Half Yearly Report
Ocean Wilsons Holdings Limited
Preliminary Announcement
Chairman's Interim 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.
Ocean Wilsons Investments Limited is a wholly owned Bermuda investment company. The Company holds a portfolio of international investments. Hanseatic Asset Management LBG, a Guernsey registered and regulated investment group acts as investment manager.
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% minority 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.
Results
I am delighted to report another excellent performance in the first half of 2011. Revenue for the six months ended 30 June 2011 increased 34% to US$338.9 million (2010 US$252.5 million) driven by increases in port terminal, logistics and shipyard revenue. Terminal revenue reflects the benefits from higher warehousing revenues at our container terminals, improved pricing and the continued strong growth from our Oil and Gas terminal business, Brasco. In logistics the new in house operations started in the second half of 2010 contributed to robust revenue growth. Shipyard revenue reflected the increase in third party sales. Following the formation of our offshore joint venture in June 2010, 50% of shipyard construction sales to the joint venture are recognised as third party revenue.
Operating profit for the period increased by 39% to US$42.8 million (2010 US$30.7million) reflecting the higher turnover. Operating margins for the period improved marginally to 12.6% (2010 12.2%). Improved margins from our terminal, logistic and shipyard businesses was partially offset by a fall in towage and offshore margins. Terminal margins were positively impacted by higher warehousing revenues and improved pricing. Logistic margins reflected the improved pricing from the new contracts started in 2010 while towage margins suffered from the strong Real as the majority of towage revenues are US Dollar denominated while costs are largely Real denominated, and competitive price pressures. Offshore margins are lower in the period compared to 2010 as platform supply vessels, "PSVs" migrated from higher margin spot contracts to long-term contracts with Petrobras during 2010 as stated in previous reports.
Investment revenues for the period were up US$6.5 million to US$12.3 million (2010 US$5.8 million) principally due to exchange gains on cash and cash equivalents of US$5.0 million (2010 US$0.7 million loss), mainly attributable to the appreciation of the Real against the US Dollar in the period. Interest on bank deposits in the period increased US$0.6 million to US$5.3 million (2010 US$4.7million)
Other gains of US$0.7 million (2010 US$4.4 million loss) arise from the Group's portfolio of trading investments and reflect the profit on the disposal of trading investments in the period less the decrease in the fair value of trading investments held at period end.
Finance costs at US$6.9 million for the period were US$1.2 million higher than the comparative period in 2010 (US$5.7 million) as a result of higher interest payments on increased borrowings used to fund capital expenditure.
Profit before tax of US$48.9 million is up 4% compared to the first half 2010 (US$46.8 million). Underlying profit before tax improved 85% after adjusting for the profit on the formation of the offshore joint venture in 2010 (US$20.4 million) due to the increase in operating profit, investment revenues and other gains from the investment portfolio.
The effective tax rate in the period of 34% is marginally lower than the comparative period in 2010, 36%. Current tax in Brazil in the period increased by US$7.7million to US$20.2million (2010 US$12.5million) driven by higher taxable profits. The increase in current tax was offset by a US$8.2 movement in the deferred tax charge compared to 2010, (2011 US$3.7million credit, 2010 US$4.5million debit). The improvement in the deferred tax movement was principally caused by an increase in the deferred tax credit arising on the retranslation of non-current asset values which is caused by the appreciation of the Real against the US Dollar.
Basic earnings per share for the period were 51.7 cents (2010: 39.5 cents).
Wilson Sons Limited
At the close of business on the 5 August 2011, the Wilson Sons share price was Real 26.10 resulting in a market value for the Ocean Wilsons holding of 41,444,000 shares (58.25% of Wilson Sons) of approximately US$684.6 million which is the equivalent to US$19.36 per Ocean Wilsons Holdings Limited share.
Briclog acquisition
In June 2011 we were pleased to announce that Brasco Logística Offshore Limitada (Brasco), signed a contract for the acquisition of 100% of the issued share capital of Bric Brazilian Intermodal Complex S/A. (Briclog) for Real 125 million (approximately US$80 million). Briclog provides port services to the offshore oil & gas industry. The acquisition is subject to various conditions precedent including a 30-year lease right to operate a 67,000 square metre area in the Bay of Guanabara, Rio de Janeiro, Brazil, together with the assignment of certain other lease contracts to Briclog.
Consideration is payable in three tranches, Real 10 million paid in June 2011, Real 60 million on satisfaction of all conditions precedent, and the balance of Real 55 million, three hundred and sixty days from the contract signature. The last two payments are adjusted for movement in the Brazilian consumer price index (IPCA). In 2010 Briclog generated Real 6 million in net profit and at 31 December 2010, the gross assets of Briclog amounted to Real 39 million. Lease contracts generated further receipts of Real 4 million in 2010.
As at 30 June 2011 the acquisition was not finalised and so the Real 10 million payment made in June 2010 has been treated as a prepayment in the Groups accounts.
The Company expects strong growth in the business through synergy with the existing Brasco operations and client base, together with overall growth in the Brazilian offshore oil & gas industry.
Tecon Salvador
In January 2011 the Group disposed of a 7.5% share interest in Tecon Salvador S.A to Intermarítima Terminais Ltda ("Intermarítima"), reducing our ownership to 92.5% for US$6.7 million. Intermarítima is an important inland and port logistics operator with activities in the major ports of Bahia state - Salvador, Aratu and Ilhéus. This alliance will facilitate the continued growth of Tecon Salvador as well as the exploration of new general and bulk cargo opportunities in Bahia, the sixth largest Brazilian economy according to data from the Brazilian Institute of Geography and Statistics.
The profit net of tax, between the increase in the non-controlling interests and the consideration received has been credited to retained earnings in the consolidated statement of changes in equity.
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/Real exchange rate can impact the Group both positively and negatively from period to period. In the six months to 30 June 2011, the Real appreciated 6% against the US Dollar from 1.67 at 1 January 2011 to 1.56 at the period end.
The main impacts from the appreciation of the Real against the US Dollar in the period were a net exchange gain of US$4.7 million (2010 US$0.7 million loss) on the Group's Real-denominated cash balances included in the income statement and a currency translation adjustment gain to net equity of US$3.8 million (2010: US$0.7 million loss). The average Real/US Dollar exchange rate in the period at 1.63 was 10% lower than the comparative period in 2010, 1.81. The lower average exchange rate has an adverse effect on our Real denominated costs when converted into US Dollars.
Dividend
The Board has declared an interim dividend of 4.0 cents per share (2010: 4.0 cents per share) to be paid on 30 September 2011 to shareholders on the register at close of business on 2 September 2011.
Cash flow and debt
Net cash inflow from operating activities for the period at US$27.7 million (2010 US$37.6million) was negatively impacted by adverse working capital movements.
The Group's cash and cash equivalents decreased US$41.7 million at period end to US$88.4 million (31 December 2010 US$130.1 million) driven principally by capital expenditure in the period of $103.4 million and dividends paid to shareholders and non controlling interests of US$21.0 million.
Capital expenditure was invested in the development of the new Guarujá II shipyard, the expansion of Tecon Salvador and new offshore vessels and tug boat construction. New loans of US$41.8 million were raised in the period to finance capital expenditure.
Balance sheet
Equity attributable to equity holders of the parent increased from US$535.1 million at the beginning of the year to US$545.4 million at 30 June 2011. Comprehensive income for the period attributable to equity holders of US$21.1 million was partially offset by dividends paid in the period of US$13.5 million. On a per share basis equity attributable to shareholders of US$545.4 million is the equivalent of US$15.42 per share (31 December 2010: US$15.13).
Investment Portfolio
The investment portfolio, including cash under management, amounted to US$257.5 million a decrease of US$5.9 million since year end. The fall in value is mainly due to a US$7.5 million dividend paid from the investment portfolio to the parent company Ocean Wilsons Holdings Limited in the period. The US$257.5 million investment portfolio is the equivalent of US$ 7.29 per Ocean Wilsons Holdings Limited share.
Board of Directors
We are pleased to announce the appointment of Mr Christopher Townsend as a non-executive Director of Ocean Wilsons Holdings Limited with effect from 11 August 2011. Mr Christopher Townsend is aged 37 and is a qualified solicitor. He has an MA from Peterhouse, Cambridge and an MBA from London Business School. He is currently investment director at Hanseatic Asset Management Limited Consulting GmbH and previously worked as a principal in the investment team at Coller Capital Limited and as a solicitor at Ashurst Morris Crisp.
Mr Christopher Townsend is the son of Mrs C A Townsend who is interested in the 8,364,113 shares registered in the name of Nicholas B Dill Jnr and Codan Trustees (BVI) Limited.
There are no disclosures to be made in respect of Mr Townsend pursuant to Listing Rule 9.6.13.
Wilson Sons Limited operating review
We have summarised the following highlights from the Wilson Sons 2nd quarter 2011 earnings results released on 12 August 2011. The full report is available on the Wilson Sons Limited website: www.wilsonsons.com:
Wilson, Sons delivers nearly 40% revenue growth in second quarter and announced a contract for the acquisition of an oil & gas terminal.
Record quarterly and half-year revenues of US$ 182.3M and US$ 338.9M, were led by strong growth at Port Terminals and Logistics.
Quarterly EBITDA of US$ 33.7M, was up 6.7% compared to 2Q10 EBITDA of US$ 31.6M; EBITDA for 1H11 of US$ 73.6M was up 32.8% versus 1H10
Quarterly net income of US$ 13.7M, was slightly down from adjusted net income of US$ 14.1M for 2Q10 (adjusted net income excludes non-recurring events regarding the formation of the joint venture last year)
Cezar Baião,
CEO of Operations in Brazil
"It is good to see that Wilson, Sons continues to increase its top-line, delivering record revenues for the quarter and half-year. The sectors in which the Company operates are expected to continue to expand, which will present us with further growth potential even in the current uncertain economic environment.
Our diverse range of services provide us with good opportunities to meet the growing needs of our customers. Brasco is an example - during the second quarter, this business announced a contract for acquisition of Briclog, an offshore supply terminal.
With strong financial discipline and focus on executing our investment plan, we are making steady progress in implementing our strategy. Clearly, Wilson, Sons continues its sustained profitability and growth."
Financial Highlights
Quarterly revenues of US$ 182.3M, were up 39.1% compared to 2Q10 with volumes especially strong in Container Terminal's warehousing, our Brasco supply base operations, and Logistics.
Brasco revenues grew 32.3% compared to 2Q10, with intense activity across our existing long-term clients and higher demand for waste management services.
Logistics revenues increased 72.4% over 2Q10 due to several new in-house operations and the addition of new services and clients at our bonded-warehousing facility (EADI Santo André).
