2023 Interim Statement
About Ocean Wilsons Holdings Limited
Ocean Wilsons Holdings Limited (“Ocean Wilsons” or the “Company”) is a Bermuda investment holding company which, through its subsidiaries, holds a portfolio of international investments and operates a maritime services company in Brazil. The Company is listed on both the London Stock Exchange and the Bermuda Stock Exchange.
Principal Activities
The Company’s principal activities are the management of a diverse global investment portfolio and the provision of maritime and logistics services in Brazil.
Ocean Wilsons has two operating subsidiaries: Ocean Wilsons (Investments) Limited (“OWIL”) and Wilson Sons S.A. (“Wilson Sons”) (together with the Company and their subsidiaries, the “Group”).
The Company owns 57% of Wilson Sons which is fully consolidated in the financial statements with a 43% non-controlling interest. Wilson Sons is one of the largest providers of maritime services in Brazil with activities including towage, container terminals, offshore oil and gas support services, small vessel construction, logistics and ship agency.
Objective
The Company’s objective is to focus on long-term value creation through both the investment portfolio and the investment in Wilson Sons. This longer-term view directs an OWIL investment strategy of a balanced thematic portfolio of funds leveraging our long-standing investment market relationships and through detailed insights and analysis. The Wilson Sons’ strategy focuses on providing best in class or innovative solutions in a rapidly growing maritime logistics market.
Data Highlights
| KEY OPERATING DATA (in US$ millions) |
| 6 months ended30 June 2023 | 6 months ended30 June 2022 | Change | |
| Revenue | 229.7 | 211.0 | +18.7 |
| Operating profit | 54.7 | 54.7 | – |
| Investment portfolio net return | 11.2 | (50.5) | +61.7 |
| Profit/(loss) after tax | 47.9 | (20.4) | +68.3 |
| Net cash inflow from operating activities | 44.3 | 24.7 | +19.6 |
| KEY FINANCIAL POSITION DATA (in US$ millions) |
| At 30 June 2023 | At 31 December 2022 | Change | |
| Investment portfolio assets | 299.6 | 293.8 | +5.8 |
| Net assets | 773.9 | 754.1 | +19.8 |
| Net debt | 525.9 | 442.3 | +83.6 |
| SHARE DATA |
| 6 months ended30 June 2023 | 6 months ended30 June 2022 | Change | |
| Proposed/Actual dividend per share (USD) | 70 cents | 70 cents | – |
| Earnings per share (USD) | 86.2 cents | (98.0) cents | +184.2 cents |
| At 30 June 2023 | At 31 December 2022 | Change | |
| Share price discount to net asset value | 56.55% | 50.5% | +6.05% |
| Implied net asset value per share* (GBP) | 22.10 | 18.78 | +3.32 |
| Share price (GBP) | 9.60 | 9.30 | +0.30 |
*net asset value per share of Ocean Wilsons based on the market value of each operating subsidiary
Chair’s Statement
Our financial result for the first half of 2023 has improved substantially from the loss for the same period last year. This result is a clear affirmation of both the robust business model at Wilson Sons which is continuing to go from strength-to-strength post Covid, and the longer-term balanced wealth creation strategy of our investment portfolio.
Our financial assets portfolio delivered a $12.7 million contribution to profit for the period, representing a gross overall return of 4.5% and returning to a positive performance after the challenging prior year comparative period which reported a loss of $48.9 million. The diversified nature of the portfolio means that when equity markets sharply rise, as they have done this period, it is unlikely our performance will keep up but, similarly, when markets fall our portfolio declines will be less correlated. During the period our core regional funds have been the main driver of returns, while in 2022 the portfolio’s defensive and private equity holdings were instrumental in mitigating the decline of global markets. We strongly believe that this is key to delivering on our strategy of long-term value creation and leads to the best outcome for shareholders.
Our operating profit of US$54.7 million for the period is almost entirely due to the performance of Wilson Sons and is identical to the same metric in the prior year period. The result, however, masks some offsetting trends where we saw revenue growth across the major business lines of towage and container terminals and, most notably, the offshore support bases which delivered an operating profit for the first time. The overall 9% growth in revenues was offset by higher operating costs, due almost entirely to the wage and raw materials cost inflation continuing to bite across the world in most sectors. It was very pleasing however to see that, even with these inflationary costs, key operating margins and profits were maintained. We believe this demonstrates both the financial resilience of Wilson Sons, and the success of our strategy of driving revenue growth, continuing to find operating efficiencies and maintaining our focus on innovation and sustainability. As well as our own operating performance, our results are beginning to reflect the increasing stability in Brazil demonstrated by both the relatively low level of inflation compared to the more developed markets in the US and Europe, and the appreciation of the BRL versus the USD.
