REG - Ocean Wilsons Hldgs - Preliminary results for the year ended 31 Dec 2021
24/03/2022 07:00
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RNS Number : 8366F Ocean Wilsons Holdings Ltd 24 March 2022
Ocean Wilsons Holdings Limited
Preliminary results for the year ended 31 December 2021
Ocean Wilsons Holdings Limited ("Ocean Wilsons" or the "Company") today
announces its preliminary results for the year ended 31 December 2021.
COMPANY HIGHLIGHTS
About Ocean Wilsons Holdings Limited
Ocean Wilsons Holdings Limited ("Ocean Wilsons" or the "Company") is a Bermuda
holding company which, through its subsidiaries, holds a portfolio of
international investments and operates a maritime services company in Brazil.
The Company is a premium listed entity on the London Stock Exchange and is
also listed on the Bermuda Stock Exchange.
It has two principal subsidiaries: Ocean Wilsons (Investments) Limited
("OWIL") and Wilson Sons Holdings Brasil S.A. ("Wilson Sons") (together with
the Company and their subsidiaries, the "Group"). OWIL is a wholly owned
Bermuda investment company. The Company owns 57% of Wilson Sons which is fully
consolidated in the accounts with a 43% non-controlling interest. Wilson Sons
is one of the largest providers of maritime services in Brazil with activities
including towage, container terminals, offshore oil and gas support services,
small vessel construction, logistics and ship agency.
Objective
Ocean Wilsons focuses on long-term performance and value creation. This
approach applies to both the investment portfolio and our investment in Wilson
Sons. This longer-term view of the Board directs an OWIL investment strategy
whereby investments are made in a balanced thematic portfolio of funds
leveraging our long-standing investment market relationships and through
detailed insights and analysis. The Wilson Sons maritime logistic services
investment strategy focuses on providing best in class innovative solutions in
a rapidly growing market.
2021 Data Highlights
Key Data as at 31 December
(In US$ millions) 2021 2020 Change
Profit after tax $82.5 $48.0 71.9%
Operating Profit $97.0 $70.0 38.6%
Revenue $396.4 $352.8 12.4%
Net cash inflow from operating activities $106.1 $105.7 0.4%
Investment portfolio assets including cash and cash equivalents $351.8 $310.9 13.2%
Net assets $783.7 $743.7 5.4%
Debt net of cash and cash equivalents $440.9 $437.3 0.8%
Share Data as at 31 December
2021 2020 Change
Earnings per share US 180.1 cents US 109.5 cents 64.5%
Proposed dividend/Actual dividend per share US 70 cents US 70 cents -
Share discount 41.6% 39.2% 2.4%
Implied net asset value per share GBP 15.95 GBP 13.89 14.8%
Share price GBP 9.32 GBP 8.45 10.3%
Profit Analysis as at 31 December
(In US$ millions) 2021 2020 Change
Investment Portfolio Net Return $44.5 $30.3 46.9%
Maritime Services Net Profit $41.4 $20.6 101.0%
Investment Portfolio as a % of Net Profit 53.9% 63.1% (9.2%)
Maritime Services as a % of Net Profit 50.2% 42.9% 7.3%
STRATEGIC REPORT
Chairman's Statement
As we continue to find a balance between getting back to pre-pandemic business
operations, minimizing the challenges that "living with Covid" pose, and now
considering the potential impacts of the Russia/Ukraine war on both our
operations and investments; we find ourselves challenging how we operate,
rationalizing our investment strategies and ensuring that we address any
issues related to Russian sanctions. When navigating our day-to-day
operations, we seek opportunities to grow and protect our investments, drive
innovation, address sustainability and minimize risks in the face of
geo-political conflict.
A significant part of the Board's focus during the year was given to
supporting Wilson Sons' new listing on the Novo Mercado on the Sao Paulo Stock
Exchange and analysing OWIL's legacy private equity holdings to rationalize
the current investment portfolio while seeking to maximize the potential
returns on these holdings. At the same time, we have been reducing risk
exposure and driving ESG initiatives with Wilson Sons to have more measurable
outcomes and to begin to establish climate related emissions targets for the
Group. This is the first year that the Company will report on its TCFD
disclosures (Taskforce for Climate-related Financial Disclosures) which has
driven a more focused approach to the Group's risk management framework for
monitoring and managing climate related risks. It is our ambition to ensure
that these risks and related opportunities are examined in depth and across
time horizons with clear discussion of strategic implications and mitigating
actions.
The Group's financial results are moving back to pre-pandemic performance
levels. Driven by the success of the investment portfolio in rising equity
markets, the portfolio assets (including cash and cash equivalents) increased
13.2% to US$351.8 million (2020: US$310.9 million) and outperformed the
benchmark.
Wilson Sons reported better than expected revenues of US$396.4 million, close
to comparable 2019 revenues of US$406.1 million, against a global shipping
industry backdrop of container shortages, supply chain challenges, clogged
shipping ports and changing demands in the mix of consumer goods generated.
Key performance indicators of the Wilson Sons' main revenue generating
activities, the container terminals, towage and offshore vessels businesses
improved year over year:
Operating volumes 2021 2020 % Change
Container Terminals (container movements in TEU '000s) * 1,042.3 1,017.6 2.4%
Towage (number of harbour manoeuvres performed) 54,839 52,873 3.7%
Offshore Vessels (days in operation) 5,400 5,356 0.8%
* TEUs stands for "twenty-foot equivalent units".
Results
Encouragingly, profit for the year at US$82.5 million was US$34.5 million
better than the prior year (2020: US$48.0 million) primarily due to the
returns on the investment portfolio and significant improvement in Wilson
Sons' revenues with increased activity over the prior year.
Operating profit at US$97.0 million (2020: US$70.0 million) improved by
US$27.0 million, and total comprehensive income was US$75.3 million, US$78.8
million better than prior year (2020: loss US$3.5 million) driven in part by
reduced foreign exchange losses. Operating expenses generally increased in
correlation with increased operating revenues at Wilson Sons as business
activities return to normalized levels.
The investment portfolio delivered a net return basis 14.5% and outperformed
the benchmark (10.0%) by 4.5%. The portfolio including cash increased US$43.0
million to US$351.8 million (2020: US$308.8 million). OWIL paid dividends of
US$5.0 million to Ocean Wilsons Holdings Limited and paid the Investment
Manager management fees of US$3.3 million (2020: US$2.8 million) and
performance fees of US$1.6 million (2020: US$0.3 million).
Over the three-year period ended 31 December 2021, the portfolio produced a
time-weighted net return of 12.5% per annum compared with the three-year
period performance benchmark of 6.5% per annum.
At the close of markets on 31 December 2021, the Wilson Sons' share price was
R$55.68 (US$9.99), resulting in a market value for the Ocean Wilsons holding
of 41,444,000 shares (56.88% of Wilson Sons) of US$414.2 million, the
equivalent of US$11.71 (£8.65) per Ocean Wilsons share.
The market value per share at 31 December 2021 was US$11.71 for Wilsons Sons
and US$9.88 (£7.30) for the investment portfolio. The net asset value per
Ocean Wilsons Holdings Limited share was US$22.16 (£16.37). The Ocean Wilsons
Holdings Limited share price was £9.32 at 31 December 2021.
Earnings per share for the year were US 180.1 cents compared with US 109.5
cents in 2020.
The Financial Report provides further details in relation to the performance
of the Group.
Environmental Social and Governance Practices (ESG)
Ocean Wilsons is committed to a responsible investing policy and operating
practices within its subsidiaries. Ocean Wilsons is in a unique position,
relating to ESG, as a holding company of two varied investments
Although our investments are managed by an external investment manager, we do
expect the investments in our portfolio to take ESG issues seriously, to
clearly report on them and to aspire to do the right thing. As part of the
Company's continued evolution of its ESG practices, the Board is working with
the Investment Manager Hanseatic Asset Management LBG ("HAML") and its
Sub-advisor Hansa Capital Partners LLP ("HCP"), collectively the HAML Group,
such that they are working towards becoming a signatory in 2022 for the
internationally recognized United Nations' Principles for Responsible
Investment ("UN PRI") to demonstrate their and our commitment to responsible
investment.
At Wilson Sons, it is recognized that continued evolution of the maritime port
sector is necessary for the coming years. The combination of the exponential
advances in the application of technologies in ports and vessels with the
growing demand for the sector to become increasingly sustainable will
significantly affect the business dynamics in the industry. Wilson Sons
monitors these industry trends to seek opportunities to participate in this
transformation and take value from it. We believe that innovation and ESG are
intrinsically connected, so that many of the solutions we apply to our current
or potential businesses must involve aspects of emissions reduction,
inclusion, and positive social impact. ESG is an intrinsic part of our
innovative business analysis and selection criteria.
Corporate Governance
The Board has established corporate governance arrangements which are
appropriate for the operation of the Company. The Board has considered the
principles and recommendations of the 2018 UK Corporate Governance Code ("the
Code") issued by the Financial Reporting Council applying those aspects which
are appropriate to the business. The limited areas where the Company does not
comply with the Code, and an explanation of why, are contained in the section
on Corporate Governance in the Annual Report. The position is regularly
reviewed and monitored by the Board.
Outlook
Our outlook in the earlier part of 2022 would have discussed the ongoing
supply-chain challenges triggered by Covid-19, global container shortages and
inflationary concerns. These are still factors; however, we now must consider
the geo-political uncertainties and global economic impacts stemming from the
Russian invasion of Ukraine. We initially expected global economic growth to
be more moderate in 2022 following the very strong recovery in 2021 and this
is still our general view, albeit with a more cautious lens.
As a result of the Ukrainian conflict and the ensuing economic sanctions on
Russia, significant pressure has been put on markets especially commodity
markets, further impacting inflation and interest rates, the full extent and
market reach of these impacts is still to be fully realized. The portfolio's
exposure to Russian linked investments is less than 1.4% at the time of
writing and reduced to zero at the end of Q1. Further, we are ensuring that
the funds we invest in are, and remain, compliant with sanctions being imposed
on Russia. We continue to be alert and cautious in our approach to minimize
overreaction and maintain our disciplined approach to focus on the portfolio's
objective of long-term sustainable capital growth.
The outlook in Brazil for 2022 remains cautious when considering the impacts
of the war in Ukraine on world trade and the upcoming presidential elections
which creates a scenario of economic uncertainty. While it is expected that
pressures on our container terminal business will continue, we are expecting
stronger results in the towage and a move towards recovery of maritime
services to the oil and gas industry.
I am pleased to report that Wilson Sons' strategy to maximise its economies of
scale to improve operating efficiencies has placed its ports in Salvador and
Rio Grande as the most efficient in Brazil according to the rankings of the
Global Container Port Performance Index released by the World Bank. Wilson
Sons' ports were the only Brazilian ports to appear among the top 50 ports in
the world. Additionally, Ocean Wilsons' stock became part of the FTSE
All-Share Index on 21 March 2022, which is expected to improve the liquidity
of our stock.
Passing the Torch
23 years have passed since I took office as the Chairman of Ocean Wilsons
Board of Directors. At the forthcoming Annual General Meeting, I will be
retiring from the Board. I would like to take this opportunity to express my
sincere thanks to our valued shareholders, for the ongoing support and
confidence you have given to me over the years. It was a great honour for me
to serve and I am proud of what our Company has become today.
My designated successor, Ms. Caroline Foulger, with her extensive experience
and strong leadership, will prove to be an excellent Chair to continue the
Company's growth and evolve its investment strategy. I wish Ocean Wilsons, all
its shareholders, employees, and business partners and last, but not least, my
colleagues on the Board of Directors and the entire management team all the
best and continuing success for the future.
J F Gouvêa Vieira
Chairman
Ocean Wilsons Holdings Limited
23 March 2022
BUSINESS REVIEW - INVESTMENT MANAGER'S REPORT
Market Backdrop
2021 ended in a similar vein to how it started with concerns over new variant
of COVID, Omicron. Despite this, 2021 can be best described as a year of
normalization albeit one beset by challenges and setbacks. Risk assets
produced another year of double-digit returns, rising by 18.5%. Driving this
performance yet again was the US market which rose by 26.4%. Europe and the UK
produced positive returns rising by 15.7% and 18.5% for the year,
respectively. Japan was up 1.7% whereas China fell by 21.7%. In contrast India
and Russia rose by 26.2% and 15.0% albeit coming off very weak performances in
2020.
At the sector level, in contrast to recent years where performance has largely
been driven by the technology and growth sectors, this year saw a broadening
in returns with financials, real estate and IT returning 24.3%, 22.8% and
27.4% respectively. Highlighting contrasting fortunes, commodities rose by
27.1%, with energy the standout performer rising by 36.0%, whereas bonds were
typically weaker for the year with US Treasuries falling by 2.3%.
Portfolio Commentary
Global markets were more volatile during 2021 with periods of strong
performance counterbalanced by declines when concerns about new Covid variants
shook confidence. Rising rates became an increasing focus as inflation
continued to tick higher as energy prices increased and supply constraints
remained unresolved. Towards the end of the year markets initially worried
about the new Omicron COVID variant but ultimately this variant turned out to
be far less virulent than previous waves and investors quickly looked past it.
The investment portfolio was up 16.1% over the year whilst its benchmark
returned 10.0% over the same period. The MSCI ACWI gained 18.5% while the
Bloomberg Barclays Global Treasury index fell by 6.6%.
Looking Forward
We entered 2022 with ongoing inflationary concerns albeit with an expectation
that we would see an easing as we moved through the year. Interest rates had
started to rise in the West having previously been held at historically low
levels due to central bank efforts to combat the pandemic.
In late February however, the decision by Russia to invade Ukraine stunned
world markets. Whilst there were some fears that President Putin might launch
an invasion it was not widely expected to occur in face of the limited
strategic advantage and Ukraine's clear commitment to retaining its
independence, not to mention the devastating effects on human life. The
subsequent global sanctions that have been imposed on Russia have been both
swift and severe, placing Russia under significant financial duress as well as
being excluded from the global financial system for the foreseeable future.
At this stage, it is too early to assess the full financial impact of recent
events. Commodity markets, which had already been under considerable
pressure, are being squeezed with Russian commodities excluded from the global
system. This will place yet further pressure on inflation in the
short-term. The knock-on effects to global growth will need to be monitored
carefully, albeit Russia itself is a small component of the global economy;
however, the effects on Europe will be more severe. Commodities are of
particular importance with their many different touch points
on Western economies including fuel costs, global supply chains, where
Russian metals are important, and food supply. These factors, combined with
the impact on economic confidence with a war in Europe, will certainly weigh
on growth. Outside of Europe economies will be more immune with the US being
a relatively closed economy and largely energy self-sufficient and with many
emerging markets far less affected. Our weightings in the US and emerging
markets are 50% and 23% respectively compared to 11% in Europe for our core
regional, thematic and private equity silos (as at 10 March 2022).
We had a modest exposure to Russia through our holding in Prosperity Quest
(1.2%) and some de minimis exposures mainly through index funds. The portfolio
is highly diverse by country exposure, asset class and number of holdings
managed by highly experienced asset managers who have operated through many
different economic cycles with underlying holdings that are well positioned to
weather more difficult trading conditions.
Our defensive holdings have, to-date, held up extremely well. This part of
the portfolio was designed to provide a more defensive and diversified
exposure at a time when bond markets, the conventional defensive asset class,
were looking extremely expensive. So far this year, interestingly, bonds do
not appear to be generating the positive performance that would have typically
been expected during periods such as this with the ongoing inflationary
pressures and prospect of higher rates weighing on them.
We will continue to actively monitor the situation over the coming weeks and
months and will adjust the portfolio accordingly as matters develop, albeit
always with a view to our long-term mandate.