Quarterly EBITDA of US$ 33.7M was 6.7% higher compared to 2Q10, benefitting from better pricing, warehousing, and improved deep-sea volumes in the container terminals business.
EBITDA margin of 18.5% has been negatively impacted by a US$ 5.9M provision for cash-settled stock options, a result of the movement in the share price for the quarter. In contrast, a provision of US$ 1.3M was reversed in 2Q10.
The development of the new Guarujá II shipyard, the expansion of TECON Salvador and new offshore vessels and tugboats contributed to the quarterly capex of US$ 50.0M.
Net Revenues
Port Terminals quarterly revenues were up a robust 29.9%, benefiting from increased warehousing of imported cargoes, and strong activity in our Brasco terminals.
Container terminals revenues continued their trend and rose again for the quarter. The Brazilian Real maintained its strength against the Dollar, incentivising higher-yielding imports which, again, favoured warehousing revenues.
Towage revenues grew 5.2%, with increases in both harbour manoeuvres and special operations for the quarter.
Costs and Expenses
Costs and Expenses have been negatively impacted by the continued strength of the Brazilian Real relative to the US$ reporting currency.
Raw Material Costs were up significantly for the quarter as a result of increased shipyard activity.
Personnel Expenses for the quarter were impacted by:
a US$ 5.9M provision for the cash-settled stock option plan;
an average headcount increase from 4,569 in 2Q10 to 6,036 in 2Q11, mostly due to more Logistics operations and expanded activity at both container terminals and Brasco;
labour wage agreements for 2010 did not occur prior to 2H10 while agreements for 2011 started impacting from the beginning of this year.
Higher depreciation & amortisation costs were a direct result of a larger asset base, with bigger towage and offshore fleets, and more equipment for new Logistics operations.
Other Operating Expenses expanded with higher levels of equipment rental, increased insurance and office rental costs.
EBITDA
Quarterly EBITDA of US$ 33.7M is up 6.7% when compared to 2Q10. EBITDA is up significantly for the first half of 2011, 32.8% higher than 1H10.
Port Terminals revenues are up substantially, with increases of 23.6% quarterly and a robust 50.0% for the six-month period. Container terminals EBITDA benefitted from growth in deep-sea and cabotage volumes in Tecon Rio Grande. Imports warehousing is also a highlight. Brasco experienced not only more operations but also increased activity in the existing ones.
Logistics delivered impressive increases for both the quarter and the half-year comparisons, up 184.2% and 172.8% respectively, due to strong demand for integrated client solutions involving transportation, bonded-warehousing, and distribution centre altogether.
Towage EBITDA is down 10.1% for the quarter and 5.5%, for the half year. Although both harbour manoeuvre volumes and special operations are up, the business suffered from higher personnel costs, increased headcount, and a strong Real.
In Offshore, rising crew cost and a higher percentage of vessels in long-term contracts with Petrobras have reduced EBITDA. Additionally, the Company now only reports its 50% share in the partnership following the formation of the joint venture.
Provisions for our cash-settled stock option plan amounted to US$ 5.9M, a result of the movement from the closing share price of R$26.52 on March 2011 to R$30.39 for June 2011. In comparison, 2Q10 saw a reversal of provision totalling US$ 1.3M.
Net Income
Net income of US$ 13.7M for the quarter is down 55.9% as net income for 2Q10 included non-recurring events regarding the formation of the joint venture, as discussed in our 2Q10 earnings release. Excluding these one-off events, net income for 2Q10 would have been US$ 14.1M.
Net income was US$ 33.4M for the six-month period, down 10.4% compared to 1H10, which included non-recurring entries discussed above.
Financial Revenues rose as a result of US$/Real exchange rate movement and the subsequent effect on the valuation of our monetary items denominated in Real (mostly cash).
Financial expenses are up 23.9% in the quarter as a result of larger total debt of US$ 356.4M at quarter-end compared to US$ 270.4M in 2Q10.
Business Highlights - Ports and Logistics
Port Terminals (Container Terminals & Brasco)
Port Terminals revenues hit record levels for the quarter and the six-month period, at US$ 72.7M and US$ 137.4M, respectively.
Quarterly and 1H11 EBITDA are up significantly compared to respective prior periods, with increases of 23.6% and 50.0%, helped by better pricing, growing warehousing of imported cargo, improved deep-sea volumes in the container terminals business, and impressive Brasco results.
Container Terminals
Container Terminals revenues of US$ 53.7M and US$ 102.0M for 2Q11 and 1H11, respectively, are historical highs. The Brazilian Real maintained its strength against the Dollar, incentivising higher-yielding imports. Revenues from warehousing of imported cargo have risen remarkably. Price increases to services rendered to cargo owners also helped results.
Container movement volumes are basically flat over the comparative periods. Deep-sea and cabotage quarterly volumes are up strongly at Tecon Rio Grande, but lower-margin transhipment levels at both Tecons have decreased due to a change in shipowner's choice.
Tecon Rio Grande deep-sea cargo gained from higher export volumes of rice, resins, vehicle parts, and frozen chicken. Major import cargoes included machinery, parts, and chemicals. Higher cabotage volumes were driven by rice and resins at this terminal.
Tecon Salvador deep-sea exports were mainly wood pulp, rubber, and chemicals. Cabotage volumes were mainly chemicals, rice, pulp & paper, and beverages.
Brasco
Brasco, our oil & gas supply base business, continues to grow with strong demand from oil companies through all of our terminals - some operations are now running a second shift.
Revenues grew over 32% both quarterly and half-yearly over the comparative periods of 2010, due to higher revenues from waste management and greater number of turnarounds.
Vessel turnarounds for both comparative periods are up significantly, over 300%, as a result of stronger demand from regular customers and the new operation in the port of Rio de Janeiro.
Logistics
Revenues grew strongly, up 72.4% in 2Q11 and 66.7% in 1H11 when compared to last year's figures.
EBITDA for both comparative periods were up significantly, well over 100%, as a result of new in-house operations that began after 2Q10, such as: Fibria, Gerdau, Anglo American, Braskem, and Vale. In-house operations now comprise two thirds (66%) of the total Logistics revenues.
A strong Real continues to drive imports, impacting positively our bonded-warehouse operation in Santo André (SP), which performed particularly strongly.
Vehicle movements decreased as the company continues to focus on the most profitable operations.
Business Highlights - Maritime
Towage
Quarterly Towage revenues increased 5.2%, helped by better volumes in traditional harbour towage and an increase in special operations.
EBITDA is down 10.1% for the quarter, negatively impacted by a strong Real since the majority of revenues are in US$ while costs are Real-denominated for this business.
EBITDA was also impacted by a more competitive business environment.
Special operations increased to 14.5% of total Towage revenues in 2Q11 against a comparative 13.4% in 2Q10.
The participation of Special Operations in the Total EBITDA for this business also rose for both comparative periods and is now 35.6% for the quarter and 30.2% for the six-month period.
Currently, the company has 3 tugboats in different stages of construction at our shipyard in Guarujá - Wezen, Alphard, and Octans.
Offshore
The Wilson, Sons Ultratug Offshore (WSUT) joint venture results for 2011 are reported proportionally, with Wilson, Sons 50% participation in the entity. Financial values for 2010 include 100% ownership up until May 28th, 2010 when the joint venture was completed.
Revenues increased by 14.8% compared to 2Q10 as result of a larger fleet - 2 owned PSVs and 2 chartered AHTS were added.
EBITDA is down 56.7% for the quarter compared to 2Q10 due to the formation of the JV and vessels that migrated from spot contracts to 8-year, long-term contracts with Petrobras (which carry lower daily rates than spot market rates).
The two AHTS vessels named Chinook and Cyclone continued to provide general support to Transocean Driller during 2Q11.
Higher personnel costs negatively impacted the results, mainly due to collective labour agreements and a higher headcount.
PSV Cormoran was delivered right after quarter-end and an additional 2 PSVs - Stema and Batuíra - are in different stages of construction at the Wilson, Sons Guarujá Shipyard.
Capital expenditure
The expansion of TECON Salvador, the development of the new shipyard, and new vessels for offshore and towage are the major contributors to the quarterly capex of US$ 50.0M.
As announced on the 9 June 2011 civil works for the new Guarujá II shipyard has been interrupted and the company is taking all appropriate legal measures to resume construction.
PSV Cormoran was delivered right after quarter-end and PSV Stema is expected for delivery in 4Q11.
The majority of Port Terminals capital expenditures were related to the expansion of Tecon Salvador, with civil works well underway - the quay reinforcement job is complete and retro area paving is in progress.
Logistics investments in the quarter were mostly equipment for new client in-house operations.
Debt and Cash Profiles
Debt schedule: 90.0% of total debt is long-term, 86.0% of total debt is US$-denominated, and 73.9% of total debt is provided through BNDES and Banco do Brasil as agents for the Fundo da Marinha Mercante (Merchant Marine Fund - FMM).
Net debt totalled US$ 254.7M at quarter-end as a result of our aforementioned capital expenditures.
Cash, cash-equivalents, and short-term investments decreased to US$ 101.7M in the quarter.
Corporate Costs
The Company's Corporate activities include head office and group support functions together with costs not allocated to the individual business operations.
Corporate personnel expenses increased 94.1% for 2Q11 impacted by a provision for cash-settled stock options amounting to US$ 2.3M for 2Q11 compared to a reversion of provision of US$ 0.6M in 2Q10.
Also impacting personnel expenses in the quarter is a higher headcount and the payment of bonuses to employees.
A stronger Real (2Q10 of R$1.79/US$ compared to 2Q11 of R$1.60/US$) negatively impacted Personnel Costs by US$ 0.7M.
Business Highlights - Maritime
Shipyards
2Q11 Revenues, Operating Profit, and EBITDA are all up compared to 2Q10 figures as a result of a greater number of vessels being built for third-parties (following the formation of the JV in May 2010, 50% of shipyard construction for WSUT is considered third-party).
Operating Profit and EBITDA for 2Q10 were re-categorized in 3Q10 to "Profit on Disposal of PP&E" to better reflect the nature of the transaction.
PSV Cormoran was delivered right after quarter-end, while PSV Stema is expected for delivery by year-end.
Construction of tugboats for the Wilson, Sons Towage business is considered intercompany. As such, tugboats can be observed as assets at cost in the consolidated balance sheet of the Company.
Shipping Agency
Shipping Agency revenues increased 17.1% compared to 2Q10 as a result of higher volumes overall, generally benefitting from both higher domestic and international shipping demand.
Quarterly Operating Profit (Loss) and EBITDA decreased as a result of a stronger Real that continues to erode margins of this business as 100% of costs are Real-denominated and the majority of revenues are US$-denominated.