The Board continues to recognise that there are divergent views among our shareholders regarding our non-correlated asset holdings. We announced on 12 June 2023 that the Board has instigated a strategic review of the Company’s investment in Wilson Sons. This review is intended to provide a platform for us to optimise our asset mix, enhance returns, and drive growth in the longer term. We will communicate the findings of this review once completed and we appreciate your patience during this period.
Our healthy financial results for this half-year illustrate our solid business model and our capacity to deliver returns. We remain focused on delivering strong performance from the whole business in the belief that the market will eventually recognise the attractiveness of our investment proposition and the level of dividends we are able to consistently deliver.
Investment Manager’s Report
Portfolio Review
The investment portfolio returned 4.5% over the first six months of 2023. With equity markets performing strongly so far this year, many of the portfolio’s core regional exposures have performed well with this investment silo gaining 9.9%. The thematic exposures saw lower returns of 1.9% and the private equity segment of the portfolio gained 1.3% over the last six months. Private markets normally lag behind the public markets and some of our newer private equity commitments have seen their valuations increase notably.
Market Backdrop
The first half of 2023 was strong for global stock markets with the MSCI ACWI + FM Index gaining 13.9%. Most developed markets performed strongly with the US and Eurozone leading the way as the biggest technology companies saw increased investor interest in artificial intelligence boost their share prices in the US and some large semiconductor companies seeing increases in their share prices driving performance in the Eurozone. This came against a backdrop of moderating inflation in the US and signs that the economy may be more resilient than previously thought. Emerging markets lagged, mainly due to China’s COVID recovery being weaker than expected. Government bond yields slightly declined since year end in most markets with the Global Treasury Index up 0.6%. All major central banks continued to raise interest rates but many started to slow the pace.
Corporate bonds gained as recession fears eased with high yield bonds outperforming their investment grade peers. Commodities declined 7.8% driven by a fall in demand for both crude oil and gas with industrial metals also performing poorly. Gold, however, was up 5.2%, driven mainly by uncertainty in the banking sector early in the year.
Outlook
We continue to execute our strategy of diversification and balance at both the country, asset class and style level. Specifically, bonds have increasingly returned to being a viable asset class and the approach whereby “there is no alternative” to equities is no longer the case. Similarly at the country level, countries other than the US are increasingly attractive as they are both cheaper in valuation and have improving investment stories in many instances. Stylistically, value investing is again becoming attractive having suffered years of underperformance as a low duration asset class. Hence whilst this new backdrop might generate returns that are somewhat lower than those generated by equity markets over the past ten years, we still view them as being attractive.
Cumulative Portfolio Returns
| YTD | 2022 | 3 Yearsp.a. | 5 Yearsp.a. | |
| Gross return | 4.5% | -13.8% | 7.2% | 4.9% |
| Net return* | 3.9% | -14.7% | 5.9% | 3.7% |
| Performance Benchmark** | 4.2% | 9.5% | 8.8% | 6.9% |
| MSCI ACWI + FM NR US$ | 13.9% | -18.4% | 11.0% | 8.1% |
| Bloomberg Global Treasury TR US$ (Unhedged) | 0.6% | -17.5% | -6.3% | -2.1% |
| MSCI Emerging Markets NR US$ | 4.9% | -20.1% | 2.3% | 0.9% |
*Net of management fees and performance fees. No performance fees were earned in 2023 and 2022.
