REG - Ocean Wilsons Hldgs - Preliminary results for the year ended 31 Dec 2022
24/03/2023 07:00
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RNS Number : 0687U Ocean Wilsons Holdings Ltd 24 March 2023
Ocean Wilsons Holdings Limited
Preliminary results for the year ended 31 December 2022
STRATEGIC REPORT
About Ocean Wilsons Holdings Limited
Ocean Wilsons Holdings Limited ("Ocean Wilsons" or the "Company") is a Bermuda
investment holding company which, through its subsidiaries, holds a portfolio
of international investments and operates a maritime services company in
Brazil. The Company is listed on both the London Stock Exchange and the
Bermuda Stock Exchange.
Principal Activities
The Company's principal activities are the management of a diverse global
investment portfolio and the provision of maritime and logistics services in
Brazil.
Ocean Wilsons has two operating subsidiaries: Ocean Wilsons (Investments)
Limited ("OWIL") and Wilson Sons Holdings Brasil S.A. ("Wilson Sons")
(together with the Company and their subsidiaries, the "Group").
The Company owns 57% of Wilson Sons which is fully consolidated in the
financial statements 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
The Company's objective is to focus on long-term value creation through both
the investment portfolio and the investment in Wilson Sons. This longer-term
view directs an OWIL investment strategy of a balanced thematic portfolio of
funds leveraging our long-standing investment market relationships and through
detailed insights and analysis. The Wilson Sons strategy focuses on providing
best in class or innovative solutions in a rapidly growing maritime logistics
market.
Data Highlights
Key Data at 31 December
(In US$ millions) 2022 2021 Change
Revenue $440.1 $396.4 +11.0%
Operating Profit $112.1 $97.0 +15.6%
Profit after tax $11.5 $82.5 -86.1%
Investment portfolio net return ($51.0) $44.5 ($95.5)
Investment portfolio assets $293.8 $351.8 ($58.0)
Net assets $754.1 $783.7 -3.8%
Net debt $442.3 $440.9 +0.3%
Net cash inflow from operating activities $97.1 $106.1 -8.5%
Share Data at 31 December
2022 2021 Change
Earnings per share USD (52.8) cents USD 180.1 cents USD (232.9) cents
Proposed/Actual dividend per share US 70 cents US 70 cents -
Share price discount to net asset value 50.5% 41.6% -8.9%
Implied net asset value per share* GBP 18.78 GBP 15.95 +17.7%
Share price GBP 9.30 GBP 9.32 -0.2%
*net asset value per share of Ocean Wilsons based on the market value of each
operating subsidiary
The Chair's Statement
I am delighted to report that, in spite of a challenging 2022, the business
has navigated the year with confidence and delivered both strong operational
results and investment returns that are respectable compared to benchmarks.
Elevated risks and uncertainties with respect to the supply chain challenges
and the impacts of the sanctions on shipping markets, coupled with inflation
and the effects of the fears of recession on global financial markets all had
a dampening effect. Notwithstanding these headwinds, the Group performed
particularly well in our maritime operations, and our defensive positions
minimized losses in the investment portfolio against index comparatives.
Our investment portfolio was, of course, not immune to the global market
volatility spurred by inflationary fears and geopolitical instability.
However, the portfolio loss of 13.8% compared favourably to a notional
balanced portfolio of global equities and government bonds, which fell by
18.2% for the year. In the most challenging investment year in a decade, it is
important to remember that the fundamental tenet of our investment strategy is
the long-term generation of capital through the cycle. In addition to our
equity and diversifying fund investments, our longstanding relationships with
proven fund managers allows us to access compelling investment opportunities
not always available to others that support our longer-term views. To reflect
this, our portfolio continues to include a substantial weighting in private
equity funds which are less correlated to equity market volatility and have
outperformed those indices by over 100% since 2014.
Wilson Sons grew revenues despite lower container volumes as the business
benefited from increases in volumes at its towage and offshore support base
divisions. This rebalancing of product mix allowed Wilson Sons to pivot its
operations and to harden pricing in the towage sector, fill empty capacity at
the offshore support bases and improve margins to maximize profitability in
the container terminals.
Results Overview
At the close of markets on 31 December 2022, the Wilson Sons' share price was
R$10.81 (US$2.05), resulting in a market value for the Ocean Wilsons holding
of 248,644,000 shares (57% of Wilson Sons) of US$509.7 million which is
equivalent to US$14.41 (£11.91) per Ocean Wilsons share. This together with
the value of the investment portfolio at 31 December 2022 of US$8.29 results
in an implied net asset value per Ocean Wilsons Holdings Limited share of
US$22.69 (£18.78). The Ocean Wilsons Holdings Limited share price was £9.30
at 31 December 2022.
Earnings per share for the year was a loss of US 52.8 cents compared with a
profit of US 180.1 cents in 2021.
The Financial Report provides further details in relation to the performance
of the Group.
Our Environmental Social and Governance (ESG) Practices
The Board is committed to driving and implementing responsible investing
policies and operating practices for the Group. Ocean Wilsons' ESG practices
and related strategy continued to receive close attention at our Board
meetings over the past year.
The investment portfolio is managed by the investment manager, Hanseatic Asset
Management LBG ("Hansa Capital"). During the year, Hansa Capital became a
signatory to the internationally recognised United Nations' Principles for
Responsible Investment in line with the Board's strategy to further its ESG
commitment within its subsidiaries. While the Company does not have a specific
ESG policy to exclude investments in companies or sectors, new investments
which the Board believes will further the Company's long-term growth
objectives are considered with an ESG lens in addition to other factors. Our
Investment Manager follows a rigorous onboarding process for any new
investments which include a review of the funds' ESG practices and
philosophies.
On the Board's recent visit to our operations in Brazil, we were able to
witness first-hand Wilson Sons' continued commitment to its corporate culture
that drives innovation, sustainability, social and diversity initiatives and
strong governance practices. Part of Wilson Sons' criteria when considering
expansion and capital investments is the improvement of the Company's impact
on the environment and climate, opportunities to improve employee engagement
and to ensure its governance procedures are effective. For example, Wilson
Sons recently launched the first two of six new tugs whose design reduces
carbon emissions and have recently moved into new office space which is
smaller and more energy efficient. Employees are encouraged to participate in
corporate innovation think tanks and are rewarded when their ideas are
implemented through donations to charities of their choice. These are just a
few examples of the strong sense of commitment to being a better corporate
citizen to all its stakeholders that embodies the corporate culture at Wilson
Sons.
Further details of the Company's ESG practices and our TCFD disclosures are
presented in the annual report.
The Board
I would like to take the opportunity to recognise that after 23 years as the
Chair of Ocean Wilsons, José Francisco Gouvêa Vieira retired at the Annual
General Meeting held in May 2022. On behalf of the Board and the shareholders,
I would like to say thank you for his leadership and many contributions. We
continue to benefit from his knowledge of Brazilian markets as he maintains
his directorship on the Wilson Sons Board. We wish him well in his future
endeavours.
Outlook
The first quarter of 2023, in terms of uncertainty, is reminiscent of the
first quarter of 2022, which saw the Russian invasion of Ukraine and a
commensurate change in the prevailing world order regarding supply chains,
food security and armed conflict; 2023 has already been jolted by the effect
on the US and global banking sectors from the demise of Silicon Valley Bank
and Signature Bank and the current uncertainty around Credit Suisse and
possible others. There is much debate as to the mid-term impact of this on
financial markets, but what is clear is that there continues to be little
expectation of predictability.
