce attractive compounded returns.
(ii) 'Private Assets' $49.4m 20.8% of NAV (2011: $39.8m: 17.3% 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, real assets (such as property and natural resources) and private debt.
These investments are driven by a 'bottom-up' analysis of the manager's value creation attributes, regardless of the prevailing economic climate. Managers reliant on financial engineering as a primary driver of returns are avoided. Moreover, it is essential that the manager provides more than capital to its portfolio companies - e.g. strong operational capabilities. Investments should be made into companies where there is a clearly defined exit route, which is not solely reliant on IPO markets.
These investments often offer access to differentiated opportunities and fast growing businesses not normally available through public markets. For example, immature capital markets in most Emerging Markets often results in limited access to certain attractive sectors or public market where valuations may be excessive. Furthermore, Private Assets often exhibit low correlation to public security markets and phased drawdown of capital helps to reduce market timing risk.
· The first commitment to Private Assets was made in 2007.
· 20 commitments (totalling $85.1m) have been made as at 31 December 2012.
· $56.2m has been drawn down.
· To date, cumulative distributions received total c$12.6m.
· Overall, this silo has progressed from being at an immature stage to showing greater visibility on value creation. The Investment Manager remains confident that the significant capital deployed into 'post-crisis' vintages will produce attractive returns for the portfolio.
(iii) 'Market Neutral Funds'$23.3m 9.8% of NAV (2011: $45.7m: 19.9% of NAV) contains generally lower volatility investments in a small number of funds that engage in a variety of trading strategies across asset classes. Each market neutral fund has a different investment mandate and it is expected that their collective performance will not be dependent on the direction of global security markets. What they have in common is a focus on generating positive absolute returns while providing downside protection in volatile markets.
In addition, Market Neutral Funds act as a secondary backstop to cash in covering long-term capital commitments (thus helping to avoid excessive cash drag - especially in the current environment of near-zero interest rates) and other opportunistic investments. In short, the Investment Manager believes that they provide a better risk/reward allocation than other investments that are perceived to be 'lower risk' such as government bonds.
(iv) 'Bonds / Other' $41.1m 17.3% of NAV (2011: $26.4m: 11.4%) - Bonds are comprised of two constituents: (i) Investment Grade Bonds and (ii) High Yield Bond. Returns may be generated from rising capital value and coupons as well as currency exposure.
Investment Grade Bonds (0% of NAV) would contain investments in sovereign (government) bonds as well as corporate bonds with high credit ratings (typically at least 'BBB' as defined by Standard & Poor's). High Yield Bonds ($25.0m, 10.5% of NAV) include investments in Emerging Market (sovereign and corporate debt) and other Developed Market high yield corporate debt. 'Other' is comprised of cash valued at $16.1m 6.8% of NAV (2011: 12.6m: 5.5% of NAV).
|
Performance |
Since Inception |
|
(Time-weighted) |
|
|
Portfolio Performance |
118.3% |
|
MSCI World (Developed) Index |
30.5% |
|
Performance Benchmark |
62.6% |
2012 PERFORMANCE
|
Performance |
2012 |
|
(Time-weighted) |
|
|
Portfolio Performance |
8.8% |
|
MSCI World (Developed) Index |
15.8% |
|
MSCI All Country World Index |
16.1% |
|
MSCI Emerging Markets Index |
18.2% |
|
Performance Benchmark |
3.1% |
*Note: Performance information for the MSCI All Country World Index, which includes Developed, Emerging and Frontier Markets (weighted by marketcapitalisation), is only available from 31 May 2002.
INVESTMENT PORTFOLIO PERFORMANCE
The portfolio generated a time weighted return of 8.8% in 2012.
|
|
|
|
|
|
2012 PERFORMANCE BY SILO |
|
|
% |
|
Cash |
|
|
0.8 |
|
Bonds |
|
|
8.6 |
|
Market Neutral |
|
|
6.2 |
|
Global Equities |
|
|
12.9 |
|
Private Assets |
|
|
1.0 |
The top contributors were:
|
Top Five Contributors (in USD) |
Contribution |
Performance |
Gain |
|
|
% |
% |
$m |
|
Jupiter European Opportunities Trust * |
1.2 |
48.2 |
2.8 |
|
Findlay Park American Fund |
0.8 |
16.3 |
1.8 |
|
NTAsian Discovery Fund |
0.7 |
32.7 |
1.6 |
|
Lansdowne Developed Markets Fund |
0.6 |
18.0 |
1.3 |
|
AR New Asia Fund |
0.5 |
15.9 |
1.2 |
|
TOTAL |
3.8 |
|
8.7 |
*sold during the year
Global Equities
Global Equities can be broken down into long-only equities totalling $88.2m and long/short equitytotalling$35.7m.
The long-only equity portfolio gained +15.1% over the year. The top performing investments in this category were Jupiter European Opportunities Trust +48.2%, VinaCapital Vietnam Opportunity Fund+43.4%, Prusik Asian Smaller Companies +38.7% and Findlay Park Latin American +32.7%. The principal detractors to performance were in the energy and commodity sectors. Relative to global stock market indices, a cautious stance towards Europe was detrimental but the ASEAN region where the portfolio is overweight outperformed.
The long/short equity portfolio returned +7.5% as managers typically focused on limiting risk, erring on the side of caution as opposed to the opportunity set. The exception was the Lansdowne Developed Markets Fund which appreciated by +18%.
