Interim / Quarterly Report • Aug 17, 2015
Interim / Quarterly Report
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RNS Number : 1934W
Ocean Wilsons Holdings Ld
17 August 2015
Ocean Wilsons Holdings Limited
Interim Management Statement for the six months ended 30 June 2015
Ocean Wilsons Holdings Limited ("Ocean Wilsons" or the "Company") today provides its interim management statement for the six months ended 30 June 2015.
Key points
· Operating profit up 53% to US$52.5 million (2014: US$34.3 million).
· Net cash inflow from operating activities increased significantly to US$89.1 million (2014: US$26.7 million).
· The Brazilian Real depreciated 17% in the period against the US Dollar at period end and the average US Dollar / Brazilian Real exchange rate in the period at 2.97 was 29% higher than the comparative period in 2014 of 2.30.
· Revenue in US Dollar terms 10% lower at US$269.4 million (2014: US$299.9 million) impacted by the lower Brazilian Real.
· Earnings of 33.8 cents per share (2014: 82.2 cents) impacted by the lower period end Brazilian Real.
· Dividends paid to shareholders in the period of US$22.3 million (2014: US$21.2 million).
Chairman's Statement
Introduction
The Group delivered a good operating result for the first half of 2015 despite the difficult economic environment in Brazil. Operating profit grew 53% to US$52.5 million (2014: US$34.3 million) driven by improved operating margins, (helped by the weaker Brazilian Real "BRL") and higher towage volumes. The improved operating profit was reflected in strong cash generation, with net cash inflows from operating activities for the period of US$89.1 million (2014: US$26.7 million). On the negative side the depreciation of the BRL against the US Dollar "USD" affected both our revenue in USD terms and bottom line earnings in the period. Although Group revenue grew 18% in BRL terms, in USD terms, revenue was 10% lower at US$269.4 million (2014: US$299.9 million).The investment portfolio returned 2.2% in the period.
Group Results
Operating Profit
Operating profit for the period at US$52.5 million was US$18.2 million higher than the comparative period in 2014 (US$34.3 million) principally due to improved operating margins. Operating margins for the period at 19% were 8% higher than the comparative period in 2014 (2014: 11%), mainly due to the higher average USD / BRL exchange rate impacting BRL denominated costs when converted into our USD reporting currency. Employee expenses at US$81.8 million (2014: US$101.8 million) were 20% lower and other operating expenses at US$73.1 million (2014: US$92.1 million) 21% lower than prior period. In addition to the exchange rate effect on these costs, other operating expenses decreased due to reductions in costs associated with discontinued logistics operations while employee expenses benefitted from a reduction in headcount, mainly at our logistics and terminal businesses and lower bonus payments. The depreciation and amortisation expense in the period decreased US$2.8 million to US$28.9 million from US$31.7 million in 2014 as a result of the weaker BRL and changes to the Tecon Rio Grande quay depreciation policy. Following an independent review the Group increased the remaining economic useful life of the quay and other improvements at Tecon Rio Grande from 25 years to between 25 and 40 years. As a result of these changes, the depreciation expense for the period is US$1.5 million lower. Towage margins further benefitted from an increase in high margin special operations and higher turnover.
Revenue
Group revenue for the six months ended 30 June 2015 was 10% lower at US$269.4 million (US$299.9 million) principally due to a decrease in our port terminal and logistics revenue. Port Terminal and logistics revenue fell 21% to US$121 million (2014: US$152.8 million) mainly due to the higher average USD/BRL exchange rate used to convert revenue into our reporting currency. In addition to the adverse currency effect, revenue in the period was impacted by a reduction in vessel turnarounds at our offshore oil and gas support base, Brasco, and the effect of our withdrawal from lower margin logistic contracts. Container volumes handled at Tecon Rio Grande and Tecon Salvador for the period at 481,600 TEUs (twenty-foot equivalent units) were marginally lower than prior year (2014: 489,300 TEUs) although volumes in the second quarter were ahead of prior year, with improvements in both export and cabotage movements.
Towage and ship agency revenue grew 4% in the period to US$115.3 million (2014:US$110.5 million) benefitting from the new harbor towage operations started in 2014 and increased special operations. Towage and ship agency revenue is less sensitive to movements in the USD/BRL exchange rate as approximately 75% of towage and ship agency pricing is denominated in USD. Shipyard revenue at US$33.2 million (2014: US$36.6 million) was adversely impacted by the lower BRL and a US$1.5 million contractual penalty relating to vessel construction.
Share of results of joint ventures
The share of results of joint ventures is Wilson Sons' 50% share of net profit for the period from our offshore support vessel joint venture. Net profit attributable to Wilson Sons increased US$0.5 million to US$2.1 million (2014: US$1.6 million). Operating profit for the joint venture in the period was US$22.0 million compared to US$18.3 million in the comparative period in 2014.
Investment revenues
Investment revenues at US$7.9 million were U$0.8 million higher than prior period (2014: US$7.1 million) due to higher interest on bank deposits.
Investment gains and losses
Other gains of US$3.4 million (2013: US$7.3 million) arise from the Group's portfolio of trading investments and reflect the profit realised on disposal of trading investments in the period plus the movement in the fair value of trading investments at period end.
Finance costs
Finance costs increased US$18.6 million from US$2.0 million to US$20.6 million for the period mainly as a result of exchange losses on foreign currency borrowings of US$13.8 million (2013: US$4.5 million gain).
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 can impact the Group both positively and negatively from year to year. In the six months to 30 June 2015 the BRL depreciated 17% against the USD from R$2.66 at 1 January 2015 to R$3.10 at the period end. In the comparative period in 2014 the BRL appreciated 6% against the USD from R$2.34 to R$2.20.
The principal effects from the movement of the BRL against the USD on the income statement are:
| 2015 | 2014 | |||||
| US$ million | US$ million | |||||
| Exchange (losses) / gains on monetary items (i) | (6.5) | 9.3 | ||||
| Exchange (loss) / gain on foreign currency borrowings | (13.8) | 4.5 | ||||
| Deferred tax on retranslation of fixed assets (ii) | (12.5) | 10.8 | ||||
| Deferred tax on exchange variance on loans (iii) | 12.5 | (4.9) | ||||
| Total | (20.3) | 19.7 |
(i) This arises from the translation of BRL denominated monetary items in USD functional currency entities.
(ii) The Group's fixed assets are located in Brazil and therefore future tax deductions from depreciation used in the Group's tax calculations are denominated in BRL. When the BRL depreciates against the US Dollar the future tax deduction in BRL terms remain unchanged but is reduced in US Dollar terms.
(iii) Deferred tax credit arising from the exchange losses on USD denominated borrowings in Brazil.
The average USD/BRL exchange rate in the period was 29% higher at 2.97 (2014: 2.30). A higher average exchange rate adversely impacts BRL denominated revenues and benefits BRL denominated costs when converted into our reporting currency.
Foreign exchange gains on monetary items
Foreign exchange losses on monetary items of US$6.5 million (2014: US$9.3 million gain) arose from the Group's foreign currency monetary items and principally reflect the depreciation of the BRL against the USD during the period. In the comparative period in 2014, the Brazilian Real appreciated against the US Dollar generating an exchange gain.
Profit before tax
Profit before tax of US$38.9 million was US$18.7 million lower compared to the first half of 2014 (US$57.6 million), principally due to a US$15.7 million movement in exchange losses on monetary items and a US$18.7 million increase in finance costs. These gains were partially offset by the US$18.2 million increase in operating profit.
Taxation
The tax charge for the period at US$19.7 million was US$8.3 million higher than the comparative period in 2014 (US$11.4 million) due to a higher current tax charge and a deferred tax charge of US$0.3 million against a deferred tax credit in 2014 of US$3.1 million. The deferred tax credit in the 2014 is principally due to the effect of exchange movements on the retranslation of non-current assets caused by the appreciation of the BRL against the USD at period end and reflects the difference between the historical USD denominated property, plant and equipment balances recorded in the Group's accounts and the BRL denominated property, plant and equipment balances used in the Group's Brazilian tax calculations. In 2015 the deferred tax charge arising on the retranslation of non-current asset values caused by the depreciation of the BRL against the USD at period end of US$12.5 million (2014: US$10.8 million) was offset by a deferred tax credit arising from exchange losses on loans of US$12.5 million (2014: US$4.9 million charge).
The effective tax rate in the period of 51% (2014: 20%) is higher than the corporate tax rate prevailing in Brazil of 34% principally due to expenses that are not included in determining taxable profit.
Period for the period
Profit attributable to equity holders of the parent is US$12.0 million (2014: US$29.1 million) after deducting profit attributable to non-controlling interests of US$7.2 million (2014: US$17.2 million).
Earnings per share for the period was 33.8 cents (2014: 82.2 cents).
Investment portfolio performance
The trading investment portfolio and cash under management at 30 June 2015 amounted to US$248.5 million, compared with US$251.7 million at the 31 December 2014, a decrease of US$3.2 million. The decrease is primarily due to dividends paid in the period of US$7.0 million to the parent company, Ocean Wilson Holding Limited, principally to fund the 2014 final dividend payment to shareholders.
Cash flow and debt
Net cash inflow from operating activities for the period was up US$62.5 million to US$89.1 million compared with US$26.7 million in the same period last year, reflecting the improved operating profit performance and positive working capital movements in the period. Operating cash flow for the comparative period in 2014 was adversely impacted by a significant decrease in trade payables due to the final payment relating to the Brasco Caju acquisition and the termination of the Wilson Sons Limited cash settled long-term incentive plan.