** The OWIL Performance Benchmark is an absolute benchmark of US CPI Urban Consumers NSA +3% p.a.
Investment Portfolio at 30 June 2023
| Market Value US$000 | % of NAV | Primary Focus | |
| Findlay Park American Fund | 27,754 | 9.3 | US Equities – Long Only |
| BlackRock Strategic Equity Hedge Fund | 14,299 | 4.8 | Europe Equities – Hedge |
| Select Equity Offshore, Ltd | 11,270 | 3.8 | US Equities – Long Only |
| BA Beutel Goodman US Value Fund | 9,075 | 3.0 | US Equities – Long Only |
| NG Capital Partners II, LP | 7,272 | 2.4 | Private Assets – Latin America |
| iShares Core MSCI Europe UCITS ETF | 6,493 | 2.2 | Europe Equities – Long Only |
| Schroder ISF Global Recovery | 6,204 | 2.1 | Global Equities – Long Only |
| Pershing Square Holdings Ltd | 6,152 | 2.0 | US Equities – Long Only |
| Schroder ISF Asian Total Return Fund | 6,106 | 2.0 | Asia ex-Japan Equities – Long Only |
| Pangaea II, LP | 6,085 | 2.0 | Private Assets – GEM |
| Top 10 Holdings | 100,710 | 33.6 | |
| Stepstone Global Partners VI, LP | 5,709 | 1.9 | Private Assets – US Venture Capital |
| Polar Capital Global Insurance Fund | 5,394 | 1.8 | Financials Equities – Long Only |
| Hudson Bay International Fund Ltd | 5,385 | 1.8 | Market Neutral – Multi-Strategy |
| NTAsian Discovery Fund | 5,380 | 1.8 | Asia ex-Japan Equities – Long Only |
| Egerton Long – Short Fund Limited | 5,331 | 1.8 | Europe/US Equities – Hedge |
| Armistice Capital Offshore Fund Ltd | 5,250 | 1.7 | US Equities – Hedge |
| Silver Lake Partners IV, LP | 5,059 | 1.7 | Private Assets – Global Technology |
| Navegar I, LP | 5,046 | 1.7 | Private Assets – Asia |
| iShares Core S&P 500 UCITS ETF | 4,863 | 1.6 | US Equities – Long Only |
| Indus Japan Long Only Fund | 4,729 | 1.6 | Japan Equities – Long Only |
| Top 20 Holdings | 152,856 | 51.0 | |
| KKR Americas XII, LP | 4,609 | 1.5 | Private Assets – North America |
| GAM Star Fund PLC – Disruptive Growth | 4,187 | 1.4 | Technology Equities – Long Only |
| TA Associates XIII-A, LP | 4,141 | 1.4 | Private Assets – Global Growth |
| Baring Asia Private Equity Fund VII, LP | 4,018 | 1.3 | Private Assets – Asia |
| Global Event Partners Ltd | 3,691 | 1.2 | Market Neutral – Event-Driven |
| Goodhart Partners: Hanjo Fund | 3,559 | 1.2 | Japan Equities – Long Only |
| Reverence Capital Partners Opportunities Fund II | 3,502 | 1.2 | Private Assets – Financials |
| Schroder GAIA BlueTrend | 3,477 | 1.2 | Market Neutral – Multi-Strategy |
| GAM Systematic Core Macro (Cayman) Fund | 3,440 | 1.2 | Market Neutral – Multi-Strategy |
| Silver Lake Partners V, LP | 3,420 | 1.1 | Private Assets – Global Technology |
| Top 30 Holdings | 190,900 | 63.7 | |
| Remaining Holdings | 108,686 | 36.3 | |
| Cash and cash equivalents | 61 | 0.02 | |
| TOTAL | 299,647 | 100.0 |
Wilson Sons’ Management Report
Wilson Sons’ net revenues of US$229.7 million were 8.9% higher than the six months of 2022 (US$211.0 million), mainly driven by excellent towage results, container terminal operational growth and a strong recovery in offshore energy-linked services.
Towage revenues rose 12.7% year-over-year with higher volume and an increase in average revenue per manoeuvre and special operations. In April, we added a new 91-tonne bollard pull tug to our which fleet to serve large iron ore carriers and tankers. In July, the company implemented a new tugboat fleet management system developed in partnership with Argonáutica, a leading provider of digital solutions for the maritime and port sectors, which will allow us to continue seeking operational efficiencies, improving margins and providing better services to customers.
Container terminal revenues increased 5.7% with volumes up 7.1%. The Rio Grande terminal reported an 11.9% increase in overall handling mainly due to higher empty, export, inland navigation, import and transshipment flows. The Salvador terminal registered flat volumes, as the increase in empty, cabotage and export flows was offset by lower imports and transshipment. The completion of the quay reinforcement in August 2023 will support improved service offering in the Salvador terminal through the second half of the year.
