15th Aug 2007 08:54
Ocean Wilsons Holdings Ld15 August 2007 Chairman's Interim Statement for Ocean Wilsons Holdings Limited Wilson Sons Limited Initial Public Offer (IPO) As part of the Company strategy to realise long term shareholder value, on the30 April 2007, Ocean Wilsons Holdings Limited, ("Ocean Wilsons or the Company")successfully floated Wilson Sons Limited, ("Wilson Sons") the holding company ofits Brazilian business, on the Sao Paulo Stock Exchange and the Luxembourg StockExchange. The flotation involved the sale of 18.7 million shares by OceanWilsons, resulting in net proceeds to the Company of approximately US$ 205.6million, and the issue of 11 million new shares by Wilson Sons, raisingapproximately US$119.1 million for Wilson Sons. Following the flotation, Ocean Wilsons retains a 58.25% holding in Wilson Sons.The Company will continue to fully consolidate Wilson Sons in its accounts witha 41.75% minority interest. As at the close of business on the 13 August 2007the Wilson Sons share price was Real 25.00 resulting in a market value for theOcean Wilsons holding of 41,444,000 shares in Wilson Sons of approximatelyUS$530 million. The investment portfolio has produced extremely satisfactory returns since theappointment of Hanseatic Asset Management as its investment managers in November2000, delivering a total return to date of 79.82% against 12.33% for the MSCI. As set out in the April class one circular titled "Proposed initial publicoffering of Wilson Sons Limited and approval of new long term incentive plan",your Board has reviewed the options for the use of the net proceeds from thesale of the Company's shares in Wilson Sons. The net proceeds after all expensesamounted to approximately US$205.6 million. The Board has decided as indicatedin the circular to invest approximately US$183.0 million of this money in itsinvestment subsidiary, Ocean Wilson Investments Limited ("Ocean WilsonsInvestments") to increase the scale and breadth of that company's investmentsand expand the remit to include alternative investment classes, includingilliquid securities, with a particular emphasis on emerging markets. This is totake advantage of both the Board's and the Investment Manager's knowledge ofthese fields and to benefit from the superior returns which it is anticipatedwill arise from this investment strategy. The Board will also seek to takeadvantage of the Company's access to any attractive investment opportunitiesthat might present themselves as a consequence of its relationship with WilsonSons and its own knowledge of Latin America. This investment strategy will bereviewed on a regular basis to ensure it is consistent with changingcircumstances in global markets. The balance will be retained in a separate investment fund to fund the OceanWilsons long term incentive plan liability as detailed below and pay the 2007interim dividend and company operating expenses. Accounts and results The Company's consolidated revenue increased by 18% to US$182.7 million,compared with US$150.4 million in the first six months of 2006 with increases inmost businesses. Operating profit increased US$210.2 million from US$23.7millionto US$233.9 million due to the profit on the disposal of the minority interestin Wilson Sons of US$213.7 million. Adjusting for non-recurring items in 2006and 2007 (Profit on the sale of minority interest, profit on disposal of jointventure and release of surplus on acquisition of interest in subsidiary),operating profit at US$19.2 million for the period was in line with thecomparative period in 2006 (US$19.2 million). Employee expenses increased US$18.2 million to US$58.7 million compared with2006. This was principally due to wage increases under collective labouragreements, the impact of the weaker US Dollar and a US$7.0 million accrual inthe period (2006: zero) in respect of the Ocean Wilsons long-term incentiveplan. Investment revenues increased from US$7.1 million to US$ 10.2 million in theperiod, principally due to higher interest receipts from bank deposits. Other gains of US$9.9 million (2006: US$4.0 million) arose from the Group'sportfolio of trading investments and relate primarily to increases in the fairvalue of trading investments held at period end. Finance costs for the period were US$0.4 million lower at US$2.8 million (2006:US$3.2 million). Profit before tax for the period was US$250.3 million (2006: US$31.5 million)benefiting from the higher operating profit and investment portfolio gains.Earnings per share based on ordinary activities after taxation and minorityinterests were US$ 6.695 (2006: US$ 0.666). Long-term incentive plan The Company implemented a cash settled phantom option scheme that was approvedby shareholders at the Special General Meeting held on 19 April 2007. Theoptions provide for the option holder to receive on exercise the differencebetween (i) the lower of the Wilson Sons IPO offer price (US$11.74) and themarket price per BDR (Brazilian depositary receipt) at the time of exercise and(ii) US$5.66. The maximum liability under the plan is US$25.1 million based onthe Wilson Sons IPO offer price. The Ocean Wilsons phantom scheme is anon-recurring event to the extent that future incentive programmes for Brazilianmanagement will be the responsibility of our subsidiary, Wilson Sons. A liability equal to the portion of the services received is recognised at thecurrent fair value at each balance sheet date. An accrual of US$ 7.0 million hasbeen included in the accounts at 30 June 2007 for benefits accruing under theplan, although cash payments under the scheme will not begin before April 2009.Awards under the long-term incentive plan vest in four tranches from April 2009to April 2012 and expire in April 2016. Exchange rates In the six months to 30 June 2007 the Real appreciated 10% against the US Dollarfrom 2.14 at 1 January 2007 to 1.93 at the period end. Dividend The Board has declared an interim dividend of 4.0 cents per share (2006: 2.0cents per share) to be paid on 28 September 2007 to shareholders on the registerat close of business on 7 September 2007. Dividend Policy Dividends will continue