Hanseatic Asset Management LBG
10 March 2022
Investment Portfolio as at 31 December 2021
Market Value US$000 % of NAV Primary Focus
Findlay Park American Fund 39,264 11.2 US Equities - Long Only
BlackRock Strategic Equity Hedge Fund 16,200 4.6 Europe Equities - Hedge
Adelphi European Select Equity Fund 15,590 4.4 Europe Equities - Long Only
Egerton Long - Short Fund Limited 15,474 4.4 Europe/US Equities - Hedge
Select Equity Offshore, Ltd 14,508 4.1 US Equities - Long Only
GAM Star Fund PLC - Disruptive Growth 14,454 4.1 Technology Equities - Long Only
Vulcan Value Equity Fund 13,324 3.8 US Equities - Long Only
Schroder ISF Asian Total Return Fund 8,988 2.5 Asia ex-Japan Equities - Long Only
Stepstone Global Partners VI, LP 8,364 2.4 Private Assets - US Venture Capital
NG Capital Partners II, LP 7,973 2.3 Private Assets - Latin America
Top 10 Holdings 154,139 43.8
Goodhart Partners: Hanjo Fund 7,767 2.2 Japan Equities - Long Only
Pangaea II, LP 7,670 2.2 Private Assets - GEM
NTAsian Discovery Fund 7,247 2.1 Asia ex-Japan Equities - Long Only
KKR Americas XII, LP 6,879 2.1 Private Assets - North America
Pershing Square Holdings Ltd 6,817 1.9 US Equities - Long Only
Silver Lake Partners IV, LP 6,095 1.7 Private Assets - Global Technology
Primary Capital IV, LLP 5,609 1.6 Private Assets - Europe
Indus Japan Long Only Fund 5,394 1.5 Japan Equities - Long Only
Impax Environmental Markets Fund 5,310 1.5 Environmental Equities - Long Only
Hudson Bay International Fund Ltd 5,101 1.4 Market Neutral - Multi-Strategy
Top 20 Holdings 218,028 62.0
Stepstone Global Partners IV, LP 4,980 1.4 Private Assets - US Venture Capital
Helios Investors II, LP 4,807 1.4 Private Assets - Africa
Prince Street Opportunities Fund 4,733 1.3 Emerging Markets Equities - Long Only
Baring Asia Private Equity Fund VII, LP 4,317 1.2 Private Assets - Asia
Silver Lake Partners V, LP 4,311 1.2 Private Assets - Global Technology
EQT Mid-Market Europe, LP 4,092 1.2 Private Assets - Europe
Prosperity Quest Fund 4,077 1.2 Russia Equities - Long Only
Worldwide Healthcare Trust PLC 4,069 1.1 Healthcare Equities - Long Only
SPDR MSCI World Financials UCITS ETF 3,832 1.1 Financials Equities - Long Only
Global Event Partners Ltd 3,772 1.1 Market Neutral - Event-Driven
Top 30 Holdings 261,018 74.2
58 Remaining Holdings 88,595 25.2
Cash 2,186 0.6
TOTAL 351,799 100.0
BUSINESS REVIEW - WILSON SONS' MANAGEMENT REPORT
The Wilson Sons 2021 Earnings Report released on 23 March 2022 is posted on
www.wilsonsons.com.br.
In the report, Mr. Fernando Salek, CEO of Wilson Sons, said:
Wilson Sons' 2021 EBITDA of US$159.4 million increased 16.3% compared to 2020
(2020: US$137.1 million) with solid growth in towage operating revenues.
Container terminal operating results and exports in particular were impacted
by the limited availability of empty containers and worldwide logistic
bottlenecks causing vessel call cancellations. Despite these challenges
Salvador container terminal reached an all-time cargo handling record of
376,400 TEUs in 2021 with new berth infrastructure supporting increased
efficiency. Due to robust first half results in 2021 and an improved revenue
mix, net revenues from the container terminals were U$141.8 million, 7.3%
better than prior year (2020: US$132.2 million).
Towage results rebounded with operating volumes driven by strong commodity
exports and LNG imports. Towage net revenues were U$199.1 million in 2021
(2020: US$173.6 million).
Our outlook for 2022 remains cautious with the effects on worldwide trade from
the war in Ukraine, Brazilian elections and political scenario creating some
uncertainty. In addition, our container terminal business will continue to be
challenged in the first half of the year with logistical bottlenecks, lack of
empty containers and cancellation of vessel calls. Trade flow in particular is
expected to support strong towage results and maritime services to the oil and
gas industry are expected to recover.
In terms of sustainability, we are pleased to report our carbon emissions
audit has achieved the CDP Gold Seal. Health and safety continue to be
fundamental for our business and the highlight for 2021 is exceptional
vaccination rates among our employees which together with other precautionary
actions like testing and mask wearing have protected our employees and allowed
our operations to continue throughout the year.
We accomplished more than just solid financial results in 2021. Significant
achievements during the year include our listing on B3's Novo Mercado, we were
awarded with the internationally recognized standard of excellence for
workplace environments Great Place to Work, publication of the Standard &
Poor's (S&P) ESG Corporate Sustainability Assessment with the company
ranked in the second quartile and we ranked in the 100 Open Start-ups Award.
These initiatives and successes coupled with our strong financial position and
culture of innovation, position us well for continued growth and success as we
strive to be the best in class of Brazil's maritime logistics companies.
FINANCIAL REPORT
Operating Profit
Operating profit of US$97.0 million was US$27.0 million better than prior year
(2020: US$70.0 million). Operating margin improved year over year at 24.5%
(2020: 19.9%) principally due to increased revenues and an improvement in
foreign exchange losses on monetary items.
Operating expenses increased as expected with increased volumes in the ports
nearing pre-pandemic levels. Raw materials and consumables used were US$4.7
million higher at US$24.0 million (2020: US$19.3 million). Employee expenses
were US$2.0 million higher at US$112.0 million (2020: US$110.0 million).
Employee expenses as a percentage of revenue declined from 31.2% in 2020 to
28.3% in the current year.
Other Operating expenses increase US$13.6 million to US$98.3 million (2020:
US$84.7 million). Depreciation at $61.4 million was US$0.1 million higher than
the comparative period (2020: US$61.3 million).
Revenue from Maritime Services
Revenue for the year increased by 12.4% to US$396.4 million (2020: US$352.8
million). The increase in revenue can be attributed to higher towage
manoeuvres, increases in special operations and improved operational activity
in logistics, the shipyards and shipping agency over the prior year. Container
Terminal revenue increased 7.3% year over year to US$141.8 million (2020:
US$132.2 million), in spite of a challenging global container bottlenecks in
the second half of the year. Towage revenue at US$199.1 million was US$25.5
million higher than the prior year (2020: US$173.6 million) with increased
volumes in ports that operate larger ships and success in our ongoing focus to
improve our revenue mix.
Returns on the Investment Portfolio at Fair Value Through Profit or Loss
Returns on the investment portfolio of US$49.5 million (2020: US$33.4 million)
comprise realised profits on the disposal of financial assets at fair value
through profit or loss of US$11.9 million (2020: US$1.0 million), net income
from underlying investment vehicles of US$3.8 million (2020: US$3.3 million)
and unrealised gains on financial assets at fair value through profit or loss
of US$33.9 million (2020: US$29.1 million).
Finance Costs
Finance costs for the year at US$30.2 million were US$7.0 million higher than
the prior year (2020: US$23.2 million) as interest on lease liabilities
increased US$1.1 million to US$13.9 million (2020: US$12.8 million). Interest
on bank loans and overdrafts increased US$5.9 million to US$16.2 million
(2020: US$10.3 million) due to normalization of debt repayments in during the
current year after "stand still" debt repayment agreements that were given
during Covid expired.
Exchange Rates
The Group reports in USD and has revenues, costs, assets and liabilities in
both BRL and USD. Therefore, movements in the USD/BRL exchange rate influence
the Group's results either positively or negatively from year to year. During
2021 the BRL depreciated 7.1% against the USD from R$5.20 at 1 January 2020 to
R$5.57 at the year end. In 2020 the BRL depreciated 29.0% against the USD from
R$4.03 at 1 January 2019 to R$5.20 at the year end.
Profit Before Tax
Profit before tax for the year increased US$35.8 million to US$110.4 million
compared to US$74.6 million in 2020. The increase in profit is primarily due
to the US$16.1 million in higher returns from the investment portfolio, and
the $43.6 million increase in revenues offsetting increased operating expenses
and finance costs.
Taxation
The tax charge for the year at US$27.9 million was US$1.3 million higher than
prior year (2020: US$26.6 million). This represents an effective tax rate for
the year of 25.3% (2020: 35.6%) for the Group. A more detailed breakdown of
Taxation is provided in note 9 to the consolidated financial statements
reconciling the effective tax rate.
Cash Flow
Net cash inflow from operating activities for the period at US$106.1 million
was consistent with the prior year (2020: US$105.7 million. Capital
expenditure in the year at US$48.7 million was US$10.7 million lower than the
prior year (2020: US$59.4 million).
The Group drew down new loans of US$19.4 million (2020: US$51.5 million) to
finance capital expenditure, while making loan repayments of US$57.9 million
in the year (2020: US$25.7 million). Dividends of US$24.8 million were paid to
shareholders (2020: US$24.8 million) with a further US$17.8 million paid by
Wilson Sons to non-controlling interests (2020: US$17.5 million).
Cash and cash equivalents at 31 December 2020 decreased US$34.7 million from
the prior year end to US$28.6 million, (2020: US$63.3 million). Wilson Sons
held a further US$43.3 million in USD denominated investments which are
classified as financial assets at fair value through profit or loss (2020:
US$39.6 million) which are not part of the Group's investment portfolio and
are intended to fund Wilson Sons.
Statement of Financial Position
Equity attributable to shareholders of the parent company at the reporting
date was US$37.9 million higher at US$593.7 million compared with US$555.8
million at 31 December 2020. The main movements for the year were profits for
the period of US$63.7 million, less dividends paid of US$24.8 million and a
negative currency translation adjustment of US$4.2 million. The currency
translation adjustment arises from exchange differences on the translation of
Wilson Sons operations which use a functional currency other than USD.
Net Debt and Financing
All debt at the year-end was held in the Wilson Sons subsidiary with no
recourse to Ocean Wilsons, or the investment portfolio held by Ocean Wilsons
(Investments) Limited. Wilson Sons' borrowings are used principally to finance
vessel construction and the development of its container terminal business.
Debt net of cash and cash equivalents at 31 December 2021 was US$440.9 million
(2020: US$437.3 million).
Leslie J. Rans, CPA
Chief Operating and Financial Officer
Ocean Wilsons Holdings Limited
23 March 2022
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31 December 2021
(Expressed in thousands of US Dollars)
Note 2021 2020
Sales of services 5 396,376 352,792
Raw materials and consumables used (24,036) (19,266)
Employee charges and benefits expense 6 (112,026) (110,016)
Other operating expenses 7 (98,289) (84,666)
Depreciation of owned assets 15 (46,631) (47,793)
Depreciation of right-of-use assets 16 (12,063) (10,706)
Amortisation of intangible assets 17 (2,718) (2,824)
(Loss)/gain on disposal of property, plant and equipment and intangible assets (499) 65
Foreign exchange losses on monetary items (3,100) (7,551)
Operating profit 97,014 70,035
Share of results of joint ventures 14 (5,029) (4,142)
Returns on investment portfolio at fair value through profit or loss 5 49,474 33,383
Investment portfolio performance and management fees (4,954) (3,130)
Other investment income 5 4,113 1,644
Finance costs 8 (30,227) (23,210)
Profit before tax 110,391 74,580
Tax expense 9 (27,925) (26,577)
Profit for the year 82,466 48,003
Other comprehensive income:
Items that will not be reclassified subsequently to profit or loss
Post-employment benefits remeasurement 22 108 351
Items that will be or may be reclassified subsequently to profit or loss
Exchange differences arising on translation of foreign operations (7,459) (51,824)
Effective portion of changes in fair value of derivatives 158 (35)
Other comprehensive loss for the year (7,193) (51,508)
Total comprehensive income/(loss) for the year 75,273 (3,505)
Profit for the year attributable to:
Equity holders of the Company 63,687 38,712
Non-controlling interests 27 18,779 9,291
82,466 48,003
Total comprehensive income/(loss) for the year attributable to:
Equity holders of the Company 59,604 9,064
Non-controlling interests 27 15,669 (12,569)
75,273 (3,505)
Earnings per share:
Basic and diluted 29 180.1c 109.5c
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Statement of Financial Position
As at 31 December 2021
(Expressed in thousands of US Dollars)
Note 2021 2020
Current assets
Cash and cash equivalents 10 28,565 63,255
Financial assets at fair value through profit and loss 11 392,931 347,464
Recoverable taxes 9 25,380 22,479
Trade and other receivables 12 59,350 47,807
Inventories 13 12,297 11,764
518,523 492,769
Non-current assets
Other trade receivables 12 1,580 9
Related party loans receivable 24 10,784 30,460
Other non-current assets 23 3,582 4,905
Recoverable taxes 9 12,816 11,006
Investment in joint ventures 14 61,553 26,185
Deferred tax assets 9 22,332 29,716
Property, plant and equipment 15 563,055 579,138
Right-of-use assets 16 157,869 149,278
Other intangible assets 17 14,981 16,967
Goodwill 18 13,272 13,429
861,824 861,093
Total assets 1,380,347 1,353,862
Current liabilities
Trade and other payables 20 (58,513) (41,066)
Tax liabilities 9 (8,057) (6,346)
Lease liabilities 16 (19,449) (18,192)
Bank overdrafts and loans 21 (45,287) (58,672)
(131,306) (124,276)
Net current assets 387,217 368,493
Non-current liabilities
Bank loans 21 (256,312) (283,989)
Post-employment benefits 22 (1,562) (1,641)
Deferred tax liabilities 9 (50,194) (50,987)
Provisions for legal claims 23 (8,907) (9,560)
Lease liabilities 16 (148,394) (139,702)
(465,369) (485,879)
Total liabilities (596,675) (610,155)
Capital and reserves
Share capital 25 11,390 11,390
Retained earnings 678,006 635,987
Translation and hedging reserve (95,739) (91,595)
Equity attributable to equity holders of the Company 593,657 555,782
Non-controlling interests 27 190,015 187,925
Total equity 783,672 743,707
The accompanying notes are an integral part of these consolidated financial
statements.
Signed on behalf of the Board
F. Beck A. Berzins
Director Director
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
(Expressed in thousands of US Dollars)
Share capital Retained earnings Hedging and Translation reserve Attributable to equity holders of the Company Non-controlling interests Total equity
Balance at 1 January 2020 11,390 620,151 (61,748) 569,793 216,067 785,860
Currency translation adjustment - - (29,827) (29,827) (21,997) (51,824)
Post-employment benefits (note 22) - 199 - 199 152 351
Effective portion of changes in fair value of derivatives - - (20) (20) (15) (35)
Profit for the year - 38,712 - 38,712 9,291 48,003
Total comprehensive income/(loss) for the year - 38,911 (29,847) 9,064 (12,569) (3,505)
Dividends (notes 27, 28) - (24,754) - (24,754) (17,455) (42,209)
Tax incentives - - - - 19 19
Share options exercised in subsidiary (note 26) - 1,679 - 1,679 1,657 3,336
Share based payment expense (note 26) - - - - 206 206
Balance at 31 December 2020 11,390 635,987 (91,595) 555,782 187,925 743,707
Balance at 1 January 2021 11,390 635,987 (91,595) 555,782 187,925 743,707
Currency translation adjustment - - (4,234) (4,234) (3,225) (7,459)
Post-employment benefits (note 22) - 61 - 61 47 108
Effective portion of changes in fair value of derivatives - - 90 90 68 158
Profit for the year - 63,687 - 63,687 18,779 82,466
Total comprehensive income/(loss) for the year - 63,748 (4,144) 59,604 15,669 75,273
Dividends (notes 27, 28) - (24,754) - (24,754) (17,808) (42,562)
Share options exercised in subsidiary (note 26) - 3,025 - 3,025 3,860 6,885
Share based payment expense (note 26) - - - - 369 369
Balance at 31 December 2021 11,390 678,006 (95,739) 593,657 190,015 783,672
The accompanying notes are an integral part of these consolidated financial
statements.
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 designated hedging relationships.
Amounts in the statement of changes in equity are stated net of tax where
applicable.
Consolidated Statement of Cash Flow
For the year ended 31 December 2021
(Expressed in thousands of US Dollars)
Notes 2021 2020
Operating activities
Profit for the year 82,466 48,003
Adjustment for:
Depreciation & amortisation 15,16,17 61,412 61,323
Loss/(gain) on disposal of property, plant and equipment and intangible assets 499 (65)
Share of results of joint ventures 14 5,029 4,142
Returns on investment portfolio at fair value through profit or loss 5 (49,474) (33,383)
Other investment income 5 (4,113) (1,644)
Finance costs 8 30,227 23,210
Foreign exchange losses on monetary items 3,100 7,551
Share based payment expense 26 369 127
Post-employment benefits 22 136 134
Tax expense 9 27,925 26,577
Changes in:
Inventories 13 (533) (1,257)
Trade and other receivables 12, 24 (13,629) 8,141
Other current and non-current assets 9,23 (3,388) 22,565
Trade and other payables 20 19,158 (8,914)
Provisions for legal claims 23 (653) 1,030
Taxes paid (27,256) (29,137)
Interest paid (25,161) (22,703)
Net cash inflow from operating activities 106,114 105,700
Investing activities
Income received from trading investments 5,700 5,076
Purchase of trading investments (72,811) (63,723)
Proceeds on disposal of trading investments 73,064 45,154
Purchase of property, plant and equipment 15 (47,352) (58,360)
Proceeds on disposal of property, plant and equipment 304 1,259
Purchase of intangible assets 17 (1,375) (1,085)
Proceeds on disposal of intangible assets 517 -
Investment in joint ventures 14 (20,016) (23)
Net cash used in investing activities (61,969) (71,702)
Financing activities
Dividends paid to equity holders of the Company 28 (24,754) (24,754)
Dividends paid to non-controlling interests in subsidiary 27 (17,808) (17,455)
Repayments of borrowings 21 (57,926) (25,725)
Payments of lease liabilities 16 (8,473) (6,345)
New bank loans drawn down 21 19,438 51,455
Issue of new shares in subsidiary under employee share option plan 26 6,885 3,336
Net cash used in financing activities (82,638) (19,488)
Net (decrease)/increase in cash and cash equivalents (38,493) 14,510
Cash and cash equivalents at beginning of year 63,255 68,979
Effect of foreign exchange rate changes 3,803 (20,234)
Cash and cash equivalents at end of year 28,565 63,255
The accompanying notes are an integral part of these consolidated financial
statements.