Capital expenditure for the period at US$32.7 million was US$24.9 million lower than the comparative period in 2014 (US$57.6 million). Capital expenditure was mainly invested in the expansion of the Brasco Caju offshore support base and towage vessel construction. The Group's borrowings (including obligations under finance leases) at 30 June 2015 were US$372.9 million (31 December 2014: US$399.9 million) with capital repayments on existing loans in the period of US$28.9 million (2013: US$20.3 million) and new bank loans raised of US$9.8 million (2014: US$18.9 million). New loans were raised to finance capital expenditure. The Group's borrowings do not include US$265.9 million (2014: US$257.4 million) of debt from the company's 50% share of borrowing in the Offshore Vessels joint venture.
Dividends of US$22.3 million were paid to shareholders in the period (2014: US$21.2 million) with a further US$13.3 million paid to non-controlling interests in our subsidiaries (2014: US$11.3 million).
At 30 June 2015 the Group had US$101.3 million in cash and cash equivalents (31 December 2014: US$103.8 million).
Net asset value
At the close of business on 5 August 2015, the Wilson Sons share price was R$30.54, resulting in a market value for the Ocean Wilsons holding of 41,444,000 shares (58.25% of Wilson Sons) totalling approximately US$363.3 million which is the equivalent of US$10.27 (£6.58) per Ocean Wilsons Holdings Limited share.
Adding together the market value per share of Wilsons Sons, US$10.27 and the investment portfolio per share of US$7.03 results in a net asset value per Ocean Wilsons Holdings Limited share of approximately US$17.30 (£11.09). The Ocean Wilsons Holdings Limited share price of £8.35 at 5 August 2015 represented an implied discount of 25%.
Dividend
The Board is not declaring an interim dividend. As stated in the 2012 annual report from 2013 onwards the Directors have decided to cease paying an interim dividend.
Outlook
The Shipyard order book includes six tugboats for the Wilson Sons Fleet and six Offshore Support Vessels for third-parties: including two OSRV´s (oil spill response vessel) for Oceanpact, two PSV's (platform supply vessels) for WSUT, one ROVSV (Remotely operated vehicle support vessel) for Fugro, and the completion of one OSRV (oil rig supply vessel) for SIEM Consub. Although the short-term outlook for the Brazilian economy continues to disappoint, we remain confident in the fundamental strengths and quality of our Brazilian business. The BRL has depreciated approximately 8% against the USD since the period end. If the continued weakness in the BRL is maintained at year end this will again negatively impact our bottom line earnings in the year.
Wilson Sons Limited
The Wilson Sons 2nd quarter 2015 Earnings Report released on 14 August 2015 is available on the Wilson Sons Limited website: www.wilsonsons.com:
In it Cezar Baião, CEO of Operations in Brazil said:
"Despite the weak Brazilian macroeconomic scenario, the second quarter of 2015 highlights the strength of our businesses linked to trade flows.
The evolution of the Towage and Offshore Support Vessels businesses is testament of our experience in these sectors and the quality of our operations which represent important differentiating factors in a competitive market. While the local market for Offshore Vessels is currently under pressure, we are confident Petrobras will continue to prioritise existing Brazilian flag vessels in 2015. These facts together with general efficiencies contributed to results as we continue to benefit from our diversified business portfolio.
This solid operating result has driven increased free cash flow. In the quarter the Company paid a record US$29 million dividend in reference to the 2014 results."
Investment Managers Report
Hanseatic Asset Management LBG, the manager of the Group's investment portfolio reports as follows:
MARKET COMMENTARY
Sell in May and Go Away; Come Back on St Leger Day?
The old stock market adage of 'Sell in May and go away; come back on St Leger Day' has a rather uncanny habit of being more right than not. Indeed, 2015 looks to be no different with world markets starting the year well but falling by some 2.3% in June (in Dollars). Underlying this, in the developed markets, the US, Europe and UK fell by 2.0%, 2.8% and 3.6% respectively in June. Emerging markets fared similarly, falling 2.6% over the period.
Whilst it is easy to blame this weakness on the current situation in Greece, which failed to repay its IMF loan and voted against the proposed rescue package from the European Union, we should be mindful that we are not missing a more significant, sinister turn in world stock markets.
On the face of it there is cause for concern. World markets have now been in a bull market for over 6 years, which is long in the tooth versus past recoveries, which typically last some 3.8 years. Greece is not large enough to cause a systemic risk to global markets, with its population being a similar size to the state of Ohio, but what it could do is create some dangerous precedents. If it were to leave the Euro, this would signal that membership is not forever and potentially open the door to other weak countries, such as Spain, Italy and even France, departing in the future.
China is bubbling away in the background. Its domestic equity market has started to fall sharply having been in a raging bull market for the past year. Since rising 150% over twelve months to its peak in June, the market has since fallen by 30%. To some degree this rise was justified by growth, which, whilst declining, is still high by global standards. However, there is also a fear that the relaxation in individual dealing rules, combined with cuts in interest rates, had created an unsustainable bubble that is starting to unravel. China is helped by the fact that it is a command economy, with its government exerting far more power than a typical developed market government, but even so the market looks vulnerable until past excesses work their way out of the system.
Even more worrying, the liquidity picture is also turning. In response to the global financial crisis of 2007-8 central banks engaged in a process of aggressively cutting interest rates and buying back government bonds through quantitative easing (QE) programmes. This largely failed its first objective of encouraging banks to lend out their excess cash to stimulate growth but it did encourage investors to move up the risk spectrum in the pursuit of higher returns and yield.
We are conscious that central banks in the US and UK are toying with the idea of increasing rates either later this year or early in 2016, and the potential impact of this on markets. Different countries are at different stages in their QE programmes (with both Europe and Japan late to the party) but it is generally the direction of travel and the prospect of change that influence markets.
All of this begs the question as to whether or not we should be selling riskier assets such as equities and switching into more defensive assets and cash?
The key to this question is market valuation. Valuations, especially when they are either very high or very low, are one of the most important drivers of long-term returns. Whilst valuations have undoubtedly risen from their lows of 2009, they are still not in the danger zone. Certainly they are on watch but we do not see them necessarily limiting further progress at current levels.
Elsewhere, we acknowledge that, whilst the advent of interest rate rises in the US and UK may cause some unease, just as the prospect of QE ending in 2013 led to the 'taper tantrum' sell-off, we do not see this event as terminal for markets in its early stages. Rather, we would view the change in policy as confirmation that economies are normalising and that economic growth is finally becoming entrenched. Indeed we view this as positive at the outset with it hopefully presaging company profit growth which helps ensure that valuations do not tip into expensive territory.
Activity in corporate Mergers & Acquisitions (M&A) is also on the up. Again, at extremes, this might indicate market excesses, but in the early stages, and where there is a sound corporate rationale behind the deals, it suggests a shift towards expansion and growth, highlighting that confidence is picking up. It is also notable that lending by banks in the US and Europe is beginning to pick up.
Overall then, we view a business cycle that is maturing but still not excessive, with equities remaining the asset class of choice. Your Fund is positioned accordingly. We do recognise that it is now appropriate to start identifying assets that will help protect capital in the next downturn. Unfortunately, identifying such assets is no easy feat in the current market conditions.
Government bonds are less likely to perform their typical defensive role this time round with valuations of developed market bonds at multi-decade highs. Even if they outperform more risky asset in the short-term the danger is one of protracted poor performance as their yields normalise over time. Similarly, commodities and real estate, which often take different paths from equities, are not obviously safe havens now.
This leaves hedge funds which have a rather mixed record of protecting shareholder value. This probably reflects the fact that they should not be treated as a single asset class but rather as a number of different strategies, some of which do help to protect against a market setback.
Portfolio Construction
The net asset value at the end of June 2015 was $248.4m. The portfolio is comprised of four 'sub-portfolios' as detailed below:
| Sub-Portfolio | $m | % NAV |
| Global Equities | 146.4 | 58.9 |
| Private Assets | 76.6 | 30.8 |
| Market Neutral Funds | 13.6 | 5.5 |
| Bonds / Other | 11.8 | 4.8 |
| Total | $248.4m | 100.0% |
CUMULATIVE PORTFOLIO RETURNS
| Performance (Time-weighted) |
Q2 2015 |
YTD | 1 Year | 3 Year p.a. | 5 Year p.a. | 10 Year p.a. | Since Inception p.a. (i) |
| Portfolio Performance | 0.7% | 2.2% | 3.2% | 7.5% | 5.0% | 6.1% | 7.3% |
| Performance Benchmark (ii) | 1.8% | 3.1% | 3.1% | 4.3% | 4.8% | 5.1% | 5.2% |
| MSCI World (Developed) Index | 0.3% | 2.6% | 1.4% | 14.3% | 13.1% | 6.4% | 4.0% |
| MSCI All Country World Index (iii) | 0.3% | 2.6% | 0.7% | 13.0% | 11.9% | 6.4% | n/a |
| MSCI Emerging Markets Index | 0.7% | 2.9% | (5.1%) | 3.7% | 3.7% | 8.1% | 9.5% |
*Notes:
(i) Inception on 1 November 2000
(ii) The Performance Benchmark is US CPI plus 3% per annum, measured over rolling three-year periods. This was changed on 1 January 2015 from one-year US Dollar LIBOR (prevailing on 1 January each year) plus 2%.