Higher personnel costs adversely impacted results (negative impact of US$ 1.4M) due to labour agreements.
Higher provisions associated with the cash-settled stock option plan also influenced results (negative impact of US$ 0.7M).
Investment Portfolio
Hanseatic Asset Management LBG that manages the Groups investment portfolio reports at the period end as follows:
MARKET BACKGROUND
During the first half of 2011, global equities experienced significant volatility. Stock markets weathered a combination of geopolitical shocks and natural disasters to post gains in the first quarter but sold off in the second quarter on the back of a resurgence of Eurozone and US sovereign debt fears, together with softening global economic data.
Over the period, the MSCI World Index of Developed Markets posted solid gains of +5.3% with the MSCI Emerging Markets Index only just in positive territory with a gain of +0.9%. March 2011 marked the two year anniversary of Developed Market lows, from which the MSCI World Index of Developed Markets has rallied +103.5%. In Emerging Markets, the MSCI Emerging Markets Index has now risen +168.0% since its market lows in October 2008. As at 30 June 2011, these indices remain -14.1% and -6.9% respectively below their 2007 highs.
The major investment theme over the first quarter was a trend reversal in fund flows with investors favouring Developed Markets over their Emerging Market counterparts. Developed Market equities were supported by largely positive momentum in economic data, above consensus corporate earnings and the tailwind of Quantitative Easing programmes in the US, UK and Japan. In Emerging Markets, inflationary pressures became more marked as Emerging Market policy makers continued to act against these largely cyclical forces with hikes in interest rates and reserve requirements, although real interest rates remain close to or below zero. Concerns over Chinese monetary tightening also intensified over the period, evidenced by five interest rate hikes and nine bank reserve requirement increases since October 2010. The quarter was also marked by a number of geopolitical events, including unrest in the Middle East and North Africa, which ranged in scale from protests and riots to civil war in the case of Libya and in March, Japan experienced its most destructive earthquake in centuries, causing a horrific human toll and the country's worst nuclear crisis in peacetime as well as global supply chain disruptions.
The second quarter saw the resurfacing of sovereign debt fears in the US and Eurozone. In April, Standard and Poor's cut its ratings outlook on the 'AAA' rated US sovereign debt from stable to negative. The Eurozone continued to show a marked contrast between the strength of Germany versus the weak periphery. The Portuguese government failed to win approval for its deficit reduction plan (becoming the third Eurozone member to request an emergency bailout), Ireland exposed a further capital shortfall of €24bn in its banking system, Italian bond yields spread to Euro era highs against German Bunds and Greek bond yields soared to record highs as the country's debt was downgraded to the lowest global sovereign rating of 'CCC'.
In Developed Markets, European equities were the strongest performers over the period, helped by a strong gain in the Euro which appreciated by +8.4% against the US Dollar. The CAC Index in France gained +16.6% and the DAX Index in Germany gained +15.3%. The S&P 500 Index and the FTSE 100 Index also posted gains of +6.0% and +5.3% respectively. Japan was the only major Developed Market to decline over the period as the Topix Index fell by -4.3%.
Amid a lacklustre period for Emerging Markets, Russia was the standout performer, posting gains of +7.7% in the RTS Index despite a weak second quarter in line with energy market declines. The 'A' Share CSI 300 Index of China was flat over the period, whilst the Brazilian economy remained under pressure from the impact of the strong Real on exporters with a decline of -4.4% in the Bovespa Index. The Indian market was the major laggard with an -8.1% decline in the Sensex Index after being one of the strongest performers of 2010.
In the commodity complex, significant gains in precious metals and energy during the first quarter were partially eroded with a 9% plunge in the CRB Index of raw materials in the first week of May, its sharpest decline in three years. The price of a barrel of oil (as measured by West Texas Intermediate) ended the period at $95 (a gain of +4.4%), having hit post crisis highs of $114 during April. Gold continued breaking to new nominal highs up over the period ending +5.6% at $1,500 per ounce (having peaked at $1,578 per ounce), whilst Silver hit a 31 year high during the second quarter, before retreating to end the period +12.2%. Copper declined -2.2% over the first half. Agricultural prices declined significantly as supply constraints eased, with the price of Wheat falling -32.0%.
The US Dollar saw weakness against a basket of major currencies, declining -2.8% against Sterling, -7.8% against the Euro and -0.1% against the Yen. It was also weak against commodity currencies, depreciating -4.5% against the Australian Dollar, -5.9% against the Brazilian Real and -3.4% against the Canadian Dollar.
Investors flooded back into bond markets in the second quarter after modest first quarter gains, given anticipated economic weakness upon the end of the $600bn second round of Quantitative Easing in the US (on 30 June). The Barclays Capital Global Aggregate Investment Grade Bond Index rose +4.4% over the period, with strength in the High Yield Index which gained +6.1%. Sovereign Emerging Market Debt posted strong returns with the JP Morgan Emerging Local Markets Index (JPM GBI EM Global Diversified) +6.9% outperforming the JP Morgan Emerging Hard Currency Index (JPM EMBI Global Index) +5.1%. Emerging Market Corporate Debt (JPM CEMBI Diversified Index) was +3.4% over the period.
In the major sovereign bond markets, the US ten year treasury yield fell from 3.3% to 3.2%, the UK ten year gilt yield fell from 3.5% to 3.4% and the European Central Bank ten year yield finished flat over the period at 3.0%.
Note: All Index performance numbers are in US Dollar terms, unless specifically stated in local currency terms.
MARKET OUTLOOK
The legacies of the banking crisis of 2008, the ensuing economic contraction and subsequent policy responses continue to undermine growth prospects for the world economy. The European sovereign debt crisis, a dysfunctional banking system in the West, soaring public debt levels, a battered US consumer together with restrictive policies in China particularly, aimed at neutralising the inflationary impact of Quantitative Easing, are all significant obstacles to expansion. Together with the apparent lack of political will, both in the US and Europe, to implement fiscally responsible policies these are weighing heavily on most equity markets and further eroding fragile investor confidence.
Despite this extremely bleak macro environment, the case for long-term commitment to growth and value in shares remains intact. Holders of cash are guaranteed negative real returns, bondholders, particularly holders of public debt, face an ever increasing risk of losing principal. The rampant speculation that has occurred in commodities via Exchange Traded Funds has also greatly increased the risks facing commodity investors at current levels. Unlike government and personal balance sheets, the corporate sector is in surprisingly robust shape with historically very high levels of profitability and cash flow generation. Valuation levels are attractive when using historical criteria.
The decisions taken or avoided by fiscal and monetary policy makers in the coming months are impossible to predict and will have the largest say in the outcomes for markets. However, certain themes should surface in the second half of 2011. Japan, for instance, should experience some economic rebound after the trauma of earlier this year and the share market is at bargain basement levels. Inventory restocking, rising capital spending and continued innovation in the electronics field, together with a competitively priced currency, should all be favourable for US prospects. Emerging Market equities were held back relative to the Developed Market ones in the first half as policy tightened in response to inflationary pressures in food prices and wage settlements. Once investors perceive that this current tightening phase is over then some rotation back into Emerging Markets and improved relative performance is to be anticipated. Over the longer term, abandoning the link to the US Dollar will give greater scope for emerging economies to manage internal inflationary pressures but such a change of strategy could take some time to materialise no matter how obvious it appears to external commentators.
It would be wrong to underestimate the scale of challenges confronting the world economy and the next crisis to impact investors could emanate from a number of different directions. Investors should be braced for a volatile environment. That being said markets "climb a wall of worry" and there is plenty to worry about. Looking at the investment landscape from the "bottom up" is a lot more reassuring. Shares represent good value, many dividends are larger than bond yields, corporate balance sheets are in much better shape than national ones. The Manager remains confident that the investment portfolio provides a broad based exposure to some of the best managers in specialisations that have superior growth potential and represent a store of underlying value.
PORTFOLIO CONSTRUCTION
There are four main 'silos' in the portfolio: (i) Global Equities, (ii) Alternative Assets, (iii) Bonds and (iv) Cash.
'Global Equities' (53.7% of NAV as at 30 June 2011) is comprised of holdings that are sensitive to stock market movements and may take the form of investments in open-ended funds, closed-ended listed funds (such as Investment Trusts), UCITS funds, long / short directional hedge funds as well as direct quoted equities.
'Alternative Assets' (34.5% of NAV) is comprised of three constituents: (i) Private Assets, (ii) Market Neutral Funds and (iii) Liquid Real Assets.
Private Assets (14.2% 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. They allow longer cycle investment plays and access to businesses at potentially lower valuations than in public markets. They also allow access to high quality management teams often not available through more liquid vehicles. Finally, phased drawdown of capital helps to eliminate market timing risk. The first commitment to Private Assets was made in 2007. A total of 15 commitments (totalling $61.6m) have been made as at 30 June 2011. $39.9m has been drawn down, indicating that these investments are (collectively) at an immature stage of value realisation.
Market Neutral Funds(18.0% of NAV) contains 'all-weather' holdings in funds that engage in a variety of trading strategies across asset classes. Their performance is not dependent on the direction of global security markets and each market neutral fund has a different investment mandate. What they have in common is a focus on seeking to generate positive absolute returns and good 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). They provide a better risk/reward allocation than other 'lower risk' investments such as investment grade bonds (where the current risk/reward offers an unattractive investment proposition).
Marketable Real Assets(2.3% of NAV) contains real asset investments (e.g. property and natural resources) which are quoted on a stock market.
'Bonds' (9.8% of NAV) is comprised of two constituents: (i) High Yield Bonds and (ii) Investment Grade Bonds. Returns may be generated from an increased capital value, coupons as well as currency exposure.
High Yield Bonds (9.8% of NAV) contains investments in Emerging Market (sovereign and corporate debt) and other high yield corporate debt.
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).
'Cash' (2.0% of NAV) is comprised of cash and cash equivalents such as money market / liquidity funds. Cash may be held in currencies other than US Dollar.
INVESTMENT PORTFOLIO PERFORMANCE for the Half Year ended 30 June 2011
The portfolio generated a time weighted absolute return of +0.9% in the first half of 2011 versus +1.4% for the performance benchmark (one year USD LIBOR plus 2% prevailing at the commencement of each calendar year). The portfolio's performance compares to positive performance of +4.6% for the MSCI All Country World Index (includes Developed, Emerging and Frontier Markets - weighted by market capitalisation) and +0.9% for the MSCI Emerging Markets Index.
Cash represented approximately 2.0% of the portfolio's net asset value at the end of the period with 18.0% in 'Market Neutral Funds' and 14.2% invested in commitments to 'Private Assets' (which overall are at a relatively immature stage of investment and represent a future store of value).