to be set in US Dollars and paid twice yearly.Shareholders will continue to receive dividends in Sterling by reference to theexchange rate applicable to the US Dollar on the dividend record date, exceptfor those shareholders that elect to receive dividends in US Dollars. The Company's target dividend payout in respect of each financial year is to paythe Company's full dividend received from Wilson Sons in the period plus apercentage of the average capital employed in the investment portfolio includingcash under management to be determined annually by the Board. The US$ 8 millionreceived in dividends from Wilsons Sons in March 2007 prior to Wilson Sonslisting will not be included in the Ocean Wilsons 2007 dividend calculation asthis represents part of the profits earned in 2006. Your Board of Directors may review and amend the dividend policy from time totime in light of our future plans and other factors. The payment of dividendscannot be guaranteed and maybe discontinued or varied at the discretion of theBoard. Cash flow and debt During the period there was a net cash inflow of US$325.5 million (2006: US$10.0million outflow) principally due to the disposal of the minority interest inWilson Sons, (US$ 324.7 million inflow). Net cash flow from operations was US$16.7 million in the first six months of2007 compared with US$13.6 million in the same period last year, due to improvedworking capital movements. Capital expenditure at US$27.2 million was 67% higher than the comparativeperiod in 2006 (US$16.3 million). This was mainly invested in the constructionof the third berth at Tecon Rio Grande, the towage fleet renewal program andoffshore vessel construction. The Group's third Platform Supply Vessel (PSV),Fragata was launched in April 2007, and is on long-term charter to Petrobras. The Company's consolidated borrowings (including obligations under financeleases) at 30 June 2007 were US$126.6 million, (31 December 2006: - US$ 111.8million). New loans of US$20.7 million were raised to finance the constructionof new PSV's. At 30 June 2007 the Company and its subsidiaries had US$388.1 million in cashand cash equivalents (31 December 2006: US$62.6 million). Balance sheet Net equity (equity attributable to ordinary shareholders of the Company)increased from US$ 221.8 million at the beginning of the year to US$ 456.5million, mainly due to the profit in the period after minority interests lessthe ordinary dividend in respect of 2006. Minority interests increased fromUS$3.8 million at the beginning of the year to US$ 118.0 million, principallydue to the sale of a 41.75% minority interest in Wilson Sons. At 30 June 2007, the Company's consolidated net assets (including minorityinterests) amounted to US$ 574.5 million (31 December 2006: US$ 225.6 million).This is the equivalent of US$ 16.24 per share (31 December 2006: US$ 6.38). Netassets located in Brazil account for US$ 4.43 per share (31 December 2006: US$4.07) and net assets outside Brazil US$ 11.81 per share (31 December 2006: US$2.31). At 30 June 2007 the investment portfolio including cash under management wasamounted to US$89 million, being US$ 2.52 per share, Wilson Sons Limited operating review We have extracted the following highlights from the Wilson Sons 2Q07 and 1H07Earnings Report released on the 14 August 2007. The full report is available onthe Wilson Sons Limited website: www.wilsonsons.com: Port terminals Revenue 2Q07 versus 2Q06 Port Terminals' net revenue rose 38.1% to US$ 36.9 million in 2Q07, from US$26.7 million in 2Q06. This growth comes from: (i) improvement in the mix ofcargo handled, (ii) an increase in storage operations in container terminals.Additionally, revenues related to oil & gas industry grew due to (iii) increasesin clients and larger contract amounts. In container terminals, continuing the trend observed in 1Q07, results benefitedfrom an improved cargo mix of containers handled. The share of deep seacontainer in total container handling increased from 69.1% to 74.0%, and theshare of cabotage in total container handling rose from 10.7% to 12.2%, whichled to an improvement in revenue. Furthermore, gains were achieved by the increase of 11.6% in the volume ofhigher-valued deep sea full containers handled, driven by higher exports ofresin, beef and frozen chicken. This increase more than offset declines intranshipment volumes, improving cargo mix and, as a result, operating margin. Higher imports, resulting from devaluation of US dollar during the past 2 yearshas not only increased imported container traffic but also yielded gains instorage revenue, which increased from 12.7% of total revenue in 2Q06 to 13.3% in2Q07, especially in the company's bonded warehouses Moreover, recovery of frozen chicken exports (from the avian flu setbacks in2006) and higher fruit exports (particularly apples) increased auxiliaryservices coming from supplying energy to containers and monitoring reefer(refrigerated) containers. Net revenue from services provided to the port terminal dedicated to theoffshore oil and gas industry improved significantly increasing its contributionto the business unit revenue from 3.7% in 2Q06 to 10.2% in 2Q07. This was due toan increase in the quarterly average number of contracts, which surged from 1.7in 2Q06 to 5.0 in 2Q07. 1H07 versus 1H06 Net revenue rose 26.2% between 1H07 (US$ 66.9 million) and 1H06 (US$ 53.0million). Continued increases of deep sea container handling volumes, resultedin a higher margin mix of cargo handled. In addition, port terminal services forthe oil and gas industry increased its share of business unit net revenue from3.6% in 1H06 to 10.7% in 1H07. This reflects a higher semi-annual average numberof contracts, which jumped from 1.8 in 1H06 to 4.5 in 1H07. Operating Income 2Q07 versus 2Q06 Port Terminals' operating income climbed 73.0%, from US$ 5.9 million in 2Q06 toUS$ 10.2 million in 2Q07. This resulted from higher average margin in the cargomix. Operating margin rose to 27.7% in 2Q07, from 22.1% in 2Q06 1H07 versus 1H06 Operating income rose 55.2%, from US$ 11.8 million in the 1H06 to US$ 18.3million in the 1H07, mainly due to the improvement in the cargo. Operatingmargin rose to 27.3% in the 1H07, from 22.2% in the 1H06. Towage Revenue 2Q07 versus 2Q06 Towage's net revenue grew 31.7% from US$ 26.8 million in 2Q06 to US$ 35.4million in 2Q07, despite the decline in the number of towage manoeuvres. Thisgrowth was due to: (i) an increase in the volume of special operations, such asocean towage operations, salvage support operations, towage manoeuvres for oilexploration and production platforms, and operations for oil and gas operations,(ii) the rebuilding of margins, and (iii) a greater mix of larger deadweightmanoeuvres. 