(iii) MSCI All Country World Index includes Developed, Emerging and Frontier Markets (weighted by market capitalisation). Inception date for the index was 31 May 2002.
PORTFOLIO COMMENTARY
| Sub-Portfolio | Valuation | Weighting | Performance (Time-weighted) |
Contribution | Performance (Time-weighted) |
Contribution |
| 30 June 2015 | $m | % | Q2 2015 % | Q2 2015 $m | 6m 2015 % | 6m 2015 $m |
| Global Equities | 146.4 | 58.9 | 1.3 | 2.0 | 4.6 | 6.9 |
| Private Assets | 76.6 | 30.8 | 0.4 | 0.3 | (1.3) | (1.0) |
| Market Neutral Funds | 13.6 | 5.5 | (1.5) | (0.2) | 2.7 | 0.2 |
| Bonds / Other | 11.8 | 4.8 | (1.3) | (0.2) | (2.6) | (0.5) |
| Total | $248.4m | 100.0% | 0.7% | $1.9m | 2.2% | $5.6m |
The portfolio gained 0.7% in the second quarter, resulting in a time-weighted return of 2.2% for the first half of the year. This performance compares to the Performance Benchmark, which rose by 1.8% over the quarter, and 3.1% over the year. The Fund outperformed the MSCI All Country World Index over the quarter by 0.4%, but lags the 2.6% rise of the Index year-to-date.
Japan was a notable area of outperformance in the second quarter, with the portfolio's exposure rising by 12.9% versus the Index, which rose by 3.1%. Several factors have supported the current rally in Japanese equities. Notably, corporate governance has improved and corporate profitability has surged. Inflation is increasing, with wage rises finally starting to come through, and growing evidence points to a more serious attitude of the government towards reform. On the back of these factors, investors have flooded back to the market, driving performance. On a year-to-date basis, the portfolio's Japan exposures generated 16.0%, versus the index at 13.6%. Over the quarter, JO Hambro Japan was the largest contributor to performance, up 12.0%, and benefiting significantly from the hedged share class.
The portfolio's exposure to Europe had a muted quarter, rising by 0.9%, slightly ahead of the Index which rose by 0.4%. However, on a year-to-date basis, the portfolio's European exposure has generated exceptional performance, rising by 15.3% versus the Index at 3.8%. Outstanding returns have come from the Fund's two core European holdings, Adelphi European Select Equity Fund (up 16.0% year-to-date) and BlackRock European Hedge Fund (up 14.6% year-to-date), who continue to demonstrate an impressive ability to navigate the markets. Global Developed holdings, with a significant weighting in Europe also produced strong returns over the quarter, in particular, Lansdowne Global Developed Markets Fund (+5.3%) and Odey Absolute Return Fund (+5.0%). Despite bouts of volatility, fundamentals across Europe have continued to improve domestically and the threat of systemic risk in the European banking system appears to be behind us.
It is worth noting that by the end of the period, the portfolio's direct exposure to Commodity Equity was reduced to zero (albeit from a low base to begin with), following the sale of Schroder ISF Global Energy Fund. Commodity Equity experienced a strong comeback over the second quarter, with gains of 19.7%, as the oil price showed further signs of stabilising following a tumultuous start to the year.
It was a mixed quarter for Asian equities. The rally which began in Chinese equities in 2014, continued through the first five months of the year, particularly in the domestic A-Share market which peaked in early June. However, a significant amount of margin financing had been adopted and as the risks of leverage came to the forefront, the government attempted to reduce the margin financing in the system, causing a forced sale of equities and a subsequent plunge in the markets. The portfolio's exposure to Asia Pacific equities (ex-Japan) fell by 4.2% over the quarter, resulting in an overall loss of -3.1% year-to-date. A notable detractor to performance was NTAsian Discovery Fund, which fell by 4.5% in the quarter. With only a small exposure to the markets which have been experiencing liquidity driven rallies (notably India, China and Hong Kong), performance has lagged for the majority of the year. However, the fund suffered in May following a significant fall of c15% in one of its positions, after a report was released suggesting accounting irregularities. Following further due diligence, the underlying manager believes these claims are unfounded.
Whilst the United States has been hailed as a key engine of growth, driving the global recovery, the second quarter presented a more challenging picture. A key factor in the apparent 'brake' to the US economy has been the strengthening US Dollar, with exports detracting 1-2% from sequential annualised GDP growth in the last two quarters. The energy sector has also been a drag on performance. It is estimated that approximately 150,000 employees have been laid off in the sector over the last six to nine months, and it is speculated that the multiplier effect is two to four times that. In light of this, the portfolio's North American exposure posted a small loss for the quarter (-0.6%), however, year-to-date, a positive return of 1.4% has been generated.
The portfolio's exposure to Global High Yield, notably Oaktree CM Value Opportunities Fund, also generated losses over the quarter (-3.0%) and year-to-date (-4.6%). The majority of these losses stemmed from weakness in the fund's commodity-related holdings.
Private Assets
The private assets silo of the portfolio produced a small gain of 0.4% over the quarter. However, year-to-date, private assets have generated a loss of 1.3%. Losses have primarily come from exposure to the commodity sector, with African Minerals Exploration & Development Fund and R/C Global Energy & Power Fund V, the top detractors to performance over the first half of the year. Both funds have been affected by the oil price fall. In Africa, the region's oil exporters have been hit hard, and have subsequently halted growth and capex. Long-term, however, the underlying manager remains positive about prospects given the attractiveness of underlying fund assets.
Elsewhere in the portfolio, Greenspring IV has continued to generate strong returns and was one of the strongest contributors to performance both for the quarter and for the year-to-date. At the date of the last report, the fund was directly or indirectly invested in 1,265 private companies and 73 public companies. The fund achieved seven realisations over the first quarter within its portfolio of direct investments, which combined, generated a 3.9x gross multiple. There are 12 remaining direct investments in the fund, which are being carried at a 2.3x gross multiple. The fund is currently held at a 2x multiple of cost.
The top five contributors to the overall portfolio performance were:
| Top Five Contributors (in USD) | Contribution | Performance | Gain/(Loss) |
| % | % / X | $m | |
| Adelphi European Select Equity Fund | 0.7 | 16.0% | 1.8 |
| BlackRock European Hedge Fund | 0.6 | 14.6% | 1.5 |
| JO Hambro CM Japan Fund*(ii) | 0.4 | 12.6% | 1.0 |
| Greenspring Global Partners IV, LP*(i) | 0.3 | 2.0X | 0.9 |
| Prosperity Quest Fund | 0.3 | 20.0% | 0.8 |
| Total | 2.3 | 6.0 |
*Notes:
(i) Performance for Private Assets Investments is measured as a multiple (since inception of the investment) based on the following equation: Cash Multiple = (Profit / Loss + Drawn Capital) / Drawn Capital (since inception not for the period) where Profit / Loss = (Investment Value + Distributions) - (Initial Costs + Taxes).
(ii) Sold during the period.
PORTFOLIO ACTIVITY - for the Half Year ended 30 June 2015
During the first half of 2015, there were additions totalling $27.3m, consisting of $21.2m purchases (including pending subscriptions) and $6.1m private equity capital calls. Redemptions of $20.9m, combined with the receipt of $1.0m of recallable private equity capital, resulted in total disposals of $21.9m over the period.
Purchases
| New Positions | $m | |
| Hudson Bay International Fund | 5.0 | |
| Pershing Square Holdings Ltd | 4.8 | |
| Total | 9.8 |
· Hudson Bay International Fund - a global hedge fund that seeks to employ a diverse set of catalyst-driven absolute return strategies that are intended to be uncorrelated to each other and to major indices. The portfolio teams invest across the capital structure and trade around an event or catalyst in an effort to exploit market inefficiencies.
· Pershing Square Holdings Ltd - a US focused fund led by the well-known activist investor, Bill Ackman. The group looks to identify companies with strong fundamentals that are being mismanaged for a variety of reasons. Then, by actively engaging with the Boards, Pershing seeks to encourage change in the companies and subsequent re-ratings. Many of its campaigns are high profile and in some cases they can be acrimonious, but its strategy is often likened to private equity in the public market.
Sales - there were sales totalling $20.9m during the first half of 2015
Private Assets - Commitments
There were two new commitments to Private Assets in the first half of 2015, totalling $4.8m:
| New Commitments | $m |
| PAI Europe VI, LLP | 3.0 |
| TA XII-B, LP | 1.8 |
| Total | 4.8 |
· PAI Europe VI, LLP - Western Europe upper middle market control buyouts. The manager will target market leaders who are either number one or two in their sector or geography, and where there is a clear vision for transformational change.
