2022 Interim Statement
About Ocean Wilsons Holdings Limited
Ocean Wilsons Holdings Limited (“Ocean Wilsons” or the “Company”) is a Bermuda holding company which, through its subsidiaries, holds a portfolio of international investments and operates a maritime services company in Brazil. The Company is a premium listed entity on the London Stock Exchange and is also listed on the Bermuda Stock Exchange.
It has two principal subsidiaries: Ocean Wilsons (Investments) Limited (“OWIL”) and Wilson Sons Holdings Brasil S.A. (“Wilson Sons”) (together with the Company and their subsidiaries, the “Group”). OWIL is wholly owned, and Wilson Sons is 57% owned and therefore is fully consolidated in the accounts 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
Ocean Wilsons focuses on long-term performance and value creation. This approach applies to both the investment portfolio and our investment in Wilson Sons. This longer-term view of the Board results in an investment strategy whereby we hold a balanced thematic portfolio of funds leveraging our long-standing investment market relationships and supported by detailed insights and analysis. The Wilson Sons maritime logistic services investment strategy focuses on providing best in class innovative solutions in a rapidly growing market.
Data Highlights
|
KEY OPERATING DATA (in US$ millions) |
|
6 months ended 30 June 2022 |
6 months ended 30 June 2021 |
Change |
|
|
Revenue |
211.0 |
188.9 |
22.1 |
|
Operating profit |
54.7 |
53.6 |
1.1 |
|
Return of investment portfolio |
(48.9) |
29.5 |
(78.4) |
|
(Loss) /Profit after tax |
(20.4) |
51.8 |
(72.2) |
|
Net cash inflow from operating activities |
(24.7) |
41.6 |
(16.9) |
|
KEY FINANCIAL POSITION DATA (in US$ millions) |
|
At 30 June 2022 |
At 31 December 2021 |
Change |
||
|
Investment portfolio assets including cash and cash equivalents |
296.9 |
351.8 |
(54.9) |
|
|
Net Assets |
729.3 |
783.7 |
(54.4) |
|
|
Debt net of cash and cash equivalents |
492.8 |
440.9 |
51.9 |
|
|
SHARE DATA |
|
6 months ended 30 June 2022 |
6 months ended 30 June 2021 |
Change |
|
|
Dividend per share |
US 70 cents |
US 70 cents |
– |
|
Earnings per share |
US (98.0) cents |
US 111.7 cents |
US (209.7) cents |
|
At 30 June 2022 |
At 31 December 2021 |
Change |
|
|
Share discount |
39.3% |
41.6% |
(2.3%) |
|
Implied net asset value per share |
GBP 15.50 |
GBP 15.95 |
GBP (0.45) |
|
Share price |
GBP 9.40 |
GBP 9.32 |
GBP 0.12 |
Chair's Statement
The Group has delivered a mixed financial performance for the period which is not unexpected given the market conditions in the first half of 2022. Global supply chain challenges and continued container shortages, that we saw at the end of 2021 are still impacting the financial results of Wilson Sons. Despite these headwinds, Wilson Sons maintained its operating profit when compared to the prior period due primarily to the resilience of its operations and improved revenue mix in its various business lines that offset the impact of lower container volumes. The performance is a direct result of the Management team's continued focus on business growth and driving innovation at all levels of the organization.
Whilst the investment portfolio results were loss making, in the context of the overall market and our consistent strategy, the Board is pleased with the Investment Manager's performance and by the underlying performance of some of the specific fund holdings. With the market backdrop of geo-political instability and surging inflation, the performance of the portfolio for the remainder of the year will continue to be challenging. The Investment Manager provides more context with regards to the underlying investments results for the period. The portfolio strategy continues to be focused on producing returns with a long-term view.
Environmental, Social and Governance (“ESG”)
The Board's commitment to further enhance its ESG practices is evidenced with several initiatives producing tangible outcomes during the period. At Wilson Sons, there was the launch of a new tug, one of six, which substantially reduces emissions over the older fleet. In addition, Wilson Sons continues to electrify its terminal operating machines with the order placement of new machinery at its Salvador terminals. The Investment Manager, as part of the Hanseatic Group, has applied to become a signatory to the United Nations' Principles for Responsible Investment.