1H07 versus 1H06 Towage Net revenue in 1H07 rose 22.9% vs.1H06, from US$ 52.6 million to US$ 64.6million for the same reasons listed above for the quarter. Operating Income 2Q07 versus 2Q06 Operating income in this business unit climbed 68.0%, from US$ 5.7 million in2Q06 to US$ 9.5 million in 2Q07. Operating margins improved from 21.2% in 2Q06to 27.0% in 2Q07, due to increases in higher-margin special operations. 1H07 versus 1H06 In line with quarterly results, operating income grew 34.8% in 1H07, from US$13.3 million to US$ 17.9 million. Operating margins were up from 25.2% in 1H06to 27.7% in 1H07. Logistics Revenue 2Q07 versus 2Q06 Logistics' net revenue climbed 28.2%, from US$ 11.3 million in 2Q06 to US$ 14.5million in 2Q07. This was mainly due to three factors: (i) several new largeclients were acquired supplementing growth with current clients; (ii) increasein transport operations, mainly from new clients in Brazil's South region, wherea significant increase in the client portfolio was observed; (iii) due to aweaker US dollar, greater import volumes in Santo Andre (Sao Paulo state)enabled increased customs and general warehousing revenues, many new clientadditions, and higher margins. 1H07 versus 1H06: Logistics Net Revenue in 1H07 grew 32.3% to US$ 29.3 million, from US$ 22.1million in the 1H06, consistent with the quarterly factors. Operating Income 2Q07 versus 2Q06 Operating income in the business unit climbed 83.3%, from US$ 0.4 million in2Q06 to US$ 0.8 million in 2Q07 due to the acquisition of higher-profit clientsand increase in current client operations. Operating margins jumped from 3.8% in2Q06 to 5.4% in 2Q07. 1H07 versus 1H06 The growth of 47.1% in operating income in 1H07 to US$ 1.8 million, from US$1.2million in 1H06, was mainly the result of concerted efforts towards a moreprofitable client mix. Higher margin and increased revenue at the Santo Andrecustoms stations were another highlight. Ship Agency Revenue 2Q07 versus 2Q06 Shipping Agency's net revenue of US$ 5.2 million in 2Q07 was down 16.3% vs. theUS$ 6.2 million in 2Q06. This decline was due to 20% less calls in the period,mainly because a former client opened its own agency. This was partially offsetby an increase of 9.7% in the number of containers controlled and of 1.4% gainin the number of Bills of Lading. 1H07 versus 1H06 The net revenue of US$ 9.8 million in this segment in 1H07 was 7.5% lower thanthe US$ 10.6 million in 1H06, for the same reasons as in the quarter. Operating Income 2Q07 versus 2Q06 Operating income in the business unit remained practically unchanged at US$ 1.7million in 2Q07, up 2.9% against the 2Q06. However, operating margins improvedsignificantly, from 26.6% in 2Q06 to 32.7% in 2Q07. This result is mainly due tocost savings program in major items, such as personnel expenses. 1H07 versus 1H06 Operating income grew 10.8% against the 1H06, from US$ 2.8 million to US$ 3.1million, basically due to the same reasons as the quarter. Operating marginimproved by 5.3 percentage points between the two half-year periods. Offshore Revenue 2Q07 versus 2Q06 Off shore's Net revenue rose 45.2%, from US$ 1.9 million in 2Q06 to US$ 2.8million in 2Q07, resulting from the launching the PSV Saveiros Fragata (thethird PSV in our fleet) to support Petrobras' oil platforms. 1H07 versus 1H06 Net revenue in the offshore business contracted by 3.0% in the 1H07 to US$ 4.6million, from US$ 4.8 million in the 1H06, as a result of the extra supportservices provided to offshore operations in 2006. Operating Income 2Q07 versus 2Q06 Operating income from the business remained stable in relation to 2Q06. Higheroperating income was offset by the depreciation added from starting up PSVFragata. 1H07 versus 1H06 Operating income grew 44.9% to US$ 0.4 million in 1H07, from US$ 0.3 million in1H06. Operating margins improved 8.2% in 1H07 from 5.5% in 2H06. Non-segmented activities Revenue 2Q07 versus 2Q06 Net revenue from non-segmented activities in 2Q07 was US$ 5.3 million, versusonly US$ 0.1 million in 2Q06. This large disparity was due to the timing ofrevenues from Shipyard activities, which were concentrated in 1Q07. 1H07 versus 1H06: Net revenue in this segment in the first half of the year remained practicallyunchanged, rising by 3.3% to US$ 7.5 million, from US$ 7.2 million in the 1H06. Operating Income 2Q07 versus 2Q06 Operating income from Non-Segmented Activities went from a loss of US$ 3.1million in 2Q06 to a loss of US$ 10.2 million in 2Q07. In addition to theincrease in depreciation of US$ 3.0 million from the 2Q06,the sharper loss wasdue to four factors: (i) 2Q06 profit was inflated by the gain from the sale ofthe company's interest in WR Operadores Portuarios in April 2006, (ii) the lackof any services to third parties at the shipyard (US$1.4 million) in 2Q07, (iii)higher bonuses were paid to employees in the 2Q07 (US$ 0.8 million), (iv)phantom stock options for the group's executives were accrued for the period(US$0.7 million), (v) operating income from dredging operations declined from2QT06 to 2Q07 (US$1.1 million) due to lower operation levels (reduction from 2to 1 dredge), combined with their higher operating costs. 