· TA XII-B, LP - Global upper middle market growth equity. The firm focuses on investing in rapidly growing profitable companies that are leaders in their respective markets and generating above-average annual revenue and EBITDA growth.
| INVESTMENT PORTFOLIO 30 June 2015 |
Market Value $000 | % of NAV | Primary Focus |
| Findlay Park American Fund | 16,010 | 6.4 | US equities - long-only |
| Egerton Long - Short Fund | 14,066 | 5.7 | Europe / US equities - hedge |
| Adelphi European Select Equity Fund | 13,104 | 5.3 | Europe equities - long-only |
| Lansdowne Developed Markets Fund | 11,464 | 4.6 | Europe / US equities - hedge |
| BlackRock European Hedge Fund | 11,418 | 4.6 | Europe equities - hedge |
| NTAsian Discovery Fund | 10,743 | 4.3 | Asia ex-Japan equities - long-only |
| Oaktree CM Value Opportunities Fund | 8,659 | 3.5 | US high yield corporate debt - hedge |
| BlueCrest AllBlue Leveraged Feeder | 8,604 | 3.5 | Market Neutral - multi-strategy |
| Odey Absolute Return Fund | 7,478 | 3.0 | Europe / US equities - hedge |
| Hirzel Capital Fund | 6,574 | 2.7 | US equities - hedge |
| Top 10 Holdings | 108,120 | 43.6 | |
| Greenspring Global Partners IV, LP | 6,388 | 2.6 | Private Assets - US Venture Capital |
| Indus Japan Long Only Fund | 6,250 | 2.5 | Japan equities - long-only |
| Schroder ISF Asian Total Return Fund | 6,198 | 2.5 | Asia ex-Japan equities - long-only |
| Gramercy Distressed Opportunity Fund II, LP | 5,554 | 2.2 | Private Assets - distressed debt |
| Helios Investors II, LP | 5,477 | 2.2 | Private Assets - Africa |
| Prince Street Opportunities Fund | 5,422 | 2.2 | Emerging Markets equities - long-only |
| L Capital Asia, LP | 5,220 | 2.1 | Private Assets - Asia (Consumer) |
| Pershing Square Holdings Ltd | 5,214 | 2.1 | US equities - long-only |
| Select Equity Offshore, Ltd | 5,126 | 2.1 | US equities - long-only |
| Vulcan Value Equity Fund | 5,125 | 2.1 | US equities - long-only |
| Top 20 Holdings | 164,094 | 66.2 | |
| Global Event Partners Ltd | 5,000 | 2.0 | Global equities - long-short |
| Hudson Bay International Fund | 4,993 | 2.0 | Market Neutral - multi-strategy |
| Prosperity Quest Fund | 4,874 | 2.0 | Russian equities - long-only |
| KKR Special Situations Fund, LP | 4,825 | 1.9 | Private Assets - distressed debt |
| GAM Star Technology | 4,715 | 1.9 | Technology - long-only |
| Hony Capital Fund V, LP | 4,569 | 1.8 | Private Assets - China |
| Goodhart Partners Longitude Fund: Hanjo Fund | 4,353 | 1.7 | Japan equities - long-only |
| China Harvest Fund II, LP | 4,308 | 1.7 | Private Assets - China |
| African Development Partners I, LLC | 4,280 | 1.7 | Private Assets - Africa |
| Oaktree Principal Fund V, LP | 3,997 | 1.6 | Private Assets - US distressed debt |
| Top 30 Holdings | 210,008 | 84.5 | |
| 22 remaining holdings | 35,240 | 14.2 | |
| Cash | 3,200 | 1.3 | |
| Total | 248,448 | 100.0 |
Hanseatic Asset Management LBG
August 2015
Going concern
The Group closely monitors and manages its liquidity risk. The Group has considerable financial resources including US$101.3 million in cash and cash equivalents and the Group's borrowings have a long maturity profile. The Group's business activities together with the factors likely to affect its future development and performance are set out in Chairman's statement and investment manager's report. The financial position, cash flows and borrowings of the Group are also set out in the Chairman's statement. Details of the Group's borrowings are set out in note 15. Based on the Group's cash forecasts and sensitivities run, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operation for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the accounts.
Responsibility statement
The Directors confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared in accordance with IAS 34;
(b) the interim management report includes a fair review of the information required by DTR 4.2.7R; and
(c) the interim management report includes a fair review of the information required by DTR 4.2.8R.
J F Gouvêa Vieira
Chairman
14 August 2015
Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2015
| Unaudited | Unaudited | ||
| six months to | six months to | ||
| 30 June | 30 June | ||
| 2015 | 2014 | ||
| Notes | US$'000 | US$'000 | |
| Revenue | 3 | 269,408 | 299,907 |
| Raw materials and consumables used | (33,286) | (39,824) | |
| Employee benefits expense | 5 | (81,778) | (101,773) |
| Depreciation & amortisation expense | 4 | (28,904) | (31,676) |
| Other operating expenses | (73,081) | (92,128) | |
| Profit /(loss) on disposal of property, plant and equipment | 141 | (242) | |
| Operating profit | 52,500 | 34,264 | |
| Share of results of joint ventures | 2,093 | 1,612 | |
| Investment revenue | 6 | 7,943 | 7,121 |
| Other gains and losses | 7 | 3,421 | 7,335 |
| Finance costs | 8 | (20,604) | (1,950) |
| Foreign exchange (losses)/gains on monetary items | (6,481) | 9,263 | |
| Profit before tax | 38,872 | 57,645 | |
| Income tax expense | 9 | (19,722) | (11,410) |
| Profit for the period | 19,150 | 46,235 | |
| Other comprehensive income: items that may be reclassified subsequently to profit and loss | |||
| Exchange differences arising on translation of foreign operations | (35,554) | 5,681 | |
| Effective portion of changes in fair value of derivatives | (852) | (484) | |
| Other comprehensive (loss)/income for the period | (36,406) | 5,197 | |
| Total comprehensive (loss)/income for the period | (17,256) | 51,432 | |
| Profit for the period attributable to: | |||
| Equity holders of parent | 11,953 | 29,085 | |
| Non-controlling interests | 7,197 | 17,150 | |
| Profit for the period | 19,150 | 46,235 | |
| Total comprehensive income for the period attributable to: | |||
| Equity holders of parent | (8,976) | 31,696 | |
| Non-controlling interests | (8,280) | 19,736 | |
| Total comprehensive (loss)/income for the period | (17,256) | 51,432 | |
| Earnings per share | |||
| Basic and diluted | 11 | 33.8c | 82.2c |
Consolidated Balance Sheet
as at 30 June 2015
| Unaudited | Audited | ||
| as at | as at | ||
| 30 June | 31 December | ||
| 2015 | 2014 | ||
| Notes | US$'000 | US$'000 | |
| Non-current assets | |||
| Goodwill | 31,588 | 35,024 | |
| Other intangible assets | 31,766 | 38,565 | |
| Property, plant and equipment | 12 | 601,594 | 639,480 |
| Deferred tax assets | 32,481 | 31,665 | |
| Trade and other receivables | 14 | 45,485 | 51,535 |
| Investment in joint ventures | 16 | 14,998 | 11,500 |
| Other non-current assets | 11,347 | 11,838 | |
| 769,259 | 819,607 | ||
| Current assets | |||
| Inventories | 33,762 | 32,460 | |
| Trading investments | 13 | 265,867 | 260,491 |
| Trade and other receivables | 14 | 83,153 | 96,199 |
| Cash and cash equivalents | 101,323 | 103,810 | |
| 484,105 | 492,960 | ||
| Total assets | 1,253,364 | 1,312,567 | |
| Current liabilities | |||
| Trade and other payables | (92,413) | (78,879) | |
| Derivatives | (649) | (156) | |
| Current tax liabilities | (794) | (1,994) | |
| Obligations under finance leases | (1,531) | (1,444) | |
| Bank overdrafts and loans | 15 | (39,632) | (51,195) |
| (135,019) | (133,668) | ||
| Net current assets | 349,086 | 359,292 | |
| Non-current liabilities | |||
| Bank loans | 15 | (329,336) | (343,990) |
| Derivatives | (1,843) | (1,843) | |
| Employee benefits | (1,428) | (1,570) | |
| Deferred tax liabilities | (50,971) | (45,197) | |
| Provisions | (15,804) | (15,702) | |
| Obligations under finance leases | (2,351) | (3,253) | |
| (401,733) | (411,555) | ||
| Total liabilities | (536,752) | (545,223) | |
| Net assets | 716,612 | 767,344 | |
| Capital and reserves | |||
| Share capital | 11,390 | 11,390 | |
| Retained earnings | 497,972 | 508,298 | |
| Capital reserves | 31,760 | 31,760 | |
| Translation and hedging reserve | (22,323) | (1,677) | |
| Equity attributable to equity holders of the parent | 518,799 | 549,771 | |
| Non-controlling interests | 197,813 | 217,573 | |
| Total equity | 716,612 | 767,344 |
Consolidated Statement of Changes in Equity
as at 30 June 2015
| Hedging and | Attributable to equity | Non- | |||||
| Share | Retained | Capital | Translation | holders of | controlling | Total | |
| For the six months ended 30 June 2014 | capital | earnings | reserves | reserve | the parent | interests | equity |
| (unaudited) | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 |
| Balance at 1 January 2014 | 11,390 | 505,922 | 31,760 | 3,128 | 552,200 | 217,875 | 770,075 |
| Currency translation adjustment | - | - | - | 3,095 | 3,095 | 2,586 | 5,681 |
| Effective portion of changes in fair value of derivatives | - | - | - | (261) | (261) | (223) | (484) |
| Profit for the period | - | 29,085 | - | - | 29,085 | 17,150 | 46,235 |
| Total income and expense for the period | - | 29,085 | - | 2,834 | 31,919 | 19,513 | 51,432 |
| Dividends | - | (21,218) | - | - | (21,218) | (11,286) | (32,504) |
| Share based expense | - | - | - | - | - | 1,477 | 1,477 |
| Balance at 30 June 2014 | 11,390 | 513,789 | 31,760 | 5,962 | 562,901 | 227,579 | 790,480 |
| For the six months ended 30 June 2015 (unaudited) | |||||||
| Balance at 1 January 2015 | 11,390 | 508,298 | 31,760 | (1,677) | 549,771 | 217,573 | 767,344 |
| Currency translation adjustment | - | - | - | (20,470) | (20,470) | (15,084) | (35,554) |
| Effective portion of changes in fair value of derivatives | - | - | - | (459) | (459) | (393) | (852) |
| Profit for the period | - | 11,953 | - | - | 11,953 | 7,197 | 19,150 |
| Total income and expense for the period | - | 11,953 | - | (20,929) | (8,976) | (8,280) | (17,256) |
| Dividends | - | (22,279) | - | - | (22,279) | (13,336) | (35,615) |
| Derivatives | - | - | - | 283 | 283 | 203 | 486 |
| Share based expense | - | - | - | - | - | 1,653 | 1,653 |
| Balance at 30 June 2015 | 11,390 | 497,972 | 31,760 | (22,323) | 518,799 | 197,813 | 716,612 |
Share capital
The Group has one class of ordinary share which carries no right to fixed income.