Our outlook for 2023, in terms of our investment portfolio, is that there are
new opportunities with inflation beginning to decline, interest rates likely
nearing their peak, some greens shoots of growth, albeit slow, lower
valuations and an expectation that geo-political risks will continue to be a
factor for the longer term. In anticipation of this, we broadened the
investment portfolio by adding more exposure to value strategies to balance
and complement our quality and growth holdings. The key investment objective
for the portfolio remains unchanged; generate real returns through long-term
capital growth rather than overly responding to short-term moves in equity
markets.
We expect Wilson Sons to continue to leverage its strong market position in
Brazil and seek opportunities to expand its maritime services and grow market
share. Market consensus is for an easing of the constraints on the global
shipping industry caused by the container shortages and supply chain
interruptions in recent years. The Wilson Sons' management team will continue
to drive results from its towage and offshore support bases to offset
challenges in the container terminals sector. Fundamental to the continued
success of Wilson Sons is their commitment to innovation which steers
investment towards new technologies that promote revenue growth,
sustainability and operating efficiency.
There are choppy waters ahead in the global economy, however the experience of
2022 has demonstrated that there are always navigation opportunities to be
found and the Board believes that both our divisions are well placed to seek
them out.
Caroline Foulger
Chair
23 March 2023
Business Review
Investment Manager's Report
Market Backdrop
After a highly volatile year, the MSCI ACWI + FM, a key benchmark index,
finished down 18.4% with most equity markets across the world declining. It
was a similar story in bond markets with the Bloomberg Global Treasury index
down 17.5%. The start of the year was fraught with concerns about growing
inflation and increasing interest rates before Russia's invasion of Ukraine
dominated the news and impacted global prices of energy and commodities. These
worries over inflation, interest rates and commodity prices eased slowly
through the year, leading to stronger market performance in the last quarter.
Cumulative Portfolio Returns
2022 2021 3 years p.a. 5 years p.a.
OWIL -13.8% 16.1% 3.9% 4.3%
OWIL (Net)* -14.7% 14.5% 2.7% 3.1%
Performance Benchmark** 9.5% 10.0% 7.9% 6.8%
MSCI ACWI + FM NR US$ -18.2% 18.5% 0.3% 2.3%
Bloomberg Global Treasury TR US$ (Unhedged) -18.4% -6.6% 4.0% 5.2%
MSCI Emerging Markets NR US$ -20.1% -2.5% 2.7% -1.4%
*Net of management and performance fees. No performance fees were earned in
2022.
** The OWIL Performance Benchmark is an absolute benchmark of US CPI Urban
Consumers NSA +3% p.a.
Portfolio Commentary
The investment portfolio declined by 13.8% over the year in contrast to a
comparable portfolio represented by a 60:40 composite of the MSCI ACWI + FM
index and the Bloomberg Global Treasury which fell by 18.2%. The portfolio's
absolute benchmark (US CPI Urban Consumers NSA + 3%), which is inflation
based, returned +9.5%, boosted by rising inflation.
Within the public market equity investments, the MSCI North American Net
Return USD Index declined by 19.5% and the MSCI Europe Net Return USD Index
declined by 15.1%. Long duration sectors, such as technology, which dominates
the US market, were hit hard by concerns over rising interest rates while more
traditional industries, such as energy, commodities and utilities, benefited.
The market rotation away from growth stocks towards value stocks drove the
decision to add Beutal Goodman US Value and Schroders ISF Global Recovery to
the portfolio with both performing positively, returning 1.7% and 13.7%,
respectively. Our largest position, Findlay Park American, declined 21.5%
leaving it slightly behind the US index. Several thematic investments were
more resilient, in terms of the market environment, with energy and
commodities gaining 24.0% and declining 6.1%, respectively. A new position
initiated in Polar Capital Global Insurance gained 12.9%. Our health care
holdings were more mixed with Worldwide Healthcare Trust down 18.9% while RA
Capital Healthcare fared relatively better, declining 10.5%.
The portfolio's private market investments were more resilient with many still
seeing their value increasing and returning significant capital to investors.
While there is often a time lag between public and private markets, several of
our private investments in Europe, healthcare and venture continue to add
value to their portfolios and be able to achieve strong exits of their
portfolio companies. Additionally, many of our North American funds are now
able to purchase assets at far more attractive prices.
Those of our investments that are designed to be less correlated to equity
markets had a particularly strong year. The non-directional hedge funds, MKP
Opportunity (+8.9%), Hudson Bay (+3.2%) and Keynes Dynamic Beta (+10.2%) all
finished the year with a positive return as did the trend-following CTA funds,
GAM Systematic Core Macro and Schroder GAIA BlueTrend. Our investment in
BioPharma Credit, a healthcare secured lending specialist, also performed well
returning 9.9%, as did our long/short government bond fund, Brevan Howard
Absolute Return Government Bond (+7.5%), with its ability to go short proving
crucial given the broad declines seen in world bond markets.
Looking Forward
Despite the rally of the past few months being underpinned by expectations
that inflation and interest rates may have peaked and that some of the more
pessimistic outlooks for the economy are now looking to be overly cautious, we
would still advocate proceeding with some caution. We are yet to see a
weakening of the economy or corporate earnings, many important economic
indicators are still in expansionary territory and employment figures remain
very strong in many key markets. With regards to inflation, whilst it is
encouraging that some of the more cyclical factors appear to be rolling over,
there is concern that some of the more structural factors will be more
persistent and challenging to eliminate. This combination of stronger than
expected growth together with stickier inflation is likely to make it harder
for central banks to cut rates.
It seems likely that markets will face a period of continued uncertainty. It
is very possible that the rally seen at the end of the year continues in the
first part of 2023 with reports of inflation coming off its highs and global
growth bolstered by China's reopening process. In contrast, if there is a
growing realisation that inflation will be more permanent than many believe,
then markets may well experience a setback. Weaker growth would suggest that
central bank policy measures are working, in contrast, stronger growth is
likely to lead to central banks being more aggressive, forcing rates higher,
and ultimately driving economies into a much deeper recession. Hence, at this
stage, while the building blocks are being put in place for better market
conditions, our approach will be more circumspect with a longer-term view.