Private Assets
The silo returned 1%. The Private Assets portfolio is at a relatively immature stage of value creation. With total distributions amounting to $4.1m, the largest of which were from $1.4m from Gramercy Distressed Opportunities Fund and $1.3m from Riverstone Carlyle Energy and Power Fund. It is currently estimated that a more meaningful level of annual distributions will be realised from this silo from 2016 onwards.
Market Neutral Funds
The silo returned +6.2%. The QFR Victoria Fund (+13.6%) was the top performing fund but solid returns were also generated by BlueBay Macro (+9.5%) and BlueCrest AllBlue Leveraged Feeder (+8.2%).
Bonds
The silo returned +8.6% with the best performing investment being Oaktree Value Opportunities (+15.2%).
PORTFOLIO ACTIVITY - for the year to 31 December 2012
During 2012, there were total purchases of $49.3m, including purchases of new positions totalling $36.5m and total sales of $82.9m.
Within the portfolio's private assets silo, there were new commitments made of $6.0m and drawdowns of $12.6m. During 2012, investments in private assets generated distributions of $4.1m.
Significant Purchases
|
New Positions |
|
$m |
|
Schroder ISF Asian Total Return Fund |
|
6.0 |
|
Instinct Dark Horse Fund |
|
5.0 |
|
CCI Technology Partners II |
|
5.0 |
|
NTAsian Discovery Fund |
|
5.0 |
|
BlueBay EM Corporate Alpha Fund |
|
5.0 |
|
Stratton Street Renminbi Bond Fund |
|
4.0 |
|
BlackRock Mining Opportunities Fund |
|
3.5 |
|
Equinox Russian Opportunities Fund |
|
3.0 |
|
Total |
|
36.5 |
Schroder ISF Asian Total Return Fund - is an Asia ex Japan absolute return equity strategy, with a focus on high quality companies, managed with a macro overlay to reduce volatility.
Instinct Dark Horse Fund - is a long/short Japanese equities hedge fundutilising a fundamental trading strategy with a focus on catalysts and special situations.
CCI Technology Partners II - is a long/short equities hedge fund investing in technology companies, predominantly listed in the US.
NTAsian Discovery Fund - invests in Asian small and mid-cap equities with a particular focus on ASEAN countries (e.g. Indonesia, Malaysia, Philippines, Singapore and Thailand).
BlueBay EM Corporate Alpha Fund - is a long/short credit hedge fund investing in (predominantly USD denominated) Emerging Market corporate debt.
Stratton Street Renminbi Bond Fund - is a long only fund investing in Pan-Asian investment grade quasi-sovereign credit, with currency exposure hedged into the Renminbi.
BlackRock Mining Opportunities Fund - invests in a portfolio of mining equities with a greater focus, compared to the BlackRock World Mining Trust Plc, on mid-caps and companies in the exploration and development phase. Reduced fees were negotiated as a day one investor.
Equinox Russian Opportunities Fund - invests in a concentrated portfolio of 'value' Russian equities. The manager may opportunistically raise cash to high levels.
Sales
There were sales totalling $82.9m in 2012.
Private Assets - Commitments
There were two new commitments to private assets in 2012:
|
New Commitments |
$m |
|
African Minerals Exploration & Development Fund, SICAR |
3.0 |
|
Riverstone Global Energy & Power Fund V, LP |
3.0 |
|
Total |
6.0 |
African Minerals Exploration & Development Fund, SICAR - will invest in 10 to 15 African mineral extraction projects, with an average equity ticket range of between $20m and $30m. The Fund will target brown field projects in minerals where the global supply is not expected to keep up with global demand in the coming decade, such as gold, platinum, copper, nickel, niobium, coal and fluorspar. It will also seek to create significant value in more advanced projects through conducting additional geological and legal work in order to make a project an attractive acquisition target for a large mining company.
Riverstone Global Energy & Power Fund V, LP - the manager will make 15 to 25 privately negotiated investments in companies operating in the energy and power sector. While the manager has the potential to invest globally, it is anticipated that the majority of investments will be focused in North America. As was the case with the predecessor funds, investment activity will be primarily targeted in four main industry sectors: (i) Exploration and Production, (ii) Midstream, (iii) Energy Services and (iv) Power & Coal. The manager is expected to make both controlling and strategic minority investments, with deals being completed in six principal areas: (i) 'Build-ups' orchestrated by management teams known to Riverstone, (ii) Buyouts of non-core 'orphan' assets from large corporations, (iii) Growth capital to support business development, (iv) Distressed opportunities, (v) Take-private transactions and (vi) Restructuring of established companies.
ANALYSIS OF PRIVATE ASSETS
Investments in Private Assets are at a relatively immature stage of value realisation. With a high allocation to post-2008 vintages.
Outstanding commitments of $32.2m are well covered by cash, investments in market neutral funds and investment grade bond funds ($16.1m, $23.3m and $4.0m respectively).