1H07 versus 1H06 Operating income from Non-Segmented Activities went from a loss of US$ 5.2million in 1H06 to a loss of US$14.5 million in 1H07. In addition to theincrease in depreciation of US$ 0.2 million in the 1H07 versus the 1H06, as inthe quarter, this sharper loss was due to several factors:(i) operating incomefrom dredging dropped US$ 2.2 million due to lower operating dredging levels(from 2 to 1 dredge) and higher operating costs, (ii) modernization andconstruction services for third parties stressed in 1H06 in the 1H07 (US$ 1.4million) did not repeat, (iii) higher bonuses were paid to employees in the 2Q07(US$ 0.8 million), (iv) phantom stock options for the group's executives wereaccrued for the period (US$0.7 million), and, finally, (v) 1H06 results wereinflated by gains from the change in the interest held in Brasco LogisticaOffshore in March 2006 (US$ 1.4 million), and from the sale of the interest inWR Operadores Portuarios in April 2006 (US$ 3.1 million). Operating costs Raw Material Costs 2Q07 versus 2Q06 Raw Material Costs declined 16.9% to US$ 11.4 million in the 2Q07, versus US$13.5 million in the 2Q06, mainly driven by (i) the reduction in fuel costs dueto the lower volume of manoeuvres, despite increased contribution from specialservices, and (ii) the lower costs with container maintenance, due to thereduction in services provided in the Port Terminal depot segment. 1H07 versus 1H06 Raw Materials Costs fell by 4.6% in the 1H07 to US$ 22.5 million, from US$ 23.5million in the 1H06, as a result of the same events described above. Employee benefits expenses 2Q07 versus 2Q06 Personnel Expenses increased by 37.8%, from US$ 21.8 million in 2Q06 to US$30.0million in 2Q07, due to five factors: (i) the number of employees has beengrowing, especially in the Offshore (PSV Fragata), Logistics (new operations)and Port Terminal business units, (ii) wages increased due to collectivebargaining agreements, (iii) phantom stock options for the group's executiveswere accrued for the period (US$0.7 million), (iv) the employee profit-sharingplan grew in the second quarter due to increased headcount and the company'sfavourable performance in the previous year, (v) the strengthening of theBrazilian Real had a negative impact on these expenses since they aredenominated in R$. 1H07 versus 1H06 Personnel Expenses rose 27.5% in 1H07 to US$ 51.6 million, from US$ 40.5 millionin the 1H06, basically due to the same factors described above for the quarterlycomparison. Other Operating Expenses 2Q07 versus 2Q06 The Other Operating Income item increased by 56.9%, from US$ 42.5 million in the2Q06 to US$ 42.1 million in the 2Q07. The main variations were: (i) the higherfreight costs, for the growth in logistics transportation operations, (ii)higher costs for leasing goods Port Terminal and Logistics equipment), (iii) thegrowth in stevedoring expenses. 1H07 versus 1H06 Other Operating Expenses rose 24.9% to US$ 73.9 million in the 1H07, from US$59.2 million in the 1H06. In addition to the factors previously reported in thequarterly comparison, another factor was the higher costs with hiring thirdparties for overland transport due to the increase in logistics operations. Operating Income 2Q07 versus 2Q06: Consolidated Operating Income in 2Q07 increased by 12.8% to US$ 12.0 million,from US$ 10.6 million in 2Q06. This increase of US$ 1.4 million was driven byPort Terminals (from revenue gains and a higher-margin mix of cargo handled),and Towage from an increased level of higher-margin special operations. Operating Margin was 12.0% in 2Q07, compared to 14.6% in 2Q06. However,excluding the positive non-recurring gain from the sale of the company'sinterest in WRC in 2Q06, operating margins would have improved from 10.4% in2Q06 to 12.0% in 2Q07. 1H07 versus 1H06 Consolidated Operating Income in the 1H07 climbed 11.9% to US$ 27.0 million,from US$ 24.1 million in the 1H06. The higher contributions from the PortTerminals segment of US$ 6.4 million and from the Towage segment of US$ 4.5million leveraged the result in the comparison of half year periods.Non-recurring effects in the 1H06 led to lower growth in the 1Q07 compared tothat period. Operating income in the 1H06 was positively impacted by the gainfrom the change in the interest held in Brasco Logistica Offshore and the gainfrom the sale of the interest in WR Operadores Portuarios. Operating margin in the 1H07 was 14.8%, versus 16.1% in the 1H06. Excluding thepositive impact from (i) the gain from the sale of the interest in WRC in the2Q06, and (ii) the gain from the change in the interest held in BRASCO in the1Q06, operating margin in the 1H06 declines from 16.1% to 13.1%. Accordingly,excluding this non-recurring effect, operating margin improved from 13.1% in the1H06 to 14.8% in the 1H07. Investment Portfolio Hanseatic Asset Management LBG that manages the Groups investment portfolioreports as follows: Equity markets made good progress in the first half of 2007. Throughout theperiod the worsening situation in the US sub-prime market gave concern thatthere would be some further contagion into other credit markets. This led to asmall correction in February, however equity markets rallied in March tocomplete a positive first quarter. Europe and the Far East were the maincontributors with China and China related activity a continuing theme. Over thesecond quarter markets posted positive returns reflecting continuing economicresilience, record levels of private equity and LBO activity and strength incorporate earnings. After a strong start to the second quarter, equity marketslost some ground in June as the concerns about the credit markets returnedalongside fears of higher interest rates. Emerging markets continued to leadmarkets in the second quarter with Brazil and China the standout performers.Mining stocks continued their strong performance. In other markets European equities have performed well with Germany once againleading the way. The UK market remained a good performer, aided by acontinuation of Merger and Private Equity activity. Returns in Europe and the UKwere augmented for Dollar investors by relative strength of Euro and Sterling.Having lagged in the first quarter, the S&P 500 and the Dow Jones indicesreached new record highs in June whilst Japanese equities were a relatively poorperformer for much of the first half. Overall the fund showed a gain of 12.37% for the half year; the MSCI returned9.17%. The fund's performance was enhanced by