Given the high exposure to Emerging Markets and related sectors (approaching 40% of net asset value), it is unsurprising that the portfolio's performance has lagged the return on the MSCI All Country World Index during a period of strong outperformance by Developed Markets, especially the US where the portfolio is significantly underweight the MSCI All Country World Index (approximately 11% of net asset value versus 48% in the Index).
In terms of contribution to the overall portfolio performance, the top ten positive contributors (excluding Private Assets) were:
|
Top Contributors (in USD) |
Contribution |
Performance |
|
Gain |
|
|
% |
% |
|
$m |
|
AR New Asia Fund |
0.3 |
11.0 |
|
1.0 |
|
Findlay Park American Fund |
0.2 |
4.2 |
|
0.5 |
|
BlueBay Macro Fund |
0.2 |
8.9 |
|
0.5 |
|
Oaktree CM Value Opportunities Fund |
0.1 |
5.8 |
|
0.4 |
|
Prosperity Quest Fund |
0.1 |
8.0 |
|
0.4 |
|
Gramercy EMD - Allocation Fund |
0.1 |
7.5 |
|
0.4 |
|
Jupiter European Opportunities Trust Plc |
0.1 |
4.9 |
|
0.3 |
|
Investec GSF - Enhanced Global Energy Fund |
0.1 |
2.8 |
|
0.3 |
|
BlueCrest AllBlue Leveraged Feeder Fund |
0.1 |
2.3 |
|
0.3 |
|
Dynamo Brasil VIII, LLC |
0.1 |
9.0 |
|
0.3 |
|
Total |
|
|
|
4.9 |
In terms of positives, there were solid gains from several of the more liquid holdings (which "mark to market"). AR New Asia Fund was +11.0% through strong stock selection during a period where the MSCI Emerging Asia Index was narrowly in positive territory. The portfolio's largest holding, Findlay Park American Fund (4.7% of NAV), put in another respectable performance +4.2%, whilst two of the more recent additions performed well: Dynamo Brasil VIII, LLC+9.0% and Gramercy Emerging Market Debt - Allocation Fund +7.5%. In Emerging Europe, Tau Capital Plc (Kazakhstan public and private equities) was +27.0% with Prosperity Quest Fund (Russian special situations equities) +8.0%. BlueBay Macro (market neutral hedge fund) also performed strongly +8.9% with Oaktree CM Value Opportunities Fund (US focused distressed debt hedge fund) +5.8% continuing to add value.
ANALYSIS OF INVESTMENTS IN PRIVATE ASSETS (ILLIQUID)
|
COMMITMENTS and COVER |
Value |
|
Weighting |
|
|
$m |
|
% |
|
Total level of commitments |
|
|
|
|
|
|
|
|
|
Drawn - Investment Value |
36.6 |
|
14.2 |
|
Undrawn |
26.6 |
|
10.3 |
|
|
|
|
|
|
Cash and liquidity funds |
5.0 |
|
2.0 |
|
Market Neutral funds (see table below) |
46.3 |
|
18.0 |
|
MARKET NEUTRAL FUNDS |
Liquidity |
|
Value |
|
|
|
|
|
$m |
|
|
BlueCrest AllBlue Leveraged Feeder Fund |
Quarterly |
|
11.9 |
|
|
BlueBay Macro Fund |
Monthly |
|
5.5 |
|
|
GLG Emerging Currency and Fixed Income Fund |
Monthly |
|
10.9 |
|
|
QFR Victoria Fund |
Quarterly |
|
7.5 |
|
|
Schroder ISF Emerging Markets Debt Absolute Return |
Daily |
|
5.2 |
|
|
Winton Futures Fund |
Monthly |
|
5.5 |
|
|
Total |
|
|
$46.3 |
|
PORTFOLIO ACTIVITY - for the Half Year ended 30 June 2011
Purchases
There were purchases totalling $28.6m during the first of the half year.
|
New Positions |
|
$m |
|
Artemis Global Energy Fund |
|
5.0 |
|
Gramercy Emerging Markets Debt - Allocation Fund |
|
5.0 |
|
Schroder GAIA - Egerton European Equity Fund |
|
5.0 |
|
Dynamo Brasil VIII, LLC |
|
3.0 |
|
Findlay Park Latin America Fund |
|
3.0 |
|
Prince Street Opportunities Fund |
|
3.0 |
|
Eredene Capital Plc |
|
2.5 |
|
Additions to Existing Investments |
|
|
|
QFR Victoria Fund |
|
2.1 |
|
Total |
|
$28.6 |
Artemis Global Energy Fundwas purchased at launch to diversify the portfolio's energy exposure. The portfolio is concentrated and weighted towards mid and small caps. One of the main differentiation points from other energy funds is that its major focus is not on North America but rather on Europe and Russia. A maximum of 10% of the Fund will be invested in pure oil and gas explorers (which do not have any certified producing assets). The Fund has daily liquidity.
Gramercy Emerging Market Debt - Allocation Fund was purchased to diversify the portfolio's exposure to Emerging Market Debt from the sole holding in Capital International Emerging Markets Debt Fund. The Allocation Fund provides exposure to four sub-funds investing in Local Currency Sovereign Debt, Hard Currency (USD denominated) Sovereign Debt, Corporate Debt and Distressed Debt. The allocation to each strategy may range from 0-50%. Cash can be up to 35%. The Fund has monthly liquidity.
Schroder GAIA - Egerton European Equity Fund is a long/short UCITS vehicle. Investments are primarily in European equities although the manager is only compelled to invest 51% in Europe. The manager has an excellent long-term track record and has been closed to new investors for several years. The Fund has weekly liquidity.
Dynamo Brasil VIII, LLCwas purchased in recognition of the manager's exceptional long-term track record and the attractive long-term outlook for Brazilian investments. The portfolio may contain up to 35% of its net asset value in unlisted companies. This illiquid may be liquidated over a period of approximately four years.
Findlay Park Latin American Fund was purchased in recognition of the manager's strong track record and the attractive long-term outlook for investments in the region. The portfolio is focused on small and mid caps. The Fund has daily liquidity.
Prince Street Opportunities Fund was purchased as a differentiated fund investing in global Emerging and Frontier Market equities with a bias towards small and mid caps. The manager can take aggressive cash positions as its primary portfolio protection tool, which helped the Fund to mitigate losses in 2008. The Fund is now closed to new investors and has quarterly liquidity.
Eredene Capital Plcis a London AIM listed company engaged in making investments in Indian infrastructure projects with a primary focus on port services, logistics and distribution warehouses.
QFR Victoria Fundwas increased following the manager's decision to reopen the Fund to new investments. The Fund is a market neutral hedge fund, focused on making investments in Emerging Market currencies, fixed income and their derivatives. The Fund has quarterly liquidity.
Commitments
There was one new commitment to illiquid private limited partnerships during the half year:
|
Commitments |
|
$m |
|
Gramercy Distressed Opportunity Fund |
|
5.0 |
Gramercy Distressed Opportunity Fundwas launched on 1 April 2009 to invest in event driven distressed debt in Emerging Markets. The Fund invests in corporate, sovereign and quasi-sovereign entities, seeking to extract value by playing an active role in the restructuring of these assets. The manager proactively leads creditor committees and implements restructuring proposals on defaulted securities. The investment objective is to generate consistent returns with low volatility whilst outperforming traditional asset classes. A global macro hedge may be utilised through Credit Default Swaps. The Fund will wind up by 31 March 2013.
Sales
There were sales with proceeds totalling $24.0m during the first of the half year.
Hanseatic Asset Management LBG August 2011
|
INVESTMENT PORTFOLIO at 30 June 2011 |
Market Value |
|
% of |
|
|
$000 |
|
NAV |
|
|
|
|
|
|
Findlay Park American Fund |
12,107 |
|
4.7% |
|
BlueCrest AllBlue Leveraged Feeder Fund |
11,860 |
|
4.6% |
|
BlackRock World Mining Trust Plc |
11,257 |
|
4.4% |
|
GLG Emerging Currency and Fixed Income Fund |
10,877 |
|
4.2% |
|
Lansdowne UK Equity Fund |
9,996 |
|
3.9% |
|
AR New Asia Fund |
9,867 |
|
3.8% |
|
Oaktree CM Value Opportunities Fund |
7,893 |
|
3.1% |
|
QFR Victoria Fund |
7,489 |
|
2.9% |
|
BlackRock UK Emerging Companies Hedge Fund |
6,800 |
|
2.6% |
|
Jupiter European Opportunities Trust Plc |
6,780 |
|
2.6% |
|
Top 10 Holdings |
94,926 |
|
36.9% |
|
|
|
|
|
|
Capital International Emerging Markets Debt Fund |
6,471 |
|
2.5% |
|
SR Global - Emerging Markets |
6,425 |
|
2.5% |
|
Aberdeen Global - Asia Pacific Fund |
6,353 |
|
2.5% |
|
Schroder ISF Global Energy |
5,799 |
|
2.3% |
|
Prosperity Quest Fund |
5,676 |
|
2.2% |
|
Winton Futures Fund |
5,463 |
|
2.1% |
|
BlueBay Macro Fund |
5,453 |
|
2.1% |
|
Gramercy Emerging Market Debt - Allocation Fund |
5,374 |
|
2.1% |
|
Schroder ISF Emerging Markets Debt Absolute Return |
5,154 |
|
2.0% |
|
Gramercy Distressed Opportunity Fund |
5,112 |
|
2.0% |
|
Top 20 Holdings |
152,207 |
|
59.1% |
|
|
|
|
|
|
41 remaining holdings |
100,279 |
|
38.9% |
|
|
|
|
|
|
Cash |
5,038 |
|
2.0% |
|
|
|
|
|
|
TOTAL |
257,524 |
|
100.0% |
Going concern
The Group closely monitors and manages its liquidity risk. The Group has considerable financial resources including US$88.5 million in cash and cash equivalents and the Groups borrowings have a long maturity profile. The Groups business activities together with the factors likely to affect its future development and performance are set out in Chairman's statement, operating review and investment managers report. The financial position, cash flows and borrowings of the Group are also set out in the Chairman's statement. Details of the Group's borrowings are set out in note 15. Based on the Group's cash forecasts and sensitivities run, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operation for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the accounts.