|
Commitments and Cover |
Value |
|
Weighting |
|
|
$m |
|
% |
|
Total level of commitments |
|
|
|
|
|
|
|
|
|
Drawn - Investment Value |
49.4 |
|
17.0 |
|
Undrawn |
32.2 |
|
13.6 |
|
|
|
|
|
|
Cash |
16.2 |
|
6.8 |
|
Market Neutral & Investment Grade Bond Funds (see table below) |
27.3 |
|
11.5 |
|
Market Neutral Funds |
Liquidity |
|
Value |
|
|
|
|
$m |
|
BlueCrest AllBlue Leveraged Feeder |
Quarterly |
|
7.6 |
|
BlueBay Macro Fund |
Monthly |
|
6.8 |
|
QFR Victoria Fund |
Quarterly |
|
5.9 |
|
GLG Emerging Currency and Fixed Income Fund |
Daily |
|
3.0 |
|
Primary Cover |
|
|
|
|
|
|
|
|
|
Stratton Street Renminbi Bond Fund |
Weekly |
|
4.0 |
|
Total |
|
|
27.3 |
|
INVESTMENT PORTFOLIO |
Market Value $000 |
% of NAV |
Silo |
|
at 31 December 2012 |
|||
|
Findlay Park American Fund |
13,170 |
5.5 |
Global Equities (Long Only) |
|
Egerton European Dollar Fund |
10,330 |
4.4 |
Global Equities (Long/Short) |
|
AR New Asia Fund |
8,790 |
3.7 |
Global Equities (Long Only) |
|
Oaktree CM Value Opportunities Fund |
8,220 |
3.5 |
Bonds |
|
BlueCrest AllBlue Leveraged Feeder |
7,650 |
3.2 |
Market Neutral |
|
Lansdowne Developed Markets Fund |
7,450 |
3.1 |
Global Equities (Long/Short) |
|
BlackRock UK Emerging Companies Hedge Fund |
6,980 |
2.9 |
Global Equities (Long/Short) |
|
Artemis Global Energy Fund |
6,970 |
2.9 |
Global Equities (Long Only) |
|
Prosperity Quest Fund |
6,970 |
2.9 |
Global Equities (Long Only) |
|
BlueBay Macro Fund |
6,850 |
2.9 |
Market Neutral |
|
Top 10 Holdings |
83,380 |
35.1 |
|
|
NTAsian Discovery Fund |
6,640 |
2.8 |
Global Equities (Long Only) |
|
Schroder ISF Asian Total Return |
6,210 |
2.6 |
Global Equities (Long Only) |
|
QFR Victoria Fund |
5,890 |
2.5 |
Market Neutral |
|
Gramercy Emerging Market Debt |
5,880 |
2.5 |
Bonds |
|
BlackRock World Mining Trust |
5,810 |
2.4 |
Global Equities (Long Only) |
|
Instinct Dark Horse Fund |
5,270 |
2.2 |
Global Equities (Long/Short) |
|
BlueBay EM Corporate Alpha Fund |
5,140 |
2.2 |
Bonds |
|
CCI Technology Partners II |
4,850 |
2.0 |
Global Equities (Long/Short) |
|
Greenspring Global Partners IV, LP |
4,560 |
1.9 |
Private Assets |
|
China Harvest Fund II, LP |
4,430 |
1.9 |
Private Assets |
|
Top 20 Holdings |
138,060 |
58.1 |
|
|
African Development Partners I, LLC |
4,140 |
1.7 |
Private Assets |
|
Schroder ISF Global Energy Fund |
4,140 |
1.7 |
Global Equities (Long Only) |
|
Stratton Street Renminbi Bond Fund |
4,000 |
1.7 |
Bonds |
|
Oaktree CM Principal Fund V, LP |
3,960 |
1.7 |
Private Assets |
|
Prince Street Opportunities Fund |
3,930 |
1.7 |
Global Equities (Long Only) |
|
BlackRock Mining Opportunities Fund |
3,760 |
1.6 |
Global Equities (Long Only) |
|
Capital International Private Equity Fund V, LP |
3,690 |
1.6 |
Private Assets |
|
R/C Global Energy and Power Fund IV, LP |
3,600 |
1.5 |
Private Assets |
|
Vinacapital Vietnam Opportunity Fund |
3,380 |
1.4 |
Global Equities (Long Only) |
|
Atlantis China Fund |
3,360 |
1.4 |
Global Equities (Long Only) |
|
Top 30 Holdings |
176,020 |
74.0 |
|
|
27 remaining holdings |
45,570 |
19.2 |
|
|
Cash |
16,150 |
6.8 |
|
|
TOTAL |
237,740 |
100.0 |
|
MARKET OUTLOOK
The strength in world equity markets in the latter part of 2012 has continued into the opening weeks of 2013. Many macroeconomic commentators have been confounded by the buoyancy of share prices in the face of economic headwinds posed by the US 'fiscal cliff', recessionary conditions throughout Europe and a more challenging environment throughout the major emerging economies. However, the disconnect between stock markets and economic performance is a ubiquitous theme in investment. Multiple factors determine market actions and markets typically give their best returns whenscepticismabounds. The 'crisis fatigue' that enveloped investors in the first half of last year meant that any sniff of 'good' news would have more market impact than a continuation of 'bad'. Distortions in the relationship between debt and equity valuations resulting from extremes of monetary policy and institutional bearishness have created the potential for significant stock market rallies as and when asset allocators reduce bond exposure in favour of shares. The yield on company dividends in many cases exceeds that of corporate bonds. This valuation support underpins the outlook for equities.
Despite the emergence and rapid growth rates of the BRIC countries over the last decade or so, the USA remains the most powerful economy and largest stock market. While the worst fears over the fiscal cliff may prove overblown, the USA is clearly going to enter a phase of fiscal consolidation which will act as a drag on growth. Unlike Europe, however, this 'drag' will occur when the economy is already showing signs of recovery and has been through the worst of the Post-2008 crisis. In the near term 'fiscal drag' will negatively impact corporate profits and may well lead to a correction in the stock market after its recent gains. However, beyond that, investors have several reasons to justify optimism over prospects for Obama's second term. The 2008 crisis originated with excesses in real estate securitisation and consumer debt. Currently, the level of debt service ratio to income for US homeowners is at the low end of the range that prevailed in the 1980s and 1990s. The level of housing starts and permits issued to build is lower than at any time in the post war period despite a demographic profile that implies pent up demand. A recovery to the average level of the last 60 years would entail a near doubling of activity from current levels. Other cyclical industries such as the auto sector are also underpinned byfavourable'reversion to the mean' metrics.