Hanseatic Asset Management LBG
March 2023
Investment Portfolio at 31 December 2022
Market Value US$000 % of NAV Primary Focus
Findlay Park American Fund 24,154 8.2 US Equities - Long Only
BlackRock Strategic Equity Hedge Fund 12,920 4.4 Europe Equities - Hedge
Select Equity Offshore, Ltd 10,597 3.6 US Equities - Long Only
NG Capital Partners II, LP 7,465 2.5 Private Assets - Latin America
Pangaea II, LP 6,823 2.3 Private Assets - GEM
BA Beutel Goodman US Value Fund 6,317 2.2 US Equities - Long Only
Stepstone Global Partners VI, LP 6,117 2.1 Private Assets - US Venture Capital
Pershing Square Holdings Ltd 5,836 2.0 US Equities - Long Only
iShares Core MSCI Europe UCITS ETF 5,758 2.0 Europe Equities - Long Only
Schroder ISF Asian Total Return Fund 5,669 1.9 Asia ex-Japan Equities - Long Only
Top 10 Holdings 91,656 31.2
Polar Capital Global Insurance Fund 5,304 1.8 Financials Equities - Long Only
Silver Lake Partners IV, LP 5,304 1.8 Private Assets - Global Technology
Hudson Bay International Fund Ltd 5,266 1.8 Market Neutral - Multi-Strategy
Egerton Long - Short Fund Limited 4,957 1.7 Europe/US Equities - Hedge
NTAsian Discovery Fund 4,948 1.7 Asia ex-Japan Equities - Long Only
KKR Americas XII, LP 4,731 1.6 Private Assets - North America
Navegar I, LP 4,481 1.5 Private Assets - Asia
Indus Japan Long Only Fund 4,226 1.4 Japan Equities - Long Only
iShares Core S&P 500 UCITS ETF 4,165 1.4 US Equities - Long Only
TA Associates XIII-A, LP 4,152 1.4 Private Assets - Global Growth
Top 20 Holdings 139,190 47.4
Baring Asia Private Equity Fund VII, LP 4,101 1.4 Private Assets - Asia
Schroder GAIA BlueTrend 3,771 1.3 Market Neutral - Multi-Strategy
Global Event Partners Ltd 3,647 1.2 Market Neutral - Event-Driven
Silver Lake Partners V, LP 3,616 1.2 Private Assets - Global Technology
Goodhart Partners: Hanjo Fund 3,563 1.2 Japan Equities - Long Only
GAM Star Fund PLC - Disruptive Growth 3,554 1.2 Technology Equities - Long Only
Schroder ISF Global Recovery 3,549 1.2 Market Neutral - Multi-Strategy
GAM Systematic Core Macro (Cayman) Fund 3,342 1.1 Market Neutral - Multi-Strategy
Worldwide Healthcare Trust PLC 3,295 1.1 Healthcare Equities - Long Only
Reverence Capital Partners Opportunities Fund II 3,222 1.1 Private Assets - Financials
Top 30 Holdings 174,850 59.5
Remaining Holdings 98,081 33.4
Cash and cash equivalents 20,895 7.1
TOTAL 293,826 100.0
Wilson Sons Management Report
The Wilson Sons 2022 Earnings Report was released on 23 March 2023 and is
posted on www.wilsonsons.com.br.
In the report, Mr Fernando Salek, CEO of Wilson Sons, said:
"Wilson Sons' 2022 revenues of US$440.1 million were 11.0% higher than the
prior year (2021: US$396.4 million), and EBITDA of US$181.8 million (R$939.0
million) was 14.1% above the comparative with resilient towage and logistics
results. In R$ terms, EBITDA increased 9.3% year-over-year.
Towage results rose 4.1% with an increase in average revenue per manoeuvre and
special operations. During the year, our shipyard delivered WS Centaurus and
WS Orion, the first two of a six-tugboat series with over 90 tonnes of bollard
pull. Both vessels are in operation serving the largest bulk carriers
currently calling at Brazilian ports, with capacities reaching 400,000 tonnes
deadweight.
Container terminal results were impacted by the global limited availability of
empty containers and logistics bottlenecks causing vessel call cancellations.
However, the situation has started to improve with aggregated volumes up 16.1%
year-over-year in January 2023.
Demand for our offshore energy-linked services improved markedly as vessel
turnarounds in our offshore support base division increased 30.6% over 2021
and operating days in our non-consolidated offshore support vessel joint
venture rose 20.1% year-over-year. In the last quarter of 2022, new
support-base contracts were signed with Petronas and 3R Petroleum. Under the
Petrobras support-base contract, PSVs Torda, Biguá and Fulmar also began new
four-year operating contracts.
Looking back over the past two years of turmoil to global supply chains
created by the pandemic we are pleased to report that Wilson Sons performed
and managed these challenges while continuing growth, ensuring the safety of
our employees, and the continuity of excellent service to our customers and
trade flow partners. We continue to advance the world-class performance of our
infrastructure, maintain the safety levels of our operations, and consistently
seek opportunities to leverage our market position, the resilience of our
business model and the versatility of our services to challenge and transform
maritime transport for the benefit of all our stakeholders."
KPIs 2022 2021 Change
Towage
Number of harbour manoeuvres 54,865 54,389 0.9%
Offshore support bases
Number of vessel turnarounds 785 601 30.6%
Number of operating days 6,488 5,400 20.1%
Container terminal - aggregated Volumes
Exports - full containers 254.5 306.2 -16.9%
Imports - full containers 129.3 150.4 -14.0%
Cabotage - full containers 122.7 121.1 1.3%
Inland Navigation - full containers 21.3 22.2 -4.1%
Transhipment - full containers 142.2 160.2 -11.2%
Empty containers 245.8 282.2 -12.9%
Total Volume 915.8 1,042.3 -12.1%
Financial Report
Operating Profit
Operating profit of US$112.1 million (2021: US$97.0 million) was US$15.1
million better than the prior year. Operating margin improved year over year
to 25.5% (2021: 24.5%) principally due to an 11.0% increase in revenues and
lower foreign exchange losses on monetary items.
Operating expenses increased US$31.0 million driven by higher costs for both
raw materials and employee related costs. Raw materials and consumables used
were US$9.0 million higher at US$33.0 million (2021: US$24.0 million).
Employee charges and benefits expenses were US$14.3. million higher at
US$126.3 million (2021: US$112.0 million) although remained relatively
unchanged as a percentage of revenue at 28.7% (2021: 28.3%). Other operating
expenses increased US$7.8 million to US$106.1 million (2021: US$98.3 million)
driven by increases in freight charges and utilities costs. Depreciation
increased to US$62.0 million (2021: US$58.7 million) due to the planned
increases in capital spending during the year.
Revenue from Maritime Services
Revenue for the year increased by 11.0% to US$440.1 million (2021: US$396.4
million) attributed to higher towage manoeuvres, growth in the offshore
support bases contracts, warehousing and ship agency services. Harbour
manoeuvre revenues increased 12.8% to US$201.4 million (2021: US$178.6
million) and the offshore support bases revenue increased 47.2% to US$10.6
million (2021: US$7.2 million) with the start of new contracts during the
year.
Returns on the Investment Portfolio
Returns on the investment portfolio were a loss of US$47.9 million (2021: gain
of US$49.5 million) and comprised realised profits on the disposal of
financial assets of US$24.3million (2021: US$11.9 million), net income from
underlying investments of US$11.8 million (2021: US$3.8 million) and
unrealised losses of US$80.0 million (2021: unrealised gains of US$33.9
million). Additionally, the only Russia focused investment was written off
during the year for a loss of US$4.1 million.
Other Investment Income
Other investment income for the year increased US$4.3 million to US$8.4
million (2021: US$4.1 million). Increased interest on bank deposits and higher
other interest income were the contributing factors.
Finance Costs
Finance costs for the year at US$34.5 million were US$4.3 million higher than
the prior year (2021: US$30.2 million) due to interest on lease liabilities
and interest on bank loans increasing.
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
2022 the BRL appreciated 6.5% against the USD from R$5.58 at 1 January 2022 to
R$5.22 at the year end. In 2021 the BRL depreciated 7.1% against the USD from
R$5.20 at 1 January 2021 to R$5.57 at the year end. The foreign exchange gains
on monetary items were US$1.6 million in 2022, compared to a loss of US$3.1
million in 2021.
Profit Before Tax
Profit before tax for the year decreased US$72.3 million to US$38.1 million
compared to US$110.4 million in 2021. The decline in profit is primarily due
to the unrealised losses in valuation of the investment portfolio which
contributed negative returns of US$47.9 million compared to a positive return
of $49.5 million in the prior year in common with macro trends globally.