its substantial positions in the UK,Emerging Markets, particularly the Far East, and by the strength of its thematicglobal funds, notably in mining. This was partially offset by weakness in Japanwhere the market remained under pressure. The best performance came from anumber of individual equity holdings (appendix A), namely Ark Therapeutics, UTSEnergy and Ivanhoe Mines, and there was a strong contribution from all funds inthe Far East and Emerging Markets (Appendix B). Lansdowne UK Equity Fund, MLWorld Mining Trust and Findlay Park American Smaller Companies Fund were onceagain strong contributors to the fund's performance. A schedule of the toptwenty holding by value can be found in Appendix C. Transactions during the period included four new holdings. RAB SpecialSituations is a diversified fund on a substantial discount to asset value withsignificant exposure to mining and Chinese demand. The manager seeks to backstrong and entrepreneurial management teams in companies with substantial assetbacking. Tau Capital is a Kazakhstan fund investing in both public and privateequities. The investment opportunity stems from Kazakhstan's fast growing(industrialised and largely private) economy which is underpinned by naturalresources (oil, gas, coal, minerals). Prusik Asia Fund is a long-only equityfund focusing on Asia & Australia ex-Japan. The manager is a bottom up investorseeking absolute returns through a concentrated portfolio. The manager will holdcash when there are insufficient opportunities to invest in good companies atgood prices. This has recently been the case and their cash position has risento well over 50%. Summit Germany is a commercial property fund seeking to investin well located office and logistics assets. The manager is building asubstantial commercial property portfolio across Germany secured on long leaseswith strong covenants. Germany is Europe's largest property market and lookscheap based on rental, capital and total return criteria. There were no disposals from the fund in the first half of 2007. As we look forward the prospects for equities are encouraging; although manyissues remain to test the market's resolve. The recovery of global equitymarkets from their 2002/03 lows has been accompanied by many concerns. Thesehave centred around high interest rates, the inverted yield curve, the impact ofhigher energy costs and the dangers of leverage, both for consumers and buyoutfirms. The most recent issue is the collapse in US sub prime market due to laxlending practices. These overly accommodative liquidity conditions inflatedvarious parts of the stock market and various asset classes. As this liquidityis removed the impact has already been seen in the real estate industry asyields have started to rise. This will also reduce the amount of aggressiveprivate equity activity which has extended valuations in some areas of themarket. This adjustment, when combined with a mid-cycle slowdown in the US, hasled to a correction in markets. However, in contrast to the euphoric days of2000 the markets have not lost touch with economic reality. Neither mainstreamdebt nor equity valuations are overly extended; this suggests that in a periodof abundant liquidity the markets believe that there is sufficient growth tosupport the debts upon which the recovery has been built. Corporate balancesheets are reassuringly robust and earnings statements supportive. Equities remain the best vehicle for participating in growth and global marketsremain in a growth phase. Any fear of widespread distress in financial marketsis likely to lead to swift action by the authorities and a loosening of monetaryconditions; this will provide support for the equity markets by allowing lowerrates than should be the case in what is now generally acknowledged to be astrong overall growth environment. The markets will remain concerned over theresilience of the US consumer who appears to have survived this initial squeezeon liquidity relatively unscathed. In any event the baton of growth appears tohave passed from the US to the Emerging economies whose rapid developmentcontinues to fuel the commodity boom. This theme still has further to run as thetightness of supply is acerbated by strongly rising demand. Whilst at the time of writing it is difficult to see how profound a correctionthe current squeeze will cause, we continue to believe that equities,underpinned by strong fundamentals, represent decent value. Our preference forEmerging Markets remains as the strong macro environment and positivedemographics drive performance. There appears as yet to be little reason toreverse the cautious position the fund has taken in the US market; however thereare many valuable companies in this market and their strong earnings performancehas brought them nearer to good value. Japan is still in a recovery phase andthe markets need to be convinced that the authorities will not kill off thatrecovery as they have in the past; we remain optimistic. Bonds may offer somevalue as some areas of the market become distressed however, the investmentgrade markets may have further to fall as the effect of tighter liquidity takeseffect. J F Gouvea Vieira 14 August 2007 Appendix A The top ten performing investments were: Holding % Growth Ark Therapeutics 64UTS Energy Corp 48Ivanhoe Mines 45Merrill Lynch World Mining Trust PLC 35ACP 27Lansdowne UK 23CFGIF Far East 22Royal Dutch Shell 22SR Phoenicia Class B 22Investec Global Energy 21 Appendix B The top ten contributors were: Holding % Contribution Lansdowne UK Equity Fund 2.00Merrill Lynch World Mining Trust PLC 1.55SR Global Fund - Emerging Markets 0.95Findlay Park American Smaller Companies 0.89CFGIF Far East Fund 0.87ACP Capital Limited 0.59Jupiter European Opportunities Trust PLC 0.53Aberdeen Global - Asia Pacific 0.52SR Global Fund - Asia 0.45Royal Dutch Shell PLC 0.43TOTAL 8.78 Appendix C Investment Portfolio Information at 30 June 2007 - top 20 holdings: Value in USD % NAVLansdowne UK Equity Fund 8,465,360 9.50Lansdowne European Equity Fund 5,228,217 5.87Merrill Lynch World Mining Trust PLC 5,155,922 5.79Findlay Park American Smaller