As well as favourable cyclical factors, prospects for the USA are reinforced by important structural changes. In energy, the US has managed to reduce its levels of demand while increasing its levels of supply. Despite the size of the economy being 5% larger than in 2006, oil consumption has decreased by 10%. Developments in shale fracking are potentially hugely beneficial for the US and the surge of available cheap natural gas should further drive substitution of natural gas liquids for oil derived gasoline. Lower energy costs not only boost the disposable incomes of consumers but increase the competitiveness of US-based manufacturing, reinforcing the trend to relocate offshore manufacturing back to the US. In short, while near term earnings expectations are vulnerable to downward revisions and Wall Street is vulnerable to profit taking, the medium term prospects for the US appear more soundly based than at any time for a decade or more.
As far as Europe is concerned, a full blown Euro crisis appears to have been averted for now although the deep structural flaws, inconsistencies and distortions at the heart of the Euro project remain. The ECB policy of Outright Monetary Transactions (OMT) in "unlimited" quantities has proved successful in heading off speculative selling in the Spanish and Italian sovereign bond markets. This safety net for capital markets and pragmatic concessions from Germany towards the more challenged economies of Southern Europe should help keep the Euro crisis out of the headlines in the build-up to this autumn's elections in Germany. Recent relaxation in the Basel rules governing bank liquidity should also help shore up sentiment towards the Euro and European assets generally. The extent to which growth rates recover in Europe, however, is much less certain. Fiscal tightening is having a negative multiplier effect in the underlying economies. Deficit levels have not ameliorated despite ongoing austerity measures. It is hard to see how the current policy set will be sufficient to lift Europe out of the mire it is currently in.
Sentiment towards the Japanese market has improved recently following the LDP landslide victory in the Lower House election. A new political order now exists to pave the way for morestimulativepolicies and a weakening of the Yen. International investors will be sceptical after the experience of Koizumi's 2005 victory, which many thought signalled the end of Japan's secular bear market, only for the rally to fizzle out followed by new lows in the stock market and general policy paralysis. Despite this a greater sense of urgency amongst policy makers in Japan will be welcomed. Prime Minister Abe has named his new cabinet the "Crisis Breaking Cabinet". Since 2008, the Yen has appreciated by 60% against the Korean Won and 40% against the US Dollar. A weaker Yen should be stimulative for the economy and bullish for corporate earnings.
The post 2008 environment has proved something of a 'reality check' for Emerging Market investors. Contrary to more bullish predictions, growth rates have not been immune to the global economic context. Corruption and administrative incompetence have been sufficiently embedded to further compromise growth potential. In the World Bank 'Doing Business' rankings, China was 91st, Russia 112th, Brazil 130th and India 132nd. However, corporate profits in the Emerging Markets should re-accelerate on any rebound in the global economy while current valuations leave potential for positive re-rating. More decisive policy moves in China following the election should boost growth there. In India, a more benign regime for foreign investment and personnel changes in government should encourage investment flows. Brazil's exporters will benefit from last year's retracements of the Real and Russia remains a very cheap stock market. Emerging Markets seem poised to outperform if global trade activity builds on the early signs of improvement. The largest threat to this asset class is probably the very low spreads against US Treasuries that prevail in most domestic bond markets when bond yields themselves are so compressed.
In summary, there is more mileage in global equities which remain supported by very loose monetary policy, geared earnings potential to any recovery in the global economy and veryfavourablevaluation metrics compared to bonds. However, the world economy is in a very fragile state and could be easily derailed by policy error in an environment of fiscal retrenchment. Investors need to tread a fine line between caution based on the seriousness of the problems the world faces, and an awareness of the potential returns equities can offer at the beginning of a new cycle.