The tax charge for the year at US$26.7 million was US$1.2 million lower than
prior year (2021: US$27.9 million). The Company is taxed on its maritime
services operations. This represents an effective tax rate for the year of 29%
(2021: 40%) for maritime services. A more detailed breakdown of taxation
reconciling the effective tax rate is provided in note 9 to the consolidated
financial statements.
Loss/Profit for the year
The loss for the year attributable to the equity holders of the Company is
US$18.6 million (2021: US$63.7 million profit) and the profit attributable to
the non-controlling interests is US$30.2 million (2021: US$18.8 million
profit). While the US$25.1 million increase in Wilson Sons' profit after tax
was attributed to both the equity holders of the Company and the
non-controlling interests based on ownership, the US$47.9 million loss on the
investment portfolio (2021: US$49.5 million gain) was only attributed to the
equity holders of the Company since the Company has full ownership of it.
Cash Flows
Net cash inflow from operating activities for the period at US$97.1 million
was US$9.0 million lower than prior year (2021: US$106.1 million). Capital
expenditure for the year at US$63.3 million was US$15.9 million higher than
the prior year (2021: US$47.4 million).
The Group drew down new bank loans of US$59.8 million (2021: US$19.4 million)
to finance capital expenditure, while making repayments of US$49.3 million
(2021: US$57.9 million). Dividends of US$24.8 million were paid to
shareholders of Ocean Wilsons (2021: US$24.8 million).
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31 December 2022
(Expressed in thousands of US Dollars)
Note 2022 2021
Sales of services 5 440,107 396,376
Raw materials and consumables used (32,956) (24,036)
Employee charges and benefits expenses 6 (126,330) (112,026)
Other operating expenses 7 (106,055) (98,289)
Depreciation of owned assets 14 (48,473) (46,631)
Depreciation of right-of-use assets 15 (13,573) (12,063)
Amortisation of intangible assets 16 (2,389) (2,718)
Gain/(loss) on disposal of property, plant and equipment and intangible assets 100 (499)
Foreign exchange gains/(losses) on monetary items 1,620 (3,100)
Operating profit 112,051 97,014
Share of results of joint ventures and associates 13 3,165 (5,029)
Returns on investment portfolio at fair value through profit or loss 5 (47,947) 49,474
Investment portfolio performance and management fees (3,047) (4,954)
Other investment income 5 8,421 4,113
Finance costs 8 (34,509) (30,227)
Profit before tax 38,134 110,391
Tax expense 9 (26,656) (27,925)
Profit for the year 11,478 82,466
Other comprehensive income:
Items that will not be reclassified subsequently to profit or loss
Post-employment benefits remeasurement 21 93 108
Purchase price adjustment of associate 13 159 -
Items that will be or may be reclassified subsequently to profit or loss
Exchange differences arising on translation of foreign operations 7,128 (7,459)
Effective portion of changes in fair value of derivatives 9 158
Other comprehensive income/(loss) for the year 7,389 (7,193)
Total comprehensive income for the year 18,867 75,273
(Loss)/profit for the year attributable to:
Equity holders of the Company (18,675) 63,687
Non-controlling interests 26 30,153 18,779
11,478 82,466
Total comprehensive (loss)/income for the year attributable to:
Equity holders of the Company (14,484) 59,604
Non-controlling interests 26 33,351 15,669
18,867 75,273
Earnings per share:
Basic and diluted 28 (52.8)c 180.1c
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Statement of Financial Position
At 31 December 2022
(Expressed in thousands of US Dollars)
Note 2022 2021
Current assets
Cash and cash equivalents 75,724 28,565
Financial assets at fair value through profit and loss 10 275,080 392,931
Recoverable taxes 9 34,515 25,380
Trade and other receivables 11 67,136 59,350
Inventories 12 17,579 12,297
470,034 518,523
Non-current assets
Other trade receivables 11 1,456 1,580
Related party loans receivable 23 11,176 10,784
Other non-current assets 22 3,506 3,582
Recoverable taxes 9 15,143 12,816
Investment in joint ventures and associates 13 81,863 61,553
Deferred tax assets 9 21,969 22,332
Property, plant and equipment 14 589,629 563,055
Right-of-use assets 15 178,699 157,869
Other intangible assets 16 14,392 14,981
Goodwill 17 13,420 13,272
931,253 861,824
Total assets 1,401,287 1,380,347
Current liabilities
Trade and other payables 19 (58,337) (58,513)
Tax liabilities 9 (10,290) (8,057)
Lease liabilities 15 (24,728) (19,449)
Bank loans 20 (59,881) (45,287)
(153,236) (131,306)
Net current assets 316,798 387,217
Non-current liabilities
Bank loans 20 (262,010) (256,312)
Post-employment benefits 21 (1,737) (1,562)
Deferred tax liabilities 9 (49,733) (50,194)
Provisions for legal claims 22 (8,997) (8,907)
Lease liabilities 15 (171,448) (148,394)
(493,925) (465,369)
Total liabilities (647,161) (596,675)
Capital and reserves
Share capital 24 11,390 11,390
Retained earnings 634,910 678,006
Translation and hedging reserve (91,692) (95,739)
Equity attributable to equity holders of the Company 554,608 593,657
Non-controlling interests 26 199,518 190,015
Total equity 754,126 783,672
Signed on behalf of the Board
F. Beck A. Berzins
Director Director
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
(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 2021 11,390 635,987 (91,595) 555,782 187,925 743,707
Currency translation adjustment - - (4,234) (4,234) (3,225) (7,459)
Effective portion of changes in fair value of derivatives - - 90 90 68 158
Post-employment benefits (note 21) - 61 - 61 47 108
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 26, 27) - (24,754) - (24,754) (17,808) (42,562)
Equity transactions in subsidiaries (note 25) - 3,025 - 3,025 4,229 7,254
Balance at 31 December 2021 11,390 678,006 (95,739) 593,657 190,015 783,672
Balance at 1 January 2022 11,390 678,006 (95,739) 593,657 190,015 783,672
Currency translation adjustment - - 4,042 4,042 3,086 7,128
Effective portion of changes in fair value of derivatives - - 5 5 4 9
Post-employment benefits (note 21) - 54 - 54 39 93
Purchase price adjustment of associate (note 13) - 90 - 90 69 159
(Loss)/profit for the year - (18,675) - (18,675) 30,153 11,478
Total comprehensive (loss)/income for the year - (18,531) 4,047 (14,484) 33,351 18,867
Dividends (notes 26, 27) - (24,754) (24,754) (25,173) (49,927)
Equity transactions in subsidiaries (note 25) - 189 - 189 1,325 1,514
Balance at 31 December 2022 11,390 634,910 (91,692) 554,608 199,518 754,126
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.