Capital reserves
The capital reserves arise principally from transfers from revenue to capital reserves made in the Brazilian subsidiaries arising in the following circumstances:
(a) profits of the Brazilian subsidiaries and Brazilian holding company which in prior periods were required by law to be transferred to capital reserves and other profits not available for distribution; and
(b) Wilson Sons Limited bye-laws require the company to credit an amount equal to 5% of the company's net profit to a retained earnings account to be called legal reserve until such amount equals 20% of the Wilson Sons Limited share capital.
Hedging and translation reserve
The hedging and translation reserve arises from exchange differences on the translation of operations with a functional currency other than US Dollars and effective movements on hedging instruments.
Amounts in the statement of changes in equity are stated net of tax where applicable
Consolidated Cash Flow Statement
for the six months ended 30 June 2015
| Unaudited | Unaudited | ||
| six months to | six months to | ||
| 30 June | 30 June | ||
| 2015 | 2014 | ||
| Notes | US$'000 | US$'000 | |
| Net cash inflow from operating activities | 17 | 89,148 | 26,695 |
| Investing activities | |||
| Interest received | 4,407 | 4,045 | |
| Dividends received from trading investments | 2,172 | 2,129 | |
| Proceeds on disposal of trading investments | 25,301 | 80,874 | |
| Proceeds on disposal of property, plant and equipment | 228 | 133 | |
| Purchases of property, plant and equipment | (32,657) | (57,591) | |
| Purchase of intangible asset | (255) | (496) | |
| Purchases of trading investments | (27,256) | (54,208) | |
| Net cash used in investing activities | (28,060) | (25,114) | |
| Financing activities | |||
| Dividends paid | 10 | (22,279) | (21,218) |
| Dividends paid to non-controlling interests in subsidiary | (13,336) | (11,286) | |
| Repayments of borrowings | (28,855) | (20,332) | |
| Repayments of obligations under finance leases | (568) | (1,015) | |
| Derivative paid | (72) | (71) | |
| New bank loans raised | 9,804 | 18,915 | |
| Increase in bank overdrafts | - | 13,900 | |
| Net used in financing activities | (55,306) | (21,107) | |
| Net increase/(decrease) in cash and cash equivalents | 5,782 | (19,526) | |
| Cash and cash equivalents at beginning of period | 103,810 | 106,512 | |
| Effect of foreign exchange rate changes | (8,269) | 4,885 | |
| Cash and cash equivalents at end of period | 101,323 | 91,871 |
Notes to the Accounts
for the six months ended 30 June 2015
1 General information
The interim financial information is not the company's statutory accounts. The auditors of the company have not made any report thereon under section 90(2) of the Bermuda Companies Act.
Ocean Wilsons Holdings Limited is a company incorporated in Bermuda under the Companies Act 1981 and the Ocean Wilsons Holdings Limited Act, 1991.
These financial statements are presented in US Dollars because that is the currency of the primary economic environment in which the Group operates.
2 Accounting policies
The condensed consolidated interim financial report of the company for the six months ended 30 June 2014 comprises the company and its subsidiaries (together referred to as the 'Group') and the Group's interests in associates and jointly controlled entities.
The condensed set of financial statements has been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS's) and in accordance with 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 condensed set of financial statements have been prepared on the basis of accounting policies consistent with those applied to the financial statements for the year ended 31 December 2014.
3 Revenue
An analysis of the Group's revenue is as follows:
| Unaudited | Unaudited | ||
| six months to | six months to | ||
| 30 June | 30 June | ||
| 2015 | 2014 | ||
| Note | US$'000 | US$'000 | |
| Sales of services | 236,219 | 263,274 | |
| Revenue from construction contracts | 33,189 | 36,633 | |
| 269,408 | 299,907 | ||
| Investment income | 6 | 7,943 | 7,121 |
| 277,351 | 307,028 |
All revenue is derived from continuing operations.
4 Business and geographical segments
Business segments
Ocean Wilsons Holdings Limited has two reportable segments: Maritime services and investments. The maritime services segment provides towage, port terminals, ship agency, offshore, logistics and shipyard services in Brazil through Wilson Sons Limited. The investment segment holds a portfolio of international investments through Ocean Wilsons Investments Limited.
Segment information relating to these businesses is presented below.
For the six months ended 30 June 2015 (unaudited)
| Maritime | ||||
| services | Investment | Unallocated | Consolidated | |
| six months to | six months to | six months to | six months to | |
| 30 June | 30 June | 30 June | 30 June | |
| 2015 | 2015 | 2015 | 2015 | |
| US$'000 | US$'000 | US$'000 | US$'000 | |
| Revenue | 269,408 | - | - | 269,408 |
| Result | ||||
| Segment result | 55,011 | (1,353) | (1,158) | 52,500 |
| Share of joint venture results | 2,093 | - | - | 2,093 |
| Investment revenue | 5,769 | 2,173 | 1 | 7,943 |
| Other gains and losses | - | 3,421 | - | 3,421 |
| Finance costs | (20,604) | - | - | (20,604) |
| Exchange losses on monetary items | (6,673) | 17 | 175 | (6,481) |
| Profit before tax | 35,596 | 4,258 | (982) | 38,872 |
| Tax | (19,722) | - | - | (19,722) |
| Profit after tax | 15,874 | 4,258 | (982) | 19,150 |
| Other information | ||||
| Capital additions | (33,722) | - | - | (33,722) |
| Depreciation and amortisation | (28,903) | - | (1) | (28,904) |
| Balance Sheet | ||||
| Assets | ||||
| Segment assets | 1,001,132 | 249,393 | 2,839 | 1,253,364 |
| Liabilities | ||||
| Segment liabilities | (536,235) | (237) | (280) | (536,752) |
For the six months ended 30 June 2014 (unaudited)
| Maritime | ||||
| services | Investment | Unallocated | Consolidated | |
| six months to | six months to | six months to | six months to | |
| 30 June | 30 June | 30 June | 30 June | |
| 2014 | 2014 | 2014 | 2014 | |
| US$'000 | US$'000 | US$'000 | US$'000 | |
| Revenue | 299,907 | - | - | 299,907 |
| Result | ||||
| Segment result | 36,612 | (1,345) | (1,003) | 34,264 |
| Share of joint venture results | 1,612 | - | - | 1,612 |
| Investment revenue | 4,990 | 2,130 | 1 | 7,121 |
| Other gains and losses | - | 7,335 | - | 7,335 |
| Finance costs | (1,950) | - | - | (1,950) |
| Exchange losses on monetary items | 9,156 | (32) | 139 | 9,263 |
| Profit before tax | 50,420 | 8,088 | (863) | 57,645 |
| Tax | (11,410) | - | - | (11,410) |
| Profit after tax | 39,010 | 8,088 | (863) | 46,235 |
| Other information | ||||
| Capital additions | (58,714) | - | - | (58,714) |
| Depreciation and amortisation | (31,675) | - | (1) | (31,676) |
| Balance Sheet | ||||
| Assets | ||||
| Segment assets | 1,073,321 | 251,575 | 3,688 | 1,328,584 |
| Liabilities | ||||
| Segment liabilities | (537,448) | (245) | (411) | (538,104) |
Finance costs and associated liabilities have been allocated to reporting segments where interest costs arise from loans used to finance the construction of fixed assets in that segment.
Geographical Segments
The Group's operations are located in Bermuda and Brazil.
All of the Group's sales are derived in Brazil.
The following is an analysis of the carrying amount of segment assets, and additions to property, plant and equipment and intangible assets, analysed by the geographical area in which the assets are located.
| Carrying amount of segment assets |
Additions to property, plant and equipment and intangible assets | ||||
| Unaudited | Unaudited | ||||
| Unaudited | Unaudited | six months to | six months to | ||
| 30 June | 30 June | 30 June | 30 June | ||
| 2015 | 2014 | 2015 | 2014 | ||
| US$'000 | US$'000 | US$'000 | US$'000 | ||
| Brazil | 967,859 | 1,043,541 | 33,722 | 58,714 | |
| Bermuda | 285,505 | 285,043 | - | - | |
| 1,253,364 | 1,328,584 | 33,722 | 58,714 |
5 Employee benefits expense
| Unaudited | Unaudited | |
| six months to | six months to | |
| 30 June | 30 June | |
| 2015 | 2014 | |
| US$'000 | US$'000 | |
| Aggregate remuneration comprised: | ||
| Wages and salaries | 68,788 | 90,834 |
| Share based payment expense | 1,824 | (2,302) |
| Social security costs | 10,637 | 12,587 |
| Other pension costs | 529 | 654 |
| 81,778 | 101,773 |
6 Investment revenue
| Unaudited | Unaudited | |
| six months to | six months to | |
| 30 June | 30 June | |
| 2015 | 2014 | |
| US$'000 | US$'000 | |
| Interest on bank deposits | 4,348 | 3,543 |
| Dividends from equity investments | 2,172 | 2,129 |
| Other interest | 1,423 | 1,449 |
| 7,943 | 7,121 |
7 Other gains and losses
| Unaudited | Unaudited | |
| six months to | six months to | |
| 30 June | 30 June | |
| 2015 | 2014 | |
| US$'000 | US$'000 | |
| Increase in fair value of trading investments held at year end | 1,793 | 5,160 |
| Profit on disposal of trading investments | 1,628 | 2,175 |
| 3,421 | 7,335 |
Other gains and losses form part of the movement in trading investments.