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
(Expressed in thousands of US Dollars)
1 General Information
Ocean Wilsons Holdings Limited ("Ocean Wilsons" or the "Company") is a Bermuda
investment holding company which, through its subsidiaries, operates a
maritime services company in Brazil and holds a portfolio of international
investments. The Company is incorporated in Bermuda under the Companies Act
1981 and the Ocean Wilsons Holdings Limited Act, 1991. The Company's
registered office is Clarendon House, 2 Church Street, Hamilton, Bermuda.
These consolidated financial statements comprise the Company and its
subsidiaries (the "Group").
These consolidated financial statements were approved by the Board 23 March
2022.
2 Significant accounting policies and critical accounting
judgements
Basis of accounting
These consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRSs") and are presented in US
Dollars, which is the Company's functional currency. All amounts have been
rounded to the nearest thousand, unless otherwise indicated.
Although the outbreak of the COVID-19 pandemic and the measures adopted by
governments to mitigate its spread have impacted the Group, management
continues to have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future and
that the going concern basis of accounting remains appropriate.
These consolidated financial statements have been prepared on the historical
cost basis, except for the revaluation of financial instruments, share-based
payments liabilities and defined health benefit plan liabilities that are
measured at fair value.
Basis of consolidation
These consolidated financial statements incorporate the financial statements
of the Company and entities controlled by the Company. The Group controls an
entity when it is exposed to, or has the rights to, variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity. The financial statements of subsidiaries
are included in the consolidated financial statements from the date on which
control commences until the date on which control ceases. The financial
statements of subsidiaries are prepared in accordance with the accounting
policies set out in note 2. All intra-group transactions and balances are
eliminated on consolidation.
Non-controlling interests consist of the amount of those interests at the date
of the original business combination and the non-controlling interests' share
of changes in equity since the date of the combination. Where a change in
percentage of interests in a controlled entity does not result in a change of
control, the difference between the consideration paid for the additional
interest and the book value of the net assets in the subsidiary at the time of
the transaction is taken directly to equity. When the Group loses control over
a subsidiary, it derecognises the assets and liabilities of the subsidiary,
and any related non-controlling interests and other components of equity. Any
resulting gain or loss is recognised in profit or loss. Any interest retained
in the former subsidiary is measured at fair value when control is lost.
Joint arrangements
Joint ventures
A joint venture is a contractual agreement where the Group has joint control
and has rights to the net assets of the contractual arrangement, rather than
being entitled to specific assets and liabilities arising from the agreement.
Joint venture entities are accounted for using the equity method. After
initial recognition at cost, these consolidated financial statements include
the Group's share in the profit or loss and other comprehensive income of the
joint venture until the date that significant influence or joint control
ceases.
Joint operations
A joint operation is a contractual agreement where the Group and other parties
undertake an economic activity that is subject to joint control, where the
strategic financial and operating policy decisions relating to the activities
require the unanimous consent of the parties sharing control. The joint
operations' assets and any liabilities incurred jointly with other ventures
are recognised in the financial statements of the relevant entity and
classified according to their nature. The Group's share of the assets,
liabilities, income and expenses of joint operation entities are combined with
the equivalent items in these consolidated financial statements on a
line-by-line basis.
Foreign currency
The functional currency of each entity of the Group is established as the
currency of the primary economic environment in which it operates.
Transactions other than those in the functional currency of the entity are
translated at the exchange rate prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are
translated into the functional currency at the exchange rate at the reporting
date. Non-monetary items that are measured based on historical cost in a
foreign currency are translated at the exchange rate at the date of the
transaction. Exchange differences arising on the settlement and on the
translation of monetary items are included in profit or loss for the period.
On consolidation, the statement of profit or loss and comprehensive income of
entities with a functional currency other than US Dollars are translated into
US Dollars, at the average exchange rates for the period. Statement of
financial position items are translated into US Dollars at the exchange rate
at the reporting date. Exchange differences arising on consolidation of
entities with functional currencies other than US Dollars are recognised in
other comprehensive income and accumulated in the translation reserve, less
the translation difference allocated to non-controlling interest.
Revenue
Revenue is measured at the fair value of the consideration received or
receivable for goods and services provided in the normal course of business
net of trade discounts and other sales related taxes.
Shipyard revenue
Revenue related to services and construction contracts is recognised
throughout the period of the project when the work in proportion to the stage
of completion of the transaction contracted has been performed.
Port terminals revenue
Revenue from providing container movement and associated services is
recognised on the date that the services have been performed.
Offshore support base revenue
Revenue from providing vessel turnarounds is recognised on the date that the
services have been performed.
Towage revenue
Revenue from towage services is recognised on the date that the services have
been performed.
Ship agency and logistics revenues
Revenue from providing agency and logistics services is recognised when the
agreed services have been performed.
Employee Benefits
Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided.
A liability is recognised for the amount expected to be paid if the Group has
a present legal or constructive obligation to pay this amount as a result of
past service provided by the employee and the obligation can be estimated
reliably.
Share option plan
For equity settled share-based payment transactions, the Group measures the
options granted, and the corresponding increase in equity, directly at the
fair value of the option grant. Subsequent to initial recognition and
measurement, the estimate of the number of equity instruments for which the
service and non-market performance conditions are expected to be satisfied is
revised during the vesting period. The cumulative amount recognised is based
on the number of equity instruments for which the service and non-market
related vesting conditions are expected to be satisfied. No adjustments are
made in respect of market related vesting conditions.
Defined contribution plan
Obligations for contributions to defined contribution plans are expensed as
the related service is provided. Prepaid contributions are recognised as an
asset to the extent that a cash refund or a reduction in future payments is
available.
Defined health benefit plans
The Group's net obligation regarding defined health benefit plans is
calculated separately for each plan by estimating the amount of future benefit
that employees receive in return for their service in the current period and
prior periods. That health benefit is discounted to determine its present
value.
The calculation of the liability of the defined health benefit plan is
performed annually by a qualified actuary using the projected unit credit
method. Remeasurements of the net defined health benefit obligation, which
include actuarial gains and losses, are immediately recognised in other
comprehensive income.
The Group determines the net interest expense on the net defined benefit
liabilities for the period by multiplying them by the discount rate used to
measure the defined health benefit obligations. Defined health benefit
liabilities for the period take into account any changes during the period due
to the payment of contributions and benefits. Net interest and other expenses
related to defined health benefit plans are recognised in profit or loss.
When the benefits of a health plan are changed, the portion of the change in
benefits relating to past services rendered by employees is recognised
immediately in profit or loss. The Group recognised gains and losses on the
settlement of a defined health benefit plan when settlement occurs.
Termination benefits
Termination benefits are recognised as an expense when the Group can no longer
withdraw the offer of such benefits. If payments are settled after 12 months
from the reporting date, then they are discounted to their present values.
Finance income and finance costs
The Group's finance income and finance costs include interest income, interest
expense and the net gain or loss on the disposal on financial assets at fair
value through profit or loss. Interest income or expense is recognised in
profit or loss using the effective interest method.
Taxation
Tax expense comprises current and deferred tax. It is recognised in profit or
loss except to the extent that it relates to items recognised directly in
equity or in other comprehensive income, in which case the tax is also
recognised directly in equity or in other comprehensive income.
Current tax is based on taxable profit for the year. Taxable profit differs
from profit as reported in the consolidated statement of profit or loss and
other comprehensive income because it excludes or includes items of income or
expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Group's current tax expense is
calculated using tax rates that have been enacted or substantively enacted by
the end of the reporting period.
Deferred tax is recognised in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. Deferred tax is generally
recognised for all taxable temporary differences except for when the Group is
able to control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable future.
Deferred tax is not recognised if the temporary difference arises from
goodwill or from the initial recognition of assets or liabilities in a
transaction that is not a business combination and that affects neither
accounting nor taxable profit or loss.
Deferred tax assets are recognised for unused tax losses, unused tax credits
and deductible temporary differences to the extent that it is probable that
future taxable profits will be available against which they can be used. The
carrying amount of deferred tax assets is reviewed at the end of each
reporting period and reduced to the extent that it is no longer probable that
the related tax benefit will be realised. Prior reductions are reversed when
the probability of future taxable profits improves.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply in the period in which the liability is settled or the asset
is recognised, based on tax rates and tax laws that have been enacted or
substantively enacted by the end of the reporting period. The measurement of
deferred tax reflects the tax consequences that would follow from the manner
in which the Group expects, at the reporting date, to recover or settle the
carrying amount of its assets and liabilities
The Company offsets current tax assets against current tax liabilities when
these items are in the same entity and relate to taxes levied by the same
taxation authority and the taxation authority permits the Company to make or
receive a single net payment.
Financial instruments
Recognition and initial measurement
Trade and other receivables are initially recognised when they are originated.
All other financial assets and financial liabilities are initially recognised
when the Group becomes a party to the contractual provisions of the
instruments. Trade and other receivables are initially measured at the
transaction price which reflects fair value. All other financial assets and
financial liabilities are initially measured at fair value plus transaction
costs that are directly attributable to their acquisition or issue.
Classification and subsequent measurement
Management determines the classification of its financial instruments at the
time of initial recognition. The classification depends on the purpose for
which the financial instruments were acquired or issued, their characteristics
and the Group's designation of such instruments.
Financial assets
A financial asset is classified as measured at amortised cost if it is not
designated as at fair value through profit and loss and if it is held within a
business model whose objective is to hold assets to collect contractual cash
flows and if its contractual terms give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount
outstanding. These assets are subsequently measured at amortised cost using
the effective interest method, reduced by any impairment losses. Interest
income, foreign exchange gains and losses and impairment are recognised in
profit or loss. Any gain or loss on derecognition is recognised in profit or
loss.
A financial asset is classified as measured at fair value through other
comprehensive income if it is not designated as at fair value through profit
and loss and if it is held within a business model whose objective is to both
hold assets to collect contractual cash flows and to sell financial assets,
and if its contractual terms give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal amount
outstanding. These assets are subsequently measured at fair value. Interest
income calculated using the effective interest method, dividends, foreign
exchange gains and losses and impairment are recognised in profit or loss.
Other net gains and losses are recognised in other comprehensive income. On
derecognition, gains and losses accumulated in other comprehensive income are
reclassified to profit or loss.
A financial asset is classified as measured at fair value through profit and
loss if it is not classified as measured at amortised cost or at fair value
through other comprehensive income, or if it is designated as such by
management on initial recognition. Financial assets held for trading are
classified as measured at fair value through profit and loss. These assets are
subsequently measured at fair value. Net gains and losses, including any
interest or dividend income, are recognised in profit or loss.
The Group makes an assessment of the objective of the business model in which
a financial asset is held at a portfolio level because this best reflects the
way the business is managed and information is provided to management. The
information considered includes the stated policies and objectives for the
portfolio, how the performance of the portfolio is evaluated and reported to
the Group's management and the risks that affect the performance of the
business model and how those risks are managed. In assessing whether the
contractual cash flows are solely payments of principal and interest, the
Group considers the contractual terms of the instrument, including assessing
whether the financial asset contains a contractual term that could change the
timing or amount of contractual cash flows such that it would not meet this
condition.
Financial liabilities
Financial liabilities are classified as at fair value through profit and loss
when the financial liability is either held for trading or it is designated as
such by management on initial recognition. These liabilities are measured at
fair value and net gains and losses, including any interest expense, are
recognised in profit or loss.
Financial liabilities that are not classified as at fair value through profit
and loss are classified as other financial liabilities and are subsequently
measured at amortised cost using the effective interest method. Interest
expense and foreign exchange gains and losses are recognised in profit or
loss. Any gain or loss on derecognition is also recognised in profit or loss.
The following summarises the classification the Group applies to each of its
significant categories of financial instruments:
Category Classification
Trade and other receivables Amortised cost
Financial assets at fair value through profit and loss At fair value through profit and loss
Cash and cash equivalents Amortised cost
Trade and other payables Other financial liabilities
Bank overdraft and loans Other financial liabilities
Derecognition
The Group derecognises a financial asset when the contractual rights to the
cash flows from the asset expire or when it transfers the rights to receive
the contractual cash flows in a transaction in which the Group either
substantially transfers all of the risks and rewards of ownership of the
financial asset or in which the Group neither transfers nor retains
substantially all of the risks and rewards of ownership and it does not retain
control of the financial asset.
The Group derecognises a financial liability when its contractual obligations
are discharged or cancelled, or expire. The Group also derecognises a
financial liability when its terms are modified and the cash flows of the
modified liability are substantially different, in which case a new financial
liability based on the modified terms is recognised at fair value.
Hedge Accounting (Cash flow hedge)
The Company seeks to apply hedge accounting (cash flow hedge) to manage
volatility in profit or loss. When a derivative is designated as the hedging
instrument in a hedge of the variability in cash flows attributable to a
particular risk associated with a recognised asset or liability or a highly
probable forecast transaction that could affect profit or loss, the effective
portion of changes in the fair value of the derivative is recognised in other
comprehensive income and presented in the hedging reserve in equity. Any
ineffective portion of changes in the fair value of the derivative is
recognised immediately in profit or loss.
When the forecast transaction that is hedged results in the recognition of a
non-financial asset or a non-financial liability, the gains and losses
previously deferred in other comprehensive income are transferred from equity
and included in the measurement of the initial carrying amount of the asset or
liability. Any ineffective portion of changes in the fair value of the
derivative is recognised immediately in profit or loss.
Impairment of financial assets
The Group recognises an allowance for expected credit losses ("ECLs") for all
debt instruments not held at fair value through profit or loss. ECLs are based
on the difference between the contractual cash flows due in accordance with
the contract and all the cash flows that the Group expects to receive,
discounted at an approximation of the original effective interest rate.
ECLs are recognised in two stages. For credit exposures for which there has
not been a significant increase in credit risk since initial recognition, ECLs
are provided for credit losses that result from default events that are
possible within the next 12-months (a 12-month ECL). For those credit
exposures for which there has been a significant increase in credit risk since
initial recognition, a loss allowance is required for credit losses expected
over the remaining life of the exposure, irrespective of the timing of the
default (a lifetime ECL).
For financial assets measured at amortised cost, the Group applies a
simplified approach in calculating ECLs. Therefore, the Group does not track
changes in credit risk, but instead recognises a loss allowance based on
lifetime ECLs at each reporting date. The Group has established a provision
matrix that is based on its historical credit loss experience, adjusted for
forward-looking factors specific to the receivables and the economic
environment.
The Group considers a financial asset in default when contractual payments are
180 days past due. However, in certain cases, the Group may also consider a
financial asset to be in default when internal or external information
indicates that the Group is unlikely to receive the outstanding contractual
amounts in full before. A financial asset is written off when there is no
reasonable expectation of recovering the contractual cash flows.
Impairment losses are recognised in profit and loss and reflected in an
allowance account against trade and other receivables. If, in a subsequent
period, an event causes the amount of impairment loss to decrease, the
decrease in impairment loss is reversed through profit and loss.
Inventories
Inventories are measured at the lower of cost and net realisable value. Cost
comprises direct materials, spare parts and, where applicable, direct labour
costs and those overheads that have been incurred in bringing the inventories
to their present location and condition. Net realisable value represents the
estimated selling price less all estimated costs of completion and costs to be
incurred in marketing, selling and distribution.
Property, plant and equipment
Property, plant and equipment is measured at cost, which includes capitalised
borrowing costs, less accumulated depreciation and any accumulated impairment
losses. Subsequent expenditure is recognised only when it is probable that the
future economic benefits associated with the expenditure will flow to the
Group.
Depreciation is calculated to write off the cost less the estimated residual
value of items of property, plant and equipment, other than freehold land or
assets under construction, over their estimated useful lives, using the
straight-line method. Land is not depreciated, and assets under construction
are not depreciated until they are transferred to the appropriate category of
property, plant and equipment when the assets are ready for intended use.
Depreciation is recognised in profit or loss.
The estimated useful life of the different categories of property, plant and
equipment are as follows:
Freehold Buildings: 25 to 60 years
Leasehold Improvements: Lower of the rental period and useful life
Floating Craft: 25 years
Vehicles: 5 years
Plant and Equipment: 5 to 30 years
The estimated useful lives, residual values and depreciation method are
reviewed at the end of each reporting period with the effect of any changes in
estimate accounted for on a prospective basis.
