Preliminary Results

Ocean Wilsons Holdings Ld 28 April 2006 Ocean Wilsons Holdings Limited Preliminary Announcement Chairman's Statement Introduction I am pleased to report that the Group's performance in 2005 was in line with our expectations delivering another good performance. Revenue increased in all the Group's core businesses although margins were adversely impacted by the appreciation of the Brazilian Real (R$). The Group maintained its position as the leading supplier of maritime services in Brazil. Results In 2005 Group revenue increased by 31% to US$285.2 million (2004: US$217.7 million) although operating profit decreased 6% at US$33.5 million (2004: US$35.8 million). Increased investment revenues to US$14.2 million (2004: US$10.4 million) were the main factor in profit before taxation improving by 3% to US$49.5 million (2004: US$48.2 million). Earnings per share improved 4.2 cents to 93.6 cents (2004: 89.4 cents). Brazil The Brazilian economy grew by around 2.3% in 2005, lower than expected at the beginning of the year. Brazil's external accounts have improved considerably in 2005: - Trade surplus reached US$44.8 billion; - Accumulated net foreign exchange reserves at US$61 billion; - Prepaid debt to IMF; - Retired remaining Brady Bonds; - Brazil risk premium had fallen to 311 basis points by year end and since dropped further; - Strength of Brazilian Real against US dollar Unfortunately the strength of Brazil's external position has not been matched by the internal accounts. Government expenditures increased especially with 'Bolsa Familia', minimum wage and other social programs. Domestic interest rates, after rising to 19.75% p.a., dropped by the year end and continued this trend during the first quarter of 2006 falling to 16.50% p.a.. However, further significant reductions will depend on important pending structural reforms, in areas such as social security, labour and tax which are regrettably unlikely to be approved by Congress in this electoral year. Exchange rates The Brazilian Real appreciated 12% against the US Dollar from R$2.66 at 1 January 2005 to R$2.34 at the year end. The appreciation of the Brazilian Real against the US Dollar generated a net exchange gain of US$5.4 million (2004: US$3.5 million) on the Group's Real$ denominated cash balances. Dividends In light of the Group's continuing strong performance, the Board is recommending that the final dividend remain at 18 cents per share (2004: 18.0 cents per share) to be paid on 16 June 2006 to shareholders on the register at the close of business on 12 May 2006, making a total dividend for the year of 20.0 cents per share (2004: 20.0 cents per share). The Group's dividends are determined in US Dollars. Shareholders receive dividends in Sterling determined by reference to the exchange rate applicable to the US Dollar on the dividend record date, except for those shareholders that elect to receive dividends in US Dollars. Shareholders electing to receive a dividend in US Dollars should write to the Company's UK transfer agent, Capita Registrars at the address set out at the end of this announcement, before the next dividend record date, 12 May 2006. The Board's dividend policy takes into consideration all aspects of the Group's financial performance and prospects, but especially profitability and free cash flow. Shareholders should also be aware that the future value of dividend payments in Sterling terms will depend on the prevailing Sterling/US Dollar exchange rate at the relevant dividend record date. Corporate social responsibility The Board has adopted the fundamental principles of corporate social responsibility. We are committed to understanding the needs and interests of all stakeholders we are involved with and are concerned for the community and environment. We continually strive to improve our social and environmental performance, with the objective of ensuring that our activities contribute to the sustainable development of the communities in which we operate. Taxes In 2005 the Group paid in excess of US$60 million (2004: US$55 million) in Brazilian income, payroll and sales taxes. Local employment At the end of 2005, the Group directly employed more than 3,000 people in Brazil and created numerous employment opportunities through its suppliers and sub-contractors. We continue to have an active and constructive relationship with the local and national trade unions in Brazil that represent our employees and negotiate wage agreements on their behalf. Best employment practice As part of our commitment to best employment practice, all employees and their dependents receive private medical cover at a cost of US$4.1 million (2004: US$3.0 million) to the Group. In addition, the Group provided US$2.2 million (2004: US$1.6 million) of food assistance and spent a further US$400,000 (2004: US$309,000) on education and professional development for employees. The Group will continue to invest in these areas. Charitable donations In line with our policy to support local charities the Group made charitable donations of US$163,000 (2004: US$93,000) during the year. The primary focus of the Group's charitable efforts continues to be projects helping homeless children and adolescents. The Group continued its support of Casa Jimmy and Pastoral do Menor in Rio and Casa da Crianca in Salvador. In addition to financial support, the Group encourages