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2022
(Expressed in thousands of US Dollars)
Notes 2022 2021
Operating activities
Profit for the year 11,478 82,466
Adjustment for:
Depreciation & amortisation 14,15,16 64,435 61,412
(Gain)/loss on disposal of property, plant and equipment and intangible assets 499
(100)
Share of results of joint ventures and associates 13 (3,165) 5,029
Returns on investment portfolio at fair value through profit or loss 5 47,947 (49,474)
Other investment income 5 (8,421) (4,113)
Finance costs 8 34,509 30,227
Foreign exchange (gains)/losses on monetary items (1,620) 3,100
Share based payment expense 25 334 369
Post-employment benefits 21 (170) 136
Tax expense 9 26,656 27,925
Changes in:
Inventories 12 (5,282) (533)
Trade and other receivables 11, 23 (8,054) (13,629)
Other current and non-current assets 9,22 (11,386) (3,388)
Trade and other payables 9,19 2,057 19,158
Provisions for legal claims 22 90 (653)
Taxes paid (22,070) (27,256)
Interest paid (30,143) (25,161)
Net cash inflow from operating activities 97,095 106,114
Investing activities
Income received from trading investments 16,348 5,700
Purchase of trading investments (70,864) (72,811)
Proceeds on disposal of trading investments 128,959 73,064
Purchase of property, plant and equipment 14 (63,268) (47,352)
Proceeds on disposal of property, plant and equipment 726 304
Purchase of intangible assets 16 (1,386) (1,375)
Proceeds on disposal of intangible assets - 517
Investment in joint ventures and associates 13 (17,016) (20,016)
Net cash used in investing activities (6,501) (61,969)
Financing activities
Dividends paid to equity holders of the Company 27 (24,754) (24,754)
Dividends paid to non-controlling interests in subsidiary 26 (25,173) (17,808)
Repayments of borrowings 20 (49,349) (57,926)
Payments of lease liabilities 15 (8,591) (8,473)
New bank loans drawn down 20 59,793 19,438
Shares repurchased in subsidiary 25 (2,549) -
Issue of new shares in subsidiary under employee share option plan 25 3,729 6,885
Net cash used in financing activities (46,894) (82,638)
Net increase/(decrease) in cash and cash equivalents 43,700 (38,493)
Cash and cash equivalents at beginning of year 28,565 63,255
Effect of foreign exchange rate changes 3,459 3,803
Cash and cash equivalents at end of year 75,724 28,565
The accompanying notes are an integral part of these consolidated financial
statements.
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(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
2023.
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.
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 ventures and associates
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.
An associate is an entity in which the Group has significant influence, but
not control or joint control, over the financial and operating policies.
Investments in joint ventures and associates are accounted for using the
equity method and are initially recognised at cost. The Group's share in the
profit or loss and other comprehensive income of the joint ventures and
associates is included in these consolidated financial statements, until the
date that significant influence or joint control ceases.
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 sales related taxes.
Ship agency and logistics revenues
Revenue from providing agency and logistics services is recognised when the
agreed services have been performed.
Towage and port terminals revenues
Revenue from providing towage services, vessel turnarounds, container movement
and associated services is recognised on the date that the services have been
performed.
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.
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.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and other short-term highly
liquid cash equivalents.
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 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, 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
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 35 years
Leasehold Improvements: 5 to 52 years, shorter of the rental period or the useful life of the
underlying asset
Floating Craft: 25 years
Vehicles: 5 to 10 years
Plant and Equipment: 10 to 20 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 at 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: 30 to 33 years
Computer software: 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, estimates and assumptions
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 management's 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 higher 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 - Judgements, estimates and
assumptions
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
A number of new or amended standards are effective for annual periods
beginning after 31 December 2021, but do not have a significant impact on the
preparation of the consolidated financial statements of the Group.
Standards issued but not yet effective
Several new or amended standards are effective for annual periods beginning
after 31 December 2022 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.
- Amendments to IAS 1: Classification of Liabilities as Current or
Non-current, effective for periods beginning after 31 December 2022
- Amendments to IAS 8: Definition of Accounting Estimates, effective
for periods beginning after 31 December 2022
- Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of
Accounting Policies, effective for periods beginning after 31 December 2022
- Amendments to IAS 12: Deferred Tax related to Assets and Liabilities
arising from a Single Transaction, effective for periods beginning after 31
December 2022
3 Group composition
Ocean Wilsons has direct ownership in the following subsidiaries:
Place of incorporation Ownership interest
Subsidiaries and operation Segment 2022 2021
Investments
Ocean Wilsons (Investments) Limited Bermuda Investment 100% 100%
Holdings
Ocean Wilsons Overseas Limited Bermuda Unallocated 100% 100%
Ocean Wilsons Overseas Limited has direct ownership in the following
subsidiary:
Place of incorporation Ownership interest
Subsidiaries and operation Segment 2022 2021
Holdings
OW Overseas (Investments) Limited United Kingdom Unallocated 100% 100%
OW Overseas (Investments) Limited has direct ownership in the following
subsidiary:
Place of incorporation Ownership interest
Subsidiaries and operation Segment 2022 2021
Holdings
Wilson Sons Holdings Brasil S.A. Brazil Maritime service 56.58% 56.88%
The change in ownership interest in Wilson Sons Holdings Brasil S.A. from the
year ended 31 December 2021 to 31 December 2022 is due to the exercise of
share options and the repurchase of shares in subsidiaries, for which the
details are presented in note 25. The information on non-controlling interests
is presented in note 26.
Wilson Sons Holdings Brasil S.A. has direct ownership in the following
subsidiaries:
Place of incorporation Ownership interest
Subsidiaries and operation Segment 2022 2021
Shipyard
Wilson Sons Estaleiros Ltda. Brazil Maritime service 100% 100%
Ship agency
Dock Market Soluções Ltda. Brazil Maritime service 90% 90%
Wilson Sons Shipping Services Ltda. Brazil Maritime service 100% 100%
Logistics
Wilson Sons Terminais e Logística Ltda. Brazil Maritime service 100% 100%
Allink Transportes Internacionais Ltda. Brazil Maritime service 50% 50%
Container terminal
Tecon Rio Grande S.A. Brazil Maritime service 100% 100%
Tecon Salvador S.A. Brazil Maritime service 100% 100%
Offshore support bases and towage
Wilson Sons Serviços Marítimos Ltda. Brazil Maritime service 100% 100%
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 2022 Brazil - Maritime Services Bermuda - Investment Unallocated Consolidated
Result
Sale of services 440,107 - - 440,107
Net return on investment portfolio at fair value through profit or loss - (50,994) - (50,994)
Operating expenses (261,461) (202) (3,578) (265,241)
Depreciation and amortisation (64,435) - - (64,435)
Share of results of joint ventures and associates 3,165 - - 3,165
Other investment income 8,421 - - 8,421
Finance costs (34,509) - - (34,509)
Foreign exchange gains/(losses) on monetary items 1,837 (159) (58) 1,620
Profit/(loss) before tax 93,125 (51,355) (3,636) 38,134
Tax (26,656) - - (26,656)
Profit/(loss) after tax 66,469 (51,355) (3,636) 11,478
Financial position
Current assets 167,140 293,717 9,177 470,034
Investment in joint ventures and associates 81,863 - - 81,863
Property, plant and equipment 589,629 - - 589,629
Right-of-use assets 178,699 - - 178,699
Other intangible assets 14,392 - - 14,392
Goodwill 13,420 - - 13,420
Other non-current assets 53,250 - - 53,250
Segment assets 1,098,393 293,717 9,177 1,401,287
Segment liabilities (646,339) (509) (313) (647,161)
Other information
Capital additions 64,654 - - 64,654
Right-of-use assets additions 5,222 - - 5,222
For the year ended 31 December 2021 Brazil - Maritime Services Bermuda - Investment Unallocated Consolidated
Result
Sale of services 396,376 - - 396,376
Net return on investment portfolio at fair value through profit or loss - 44,520 - 44,520
Operating expenses (231,476) (212) (3,162) (234,850)
Depreciation and amortisation (61,412) - - (61,412)
Share of results of joint ventures and associates (5,029) - - (5,029)
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
Financial position
Current assets 163,967 351,774 2,782 518,523
Investment in joint ventures and associates 61,553 - - 61,553
Property, plant and equipment 563,055 - - 563,055
Right-of-use assets 157,869 - - 157,869
Other intangible assets 14,981 - - 14,981
Goodwill 13,272 - - 13,272
Other non-current assets 51,094 - - 51,094
Segment assets 1,025,791 351,774 2,782 1,380,347
Segment liabilities (594,218) (2,211) (246) (596,675)
Other information
Capital additions 48,727 - - 48,727
Right-of-use assets additions 7,718 - - 7,718
5 Revenue
An analysis of the Group's revenue is as follows:
2022 2021
Sale of services 440,107 396,376
Net income from underlying investment vehicles 11,809 3,754
Profit on disposal of financial assets at fair value through profit or loss 24,316 11,870
Unrealised (losses)/gains on financial assets at fair value through profit or (79,995) 33,850
loss
Write down of Russia-focused investments (note 10) (4,077) -
Returns on investment portfolio at fair value through profit or loss (47,947) 49,474
Interest on bank deposits 4,146 2,254
Other interest 4,275 1,859
Other investment income 8,421 4,113
Total Revenue 400,581 449,963
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:
2022 2021
Harbour manoeuvres 201,429 178,552
Special operations 17,633 20,558
Ship agency 9,910 8,774
Towage and ship agency services 228,972 207,884
Container handling 73,166 72,402
Warehousing 40,946 35,036
Ancillary services 20,932 21,283
Offshore support bases 10,617 7,234
Other services 13,360 13,040
Port terminals 159,021 148,995
Logistics 47,591 35,142
Shipyard 4,523 4,355
Total Revenue from contracts with customers 440,107 396,376
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$54.5 million (2021: US$49.1 million). These amounts include US$12.0 million
(2021: US$13.5 million) of contract assets (unbilled accounts receivables).