Investment Manager's Report
Market backdrop
Stock markets have declined through the first half of 2022, with the MSCI ACWI + FM Index declining by 20.2%, as persistently high inflation caused investors to worry about the threat of rising interest rates and their possible impact on economic growth. The US, Europe and Japan have all fallen broadly in line with the global index, while emerging markets have fallen by slightly less (-17.6%). Emerging markets have been helped by China's relatively stronger performance so far this year (-11.3%), after it significantly underperformed last year. Additionally, and unusually, bonds have not been a haven this period, with US Treasuries down 9.1% year-to-date (YTD), while investment grade and high yield bonds have fallen further. Commodities have been one area of strength, with the Bloomberg Commodity Index up 18.4%, but even here gold and copper have declined over the last six months, while the main contributors have been energy commodities, such as WTI crude oil which has gained 37.4%.
It has been pleasing to see the portfolio's basket of less-correlated investments resist the steep falls of both the equity and bond markets so far this year, with this part of the portfolio down just 1.1% YTD. The trend-following CTA funds have done very well in this environment, with the GAM Systematic Core Macro Fund up 9.2% and Schroder GAIA Blue Trend Fund up 4.6% since its purchase in April. Keynes Systematic Absolute Fund return (+8.8%) and MKP Opportunity Fund (+6.3%) are other notable performers.
The private equity part of the portfolio has held up better than public markets and gained 1.1% over the last six months. There have been significant contributions from funds such as Pangaea II and Great Point Partners III thanks to recent exits.
With equity markets falling sharply YTD, many of the portfolio's long-only regional exposures declined as a result. Findlay Park American Fund fell 23.8%, while in Japan, Goodhart Partners: Hanjo Fund declined 23.1%. The thematic exposures saw mixed returns, with the passive exposure to the energy sector benefiting as the iShares MSCI World Energy ETF gained 5.4%, but funds focusing on the healthcare and technology sectors have fallen in value.
Outlook
With markets having already entered a bear market, the question now is how close are they to the bottom. While some comfort can be taken from the fact that the current fall of 23% from the peak of the MSCI World Index is greater than the 19% average fall of previous declines, this may be overly optimistic if central banks engage in more aggressive policy measures in their battle against inflation. The outcome from here is very dependent on the path of inflation and interest rates, although continued volatility in markets seems likely, whatever happens. However, with a portfolio comprised of a variety of risk-on and risk-off assets and with a blend of sectors including growth and value, we will hopefully stand in reasonable stead for the challenging months ahead.
Cumulative Portfolio Returns
|
Performance (Time-weighted) |
YTD |
3 Years p.a. |
5 Years p.a. |
|
OWIL |
-14.1% |
5.3% |
5.6% |
|
OWIL (net)* |
-14.5% |
3.9% |
4.3% |
|
Absolute Performance Benchmark** |
7.7% |
8.0% |
6.9% |
|
60:40 Composite of MSCI ACWI and Bloomberg Global Treasury |
-18.0% |
2.2% |
3.9% |
|
MSCI ACWI + FM |
-20.2% |
6.2% |
7.0% |
|
MSCI Emerging Markets |
-17.6% |
0.6% |
2.2% |
Notes:
*Net of management and performance fees
**The OWIL Performance Benchmark is an absolute benchmark of US CPI Urban Consumers NSA +3% p.a.
Investment Portfolio at 30 June 2022
|
|
Market Value US$000 |
% of NAV |
Primary Focus |
|
Findlay Park American Fund |
27,967 |
9.4 |
US Equities – Long Only |
|
Stepstone Global Partners |
15,778 |
5.3 |
Private Assets – US Venture Capital |
|
BlackRock Strategic Equity Hedge Fund |
13,838 |
4.7 |
Europe Equities – Long/Short |
|
Silver Lake Partners |
11,939 |
4.0 |
Private Assets – Global Technology |
|
Egerton Long – Short Fund Limited |
11,807 |
4.0 |
Europe/US Equities – Long/Short |
|
iShares Core MSCI Europe UCITS ETF |
10,917 |
3.7 |
Europe Equities – Long Only |
|
Select Equity Offshore, Ltd |
10,406 |
3.5 |
US Equities – Long Only |
|
Pangaea II, LP |
8,619 |
2.9 |
Private Assets – Global Emerging Markets |
|
NG Capital Partners II, LP |
8,159 |
2.7 |
Private Assets – Latin America |
|
TA Associates |
7,144 |
2.4 |
Private Assets – Global Growth |
|
Top 10 Holdings |
126,574 |
42.6 |
|
|
Schroder ISF Asian Total Return Fund |
6,771 |
2.3 |
Asia ex-Japan Equities – Long Only |
|
GAM Star Fund PLC – Disruptive Growth |
6,758 |
2.3 |
Technology Equities – Long Only |
|
KKR America |
6,661 |
2.2 |
Private Assets – North America |
|
NTAsian Discovery Fund |
5,179 |
1.7 |
Asia ex-Japan Equities – Long Only |
|
Hudson Bay International Fund Ltd |
5,116 |
1.7 |
Market Neutral – Multi-Strategy |
|
Pershing Square Holdings Ltd |
5,012 |
1.7 |
US Equities – Long Only |
|
Goodhart Partners: Hanjo Fund |
4,849 |
1.6 |
Japan Equities – Long Only |
|
Polar Capital Global Insurance Fund |
4,768 |
1.6 |
Financials Equities – Long Only |
|
Helios Investors II, LP |
4,525 |
1.5 |
Private Assets – Africa |
|
PAI Europe |
4,415 |
1.5 |
Private Assets – Europe |
|
Top 20 Holdings |
180,628 |
60.7 |
|
|
Indus Japan Long Only Fund |
4,135 |
1.4 |
Japan Equities – Long Only |
|
Baring Asia Private Equity Fund VII, LP |
3,813 |
1.3 |
Private Assets – Asia |
|
Global Event Partners Ltd |
3,603 |
1.2 |
Market Neutral – Event-Driven |
|
Reverence Capital Partners Opportunities |
3,339 |
1.1 |
Private Assets – North America |
|
L Capital Asia |
3,223 |
1.1 |
Private Assets – Asia |
|
Worldwide Healthcare Trust PLC |
3,192 |
1.1 |
Healthcare Equities – Long Only |
|
Schroder GAIA BlueTrend |
3,137 |
1.1 |
Market Neutral – Multi-Strategy |
|
EQT Mid Market Europe, LP |
3,086 |
1.0 |
Private Assets – Europe |
|
Dynamo Brasil VIII |
3,048 |
1.0 |
Brazil Equities – Long Only |
|
GAM Systematic Core Macro (Cayman) Fund |
3,005 |
1.0 |
Market Neutral – Multi-Strategy |
|
Top 30 Holdings |
214,209 |
72.1 |
|
|
Remaining Holdings |
71,691 |
24.2 |
|
|
Cash and Cash Equivalents |
11,046 |
3.7 |
|
|
TOTAL |
296,946 |
100.0 |
|
|
|
|
|
Wilson Sons' Management Report
The Wilson Sons second quarter 2022 earnings report released on 11 August 2022 is available on the Wilson Sons website: www.wilsonsons.com.br.
In the report, Fernando Salek, CEO, said:
“Wilson Sons' 2Q22 revenues US$211.0 million are 11.7% higher than the prior year period of US$188.9 million.
Towage results were resilient with an increased average revenue per manoeuvre, despite higher fuel costs. Towage revenues increased by 9.5% to US$101.7 million in the period.
Container terminal results were impacted by the limited availability of empty containers and global logistics bottlenecks causing vessel call cancellations. We believe that this challenging scenario could show some signs of improvement in the second half of 2022 depending on the resolution of port closures in China.