Companies 4,748,323 5.33JO Hambro Japan Fund 4,732,266 5.31SR Global Fund - Emerging Markets 4,623,300 5.19Ashmore Emerging Markets Liquid Investment 4,413,120 4.95PortfolioBlueBay European Credit Opportunity Fund 3,900,706 4.38Orbis Sicav - Japan Equity 3,891,678 4.37CFGIF Far East Fund 3,786,296 4.25Aberdeen Global - Asia Pacific 3,324,293 3.73Finsbury Growth & Income Trust PLC 3,148,514 3.53SR Global Fund - Asia 2,728,685 3.06Jupiter European Opportunities Trust PLC 2,631,309 2.95ACP Capital Limited 2,160,142 2.42Summit Germany Limited 2,087,558 2.34Royal Dutch Shell PLC 1,946,994 2.18SM Investors Offshore 1,889,546 2.12Prusik Asia Fund 1,767,752 1.98BP PLC 1,540,350 1.73 TOTAL TOP 20 holdings 72,170,340 80.99 Ocean Wilsons Holdings Limited Consolidated income statement for the six months ended 30 June 2007 Unaudited Unaudited Audited six months six months Year to to to 30 June 30 June 31 December 2007 2006 2006 Notes US$'000 US$'000 US$'000 Revenue 182,671 150,423 334,109 Raw materials and consumables used (22,459) (23,548) (53,886) Employee benefits expense 3 (58,667) (40,450) (83,225) Depreciation & amortisation expense (8,288) (7,538) (15,100) Other operating expenses (74,544) (59,763) (125,247) Profit on disposal of property plant 534 113 435 and equipment Profit on sale of minority interest 8 213,667 - - Profit on disposal of joint venture - 3,107 2,965 Release of surplus on acquisition of - 1,396 1,433 interest in subsidiary Share of loss of associate - (50) (51) Operating profit 232,914 23,690 61,433 Investment income 4 10,221 7,095 11,196 Other gains and losses 5 9,946 3,984 11,433 Finance costs 6 (2,814) (3,220) (6,414) Profit before tax 250,267 31,549 77,648 Income tax expense 7 (10,167) (7,674) (20,765) Profit for the period 240,100 23,875 56,883 Attributable to: Equity holders of parent 236,760 23,566 56,077 Minority interests 3,340 309 806 240,100 23,875 56,883 Earnings per share Basic and diluted 669.5c 66.6c 158.6c Ocean Wilsons Holdings Limited Consolidated Balance Sheet as at 30 June 2007 Unaudited Unaudited Audited as at 30 as at 30 as at 31 June June December 2007 2006 2006 US$'000 US$'000 US$'000 Non current assets Goodwill 13,132 13,132 13,132 Other intangible assets 2,080 2,140 2,053 Property, plant and 197,200 160,926 175,785 equipment Deferred tax assets 10,392 7,921 8,289 Interest in associate - 344 - Available for sale 5,934 5,281 5,346 investment Other non-current assets 9,714 7,256 7,809 238,452 197,000 212,414 Current assets Inventories 9,126 7,145 7,061 Trading investments 88,543 72,313 73,192 Trade and other 68,731 49,264 54,413 receivables Cash and cash 388,067 40,909 62,599 equivalents 554,467 169,631 197,265 Total assets 792,919 366,631 409,679 Current liabilities Trade and other payables (75,420) (55,964) (54,223) Current tax liabilities (1,502) (402) (1,944) Obligations under (680) (2,465) (581) finance leases Bank overdrafts and (16,069) (13,823) (14,945) loans Derivative financial (529) - (782) instruments (94,200) (72,654) (72,475) Net current assets 460,267 96,977 124,790 Non-current liabilities Bank loans (108,788) (85,362) (95,216) Deferred tax liabilities (8,571) (9,674) (9,336) Provisions (5,808) (5,908) (5,913) Obligations under (1,093) (389) (1,098) finance leases (124,260) (101,333) (111,563) Total liabilities (218,460) (173,987) (184,038) Net assets 574,459 192,644 225,641 Capital and reserves Share capital 11,390 11,390 11,390 Retained earnings 402,992 142,311 173,305 Capital reserves 25,973 26,044 25,973 Investment reserve 2,969 1,958 2,381 Translation reserve 13,161 7,819 8,762 Equity attributable to equity 456,485 189,522 221,811 holders of the parent Minority interests 117,974 3,122 3,830 Total equity 574,459 192,644 225,641 Ocean Wilsons Holdings Limited Cash flow statement for the six months ended 30 June 2007 Unaudited Unaudited Audited six months six months year to to to 30 June 30 June 31 December 2007 2006 2006 Note US$'000 US$'000 US$'000 Net cash inflow from operating 9 16,678 13,562 37,239 activities Investing activities Interest received 5,333 2,572 5,922 Dividends received from associate - - 327 Dividends received from trading 234 417 915 investments Proceeds on disposal of trading - 2,146 17,280 investments Cash inflow from underwriting 610 - - activities Proceeds on disposal of property, plant 108 113 2,144 and equipment Purchases of property, plant and (27,160) (16,307) (42,231) equipment Proceeds on investment in an associate - - 49 Net cash inflow arising from - 685 1,723 acquisition of subsidiary Purchases of trading investments (5,405) (5,912) (14,476) Net cash inflow arising on disposal of 8 324,688 - - minority interest Net cash inflow arising on disposal of - 1,355 3,464 joint venture Net cash used in investing activities 298,408 (14,931) (24,883) Financing activities Dividends paid (7,073) (6,365) (7,072) Repayments of borrowings (7,024) (6,498) (16,099) Repayments of obligations under finance (440) (1,605) (3,421) leases New bank loans raised 20,692 1,928 20,955 Increase/(decrease) in bank overdrafts 310 (169) 640 Net cash used in financing activities 6,465 (12,709) (4,997) Net increase/(decrease) in cash and 321,551 -14,078 7,359 cash equivalents Cash and cash equivalents at beginning 62,599 50,881 50,881 of year Effect of foreign exchange rate changes 3,917 4,106 4,359 Cash and cash equivalents at end of 388,067 40,909 62,599 year Ocean Wilsons Holdings Limited Statement of changes in Equity as at 30 June 2007 For the six months ended 30 June 2006 Attributable Investment to equity Share Retained Capital revaluation Translation holders of Minority capital earnings reserves reserve reserve the parent interests Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Balance at 1 January 2006 11,390 126,331 23,942 1,856 6,538 170,057 1,313 171,370Gains on available for sale - - - 102 - 102 - 102investmentCurrency translation - - - - 1,281 1,281 - 1,281adjustmentProfit for the period - 23,566 - - - 23,566 309 23,875Total income and expense for - 23,566 - 102 1,281 24,949 309 25,258the periodDividends - (6,365) - - - (6,365) - (6,365)Acquisition of minority - - - - - 