There were no contract liabilities as of 31 December 2022 (2021: 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 ship agency services
Harbour manoeuvres 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 At a point in time
Shipyard Over time
The disaggregation of revenue from contracts with customers based on the
timing of performance obligations is as follows:
2022 2021
At a point of time 435,584 392,021
Over time 4,523 4,355
Total Revenue from contracts with customers 440,107 396,376
The performance obligation of shipyard 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. At 31
December 2022 and 2021, 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 expenses
Employee charges and benefits expenses are classified as follows:
2022 2021
Wages, salaries and benefits (102,397) (90,868)
Social security costs (22,701) (20,062)
Other pension costs (904) (772)
Share based payments (328) (324)
Total employee charges and benefits expenses (126,330) (112,026)
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$0.9 million (2021: US$0.7 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 is detailed in note 21.
7 Other operating expenses
Other operating expenses are classified as follows:
2022 2021
Utilities and communications (13,616) (12,309)
Insurance (3,483) (4,076)
Corporate, governance and compliance costs (3,292) (2,359)
Short-term or low-value asset leases (33,432) (32,881)
Service costs (24,925) (24,401)
Freight (17,320) (10,717)
Port expenses (7,168) (6,629)
Other operating expenses (2,819) (4,917)
Total other operating expenses (106,055) (98,289)
8 Finance costs
Finance costs are classified as follows:
2022 2021
Interest on lease liabilities (15,798) (13,882)
Interest on bank loans (17,160) (16,219)
Exchange loss on foreign currency borrowings (248) (32)
Other interest costs (1,303) (94)
Total finance costs (34,509) (30,227)
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:
2022 2021
Current tax expense
Brazilian corporation tax (17,018) (17,239)
Brazilian social contribution (8,340) (7,114)
Total current tax expense (25,358) (24,353)
Deferred tax - origination and reversal of timing differences
Charge for the year in respect of deferred tax liabilities (14,123) (6,737)
Credit for the year in respect of deferred tax assets 12,825 3,165
Total deferred tax expense (1,298) (3,572)
Total tax expense (26,656) (27,925)
Brazilian corporation tax is calculated at 25% (2021: 25%) of the taxable
profit for the year. Brazilian social contribution tax is calculated at 9%
(2021: 9%) of the taxable profit for the year.
The reconciliation of the effective tax rate is as follows:
2022 2021
Profit before tax 38,134 110,391
Less: Loss/(profit) before tax of Bermuda and unallocated segments 54,991 (41,036)
Profit before tax - Maritime services 93,125 69,355
Tax at the aggregate Brazilian tax rate of 34% (2021: 34%) (31,663) (23,581)
Net operating losses in the period (788) (816)
Non-deductible expenses (863) (554)
Foreign exchange variance on loans (3,008) 1,142
Tax effect of share of results of joint ventures and associates 1,076 (1,710)
Tax effect of foreign exchange gains or losses on monetary items 625 (881)
Retranslation of non-monetary items 11,592 228
Share option scheme - (110)
Leasing 64 158
Other (3,691) (1,801)
Tax expense for the year (26,656) (27,925)
Effective rate for the year - Maritime services 29% 40%
Effective rate for the year - Group 70% 25%
The tax expense related to amounts recognised in other comprehensive income is
as follows:
For the year ended 31 December 2022 Before tax Tax (expense)/ Net of tax
credit
Items that will not be reclassified subsequently to profit or loss
Post-employment benefits 124 (31) 93
Purchase price adjustment of associate 213 (54) 159
Items that will be or may be reclassified subsequently to profit or loss
Exchange differences arising on translation of foreign operations 9,551 (2,423) 7,128
Effective portion of changes in fair value of derivatives 12 (3) 9
Total amounts recognised in other comprehensive income 9,900 (2,511) 7,389
For the year ended 31 December 2021 Before tax Tax (expense)/ Net of tax
credit
Items that will not be reclassified subsequently to profit or loss
Post-employment benefits 164 (56) 108
Items that will be or may be reclassified subsequently to profit or loss
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
Total amounts recognised in other comprehensive income (10,899) 3,706 (7,193)
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 2021 (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)
(Charge)/credit to income (1,711) (8,433) (4,112) (534) 1,900 11,592 (1,298)
Other adjustments (1,510) (68) 151 82 1,438 1 94
Exchange differences (2,168) 2,200 703 - 678 (111) 1,302
At 31 December 2022 (35,239) 28,971 6,420 14,356 10,552 (52,824) (27,764)
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:
2022 2021
Deferred tax assets 21,969 22,332
Deferred tax liabilities (49,733) (50,194)
Net deferred tax balance (27,764) (27,862)
At 31 December 2022, the Group had unused tax losses of US$31.2 million (2021:
US$39.0 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$4.0 million (2021:
US$7.6 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 bonds related to these 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:
2022 2021
Recoverable taxes - current 34,515 25,380
Recoverable taxes - non-current 15,143 12,816
Total recoverable taxes 49,658 38,196
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:
2022 2021
Taxes payable - current (10,290) (8,057)
Taxes payable - non-current - -
Total taxes payable (10,290) (8,057)
10 Financial assets at fair value through profit or loss
The movement in financial assets at fair value through profit or loss is as
follows:
2022 2021
Opening balance - 1 January 392,931 347,464
Additions, at cost 70,864 72,811
Disposals, at market value (128,959) (73,064)
(Decrease)/increase in fair value of financial assets at fair value through (79,995) 33,850
profit or loss
Write down of Russia-focused investments(1) (4,077) -
Profit on disposal of financial assets at fair value through profit or loss 24,316 11,870
Closing balance - 31 December 275,080 392,931
Bermuda - Investment segment 272,931 349,613
Brazil - Maritime services segment 2,149 43,318
( )
(1) During the year ended 31 December 2022, the Company wrote down the full
value of its investment in Prosperity Quest Fund, a Russia-focused equity fund
held within the investments segment portfolio, following the issue of an
investor notice announcing the suspension of its net asset valuation,
subscriptions and redemptions.
