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Ocean Wilsons Holdings Ltd - Quarterly Update

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Ocean Wilsons Holdings Limited

Quarterly Update

Ocean Wilsons Holdings Limited (LSE: OCN) today announces its first quarter update for 2020. 

Our Operations

Ocean Wilsons Holdings Limited ("Ocean Wilsons" or the "Group") is a Bermudian investment holding company which holds a portfolio of international investments, and through its subsidiary, Wilson Sons Limited ("Wilson Sons"), controls a maritime services and logistics company in Brazil.

The CEO of Wilson Sons operations in Brazil, Cezar Baião, stated:

"Wilson Sons reports 1Q20 EBITDA of US$36.1 million, a 3.3% decrease in US$ terms from 1Q19, but a 14.4% increase in BRL terms.

  • 1Q20 results were little impacted by the effects of Covid-19 on trade flows, although 2Q20 expectations are significantly lower, with our April container terminal and towage volumes already down 7.2% and 5.6% respectively compared with April 2019.
  • Liquidity remains strong with US$96.8 million in cash at the quarter end.
  • 1Q20 loss after tax of US$7.8 million due to negative exchange rate effects totalling US$14.4 million.  Excluding foreign currency movements, Wilson Sons would show a profit after tax of US$6.6 million.

While our 1Q20 results suffered little impact from the Covid-19 outbreak, the demand outlook heading into 2Q20 has been deteriorating sharply, with our April container terminal and towage volumes already down 7.2% and 5.6% respectively. This reflects the lockdown strategy in many countries and will take some months to stabilise. The World Trade Organization predicts that global trade flows may contract between 13% and 32% in 2020, reflecting continuing uncertainties in forecasting the effects of the worldwide pandemic. Also, the recent oil price shock will delay the recovery in offshore oil and gas support services. In light of such circumstances, we are continuously assessing the potential impacts on our businesses and remain confident in their resilience as demonstrated in other volatile periods such as the 2008 financial crisis.

In view of the rapid spread of the virus, we are taking significant precautions to ensure the health, safety and well-being of our employees, clients and other stakeholders. To date we have been successful in keeping all our business activities operational. This has been made possible by the flexibility, commitment and courage of our more than 4,300 active employees.

We have also taken immediate austerity measures to safeguard the financial strength and resilience of our business. In order to preserve a robust cash flow through this global crisis we are actively pursuing several operational and financial initiatives to further increase our liquidity, including reduction in our capital spend and operating expenses. The Company currently has material headroom in its bank covenants.

In what is a challenging environment for world trade we reaffirm our commitment to the safety and well-being of our employees, clients, suppliers and the communities where we operate to ensure the continuity of the essential services we provide, connecting Brazil with its trading partners to meet the urgent needs of society, as well as ensuring support to the country's offshore oil and gas industry. All our operations and facilities are applying the more rigorous health and safety protocols established by Brazilian authorities and agencies, and we are closely monitoring the evolution of the disease in the country."

Financial Results

Group revenue for the three months ended 31 March 2020 was 9% lower at US$91.1 million (2019: US$100.5 million). Results in the first quarter were minimally impacted by the effects of Covid-19 on trade flows. Port terminal and logistics revenue was 21% lower at US$47.5 million (2019: US$60.3 million) principally due to a higher average USD/BRL exchange rate in the period and lower offshore support base and logistics revenue. The average USD/BRL exchange rate in the period at 4.47 was 19% higher than the comparative period (2019: 3.77). Container volumes in the period at 243,900 TEUs were in line with the prior year (2019: 244,100 TEUs). Towage and ship agency revenue for the quarter was 11% higher at US$42.9 million (2019: US$38.6 million) due to improved pricing and higher special towage operations revenue. Harbour towage manoeuvres decreased 3% to 12,540, (2019: 12,926). Shipyard revenue fell US$0.9 million to US$0.7 million (2019: US$1.6 million).

Wilson Sons EBITDA for the first quarter was 3% lower than 2019 at US$36.1 million (2019: US$37.3 million). The decrease in EBITDA is largely due to a decrease in offshore support base and logistics results.

Wilson Sons made a loss after tax for the first quarter of US$7.8 million (2019: US$6.4 million profit) after exchange losses on translation of US$13.2 million (2019: US$0.5 million).

Covid-19

While we are starting to see the first impacts from the Covid-19 pandemic on our businesses the outlook remains uncertain and is changing rapidly. As previously announced the Board has withdrawn its market guidance and outlook statements for 2020 until both the impact and duration of the pandemic becomes clearer.

Since January 2020 Wilson Sons have been implementing several measures and protocols to ensure (i) the health, safety and well-being of their employees, clients and other stakeholders, (ii) the continuity of all their operations safely, and (iii) the financial strength and resilience of our business. A Covid-19 crisis committee has been created to manage risks and responses in alignment with the interests of all stakeholders.

Wilson Sons has published a Covid-19 and oil price impact assessment in their earnings release for the quarter ended 31 March 2020 which was announced to the São Paulo and Luxembourg Stock exchanges on the 14th May 2020. The full announcement is available on the Wilson Sons website (www.wilsonsons.com.br) and at the Brazilian stock exchange website.

Ocean Wilsons and our investment managers, Hanseatic Asset Management LBG continue to work remotely to ensure the health and safety of our/their employees whilst ensuring the continuity of operations.

Investment Portfolio

At 30 April 2020, the investment portfolio including cash under management amounted to US$265.7 million (31 December 2019: US$285.3 million). The investment portfolio has bounced back from the weakness exhibited in March.  Having fallen by 10.9% in the quarter to the end of March the portfolio rebounded by 4.6% in April taking the year-to-date return to -6.8%.  This compares to a fall of 13.0% for the MSCI World index over the same period.

Net asset value

At the close of markets on 30 April 2020, the market value of the Ocean Wilsons holding of Wilson Sons totalled approximately US$218.1 million which is the equivalent of US$6.17 (£4.90) per Ocean Wilsons share. The investment portfolio of US$265.7 million represents US$7.51 (£5.97) per Ocean Wilsons share. Adding the market value per share of Wilsons Sons and the investment portfolio results in a net asset value per Ocean Wilsons share price of US$13.68 (£10.87) per share. The Ocean Wilsons share price of £6.75 at 30 April 2020 represented an implied discount of 38%.