Responsibility statement
The Directors confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared in accordance with IAS 34;
(b) the interim management report includes a fair review of the information required by DTR 4.2.7R; and
(c) the interim management report includes a fair review of the information required by DTR 4.2.8R
By order of the Board
Jose Francisco Gouvea Vieira
12 August 2011
Ocean Wilsons Holdings Limited
Condensed consolidated statement of comprehensive income
for the six months ended 30 June 2011
|
|
Unaudited six months to |
|
Unaudited six months to |
|
Audited Year to |
|
|
30 June |
|
30 June |
|
31 December |
||
|
|
Notes |
2011 US$'000 |
|
2010 US$'000 |
|
2010 US$'000 |
|
Revenue |
3 |
338,948 |
|
252,523 |
|
575,551 |
|
Raw materials and consumables used |
|
(37,599) |
|
(22,957) |
|
(67,222) |
|
Employee benefits expense |
5 |
(121,916) |
|
(87,469) |
|
(205,486) |
|
Depreciation & amortisation expense |
|
(26,841) |
|
(19,860) |
|
(42,923) |
|
Other operating expenses |
|
(110,890) |
|
(91,540) |
|
(192,090) |
|
Profit on disposal of property, plant and equipment |
|
1,088 |
|
33 |
|
90 |
|
Operating profit |
|
42,790 |
|
30,730 |
|
67,920 |
|
Profit realised on formation of joint venture |
|
- |
|
20,407 |
|
20,407 |
|
Investment revenue |
3, 6 |
12,251 |
|
5,806 |
|
17,982 |
|
Other gains and losses |
7 |
688 |
|
(4,407) |
|
22,460 |
|
Finance costs |
8 |
(6,865) |
|
(5,715) |
|
(11,611) |
|
Profit before tax |
|
48,864 |
|
46,821 |
|
117,158 |
|
Income tax expense |
9 |
(16,545) |
|
(17,020) |
|
(30,564) |
|
Profit for the period |
|
32,319 |
|
29,801 |
|
86,594 |
|
Other comprehensive income |
|
|
|
|
|
|
|
Exchange differences arising on translation of |
|
|
|
|
|
|
|
foreign operations |
|
6,573 |
|
(1,388) |
|
4,644 |
|
Other comprehensive income / (loss) for the period |
|
6,573 |
|
(1,388) |
|
4,644 |
|
Total comprehensive income for the period |
|
38,892 |
|
28,413 |
|
91,238 |
|
Profit for the period attributable to: |
|
|
|
|
|
|
|
Equity holders of parent |
|
18,273 |
|
13,958 |
|
56,879 |
|
Non controlling interests |
|
14,046 |
|
15,843 |
|
29,715 |
|
|
|
32,319 |
|
29,801 |
|
86,594 |
|
Total comprehensive income for the period attributable to: |
|
|
|
|
|
|
|
Equity holders of parent |
|
22,063 |
|
13,230 |
|
59,749 |
|
Non controlling interests |
|
16,829 |
|
15,183 |
|
31,489 |
|
|
|
38,892 |
|
28,413 |
|
91,238 |
|
Earnings per share |
|
|
|
|
|
|
|
Basic and diluted |
11 |
51.7c |
|
39.5c |
|
160.8c |
Ocean Wilsons Holdings Limited
Consolidated balance sheet
as at 30 June 2011
|
Unaudited |
Unaudited |
Audited |
|
as at 30 June 2011 US$'000 |
as at 30 June 2010 US$'000 |
as at 31 December 2010 US$'000 |
Non-current assets
|
Goodwill |
|
15,612 |
|
15,612 |
|
15,612 |
|
Other intangible assets |
|
17,356 |
|
2,084 |
|
16,841 |
|
Property, plant and equipment |
12 |
646,224 |
|
470,096 |
|
560,846 |
|
Deferred tax assets |
|
34,865 |
|
22,986 |
|
28,923 |
|
Trade and other receivables |
|
13,885 |
|
- |
|
6,400 |
|
Other non-current assets |
|
7,832 |
|
7,007 |
|
6,550 |
|
|
|
735,774 |
|
517,785 |
|
635,172 |
|
Current assets |
||||||
|
Inventories |
|
18,066 |
|
21,786 |
|
20,147 |
|
Trading investments |
13 |
277,737 |
|
236,264 |
|
297,273 |
|
Trade and other receivables |
14 |
158,397 |
|
137,819 |
|
129,242 |
|
Cash and cash equivalents |
|
88,460 |
|
165,510 |
|
130,071 |
|
|
|
542,660 |
|
561,379 |
|
576,733 |
|
Total assets |
|
1,278,434 |
|
1,079,164 |
|
1,211,905 |
|
Current liabilities Trade and other payables |
|
(134,032) |
|
(114,591) |
|
(126,656) |
|
Current tax liabilities |
|
(4,935) |
|
(1,518) |
|
(3,354) |
|
Obligations under finance leases |
|
(4,162) |
|
(4,182) |
|
(4,847) |
|
Bank overdrafts and loans |
15 |
(31,616) |
|
(17,779) |
|
(25,565) |
|
|
|
(174,745) |
|
(138,070) |
|
(160,422) |
Net current assets 367,915 423,309 416,311
Non-current liabilities
|
Bank loans |
15 |
(315,974) |
|
(241,250) |
|
(288,596) |
|
Deferred tax liabilities |
|
(16,835) |
|
(13,645) |
|
(15,073) |
|
Provisions |
|
(13,846) |
|
(11,173) |
|
(12,289) |
|
Obligations under finance leases |
|
(4,655) |
|
(7,219) |
|
(6,305) |
|
|
|
(351,310) |
|
(273,287) |
|
(322,263) |
|
Total liabilities |
|
(526,055) |
|
(411,357) |
|
(482,685) |
|
Net assets |
|
752,379 |
|
667,807 |
|
729,220 |
|
Capital and reserves Share capital |
|
11,390 |
|
11,390 |
|
11,390 |
|
Retained earnings |
|
481,553 |
|
433,536 |
|
475,042 |
|
Capital reserves |
|
31,760 |
|
31,760 |
|
31,760 |
|
Translation reserve |
|
20,690 |
|
13,302 |
|
16,900 |
|
Equity attributable to equity holders of the parent |
|
545,393 |
|
489,988 |
|
535,092 |
|
Non controlling interests |
|
206,986 |
|
177,819 |
|
194,128 |
|
Total equity |
|
752,379 |
|
667,807 |
|
729,220 |
Ocean Wilsons Holdings Limited
Consolidated Statements of Changes in Equity
as at 30 June 2011
|
|
|
|
|
|
|
Attributable |
|
|
|||||||||||||||
|
|
|
|
|
|
|
to equity |
Non |
|
|||||||||||||||
|
|
|
Share |
Retained |
Capital |
Translation |
holders of |
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 six months ended 30 June 2010 (unaudited) |
|
|
|
|
|
|
|
||||||||||||||||
|
Balance at 1 January 2010 |
|
11,390 |
435,844 |
31,760 |
14,030 |
493,024 |
180,221 |
673,245 |
|||||||||||||||
|
Currency translation adjustment |
|
- |
- |
- |
(728) |
(728) |
(661) |
(1,389) |
|||||||||||||||
|
Profit for the period |
|
- |
13,958 |
- |
- |
13,958 |
15,843 |
29,801 |
|||||||||||||||
|
Total income and expense for the period |
|
- |
13,958 |
- |
(728) |
13,230 |
15,182 |
28,412 |
|||||||||||||||
|
Dividends |
|
- |
(13,438) |
- |
- |
(13,438) |
(11,407) |
(24,845) |
|||||||||||||||
|
Acquisition of non controlling interest |
|
- |
(2,828) |
- |
- |
(2,828) |
(6,177) |
(9,005) |
|||||||||||||||
|
Balance at 30 June 2010 |
|
11,390 |
433,536 |
31,760 |
13,302 |
489,988 |
177,819 |
667,807 |
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
For the year ended 31 December 2010 (audited) |
|
|
|
|
|
|
|
||||||||||||||||
|
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 |
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
For the six months ended 30 June 2011 (unaudited) |
|
|
|
|
|
|
|
||||||||||||||||
|
Balance at 1 January 2011 |
|
11,390 |
475,042 |
31,760 |
16,900 |
535,092 |
194,128 |
729,220 |
|||||||||||||||
|
Currency translation adjustment |
|
- |
- |
- |
3,790 |
3,790 |
2,783 |
6,573 |
|||||||||||||||
|
Profit for the period |
|
- |
18,273 |
- |
- |
18,273 |
14,046 |
32,319 |
|||||||||||||||
|
Total income and expense for the period |
|
- |
18,273 |
- |
3,790 |
22,063 |
16,829 |
38,892 |
|||||||||||||||
|
Dividends |
|
- |
(13,438) |
- |
- |
(13,438) |
(7,543) |
(20,981) |
|||||||||||||||
|
Sale of non controlling interest |
|
- |
1,676 |
- |
- |
1,676 |
3,572 |
5,248 |
|||||||||||||||
|
Balance at 30 June 2011 |
|
11,390 |
481,553 |
31,760 |
20,690 |
545,393 |
206,986 |
752,379 |
|||||||||||||||
|
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 six months ended 30 June 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
Unaudited |
|
Audited |
|
|
|
|
six months to |
|
six months to |
|
Year to |
|
|
|
|
30 June |
|
30 June |
|
31 December |
|
|
|
|
2011 |
|
2010 |
|
2010 |
|
|
|
Notes |
US$'000 |
|
US$'000 |
|
US$'000 |
|
|
|
|
|
|
|
|
|
|
Net cash inflow from operating activities |
16 |
27,688 |
|
37,589 |
|
85,538 |
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
Interest received |
|
5,325 |
|
4,722 |
|
10,159 |
|
|
Dividends received from trading investments |
|
1,952 |
|
1,825 |
|
3,795 |
|
|
Proceeds on disposal of trading investments |
|
90,864 |
|
67,298 |
|
120,849 |
|
|
Proceeds on disposal of property, plant and equipment |
|
3,571 |
|
341 |
|
959 |
|
|
Purchases of property, plant and equipment |
|
(103,398) |
|
(68,295) |
|
(161,971) |
|
|
Purchases of trading investments |
|
(70,640) |
|
(58,191) |
|
(145,884) |
|
|
Advance for future investment |
|
(6,406) |
|
- |
|
- |
|
|
Net cash inflow arising from creation of joint venture |
|
- |
|
5,040 |
|
5,040 |
|
|
Net cash outflow arising on purchase of intangible asset |
|
- |
|
- |
|
(14,546) |
|
|
Net cash used in investing activities |
|
(78,732) |
|
(47,260) |
|
(181,599) |
|
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
Dividends paid |
10 |
(13,438) |
|
(13,438) |
|
(14,853) |
|
|
Dividends paid to non controlling interests in subsidiary |
|
(7,543) |
|
(11,407) |
|
(11,405) |
|
|
Repayments of borrowings |
|
(13,069) |
|
(9,465) |
|
(18,953) |
|
|
Repayments of obligations under finance leases |
|
(3,950) |
|
(1,912) |
|
(3,969) |
|
|
New bank loans raised |
|
41,790 |
|
22,924 |
|
77,650 |
|
|
Increase in bank overdrafts |
|
(949) |
|
1,406 |
|
6,252 |
|
|
Net cash outflow arising on purchase of non controlling interest |
- |
|
(8,614) |
|
(9,005) |
||
|
Net cash (used in)/from financing activities |
|
2,841 |
|
(20,506) |
|
25,717 |
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
(46,585) |
|
(30,177) |
|
(70,344) |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
130,071 |
|
196,428 |
|
196,428 |
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes |
|
4,974 |
|
(741) |
|
3,987 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
88,460 |
|
165,510 |
|
130,071 |
|
|
|
|
|
|
|
|
|
|
Ocean Wilsons Holdings Limited
Notes to the Accounts
1 General information
(a) The interim financialinformation is not the Company'sstatutory accounts.