employees to participate in social initiatives of this nature. International Financial Reporting Standards The financial information contained in this report, including all comparatives, has been prepared in accordance with International Financial Reporting Standards ('IFRS'). Further details are given in the IFRS interim restatement available on the Company's website and released to the London and Bermuda stock exchanges. The Group published financial information in accordance with IFRS for the year ended 31 December 2004 on the 10 October 2005. The change to IFRS has had a significant impact on the Group's accounts and I encourage all shareholders to read the details contained in these news releases. Management and staff On behalf of your Board, I would like to thank our management and staff for their hard work and loyalty during the year. The Group's performance in a competitive market is a credit to our people who have delivered a first class service. We will continue to invest in their future through training and incentive programmes. Strategy In September 2005 the Board of Ocean Wilsons Holdings Limited announced that it had concluded the review of its strategic options in relation to the Company's Brazilian operations and had decided to continue to remain focused on its current operations and to invest in their future development. The acquisition of a further 33% equity interest in Tecon Rio Grande S.A. announced in August 2005 for R$55.5 million (approximately US$23.2 million) is consistent with the Board's strategy and strengthens the Company's position in the growing container terminal market in Brazil. In the 2004 Group accounts, Tecon Rio Grande was consolidated 100% with a 33% minority interest. The Board believes that the strength of our Brazilian business continues to present exciting opportunities for future growth and remains committed to creating long term value for shareholders. Outlook The Group continues to grow and establish strong positions in a range of markets. We will continue to invest in our core businesses and the Group remains well positioned to benefit from any further upturn in Brazilian trade. Civil works for the expansion of the Tecon Rio Grande container terminal will begin in the second quarter of 2006. This is later than originally stated in last year's annual report due to the acquisition of the minority interest in Tecon RG in August 2005. Two new Portainers are currently being assembled at the terminal and are forecast to begin operation in July 2006. The outlook for the oil and gas offshore business remains positive and the Group is actively pursuing further opportunities in this area through participation in new tenders as they arise. One of the challenges facing management is the need to maintain margins in face of a strengthening Brazilian currency. Management remains committed to reducing costs and improving tariffs where possible to ensure the continuing profitability of the Group. J. F. Gouvea Vieira Chairman OPERATING REVIEW Introduction As the leading supplier of maritime services in Brazil, the Group is the largest provider of Towage services, as well as being a significant Ship Agent, and operator of Ports and Logistics businesses. Towage, Shipyard and Offshore Operations Revenue in the Group's Towage, Shipyard and Offshore division rose to US$126.5 million in 2005 (2004: US$ 112.2 million), an increase of 13% which reflects consistent growth in both towage and offshore revenues. However, operating margins fell due to the appreciation of the Brazilian Real with segment operating profit falling from US$26.2 million in 2004 to US$24.2 million in 2005. Towage The towage business performed very well in 2005, with an increase of 14% in the number of vessels attended and a small decrease in the average dead-weight tonnage of vessels serviced. This dynamic resulted principally from a rise in the number of liner vessels calling at Brazilian ports combined with a reduction in soya bean exports. However, an increase in service costs, due to the appreciation of the Real against the US Dollar, resulted in lower margins compared to 2004. The Group's ocean towage operations and salvage assistance activities performed strongly and achieved a record number of ocean tows along the Brazilian coast as well as salvage work carried out in the ports of Paranagua and Sepetiba. Continuing the Group's fleet renewal program, the Group's shipyard in Guaruja delivered the 43 ton bollard pull tugs, Cetus and Haris, in May and July 2005 respectively. To improve operating efficiency and meet market demand, the Group's policy is to replace the fleet's smaller, older tugs with larger state of the art vessels. Following this strategy the majority of the Group's new tugs are between 40 to 50 ton bollard pull. The older vessels in the fleet are single screw, 15 to 20 ton bollard pull tugs. The average age of the fleet is 17 years. The Group currently operates over 70 tugs in 19 ports throughout Brazil. The Group's towage joint venture, Consorcio Baia de Sao Marcos, also delivered a strong performance during the year, increasing revenue by 15% and operating profit by 24% over 2004. The joint venture fleet rose from seven to eight tugs during the course of the year. Shipyard In addition to the Group's ongoing fleet maintenance activities, the shipyard was busy with the Group's fleet renewal program