Demand for our offshore energy-linked services improved markedly as vessel turnarounds in the offshore support bases increased 68.4% and operating days in the offshore support vessel joint venture rose 17.8% year-over-year.
Overall, the first-half performance demonstrates strong organic growth. We remain positive on the fundamentals of our trade flow-related businesses of towage and container terminals which, together with rebounding demand for our offshore energy-linked services, will provide the basis for a superior performance of our assets. In addition to this positive market environment we are confident our continued focus on security, growing utilisation rate of assets, cost control and disciplined approach to capital allocation will yield results for clients and other stakeholders of the business.
Financial Report
Operating Profit
Operating profit remained unchanged from the 2022 comparative period at US$54.7 million. Overall operating expenses increased 11.8%. Raw material expenses rose 18.2% mainly due to higher fuel consumption and increased operational activity in the towage division. Employee benefit expenses rose 9.0% mainly due to annual inflation-linked adjustments to salary and benefits and payroll tax provisions. Other operating expenses increased 13.4% principally due to increased operating activity and inflation with higher rental costs of tugs from third-party chartering in the towage business, higher container handling costs and increased utilities expenses.
The depreciation and amortisation expense at US$35.7 million was US$4.0 million higher than the comparative period (2022: US$31.7 million) driven by the two new tugs in operation. Foreign currency exchange gains of US$0.6 million (2022: US$2.0 million) arose from the Group’s foreign currency monetary items and reflect the movement of the BRL against the USD during the period.
Revenue from Maritime Services
Revenue for the period increased by 8.9% compared to the first half of the prior year to US$229.7 million (2022: US$211.0 million). Revenue growth was generated across all divisions, except for logistics, with higher volume and a better revenue mix in the towage division; higher revenues from handling and ancillary services in the container terminal business; increased operational activity in the offshore support base unit and increased conversions and dry-docking for third parties in the shipyard business. The logistics division saw a decline in revenues of 17.6% reflecting the decline in volumes and rates at both the logistics centre and international logistics businesses.
| Operating volumes (to 30 June) | 2023 | 2022 | % Change |
| Container Terminals (container movements in TEU ‘000s)* | 490.5 | 458.1 | 7.1% |
| Towage (number of harbour manoeuvres performed) | 27,079 | 26,746 | 1.2% |
| Offshore Vessels (days in operation) | 3,657 | 3,104 | 17.8% |
*TEUs stands for “twenty-foot equivalent units”.
Returns on the Investment Portfolio
The gain for the period on the investment portfolio of US$12.7 million (2022: loss of US$48.9 million) comprises unrealised gains of US$10.5 million (2022: loss of US$72.1 million), net investment income of US$0.7 million (2022: US$7.6 million) and realised profits on disposal of US$1.5 million (2022: US$15.6 million).
Share of results of joint ventures and associates
The share of results of joint ventures and associates is Wilson Sons’ 50% share of the net results for the period from the offshore support vessel joint ventures and 32.32% share of the net results for the period from the associate Argonáutica. The net profit attributable to Wilson Sons for the period was US$6.0 million (2022: US$0.5million). Average operating days were up 7.2% with the impact of contracts that were signed in 2022 becoming operational. At the end of the period, the joint venture had 22 active vessels (2022: 21 active vessels) of a total fleet of 25 OSVs including two third-party vessels.
Exchange rates
The Group reports in USD and has revenue, costs, assets and liabilities in both BRL and USD. In the six months to 30 June 2023 the BRL appreciated 7.7% against the USD from R$5.22 at 1 January 2023 to R$4.82 at the period end. In the comparative period in 2022 the BRL appreciated 5.9% against the USD from R$5.58 to R$5.25.
Profit/(Loss) before tax
Profit before tax was US$58.3 million compared with the prior period loss of US$9.7 million. This significant increase is driven by the US$12.7 million positive return of the investment portfolio when compared to the US$48.9 million loss in the prior period as well as the improved share of results of joint ventures and associates from US$0.5 million to US$6.0 million.
Taxation
The corporate tax rate in Brazil is 34%. The Group recorded an income tax expense for the period of US$10.4 million (2022: US$10.7 million). The principal items not included in determining taxable profit in Brazil are foreign exchange gains/losses, share of results of joint ventures and associates, and deferred tax items. These are mainly deferred tax charges or credits arising on the retranslation in USD of BRL denominated fixed assets, tax depreciation, foreign exchange variance on borrowings, prior periods accumulated tax losses, and profit on construction contracts.