1,500 1,500interestFiscal incentives received 881 881 881Transfer to capital reserves - (1,221) 1,221 - - - - -Balance at 30 June 2006 11,390 142,311 26,044 1,958 7,819 189,522 3,122 192,644 For the year ended 31 December 2006 Attributable Investment to equity Share Retained Capital revaluation Translation holders of Minority capital earnings reserves reserve reserve the parent interests Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Balance at 1 January 2006 11,390 126,331 23,942 1,856 6,538 170,057 1,313 171,370Gains on available for sale - - - 525 - 525 - 525investmentCurrency translation - - - - 2,224 2,224 187 2,411adjustmentProfit for the period - 56,077 - - - 56,077 806 56,883Total income and expense for - 56,077 - 525 2,224 58,826 993 59,819the periodDividends - (7,072) - - - (7,072) - (7,072)Acquisition of minority - - - - - 1,524 1,524interestTransfer to capital reserves - (2,031) 2,031 - - - - -Balance at 31 December 2006 11,390 173,305 25,973 2,381 8,762 221,811 3,830 225,641 For the six months ended 30 June 2007 Attributable Investment to equity Share Retained Capital revaluation Translation holders of Minority capital earnings reserves reserve reserve the parent interests Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Balance at 1 January 2007 11,390 173,305 25,973 2,381 8,762 221,811 3,830 225,641Gains on available for sale - - - 588 - 588 - 588investmentCurrency translation - - - - 4,399 4,399 -217 4,182adjustmentProfit for the period - 236,760 - - - 236,760 3,340 240,100Total income and expense for - 236,760 588 4,399 241,747 3,123 244,870the periodDividends - (7,073) - - - (7,073) - (7,073)Sale of minority interest - - - - - - 111,021 111,021Balance at 30 June 2007 11,390 402,992 25,973 2,969 13,161 456,485 117,974 574,459 Ocean Wilsons Holdings Limited Notes to the financial information 1 In respect of the six monthly results, which are based on unaudited reports for management purposes (i) The interim financial information is not the Company's statutory accounts. (ii) The auditors of the Company have not made any report thereon under section 90(2) of the Bermuda Companies Act.(iii) The interim financial information has been prepared in accordance with International Financial Reporting Standards ("IFRSs") with the exception of IAS 34 - Interim Financial Reporting. For these purposes, IFRS comprise the standards issued by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC"). The interim financial information has been prepared on the basis of accounting policies consistent with those applied in the financial statements for the year ended 31 December 2006. 2 Business and geographical segments Business segments For management purposes, the Group is currently organised into seven operating activities; towage, port terminals, ship agency, offshore logistics, investment and non-segmented activities. These divisions are the basis on which the Group reports its primary segment information. Segment information relating to these businesses is presented below. For the six months ended 30 June 2007 Non Port Ship Segmented Towage terminals agency Offshore Logistics Investment activities Elimination Consolidated six six six six six six six six six months months months months months months months months months to to to to to to to to to 2007 2007 2007 2007 2007 2007 2007 2007 2007 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Revenue 64,638 66,909 9,769 4,615 29,286 - 7,454 - 182,671 Inter-segment - - - - - - 18,526 (18,526) - sales 64,638 66,909 9,769 4,615 29,286 - 25,980 (18,526) 182,671 Result Segment 17,886 18,295 3,135 381 1,774 (236) 191,679 - 232,914 result Share of results - - - - - - - - - of associates Operating 17,886 18,295 3,135 381 1,774 (236) 191,679 - 232,914 profit Investment - - - - - 1,109 9,112 - 10,221 income Other gains - - - - - 9,946 - - 9,946 and losses Finance costs (1,023) (1,085) - (423) (203) - (80) - (2,814) Profit before 16,863 17,210 3,135 -42 1,571 10,819 200,711 - 250,267 tax Tax (10,167) Profit after 240,100 tax Other info rmation Capital (7,934) (8,678) (442) (9,232) (406) - (467) - (27,159) additions Depreciation and (3,109) (2,823) (324) (1,315) (281) - (436) - (8,288) amortisation Balance Sheet Assets Segment 96,992 147,970 6,927 49,635 10,838 90,912 389,645 - 792,919 assets Liabilities Segment (56,065) (48,282) (336) (57,379) (4,300) (919) (51,178) - (218,459) liabilities For the six months ended 30 June 2006 Non Port Ship Segmented Towage terminals agency Offshore Logistics Investment activities Elimination Consolidated six six six six six six six six six months months months months months months months months months to to to to to to to to to 2007 2007 2007 2007 2007 2007 2007 2007 2007 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Revenue 52,579 53,012 10,564 4,757 22,134 - 7,377 - 150,423 Inter segment - - - - - - 17,644 (17,644) - sales 52,579 53,012 10,564 4,757 22,134 - 25,021 (17,644) 150,423 Result Segment 13,271 11,788 2,830 263 1,206 (488) (5,130) - 23,740 result Share of results - - (50) - - - - - (50) of associates Operating 13,271 11,788 2,780 263 1,206 (488) (5,130) - 23,690 profit Investment - - - - - 527 6,568 - 7,095 income Other gains - - - - - 3,984 - - 3,984 and losses Finance costs (1,176) (516) (4) (456) (153) - (915) - (3,220) Profit before 12,095 11,272 2,776 (193) 1,053 4,023 523 - 31,549 tax Tax (7,674) Profit after 23,875 tax Other info rmation Capital (2,139) (7,865) (244) (8,132) (92) - (204) - (18,676) additions Depreciation and (3,366) (2,661) (282) (792) (239) - (198) - (7,538) amortisation Balance Sheet Assets Segment 96,848 118,276 6,802 41,377 8,180 74,853 20,295 - 366,631 assets Liabilities Segment (55,809) (45,375) (3,688) (39,286) (3,718) (2,757) (23,354) - (173,987) liabilities For the year ended 31 December 2006 Non Port Ship Segmented Towage terminals agency Offshore Logistics Investment activities Elimination Consolidated six six six six six six six six six months months months months months months months months months to to to to to to to to to 2007 2007 2007 2007 2007 2007 2007 2007 2007 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Revenue 