Hanseatic Asset Management LBG
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2012
|
|
|
Year to |
Year to |
|
|
|
31 December |
31 December |
|
|
|
2012 |
2011 |
|
|
Notes |
US$'000 |
US$'000 |
|
Revenue |
3 |
645,327 |
698,044 |
|
Raw materials and consumables used |
|
(77,719) |
(82,889) |
|
Employee benefits expense |
6 |
(240,427) |
(239,543) |
|
Depreciation & amortisation expense |
5 |
(66,619) |
(59,479) |
|
Other operating expenses |
|
(180,591) |
(221,159) |
|
Profit on disposal of property, plant and equipment |
|
(546) |
1,959 |
|
Operating profit |
|
79,425 |
96,933 |
|
Investment revenue |
7 |
6,526 |
10,203 |
|
Other gains and losses |
8 |
16,394 |
(27,818) |
|
Finance costs |
9 |
(15,120) |
(20,741) |
|
Profit before tax |
|
87,225 |
58,577 |
|
Income tax expense |
10 |
(25,540) |
(51,615) |
|
Profit for the year |
|
61,685 |
6,962 |
|
Other comprehensive income |
|
|
|
|
Exchange differences arising on translation of foreign operations |
|
(6,987) |
(12,277) |
|
Other comprehensive loss for the year |
|
(6,987) |
(12,277) |
|
Total comprehensive income/(loss) for the year |
|
54,698 |
(5,315) |
|
Profit / (loss) for the period attributable to: |
|
|
|
|
Equity holders of parent |
|
41,263 |
(8,639) |
|
Non-controlling interests |
|
20,422 |
15,601 |
|
|
|
61,685 |
6,962 |
|
Total comprehensive income / (loss) for the period attributable to: |
|
|
|
|
Equity holders of parent |
|
37,268 |
(15,708) |
|
Non-controlling interests |
|
17,430 |
10,393 |
|
|
|
54,698 |
(5,315) |
|
Earnings / (loss) per share |
|
|
|
|
Basic and diluted |
12 |
116.7c |
(24.4c) |
Consolidated Balance Sheet
as at 31 December 2012
|
|
|
As at |
As at |
|
|
|
31 December |
31 December |
|
|
|
2012 |
2011 |
|
|
Notes |
US$'000 |
US$'000 |
|
Non-current assets |
|
|
|
|
Goodwill |
13 |
15,612 |
15,612 |
|
Other intangible assets |
|
29,899 |
28,546 |
|
Property, plant and equipment |
|
828,764 |
725,869 |
|
Deferred tax assets |
|
29,827 |
28,525 |
|
Trade and other receivables |
|
18,015 |
28,240 |
|
Long term investments |
|
1,072 |
1,072 |
|
Other non-current assets |
|
9,197 |
8,412 |
|
|
|
932,386 |
836,276 |
|
Current assets |
|
|
|
|
Inventories |
|
27,697 |
21,142 |
|
Trading investments |
|
241,582 |
251,297 |
|
Trade and other receivables |
|
168,267 |
135,574 |
|
Cash and cash equivalents |
|
141,335 |
119,323 |
|
|
|
578,881 |
527,336 |
|
Total assets |
|
1,511,267 |
1,363,612 |
|
Current liabilities |
|
|
|
|
Trade and other payables |
|
(163,762) |
(120,324) |
|
Current tax liabilities |
|
(3,124) |
(3,472) |
|
Obligations under finance leases |
|
(1,222) |
(3,787) |
|
Bank overdrafts and loans |
|
(43,179) |
(32,672) |
|
|
|
(211,287) |
(160,255) |
|
Net current assets |
|
367,594 |
367,081 |
|
Non-current liabilities |
|
|
|
|
Trade and other payables |
|
(1,134) |
(2,471) |
|
Bank loans |
|
(524,908) |
(451,381) |
|
Deferred tax liabilities |
|
(17,802) |
(26,093) |
|
Provisions |
|
(10,872) |
(13,378) |
|
Obligations under finance leases |
|
(2,800) |
(3,278) |
|
|
|
(557,516) |
(496,601) |
|
Total liabilities |
|
(768,803) |
(656,856) |
|
Net assets |
|
742,464 |
706,756 |
|
Capital and reserves |
|
|
|
|
Share capital |
|
11,390 |
11,390 |
|
Retained earnings |
|
482,798 |
453,205 |
|
Capital reserves |
|
31,760 |
31,760 |
|
Translation and hedging reserve |
|
5,966 |
9,831 |
|
Equity attributable to equity holders of the parent |
|
531,914 |
506,186 |
|
Non-controlling interests |
|
210,550 |
200,570 |
|
Total equity |
|
742,464 |
706,756 |
Consolidated Statement of Changes in Equity
as at 31 December 2012
|
|
|
|
|
|
Attributable |
|
|
|
|
|
|
|
Hedging and |
to equity |
Non |
|
|
|
Share |
Retained |
Capital |
Translation |
holders of |
controlling |
Total |
|
For the year ended 31 December 2011 |
capital |
earnings |
reserves |
reserve |
the parent |
interests |
equity |
|
Balance at 1 January 2011 |
11,390 |
475,042 |
31,760 |
16,900 |
535,092 |
194,128 |
729,220 |
|
Currency translation adjustment |
- |
- |
- |
(7,069) |
(7,069) |
(5,208) |
(12,277) |
|
(Loss)/profit for the year |
- |
(8,639) |
- |
- |
(8,639) |
15,601 |
6,962 |
|
Total income and expense for the period |
- |
(8,639) |
- |
(7,069) |
(15,708) |
10,393 |
(5,315) |
|
Dividends |
- |
(14,853) |
- |
- |
(14,853) |
(7,543) |
(22,396) |
|
Sale of non-controlling interest |
- |
1,655 |
- |
- |
1,655 |
3,592 |
5,247 |
|
Balance at 31 December 2011 |
11,390 |
453,205 |
31,760 |
9,831 |
506,186 |
200,570 |
706,756 |
|
|
|
|
|
|
|
|
|
|
For the year ended 31 December 2012 |
|
|
|
|
|
|
|
|
Balance at 1 January 2011 |
11,390 |
453,205 |
31,760 |
9,831 |
506,186 |
200,570 |
706,756 |
|
Currency translation adjustment |
- |
- |
- |
(3,995) |
(3,995) |
(2,992) |
(6,987) |
|
Profit for the year |
- |
41,263 |
- |
- |
41,263 |
20,422 |
61,685 |
|
Total income and expense for the period |
- |
41,263 |
- |
(3,995) |
37,268 |
17,430 |
54,698 |
|
Dividends |
- |
(11,670) |
- |
- |
(11,670) |
(7,543) |
(19,213) |
|
Derivatives |
- |
- |
- |
130 |
130 |
93 |
223 |
|
Balance at 31 December 2012 |
11,390 |
482,798 |
31,983 |
5,966 |
531,914 |
210,550 |
742,464 |
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 bye-laws 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.