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:
2022 2021
Within one year 5,951 5,219
In the second to fifth year inclusive 2,346 2,946
After five years 42,129 35,056
Total commitment for capital subscriptions 50,426 43,221
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 traded 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 30.
11 Trade and other receivables
Trade and other receivables are classified as follows:
2022 2021
Non-current
Other trade receivables 1,456 1,580
Total other trade receivables 1,456 1,580
Current
Trade receivable for the sale of services 43,293 35,915
Unbilled trade receivables 12,036 13,517
Total gross current trade receivables 55,329 49,432
Allowance for expected credit loss (792) (338)
Total current trade receivables 54,537 49,094
Prepayments 4,887 6,646
Insurance claim receivable 981 632
Employee advances 1,449 1,236
Disposal proceeds of financial assets at fair value through profit or loss 2,181 -
receivable
Other receivables 3,101 1,742
Total other current receivables 12,599 10,256
Total trade and other receivables 67,136 59,350
The aging of the trade receivables is as follows:
2022 2021
Current 44,699 43,160
From 0 - 30 days 5,997 4,098
From 31 - 90 days 2,461 858
From 91 - 180 days 1,236 988
More than 180 days 936 328
Total gross trade receivables 55,329 49,432
The movement in allowance for expected credit loss is as follows:
2022 2021
Opening balance - 1 January (338) (554)
(Increase)/decrease in allowance recognised in profit or loss (419) 188
Exchange differences (35) 28
Closing balance - 31 December (792) (338)
Information about the Group's exposure to credit risks related to trade
receivables is included in note 30.
12 Inventories
Inventories are classified as follows:
2022 2021
Operating materials 13,727 10,829
Raw materials for third party vessel construction 3,852 1,468
Total inventories 17,579 12,297
Inventories are presented net of provision for obsolescence, amounting to
US$0.3 million (2021: US$0.4 million).
13 Joint ventures and associates
The Group holds the following significant interests in joint ventures and
associates at the end of the reporting period:
Place of incorporation Proportion of ownership
and operation 2022 2021
Joint ventures
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%
Associates
Argonáutica Engenharia e Pesquisas S.A. Brazil 32.32% -
The aggregated Group's interests in joint ventures and associates are equity
accounted. The financial information of the joint ventures and associates and
reconciliations to the share of result of joint ventures and associates and
the investment in joint ventures and associates recognised for the period are
as follows:
2022 2021
Sales of services 182,882 118,049
Operating expenses (116,046) (70,364)
Depreciation and amortisation (53,212) (50,962)
Foreign exchange gains/(losses) on monetary items 5,057 (3,904)
Results from operating activities 18,681 (7,181)
Finance income 2,656 302
Finance costs (14,756) (15,789)
Profit/(loss) before tax 6,581 (22,668)
Tax (expense)/credit (253) 12,610
Profit/(loss) for the year 6,328 (10,058)
Total profit/(loss) for the year - joint ventures 6,334 (10,058)
Participation 50% 50%
Share of profit/(loss) for the year for joint ventures 3,167 (5,029)
Total profit/(loss) for the year - associates (6) -
Participation 32.32% N/A
Share of profit/(loss) for the year for associates (2) -
Share of result of joint ventures and associates 3,165 (5,029)
2022 2021
Cash and cash equivalents 5,747 7,541
Other current assets 51,260 46,548
Non-current assets 551,921 584,886
Total assets 608,928 638,975
Trade and other payables (46,506) (66,567)
Other current liabilities (56,833) (49,173)
Non-current liabilities (324,012) (375,988)
Total liabilities (427,351) (491,728)
Total net assets 181,577 147,247
Total net assets - joint ventures 180,079 147,247
Participation 50% 50%
Group's share of net assets - joint ventures 90,040 73,624
Total net assets - associates 1,498 -
Participation 32.32% N/A
Group's share of net assets - associates 484 -
Goodwill and surplus generated on associate purchase 1,711 -
Cumulative elimination of profit on construction contracts (10,372) (12,071)
Investment in joint ventures and associates 81,863 61,553
The movement in investment in joint ventures and associates is as follows:
2022 2021
Opening balance - 1 January 61,553 26,185
Share of result of joint ventures and associates 3,165 (5,029)
Capital increase 17,016 40,207
Elimination of profit on construction contracts (158) 17
Purchase price adjustment of associate 159 -
Post-employment benefits - 10
Translation reserve 128 163
Closing balance - 31 December 81,863 61,553
During the year ended 31 December 2022, the Group increased its invested
capital in Wilson Sons Ultratug Participações S.A. with a cash contribution
of US$14.9 million and in Porto Campinas Logística e Intermodal Ltda with a
cash contribution of US$0.1 million and acquired a 32.32% participation in
Argonáutica Engenharia e Pesquisas S.A. with a cash contribution of US$2.0
million.
During the year ended 31 December 2021, the Group increased its invested
capital in Wilson Sons Ultratug Participações S.A. with a cash contribution
of US$20.0 million, and in Atlantic Offshore S.A. with the conversion in
capital of a US$20.2 million related party loan.
Guarantees
Wilson Sons Ultratug Participações S.A. has loans with the Brazilian
Development Bank guaranteed by a lien on the financed supply vessels and by a
corporate guarantee from its participants, proportionate to their ownership.
The Group's subsidiary Wilson Sons Holdings Brasil Ltda. is guaranteeing
US$163.7 million (2021: US$160.4 million).
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 Petrobras. The joint venture has to maintain a cash reserve account until
full repayment of the loan agreement amounting to US$1.7 million (2021: US$2.1
million) presented as long-term investment.
Covenants
On 31 December 2022 and 2021, Wilson Sons Ultratug Participações S.A. was
not in compliance with one of its covenants' ratios with Banco do Brasil,
resulting in a required increase in capital within a year of US$1.8 million
(2021: US$ 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 and
associates as of 31 December 2022 (2021: none).
14 Property, plant and equipment
Land and Floating Craft Vehicles, plant Assets under Total
buildings and equipment construction
Cost
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 1 January 2022 274,683 541,252 198,464 9,581 1,023,980
Additions 10,835 15,493 9,936 27,004 63,268
Transfers (112) 24,623 (2,317) (22,194) -
Transfers to intangible assets - - (60) - (60)
Disposals (1,955) (4,477) (4,892) - (11,324)
Exchange differences 11,084 - 10,854 - 21,938
At 31 December 2022 294,535 576,891 211,985 14,391 1,097,802
Accumulated depreciation
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 1 January 2022 82,651 264,836 113,438 - 460,925
Charge for the year 8,518 27,831 12,124 - 48,473
Elimination on construction contracts - 87 - - 87
Disposals (1,645) (4,426) (4,609) - (10,680)
Exchange differences 3,644 - 5,724 - 9,368
At 31 December 2022 93,168 288,328 126,677 - 508,173
Carrying Amount
At 31 December 2021 192,032 276,416 85,026 9,581 563,055
At 31 December 2022 201,367 288,563 85,308 14,391 589,629
Land and buildings with a net book value of US$0.2 million (2021: US$0.2
million) and plant and equipment with a carrying amount of US$0.1 million
(2021: US$0.1 million) have been given in guarantee for various legal
processes.