and the starting of a new PSV (Platform Supply Vessel). Third party work centred on completion of the conversion of the PSV's for Companhia Brasileira de Offshore (CBO) and Delba Maritima, work which started in 2004. In addition to the delivery of the tugs, Cetus and Haris, work commenced on two new 70 ton bollard pull tugs. Dragaport Our associate dredging company Dragaport had a poor year. Dredging work was carried out at the ports of Santos and Fortaleza and at the Ponta da Madeira Terminal (CVRD). However, contracts for dredging services in 2006 have already been negotiated and market conditions are showing some modest signs of improvement. Platform Supply Vessels Under time charter to Petrobras, the Group's two offshore vessels continued to perform well during 2005, with no off hire periods and excellent operational records. Operating profit and cash flow remain in line with expectations. The Group's strategy is to increase market share in this area of activity. A third vessel, that is also to be time chartered to Petrobras, is being built and the Group will examine the viability of participating in further tenders as they are announced. Ship Agency The division again exceeded expectations for the year, attending 5,902 ship calls, up 7 % over 2004. Revenues increased 44% to US$20.7 million. The partnership agency with CMA-CGM continued to expand its business within Brazil and the hub agency contract with Gulf Agency Company provided extra ship calls. The division's Centralised Service Centre was successfully implemented. As a result, productivity improved with higher volumes being handled by the same number of staff. Service quality improvements were also achieved as a result of a review of internal processes, resulting in an improvement in customer satisfaction. In 2006, the division intends to achieve Quality Assurance certification by Lloyds Register. Ports and Logistics Tecon Rio Grande The terminal moved 670,000 TEU's (Twenty foot Equivalent Units), an increase of 9% over 2004. The number of container vessels attended increased 16% to 1,131. Productivity at 44 moves per hour is in line with the prior year (2004: 46 moves per hour), only marginally affected by the terminal's current capacity constraints. To increase capacity and attend the increased demand for transhipment cargo, two Super Post Panamax Gantry Cranes and four Rubber Tired Gantries, will commence operation in the third quarter of 2006. Work on the planned expansion of the terminal involving construction of a new berth will begin in the second quarter of 2006. The terminal at Tecon Rio Grande moves a diversified range of cargoes, with the main emphasis on tobacco, frozen chicken, resin, shoes and furniture. Tecon Rio Grande services more than 20 shipping lines. Tecon Salvador Container volumes handled at Tecon Salvador reached 221,000 TEU's, an increase of 25% over 2004. The number of container vessels attended increased by 32%, reaching 607. This rate of growth resulted from increased volumes in the port and a rise in market share achieved by the terminal. Tecon Salvador now accounts for 100% of the containers moved through the port. The volumes achieved in 2005 were originally forecast for some ten years hence. The high volume of containers handled by Tecon Salvador in 2005 requires careful logistical planning. New equipment went into service at the beginning of 2006 so as to improve operational capacity and to mitigate limitations on yard capacity. Improvements to the depot area for empty containers will be completed in 2006, which will also help to release storage space in the terminal. Tecon Salvador principally handles exports of chemical and petrochemical products, metals and fruits. Logistics The Logistics division provides storage, distribution and transportation solutions. A relatively new area for the Group, Logistics achieved another year of substantial growth, with turnover increasing 100% over 2004. The division now undertakes the logistics operations of a number of large Brazilian companies and multinationals within Brazil including, Votorantim Pulp and Paper, Frangosul (frozen chicken), Embelleze (cosmetics), Merck, Monsanto and Petroflex. The growth achieved in 2005 resulted largely from increases in the operations of Monsanto and Petroflex, as well as road transportation and bonded warehousing in Eadi Santo Andre, located near Sao Paulo. As part of our strategy to develop this business, management focus is moving from revenue growth to improving margins and profits. WRC Operadores Portuarios Limitada (WRC) Our joint venture, WRC, operating in the port of Sao Francisco do Sul, Santa Catarina had another good year. Volumes handled by the joint venture in 2005 at 261,000 TEU's were in line with 2004 at 280,000 TEU's. On the 7th April 2006 the Group sold its interest in WRC for US$4.3 million. The Group is currently analysing other terminal operation and logistic opportunities in the state of Santa Catarina. Brasco Brasco operates onshore bases, and provides logistical support for the offshore oil and gas industry. Following a slow 2004, activity increased significantly in 2005 with Shell operating from the base. Prospects for 2006 remain limited as clients' drilling schedules maybe delayed by a shortage of oil rigs for operations. However the longer-term outlook is positive as fields move from exploration to the development