An item of property, plant and equipment is derecognised upon disposal or when
no future economic benefits are expected to arise from the continued use of
the asset. The gain or loss arising on disposal or retirement of property,
plant and equipment is determined as the difference between the sales proceeds
and the carrying amount of the asset and is recognised in profit or loss.
Leased assets
At inception of a contract, the Group assesses whether it is a lease or
contains a lease component, which it is if the contract conveys the right to
control the use of an identified asset for a period of time in exchange for
consideration.
At the lease commencement date, the Group recognises a right-of-use asset and
a lease liability. The right-of-use asset is measured at cost, which comprises
the initial amount of the lease liability adjusted for any lease payments made
at or before the commencement date, plus any initial direct costs incurred and
an estimate of costs to dismantle and remove the underlying asset, less any
incentives received.
The lease liability is initially measured at the present value of the lease
payments unpaid the commencement date using the interest rate implicit in the
lease, or, if that rate cannot be readily determined, the Group's incremental
borrowing rate. Generally, the Group applies the incremental borrowing rate.
For a portfolio of leases with similar characteristics, lease liabilities are
discounted using a single discount rate.
Lease payments included in the measurement of the lease liability comprises
fixed payments, variable payments based on an index or rate, amounts expected
to be payable under a residual value guarantee, and payments arising from
options reasonably certain to be exercised. Variable lease payments not
related to an index or rate are recognised in profit or loss as incurred.
Right-of-use assets are depreciated using the straight-line method, from the
lease commencement date to the earlier of the end of their useful life or the
end of the lease term, over their expected useful lives, on the same basis as
owned assets except when there is no reasonable certainty that the Group will
obtain ownership by the end of the lease term, in which case the right-of-use
asset shall be fully depreciated over the shorter of the lease term and its
useful life. Right-of-use assets are reduced by impairment losses, if any, and
adjusted for remeasurements of the lease liability.
Subsequent to the initial measurement, the carrying amount of the liability is
reduced to reflect the lease payments made and increased to reflect the
interest payable. If there is a change in the expected cash flows arising from
and index or rate, the lease liability is recalculated. If the modification is
related to a change in the amounts to be paid, the discount rate is not
revised. Otherwise, if a modification is made to a lease, the Group revises
the discount rate as if a new lease arrangement had been made.
The Group has elected not to recognise right-of-use assets and lease
liabilities for short-term leases and leases of low-value assets. The Group
recognises the lease payments associated with these leases as an expense on a
straight-line basis over the lease term.
Intangible assets
Intangible assets that are acquired by the Group and have finite useful lives
are measured at cost less accumulated amortisation and any accumulated
impairment losses. Subsequent expenditure is recognised only when it is
probable that the future economic benefits associated with the expenditure
will flow to the Group.
Amortisation is calculated to write off the cost less the estimated residual
values of intangible assets, using the straight-line method. Amortisation is
recognised in profit or loss.
The estimated useful life of the different category of intangible assets are
as follows:
Concession rights: 10 to 33 years
Computer software: 3 to 5 years
The estimated useful life, residual values and amortisation method are
reviewed at the end of each reporting period, with the effect of any changes
in estimate accounted for on a prospective basis.
An intangible asset is derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. The gain
or loss arising on disposal or retirement of an intangible asset is determined
as the difference between the sales proceeds and the carrying amount of the
asset and is recognised in profit or loss.
Goodwill
Goodwill arising on an acquisition of a business is measured at cost as
established at the date of acquisition of the business less accumulated
impairment losses. Goodwill is not amortised.
Impairment of non-financial assets
The carrying amounts of the Group's non-financial assets, other than
inventories and deferred tax assets, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such
indication exists, then the asset's recoverable amount is estimated. Goodwill
is tested annually for impairment.
For impairment testing, assets are grouped together into the smallest group of
assets that generate cash inflows from continuing use that are largely
independent of the cash inflows of other assets or cash-generating units
(CGUs). Goodwill acquired in a business combination is allocated to groups of
CGUs that are expected to benefit from the synergies of the combination.
The recoverable amount of an asset or CGU is the greater of its value in use
and its fair value less costs to sell. In assessing value in use, the
estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or a CGU
exceeds its recoverable amount. Impairment losses are recognised in profit or
loss. Impairment losses recognised in respect of CGUs are allocated first to
reduce the carrying amount of any goodwill allocated to the CGU, and then to
reduce the carrying amounts of the other assets in the CGU on a pro rata
basis.
An impairment loss in respect of goodwill is not reversed. For other assets,
an impairment loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortisation, if no impairment loss had been
recognised.
Provisions
Provisions are recognised when the Group has a present obligation as a result
of a past event, it is probable that an outflow of economic benefits will be
required to settle that obligation and a reliable estimate can be made of the
amount of the obligation. The amount recognised as a provision is the best
estimate of the expenditure required to settle the present obligation at the
end of the reporting period taking into account the risks and uncertainties
surrounding the obligation.
Use of judgements and estimates
The preparation of these consolidated financial statements requires management
to make judgements, estimates and assumptions that affect the application of
the Group's accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from these
estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
In the process of applying the Group's accounting policies, the following
judgements, estimates and assumptions made by management have the most
significant effect on the amounts recognised in these consolidated financial
statements:
a. Provisions for tax, labour and civil risks - Judgement
Provisions for legal cases are made when the Group's management, together with
their legal advisors, consider the probable outcome is a financial settlement
against the Group. Provisions are measured at managements' best estimate of
the expenditure required to settle the obligation based upon legal advice
received. For labour claims, the provision is based on prior experience and
management's best knowledge of the relevant facts and circumstances.
b. Impairment loss on non-financial assets - Judgement, estimates
and assumptions
Impairment losses occur when book value of an asset or cash generating unit
exceeds its recoverable value, which is the highest of fair value less selling
costs and value in use. Calculation of fair value less selling costs is based
on information available on similar assets' selling transactions or market
prices less additional costs to dispose of the asset. The value-in-use
calculation is based on the discounted cash flow model. The recoverable value
of the cash-generating unit is defined as the higher of the fair value less
sales costs and value in use.
c. Valuation of unquoted investments - Judgement and estimates
The fair value of financial assets and liabilities that are not traded in an
active market is determined using valuation techniques. The Group uses a
variety of methods and makes assumptions that are based on market conditions
existing at each reporting date. Valuation techniques used include the use of
comparable recent arm's length transactions, reference to other instruments
that are substantially the same, discounted cash flow analysis, option pricing
models and other valuation techniques commonly used by market participants
making the maximum use of market inputs and relying as little as possible on
entity-specific inputs.
Changes in significant accounting policies
Amendments to IFRS 16 COVID-19 Related Rent Concessions
On 28 May 2020, the IASB issued COVID-19-Related Rent Concessions - amendment
to IFRS 16 Leases. The amendments provide relief to lessees from applying IFRS
16 guidance on lease modification accounting for rent concessions arising as a
direct consequence of the COVID-19 pandemic. As a practical expedient, a
lessee may elect not to assess whether a COVID-19 related rent concession from
a lessor is a lease modification. A lessee that makes this election accounts
for any change in lease payments resulting from the COVID-19 related rent
concession the same way it would account for the change under IFRS 16, if the
change were not a lease modification.
The amendment applies to annual reporting periods beginning on or after 1 June
2020. Earlier application is permitted and the Group adopted the amendment for
the year ending 31 December 2020, with an impact of US$0.02 million in
discounts obtained and US$0.2 million in payment deferrals from 2020 to 2021.
Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate Benchmark Reform
The amendments to IFRS 9 and IAS 39 Financial Instruments: Recognition and
Measurement provide a number of reliefs, which apply to all hedging
relationships that are directly affected by interest rate benchmark reform. A
hedging relationship is affected if the reform gives rise to uncertainty about
the timing and/or amount of benchmark-based cash flows of the hedged item or
the hedging instrument. These amendments had no impact on the consolidated
financial statements of the Group as it does not have any interest rate hedge
relationships.
Standards issued but not yet effective
A number of new or amended standards are effective for annual periods
beginning after 31 December 2021 with early adoption permitted. The Group has
elected to not adopt early the following new or amended standards, and is
assessing their impact on the preparation of its consolidated financial
statements.
- Reference to Conceptual Framework - Amendments to IFRS 3, effective
for periods beginning on or after 1 January 2022
- Property, Plant and Equipment: Proceeds before Intended Use -
Amendments to IAS 16, effective for periods beginning on or after 1 January
2022
- Onerous Contracts - Costs of Fulfilling a Contract - Amendments to
IAS 37, effective for periods beginning on or after 1 January 2022
- Amendments to IAS 1: Classification of Liabilities as Current or
Non-current, effective for periods beginning on or after 1 January 2023
- Amendments to IAS 8: Definition of Accounting Estimates, effective
for periods beginning on or after 1 January 2023
- Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of
Accounting Policies, effective for periods beginning on or after 1 January
2023
3 Group composition
Ocean Wilsons has direct ownership in Ocean Wilsons (Investments) Limited and
Wilson Sons Holdings Brasil S.A, which in turn has direct ownership in the
towage, shipyard, ship agency, logistics, container terminal and offshore
support bases subsidiaries. The effective ownership interest of Ocean Wilsons
at the end of each reporting period is as follows:
Place of incorporation Ownership interest
Subsidiaries and operation Segment 2021 2020
Investments
Ocean Wilsons (Investments) Limited Bermuda Investment 100% 100%
Holding company
Wilson Sons Limited(1) Bermuda Maritime service NA 57.77%
Wilson Sons Holdings Brasil S.A.(1) Brazil Maritime service 56.88% 57.77%
Towage
Saveiros, Camuyrano Serviços Marítimos S.A(2) Brazil Maritime service - 57.77%
Shipyard
Wilson Sons Shipping Services Ltda. Brazil Maritime service 56.88% 57.77%
Wilson Sons Estaleiros Ltda. Brazil Maritime service 56.88% 57.77%
Ship agency
Wilson Sons Agência Marítima Ltda. Brazil Maritime service 56.88% 57.77%
Dock Market Soluções Ltda. Brazil Maritime service 56.88% 57.77%
Logistics
Wilson Sons Terminais e Logística Ltda. Brazil Maritime service 56.88% 57.77%
EADI Santo André Terminais de Cargas Ltda. Brazil Maritime service 56.88% 57.77%
Allink Transportes Internacionais Ltda. Brazil Maritime service 56.88% 57.77%
Container terminal
Wilport Operadores Portuários Ltda. Brazil Maritime service 56.88% 57.77%
Tecon Rio Grande S.A. Brazil Maritime service 56.88% 57.77%
Tecon Salvador S.A. Brazil Maritime service 56.88% 57.77%
Offshore support bases and towage
Wilson Sons Serviços Marítimos Ltda Brazil Maritime service 56.88% 57.77%
(1) During the year ended 31 December 2021, Wilson Sons Limited (WSL) merged
into Wilson Sons Holdings Brasil S.A. (WSSA), its controlled subsidiary. As
all WSL shareholders received WSSA shares at the ratio of 1:1, the transaction
had no impact on the Group composition or ownership interests.
(2) During the year ended 31 December 2021, Saveiros, Camuyrano Serviços
Marítimos S.A. was merged into Wilson Sons Serviços Marítimos Ltda.
The decrease in ownership interest from the year ended 31 December 2020 to 31
December 2021 is due to the exercise of share options in subsidiaries, for
which the details are presented in note 26. The information on non-controlling
interests is presented in note 27.
4 Business and geographical segments
The Group has two reportable segments: maritime services and investments.
These segments report their financial and operational data separately to the
Board. The Board considers these segments separately when making business and
investment decisions. The maritime services segment provides towage and ship
agency, port terminals, offshore, logistics and shipyard services in Brazil.
The investment segment holds a portfolio of international investments and is a
Bermuda based company.
For the year ended 31 December 2021 Brazil - Maritime Services Bermuda - Investment Unallocated Consolidated
Sale of services 396,376 - - 396,376
Result
Segment result 103,488 (212) (3,162) 100,114
Share of results of joint ventures (5,029) - - (5,029)
Return on investment portfolio at fair value through profit or loss - 49,474 - 49,474
Investment portfolio performance and management fees - (4,954) - (4,954)
Other investment income 4,113 - - 4,113
Finance costs (30,227) - - (30,227)
Foreign exchange losses on monetary items (2,990) (6) (104) (3,100)
Profit/(loss) before tax 69,355 44,302 (3,266) 110,391
Tax (27,925) - - (27,925)
Profit/(loss) after tax 41,430 44,302 (3,266) 82,466
Other information
Capital additions 48,727 - - 48,727
Right-of-use asset additions 7,718 - - 7,718
Depreciation and amortisation (61,412) - - (61,412)
Statement of financial position
Goodwill 13,272 - - 13,272
Other intangible assets 14,981 - - 14,981
Right-of-use assets 157,869 - - 157,869
Property, plant and equipment 563,055 - - 563,055
Investment in joint ventures 61,553 - - 61,553
Related party loans 10,784 - - 10,784
Other non-current assets 3,582 - - 3,582
Other trade receivables 1,580 - - 1,580
Total current assets 163,967 351,774 2,782 518,523
Segment assets 1,025,791 351,774 2,782 1,380,347
Segment liabilities (594,218) (2,211) (246) (596,675)
For the year ended 31 December 2020 Brazil - Maritime Services Bermuda - Investment Unallocated Consolidated
Sale of services 352,792 - - 352,792
Result
Segment result 80,279 (185) (2,508) 77,586
Share of results of joint ventures (4,142) - - (4,142)
Return on investment portfolio at fair value through profit or loss - 33,383 - 33,383
Investment portfolio performance and management fees - (3,130) - (3,130)
Other investment income 1,644 - - 1,644
Finance costs (23,210) - - (23,210)
Foreign exchange losses on monetary items (7,444) (12) (95) (7,551)
Profit/(loss) before tax 47,127 30,056 (2,603) 74,580
Tax (26,577) - - (26,577)
Profit/(loss) after tax 20,550 30,056 (2,603) 48,003
Other information
Capital additions 62,486 - - 62,486
Right-of-use asset additions 5,200 - - 5,200
Depreciation and amortisation (61,323) - - (61,323)
Statement of financial position
Goodwill 13,429 - - 13,429
Other intangible assets 16,967 - - 16,967
Right-of-use assets 149,278 - - 149,278
Property, plant and equipment 579,138 - - 579,138
Investment in joint ventures 26,185 - - 26,185
Related party loans 30,460 - - 30,460
Other non-current assets 4,905 - - 4,905
Other trade receivables 9 - - 9
Total current assets 178,281 310,882 3,606 492,769
Segment assets 1,039,374 310,882 3,606 1,353,862
Segment liabilities (609,104) (621) (430) (610,155)
5 Revenue
An analysis of the Group's revenue is as follows:
2021 2020
Sale of services 396,376 352,792
Net income from underlying investment vehicles 3,754 3,327
Profit on disposal of financial assets at fair value through profit or loss 11,870 1,001
Unrealised gains on financial assets at fair value through profit or loss 33,850 29,055
Returns on investment portfolio at fair value through profit or loss 49,474 33,383
Interest on bank deposits 2,254 1,078
Other interest 1,859 566
Other investment income 4,113 1,644
Total Revenue 449,963 387,819
The Group derives its revenue from contracts with customers from the sale of
services in its Brazil - Maritime services segment. The revenue from contracts
with customers can be disaggregated as follows:
2021 2020
Harbour manoeuvres 178,552 159,134
Special operations 20,558 14,462
Ship agency 8,774 8,122
Towage and ship agency services 207,884 181,718
Container handling 72,402 71,401
Warehousing 35,036 28,727
Ancillary services 21,283 18,534
Offshore support bases 7,234 8,045
Other services 13,040 13,514
Port terminals 148,995 140,221
Logistics 35,142 28,616
Logistics 35,142 28,616
Repairs/dry-docking 4,355 2,237
Shipyard 4,355 2,237
Total Revenue from contracts with customers 396,376 352,792
Contract balance
Trade receivables are generally received within 30 days. The carrying amount
of operational trade receivables at the end of the reporting period was
US$49.1 million (2020: US$40.6 million). These amounts include US$13.5 million
(2020: US$10.7 million) of contract assets (unbilled accounts receivables).
There were no contract liabilities as of 31 December 2021 (2020: none).
Performance obligations
Revenue is measured based on the consideration specified in a contract with a
customer. The Group recognises revenue when it transfers control over a good
or service to a customer, and the payment is generally due within 30 days.