(b) The auditors of the Companyhave not made any report thereon under section 90(2) of the Bermuda CompaniesAct.
2 Accounting policies
The condensedset of financial statements has been preparedusing accounting policies consistent with International FinancialReporting Standards("IFRSs"). and in accordance with IAS 34 - Interim Financial Reporting.For these purposes,IFRS comprise the standards issued by the
International AccountingStandards Board ("IASB") and interpretations issued by the International FinancialReporting
Interpretations Committee("IFRIC").
The condensedset of financial statements have been preparedon the basis of accounting policies consistent with those appliedin the financial statements for the year ended 31 December 2010.
The financialstatements have been prepared on the going concern basis as disclosedin the Chairman's statement.
|
3 |
Revenue |
Unaudited |
|
Unaudited |
|
Audited |
|
|
An analysis of the Group's revenue is as follows: |
six months to 30 June 2011 US$'000 |
|
six months to 30 June 2010 US$'000 |
|
year to 31 December 2010 US$'000 |
|
|
Sales of services |
311,497 |
|
246,732 |
|
536,258 |
|
|
Revenue from construction contracts |
27,451 |
|
16,240 |
|
39,293 |
|
|
|
338,948 |
|
262,972 |
|
575,551 |
|
|
Investment income (note 6) |
12,251 |
|
5,806 |
|
17,982 |
|
|
|
351,199 |
|
268,778 |
|
593,533 |
|
|
All revenue is derived from continuing operations |
|
|
|
|
|
|
4 |
Business and geographical segments |
|
|
|
|
|
Business segments
Ocean WilsonsHoldings has two reportable segments:Maritime services and investments.
The maritime services segmentprovides 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 six months ended 30 June 2011 (Unaudited)
Maritime
Services Investment Unallocated Consolidated
six months to six months to six months to six months to
30 June 30 June 30 June 30 June
2011 2011 2011 2011
US$'000 US$'000 US$'000 US$'000
Revenue 338,948 - - 338,948
Result
Segment result 46,786 (1,464) (2,532) 42,790
Investment revenue 10,038 2,166 47 12,251
Other gains and losses - 688 - 688
Finance costs (6,865) - - (6,865) Profit before tax 49,959 1,390 (2,485) 48,864
Tax (16,545) - - (16,545) Profit after tax 33,414 1,390 (2,485) 32,319
Other information
Capital additions (103,398) - - (103,398) Depreciation and amortisation (26,840) - (1) (26,841)
Balance Sheet
Assets
Segment assets 1,014,908 258,712 4,814 1,278,434
Liabilities
Segment liabilities (520,548) (253) (5,254) (526,055)
For the six months ended 30 June 2010 (Unaudited)
Maritime
services Investment Unallocated Total
six months to six months to six months to six months to
30 June 30 June 30 June 30 June
|
|
2010 US$'000 |
|
2010 US$'000 |
|
2010 US$'000 |
|
2010 US$'000 |
|
Revenue |
252,523 |
|
- |
|
- |
|
252,523 |
|
Result Segment result |
35,590 |
|
(1,287) |
|
(3,573) |
|
30,730 |
|
Profit realised on formation of joint venture |
20,407 |
|
- |
|
- |
|
20,407 |
|
Investment revenue |
4,129 |
|
1,669 |
|
8 |
|
5,806 |
|
Other gains and losses |
- |
|
(4,407) |
|
- |
|
(4,407) |
|
Finance costs |
(5,715) |
|
- |
|
- |
|
(5,715) |
|
Profit before tax |
54,411 |
|
(4,025) |
|
(3,565) |
|
46,821 |
|
Tax |
(17,020) |
|
- |
|
- |
|
(17,020) |
|
Profit after tax |
37,391 |
|
(4,025) |
|
(3,565) |
|
29,801 |
|
Other information Capital additions |
(68,295) |
|
- |
|
- |
|
(68,295) |
|
Depreciation and amortisation |
(19,859) |
|
- |
|
(1) |
|
(19,860) |
|
Balance Sheet Assets |
825,788 |
|
243,590 |
|
9,786 |
|
1,079,164 |
|
Segment assets |
|
|
|
|
|
|
|
|
Liabilities |
(398,633) |
|
(5,870) |
|
(6,854) |
|
(411,357) |
|
Segment liabilities |
|
|
|
|
|
|
|
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 formationof 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) 0 - (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) |
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 corporatecosts, assets and liabilities include the Ocean Wilsons HoldingsLimited 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 reportingdate.
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 followingis an analysis of the carrying amount of segmentassets, and additionsto 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
|
|
Unaudited |
|
Unaudited |
|
Audited |
||||||
|
six months to |
|
six months to |
|
year ended |
|||||||
|
|
30 June |
|
30 June |
|
31 December |
|
30 June |
|
30 June |
|
31 December |
|
|
2011 |
|
2010 |
|
2010 |
|
2011 |
|
2010 |
|
2010 |
|
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
US$'000 |
|
Brazil |
943,800 |
|
754,457 |
|
869,766 |
|
103,398 |
|
68,295 |
|
166,739 |
|
Bermuda |
332,708 |
|
321,852 |
|
340,527 |
|
- |
|
- |
|
- |
|
Other |
1,926 |
|
2,855 |
|
1,612 |
|
- |
|
- |
|
- |
|
|
1,278,434 |
|
1,079,164 |
|
1,211,905 |
|
103,398 |
|
68,295 |
|
166,739 |
5 Employee benefits expense
Unaudited Unaudited Audited
six months to six months to year to
30 June 30 June 31 December
2011 2010 2010
US$'000 US$'000 US$'000
Aggregate remuneration comprised:
Wages and salaries 96,713 68,242 149,582
Share based payment expense 853 1,369 16,545
Social security costs 23,745 17,452 38,474
Other pension costs 605 406 885
121,916 87,469 205,486
6 Investment revenue
Unaudited Unaudited Audited
six months to six months to year to
30 June 30 June 31 December
2011 2010 2010
US$'000 US$'000 US$'000
Interest on bank deposits 5,325 4,722 10,159
Exchange gains / (losses) on cash 4,974 (741) 3,987
Dividends from equity investments 1,952 1,825 3,795
Investment revenues from underwriting activities - - 41
12,251 5,806 17,982
7 Other gains and losses
Unaudited Unaudited Audited
six months to six months to year to
30 June 30 June 31 December
2011 2010 2010
US$'000 US$'000 US$'000
(Decrease) / increase in fair value of tradinginvestments held at period end (1,720) (5,000) 21,332
Profit on disposal of trading investments 2,408 593 1,128
688 (4,407) 22,460
Other gains and losses form part of the movement in trading investments as outlined in note 13.
8 Finance costs
Unaudited Unaudited Audited
six months to six months to year to
30 June 30 June 31 December
2011 2010 2010
US$'000 US$'000 US$'000
Interest on bank overdrafts and loans 5,887 4,326 9,354
Exchange (gain) / loss on foreign currency borrowings (283) 205 -227
Interest on obligations under finance leases 830 866 1,848
Total borrowingcosts 6,434 5,397 10,975
Other interest 431 318 636
6,865 5,715 11,611
9 Taxation
Unaudited Unaudited Audited
six months to six months to year to
30 June 30 June 31 December
2011 2010 2010
US$'000 US$'000 US$'000
Current
Brazilian taxation
Corporation tax 14,828 9,134 22,747
Social contribution 5,390 3,349 8,492
Total currenttax 20,218 12,483 31,239
Deferred tax
Charge / (credit) for the period in respectof deferred tax liabilities 9,717 -2,228 7,353
Credit / charge for the period in respect of deferred tax assets (13,390) 6,765 (8,028) Total deferredtax (3,673) 4,537 (675)
Total taxation 16,545 17,020 30,564
Brazilian corporation tax is calculated at 25 percent (2010: 25 percent) of the assessable profit for the period. Brazilian social contribution tax is calculated at 9 percent (2010: 9 percent) of the assessable profit for the period.
At the present time, no income, profit, capital or capitalgains taxes are levied in Bermuda and accordingly, no provision for
such taxes has been recorded by the company.In the event that such taxes are levied, the company has received an undertaking from the
Bermuda Governmentexempting it from all such taxes until 28 March 2016.
10 Dividends
Unaudited Unaudited Audited
six months to six months to year to
30 June 30 June 31 December
2011 2010 2010
US$'000 US$'000 US$'000
Amounts recognised as distributions to equity holders in the period
Final dividendpaid for the year ended 31 December2010 of 38.0c (2009: 38.0c ) per share 13,438 13,438 13,438
Interim dividendpaid for the year ended 31 December2010 of 4.0c per share - - 1,415
13,438 13,438 14,853
Proposed interim dividendfor the year ended 31 December 2011 of 4.0c (2010: 4.0c) per share 1,415 1,415 - Proposed final dividendfor the year ended 31 December 2010 of 38.0 - - 13,438
The proposed interim dividendwas approved by the Board on the 12 August 2011 and has not been includedas a liability in these financial statements.
|
11 |
Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data: |
Unaudited |
Unaudited |
Audited |
|
|
Earnings : |
six months to 30 June 2011 US$'000 |
six months to 30 June 2010 US$'000 |
year to 31 December 2010 US$'000 |
|
|
Earnings for the purposes of basic earnings per share being net profit attributable to equity holders of the parent. |
18,273 |
13,958 |
56,879 |
|
|
Number of shares : Weighted average number of ordinary shares for the purposes of basic and diluted earnings per share |
35,363,040 |
35,363,040 |
35,363,040 |
12 Property, plant and equipment
During the period, the Group spent approximately US$ 103.4 million mainly on vessel construction and port terminalequipment.
At 30 June 2011, the Group had entered into contractual commitments for the acquisition of property, plant and equipmentamounting to US$ 64.8 million.