phase. In March 2006 the Group acquired the remaining 60% share of Brasco from our partner, ASCO for US$1.2 million. In the same month the Group subsequently sold a 25% minority interest to Brasco management for US$0.5 million. Cezar Baiao Chief Executive Brazilian Operations FINANCIAL REVIEW Revenue Group revenue, as reported for the year, was US$285.2 million, up 31% on 2004 (US$217.7 million) with growth achieved in all business segments. Operating margins and profit Group operating margin for the year declined to 11.8% (2004: 16.4%). The fall in operating margins was principally due to the appreciation of the Brazilian Real against the US Dollar over the period, which reduces revenue and increases costs in Brazilian Real terms. Additionally Brazilian Real denominated operating costs continued to be driven higher by domestic inflation and increased personnel costs. As a result of the fall in operating margins, Group operating profit decreased compared with the prior year at US$33.5 million (2004: US$35.8 million), despite the increase in turnover. Investment revenues Investment revenue for the Group for the year was up US$3.8 million to US$14.2 million, (2004: US$10.4 million) principally due to increased investment revenues from insurance underwriting activities, US$2.2 million (2004: US$0.3 million) and exchange gains on cash and cash equivalents, US$5.4 million (2004: US$3.5 million). Other gains and losses Other gains of US$7.8 million (2004: US$8.5 million) arise from the Group's portfolio of trading investments. Unrealised gains in trading investments of US$10.7 million (2004: US$6.1 million) and profits on the disposal of trading investments of US$1.3 million (2004: US$0.5 million) were partially offset by exchange losses on trading investments of US$4.2 million (2004: US$1.8 million gain) resulting from the appreciation of the US Dollar against major currencies. Finance costs Finance costs for the Group for the year were US$6.0 million compared with US$6.5 million for 2004, due to increased exchange gains on foreign currency borrowings, US$ 1.2 million (2004: US$0.7 million). Exchange gains derive principally from US Dollar borrowings in Brazilian Real functional currency businesses. Interest on bank loans and overdrafts remained in line with prior year at US$5.5 million (2004: US$5.6 million). Profit before tax Group profit before tax for the year was US$49.5 million, US$1.3 million ahead of 2004. Taxation The tax charge for the year was US$14.9 million, US$ 1.0 million higher than last year reflecting the increased profit before tax. The underlying effective tax rate for the Group rose to 30% (2004: 29%). This is lower than the corporate tax rate prevailing in Brazil of 34%. The effective tax rate reflects the benefit of income arising in subsidiaries operating in jurisdictions with lower tax rates. Earnings per share Basic earnings per share for the year were 93.6 cents, compared with 89.4 cents in 2004. Cash flow Net cash inflow from operating activities for 2005 was US$ 24.9 million, US$4.5 million below prior year. The difference is principally lower operating profit and working capital movements. Investing activities for 2005 resulted in an outflow of US$46.8 million, which was US$ 29.6 million higher than the corresponding outflow last year. This was due to the acquisition of the minority interest in Tecon Rio Grande US$ 23.2 million, and higher spending on property plant and equipment of US$ 36.2 million, up from US$20.2 million last year. Capital expenditure was invested mainly in vessel construction and container terminal equipment. At 31 December 2005, the Group had US$ 50.9 million in cash and cash equivalents, (2004: US$70.9 million). Balance sheet At 31 December 2005, the Group's net assets amounted to US$171.4 million (2004: US$147.4 million). This increase is attributable to the combination of strong underlying profits and the appreciation of the Brazilian Real. This translates into net assets per share of 485 cents per share (31 December 2004: 417 cents). Net assets located in Brazil amounted to 303 cents per share (31 December 2004: 261 cents) and net assets outside Brazil to 182 cents per share (31 December 2004: 156 cents). Debt The Group has net debt (defined as bank loans, overdrafts and obligations under finance leases less cash and cash equivalents) of US$ 58.5 million (2004: US$ 34.9 million). During the year additional loans of US$ 18.3 million were drawn down principally to finance vessel construction and equipment for Tecon Rio Grande. In 2005 the Group made capital repayments on existing loans in accordance with repayment schedules of US$11.4 million (2004: US$11.0 million). US$103.1 million of Group debt is held in US Dollar term loans or linked to the US Dollar with long maturity profiles for debt repayments. The Group is currently able to borrow at competitive rates and therefore considers this to be the most effective means of raising finance. The weighted average cost of debt is 5.5%. Risk management Treasury The Group has a centralised Treasury operation in Brazil, which manages the investment of surplus funds and borrowings. Clear guidelines have been established relating to cash management authority levels and investment limits. The guidelines prohibit taking speculative financial instrument positions and regular financial management reports are supplied to