Hedging and translation reserve
The hedging and translation reserve arises from exchange differences on the translation of operations with a functional currency other than US Dollars and effective movements on hedging instruments.
Amounts in the statement of changes of equity are stated net of tax where applicable.
Consolidated Cash Flow Statement
for the year ended 31 December 2012
|
|
|
Year to |
Year to |
|
|
|
31 December |
31 December |
|
|
|
2012 |
2011 |
|
|
Notes |
US$'000 |
US$'000 |
|
Net cash inflow from operating activities |
14 |
115,597 |
70,533 |
|
Investing activities |
|
|
|
|
Interest received |
|
9,320 |
10,158 |
|
Dividends received from trading investments |
|
2,854 |
4,002 |
|
Proceeds on disposal of trading investments |
|
134,624 |
98,323 |
|
Proceeds on disposal of property, plant and equipment |
|
2,238 |
7,384 |
|
Purchases of property, plant and equipment |
|
(162,481) |
(234,009) |
|
Purchase of intangible asset |
|
(7,761) |
(6,807) |
|
Purchases of trading investments |
|
(108,515) |
(81,237) |
|
Prepayment on Briclog acquisition |
|
- |
(5,331) |
|
Net cash used in investing activities |
|
(129,721) |
(207,517) |
|
Financing activities |
|
|
|
|
Dividends paid |
11 |
(11,670) |
(14,853) |
|
Dividends paid to non-controlling interests in subsidiary |
|
(7,543) |
(7,543) |
|
Repayments of borrowings |
|
(37.559) |
(28,415) |
|
Repayments of obligations under finance leases |
|
(3,331) |
(5,940) |
|
New bank loans raised |
|
108,121 |
195,979 |
|
(Decrease)/increase in bank overdrafts |
|
(132) |
(6,347) |
|
Derivative paid |
|
(139) |
- |
|
Net cash inflow arising on sale of non-controlling interest |
|
- |
670 |
|
Net cash from financing activities |
|
47,747 |
133,551 |
|
Net decrease in cash and cash equivalents |
|
33,623 |
(3,433) |
|
Cash and cash equivalents at beginning of year |
|
119,323 |
130,071 |
|
Effect of foreign exchange rate changes |
|
(11,611) |
(7,315) |
|
Cash and cash equivalents at end of year |
|
141,335 |
119,323 |
Notes to the Accounts
for the year ended 31 December 2012
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 2011 Group annual report.
2 Significant accounting policies and critical accounting judgements
Basis of accounting
The financial information set out in this announcement does not constitute the Group's statutory financial statements for the years ended 31 December 2012 or 2011, 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$141.3 million in cash and cash equivalents and the Groups borrowings have a long maturity profile. Based on the Group's cash forecasts and sensitivities run the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the accounts.
Whilst the financial information included in this preliminary announcement has been prepared in accordance with International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs.
3 Revenue
An analysis of the Group's revenue is as follows:
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
|
|
2012 |
2011 |
|
|
US$'000 |
US$'000 |
|
Sales of services |
583,548 |
642,680 |
|
Revenue from construction contracts |
61,779 |
55,364 |
|
|
645,327 |
698,044 |
|
Investment income (note 7) |
6,526 |
10,203 |
|
|
651,853 |
708,247 |
All revenue is derived from continuing operations.
4 Business and geographical segments
Business segments
Ocean Wilsons Holdings has two reportable segments: Maritime services and investments. The maritime services segment provides towage, port terminals, ship agency, offshore, logistics and shipyard services in Brazil through Wilson Sons Limited. The investment segment holds a portfolio of international investments through Ocean Wilsons Investments Limited.
Segment information relating to these businesses is presented below.
For the year ended 31 December 2012
|
|
Maritime |
|
|
|
|
|
Services |
Investment |
Unallocated |
Consolidated |
|
|
Year ended |
Year ended |
Year ended |
Year ended |
|
|
31 December |
31 December |
31 December |
31 December |
|
|
2012 |
2012 |
2012 |
2012 |
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
Revenue |
645,327 |
- |
- |
645,327 |
|
Result |
|
|
|
|
|
Segment result |
84,792 |
(2,666) |
(2,701) |
79,425 |
|
Investment revenue |
3,791 |
2,778 |
(43) |
6,526 |
|
Other gains and losses |
- |
16,394 |
- |
16,394 |
|
Finance costs |
(15,120) |
- |
- |
(15,120) |
|
Profit before tax |
73,463 |
16,506 |
(2,744) |
87,225 |
|
Tax |
(25,540) |
0 |
- |
(25,540) |
|
Profit after tax |
47,923 |
16,506 |
(2,744) |
61,685 |
|
Other information |
|
|
|
|
|
Capital additions |
(184,186) |
- |
(5) |
(184,191) |
|
Depreciation and amortization |
(66,618) |
- |
(1) |
(66,619) |
|
Balance Sheet |
|
|
|
|
|
Assets |
|
|
|
|
|
Segment assets |
1,269,251 |
238,904 |
3,112 |
1,511,267 |
|
Liabilities |
|
|
|
|
|
Segment liabilities |
(768,121) |
(320) |
(362) |
(768,803) |
For the year ended 31 December 2011
|
|
Maritime |
|
|
|
|
|
Services |
Investment |
Unallocated |
Consolidated |
|
|
Year ended |
Year ended |
Year ended |
Year ended |
|
|
31 December |
31 December |
31 December |
31 December |
|
|
2011 |
2011 |
2011 |
2011 |
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
Revenue |
698,044 |
- |
- |
698,044 |
|
Result |
|
|
|
|
|
Segment result |
103,789 |
(2,800) |
(4,056) |
96,933 |
|
Investment revenue |
6,068 |
4,129 |
6 |
10,203 |
|
Other gains and losses |
- |
(27,818) |
- |
(27,818) |
|
Finance costs |
(20,741) |
- |
- |
(20,741) |
|
Profit before tax |
89,116 |
(26,489) |
(4,050) |
58,577 |
|
Tax |
(51,615) |
- |
- |
(51,615) |
|
Profit after tax |
37,501 |
(26,489) |
(4,050) |
6,962 |
|
Other information |
|
|
|
|
|
Capital additions |
(262,934) |
- |
- |
(262,934) |
|
Depreciation and amortisation |
(59,478) |
- |
(1) |
(59,479) |
|
Balance Sheet |
|
|
|
|
|
Assets |
|
|
|
|
|
Segment assets |
1,130,328 |
230,848 |
2,436 |
1,363,612 |
|
Liabilities |
|
|
|
|
|
Segment liabilities |
(650,667) |
(300) |
(5,889) |
(656,856) |
Finance costs and associated liabilities have been allocated to reporting segments where interest costs arise from loans used to finance the construction of fixed assets in that segment.