13 Investments
|
Trading investments |
Unaudited 30 June 2011 US$'000 |
|
Unaudited 30 June 2010 US$'000 |
|
Audited 31 December 2010 US$'000 |
|
At 1 January |
297,273 |
|
249,778 |
|
249,778 |
|
Additions, at cost |
70,640 |
|
58,191 |
|
145,884 |
|
Disposals, at market value |
(90,864) |
|
(67,298) |
|
(120,849) |
|
Increase / (decrease) in fair value of trading investments held at period end |
(1,720) |
|
(5,000) |
|
21,332 |
|
(Loss) / profit on disposal of trading investments |
2,408 |
|
593 |
|
1,128 |
|
At period end |
277,737 |
|
236,264 |
|
297,273 |
|
Ocean Wilsons Investment Limited Portfolio |
252,486 |
|
236,264 |
|
260,544 |
|
Wilson Sons Limited |
25,251 |
|
- |
|
36,729 |
|
Trading investments held at fair value at period end |
277,737 |
|
236,264 |
|
297,273 |
Wilson Sons Limited
During 2011 Wilson Sons Limited investedin US Dollar denominated fixed rate certificates. The Wilson Sons Limited investments were held and managed separately from the Ocean WilsonsInvestment Portfolio.
Ocean WilsonsInvestments Limited
The Group has not designated any financial assets that are not classified as trading investments as financial assets at fair value through profit or loss.
Trading investments above represent investments in listed equity securities, funds and unquotedequities that present the Group with opportunity for return through dividendincome and capitalappreciation.
Included in trading investments are open ended funds whose shares may not be listed on a recognisedstock exchange but are redeemable for cash at the current net asset value at the option of the company. They have no fixed maturityor coupon rate. The fair values of these securities are based on quoted market prices where available.
Where quoted market prices are not available fair values are determined using various valuationtechniques.
|
14 |
Trade and other receivables |
Unaudited |
|
Unaudited |
|
Audited |
|
|
Trade and other receivables |
30 June 2011 US$'000 |
|
30 June 2010 US$'000 |
|
31 December 2010 US$'000 |
|
|
Amount receivable for the sale of services |
77,230 |
|
67,182 |
|
65,915 |
|
|
Allowance for doubtful debts |
(1,329) |
|
(1,597) |
|
(1,320) |
|
|
|
75,901 |
|
65,585 |
|
64,595 |
|
|
Taxation recoverable |
9,535 |
|
5,979 |
|
8,204 |
|
|
Prepayments and accrued income |
86,846 |
|
66,255 |
|
62,843 |
|
|
|
172,282 |
|
137,819 |
|
135,642 |
|
|
Total current |
158,397 |
|
137,819 |
|
129,242 |
|
|
Total non current |
13,885 |
|
- |
|
6,400 |
|
|
|
172,282 |
|
137,819 |
|
135,642 |
In determining recoverability of trade receivables, the Group considersany change in the credit quality of the trade receivable
from the date credit was initiallygranted up to the reportingdate. The concentration of credit risk is limiteddue to the customer base
being large and unrelatedexcept for one customer which accounts for 13% of Group revenue.The directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.
The directorsconsider that the carrying amount of trade and other receivables approximates their fair value.
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 financialstatements as cash equivalents.
The private investment funds are considered as cash equivalents as despite the certificates of deposit having maturities up to September2015, 96% of funds invested are available on call and the balance on one days notice. The intention of the Group is that these resourceswill be used in the tradingactivities of the Group.
These private investment funds comprise certificates of deposit and equivalent instruments with final maturitiesranging from July 2011 to September2015. The securities includedin the portfolio of the private investment funds have daily liquidity and are marked to market on a daily basis againstcurrent earnings. These private investment funds do not have significant financial obligations.
Any financialobligations are limitedto service fees to the asset management company employed to execute investmenttransactions, audit fees and other similar expenses.
Credit risk
The Group's principal financialassets are cash, trade and other receivables and trading investments.
The Group's credit risk is primarilyattributable to its bank balances,trade receivables and investments. Theamounts presented as receivables in the balance sheet are net of allowances for doubtful receivables as outlined above.
The credit risk on liquid funds is limitedbecause the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. The credit risk on investments held for trading is limitedbecause the counterparties with whom the Grouptransacts are regulatedinstitutions or banks with high credit ratings.
The company'sappointed investment manager, Hanseatic Asset Management LBG, evaluates the credit risk on trading investments prior to and during the investment period.
The Group has no significant concentration of credit risk except for one large customer, which makes up 13% of revenue. Ongoing credit evaluation is performedon the financial condition of accounts receivable.
|
15 |
Borrowings
Unsecured borrowings Bank overdrafts |
Interest
CDI +1.53% p.m. |
Unaudited 30 June 2011 US$'000
5,530 |
|
Unaudited 30 June 2010 US$'000
1,633 |
|
Audited 31 December 2010 US$'000
6,479 |
|
|
Secured borrowings Bank loans BNDES - $Real FINAME |
4.5% to 14.0% p.a |
34,961 |
|
9,004 |
|
26,789 |
|
|
BNDES - linked to the US$ FMM |
2.64% to 5% p.a |
212,310 |
|
177,997 |
|
198,192 |
|
|
BNDES - linked to the US$ |
5.36%p.a |
9,731 |
|
- |
|
- |
|
|
IFC - $Real |
14.09% p.a |
4,783 |
|
4,898 |
|
4,888 |
|
|
IFC - US$ |
3% to 8.49% p.a |
8,272 |
|
11,942 |
|
9,813 |
|
|
Banco do Brasil - linked to the US$ FMM |
3.1% p.a |
51,005 |
|
42,562 |
|
49,131 |
|
|
Eximbank - US$ |
2.43% p.a |
16,808 |
|
6,945 |
|
14,818 |
|
|
Finimp - US$ |
2.12% to 2.27% p.a |
3,600 |
|
4,048 |
|
4,051 |
|
|
Caterpillar -$Real |
|
590 |
|
- |
|
- |
|
|
|
|
342,060 |
|
257,396 |
|
307,682 |
|
|
Total borrowings |
|
347,590 |
|
259,029 |
|
314,161 |
|
|
The borrowings are repayable as follows : |
|
|
|
|
|
|
|
On demand or within one year |
|
|
|
|
31,616 |
|
17,779 |
|
25,565 |
|
In the second year |
|
|
|
|
34,437 |
|
21,676 |
|
26,194 |
|
In the third to fifth years inclusive |
|
|
|
|
91,733 |
|
61,027 |
|
82,187 |
|
After five years |
|
|
|
|
189,804 |
|
158,547 |
|
180,215 |
|
Total borrowings |
|
|
|
|
347,590 |
|
259,029 |
|
314,161 |
|
Amounts due for settlement within 12 months |
|
|
|
|
(31,616) |
|
(17,779) |
|
(25,565) |
|
Amounts due for settlement after 12 month |
|
|
|
|
315,974 |
|
241,250 |
|
288,596 |
|
Analysis of borrowings by currency : |
$Real |
|
$Real linked to US Dollars |
|
US Dollars |
|
Total |
|
|
|
30 June 2011 (unaudited) Bank overdrafts |
US$'000 5,530 |
|
US$'000 - |
|
US$'000 - |
|
US$'000 5,530 |
|
|
|
Bank loans |
40,334 |
|
273,046 |
|
28,680 |
|
342,060 |
|
|
|
Total |
45,864 |
|
273,046 |
|
28,680 |
|
347,590 |
|
|
|
30 June 2010 (unaudited) Bank overdrafts |
1,633 |
|
- |
|
- |
|
1,633 |
|
|
|
Bank loans |
13,902 |
|
220,559 |
|
22,935 |
|
257,396 |
|
|
|
Total |
15,535 |
|
220,559 |
|
22,935 |
|
259,029 |
|
|
|
31 December 2010 (audited) Bank overdrafts |
6,479 |
|
- |
|
- |
|
6,479 |
|
|
|
Bank loans |
31,677 |
|
247,323 |
|
28,682 |
|
307,682 |
|
|
|
Total |
38,156 |
|
247,323 |
|
28,682 |
|
314,161 |
|
|
The Group's main sources of financingare:
BNDES (Banco Nacional de Desenvolvimento Economicoe Social): As agent for the "FMM" (Fundo de Marinha Mercante) the BNDES finances
tug boat and platformsupply vessel construction and secure mortgageson the vessels financed. The majority of loans receivedfrom the BNDES are $Real denominated loans linked to the US Dollar are monetarily corrected by the movement in the US Dollar/$Real exchange rate and bear interest of between 2.64% and5.0% per annum. The amounts outstanding at 30 June 2011 are repayable over periods varying up to 21 years. The BNDES also finances equipmentfor logistic operations with $Real denominated loans.
Banco do Brasil as agent for the "FMM" (Fundo de Marinha Mercante) financestug boats and platform supply vessel construction and secures mortgages on the vessels financed. The loans were transferred along with the vessels they financed to the new joint venture,Wilson, Sons Ultratug Participacoes S.A. from our partner Magallanes Navegacao BrasileiraS.A. The amounts outstanding at 30 June 2011 are repayable over periods varying up to 17 years. The loans are $Real denominated loans linked to the US Dollar,are monetarily correctedby the movement in the US Dollar/$Real exchange rate and bear interest at 3.1% per annum.
IFC (International Finance Corporation); The IFC financesthe Group's two container terminals,Tecon Rio Grande and Tecon Salvador. The majorityof these loans are project finance to fund the expansionof the container terminal at Tecon Rio Grande and have no recourse to other companies in the Group.
US dollar denominated loans consist of variable rate and fixed rate loans. Variable rate loans bear interest at between six month Libor per annum plus 2.5% and sixmonth Libor plus 3.5%. US dollar denominated fixed rate loans bear interest of 8.49% per annum. Real denominated loans bear interestat 14.09% per annum. The amounts outstanding at 30 June 2011 are repayableover periods varying up to 6 years.
The Export-Import Bank of China, finances equipmentfor Tecon Rio Grande. The amounts outstanding at 30 June 2011 are repayable over periods up to 8 years. The US Dollar denominated loans are variablerate and bear interest of six month Libor plus 1.7%. There is also guarantee fee payable to Banco Itau of 2% a year.
At 30 June 2011, the Group had available US$420.6 million of undrawncommitted borrowings facilities. For each disbursement there is a set of conditions precedent that need to be fulfilled.
The loans from the Bndes are secured by a pledge over the tug boats and supply vessels financed.
Three of the Group's platform supply vessels have a guaranteeinvolving receivables from the client that has contracted the vessels. Funds receivedfrom the client pass through a special account before being immediately transferred to the Company's corporateaccount.
The loan with the Export-Import Bank of China is secured by a standby letter of credit issued for Tecon Rio Grande with the financing bank as beneficiary.