senior management. The main financial risks facing the Group relate to funding, interest rates, currency fluctuations and movements in the market price of securities. Funding risk The Group conducts business principally in Brazil and holds a portfolio of international investments outside Brazil. The Group borrows to fund capital projects and looks to cash flow from these projects to meet repayments. Working capital is funded through cash generated by operating revenues. There is limited long term commercial funding available in Brazil except from the Banco Nacional de Desenvolvimento Economico e Social (BNDES). All long term funding is obtained by our Brazilian subsidiaries from the BNDES or the International Finance Corporation (IFC, part of the World Bank) except for specific equipment supplier financing when available at favourable terms. At the year end, the Group had US$104.9 million in borrowings repayable over periods of up to 16 years. The Group also held approximately US$43.0 million in Brazilian Real denominated cash deposits in Brazil and the equivalent of US$7.9 million in Sterling and US Dollar denominated deposits outside Brazil. The Group maintains large cash balances to fund investment opportunities in Brazil and to manage short term fluctuations in cash flow. Interest rate risk During 2005 the Group did not use interest rate swaps, options or forward rate agreements to manage interest rate exposure on its debt positions. However, the Group actively reviews risk profiles and considers undertaking interest rate swaps, if necessary, subject to Board approval. The Group has three main types of borrowings, Brazilian Real denominated, Brazilian Real denominated linked to the US Dollar and US Dollar borrowings. Currency risk The Group operates principally in Brazil with a substantial proportion of the Group's revenue, expenses and assets denominated in Brazilian Real. Due to the prohibitive cost of hedging the Brazilian Real, the Group does not normally hedge its net exposure to the Brazilian Real as the Board considers it uneconomic. The Group's US Dollar debt has defined repayments during the life of the loans. The Group hedges these repayments for periods of up to one year by investing surplus funds in US Dollar linked Brazilian Government bonds or by purchasing foreign exchange options. The Group has significant long-term borrowings in US Dollars and in Brazilian Real denominated loans linked to the US Dollar. These are used to finance Brazilian Real denominated capital projects. This exposes the Group to a potential currency mismatch of costs and revenues. The Group accepts this risk, as there are few sources of long term financing denominated in Brazilian Real available. Cash and investments held outside Brazil are principally in US Dollar, Sterling and Euro denominated assets. Market price risk The Group invests in internationally listed securities or funds principally for the long-term. The Group's exposure to market price risk arises mainly from potential loss the Group may suffer through holding market positions due to price movements or currency fluctuations. Investment portfolio Hanseatic Asset Management LBG that manages the Group's investment portfolio reports as follows: General After a flat first half, 2005 turned out to be another good year for investors, the third positive year in a row. Returns on equities comfortably exceeded those on cash and bonds. The increase in share values occurred despite a background that included New Orleans and the US Gulf States being battered by hurricanes, eight increases in the Fed Funds rate, a further increase of 40% in the cost of oil and alarming pronouncements from the new leadership in Iran. The MSCI World Index appreciated by 9.5% in US Dollar terms with the largest gains coming from Japan and the emerging markets. The increases in the index occurred despite a stronger dollar, which rose by approximately 15% against the Yen and Euro and 12% against Sterling. Even with a stronger dollar, non-US markets outperformed. It was another good year for commodities. In addition to spiking energy prices, copper increased by nearly 40% and gold breached the US$500 per ounce level. The key economic themes were the revival in the Japanese and European economies. The impact of continuing high level of demand from China for commodities and capital goods and the ongoing imbalances in the US economy, both of which have been features of the investment landscape for some time, continued to dominate much macro economic analysis. Apart from a setback at the time of the Gulf of Mexico hurricanes, the markets remained well bid and volatility fell to very low levels. Performance The portfolio benefited from this favourable market environment rising by 12.3%, which exceeded the return on the MSCl World Index of 9.5%. In the five years that Hanseatic Asset Management has managed this portfolio there have been two years of sharp market declines followed by three years of rising markets. Over this period the portfolio has returned 35.2%, significantly ahead of the MSCI Index increase of 14.3% in the same period. The overweight position in Emerging Markets and good performance in Japan were the two major sources of added value relative to the index. The best performing investments were the Merrill Lynch World Mining Trust (+47.8%), JO Hambro Japan (+37.6%) and SR Emerging (+31.2%). The largest drag on performance came from the European portfolio where returns were undermined by weakness in the Euro combined with sub par returns from Hedge Funds. Portfolio Activity The major themes behind portfolio activity included increasing the Japanese weighting and exposure to energy and mining. The major reduction in exposure occurred in Lloyds Underwriters where long term profits were realised. The portfolio however still has a significant exposure to the insurance market via its unquoted holding in Cathedral Capital. New investments in the portfolio were as follows: ACP Capital is a London listed company which manages alternative investments and funds in niche product sectors, such as asset backed mezzanine financing and real estate. Ark Therapeutics, is also London listed and develops medicinal gene-based and biological therapies and diagnostic products. Herald Ventures is a limited partnership investing primarily in early stage unquoted companies operating in the information technology, media and communications sectors in the UK. Investec Energy is a fund that invests internationally in companies involved in the exploration, production and distribution of oil, gas and other energy sources. Lansdowne Macro is an absolute return fund investing in global market and sector strategies. North American Banks Fund is an AIM listed company that invests in banking start ups in the US operating in niche regional markets. SR Phoenicia (Carthaginian) is a hedge fund that invests in global equities outside North America. Market Outlook Much of the current backdrop to markets remains positive. Growth in the global economy is more broadly based following economic revival in Europe and Japan as well as ongoing momentum in China. The risks therefore posed by a mid-cycle correction in the US that may follow a cooling off period in house prices and some consumer retrenchment, are unlikely to be as significant as would have been the case earlier in the decade. Despite higher interest rates in the US, the global monetary environment remains stimulative. As long as inflation remains low, the sort of monetary squeeze that would derail stock and bond markets looks highly unlikely. Despite the severe price shocks in energy, overall inflation has remained subdued. So far the impact of new technologies such as the internet together with the massive transfer of production from the developed world to lower cost bases in the developing world has held inflation in check. The combination of reasonable growth, ample liquidity and low inflation remains supportive for risk assets. Furthermore valuations for most equity markets, including the US after a protracted period of underperformance, remain attractive in the context of short and long term interest rates. Share prices have tracked corporate earnings. Corporate profitability remains robust, as do their balance sheets. Prospective price earnings multiples for most markets are almost the same as they were three years ago. Against this positive background there are several concerns for investors. Firstly, the current rally in equity markets has been running for three years and certainly in a historical context can be said to be rather 'long in the tooth.' With the MSCI World Equity Index having almost doubled since March 2003 investors have meaningful gains to protect, should fear once again replace greed. Secondly, the notion that a slowdown in the US would be modest, in terms of scale and be offset in any case by higher economic activity globally, may be too sanguine. There is the risk that the lagged effect of higher interest rates and higher energy costs and utility bills may bite harder than expected. The US consumer has been the principal source of end demand for the world's economy for an extended period and spending habits particularly in Asia would have to adjust meaningfully to offset a period of prolonged hibernation. Potential disruption to the supply of energy and further price hikes also pose a significant threat to the outlook. It was turmoil in Iran following the overthrow of the Shah in the late 1970s that led to a massive leap in oil prices which brought about recession and severe bear markets. The current rhetoric coming from Iran about Israel and its nuclear ambitions is clearly a major geopolitical concern. Any disruption in the supply of oil from Iran could tip the global oil market into chaos. In addition to these tangible concerns there is a general unease among some more bearish commentators that there is a 'day of reckoning' to come and that the natural order of things has been tampered with due to the Federal Reserve's massive monetary stimulus and refusal to countenance a recession. As Schumpeter observed 'any revival which is merely due to artificial stimulus leaves part of the work of depressions undone and adds, to an undigested remnant of maladjustments, new maladjustments of its own.' The portfolio remains significantly exposed to the emerging markets and Japan. The attractive trade off in emerging markets between valuation and growth prospects has been highlighted in these reports before and remains in place. Although the asset class has recently broken out of its former trading range, it has done so in response to underlying earnings growth. Valuations have barely moved and remain very attractive in an historical context. Prospects for a