Unallocated corporate costs, assets and liabilities include the Ocean Wilsons Holdings Limited long term incentive plan. The long term incentive plan is a cash settled phantom option scheme linked to the Wilson Sons Limited share price.
Geographical Segments
The Group's operations are located in Bermuda, Brazil, United Kingdom and Guernsey.
All of the Group's sales are derived in Brazil.
The following is an analysis of the carrying amount of segment assets, and additions to property, plant and equipment and intangible assets, analysed by the geographical area in which the assets are located.
|
|
|
Additions to |
||
|
|
Carrying amount of |
property, plant and equipment |
||
|
|
segment assets |
and intangible assets |
||
|
|
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
31 December |
31 December |
|
|
2012 |
2011 |
2012 |
2011 |
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
Brazil |
1,200,369 |
1,062,836 |
184,191 |
262,934 |
|
Bermuda |
309,872 |
299,314 |
- |
- |
|
Other |
1,026 |
1,462 |
- |
- |
|
|
1,511,267 |
1,363,612 |
184,191 |
262,934 |
5 Profit for the year
Profit for the year has been arrived at after charging:
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
|
|
2012 |
2011 |
|
|
US$'000 |
US$'000 |
|
Net foreign exchange losses |
(10,885) |
(12,618) |
|
Depreciation of property, plant and equipment |
61,230 |
56,779 |
|
Amortisation of intangible assets |
5,389 |
2,700 |
|
Operating lease rentals |
14,128 |
17,520 |
|
Auditor's remuneration for audit services (see below) |
655 |
903 |
|
Non executive directors emoluments |
380 |
283 |
|
A more detailed analysis of auditor's remuneration is provided below: |
|
|
|
Statutory audit |
655 |
756 |
|
Further assurance services |
- |
141 |
|
Other services |
- |
6 |
|
|
655 |
903 |
The prior years auditors remuneration was payable to the Group's previous auditor, Deloitte LLP
6 Employee benefits expense
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
|
|
2012 |
2011 |
|
|
US$'000 |
US$'000 |
|
Aggregate remuneration comprised: |
|
|
|
Wages and salaries |
188,220 |
197,591 |
|
Share based payment expense |
2,262 |
(7,880) |
|
Social security costs |
48,372 |
48,604 |
|
Other pension costs |
1,573 |
1,228 |
|
|
240,427 |
239,543 |
7 Investment revenue
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
|
|
2012 |
2011 |
|
|
US$'000 |
US$'000 |
|
Interest on bank deposits |
15,283 |
13,463 |
|
Exchange losses on cash |
(11,611) |
(7,315) |
|
Dividends from equity investments |
2,854 |
4,002 |
|
Investment revenues from underwriting activities |
- |
53 |
|
|
6,526 |
10,203 |
8 Other gains and losses
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
|
|
2012 |
2011 |
|
|
US$'000 |
US$'000 |
|
Increase/(decrease) in fair value of trading investments held at year end |
3,005 |
(28,148) |
|
Profit on disposal of trading investments |
13,389 |
330 |
|
|
16,394 |
(27,818) |
Other gains and losses form part of the movement in trading investments.
9 Finance costs
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
|
|
2012 |
2011 |
|
|
US$'000 |
US$'000 |
|
Interest on bank overdrafts and loans |
14,287 |
13,034 |
|
Exchange (gain) / loss on foreign currency borrowings |
(726) |
5,303 |
|
Interest on obligations under finance leases |
864 |
1,433 |
|
Total borrowing costs |
14,425 |
19,770 |
|
Other interest |
695 |
971 |
|
|
15,120 |
20,741 |
Borrowing costs incurred on qualifying assets of US$7.8 million 2011: US$4.9 million) werecapitalisedin the year at an average interest rate of 3.18% (2011: 3.37%)
10 Taxation
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
|
|
2012 |
2011 |
|
|
US$'000 |
US$'000 |
|
Current |
|
|
|
Brazilian taxation |
|
|
|
Corporation tax |
25,625 |
30,408 |
|
Social contribution |
10,075 |
10,933 |
|
Total current tax |
35,700 |
41,341 |
|
Deferred tax |
|
|
|
Charge / (credit) for the year in respect of deferred tax liabilities |
17,027 |
(12,700) |
|
(Credit) / charge for the year in respect of deferred tax assets |
(27,183) |
22,974 |
|
Total deferred tax |
(10,160) |
10,274 |
|
Total taxation |
25,540 |
51,615 |
Brazilian corporation tax is calculated at 25% (2011: 25%) of the assessable profit for the year.
