Ocean Wilsons Hldgs - Preliminary Results

Ocean Wilsons Holdings Limited ("Ocean Wilsons" or the "Company") today announces its preliminary results for the year ended 31 December 2018.

Highlights

?       Revenue in Brazilian Real terms grew 6%. In US dollars reported sales were 7% lower at US$460.2 million (2017: US$496.3 million).

?       Operating profit fell 9.1% to US$99.5 million (2017: US$109.5 million) mainly due to lower revenue and softer operating margins at our towage business.

?       Operating margins* were a healthy 21.6%, albeit slightly lower than the prior year (2017: 22.1%) due to poorer towage margins.   

?       Net cash inflow from operating activities for the year of US$113.7 million (2017: US$103.0 million). 

?       The Investment portfolio (including cash under management) decreased US$15.8 million to US$258.9 million (2017: US$274.7 million).

?       Proposed dividend unchanged at 70 cents per share (2017: 70 cents per share).

?       EPS fell to 37.6 cents per share (2017: 221.5 cents per share) due to a fall in value of the investment portfolio, lower operating profit, foreign exchange losses and a reduction in the share of results from joint ventures.

 

About Ocean Wilsons Holdings Limited

Ocean Wilsons Holdings Limited ("Ocean Wilsons" or the "Company") is a Bermuda based investment holding company which, through its subsidiaries, operates a maritime services company in Brazil and holds a portfolio of international investments. The Company is listed on both the Bermuda Stock Exchange and the London Stock Exchange. It has two principal subsidiaries: Wilson Sons Limited and Ocean Wilsons (Investments) Limited (together with the Company and their subsidiaries, the "Group").

Wilson Sons Limited ("Wilson Sons") is a Bermuda company listed on the São Paulo Stock Exchange (BOVESPA) and Luxembourg Stock Exchange. Ocean Wilsons holds a 58.17% interest in Wilson Sons which is fully consolidated in the Group accounts with a 41.83% non-controlling interest. Wilson Sons is one of the largest providers of maritime services in Brazil, with over four thousand employees and activities including harbour and ocean towage, container terminal operation, offshore oil and gas support services, small vessel construction, logistics and ship agency. Ocean Wilsons (Investments) Limited is a wholly owned Bermuda investment company and holds a portfolio of international investments.

Objective

Ocean Wilsons is run with a long-term outlook. This applies to both the investment portfolio and our investment in Wilson Sons. The long-term view taken by the Board enables Wilson Sons to grow and develop its businesses without pressure to produce short-term results at the expense of long-term value creation. The same view allows our Investment Manager to make investment decisions that create long-term capital growth.

 Chairman's Statement

Introduction

In a highly competitive environment the Group's overall performance in 2018 has been robust. Revenue in Brazilian Real "BRL" terms grew 6% in the year however revenue growth was affected by lower towage revenue and the higher average US Dollar "USD" USD/BRL exchange rate. The key operational indicators at our container terminals increased against 2017 comparative while our towage and offshore businesses both fell due to strong market competition and the weak offshore oil and gas market.

 

Operating volumes

2018

2017

% Change

Container Terminals

 

 

 

(container movements in TEU '000s) *

1,072.7

1,068.1

0.4%

Towage

 

 

 

(number of harbour manoeuvres performed)

56,114

59,796

(6.2%)

Offshore Vessels (days in operation)

5,126

6,035

(15.1%)

Group Results


Operating profit at US$99.5 million was US$10.0 million lower than prior year (2017: US$109.5 million) largely due to a decrease in revenue and softer operating margins at our towage business. Group operating margins for the year remained healthy at 21.6% although lower than prior year (2017: 22.1%) principally due to the poorer margins at our towage business.
 In BRL terms revenue for the year grew 6% however due to the impact of lower towage revenue and a higher average USD/BRL exchange rate, group revenue in USD terms fell 7% to US$460.2 million (2017: US$496.3 million). Profit before tax for the year decreased US$85.3 million to US$60.2 million compared to US$145.5 million in 2017. The decrease in profit before tax resulted from a US$50.0 million negative movement in returns on the investment portfolio at fair value through the profit and loss, a US$8.5 million foreign exchange loss on monetary items (2017: US$2.8 million gain), the US$10.0 million decrease in operating profit and a US$7.5 million negative movement in share of results from joint ventures. Earnings per share for the year were 37.6 cents compared with 221.5 cents in 2017.

Net asset value

At the close of business on 31 December 2018, the Wilson Sons' share price was R$40.00, resulting in a market value for the Ocean Wilsons holding of 41,444,000 shares (58.17% of Wilson Sons) totalling approximately US$428.4 million which is the equivalent of US$12.11 (£9.50) per Ocean Wilsons share.

Adding the market value per share of Wilsons Sons of US$12.11 and the investment portfolio at 31 December 2018 per share of US$7.32 results in a net asset value per Ocean Wilsons Holdings Limited share of US$19.43 (£15.24) per share. The Ocean Wilsons Holdings Limited share price of £11.75 at 31 December 2018 represented an implied discount of 23% which is lower than the historic long-term discount.