recovery in domestic Chinese shares, lower interest rates in Brazil, strong commodity markets generally and undervalued currencies in Asia are all potentially bullish drivers for these asset classes in 2006. Japan remains attractive despite the gains last year as companies there are highly leveraged to nominal sales growth. Earnings prospects are encouraging for 2006 and domestic investors remain underweight with their home market implying a further source of demand. On balance the outlook appears positive but the difference may be more marginal implying lower levels of gains than last year, although we do expect market volatility to increase. Insurance Our underwriting subsidiary, Ascension Underwriting has now completed five years of active underwriting in the Lloyd's Insurance Market. In October 2005 Ascension Underwriting disposed of all its investments in Lloyds underwriting syndicates through the annual Lloyds auctions and will not be underwriting insurance in 2006, although part of the previous underwriting business remains on risk. The sale of our underwriting investments is consistent with the Board's strategy to generate additional income using the non-Brazilian assets as collateral for insurance underwriting when the Board feels that market conditions are favourable. The Group may return to underwriting if market conditions improve. Investment revenue from underwriting activities in 2005 was US$2.2 million against US$0.3 million in 2004. Prior to 2005 the traditional accounting for Lloyds insurance market was three years in arrears. In 2005 the Lloyds insurance market moved to annual accounting and the Group's 2005 income statement reflects this change in accounting approach. Consequently the Group's 2005 income statement includes underwriting profits for 2002, 2003, 2004 and a forecast loss for 2005. Results for 2003, 2004 and 2005 reflect best estimates and consequently may be subject to change in the future. As forecast last year, the 2003 Year of Account has generated strong profits. The 2004 Year of Account will be modestly profitable, notwithstanding the plethora of natural disasters that occurred in that particular year. The last year of underwriting, the 2005 Year of Account, started promisingly but in the latter part of the year was hit by three widely documented storms (in particular Hurricane Katrina which devastated New Orleans) making landfall on the US Gulf Coast. Keith Middleton Group Finance Director Ocean Wilsons Holdings Limited Consolidated income statement At a board meeting held on 28 April 2006 the following announcement of the unaudited results of the Company and its subsidiary companies for the year ended 31 December 2005 were approved by the Directors. Unaudited Audited year to 31 year to 31 December 2005 December 2004 US$'000 US$'000 Notes Revenue 285,227 217,713 Raw materials and consumables used (50,398) (27,027) Employee benefits expense (71,719) (56,501) ------- -------- Depreciation and amortisation (13,959) (11,523) expense Other operating expenses (116,207) (89,056) Profit on disposal of property, 565 1,635 plant and equipment Share of profit of associate 39 515 ------- -------- Operating profit 33,548 35,756 Investment revenues 14,212 10,394 Other gains and losses 7,764 8,537 Finance costs (6,002) (6,499) ------- -------- Profit before tax 49,522 48,188 Income tax expense 3 (14,865) (13,926) ------- -------- Profit for the year 34,657 34,262 ------- -------- Attributable to: Equity holders of parent 33,086 31,599 Minority interests 1,571 2,663 ------- -------- 34,657 34,262 ------- -------- Earnings per share Basic and diluted 93.6c 89.4c Ocean Wilsons Holdings Limited Consolidated balance sheet as at 31 December 2005 Unaudited Audited 31 December 31 December 2005 2004 US$'000 US$'000 Non current assets Goodwill 13,132 - Other intangible assets 2,288 2,314 Property, plant and equipment 147,651 123,829 Deferred tax assets 7,462 9,454 Interest in associate 365 568 Available for sale investments 4,821 4,272 Other non-current assets 5,657 3,465 ----------- ---------- 181,376 143,902 ----------- ---------- Current assets Inventories 6,669 5,031 Trading investments 64,563 57,938 Trade and other receivables 45,295 37,977 Cash and cash equivalents 50,881 70,915 ----------- ---------- 167,408 171,861 ----------- ---------- Total assets 348,784 315,763 ----------- ---------- Current liabilities Trade and other payables (54,266) (48,375) Current tax liabilities (971) (860) Obligations under finance leases (3,893) (3,034) Bank overdrafts and loans (16,431) (13,502) ----------- ---------- (75,561) (65,771) ----------- ---------- Net current assets 91,847 106,090 ----------- ---------- Non-current liabilities Bank loans (88,515) (86,171) Deferred tax liabilities (8,455) (10,621) Provisions (4,317) (2,641) Obligations under finance leases (566) (3,132) ----------- ---------- (101,853) (102,565) ----------- ---------- Total liabilities (177,414) (168,336) ----------- ---------- Net assets 171,370 147,427 ----------- ---------- Capital and reserves Share capital 11,390 11,390 Retained earnings 126,331 101,137 Capital reserves 23,942 23,122 Investment revaluation reserve 1,856 1,353 Translation reserve 6,538 1,406 ----------- ---------- Equity attributable to equity holders 170,057 138,408 of the parent Minority interests 1,313 9,019 ----------- ---------- Total equity 171,370 147,427 ----------- ---------- OCEAN WILSONS HOLDINGS LIMITED Consolidated statement of changes in equity As at 31 December 2005 Attributable Investment to equity Share Retained Capital revaluation Translation holders of Minority Capital earnings reserves reserve reserve the parent interests US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 --------- --------- --------- --------- --------- --------- --------- --------- Balance at 1 January 11,390 76,360 22,665 1,353 - 111,768 6,306 118,074 2004 Transfer to capital reserves - (457) 457 - - - - - Currency translation adjustment - - - - 1,406 1,406 50 1,456 Total recognised income for the - 31,599 - - - 31,599 2,663 34,262 period Dividends - (6,365) - - - (6,365) - (6,365) ------ ------- ------- ------- ------- ------- ------- ------ Balance at 1 January 11,390 101,137 23,122 1,353 1,406 138,408 9,019 147,427 2005 (Audited) Transfer to capital reserves - (820) 820 - - - - - Gains on available for sale - - - 503 - 503 - 503 investment Currency translation adjustment - - - - 5,132 5,132 - 5,132 Total recognised income for the - 33,086 - - - 33,086 1,571 34,657 period Dividends - (7,072) - - - (7,072) - (7,072) Acquisition of minority - - - - - - (9,277) (9,277) interest ------ ------- ------- ------- ------- ------- ------- ------ Balance at 31 December 11,390 126,331 23,942 1,856 6,538 170,057 1,313 171,370 2005 ------ ------- ------- ------- ------- ------- ------- ------ (Unaudited) Ocean Wilsons Holdings Limited Consolidated cash flow statement for the year ended 31 December 2005 Unaudited Audited Year to Year to 31 December 31 December 2005 2004 US$'000 US$'000 Net cash inflow from operating activities 24,871 29,344 Investing activities Interest received 5,997 5,952 Dividends received from associate 323 - Dividends received from trading investments 642 597 Proceeds on disposal of trading investments 12,843 9,171 Income from underwriting activities 1,530 324 Proceeds on disposal of property, plant and equipment 3,077 3,873 Purchase of property, plant and equipment (36,245) (20,190) Acquisition of investment in an associate - (17) Acquisition of minority interest in subsidiary (23,222) - Purchase of trading investments (11,704) (15,669) Acquisition of subsidiary - (1,174) --------- -------- Net cash used in investing activities (46,759) (17,133) --------- -------- Financing activities Dividends paid (7,072) (6,365) Repayment of borrowings (11,389) (11,024) Repayment of obligations under finance leases (2,932) (1,097) New bank loans 18,295 9,413 (Decrease)/increase in bank overdrafts (409) 289 --------- -------- Net cash used in from financing activities (3,507) (8,784) --------- -------- Net (decrease)/increase in cash and cash equivalents (25,395) 3,427 Cash and cash equivalents at beginning of year 70,915 61,734 Effect of foreign exchange rate changes 5,361 5,754 --------- -------- Cash and cash equivalents at end of year 50,881 70,915 --------- -------- Ocean Wilsons Holdings Limited Preliminary Announcement Notes to the Preliminary Accounts 1. Basis of Accounting The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) for the first time. The financial statements have also been prepared in accordance with IFRSs adopted for use in the European Union and also IFRSs adopted for use by the International Accounting Standards Board ('IASB'). The financial statements have been prepared on the historical cost basis, except for the revaluation of certain properties and financial instruments. The accounting policies applied are consistent with those set out in the Group's IFRS restatement published on 10 October 2005. 2. Basis of Preparation The financial information set out in this announcement does not constitute the Group's statutory financial statements for the years ended 31 December 2005 or 2004. The information for the comparative period has been restated from that which was reported in the Group's statutory financial statements for that period. The Group's statutory financial statements for the year ended 31 December 2005 will be finalised on the basis of the financial information presented by the directors in the preliminary announcement. The audit report on the full financial statements has yet to be signed. 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. The Company expects to publish full financial statements that comply with IFRSs in May 2006. 3. Taxation Unaudited Audited year to 31 year to 31 December 2005 December 2004 US$ '000 US$ '000 UK tax 380 - Overseas tax 14,485 13,926 ---------- ----------- 14,865 13,926 ---------- ----------- 4. Dividends The proposed final dividend of 18.0 cents per share will be paid on the 16 June 2006, to shareholders on the register at close of business on 12 May 2006 if approved by shareholders at the annual general meeting to be held on 16 June 2006. 5. Other information Additional copies of this announcement can be obtained from the Company's registered office, Clarendon House, Church Street, Hamilton, Bermuda or from the Company's UK transfer agent, Capita Registrars Group Plc, The Registry 34 Beckenham Road, Beckenham, Kent BR3 4TU. Address for dividend currency election Ocean Wilsons Dividend election Capita Registrars The Registry 34 Beckenham Road Beckenham Kent, BR3 4TU This information is provided by RNS The company news service from the London Stock Exchange

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