Information about the Group's performance obligations timing is as follows:
Performance obligation When performance obligation is typically satisfied
Towage and agency services
Harbour Maneuvers At a point in time
Special Operations At a point in time
Ship Agency At a point in time
Port Terminals
Container handling At a point in time
Warehousing At a point in time
Ancillary services At a point in time
Offshore support bases At a point in time
Other services At a point in time
Logistics
Logistics At a point in time
Shipyard
Ship construction contracts Over time
Technical assistance/dry-docking Over time
The disaggregation of revenue from contracts with customers based on the
timing of performance obligations is as follows:
2021 2020
At a point of time 392,021 350,555
Over time 4,355 2,237
Total Revenue from contracts with customers 396,376 352,792
The performance obligation of ship construction contracts, technical
assistance and drydocking is satisfied over time and the revenue related to
these contracts is recognised when the work in proportion to the stage of
completion of the transaction contracted has been performed. As at 31 December
2021 and 2020, there were no warranties or refund obligations associated with
ship construction contracts.
There are no significant judgements in the determination of when performance
obligations are typically satisfied.
All revenue is derived from continuing operations.
6 Employee charges and benefits expense
Employee charges and benefits expense are classified as follows:
2021 2020
Wages, salaries and benefits (90,868) (87,852)
Social security costs (20,062) (21,271)
Other pension costs (772) (687)
Share based payments (324) (206)
Employee charges and benefits expense (112,026) (110,016)
Defined contribution retirement benefit schemes
The Group operates defined contribution retirement benefit schemes for all
qualifying employees in its Brazilian operations. The assets of the scheme are
held separately from those of the Group in funds under the control of
independent managers. An expense of US$0.7 million (2020: US$0.6 million)
recognised under other pension costs represents contributions payable to the
scheme by the Group at rates specified in the rules of the plan.
Information regarding the defined health benefit plans are detailed in note
22.
7 Other operating expenses
Other operating expenses are classified as follows:
2021 2020
Utilities and communications (12,309) (10,352)
Insurance (4,076) (2,632)
Corporate, governance and compliance costs (2,359) (2,459)
Short-term or low-value asset leases (32,881) (26,522)
Service costs (24,401) (21,953)
Freight (10,717) (7,031)
Port expenses (6,629) (6,172)
Other operating expenses (4,917) (7,545)
(98,289) (84,666)
8 Finance costs
Finance costs are classified as follows:
2021 2020
Interest on lease liabilities (13,882) (12,836)
Interest on bank overdrafts and loans (16,219) (10,262)
Exchange loss on foreign currency borrowings (32) -
Other interest costs (94) (112)
(30,227) (23,210)
9 Taxation
At the present time, no income, profit, capital or capital gains taxes are
levied in Bermuda and accordingly, no expenses or provisions for such taxes
has been recorded by the Group for its Bermuda operations. The Company has
received an undertaking from the Bermuda Government exempting it from all such
taxes until 31 March 2035.
Tax expense
The reconciliation of the amounts recognised in profit or loss is as follows:
2021 2020
Current tax expense
Brazilian corporation tax (17,239) (20,912)
Brazilian social contribution (7,114) (8,276)
Total current tax expense (24,353) (29,188)
Deferred tax - origination and reversal of timing differences
Charge for the year in respect of deferred tax liabilities (6,737) (17,601)
Credit for the year in respect of deferred tax assets 3,165 20,212
Total deferred tax (expense)/credit (3,572) 2,611
Total tax expense (27,925) (26,577)
Brazilian corporation tax is calculated at 25% (2020: 25%) of the taxable
profit for the year. Brazilian social contribution tax is calculated at 9%
(2020: 9%) of the taxable profit for the year.
The reconciliation of the effective tax rate is as follows:
2021 2020
Profit before tax 110,391 74,580
Less: Profit before tax of Bermuda and unallocated segments (41,036) (27,453)
Profit before tax - Maritime services 69,355 47,127
Tax at the aggregate Brazilian tax rate of 34% (2020: 34%) (23,581) (16,023)
Net operating losses in the period (816) (2,869)
Non-deductible expenses (554) (2,018)
Foreign exchange variance on loans 1,142 14,631
Tax effect of share of results of joint ventures (1,710) (1,408)
Tax effect of foreign exchange gains or losses on monetary items (881) (4,248)
Retranslation of non-monetary items 228 (13,972)
Share option scheme (110) (43)
Leasing 158 108
Other (1,801) (735)
Tax expense for the year (27,925) (26,577)
Effective rate for the year - Maritime services 40% 56%
Effective rate for the year - Group 25% 36%
The tax expense related to amounts recognised in other comprehensive income is
as follows:
For the year ended 31 December 2021 Before tax Tax (expense)/ Net of tax
credit
Post-employment benefits 164 (56) 108
Items that will not be reclassified subsequently to profit or loss 164 (56) 108
Exchange differences arising on translation of foreign operations (11,302) 3,843 (7,459)
Effective portion of changes in fair value of derivatives 239 (81) 158
Items that will be or may be reclassified subsequently to profit or loss (11,063) 3,762 (7,301)
Total amounts recognised in other comprehensive income (10,899) 3,706 (7,193)
For the year ended 31 December 2020 Before tax Tax (expense)/ Net of tax
credit
Post-employment benefits 532 (181) 351
Items that will not be reclassified subsequently to profit or loss 532 (181) 351
Exchange differences arising on translation of foreign operations (78,521) 26,697 (51,824)
Effective portion of changes in fair value of derivatives (53) 18 (35)
Items that will be or may be reclassified subsequently to profit or loss (78,574) 26,715 (51,859)
Total amounts recognised in other comprehensive income (78,042) 26,534 (51,508)
Deferred tax
The following are the major deferred tax assets and liabilities recognised by
the Group and their movements during the current and prior reporting period:
Tax depreciation Foreign exchange variance on loans Tax losses Profit on construction contracts Other timing differences Retranslation of non-monetary items Total
At 1 January 2020 (37,274) 29,379 14,933 16,962 7,152 (51,314) (20,162)
(Charge)/credit to income (638) 15,135 3,235 (1,439) 290 (13,972) 2,611
Other adjustments - - (63) - 121 - 58
Exchange differences 8,429 (8,057) (3,400) - (1,379) 629 (3,778)
At 31 December 2020 (29,483) 36,457 14,705 15,523 6,184 (64,657) (21,271)
(Charge)/credit to income (2,497) 1,251 (4,159) (632) 2,237 228 (3,572)
Other adjustments - - - (83) (1,456) - (1,539)
Exchange differences 2,130 (2,436) (868) - (429) 123 (1,480)
At 31 December 2021 (29,850) 35,272 9,678 14,808 6,536 (64,306) (27,862)
Certain tax assets and liabilities have been offset on an entity-by-entity
basis. After offset, deferred tax balances are disclosed in the statement of
financial position as follows:
2021 2020
Deferred tax liabilities (50,194) (50,987)
Deferred tax assets 22,332 29,716
(27,862) (21,271)
As at 31 December 2021, the Group had unused tax losses of US$39.0 million
(2020: US$64.4 million) available for offset against future profits in the
company in which they arose.
No deferred tax asset has been recognised in respect of US$7.6 million (2020:
US$6.9 million) due to the unpredictability of future profit streams, as a tax
asset of one entity of the Group cannot be offset against a tax liability of
another entity of the Group as there is no legally enforceable right to do so.
The Group expects to recover the deferred tax assets between three and five
years.
Deferred tax on foreign exchange variance on loans arises from exchange gains
or losses on the Group's US Dollar and Brazilian Real denominated loans linked
to the US Dollar that are not deductible or payable for tax in the period they
arise. Exchange gains on these loans are taxable when settled and not in the
period in which gains arise.
Retranslation of non-monetary items deferred tax arises on Brazilian property,
plant and equipment held in subsidiaries with US Dollar as their functional
currency. Deferred tax is calculated on the difference between the historical
US Dollar balances recorded in the Group's accounts and the Brazilian Real
balances used in the Group's Brazilian tax calculations.
Recoverable and payable taxes
The Group reviews taxes and levies impacting its business to ensure that
payments are accurately made. In the event that tax credits arise, the Group
intends to use them in future years within their legal term. If the Group does
not utilise the tax credit within their legal term, a reimbursement of such
amounts will be requested from the Brazilian Internal Revenue Service.
The recoverable taxes relate to Brazilian federal taxes, Brazilian sales and
rendering of services taxes, Brazilian payroll taxes, Brazilian income tax,
Brazilian social contributions, and judicial bond related those previous
items. The recoverable taxes are classified as current if they are expected to
be used or reimbursed within 12 months of the end of the period, otherwise
they are classified as non-current, and are as follows:
2021 2020
Recoverable taxes - current 25,380 22,479
Recoverable taxes - non-current 12,816 11,006
Total recoverable taxes 38,196 33,485
The payable taxes relate to Brazilian federal taxes, Brazilian rendering of
services taxes, Brazilian payroll taxes and Brazilian income tax. The payable
taxes are classified as current if they are payable within 12 months of the
end of the period, otherwise they are classified as non-current, and are as
follows:
2021 2020
Taxes payable - current (8,057) (6,346)
Total taxes payable (8,057) (6,346)
10 Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and short-term bank
deposits with an original maturity of three months or less. The carrying
amount of these assets approximates their fair value.
11 Financial assets at fair value through profit or loss
The movement in financial assets at fair value through profit or loss is as
follows:
2021 2020
Opening balance - 1 January 347,464 298,839
Additions, at cost 72,811 63,723
Disposals, at market value (73,064) (45,154)
Increase in fair value of financial assets at fair value through profit or 33,850 29,055
loss
Profit on disposal of financial assets at fair value through profit or loss 11,870 1,001
Closing balance - 31 December 392,931 347,464
Bermuda - Investment segment 349,613 307,874
Brazil - Maritime services segment 43,318 39,590
Bermuda - Investment segment
The financial assets at fair value through profit or loss held in this segment
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 financial assets at fair value through profit or loss are open
ended funds whose shares may not be listed on a stock exchange but are
redeemable for cash at the current net asset value at the option of the Group.
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 by third parties
using various valuation techniques that include inputs for the asset or
liability that are not based on observable market data.
The Investment Manager receives an investment management fee of 1% of the
valuation of funds under management and an annual performance fee of 10% of
the net investment return which exceeds the benchmark, provided that the
high-water mark has been exceeded. The portfolio performance is measured
against a benchmark calculated by reference to the US CPI Urban Consumers
index not seasonally adjusted plus 3% per annum over rolling three-year
periods. Payment of performance fees are subject to a high-water mark and are
capped at a maximum of 2% of the portfolio net asset value. The Board
considers a three-year measurement period appropriate due to the investment
mandate's long-term horizon and an absolute return inflation-linked benchmark
appropriately reflects the Group's investment objectives while having a
linkage to economic factors.
At the end of the reporting period, the Group had entered into commitment
agreements with respect to the investment portfolio for capital subscriptions.
The classification of those commitments based on their expiry date is as
follows:
2021 2020
Within one year 5,219 4,670
In the second to fifth year inclusive 2,946 5,153
After five years 35,056 35,495
Total 43,221 45,318
The exact timing of capital calls made in respect of the above commitments are
at the discretion of the manager of the underlying structure. If required,
amounts expected to be settled within one year will be met from the
realisation of liquid investment holdings. There may be situations when
commitments may be extended by the manager of the underlying structure beyond
the initial expiry date dependent upon the terms and condition of each
individual structure.
Brazil - Maritime Services segment
The financial assets at fair value through profit or loss held in this segment
are held and managed separately from the Bermuda - Investment segment
portfolio and consist of US Dollar denominated depository notes, an investment
fund and an exchange fund both privately managed. Those funds' financial
obligations are limited to service fees to the asset management company
employed to execute investment transactions, audit fees and other similar
expenses. The funds' underlying investments are highly liquid and readily
convertible.
Information about the Group's exposure to financial risks and fair value
information related to financial assets at fair value through profit or loss
is included in note 31.
12 Trade and other receivables
Trade and other receivables are classified as follows:
2021 2020
Non-current
Other trade receivables 1,580 9
Total other trade receivables 1,580 9
Current
Trade receivable for the sale of services 35,915 30,436
Unbilled trade receivables 13,517 10,716
Total gross current trade receivables 49,432 41,152
Allowance for expected credit loss (338) (554)
Total current trade receivables 49,094 40,598
Prepayments 6,646 4,252
Insurance claim receivable 632 995
Employee advances 1,236 1,099
Other receivables 1,742 863
Total other current receivables 10,256 7,209
Total trade and other receivables 59,350 47,807
The aging of the trade receivables is as follows:
2021 2020
Current 43,160 34,561
From 0 - 30 days 4,098 4,800
From 31 - 90 days 858 852
From 91 - 180 days 988 197
More than 180 days 328 742
Total 49,432 41,152
The movement in allowance for expected credit loss is as follows:
2021 2020
Opening balance - 1 January 554 837
Decrease in allowance recognised in profit or loss (188) (99)
Exchange differences (28) (184)
Closing balance - 31 December 338 554
Information about the Group's exposure to credit risks related to trade
receivables is included in note 31.
13 Inventories
Inventories are classified as follows:
2021 2020
Operating materials 10,829 9,404
Raw materials for third party vessel construction 1,468 2,360
Total 12,297 11,764
Inventories are presented net of provision for obsolescence, amounting to
US$0.4 million (2020: US$0.3 million).
14 Joint arrangements
Joint operations
The Group holds the following significant interests in joint operations at the
end of the reporting period:
Place of incorporation Proportion of ownership
and operation 2021 2020
Towage
Consórcio de Rebocadores Baia de São Marcos(1) Brazil - 50%
(1) The joint operation was terminated in December 2021.
The following amounts are included in the Group's financial information as a
result of proportional consolidation of joint operations listed above:
2021 2020
Sales of services - 4,067
Other operating expenses (1,059) (2,449)
Profit for the year (1,059) 1,618
2021 2020
Property, plant and equipment - 1,842
Other intangible assets - 2
Inventories - 186
Trade and other receivables - 990
Cash and cash equivalents - 1,408
Total assets - 4,428
Trade and other payables - (4,237)
Deferred tax liabilities - (191)
Total liabilities - (4,428)
Joint ventures
The Group holds the following significant interests in joint ventures at the
end of the reporting period:
Place of incorporation Proportion of ownership
and operation 2021 2020
Logistics
Porto Campinas, Logística e Intermodal Ltda Brazil 50% 50%
Offshore
Wilson, Sons Ultratug Participações S.A. Brazil 50% 50%
Atlantic Offshore S.A. Panamá 50% 50%
The aggregated Group's interests in joint ventures are equity accounted. The
Group has not given separate disclosure of each material joint ventures
because they belong to the same economic group. The financial information of
the joint ventures and reconciliations to the share of result of joint
ventures and the investment in joint ventures recognised for the period are as
follows:
2021 2020
Sales of services 118,049 121,616
Operating expenses (70,364) (59,344)
Depreciation and amortisation (50,962) (51,199)
Foreign exchange losses on monetary items (3,904) (16,998)
Results from operating activities (7,181) (5,925)
Finance income 302 65
Finance costs (15,789) (17,415)
Loss before tax (22,668) (23,275)
Tax credit 12,610 14,991
Loss for the year (10,058) (8,284)
Participation 50% 50%
Share of result of joint ventures (5,029) (4,142)
2021 2020
Non-current assets 584,886 590,734
Other current assets 46,548 37,942
Cash and cash equivalents 7,541 15,219
Total assets 638,975 643,895
Non-current liabilities 375,988 387,478
Other current liabilities 49,173 78,011
Trade and other payables 66,567 98,145
Total liabilities 491,728 563,634
Total net assets 147,247 80,261
Participation 50% 50%
Group's share of net assets 73,624 40,131
Cumulative elimination of profit on construction contracts (12,071) (13,946)
Investment in joint ventures 61,553 26,185
Investment in joint ventures movement 2021 2020
Opening balance - 1 January 26,185 30,334
Share of result of joint ventures (5,029) (4,142)
Capital increase 40,207 23
Elimination of profit on construction contracts 17 45
Post-employment benefits 10 24
Translation reserve 163 (99)
Closing balance - 31 December 61,553 26,185
During the year ended 31 December 2021, the Group increased its invested
capital in the joint venture Wilson Sons Ultratug Participações S.A. with a
cash contribution of US$20.0 million (2020: nil), and in the joint venture
Atlantic Offshore S.A. with the conversion in capital of a US$20.2 million
(2020: nil) related party loan.
Guarantees
The joint venture Wilson Sons Ultratug Participações S.A. has loans with the
Brazilian Development Bank which are guaranteed by a lien on the financed
supply vessel and by a corporate guarantee from its participants,
proportionate to their ownership. The Group's subsidiary Wilson Sons Holdings
Brasil Ltda. is guaranteeing US$160.4 million (2020: US$170.7 million).
The joint venture Wilson Sons Ultratug Participações S.A. has a loan with
Banco do Brasil guaranteed by a pledge on the financed offshore support
vessels, a letter of credit issued by Banco de Crédito e Inversiones and its
long-term contracts with Petrobas. The joint venture has to maintain a cash
reserve account, presented as long-term investment, until full repayment of
the loan agreement, amounting to US$2.1 million (2020: US$2.1 million).