118,817 127,436 17,778 8,356 49,250 - 12,472 - 334,109 Inter segment - - - - - - 18,489 (18,489) - sales 118,817 127,436 17,778 8,356 49,250 - 30,961 (18,489) 334,109 Result Segment result 31,363 39,391 8,743 1,102 4,186 (2,131) (21,171) - 61,483 Share of results - - (51) - - - - - (51) of associates Operating 31,363 39,391 8,692 1,102 4,186 (2,131) (21,171) - 61,432 profit Investment - - - - - 882 10,314 - 11,196 income Other gains and - - - - - 11,433 - - 11,433 losses Finance costs (2,346) (1,970) - (919) (200) - (979) - (6,414) Profit before 29,017 37,421 8,692 183 3,986 10,184 (11,836) - 77,647 tax Tax (20,765) Profit after 56,882 tax Other info rmation Capital (7,848) (14,221) (519) (15,680) (1,143) - (3,462) - (42,873) additions Depreciation and (3,366) (2,661) (282) (792) (239) - (198) - (7,538) amortisation Balance Sheet Assets Segment assets 103,133 132,893 8,216 43,063 11,173 82,392 28,809 - 409,679 Liabilities Segment (64,095) (46,268) (7,667) (42,039) (3,548) (2,374) (18,047) - (184,038) liabilities Finance costs and associated liabilities have been allocated to reportingsegments where interest costs arise from loans used to finance the constructionof fixed assets in that segment. Investment revenues arising on bank balances held in Brazilian operatingsegments, including foreign exchange on cash, has not been allocated to thebusiness segment as cash management is performed centrally by the corporatefunction. Profit on disposal of the Groups interest in WR Operadores Portuarias Ltda andthe release of surplus on acquisition of Brasco during 2006 has been recognisedin port operations. 3 Employee benefits expense Unaudited Unaudited Audited six months to six months to Year to 30 June 30 June 31 December 2007 2006 2006 US$'000 US$'000 US$'000 Aggregate remuneration comprised Wages and salaries 41,095 31,411 64,473 Share based payment expense 7,790 - 212 Social security costs 9,146 8,594 17,704 Other pension costs 636 445 836 58,667 40,450 83,225 4 Investment income Unaudited Unaudited Audited six months to six months to Year to 30 June 30 June 31 December 2007 2006 2006 US$'000 US$'000 US$'000 Interest on bank deposits 5,333 2,572 5,922 Exchange gains on cash 3,917 4,106 4,359 Dividends from trading investments 234 417 915 Investment revenues from underwriting 737 - - activities 10,221 7,095 11,196 5 Other gains and losses Unaudited Unaudited Audited six months to six months to Year to 30 June 30 June 31 December 2007 2006 2006 US$'000 US$'000 US$'000 Increase in fair value of trading 9,946 3,656 8,335 investments held at year end Profit on disposal of trading investments - 328 3,098 9,946 3,984 11,433 6 Finance costs Unaudited Unaudited Audited six months to six months to Year to 30 June 30 June 31 December 2007 2006 2006 US$'000 US$'000 US$'000 Interest on bank loans, overdrafts and other 3,103 3,149 5,492 Exchange gains on foreign currency borrowings (595) (723) (792) Interest on obligations under finance 123 510 489 leases Total borrowing costs 2,631 2,936 5,189 Derivative 183 284 1,225 costs 2,814 3,220 6,414 Derivative costs represent the settlement of derivative contracts and the movement in the fair value of derivatives during the year. 7 Taxation Unaudited Unaudited Audited six months to six months to Year to 30 June 30 June 31 December 2007 2006 2006 US$'000 US$'000 US$'000 UK corporation tax 373 - - Overseas tax 9,794 7,674 20,765 10,167 7,674 20,765 8 Disposal of minority interest On April 30 2007 the Group sold a 37.11% minority interest in Wilson Sons Limited. On 31 May 2007 the Group sold a further 4.64% minority interest. The total cash consideration received for the 41.75% minority interest in Wilson Sons Limited was US$ 324.7 million Gross proceeds 348,678 Less costs of disposal (23,990) Net proceeds 324,688 Net proceeds received by Ocean Wilsons Holdings Limited 205,615 Net proceeds received by Wilsons Sons Limited 119,073 Total 324,688 Net proceeds received by Wilson Sons Limited arise from new shares issued which is deemed a disposal. Net assets sold at 41.75% Book value US$'000 Goodwill 5,413 Property, plant and equipment 77,129 Available for sale investments 2,194 Other non-current assets 4,919 Inventories 3,437 Trade and other receivables 25,974 Cash and cash equivalents 68,557 Trade and other payables (26,265) Bank overdrafts and loans (47,508) Other liabilities (2,829) Net assets disposed of (proportional 41.75%) 111,021 Total consideration satisfied by cash 324,688 Gain on disposal 213,667 9 Notes to the cash flow statement six six months months Year to to to 30 June 30 June 31 December 2006 2006 2005 Reconciliation from profit before tax to net cash from US$'000 US$'000 US$'000 operating activities Profit before tax 250,267 31,549 77,648 Less: investment revenues (10,221) (7,095) (11,196) Less: other gains and losses (9,946) (3,984) (11,433) Add: finance costs 2,814 3,220 6,414 Operating profit 232,914 23,690 61,433 Adjustments for: Depreciation of property, plant and equipment 8,158 7,406 14,822 Amortisation of intangible assets 130 132 278 Gain on disposal of property, plant and equipment (534) (113) (435) Profit on disposal of minority interest (213,667) - - Profit on disposal of joint venture and associate - (3,107) (2,965) Release of surplus on acquisition of interest in - (1,396) (1,433) subsidiary Share of loss of associate - 50 51 (Decrease )/Increase in provisions (100) 1,591 1,596 Operating cash flows before movements in working capital 26,901 28,253 73,347 Increase in inventories (2,065) (476) (392) Increase in receivables (11,174) (4,428) (9,589) Increase /(decrease) in payables 21,197 1,698 (43) Increase in other non-current assets (1,905) (1,599) (2,152) Cash generated by operations 32,563 23,448 61,171 Income taxes paid (13,605) (6,666) (17,508) Interest paid (2,671) (3,220) (6,424) Net cash from operating activities 16,678 13,562 37,239 10 The interim dividend of 4.00 cents per share will be paid on the 28 September 2007, to shareholders on the register at close of business on 7 September 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Ocean Wilsons