8 Finance costs
| Unaudited | Unaudited | |
| six months to | six months to | |
| 30 June | 30 June | |
| 2015 | 2014 | |
| US$'000 | US$'000 | |
| Interest on bank overdrafts and loans | 6,479 | 5,939 |
| Exchange loss/(gain) on foreign currency borrowings | 13,811 | (4,495) |
| Interest on obligations under finance leases | 314 | 506 |
| 20,604 | 1,950 |
9 Taxation
| Unaudited | Unaudited | |
| six months to | six months to | |
| 30 June | 30 June | |
| 2015 | 2014 | |
| US$'000 | US$'000 | |
| Current taxation | ||
| Brazilian taxation: | ||
| Corporation tax | 13,566 | 10,079 |
| Social contribution | 5,897 | 4,459 |
| Total current tax | 19,463 | 14,538 |
| Deferred tax | ||
| Charge for the period in respect of deferred tax liabilities | 14,230 | 7,883 |
| (Credit) for the period in respect of deferred tax assets | (13,971) | (11,011) |
| Total deferred tax | 259 | (3,128) |
| Total taxation | 19,722 | 11,410 |
Brazilian corporation tax is calculated at 25% (2014: 25%) of the assessable profit for the year.
Brazilian social contribution tax is calculated at 9% (2014: 9%) of the assessable profit for the year.
At the present time, no income, profit, capital or capital gains taxes are levied in Bermuda and accordingly, no provision for such taxes has been recorded by the company. In the event that such taxes are levied, the company has received an undertaking from the Bermuda Government exempting it from all such taxes until 31 March 2035.
10 Dividends
| Unaudited | Unaudited | |
| six months to | six months to | |
| 30 June | 30 June | |
| 2015 | 2014 | |
| US$'000 | US$'000 | |
| Amounts recognised as distributions to equity holders in the period: | ||
| Final dividend paid for the year ended 31 December 2014 of 63.0c (2013: 60.0c) per share |
22,279 | 21,218 |
11 Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
| Unaudited | Unaudited | |
| six months to | six months to | |
| 30 June | 30 June | |
| 2015 | 2014 | |
| US$'000 | US$'000 | |
| Earnings: | ||
| Earnings for the purposes of basic earnings per share being net profit attributable to equity holders of the parent | 11,953 | 29,085 |
| Number of shares: | ||
| Weighted average number of ordinary shares for the purposes of basic and diluted earnings per share | 35,363,040 | 35,363,040 |
12 Property, plant and equipment
During the period, the Group spent approximately US$33.5 million mainly on vessel construction and terminal equipment.
At 30 June 2015, the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to US$8.6 million.
13 Investments
| Unaudited | Audited | |
| six months to | year to | |
| 30 June | 31December | |
| 2015 | 2014 | |
| US$'000 | US$'000 | |
| Trading investments | ||
| At 1 January | 260,491 | 277,969 |
| Additions, at cost | 27,256 | 79,685 |
| Disposals, at market value | (25,301) | (103,396) |
| Increase in fair value of trading investments held at year end | 1,793 | 1,360 |
| Profit on disposal of trading investments | 1,628 | 4,873 |
| At period end | 265,867 | 260,491 |
| Ocean Wilsons Investment Limited Portfolio | 245,247 | 236,491 |
| Wilson Sons Limited | 20,620 | 24,000 |
| Trading investments held at fair value at period end | 265,867 | 260,491 |
Wilson Sons Limited
The Wilson Sons Limited investments are held and managed separately from the Ocean Wilsons Investment Portfolio and consist of US Dollar denominated depository notes.
Ocean Wilsons Investment Portfolio
The Group has not designated any financial assets that are not classified as trading investments as financial assets at fair value through profit or loss.
Trading investments above represent investments in listed equity securities, funds and unquoted equities that present the Group with opportunity for return through dividend income and capital appreciation.
Included in trading investments are open ended funds whose shares may not be listed on a recognised stock exchange but are redeemable for cash at the current net asset value at the option of the company. They have no fixed maturity or coupon rate. The fair values of these securities are based on quoted market prices where available. Where quoted market prices are not available, fair values are determined using various valuation techniques that include inputs for the asset or liability that are not based in observable market data (unobservable inputs).
14 Trade and other receivables
| Unaudited | Audited | |
| period ended | year ended | |
| 30 June | 31 December | |
| 2015 | 2014 | |
| US$'000 | US$'000 | |
| Trade and other receivables | ||
| Amount receivable for the sale of services | 46,937 | 50,617 |
| Allowance for doubtful debts | (1,117) | (1,154) |
| 45,820 | 49,463 | |
| Income taxation recoverable | 6,280 | 9,352 |
| Other recoverable taxes and levies | 28,338 | 34,000 |
| Loans to related parties | 26,640 | 31,314 |
| Prepayments | 10,039 | 12,431 |
| Other | 11,521 | 11,174 |
| 128,638 | 147,734 | |
| Total current | 83,153 | 96,199 |
| Total non-current | 45,485 | 51,535 |
| 128,638 | 147,734 |
Non-current trade receivables relate to: recoverable taxes with maturity dates in excess of one year, which comprise mainly PIS, COFINS, ISS and INSS, customers with maturities over one year, and receivables from Intermarítima relating to the sale of the non-controlling interest in Tecon Salvador. There are no indicators of impairment related to these receivables.
Included in the Group's trade receivable balances are debtors with a carrying amount of US$11.6 million (2014: US$14.2 million) which are past due but not impaired at the reporting date for which the Group has not provided as there has not been a change in credit quality and the Group believes the amounts are still recoverable.
The Group does not hold any collateral over these balances.
| Unaudited | Audited | |
| period ended | year ended | |
| 30 June | 31 December | |
| 2015 | 2014 | |
| Ageing of past due but not impaired trade receivables | US$'000 | US$'000 |
| From 0 - 30 days | 7,242 | 6,942 |
| From 31 - 90 days | 2,536 | 1,086 |
| From 91 - 180 days | 1,775 | 791 |
| more than 180 days | - | - |
| Total | 11,553 | 8,819 |
Included in the Group's allowance for doubtful debts are individually impaired trade receivables with a balance of US$2.5 million that are aged greater than 180 days. The impairment recognised represents the difference between the carrying amount of these trade receivables and the present value of the expected settlement proceeds. The Group does not hold any collateral over these balances.
| Unaudited | Audited | |
| period ended | year ended | |
| 30 June | 31 December | |
| 2015 | 2014 | |
| Ageing of impaired trade receivables | US$'000 | US$'000 |
| From 0 - 30 days | - | - |
| From 31 - 90 days | - | - |
| From 91 - 180 days | - | - |
| more than 180 days | 1,117 | 1,154 |
| Total | 1,117 | 1,154 |
In determining recoverability of trade receivables, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. The directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.
The directors consider that the carrying amount of trade and other receivables approximates their fair value.
15 Bank loans and overdrafts
| Unaudited | Audited | ||
| period ended | year ended | ||
| 30 June | 31 December | ||
| 2015 | 2014 | ||
| Annual Interest rate | US$'000 | US$'000 | |
| Secured borrowings | |||
| BNDES - FMM linked to US$ (1) | 2.07% to 6.00% | 191,988 | 200,022 |
| BNDES Real | 7.89% - 8.26% | 25,614 | 26,796 |
| BNDES - linked to US$ | 5.07% - 5.36% | 8,318 | 9,410 |
| BNDES - FINAME Real | 3.50% - 13.00% | 2,879 | 4,461 |
| BNDES - FMM Real (1) | 7.40% - 9.71% | 2,212 | 2,692 |
| Total BNDES | 231,011 | 243,381 | |
| IFC - US$ | 3.08% | 63,383 | 67,815 |
| Banco do Brasil - FMM linked to US$ | 2.00% - 3.00% | 60,844 | 54,985 |
| Itau - US Dollar linked to Real | 11.89% | - | 12,233 |
| Eximbank - US$ | 2.06% | 8,406 | 9,462 |
| Finimp - US$ | 4.16% | 4,668 | 6,287 |
| IFC - Real | 14.09% | 656 | 1,022 |
| Total others | 137,957 | 151,804 | |
| Total secured borrowings | 368,968 | 395,185 | |
| Total borrowings | 368,968 | 395,185 |
(1) As an agent of Fundo da Marinha Mercante's (FMM), BNDES finances the construction of tugboats and shipyard facilities.
| Period ended | Year ended | |
| 30 June | 31 December | |
| 2015 | 2014 | |
| US$'000 | US$'000 | |
| The borrowings are repayable as follows: | ||
| On demand or within one year | 39,632 | 51,195 |
| In the second year | 40,701 | 39,926 |
| In the third to fifth years inclusive | 116,065 | 120,389 |
| After five years | 172,570 | 183,675 |
| Total borrowings | 368,968 | 395,185 |
| Amounts due for settlement within 12 months | (39,632) | (51,195) |
| Amounts due for settlement after 12 months | 329,336 | 343,990 |
Analysis of borrowings by currency:
| US Dollars | $Real | ||||
| linked to | linked to | ||||
| $Real | $Real | US Dollars | US Dollars | Total | |
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
| 30 June 2015 (unaudited) | |||||
| Bank loans | 31,361 | - | 261,150 | 76,457 | 368,968 |
| Total | 31,361 | - | 261,150 | 76,457 | 368,968 |
| 31 December 2014 (audited) | |||||
| Bank loans | 34,971 | 12,233 | 264,417 | 83,564 | 395,185 |
| Total | 34,971 | 12,233 | 264,417 | 83,564 | 395,185 |
Guarantees
Loans with BNDES rely on a corporate guarantee from Wilson Sons de Administração e Comércio Ltda. For some contracts, the corporate guarantee is additional to: (i) pledge of the respective financed tugboat, (ii) lien of logistics and port operations equipment financed.