Covenants
On 31 December 2021 the joint venture Wilson Sons Ultratug Participações
S.A. was not in compliance with one of the covenants' ratios with Banco do
Brasil. In the event of non-compliance, the joint venture has to increase its
capital within a year to reach US$5.5 million. As the capital will be
increased to that amount within a year, management will not negotiate a waiver
letter with Banco do Brasil. There are no other capital commitments for the
joint ventures as of 31 December 2021 (2020: none).
15 Property, plant and equipment
Land and Floating Craft Vehicles, plant Assets under Total
buildings and equipment construction
Cost
At 1 January 2020 313,432 516,361 231,226 292 1,061,311
Additions 25,901 10,216 25,284 - 61,401
Transfers to right-of-use assets - - (495) - (495)
Transfers to intangible assets - - (99) - (99)
Transfers 148 (124) (24) - -
Disposals (3,725) (969) (4,039) - (8,733)
Exchange differences (56,443) - (42,819) - (99,262)
At 1 January 2021 279,313 525,484 209,034 292 1,014,123
Additions 8,992 22,152 6,919 9,289 47,352
Transfers from joint operations - 1,350 32 - 1,382
Transfers (16) 1,462 (1,446) - -
Disposals (1,998) (9,196) (4,607) - (15,801)
Exchange differences (11,608) - (11,468) - (23,076)
At 31 December 2021 274,683 541,252 198,464 9,581 1,023,980
Accumulated depreciation
At 1 January 2020 91,945 217,369 124,948 - 434,262
Charge for the year 6,774 29,030 11,989 - 47,793
Transfers to right-of-use assets - - (471) - (471)
Elimination on construction contracts - 13 - - 13
Disposals (2,400) (829) (3,928) - (7,157)
Exchange differences (16,691) - (22,764) - (39,455)
At 1 January 2021 79,628 245,583 109,774 - 434,985
Charge for the year 7,989 26,070 12,572 - 46,631
Elimination on construction contracts - 25 - - 25
Disposals (1,193) (6,842) (3,053) - (11,088)
Exchange differences (3,773) - (5,855) - (9,628)
At 31 December 2021 82,651 264,836 113,438 - 460,925
Carrying Amount
At 31 December 2020 199,685 279,901 99,260 292 579,138
At 31 December 2021 192,032 276,416 85,026 9,581 563,055
Land and buildings with a net book value of US$0.2 million (2020: US$0.2
million) and plant and equipment with a carrying amount of US$0.1 million
(2020: US$0.1 million) have been given in guarantee for various legal
processes.
The Group has pledged assets with a carrying amount of US$251.6 million (2020:
US$253.6 million) to secure loans granted to the Group.
No borrowing costs were capitalised in 2021. The amount of borrowing costs
capitalised in 2020 was US$3.0 million at an average interest rate of 2.76%.
The Group has contractual commitments to suppliers for the acquisition and
construction of property, plant and equipment amounting to US$14.2 million
(2020: US$1.6 million).
16 Lease arrangements
Right-of-use assets
Right-of-use assets are classified as follows:
Operational facilities Floating Buildings Vehicles, plant and equipment Total
craft
Cost
At 1 January 2020 186,026 4,481 6,449 12,703 209,659
Additions 1,553 3,504 19 124 5,200
Contractual amendments 9,376 52 201 83 9,712
Transfers from property, plant and equipment - - - 495 495
Terminated contracts - - (200) (1,911) (2,111)
Exchange differences (42,245) (759) (772) (1,745) (45,521)
At 1 January 2021 154,710 7,278 5,697 9,749 177,434
Additions - 7,353 176 189 7,718
Contractual amendments 33,466 (838) 119 40 32,787
Terminated contracts (15,662) - (177) (806) (16,645)
Exchange differences (5,396) (716) (427) (326) (6,865)
At 31 December 2021 167,118 13,077 5,388 8,846 194,429
Accumulated depreciation
At 1 January 2020 8,269 2,276 1,469 8,634 20,648
Charge for the year 7,280 2,995 1,099 1,062 12,436
Transfers from property, plant and equipment - - - 471 471
Terminated contracts - - (70) (1,861) (1,931)
Exchange differences (1,810) (521) (77) (1,060) (3,468)
At 1 January 2021 13,739 4,750 2,421 7,246 28,156
Charge for the year 7,410 4,187 980 748 13,325
Terminated contracts (3,264) - (504) (598) (4,366)
Exchange differences 413 (743) 63 (288) (555)
At 31 December 2021 18,298 8,194 2,960 7,108 36,560
Carrying Amount
At 31 December 2020 140,971 2,528 3,276 2,503 149,278
At 31 December 2021 148,820 4,883 2,428 1,738 157,869
Operational facilities
The main lease commitments included as operational facilities are described
below:
Tecon Rio Grande
The Tecon Rio Grande lease was signed on 3 February 1997 for a period of 25
years renewable for a further 25 years. Tecon Rio Grande was then granted the
right to renew the lease as set out in the contract amendment signed on 7
March 2006. The commitments set forth in the lease agreement and its addendum
include a monthly payment for facilities and leased areas, a contractual
payment per container moved based on minimum forecast volumes, and a payment
per tonne in respect of general cargo handling and unloading.
Tecon Salvador
Tecon Salvador S.A. has the right to lease and operate the container terminal
and heavy cargo terminal in the Port of Salvador for 25 years renewed in 2016
for a further 25 years. The total lease term of 50 years, until March 2050, is
provided in the second addendum to the rental agreement. This addendum
requires the Group to make a minimum specified investment in expanding the
leased terminal area. The commitments set forth in the lease agreement and its
addendums include a monthly payment for facilities and leased areas and a
contractual payment per container moved based on minimum forecast volumes and
a fee per ton of non-containerised cargo moved based on minimum forecast
volumes.
Shipyard
Lease commitments mainly refer to a 60-year right to lease from June 2008 and
operate an area located adjacent to a Group's shipyard in Guarujá, São Paulo
state. The initial lease of 30 years is renewable for a further period of 30
years at the option of the Group. The area has been used to expand and develop
the shipyard. Management's intention is to exercise the renewal option.
Brasco
The Brasco lease commitments mainly refers to a 30-year lease expiring in 2043
to operate a port area in Caju, Rio de Janeiro, Brazil with convenient access
to service the Campos and Santos oil producing basins.
Logistics
Lease commitments mainly refer to the bonded terminals and distribution
centres located in Santo André, São Paulo state and Suape, Pernambuco state
with terms ranging between 18 and 24 years.
Floating craft
Variable chartering of vessels for maritime transport between port terminals.
Buildings
The Group has lease commitments for its Brazilian business headquarters,
branches and commercial offices in several Brazilian cities.
Vehicles, plant and equipment
Rental contracts mainly for forklifts, vehicles for operational, commercial
and administrative activities and other operating equipment.
Lease liabilities
Lease liabilities by class of asset Discount rate 2021 2020
Operational facilities 5.17% - 9.33% 159,444 150,513
Floating craft 7.75% - 10.52% 4,823 2,759
Buildings 4.41% - 17.19% 2,139 2,932
Vehicles, plant and equipment 4.87% - 12.9% 1,437 1,690
Total 167,843 157,894
Total current 19,449 18,192
Total non-current 148,394 139,702
Maturity analysis - contractual undiscounted cash flows 2021 2020
Within one year 20,323 19,153
In the second year 37,535 17,365
In the third to fifth years inclusive 32,767 49,353
After five years 313,102 292,766
Total cash flows 403,727 378,637
Adjustment to present value (235,884) (220,743)
Total lease liabilities 167,843 157,894
The table below presents the lease liabilities balance considering the
projected future inflation rate in the discounted payment flows. For the
purposes of this calculation, all other assumptions were maintained.
2021 2020
Actual outflow 403,727 378,637
Embedded interest (235,884) (220,743)
Lease liabilities 167,843 157,894
Inflated flow 426,694 400,017
Inflated embedded interest (252,974) (236,886)
Inflated lease liabilities 173,720 163,131
Amounts recognised in profit and loss
2021 2020
Depreciation of right-of-use assets (13,325) (12,436)
PIS and COFINS taxes 1,262 1,730
Net depreciation of right-of-use assets (12,063) (10,706)
Interest on lease liabilities (14,771) (14,096)
PIS and COFINS taxes 889 1,260
Interest on lease liabilities (13,882) (12,836)
Variable lease payments not included in the measurement of lease (2,332) (2,037)
liabilities(1)
Expenses relating to short-term leases (29,641) (23,392)
Expenses relating to low-value assets (897) (1,093)
Total (58,815) (50,064)
(1) The amounts refer to payments which exceeded the minimum forecast volumes
of Tecon Rio Grande and Tecon Salvador and payments related to the number of
vessel trips which were not included in the measurement of lease liabilities.
Amounts recognised in the cash flow statement
2021 2020
Payment of lease liability (8,473) (6,345)
Interest paid - lease liability (14,771) (14,111)
Short-term leases paid (29,641) (23,392)
Variable lease payments (2,332) (2,037)
Low-value leases paid (897) (1,093)
Total cash outflow (56,114) (46,978)
17 Other intangible assets
Other intangible assets cost and related accumulated amortisation are
classified as follows:
Computer software Concession-rights Other Total
Cost
At 1 January 2020 42,420 20,461 61 62,942
Additions 1,085 - - 1,085
Transfers to property, plant and equipment 99 - - 99
Disposals (43) - - (43)
Exchange differences (2,454) (4,448) (14) (6,916)
At 1 January 2021 41,107 16,013 47 57,167
Additions 1,375 - - 1,375
Disposals (925) - - (925)
Exchange differences (634) (512) (2) (1,148)
At 31 December 2021 40,923 15,501 45 56,469
Accumulated amortisation
At 1 January 2020 33,326 7,304 - 40,630
Charge for the year 2,394 430 - 2,824
Disposals (42) (382) - (424)
Exchange differences (1,330) (1,500) - (2,830)
At 1 January 2021 34,348 5,852 - 40,200
Charge for the year 2,298 420 - 2,718
Disposals (695) - - (695)
Exchange differences (411) (324) - (735)
At 31 December 2021 35,540 5,948 - 41,488
Carrying amount
31 December 2020 6,759 10,161 47 16,967
31 December 2021 5,383 9,553 45 14,981
18 Goodwill
Goodwill is classified as follows:
Tecon Rio Grande Tecon Salvador Total
Carrying Value:
At 1 January 2020 11,610 2,480 14,090
Exchange differences (661) - (661)
At 1 January 2021 11,949 2,480 13,429
Exchange differences (157) - (157)
At 31 December 2021 10,792 2,480 13,272
The goodwill associated with each cash-generating unit "CGU" (Tecon Salvador
and Tecon Rio Grande) is attributed to the Brazil - Maritime Services segment.
Each CGU is assessed for impairment annually and whenever there is an
indication of impairment. The carrying value of goodwill has been assessed
with reference to its value in use reflecting the projected discounted cash
flows of each CGU to which goodwill has been allocated.
Details of the impairment test are disclosed in note 19.
19 Impairment Test of Cash Generating Units
Tecon Rio Grande and Tecon Salvador
The Tecon Rio Grande and Tecon Salvador CGUs contains goodwill and as such are
tested annually for impairment. The cash flows of these CGUs are derived from
operating budgets, historical and prospective data, and include forecast
assumptions on revenue, costs and expenses, investments, and projection
period. The key assumptions used in determining value in use are as follows:
Tecon Rio Grande Tecon Salvador
2021 2020 2021 2020
Discount rate 9.4% 8.4% 9.5% 8.4%
Growth rate 4.3% 7.4% 3.4% 3.9%
Inflation rate 3.7% 4.0% 3.7% 4.0%
Further assumptions include sales and operating margins, which are based on
past experience considering the effect potential changes in market or
operating conditions. Projected volumes for both CGUs were based on the
expected performance of the Brazilian economy until reaching operating
capacity for each. The discount rate was based on weighted average cost of
capital ("WACC"), whereas the growth rate for projection is based on the
inflation rate only after reaching operating capacity and does not exceed its
historical average.
As at 31 December 2021 and 2020, the estimated recoverable amount of these
CGUs significantly exceeded their carrying value and as such no impairment
loss was recognised. An increase in the discount rate of up to 33.7% (2020:
36.6%) for Tecon Rio Grande and 6.4 % (2020: 12.6 %) for Tecon Salvador would
not result in an impairment loss.
Offshore support bases
For the year ended 31 December 2021 and 2020, the Offshore support bases CGU,
which is part of the Brazil - Maritime Services segment, reported negative
earnings before taxes, and as such was tested for impairment. The cash flows
of this CGU are derived from operating budgets, historical and prospective
data, and include the following forecast assumptions: (i) revenue; (ii) costs
and expenses; (iii) investments; (iv) projection period; and (v) discount
rate.
(i) Revenue: The assumption considers the estimated pace of growth in oil
& gas offshore exploration and production. Data from the Brazilian
Petroleum National Agency, the Energy Research Agency, oil companies' releases
and specialised industry reports all support a significant increase in oil
exploration and production activities in Brazil in the next 10 years. The
Group assesses it will successfully capture part of that increase in demand
and expects to reach from 2026 onwards operating levels attained prior to the
economic and oil and gas market crises. Based on current and expected future
tender activity and competitive advantage, the average growth rate is
estimated at 20% each year until 2025. For 2026 onward, the growth rate is
estimated at 21%, based on the expected growth in the Brazilian oil and gas
sector and in the region in which the CGU operates. Projections for 2022
include a 9% increase from the pricing currently in place and a 29% decrease
in public prices for Spot berthing compared to 2021. From 2023 onwards, prices
are adjusted for inflation.
(ii) Costs and expenses: Projections for 2022 are in line with the budget and
include an increase in fixed costs of 23% over 2021. From 2023 onwards, costs
are forecasted to increase in line with the increase in activity.
(iii) Investments: The Group did not include any expansion investment within
its projections.
(iv) Projection period: The Group has prepared the projections using a 10 year
period plus a perpetuity, as the oil and gas industry life cycle is at least
10 years, due to the life cycle of investment in an oil field from exploration
to sustainable production.
(v) Discount rate: The discount rate calculation is based on the specific
circumstances of the CGU, taking into consideration the time value of money
and individual risks of the CGU that have not been incorporated in the cash
flow estimates, and is a weighted average cost of capital (WACC). The Group
has determined the discount rate using reputable sources to capture
macroeconomic assumptions and information from comparator companies in the
oilfield and the maritime services sector in which the CGU operates. For the
year ended 31 December 2021, the discount rate was estimated at 10.1% (2020:
11.3%), the reduction being principally driven by a reduction of cost of
equity due to a reduction in the unlevered beta and in the country risk
premium.
As at 31 December 2021, the estimated recoverable amount of the CGU of US$72.1
million (2020: US$57.2 million) exceeded its carrying value of US$42.9 million
(2020: US$46.3 million) and as such no impairment loss was recognised. While
maintaining all other assumptions constant, either an increase in the discount
rate of up to 2.5% (2020: 0.9%), a decrease in revenue over the projected
period of up to 7.8% (2020: 5.3%), or a decrease in revenue over the first 3
years of the projected period of up to 80.0% (2020: 12.0%) would not result in
an impairment loss.
20 Trade and other payables
Trade and other payables are classified as follows:
2021 2020
Trade payables 29,242 17,090
Accruals 7,424 5,757
Other payables 441 912
Provisions for employee benefits 19,547 16,516
Deferred income 1,859 791
Total 58,513 41,066
Trade creditors and accruals principally comprise amounts outstanding for
trade purposes and ongoing costs. The average credit period for trade
purchases is 29 days (2020: 29 days). For most suppliers, interest is charged
on outstanding trade payable balances at various interest rates. The Group has
financial risk management policies in place to ensure that payables are paid
within the credit timeframe agreed with each vendor.
21 Bank loans and overdrafts
The movement in bank loans is as follows:
2021 2020
Opening - 1 January 342,661 334,978
Additions 19,438 51,455
Principal amortisation (57,926) (25,725)
Interest amortisation (10,390) (8,569)
Accrued interest 16,246 13,840
Exchange difference (8,430) (23,318)
Closing - 31 December 301,599 342,661
The terms and conditions of outstanding secured borrowings are as follows:
2021 2020
Lender Currency Annual interest rate % Year of maturity Carrying value Fair value Carrying value Fair value
BNDES linked to US Dollar 2.30% - 3.71% 2035 110,514 110,514 117,781 117,781
BNDES linked to US Dollar 2.07% - 4.08% 2028 25,161 25,161 27,060 27,060
BNDES linked to US Dollar 5% 2022 177 177 1,605 1,605
BNDES Real 15.91% 2034 45,264 45,264 47,632 47,632
BNDES Real 14.65% 2029 6,241 6,241 7,545 7,545
BNDES Real 9.79% 2027 638 638 805 805
Banco do Brasil linked to US Dollar 2.00% - 4.00% 2035 71,854 71,854 75,795 75,795
Bradesco Real 10.08% - 10.45% 2024 27,248 27,417 38,660 40,577
Bradesco Real 10.75% 2023 4,494 4,489 - -
Itaú Real 3.38% 2021 - - 4,056 4,060
Banco Santander US Dollar 2.63% 2023 10,008 10,008 - -
Banco Santander Real 6.44% 2021 - - 6,153 6,144
Banco Santander Real 6.44% 2021 - - 1,903 1,900
China Construction Bank Real 5.65% 2021 - - 13,666 13,657
Total 301,599 301,763 342,661 344,561
The breakdown of bank overdrafts and loans by maturity is as follows:
2021 2020
Within one year 45,287 58,672
In the second year 47,961 44,707
In the third to fifth years (inclusive) 86,671 96,250
After five years 121,680 143,032
Total 301,599 342,661
Amounts due for settlement within 12 months 45,287 58,672
Amounts due for settlement after 12 months 256,312 283,989
Guarantees
The loan agreements with BNDES and Banco do Brasil rely on corporate
guarantees from the Group's subsidiary party to the agreement. For some
contracts, the corporate guarantee is in addition to a pledge of the
respective financed tugboat or a lien over the logistics and port operations
equipment financed.