During the second quarter, our shipyard delivered WS Centaurus, the most powerful tugboat in Brazil and the first of a series of six 90-tonne bollard pull vessels joining our fleet over the next two years. The vessels' design comply with the International Maritime Organization (IMO) Tier III standard, and improves hull efficiency for an estimated reduction of up to 14.0% in greenhouse gas emissions compared to previous technology. In addition to the launch of the new tugboat, the Salvador terminal signed a contract to acquire 12 fully electric yard tractors to further support our commitment to reduce our carbon footprint.
In July, Wilson Sons launched the first innovation hub focused on making port and maritime operations in Latin America more efficient, safe and sustainable. The initiative aims to integrate different ends of the ecosystem to accelerate innovation and foster the development of start-ups dedicated to our industry.
We are pleased to have delivered these financial results together with important operating milestones which adds to the safe and efficient offering we provide our clients and to minimize our impact on the environment. We continue to strive to improve the world-class performance of our infrastructure, our portfolio of activities, and the resilience and versatility of our services which we believe is the best possible way to address our sector challenges, transforming, over time, the maritime transport and creating a better future.”
Fernando Salek,
CEO
Financial Report
Revenue
Revenues in this section relate to the sales of services by Wilson Sons which increased by 11.7% compared to the first half of the prior year to US$211.0 million (2021: US$188.9 million). Towage and ship agency services were $106.3 million for the period (2021: US$97.2 million), an increase of 9.3% driven by higher average revenues per manoeuvre in towage services and by reductions in operating expenses for shipping agency services, improving the overall margin.
Despite global container availability challenges resulting in lower container volumes, financial results remained resilient in the Port terminal division with revenues at US$77.5 million for the period (2021: US$72.5 million) due to increased storage times driving warehousing revenues higher.
Logistics revenues increased 51.2% to $24.2 million (2021: US$16.0 million) due to favourable conditions in both volumes and pricing for the international logistics business.
|
Operating volumes (to 30 June) |
2022 |
2021 |
% Change |
|
Container Terminals (container movements in TEU '000s)* |
458.1 |
538.6 |
(14.9%) |
|
Towage (number of harbour manoeuvres performed) |
26,746 |
26,957 |
(0.8%) |
|
Offshore Vessels (days in operation) |
3,104 |
2,573 |
20.6% |
*TEUs stands for “twenty-foot equivalent units”.
Operating Profit
Operating profit was close to flat at US$54.7 million (2021: US$53.6 million). Raw materials and consumables increased US$3.8 million over the prior period driven by higher fuel costs in the towage division and employee costs increased US$8.6 million over the prior period; these costs were expected to increase as the workforce resumed activity post pandemic and increasing cost of living expenses driven by inflation. Other operating expenses increased US$7.9 million due to higher international freight rates in the logistics division and increases in utilities costs with longer refrigerated warehousing. The depreciation and amortisation expense at US$31.7 million was US$0.4 million higher than the comparative period (2021: US$31.3million) due to additions of fixed assets. Foreign currency exchange gains of US$2.0 million (2021: US$2.3 million) arose from the Group's foreign currency monetary items and reflect the movement of the BRL against the USD during the period.
Share of results of joint ventures
The share of results of joint ventures is Wilson Sons' 50% share of the net results for the period from our offshore support vessel joint venture. The net profit attributable to Wilson Sons for the period was US$0.5 million (2021: US$0.8million loss) as vessel turnaround times increased and the start of two new drilling campaigns by international oil companies.
Returns on the investment portfolio at fair value through profit and loss
The loss for the period on the investment portfolio of US$48.9 million (2021: gain of US$29.5 million) comprises unrealised losses on financial assets at fair value through profit and loss of US$68.0 million (2021: US$23.4 million profit), net investment income of US$7.6 million (2021: US$1.2 million) and realised profits on the disposal of financial assets at fair value through profit and loss of US$15.6 million (2021: US$5.0 million).