Brazilian social contribution tax is calculated at 9% (2011: 9%) of the assessable profit for the year.
At the present time, no income, profit, capital or capital gains taxes are levied in Bermuda and accordingly, no provision for such taxes has been recorded by the company. In the event that such taxes are levied, the company has received an undertaking from the Bermuda Government exempting it from all such taxes until 31 March 2035.
The charge for the year can be reconciled to the profit per the statement of comprehensive income as follows:
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
|
|
2012 |
2011 |
|
|
US$'000 |
US$'000 |
|
Profit before tax |
87,225 |
58,577 |
|
Tax at the standard Brazilian tax rate of 34% (2011: 34%) |
29,657 |
19,916 |
|
Tax effect of expenses/income that are not included in determining |
(2,190) |
23,738 |
|
Effect of different tax rates of subsidiaries operating in other jurisdictions |
(1,927) |
7,961 |
|
Tax expense and effective rate for the year |
25,540 |
51,615 |
|
Effective rate for the year |
29% |
88% |
The Group earns its profits primarily in Brazil. Therefore the tax rate used for tax on profit on ordinary activities is the standard rate in Brazil of 34%, consisting of corporation tax, 25% and social contribution 9%.
11 Dividends
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
|
|
2012 |
2011 |
|
|
US$'000 |
US$'000 |
|
Amounts recognised as distributions to equity holders in the period: |
|
|
|
Final dividend paid for the year ended 31 December 2011 of 29.0c |
10,255 |
13,438 |
|
First interim dividend paid for the year ended 31 December 2012 of 4.0c per share (2011: 4.0c) |
1,415 |
1,415 |
|
|
11,670 |
14,853 |
|
Proposed final dividend for the year ended 31 December 2012 of 38.0c (2011: 29c) per share |
13,438 |
10,255 |
12 Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
|
|
2012 |
2011 |
|
|
US$'000 |
US$'000 |
|
Earnings: |
|
|
|
Earnings for the purposes of basic earnings per share being net profit attributable to equity holders of the parent |
41,263 |
(8,639) |
|
Number of shares: |
|
|
|
Weighted average number of ordinary shares for the purposes of basic and diluted earnings per share |
35,363,040 |
35,363,040 |
13 Goodwill
|
|
2012 |
2011 |
|
|
US$'000 |
US$'000 |
|
Cost and carrying amount |
|
|
|
At 1 January and 31 December |
15,612 |
15,612 |
|
Goodwill attributed to Tecon Rio Grande |
13,132 |
13,132 |
|
Goodwill attributed to Tecon Salvador |
2,480 |
2,480 |
The Group tests annually for impairment, or more frequently if there are indications that goodwill might be impaired.
For the purposes of testing goodwill for impairment the Group prepares cash flow forecasts for the relevant cash generating unit (Tecon Rio Grande and Tecon Salvador) derived from the most recent financial budget for the next year and extrapolates cash flows for the remaining life of the concession based on an estimated annual growth of between 6% for Tecon Rio Grande (2011: 8% to 9%) and 7% for Tecon Salvador (2011: 7% to 8%). This rate does not exceed the average long-term historical growth rate for the relevant market. Management estimates growth rates based on past performance, current market conditions and expectations of future market changes. The rate used after tax to discount forecast cash flows is 10% (2011: 12%)
14 Notes to the cash flow statement
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
|
|
2012 |
2011 |
|
|
US$'000 |
US$'000 |
|
Reconciliation from profit before tax to net cash from operating activities |
|
|
|
Profit before tax |
87,225 |
58,577 |
|
Investment revenues |
(6,526) |
(10,203) |
|
Other gains and losses |
(16,394) |
27,818 |
|
Finance costs |
15,120 |
20,741 |
|
Operating profit |
79,425 |
96,933 |
|
Adjustments for: |
|
|
|
Depreciation of property, plant and equipment |
61,230 |
56,779 |
|
Amortisation of intangible assets |
5,389 |
2,700 |
|
Share based payment expense |
2,262 |
(7,880) |
|
Gain on disposal of property, plant and equipment |
546 |
(1,959) |
|
Increase/(decrease) in provisions |
(2,506) |
1,089 |
|
Operating cash flows before movements in working capital |
146,346 |
147,662 |
|
|
|
|
|
(Increase)/decrease in inventories |
(6,555) |
(995) |
|
Increase in receivables |
(22,468) |
(17,466) |
|
(Decrease)/increase in payables |
46,364 |
(4,556) |
|
(Increase)/decrease in other non-current assets |
(785) |
(1,862) |
|
Cash generated by operations |
162,902 |
122,783 |
|
|
|
|
|
Income taxes paid |
(30,931) |
(34,654) |
|
Interest paid |
(16,374) |
(17,596) |
|
Net cash from operating activities |
115,597 |
70,533 |
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
Wilson Sons Limited 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 January 2031, 83% of funds invested have daily liquidity. 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 2013 to October 2018 and government securities with final maturities ranging from September 2013 to January 2031. 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$111.8 million (2011: US$111.8 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$0.7 million (2011: US$3.1 million) were financed by new finance leases.
Enquiries
Company Contact
Keith Middleton 1 441 295 1309
Media
David Haggie 020 7562 4444
Haggie Partners LLP
Seymour Pierce 020 7107 8000
David Banks - Corporate Broking
This information is provided by RNS
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