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2018

 

 

 

Year to

Year to

 

 

31 December

31 December

 

 

2018

2017

 

Notes

US$'000

US$'000

Revenue

3

460,196

496,340

Raw materials and consumables used

 

(38,128)

(37,679)

Employee benefits expense

6

(146,327)

(166,395)

Depreciation & amortisation expense

5

(56,178)

(57,481)

Other operating expenses

 

(119,767)

(122,310)

Loss on disposal of property, plant and equipment

 

(296)

(2,930)

Operating profit

 

99,500

109,545

Share of results of joint venture

17

(4,062)

3,366

Returns on investment portfolio at fair value through profit and loss

 7

(7,942)

42,064

Other investment income

8

4,152

9.715

Finance costs

9

(22,951)

(21,976)

Foreign exchange (losses)/gains on monetary items

 

(8,459)

2,750

Profit before tax

5

60,238

145,464

Income tax expense

10

(26,433)

(36,056)

Profit for the year

5

33,805

109,408

Other comprehensive income:

 

 

 

Items that will never be reclassified subsequently to profit and loss

 

 

 

Post-employment benefits

 

(187)

(374)

Exchange differences arising on translation of foreign operations

 

(39,336)

(6,485)

Items that are or may be reclassified subsequently to profit and loss

 

 

 

Effective portion of changes in fair value of derivatives

 

542

557

Other comprehensive expense for the year

 

(38,981)

(6,302)

Total comprehensive (expense)/income for the year

 

(5,176)

103,106

Profit for the period attributable to:

 

 

 

Equity holders of parent

 

13,308

78,315

Non-controlling interests

 

20,497

31,093

 

 

33,805

109,408

Total comprehensive (expense)/income for the period attributable to:

 

 

 

Equity holders of parent

 

(9,278)

74,667

Non-controlling interests

 

4,102

28,439

 

 

(5,176)

103,106

Earnings per share

 

 

 

Basic and diluted

12

37.6c

221.5c

 

Dividend

The Board is recommending an unchanged dividend of 70 cents per share to be paid on 7 June 2019, to shareholders of the Company as of the close of business on 10 May 2019. At the current exchange rate this represents approximately a 5% increase in Sterling terms over the 2017 dividend. Shareholders will receive dividends in Sterling by reference to the exchange rate applicable to the USD on the dividend record date (10 May 2019) except for those shareholders who elect to receive dividends in USD. Based on the current share price and exchange rates a dividend of 70 cents per share represents an attractive dividend yield of approximately 4.7%.

Dividends are set in US Dollars and paid annually. The Ocean Wilsons Holdings Limited dividend policy is to pay a percentage of the average capital employed in the investment portfolio determined annually by the Board and the Company's full dividend received from Wilson Sons in the period after deducting funding for the parent company costs. The Board of Directors may review and amend the dividend policy from time to time in light of our future plans and other factors.

Strategic review

On 17 July 2018 we announced that our principal operating subsidiary, Wilson Sons Limited made the following announcement to the Brazilian and Luxembourg Stock Exchanges.

"Wilson Sons Limited (B3: WSON33) ("Wilson Sons" or "Company") informs the market that the Board of Directors of the Company approved on 16 July 2018 the start of a formal process involving its investments in container terminal and logistics assets. The process is part of the evaluation of strategic alternatives that is being carried out by the management of the Company which may include the divestment of such assets, as well as attracting strategic partners. The Company informs that no final decision has yet been taken with respect to pursuing any such alternatives and there can be no certainty that any transaction will occur.

The Company will keep its shareholders and the market informed about the development of such analysis, in compliance with the provisions of Law 6,404, dated 15 December 1976, as amended, and the Resolution 358 issued by the Brazilian Securities and Exchange Commission ("CMV"), dated 3 January 2002, as amended.

As can be seen from the Wilson Sons announcement, no agreement has been entered into by Wilson Sons in relation to the container terminal and logistics assets and there can be no certainty that any transaction will be entered into.  A further announcement will be made in due course, if it is appropriate to do so."

The Company advises that no final decision has yet been taken by Wilson Sons Limited with respect to pursuing any such alternatives and there can be no certainty that any transaction will occur.

Outlook

Economists are expecting the economic recovery in Brazil to accelerate in 2019 as the new government's more pro-business stance helps boost economic growth. Following receipt of the necessary environmental licenses, we started work on the expansion of the Tecon Salvador container terminal in 2018 which is forecast for completion in the second half of 2020. The completed terminal expansion will further develop and improve this important asset and enhance our operational capability. Demand at our container terminals business remains firm with volumes expected to be in line with 2018. Competition in the Brazilian towage market remains strong, however we remain confident in the strength of our business to face these challenges. The Brazilian offshore oil and gas market is expected to face another difficult year with demand for both offshore vessel hire and new vessel construction remaining sluggish although we continue to explore alternative revenue streams for our off-hire supply vessels. Two new contracts for the PSVs Fulmar and Ostreiro to provide shallow-water diving support services are scheduled to start in March 2019. The shipyard orderbook consists of one 90-tonne bollard pull tugboat for our fleet to be delivered in 2019. There are also 22 scheduled dry-dockings consisting of 11 tugboats for Wilson Sons, 10 tugboats for third parties and one PSV for our offshore joint venture. While the Group faces a number of challenges in 2019 we are confident in the resilience of our Brazilian businesses and the solid performances delivered over many years gives us encouragement that we are well placed to face the coming challenges and take advantage of business opportunities as they arise.