Finance costs
Finance costs for the period were US$3.5 million more than the comparative period at US$18.1 million (2021: US$14.6 million). In the prior period lenders in Brazil were extending Covid-19 relief on repayment of borrowings which are no longer in effect.
Exchange rates
The Group reports in USD and has revenue, costs, assets and liabilities in both BRL and USD. Therefore, movements in the USD/BRL exchange rate impact from period to period. In the six months to 30 June 2022 the BRL appreciated 8.1% against the USD from R$5.71 at 1 January 2022 to R$5.25 at the period end. In the comparative period in 2021 the BRL depreciated 3.8% against the USD from R$5.00 to R$5.20.
Profit/(Loss) before tax
Loss before tax was US$9.7 million compared with prior year (2021: profit US$66.2 million) with this sharp decrease mainly attributable to the negative return on the investment portfolio of US$48.9 million and finance costs increased US$3.5 million to US$18.1 million for the period.
Taxation
The corporate tax rate prevailing in Brazil is 34%. The Group recorded an income tax expense for the period of US$10.7 million (2021:US$14.4 million). The principal items not included in determining taxable profit in Brazil are foreign exchange gains/losses, share of results of joint ventures, 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$14.2 million (2021: US$12.3 million), the loss attributable to equity holders of the Company is US$34.7 million (2021: US$39.5 million profit). The earnings per share for the period was US 98.0 cents loss (2021: US 111.7 cents profit).
Investment portfolio performance
As markets struggle with inflation and uncertainty, the investment portfolio and cash under management was US$54.9 million lower at US$296.9 million as at 30 June 2022 (31 December 2021: US$351.8 million), after paying dividends of US$2.5 million to the parent company and deducting management and other fees of US$1.6 million.
Cash flow and debt
Net cash inflow from operating activities for the period was US$24.7 million (2021: US$41.6 million). Dividends of US$24.8 million were paid to shareholders in the period (2021: US$24.8 million) with a further US$18.5 million paid to non-controlling interests in our subsidiaries (2021: US$14.9 million). At 30 June 2022, the Group had cash and cash equivalents of US$12.8 million (31 December 2021: US$28.6 million). Group borrowings including lease liabilities at the period end were US$505.6 million (31 December 2021: US$469.4 million). New loans were raised in the period of US$20.5 million (2021: US$8.0 million) while capital repayments on existing loans in the period of US$24.3 million (2021: US$41.1 million) were made.
Balance sheet
Equity attributable to shareholders at the balance sheet date was US$539.0 million compared with US$593.7 million at 31 December 2021. The main movements in equity for the half year was the loss for the period attributable to shareholders of US$34.7 million, dividends paid of US$24.8 million and a positive currency translation adjustment of US$4.1 million. The currency translation adjustment arises from exchange differences on the translation of operations with a functional currency other than USD.
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 2021. A detailed description can be found in the Report of Directors of the 2021 Annual Report and Financial Statements which are available on the website at www.oceanwilsons.bm.
The Board notes that there is an increase in the financial risk exposure detailed in the 2021 annual report, due to the current geo-political risk and inflationary environment on our investments. The Board continues to receive regular reports from Wilson Sons on their cash and debt management as well as impacts of domestic and international trade volumes on their operations, As previously noted in this report, reductions in container volumes are being offset with other revenues streams and cashflow forecasts remain unchanged. The Investment Manager's report provides a commentary on the financial markets' reaction to the current economic and political environments and an outlook for the remainder of the year that is very dependent on the direction that central banks take as it relates to interest rates. The Board is actively engaged with the Investment Manager to discuss ongoing strategy and to consider any adjustments in the portfolio weighting to balance risk exposure across the investment holdings.
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$12.8 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 and Investment Manager's 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, being the parent company along with OWIL and Wilson Sons.
OWIL
OWIL has no debts but has made commitments in respect of investment subscriptions amounting to US$45.3 million, details are provided in note 7. The timing of the 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 Wilsons Sons and its subsidiaries and their creditors or lenders. Therefore, in the unlikely circumstance that Wilsons 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 2022.
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
10 August 2022