Loans with BB rely on a corporate guarantee from Wilson, Sons de Administração e Comércio Ltda. and pledge of the respective financed tugboat.
The loans that Tecon Salvador holds with IFC are guaranteed by shares of the company, projects' cash flows, equipment and buildings.
The loan with "The Export-Import Bank of China" is guaranteed by a "Standby Letter of Credit" issued for Tecon Rio Grande by Banco Itaú BBA S.A., with the financing bank as beneficiary, as counter-guarantee, Tecon Rio Grande pledged the equipment funded by "The Export-Import Bank of China" to Banco Itaú BBA S.A.
Undrawn credit facilities
At 30 June 2015, the Group had available US$76.9 million of undrawn borrowing facilities. For each disbursement, there is a set of precedent conditions that must be satisfied.
Fair value
Management estimates the fair value of the Group's borrowings as follows:
| Unaudited | Audited | ||
| 30 June | 31 December | ||
| 2015 | 2014 | ||
| US$'000 | US$'000 | ||
| Bank loans | |||
| BNDES | 231,011 | 243,381 | |
| BB | 64,039 | 68,837 | |
| IFC | 60,844 | 54,985 | |
| Itau | - | 12,233 | |
| Eximbank | 8,406 | 9,462 | |
| Finimp | 4,668 | 6,287 | |
| Total bank loans | 368,968 | 395,185 | |
| Total | 368,968 | 395,185 |
16 Joint ventures
The Group holds the following significant interests in joint operations and joint ventures at the end of the reporting period:
| Proportion of ownership interest | |||
| Place of | |||
| incorporation | 30 June | 31 December | |
| and operation | 2015 | 2014 | |
| Towage | |||
| Consórcio de Rebocadores Barra de Coqueiros (3) | Brazil | 29.13% | 29.13% |
| Consórcio de Rebocadores Baia de São Marcos (3) | Brazil | 29.13% | 29.13% |
| Logistics | |||
| Porto Campinas, Logística e Intermodal Ltda (3) | Brazil | 29.13% | 29.13% |
| Offshore | |||
| Wilson, Sons Ultratug Participações S.A. (1) | Brazil | 29.13% | 29.13% |
| Atlantic Offshore S.A. (2) | Panama | 29.13% | 29.13% |
(1) Wilson, Sons Ultratug Participações S.A. controls Wilson, Sons Offshore S.A. and Magallanes Navegação Brasileira S.A. These latter two companies are indirect joint ventures of the Company.
(2) Atlantic Offshore S.A. controls South Patagonia S.A. This company is indirect joint venture of Wilson Sons Limited.
(3) Joint Operations.
The Group's interests in joint ventures are equity accounted.
| Unaudited | Unaudited | |
| six months to | six months to | |
| 30 June | 30 June | |
| 2015 | 2014 | |
| US$'000 | US$'000 | |
| Revenue | 72,235 | 71,248 |
| Raw materials and consumable used | (2,532) | (2,639) |
| Employee benefits expense | (22,084) | (24,051) |
| Depreciation and amortisation expenses | (17,618) | (16,983) |
| Other operating expenses | (7,776) | (9,249) |
| Loss on disposal of property, plant and equipment | (221) | - |
| Profits from operating activities | 22,004 | 18,326 |
| Finance income | 2,486 | (183) |
| Finance costs | (8,858) | (9,241) |
| Foreign exchange gains on monetary items | (10,423) | 3,660 |
| Profit before tax | 5,209 | 12,562 |
| Income tax expense | (1,024) | (9,338) |
| Profit for the period | 4,185 | 3,224 |
| Participation (before non-controlling interests) | 50% | 50% |
| Equity result | 2,093 | 1,612 |
| Period ended | Year ended | |
| 30 June | 31 December | |
| 2015 | 2014 | |
| US$'000 | US$'000 | |
| Other non-current Assets | 889 | 1,566 |
| Property, plant and equipment | 656,537 | 598,497 |
| Long-term investment | 2,055 | 2,140 |
| Other current assets | 965 | 1,367 |
| Trade and other receivables | 30,996 | 35,782 |
| Derivatives | 2 | 79 |
| Cash and cash equivalents | 23,381 | 37,061 |
| Total assets | 714,825 | 676,492 |
| Bank overdrafts and loans | 531,729 | 514,861 |
| Other non-current liabilities | 19,558 | 16,596 |
| Trade and other payables | 94,942 | 81,596 |
| Equity | 68,596 | 63,439 |
| Total liabilities | 714,825 | 676,492 |
Guarantees
Wilson Sons Offshore's loan agreements with BNDES are guaranteed by a lien on the financed supply vessels, and in the majority of the contracts, a corporate guarantee from both Wilson Sons Adminisração e Comércio and Remolcadores Ultratug Ltda, each guarantteeing 50% of its subsidiary's debt balance with BNDES.
Magallanes Navegação Brasileira's loan agreement with Banco do Brasil is guaranteed by a lien on the financed supply vessels. The security package also includes a standby letter of credit issued by Banco de Crédito e Inversiones - Chile for part of the debt balance, assignment of Petrobras' long-term contracts and a corporate guarantee issued by Inversiones Magallanes Ltda - Chile. A cash reserve account, accounted for under long term investments, funded with US$2.1 million (R$5.7 million) should be maintained until full repayment of the loan agreement.
Covenants
The joint venture Magallanes Navegação Brasileira S.A. has to comply with specific financial covenants.
Provisions for tax, labour and civil risks
In the normal course of business in Brazil, the Group remains exposed to numerous local legal claims. It is the Group's policy to vigorously contest such claims, many of which appear to have little substance in merit, and to manage such claims through its legal counsel.
In addition to the cases for which the Group has made provision, there are other tax, civil and labour disputes amounting to US$11.7 million (2014: US$12.6 million), whose probability of loss was estimated by the legal counsel as possible.
| Period ended | Year ended | |
| 30 June | 31 December | |
| 2015 | 2014 | |
| US$'000 | US$'000 | |
| Civil cases | 2 | 2 |
| Tax cases | 9.059 | 9,189 |
| Labour claims | 2,685 | 3,387 |
| Total | 11,746 | 12,578 |
17 Notes to the cash flow statement
| Unaudited | Unaudited | |
| six months to | six months to | |
| 30 June | 30 June | |
| 2015 | 2014 | |
| US$'000 | US$'000 | |
| Reconciliation from profit before tax to net cash from operating activities | ||
| Profit before tax | 38,872 | 57,645 |
| Share of joint venture results | (2,093) | (1,612) |
| Investment revenues | (7,943) | (7,121) |
| Other gains and losses | (3,421) | (7,335) |
| Finance costs | 20,604 | 1,950 |
| Exchange losses on monetary items | 6,481 | (9,263) |
| Operating profit | 52,500 | 34,264 |
| Adjustments for: | ||
| Depreciation of property, plant and equipment | 25,912 | 28,175 |
| Amortisation of intangible assets | 2,992 | 3,501 |
| Share based payment expense/(credit) | 1,684 | (2,302) |
| (Loss) / gain on disposal of property, plant and equipment | (141) | 242 |
| Increase in provisions | 65 | 2,382 |
| Operating cash flows before movements in working capital | 83,012 | 66,262 |
| Increase in inventories | (2,082) | (7,279) |
| Decrease in receivables | 12,705 | 25,132 |
| Increase/(decrease) in payables | 13,497 | (40,984) |
| Decrease/(increase) in other non-current assets | 491 | (1,676) |
| Cash generated by operations | 107,623 | 41,455 |
| Income taxes paid | (10,830) | (8,325) |
| Interest paid | (7,645) | (6,435) |
| Net cash from operating activities | 89,148 | 26,695 |
18 Commitments
At 30 June 2015, the Group has twenty-five outstanding commitment agreements with respect to twenty-five separate Limited Partnerships. These commitments relate to capital subscription agreements entered into by Ocean Wilsons (Investments)Limited.