Profit/(Loss) for the period
After deducting the profit attributable to non-controlling interests of US$17.4 million (2022: US$14.2 million), the profit for the period attributable to equity holders of the Company is US$30.5 million (2022: loss US$34.7 million). The earnings per share for the period was US 86.2 cents (2022: US 98.0 cents loss).
Investment portfolio performance
The investment portfolio and cash under management was US$5.9 million higher at US$299.7 million at 30 June 2023 (31 December 2022: US$293.8 million), after paying dividends of US$5.5 million to the parent company and deducting management and other fees of US$1.6 million.
Cash flow and debt
At 30 June 2023, the Group had cash and cash equivalents of US$14.9 million (30 June 2022: US$12.8 million). Net cash inflow from operating activities for the period was US$44.3 million (2022: US$24.7 million). Purchase of trading investments, net of disposals, were US$30.2 million (2022: net disposal of US$ 29.0 million). Dividends of US$24.8 million were paid to equity holders of the Company in both periods with a further US$12.4 million paid to non-controlling interests in our subsidiaries (2022: US$18.5 million). Group borrowings including lease liabilities at the period end were US$540.7 million (31 December 2022: US$518.1 million). New loans of US$29.0 million were raised in the period (2022: US$20.5 million) while capital repayments on existing loans in the period of US$36.2 million were made (2022: US$24.3 million).
Balance sheet
Equity attributable to equity holders of the Company at the end of the period was US$565.2 million compared with US$554.6 million at 31 December 2022. The main movements in equity for the half year was the profit for the period attributable to equity holders of the Company of US$30.5 million, dividends paid of US$24.8 million and a positive currency translation adjustment of US$5.3 million.
Other matters
Principal risks
The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Financial Statements for the year ended 31 December 2022. A detailed description can be found in the Report of Directors of the 2022 Annual Report and Financial Statements which are available on the Company website at www.oceanwilsons.bm.
The Board notes that there has been no substantive changes to the risk assessment during the reporting period.
Related party transactions
Related party transactions during the period are set out in note 17.
Going concern
The Group closely monitors and manages its liquidity risk. The Group has considerable financial resources including US$14.9 million in cash and cash equivalents and the majority of the Group’s borrowings have a long maturity profile. The Group’s business activities together with the factors likely to affect its future development and performance are set out in the Chair’s statement together with the Investment Manager’s report and the Wilson Sons report. Details of the Group’s borrowings are set out in note 15 to the accounts. Based on the Group’s year to date results and cash forecasts, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operation for the foreseeable future.
The Group manages its liquidity risk and does so in a manner that reflects its structure and two distinct businesses.
OWIL
OWIL has no debt but has outstanding commitments of US$55.3 million in respect of investment subscriptions, for which details are provided in note 7. The timing of these investment commitments may be accelerated or delayed in comparison with those indicated in note 7.
However, highly liquid investments held are significantly in excess of the commitments. Neither Ocean Wilsons nor OWIL have made any commitments or have obligations towards Wilson Sons and its subsidiaries and their creditors or lenders. Therefore, in the unlikely circumstance that Wilson Sons was to encounter financial difficulty, the parent company and its investment subsidiary have no obligations to provide support and have sufficient cash and other liquid resources to continue as a going concern on a standalone basis.
Wilson Sons
Wilson Sons has adequate cash, other liquid resources and undrawn credit facilities to enable it to meet its obligations as they fall due in order to continue its operations. All of the debt, as set out in note 15, and all of the lease liabilities, as set out in note 11, relate to Wilson Sons, and generally have a long maturity profile. The debt held by Wilson Sons is subject to covenant compliance tests as summarised in note 15, which were satisfied at 30 June 2023.
Based on the Board’s review of Wilson Sons’ going concern assessment and the liquidity and cash flow reviews of the Company and its subsidiary OWIL, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the Interim report and accounts.
Responsibility statement
The Directors confirm that this interim financial information has been prepared in accordance with IAS 34 and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
• an indication of important events that have occurred during the first six months and their impact on the set of interim financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
• material related party transactions in the first six months and any material changes in the related party transactions described in the last Annual Report.
Caroline Foulger
Chair
9 August 2023