The loan agreements with Bradesco and Banco Santander rely on corporate
guarantees from the Group's subsidiary party to the agreement.
Undrawn credit facilities
As at 31 December 2021, the Group had US$78.8 million (2020: US$19.1 million)
of undrawn borrowing facilities available in relation to the Salvador Terminal
expansion and the dry-docking, maintenance and repair of tugs.
Covenants
Some of the loan agreements include obligations related to financial
indicators, including Net Debt/EBITDA, Profit/Total Debt, current liquidity
ratio and debt service coverage ratio. As at 31 December 2021 and 2020, the
Group was in compliance with all covenants related to its loan agreements.
Information about the Group's exposure to financial risks is included in note
31.
22 Post-employment benefits
The Group operates a private medical insurance scheme for its employees in its
Brazilian operations, which requires the eligible employees to pay fixed
monthly contributions. In accordance with Brazilian law, eligible employees
with greater than ten years' service acquire the right to remain in the plan
following retirement or termination of employment. Ex-employees remaining in
the plan will be liable for paying the full cost of their continued scheme
membership.
The future actuarial liability for the Group relates to the potential increase
in plan costs resulting from additional claims due to the expanded membership
of the scheme. The movement in the present value of the actuarial liability
for the year is as follows:
2021 2020
Opening balance - 1 January (1,641) (2,369)
Current service cost (3) (7)
Interest expense (133) (127)
Contributions to the plan (30) (23)
Changes in economic and financial assumptions 522 566
Changes in biometric and demographic assumptions (391) (215)
Exchange differences 114 534
Closing balance - 31 December (1,562) (1,641)
The calculation of the liability generated by the defined health benefits plan
involves actuarial assumptions. The principal actuarial assumptions are as
follows:
2021 2020
Economic and Financial assumptions
Annual interest rate 8.67% 7.90%
Estimated inflation rate in the long-term 3.00% 3.50%
Medical cost trend rate 5.58% 6.09%
Biometric and Demographic assumptions
Employee turnover 14.10% 21.27%
Mortality table AT-2000 AT-2000
Disability table Álvaro Vindas Álvaro Vindas
Retirement Age 100% at 62 100% at 62
Employees electing to remain in the plan after retirement or termination 23% 23%
Probability of marriage 80% of the participants 80% of the participants
Age difference for active participants Men 3 years older than women Men 3 years older than women
The present value of future liabilities may change depending on market
conditions and actuarial assumptions. Changes on a relevant actuarial
assumption, keeping the other assumptions constant, would have affected the
defined benefit obligation as follows:
Change in assumptions 2021 2020
Discount rate + 0.5% (195) (225)
Discount rate - 0.5% 223 260
Medical Cost Trend Rate + 0.5% 229 264
Medical Cost Trend Rate - 0.5% (199) (229)
Aging factor + 0.5% 145 151
Aging factor - 0.5% (145) (151)
23 Legal claims
In the normal course of its operations in Brazil, the Group is exposed to
numerous local legal claims. The Group's policy is to vigorously contest those
claims, many of which appear to have little substance or merit, and manage
such claims through its legal counsel.
Labour claims - Claims involving payment of health risks, additional overtime
and other allowances.
Tax cases - Claims involving government tax assessments when the Group
considers it has a chance of successfully defending its position.
Civil and environmental cases - Claims involving indemnification for material
damage, environmental and shipping claims and other contractual disputes.
Claims deemed probable and subject to reasonable estimation by management and
its legal counsel are recorded as provisions, whereas claims deemed only
reasonably possible are disclosed as contingent liabilities. Both provisions
and contingent liabilities are subject to uncertainties around the timing and
amount of possible cash outflows as the outcome is heavily dependent on court
proceedings.
The movement in the carrying amount of each class of provision for legal
claims for the period is as follows:
Labour claims Tax cases Civil and environmental cases Total
At 1 January 2021 7,985 1,202 373 9,560
Additional provisions 667 280 1,132 2,079
Unused amounts reversed (1,542) (102) (3) (1,647)
Utilisation of provisions (368) (2) - (370)
Exchange difference (552) (83) (80) (715)
At 31 December 2021 6,190 1,295 1,422 8,907
The contingent liabilities at the end of each period are as follows:
Labour claims Tax cases Civil and environmental cases Total
At 31 December 2020 13,318 58,809 5,264 77,391
At 31 December 2021 14,881 52,793 4,968 72,642
Other non-current assets of US$3.6 million (2020: US$4.9 million) represent
legal deposits required by the Brazilian legal authorities as security to
contest legal actions.
24 Related party transactions
Transactions between the Group and its subsidiaries which are related parties
have been eliminated on consolidation and are not disclosed in this note.
Transactions and outstanding balances between the Group and its related
parties are as follows:
Revenues/(Expenses)
Receivable/(Payable)
2021 2020 2021 2020
Joint arrangements
Consórcio de Rebocadores Baía de São Marcos - (4) - 1,535
Wilson, Sons Ultratug Participações S.A.(1) 524 506 10,784 10,346
Atlantic offshore S.A.(2) - - - 20,617
Others
Hanseatic Asset Management LBG(3) (4,876) (3,130) (2,133) (599)
Gouvêa Vieira Advogados(4) (21) (51) - -
CMMR Intermediacão Comercial Limitada(5) - (6) - -
Jofran Services(6) - (156) - -
Hansa Capital GMBH(7) - (93) - -
(1) Related party loans with Wilson, Sons Ultratug Participações
S.A. (interest - 0.3% per month with no maturity date).
(2) Related party loans with Atlantic Offshore S.A. (with no interest
and with no maturity date).
(3) Mr. W H Salomon is chairman of Hanseatic Asset Management LBG.
Fees were paid to Hanseatic Asset Management LBG for acting as Investment
Manager of the Group's investment portfolio.
(4) 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.
(5) Mr. C M Marote, a former Director of Wilson Sons Limited is a
shareholder and Director of CMMR. Intermediacão Comercial Limitada. Fees were
paid to CMMR. Intermediacão Comercial Limitada for consultancy services.
(6) Mr. J F Gouvêa Vieira is a Director of Jofran Services.
Directors' fees were paid to Jofran Services.
(7) Mr. C Townsend is a Director of Hansa Capital GmbH. Directors'
fees were paid to Hansa Capital GmbH.
Remuneration of key management personnel
The remuneration of the executive directors and other key management of the
Group is as follows:
2021 2020
Short-term employee benefits 6,131 3,877
Post-employment benefits 67 82
Share based payment expense 236 160
Total 6,434 4,119
25 Share capital
2021 2020
Authorised
50,060,000 ordinary shares of 20p each (2020: 50,060,000 ordinary shares of 16,119 16,119
20p each)
Issued and fully paid
35,363,040 ordinary shares of 20p each (2020: 35,363,040 ordinary shares of 11,390 11,390
20p each)
The Company has one class of ordinary share which carries no right to fixed
income.
Share capital is converted at the exchange rate prevailing at 31 December
2002, the date at which the Group's presentation currency changed from
Sterling to US Dollars, being US$1.61 to £1.
26 Share options in subsidiary
On 8 January 2014, the shareholders of the subsidiary WSL approved a share
option plan which allowed for the grant of options to eligible participants,
including an increase in the authorised capital of WSL through the creation of
up to 4,410,927 new shares. Following the merger of WSL into WSSA (note 3),
the shareholders of the subsidiary WSL approved on 24 June 2021 the migration
of the share option plan to WSSA, where the rights and the grated share
options were maintained in accordance with the conditions stipulated in the
prior WSL share option plan.
The options provide participants with the right to acquire shares in WSL at a
predetermined fixed price, following a vesting period of 3 to 5 years, and
expire 10 years from the grant date, or immediately on the resignation of the
employee, whichever is earlier. Options lapse if not exercised within 6 months
of the date that the participant ceases to be employed within the Group by
reason of injury, disability or retirement.
The movement in share options and related weighted average exercise prices in
Brazilian Real (R$) is as follows:
2021 2020
Number of shares (not rounded) WAEP (R$) Number of shares (not rounded) WAEP (R$)
Opening balance - 1 January 2,213,490 31.96 2,702,540 31.85
Granted during the period 450,000 51.95 - -
Exercised during the period (1,123,850) 31.65 (475,050) 31.23
Expired during the period (14,000) 38.00 (14,000) 33.98
Outstanding at 31 December 1,525,640 38.03 2,213,490 31.96
Exercisable at 31 December 1,047,420 32.02 2,063,500 31.66
The options outstanding as at 31 December 2021 had an exercise price in the
range of R$31.23 to R$51.95 (2020: R$31.23 to R$40.33) and a weighted-average
contractual life of 4.7 years (2020: 3.5 years). The weighted average share
price at the date of exercise for the year ended 31 December 2021 was R$33.5
(2020: R$45.76).
The fair value of the share options at the grant date was determined using the
Binomial model based on the following assumptions:
Grant date 10 January 2014 13 November 2014 11 August 2016 16 May 2017 9 November 2017
Closing share price (in Real) R$30.05 R$33.50 R$32.15 R$38.00 R$38.01
Expected volatility 28.00% 29.75% 31.56% 31.82% 31.82%
Expected life 10 years 10 years 10 years 10 years 10 years
Risk free rate 10.8% 12.74% 12.03% 10.17% 10.17%
Expected dividend yield 1.7% 4.8% 4.8% 4.8% 4.8%
Expected volatility was determined by calculating the historical volatility of
the subsidiary share price. The expected life used in the model has been
adjusted based on management's best estimate for exercise restrictions and
behavioural considerations.
During the year ended 31 December 2021, 1,123,850 share options were exercised
(2020: 475,050), resulting in an increase in non-controlling interest of 0.89%
(2020: 0.39%).
27 Non-controlling interest
The following table summarises the information related to non-controlling
interests. The non-controlling interests immaterial to the Group originate
from the Brazil - Maritime services segment and are presented together as
Other. The information on the Group's composition is presented in note 3.
For the year ended 31 December 2021 WSSA Other Total
Net assets attributable to non-controlling interest 189,336 679 190,015
Profit allocated to non-controlling interest 17,170 1,609 18,779
Other comprehensive income allocated to non-controlling interest (3,095) (15) (3,110)
Dividends to non-controlling interest 16,533 1,275 17,808
For the year ended 31 December 2020 WSL Other Total
Net assets attributable to non-controlling interest 187,595 330 187,925
Profit allocated to non-controlling interest 8,230 1,061 9,291
Other comprehensive income allocated to non-controlling interest (21,674) (186) (21,860)
Dividends to non-controlling interest 16,275 1,180 17,455
28 Dividends
The following dividends were declared and paid by the Company:
2021 2020
70c per share (2020: 70c per share) 24,754 24,754
After the reporting date, the following dividends were proposed by the Board,
but have not been recognised as liabilities:
2021 2020
70c per share (2020: 70c per share) 24,754 24,754
29 Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
2021 2020
Profit for the year attributable to equity holders of the Company 63,687 38,712
Weighted average number of ordinary shares (not rounded) 35,363,040 35,363,040
Earnings per share - basic and diluted 180.1c 109.5c
The Company has no dilutive or potentially dilutive ordinary shares.
30 Risk management
Capital risk management
The Group manages its capital to ensure that entities within the Group are
viable and will be able to continue as a going concern. The capital structure
of the Group consists of debt, long term in nature, which includes the
borrowings disclosed in note 21 and the lease liabilities included in note 16,
cash and cash equivalents, investments, and equity attributable to equity
holders of the Company comprising issued capital, reserves and retained
earnings disclosed in 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 activities. There were no significant changes during the year
relative to the Group policy relating to capital management.
Climate change risk
The Group is exposed to both climate-related risks and opportunities. The two
major categories of risk being transition and physical risk. Transition risks
are those relating to the transition to a lower carbon economy and include
risks such as policy and legal risk, technology risk, market risk and
reputation risk. Physical risks are those relating to the physical impacts of
climate change which can be acute (those from increased frequency and severity
of climate related events) or chronic (due to longer-term shifts in climate
patterns). The Group is more significantly affected by physical risk through
its exposure to acute and chronic climate change. However, consideration must
be, and is, given to transition and climate-related litigation risks.
During the year ended 31 December 2021, the Group assessed and evaluated risks
relating to climate change, including those related to existing and emerging
regulatory requirements, as well as other transition and physical risks. The
Group's process for managing climate related risks is grounded in its
emissions monitoring work, which includes greenhouse gas (GHG) emissions, tide
and ocean data, as well as market movements and impacts suffered by clients.
This intelligence enables the Group to mitigate potential risks and identify
opportunities, particularly in the reduction of its direct emissions, and as a
result to continue to adopt advancing technologies to reduce its GHG
emissions.
A significant part of the Board's focus during the year ended 31 December 2021
has been reducing risk exposure and driving ESG (Environmental Social and
Governance Practices) initiatives to have more measurable outcomes and to
begin establishing climate related emissions targets for the Group. This is
the first year that the Company will report on its TCFD disclosures (Taskforce
for Climate-related Financial Disclosures) which has driven a more focused
approach to the Group's risk management framework for monitoring and managing
climate related risks. It is the Board's ambition to ensure that these risks
and related opportunities are examined in depth and across time horizons with
clear discussion of strategic implications and mitigating actions.
31 Financial instruments
Accounting classification and fair value
The classification, carrying value and fair value of financial instruments is
as follows:
2021 2020
Classification Carrying value Fair value Carrying value Fair value
Financial assets
Trade and other receivables Amortised cost 59,350 59,350 47,807 47,807
Financial assets at fair value through profit and loss At fair value through profit and loss 392,931 392,931 347,464 347,464
Cash and cash equivalents Amortised cost 28,565 28,565 63,255 63,255
Financial liabilities
Trade and other payables Other financial liabilities (58,513) (58,513) (41,066) (41,066)
Bank overdraft and loans Other financial liabilities (301,599) (301,763) (342,661) (344,561)
The carrying value of trade and other receivables, cash and cash equivalents
and trade and other payable is a reasonable approximation of fair value.
The fair value of bank overdraft and loans was established as their present
value determined by future cash flows and interest rates applicable to
instruments of similar nature, terms and risks or at market quotations of
these securities.
The fair value of financial assets at fair value through profit and loss are
based on quoted market prices at the close of trading at the end of the period
if traded in active markets, and based on valuation techniques if not traded
in active markets. These valuation techniques maximise the use of observable
market data where it is available and rely as little as possible on entity
specific estimates.
Fair value measurements recognised in the consolidated financial statements
are grouped into levels based on the degree to which the fair value is
observable.
Financial instruments whose values are based on quoted market prices in active
markets are classified as Level 1. These include active listed equities.
Financial instruments that trade in markets that are not considered active but
are valued based on quoted market prices, dealer quotations or alternative
pricing sources supported by observable inputs are classified as Level 2.
These include certain private investments that are traded over the counter and
debt instruments.
Financial instruments that have significant unobservable inputs as they trade
infrequently and are not quoted in an active market are classified as Level 3.
These include investments in limited partnerships and other private equity
funds which may be subject to restrictions on redemptions such as lock up
periods, redemption gates and side pockets.
Valuations are the responsibility of the Board of Directors of the Company.
The Group's Investment Manager considers the valuation techniques and inputs
used in valuing these funds as part of its due diligence prior to investing to
ensure they are reasonable and appropriate. Therefore, the net asset value
("NAV") of these funds may be used as an input into measuring their fair
value. In measuring this fair value, the NAV of the funds is adjusted, if
necessary, for other relevant factors known of the fund. In measuring fair
value, consideration is also paid to any clearly identifiable transactions in
the shares of the fund.