The details of these commitments are as follows:
| Unaudited | Audited | ||
| Outstanding at | Outstanding at | ||
| 30 June | 31 December | ||
| Commitment | 2015 | 2014 | |
| $'000 | US$'000 | US$'000 | |
| Expiry date | |||
| 31 December 2015 | 3,000 | 68 | 68 |
| 22 February 2017 | 4,994 | 125 | 135 |
| 05 December 2017 | 5,000 | 399 | 434 |
| 30 March 2018 | 5,000 | 899 | 899 |
| 4 June 2018 | 5,000 | 1,520 | 1,538 |
| 18 July 2018 | 5,000 | 689 | 738 |
| 21 December 2018 | 5,000 | 297 | 364 |
| 31 December 2018 | 4,650 | 221 | 445 |
| 22 November 2019 | 5,000 | 550 | 550 |
| 08 December 2019 | 5,000 | 621 | 1,044 |
| 31 December 2019 | 3,000 | 120 | 240 |
| 31 January 2020 | 4,500 | 379 | 469 |
| 18 December 2021 | 5,000 | 1,024 | 1,200 |
| 17 February 2022 | 3,000 | 1,073 | 1,170 |
| 30 April 2022 | 7,500 | 3,920 | 4,547 |
| 11 July 2022 | 4,963 | 3,610 | 3,917 |
| 01 February 2023 | 5,000 | 500 | 700 |
| 28 March 2023 | 5,000 | 2,617 | 3,374 |
| 01 April 2023 | 5,000 | 3,673 | 3,723 |
| 05 June 2023 | 3,200 | 2,408 | 2,474 |
| 22 August 2023 | 5,000 | 1,185 | 2,235 |
| 21 August 2024 | 5,005 | 4,120 | 4,129 |
| 12 March 2025 | 2,954 | 2,264 | - |
| 11 April 2029 | 3,000 | 1,860 | 2,160 |
| To be confirmed | 1,800 | 1,800 | - |
| Total | 111,566 | 35,942 | 36,553 |
19 Related party transactions
Transactions between this company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
Transactions between the group and its associates, joint ventures and others investments are disclosed below.
| Dividends received/ | Amounts paid/ | |||
| Revenue of services | Cost of services | |||
| Unaudited | Unaudited | Unaudited | Unaudited | |
| 30 June | 30 June | 30 June | 30 June | |
| 2015 | 2014 | 2015 | 2014 | |
| US$'000 | US$'000 | US$'000 | US$'000 | |
| Joint ventures | ||||
| 1. Allink Transportes Internacionais Limitada | 17 | 14 | - | - |
| 2. Consórcio de Rebocadores Barra de Coqueiros | 138 | 168 | - | - |
| 3. Consórcio de Rebocadores Baía de São Marcos | 5 | 91 | - | (26) |
| 4. Wilson Sons Ultratug | 8,221 | 601 | - | (289) |
| 5. Atlantic Offshore | - | - | - | - |
| 6. Intermaritima | 276 | - | - | - |
| Others | ||||
| 7. Hanseatic Asset Management | - | - | (1,268) | (1,235) |
| 8. Gouvêa Vieira Advogados | - | - | (45) | (46) |
| 9. CMMR Intermediacao Comercial Limitada | - | - | (105) | (119) |
| 10. Jofran Services | - | - | (87) | (87) |
| Amounts owed | Amounts owed | |||
| by related parties | to related parties | |||
| Unaudited | Audited | Unaudited | Audited | |
| 30 June | 31 December | 30 June | 31 December | |
| 2015 | 2014 | 2015 | 2014 | |
| US$'000 | US$'000 | US$'000 | US$'000 | |
| Joint ventures | ||||
| 1. Allink Transportes Internacionais Limitada | 3 | 4 | - | - |
| 2. Consórcio de Rebocadores Barra de Coqueiros | 195 | 118 | - | - |
| 3. Consórcio de Rebocadores Baía de São Marcos | 2,013 | 2,285 | - | - |
| 4. Wilson Sons Ultratug | - | 23,135 | (8,497) | - |
| 5. Atlantic Offshore | - | 5,997 | - | - |
| 6. Intermaritima | 3,468 | - | - | - |
| Others | ||||
| 7. Hanseatic Asset Management LBG | - | - | (245) | (773) |
| 8. Gouvêa Vieira Advogados | - | - | - | - |
| 9. CMMR Intermediacao Comercial Limitada | - | - | - | - |
| 10. Jofran Services | - | - | - | - |
1. Mr A C Baião is a shareholder and Director of Allink Transportes Internacionais Limitada. Allink Transportes Internacionais Limitada is 50% owned by the Group and rents office space from the Group.
6. Intermarítima has a 7.5% participation in Tecon Salvaldor and contracts terminal services on an arms length basis. Intermarítima has outstanding loans paying interest at CDI advanced from Wilson Sons Limited, secured by Intermarítimas participation in Tecon Salvador.
7. Mr W H Salomon is Chairman of Hanseatic Asset Management LBG. Fees were paid to Hanseatic Asset Management LBG for acting as investment managers of the Group's investment portfolio and administration services.
8. Mr J F Gouvêa Vieira is a partner in the law firm Gouvêa Vieira Advogados. Fees were paid to Gouvêa Vieira Advogados for legal services.
9. Mr C M Marote is a shareholder and Director of CMMR Intermediacao Comercial Limitada. Fees were paid to CMMR Intermediacao Comercial Limitada for consultancy services.
10. Mr J F Gouvêa Vieira is a Director of Jofran Services. Directors' fees and consultancy fees were paid to Jofran Services.
20 Financial instruments
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern. The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 15, cash and cash equivalents and equity attributable to equity holders of the parent comprising issued capital, reserves and retained earnings and the consolidated statement of changes in equity.
The Group borrows to fund capital projects and looks to cash flow from these projects to meet repayments. Working capital is funded through cash generated by operating revenues.
Externally imposed capital requirement
The Group is not subject to externally imposed capital requirements.
Financial risk management objectives
The Group's Corporate Treasury function provides services to the business, co-ordinates access to domestic and international financial markets and manages the financial risks relating to the operations of the Group through internal reports. These risks include market risk, (including currency risk, interest rate risk and price risk) credit risk and liquidity risk.
The Group may use derivative financial instruments to hedge these risk exposures, with Board approval. The Group does not enter into trading financial instruments, including derivative financial instruments for speculative purposes.
Credit risk
The Group's principal financial assets are cash, trade and other receivables and trading investments. The Group's credit risk is primarily attributable to its bank balances, trade receivables and investments. The amounts presented as receivables in the balance sheet are net of allowances for doubtful receivables as outlined above.
The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. The credit risk on investments held for trading is limited because the counterparties with whom the Group transacts are regulated institutions or banks with high credit ratings. The Company's appointed investment manager, Hanseatic Asset Management LBG, evaluates the credit risk on trading investments prior to and during the investment period.
The Group has no significant concentration of credit risk. Ongoing credit evaluation is performed on the financial condition of accounts receivable.
Market risk
The Group's activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates.
Foreign currency risk management
The Group undertakes certain transactions denominated or linked to foreign currencies and therefore exposures to exchange rate fluctuations arise. The Group operates principally in Brazil with a substantial proportion of the Group's revenue, expenses, assets and liabilities denominated in the Brazilian Real. Due to the cost of hedging the Brazilian Real, the Group does not normally hedge its net exposure to the Brazilian Real as the Board does not consider it economically viable.
Interest rate risk management
The Group is exposed to interest rate risk as entities in the Group borrow funds at both fixed and floating interest rates.
The Group borrows from the BNDES (Banco Nacional de Desenvolvimento Econômico e Social) and Banco do Brasil to finance vessel construction. These loans are fixed interest rates loans linked to the US Dollar. Due to the favourable rates offered by these institutions, in the Group's opinion, there is minimal market interest rate risk.
The Group's strategy for managing interest rate risk is to maintain a balanced portfolio of fixed and floating interest rates in order to balance both cost and volatility. The Group may use derivative instruments to reduce cash flow interest rate attributable to interest rate volatility.
Market price sensitivity
The Group is exposed to equity price risks arising from equity trading investments.
The trading investments represent investments in listed equity securities, funds and unquoted equities and that present the Group with opportunity for return through dividend income and trading gains. They have no fixed maturity or coupon rate. The fair values of these securities are based on quoted market prices where available.
By the nature of its activities, the Group's investments are exposed to market price fluctuations. However the portfolio as a whole does not correlate exactly to any stock exchange index, as it is invested in a diversified range of markets. The investment manager and the Board monitor the portfolio valuation on a regular basis and consideration is given to hedging the portfolio against large market movements.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults.
The Group's sales policy is subordinated to the credit sales rules set by management, which seeks to mitigate any loss from customers' delinquency.
Trade receivables consist of a large number of customers. Ongoing credit evaluation is performed on the financial condition of accounts receivable.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
The Group has access to financing facilities, the total unused amount which is US$76.9 million at the balance sheet date. The Group expects to meet its other obligations from operating cash flows and proceeds of maturing financial assets.
Fair value of financial instruments
The fair value of non-derivative financial assets traded on active liquid markets are determined with reference to quoted market prices.
The carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate their fair value.
Enquiries
Company Contact
Keith Middleton 1 441 295 1309
Media
David Haggie 020 7562 4444
Haggie Partners LLP
Cantor Fitzgerald Europe 020 7894 7000
Rick Thompson - Corporate Finance
David Banks - Corporate Broking
This information is provided by RNS
The company news service from the London Stock Exchange
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