The subsidiaries Tecon Rio Grande and Tecon Salvador have specific restrictive clauses in their financing contractswith financial institutions related, basically, to the maintenance of liquidityratios. At 30 June 2011, the Group was in accordance with all clauses of these contracts.
|
16 |
Notes to the cash flow statement |
Unaudited |
|
Unaudited |
|
Audited |
|
|
Reconciliation from profit before tax to net cash from operating activities |
30 June 2011 US$'000 |
|
30 June 2010 US$'000 |
|
31 December 2010 US$'000 |
|
|
Profit before tax |
48,864 |
|
46,821 |
|
117,158 |
|
|
Profit realised on formation of joint venture |
- |
|
(20,407) |
|
(20,407) |
|
|
Investment revenues |
(12,251) |
|
(5,806) |
|
(17,982) |
|
|
Other gains and losses |
(688) |
|
4,407 |
|
(22,460) |
|
|
Finance costs |
6,865 |
|
5,715 |
|
11,611 |
|
|
Operating profit Adjustments for: Depreciation of property, plant and equipment |
42,790
26,248 |
|
30,730
19,779 |
|
67,920
42,435 |
|
|
Amortisation of intangible assets |
593 |
|
81 |
|
488 |
|
|
Share based payment expense |
853 |
|
1,369 |
|
16,545 |
|
|
Gain on disposal of property, plant and equipment |
(1,088) |
|
(33) |
|
(90) |
|
Increase / (decrease) in provisions |
1,557 |
|
1,342 |
|
2,458 |
|
Operating cash flows before movements in working capital |
70,953 |
|
53,268 |
|
129,756 |
|
Decrease / (increase) in inventories |
2,081 |
|
(1,614) |
|
25 |
|
Increase in receivables |
(25,122) |
|
(30,425) |
|
(28,487) |
|
Increase in payables |
6,523 |
|
27,789 |
|
9,117 |
|
(Increase) / decrease in other non-current assets |
(1,282) |
|
3,563 |
|
3,922 |
|
Cash generated by operations |
53,153 |
|
52,581 |
|
114,333 |
|
Income taxes paid |
(19,089) |
|
(11,011) |
|
(20,908) |
|
Interest paid |
(6,376) |
|
(3,981) |
|
(7,887) |
|
Net cash from operating activities |
27,688 |
|
37,589 |
|
85,538 |
17 Commitments
At 30 June 2011 the Group had entered into thirteen commitment agreementswith respect to thirteen separatetrading investments. These commitments relate to capital subscription agreements entered into by Ocean Wilsons Investments Limited.
The details of these commitments are as follows:
|
|
Expiry date |
Commitment currency '000 |
Unaudited Outstanding at 30 June 2011 US$'000 |
|
Unaudited Outstanding at 30 June 2010 US$'000 |
|
Audited Outstanding at 31 December 2010 US$'000 |
|
15 May 2011 |
3,000 |
150 |
|
150 |
|
150 |
|
|
30 June 2011 |
991 |
- |
|
- |
|
78 |
|
|
31 October 2012 |
3,000 |
271 |
|
271 |
|
271 |
|
|
31 October 2012 |
5,000 |
2,404 |
|
3,010 |
|
2,543 |
|
|
01 February 2013 |
5,000 |
2,850 |
|
3,550 |
|
3,250 |
|
|
13 March 2013 |
5,000 |
1,556 |
|
2,668 |
|
1,906 |
|
|
30 March 2013 |
5,000 |
1,033 |
|
1,308 |
|
1,363 |
|
|
21 May 2013 |
€3,350 |
2,076 |
|
3,989 |
|
2,597 |
|
|
30 June 2013 |
5,000 |
3,250 |
|
4,125 |
|
3,625 |
|
|
08 December 2013 |
5,000 |
2,845 |
|
3,976 |
|
4,127 |
|
|
31 December 2013 |
5,000 |
3,590 |
|
- |
|
3,813 |
|
|
31 March 2014 |
5,000 |
2,900 |
|
4,450 |
|
3,400 |
|
|
23 February 2015 |
5,000 |
3,665 |
|
3,636 |
|
3,454 |
|
|
Total |
|
26,590 |
|
31,133 |
|
30,577 |
|
|
18 |
Related party transactions |
|
|
|
|
|
|
Transactions between this company and its subsidiaries, which are relatedparties, have been eliminated on consolidation and
are not disclosed in this note. Transactions between the group and its associates, joint ventures and others investments are disclosedbelow.
Dividends received/ Amounts paid/ Revenue of services Cost of services
|
|
30 June 2011 US$'000 |
30 June 2010 US$'000 |
31 December 2010 US$'000 |
|
30 June 2011 US$'000 |
30 June 2010 US$'000 |
31 December 2010 US$'000 |
|
Joint ventures 1.Allink Transportes Internacionais Limitada |
18 |
377 |
1,308 |
|
(3) |
- |
(3) |
|
2. Consórcio de Rebocadores Barra de Coqueiros |
156 |
132 |
266 |
|
- |
- |
(26) |
|
3. Consórcio de Rebocadores Baía de São Marcos |
13 |
878 |
2,443 |
|
(7) |
- |
(20) |
|
4. Wilson Sons Ultratug and subsidiaries |
28,587 |
- |
1,623 |
|
(833) |
- |
(590) |
|
5. Wilson Sons Offshore |
- |
- |
17,573 |
|
- |
- |
(2,241) |
|
6. Magallanes Navegacao Brasileira Others 7.Hanseatic Asset Management |
-
- |
- - - |
17,751
- |
|
-
(1,336) |
-
(1,187) |
(1,792)
(2,492) |
|
8. Gouvea Vieira Advogados |
- |
- |
- |
|
(160) |
(17) |
(94) |
|
9. Jofran Services |
- |
- |
- |
|
(75) |
(75) |
(152) |
|
|
|
Amounts owed by related parties |
|
|
|
Amounts owed to related parties |
|
|
30 June |
30 June |
31 December |
|
30 June |
30 June |
31 December |
|
|
2011 |
2010 |
2010 |
|
2011 |
2010 |
2010 |
|
|
US$'000 |
US$'000 |
US$'000 |
|
US$'000 |
US$'000 |
US$'000 |
|
|
Joint ventures 1.Allink Transportes Internacionais Limitada |
3 |
15 |
287 |
|
- |
- |
- |
|
2. Consórcio de Rebocadores Barra de Coqueiros |
2 |
75 |
7 |
|
(63) |
- |
- |
|
3. Consórcio de Rebocadores Baía de São Marcos |
1,627 |
1,921 |
1,722 |
|
- |
(150) |
- |
|
4. Wilson Sons Ultratug and subsidiaries |
17,703 |
- |
8,915 |
|
(6,971) |
- |
- |
|
5. Wilson Sons Offshore |
- |
- |
49 |
|
- |
- |
(15,342) |
|
6. Magallanes Navegacao Brasileira |
- |
- |
- |
|
- |
- |
(14,020) |
|
Others 7.Hanseatic Asset Management |
- |
- |
- |
|
(224) |
(191) |
(439) |
8. Gouvea Vieira Advogados
9. Jofran Services
1-5.The transactions with the joint ventures are disclosed as a resultof proportionate amountsnot eliminated on consolidation.
6. Magallanes Navegacao Brasileira is our partnerin the offshore joint venture
7. Mr W H Salomonis Chairman of Hanseatic Asset Management. Fees were paid to Hanseatic asset management for acting as investment managers of the Groups investment portfolio and administration services.
8. Dr J.F. Gouvea Vieirais a managing partner in the law firm GouveaVieira Advogados. Fees were paid toGouvea Vieira Advogadosfor legal services.
9. Mr J F Gouvea Vieirais a Director of JofranServices. Directors fees and consultancy fees were paid to JofranServices.
19 Financial instruments
Capital risk management
The Group managesits capital to ensure that entities in the Group will be able to continue as a going concern. The capital structure of the Group consists of debt, which includes the borrowings disclosedin note 15, cash and cash equivalents and equity attributable to equity holders of the parent comprisingissued capital, reserves and retained earningsand the consolidated statement of changes in equity.
The Group borrowsto fund capital projects and looks to cash flow from these projects to meet repayments. Working capital is funded through cash generated by operating revenues.
Externally imposedcapital requirement
The Group is not subject to externally imposedcapital requirements.
Financial risk management objectives
The Group's CorporateTreasury function providesservices to the business, co-ordinates access to domesticand international financial markets and managesthe financial risks relatingto the operations of the Group through internal reports. These risks include market risk, (includingcurrency risk, interest rate risk and pricerisk) credit risk and liquidityrisk.
The Group may use derivative financialinstruments to hedge these risk exposures, with Board approval.
The Group does not enter into trade financialinstruments, including derivativefinancial instruments for speculative purposes.
Market risk
The Group's activities expose it primarilyto the financial risks of changes in foreign currencyexchange rates and interest rates.
Foreign currencyrisk management
The Group undertakes certain transactions denominated or linked to foreign currenciesand therefore exposuresto exchange rate fluctuations arise. The Group operates principally in Brazil with a substantial proportion of the Group's revenue,expenses, assets and liabilities denominated in the Real. Due to the cost of hedging the Real, the Group does not normallyhedge its net exposure to the Real as the Board does not considerit economically viable.
Interest rate risk management
The Group is exposedto interest rate risk as entities in the Group borrow funds at both fixed and floating interest rates.
The Group borrowsfrom the BNDES (Banco Nacional de Desenvolvimento Economico e Social) and Banco do Brasil to finance vessel construction. These loans are fixed interest rate loans linked to the US Dollar. Due to the favourable ratesoffered by the BNDES and Banco do Brasil, in the Group's opinion, there is minimal market interest rate risk.
The Group's strategy for managing interestrate risk is to maintaina balanced portfolioof fixed and floating interest rates in order
to balance both cost and volatility. The Group may use derivative instruments to reduce cash flow interest rate attributable to interest rate volatility. As at30 June 2011 the Companyhad no outstanding interest rate swap contracts.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financialloss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults.
The Group's sales policy is subordinated to the credit sales rules set by management, which seeks to mitigate any loss from customers'delinquency.
Trade receivables consist of a large number of customersexcept for one large customer,which makes up 13% of revenue. Ongoing credit evaluationis performed on the financial conditionof accounts receivable.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors. The Group managesliquidity risk by maintaining adequate reserves, banking facilities and reserve borrowingfacilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financialassets and liabilities.
Fair value of financialinstruments
The fair value of non-derivative financial assets traded on active liquid markets are determined with reference to quoted market prices. The carrying amounts of financial assets and financialliabilities recorded at amortised cost in the financial statements approximate their fair value.
This information is provided by RNS
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