Depending on the nature and level of adjustments needed to the NAV and the
level of trading in the fund, the Group classifies these funds as either Level
2 or Level 3. As observable prices are not available for these securities, the
Group values these based on an estimate of their fair value. The Group obtains
the fair value of their holdings from valuation statements provided by the
managers of the invested funds. Where the valuation statement is not stated as
at the reporting date, the Group adjusts the most recently available valuation
for any capital transactions made up to the reporting date. When considering
whether the NAV of the underlying managed funds represent fair value, the
Investment Manager considers the valuation techniques and inputs used by the
managed funds in determining their NAV.
The underlying funds use a blend of methods to determine the value of their
own NAV by valuing underlying investments using methodology consistent with
the International Private Equity and Venture Capital Valuation Guidelines
('IPEV'). IPEV guidelines generally provides five ways to determine the fair
market value of an investment: (i) binding offer on the company, (ii)
transaction multiples, (iii) market multiples, (iv) net assets and (v)
discounted cash flows. Such valuations are necessarily dependent upon the
reasonableness of the valuations by the fund managers of the underlying
investments. In the absence of contrary information, these values are relied
upon.
The following table provides an analysis of financial instruments recognised
in the statement of financial position by the level of hierarchy, excluding
financial instruments for which the carrying amount is a reasonable
approximation of fair value:
Level 1 Level 2 Level 3 Total
31 December 2021
Financial assets at fair value through profit and loss 67,177 196,069 129,685 392,931
Bank overdraft and loans - (301,599) - (301,599)
31 December 2020
Financial assets at fair value through profit and loss 59,224 189,103 99,137 347,464
Bank overdraft and loans - (342,661) - (342,661)
During the year ended 31 December 2021, no financial instruments were
transferred between Level 1 and Level 2 (2020: none). The movement in Level 3
financial instruments for the year is as follows:
2021 2020
Balance at 1 January 99,137 101,263
Transfers from Level 2 to Level 3 77 -
Purchases of investments and drawdowns of financial commitments 15,379 9,485
Sales of investments and repayments of capital (12,992) (9,661)
Realised gains/losses 6,873 (1,196)
Unrealised gains/losses 21,211 (754)
Balance at 31 December 129,685 99,137
Cost 125,983 117,649
Cumulative unrealised gains/losses 3,702 (18,512)
Investment in private equity funds require a long-term commitment with no
certainty of return. The Group's intention is to hold Level 3 investments to
maturity. In the unlikely event that the Group is required to liquidate these
investments, the proceeds received may be less than the carrying value due to
their illiquid nature. The following table summarises the sensitivity of the
Company's Level 3 investments to changes in fair value due to illiquidity at
31 December 2021. The analysis is based on the assumptions that the proceeds
realised will be decreased by 5%, 10% or 20%, with all other variables held
constant. This represents the Directors' best estimate of a reasonable
possible impact that could arise from a disposal due to illiquidity.
Level 3 financial instruments sensitivity 5% scenario 10% scenario 20% scenario
31 December 2021 (6,484) (12,968) (25,936)
31 December 2020 (4,957) (9,914) (19,827)
Credit risk
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's credit risk is primarily attributable to its bank balances, trade
receivables, related party loans and investments. The amounts presented as
receivables in the consolidated statement of financial position are shown net
of allowances for credit loss.
The Bermuda - Investment segment primarily transacts with regulated
institutions on normal market terms which are trade date plus one to three
days. The levels of amounts outstanding from brokers are regularly reviewed by
the Investment Manager. The duration of credit risk associated with the
investment transaction is the period between the date the transaction took
place, the trade date and the date the stock and cash are transferred, and the
settlement date. The level of risk during the period is the difference between
the value of the original transaction and its replacement with a new
transaction.
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 Group's appointed Investment Manager,
Hanseatic Asset Management LBG, evaluates the credit risk on trading
investments prior to and during the investment period.
In addition, the Bermuda - Investment segment invests in limited partnerships
and other similar investment vehicles. The level of credit risk associated
with such investments is dependent upon the terms and conditions and the
management of the investment vehicles. The Board reviews all investments at
its regular meetings from reports prepared by the Company's Investment
Manager.
The Brazil - Maritime Services segment invests temporary cash surpluses in
government and private bonds, according to regulations approved by management,
which follow the Group policy on credit risk concentration. Credit risk on
investments in non-government backed bonds is mitigated by investing only in
assets issued by leading financial institutions. The Group stipulates a cash
allocation limit per bank, in addition to investment rules according to rating
classification. The Group invests in banks with rating classification BBB
(limited to a maximum of 15%), from A to AA (limited to a maximum of 40%) or
AAA (limited to a minimum of 40% and maximum of 100%).
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 WSSA management which seek to mitigate any loss from customers'
delinquency. The Group has no significant concentration of credit risk for
trade receivables as they consist of a large number of customers. Regular
credit evaluation is performed on the financial condition of accounts
receivable.
Allowance for expected credit losses
Generally, interest of 1% per month plus a 2% penalty is charged on overdue
balances for trade receivables. The Group recognises an allowance for expected
credit losses based on an expected credit loss model and a provision matrix
that involves historical evaluation of effective losses over billing cycles.
The provision matrix is initially based on the Group's historical observed
default rates and is reassessed every 180 days. The period of review is 3.5
years, and the measurement of the default rate considers the recoverability of
receivables and will be applied according to the payment profile of debtors.
The Group will calibrate, when appropriate, the matrix to adjust the
historical credit losses experience with forward-looking information. Due to
the COVID-19 pandemic, the Group has reviewed the variables that make up the
methodology of measurement of estimated losses. There has been no increase in
customer default rate due to the outbreak. Additionally, the Group created a
credit committee to monitor and, if necessary, propose payment terms to those
customers with credit risk.
The allowance for expected credit losses determined using a provision matrix
is as follows:
Current 1-30 days 31-90 days 91-180 days More than 180 days Total
31 December 2021
Expected credit loss rate 0.05% 0.05% 1.67% 8.65% 60.08%
Receivables for services 43,160 4,098 858 989 327 49,432
Allowance for expected credit losses (22) (2) (14) (86) (214) (338)
31 December 2020
Expected credit loss rate 0.09% 0.09% 3.30% 12.77% 62.48%
Receivables for services 34,561 4,800 852 197 742 41,152
Allowance for expected credit losses (35) (4) (28) (25) (462) (554)
Foreign currency risk
The Brazil - Maritime services segment operates principally in Brazil with a
substantial proportion of its revenue, expenses, assets and liabilities
denominated in Real, exposing the Group exchange rate fluctuations. Due to the
high cost of hedging transactions denominated in Real, the Group does not
normally hedge its net exposure to the Real, as the Board does not consider it
economically viable.
Purchases and sells of goods and services are denominated in Real and US
Dollars. These transactions are subject to currency fluctuations between the
time that the price of goods or services are settled and the actual payment
date. For investing and financing cash flows, the resources and their
application are monitored with the objective of matching the currency cash
flows and due dates. For operating cash flows, the Group seeks to neutralise
the currency risk by matching assets (receivables) and liabilities (payments).
Furthermore, the Group has contracted US Dollar denominated and Real
denominated debt, and the cash and cash equivalents balances are also US
Dollar denominated and Real denominated. The Group seeks to generate an
operating cash surplus in the same currency in which the debt service of each
business is denominated.
The Bermuda - Investment segment operates internationally and holds both
monetary and non-monetary assets denominated in currencies other than the US
Dollar, the functional currency. Foreign currency risk arises as the value of
future transactions, recognised monetary assets and monetary liabilities
denominated in other currencies fluctuate due to changes in foreign exchange
rates.
The Company's policy is not to manage its exposure to foreign exchange
movements by entering into any foreign exchange hedging transactions. Instead,
when the Investment Manager formulates a view on the future direction of
foreign exchange rates and the potential impact on the Company, the Investment
Manager factors that into its portfolio allocation decisions.
The carrying amount of the Group's foreign currency denominated monetary
assets and monetary liabilities at the reporting date are as follows
(presented in US Dollar):
Assets Liabilities
2021 2020 2021 2020
Real 173,297 160,021 (367,528) (354,244)
Sterling 11,603 11,492 (22) (22)
Swiss Franc 3,305 3,273 - -
Euro 31,549 31,147 - -
Yen 5,394 5,125 - -
225,148 211,058 (367,550) (354,266)
The Group is primarily exposed to unfavorable movements in the Real on its
Brazilian liabilities held by US Dollar functional currency entities. The
sensitivity analysis below refers to the position at the end of the reporting
period and estimates the impacts of a Real devaluation against the US Dollar,
considering three scenarios: a likely scenario (probable), a 25% devaluation
scenario (possible) and a 50% devaluation scenario (remote). The Group uses
the Brazilian Central Bank's "Focus" report to determine the probable
scenario.
Currency Amount in US Dollars Probable scenario Possible Remote
scenario (25%) scenario (50%)
31 December 2021 5.59 6.99 8.39
Total assets BRL 173,297 (294) (34,895) (57,963)
Total liabilities BRL (367,528) 625 74,005 122,926
Net impact 331 39,110 64,963
31 December 2020
Exchange rate 5.20 6.50 7.80
Total assets BRL 160,021 (101) (32,085) (53,408)
Total liabilities BRL (354,244) 225 71,029 118,231
Net impact 124 38,944 64,823
Interest rate risk
The Group is exposed to interest rate risk as entities within the Group borrow
funds at both fixed and floating interest rates. The Group holds most of its
debts linked to fixed rates. The Group's Real denominated investments yield
interest rates corresponding to the DI daily fluctuation for privately issued
securities and/or "Selic-Over" government-issued bonds. The US Dollar
denominated investments are partly in time deposits, with short-term
maturities. The Group has floating rate financial assets consisting of bank
balances principally denominated in US Dollars and Real that bear interest at
rates based on the banks' floating interest rate.
The Group is primarily exposed to unfavorable movements in the interest rate
impacting its floating interest rate borrowings, which are partially being
offset by the impact on its floating interest rates investments. The
sensitivity analysis below refers to the position at the end of the reporting
period and estimates the impacts of unfavorable movement in the interest
rates, considering three scenarios: a likely scenario (probable), a 25%
devaluation scenario (possible) and a 50% devaluation scenario (remote). The
Group uses the Brazilian Central Bank's "Focus" report to determine the
probable scenario.
31 December 2021 Probable Possible Remote
Risk Amount ($US) scenario scenario (25%) scenario (50%)
Borrowing Brazilian Interbank Interest Rate (31,743) (615) (1,342) (2,053)
Borrowing Brazilian Long-Term Interest Rate (638) - (6) (12)
Borrowing Brazilian National Consumer Prices (51,506) - (1,114) (2,204)
Borrowing N/A (217,712) - - -
Investments Brazilian Interbank Interest Rate 18,626 2,207 4,111 4,089
Net impact 1,592 1,649 (180)
31 December 2020 Probable Possible Remote
Risk Amount ($US) scenario scenario (25%) scenario (50%)
Borrowing Brazilian Interbank Interest Rate (64,439) (440) (746) (1,050)
Borrowing Brazilian Long-Term Interest Rate (841) - (6) (12)
Borrowing Brazilian National Consumer Prices (55,141) - (415) (825)
Borrowing N/A (222,240) - - -
Investments LIBOR 39,997 - 15 31
Investments Brazilian Interbank Interest Rate 52,995 218 619 1,020
Net impact (222) (533) (836)
The net impact was obtained by assuming a 12-month period starting at the
beginning of the period in which interest rates vary and all other variables
are held constant. The scenarios represent the difference between the weighted
scenario rate and actual rate.
Derivative financial instruments
The Group may enter into derivatives contracts to manage risks arising from
interest rate fluctuations. All such transactions are carried out within the
guidelines set by the risk management committee. Generally, the Group seeks to
apply hedge accounting in order to manage volatility.
Market price risk
By the nature of its activities, the Bermuda - Investment segment'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.
The sensitivity analysis below has been determined based on the exposure to
market price risks at the year end and shows what the impact would be if
market prices had been 5, 10 or 20 percent higher or lower at the end of the
financial year. The amounts below indicate an increase in profit or loss and
total equity where market prices increase by 5, 10 or 20 percent, assuming all
other variables are kept constant. A fall in market prices of 5, 10 or 20
percent would give rise to an equal fall in profit or loss and total equity.
5% scenario 10% scenario 20% scenario
31 December 2021 17,481 34,961 69,922
31 December 2020 15,394 30,787 61,574
Concentration risk
By the nature of its activities, the Bermuda - Investment segment's
investments are exposed to concentration of credit risk and market risk based
on geographic exposure and sector exposure. The Investment Manager and the
Board monitor the portfolio composition on a regular basis to ensure it
remains invested in a diversified range of markets to limit the concentration
of exposure by geography and by sector.
As at 31 December 2021, the Group has identified concentration risk for its
financial assets at fair value through profit and loss within the Bermuda -
Investment segment due to their geographic exposure of US$174.8 million in
North America (2020: US$132.0 million) and their sector exposure of US$94.6
million in information technology (2020: US$72.2 million). These exposures are
based on the immediate investment into investment vehicles and may be further
affected by specific allocation of assets within those vehicles.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in
fulfilling obligations associated with its financial liabilities that are
settled with cash payments or other financial assets. The Group's approach in
managing liquidity is to ensure that the Group always has sufficient liquidity
to fulfil its obligations that expire, under normal and stressed conditions,
to avoid damage to the reputation of the Group. 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 ensures it has sufficient cash reserves to meet the expected
operational expenses, including financial obligations. This practice excludes
the potential impact of extreme circumstances that cannot be reasonably
foreseen except for those taken this year and in prior year in response to
COVID-19 liquidity management.
The following table details the Group's remaining contractual maturity for its
non-derivative financial liabilities, showing the undiscounted cash flows of
financial liabilities based on the earliest date on which the Group can be
required to pay, including both interest and principal payments.
Weighted average effective interest rate% Less than 12 months 1-5 years 5+ years Total
31 December 2021
Variable interest rate instruments 4.26% 22,445 48,787 35,792 107,024
Fixed interest rate instruments 2.73% 34,651 112,903 98,390 245,944
Lease liability 10.49% 20,323 70,302 313,102 403,727
77,419 231,992 447,284 756,695
31 December 2020
Variable interest rate instruments 2.78% 35,923 61,088 42,972 139,983
Fixed interest rate instruments 2.75% 31,136 100,087 131,858 263,081
Lease liability 8.77% 19,153 66,718 292,766 378,637
86,212 227,893 467,596 781,701
The Group expects to meet its other obligations from operating cash flows and
proceeds of maturing financial assets.
During the year ended 31 December 2020, the Brazilian National Economic and
Social Development Bank (BNDES) granted Wilson Sons eligibility for the
COVID-19 "Standstill Agreement". This allowed for the postponement of
principal and interest payments that occurred between May and October 2020, a
payment deferment of approximately US$10.3 million for the Group and US$9.9
million for the Company's 50% share in the offshore support vessel joint
venture. Loan repayments are to be made according to the remaining terms of
the contracts included in the scheme.
During the year ended 31 December 2021, the Company signed a second five-month
standstill to defer approximately US$7.5 million for the Group and US$8.9
million for the Company's 50% share in the offshore support vessel joint
venture between January 2021 and May 2021. Principal and interest payments
resumed as scheduled in June 2021.
Additionally, during the last quarter of the year ended 31 December 2020, the
Company signed a COVID-19 related "Standstill Agreement" with the Banco do
Brazil delaying repayment of approximately US$3.7 million for the Group and
US$1.9 million for the Company's 50% share in the offshore support vessel
joint venture. Principal and interest payments resumed as scheduled in the
year ended 31 December 2021.
Limitations of sensitivity analysis
The sensitivity information included in note 31 demonstrates the estimated
impact of a change in a major input assumption while other assumptions remain
unchanged. In reality, there are normally significant levels of correlation
between the assumptions and other factors.
32 Subsequent events
On 24 February 2022, Russia invaded Ukraine, and the ongoing military attack
has led multiple states including the UK, the EU and the United States to
impose economic sanctions on Russia. The conflict continues to evolve as
military activity proceeds and additional sanctions are imposed. The Company
is still assessing the full impact on its operations and investments, but it
is clear that this conflict is increasingly affecting the global economy and
financial markets and exacerbating ongoing economic challenges, including
issues such as rising inflation, rising commodity prices and global
supply-chain disruption. The Company considers this event as a non-adjusting
post year end event which has no impact on the carrying value of its assets
and liabilities as at 31 December 2021.
In March 2022, the Company wrote down the full value of its investment in
Prosperity Quest Fund, a Russia-focused equity fund, following the issue of an
investor notice announcing the suspension of its net asset valuation,
subscriptions and redemptions. As at 31 December 2021, Prosperity Quest Fund
was a Level 3 investment valued at US$4.1 million and included within
financial assets at fair value through profit and loss on the consolidated
statement of financial position.
Enquiries:
Company Contact:
Leslie Rans, CPA 1 (441) 295 1309
Media:
David Haggie 020 7562 4444
Haggie Partners LLP
Brokers:
Peel Hunt 020 7418 8900
Edward Allsopp/Charles Batten
Investment Banking
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