The Group has pledged assets with a carrying amount of US$230.2 million (2021:
US$251.6 million) to secure loans granted to the Group.
The amount of borrowing costs capitalised in 2022 was US$0.1 million at an
average interest rate of 5.6% (2021: none).
The Group has contractual commitments to suppliers for the acquisition and
construction of property, plant and equipment amounting to US$19.9 million
(2021: US$14.2 million).
15 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 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 1 January 2022 167,118 13,077 5,388 8,846 194,429
Additions - 3,018 1,305 899 5,222
Contractual amendments 17,901 5,793 63 117 23,874
Terminated contracts - (2,796) (3,771) (58) (6,625)
Exchange differences 10,313 510 96 328 11,247
At 31 December 2022 195,332 19,602 3,081 10,132 228,147
Accumulated depreciation
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 1 January 2022 18,298 8,194 2,960 7,108 36,560
Charge for the year 8,244 4,825 912 916 14,897
Terminated contracts - (1,226) (2,424) (44) (3,694)
Exchange differences 1,104 242 63 276 1,685
At 31 December 2022 27,646 12,035 1,511 8,256 49,448
Carrying Amount
At 31 December 2021 148,820 4,883 2,428 1,738 157,869
At 31 December 2022 167,686 7,567 1,570 1,876 178,699
Operational facilities
Tecon Rio Grande
Lease commitments to operate the container terminal and heavy cargo terminal
in the Port of Rio Grande, expiring in 2047. The commitments 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
Lease commitments to operate the container terminal and heavy cargo terminal
in the Port of Salvador, expiring in 2050. The commitments require the Group
to make a minimum specified investment to expand the leased terminal area and
include a monthly payment for facilities and leased areas, a contractual
payment per container moved based on minimum forecast volumes and a fee per
tonne of non-containerised cargo moved based on minimum forecast volumes.
Shipyard
Lease commitments to operate an area used to expand and develop a Group's
shipyard, expiring in 2038 and renewable for a further period of 30 years at
the option of the Group. Management's intention is to exercise the renewal
option.
Offshore support base
Lease commitments to operate a port area with convenient access to service oil
producing basins, expiring in 2043.
Logistics
Lease commitments for a distribution centre, expiring in 2026.
Floating craft
Lease commitments for the chartering of vessels for maritime transport between
port terminals.
Buildings
Lease commitments for the Brazilian headquarters, branches and commercial
offices in several Brazilian cities.
Vehicles, plant and equipment
Lease commitments mainly for forklifts, vehicles for operational, commercial
and administrative activities and other operating equipment.
Lease liabilities
Lease liabilities are classified as follows:
Average discount rate 2022 2021
Operational facilities 8.55% (184,591) (159,444)
Floating craft 9.61% (7,605) (4,823)
Buildings 9.75% (2,121) (2,139)
Vehicles, plant and equipment 12.12% (1,859) (1,437)
Total (196,176) (167,843)
Total current (24,728) (19,449)
Total non-current (171,448) (148,394)
The contractual undiscounted cash flows related to leases liabilities are as
follows:
2022 2021
Within one year (25,958) (20,323)
In the second year (23,101) (37,535)
In the third to fifth years inclusive (56,682) (32,767)
After five years (355,360) (313,102)
Total cash flows (461,101) (403,727)
Adjustment to present value 264,925 235,884
Total lease liabilities (196,176) (167,843)
The lease liabilities balance considering the projected future inflation rate
in the discounted payment flows is as follows:
2022 2021
Actual outflow (461,101) (403,727)
Embedded interest 264,925 235,884
Lease liabilities (196,176) (167,843)
Inflated flow (284,773) (426,694)
Inflated embedded interest 204,117 252,974
Inflated lease liabilities (80,656) (173,720)
Amounts recognised in profit and loss
2022 2021
Depreciation of right-of-use assets (14,897) (13,325)
PIS and COFINS taxes 1,324 1,262
Net depreciation of right-of-use assets (13,573) (12,063)
Interest on lease liabilities (16,810) (14,771)
PIS and COFINS taxes 1,012 889
Interest on lease liabilities (15,798) (13,882)
Variable lease payments not included in the measurement of lease (2,376) (2,332)
liabilities(1)
Expenses relating to short-term leases (29,778) (29,641)
Expenses relating to low-value assets (1,281) (897)
Total (62,806) (58,815)
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
2022 2021
Payment of lease liability (8,591) (8,473)
Interest paid - lease liability (16,810) (14,771)
Short-term leases paid (29,778) (29,641)
Variable lease payments (2,376) (2,332)
Low-value leases paid (1,281) (897)
Total cash outflow (58,836) (56,114)
16 Other intangible assets
Other intangible assets cost and related accumulated amortisation are
classified as follows:
Computer software Concession- Other Total
rights
Cost
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 1 January 2022 40,923 15,501 45 56,469
Additions 1,386 - - 1,386
Transfers from right-of-use 60 - - 60
Disposals (1,105) - - (1,105)
Exchange differences 558 277 2 837
At 31 December 2022 41,822 15,778 47 57,647
Accumulated amortisation
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 1 January 2022 35,540 5,948 - 41,488
Charge for the year 1,965 424 - 2,389
Disposals (1,105) - - (1,105)
Exchange differences 381 102 - 483
At 31 December 2022 36,781 6,474 - 43,255
Carrying amount
31 December 2021 5,383 9,553 45 14,981
31 December 2022 5,041 9,304 47 14,392
17 Goodwill
Goodwill is classified as follows:
Tecon Tecon Total
Rio Grande Salvador
Carrying Value
At 1 January 2021 10,949 2,480 13,429
Exchange differences (157) - (157)
At 1 January 2022 10,792 2,480 13,272
Exchange differences 148 - 148
At 31 December 2022 10,940 2,480 13,420
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 18.
18 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
2022 2021 2022 2021
Discount rate 8.5% 9.2% 8.5% 9.5%
Growth rate 5.8% 4.3% 3.4% 3.4%
Inflation rate 3.3% 3.7% 3.3% 3.7%
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.
At 31 December 2022 and 2021, 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 32.7% (2021: 33.7%) for
Tecon Rio Grande and 6.6% (2021: 6.4%) for Tecon Salvador would not result in
an impairment loss.
Offshore support bases
For the year ended 31 December 2022 and 2021, 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 from 2028 onwards to reach 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 15.2% each year until 2028. For 2032 onward, the growth rate is
estimated at 1.0%, based on the expected growth in the Brazilian oil and gas
sector and in the region in which the CGU operates. Projections for 2023
include a 4.6% increase in average contract prices in relation to current
pricing and a 7.5% increase in public prices for Spot berthing compared to
2022. From 2024 onwards, prices are adjusted for inflation.
(ii) Costs and expenses: Projections for 2023 are in line with the budget and
include an increase in fixed costs of 26% over 2022. From 2024 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 comparable companies in the oil
field and the maritime services sector in which the CGU operates. For the year
ended 31 December 2022, the discount rate was estimated at 10.2% (2021:
10.1%).
At 31 December 2022, the estimated recoverable amount of the CGU of US$91.9
million (2021: US$72.1 million) exceeded its carrying value of US$47.6 million
(2021: US$42.9 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 3.6% (2021: 2.5%), a decrease in revenue over the projected
period of up to 11.1% (2021: 7.8%), or a decrease in revenue over the first 3
years of the projected period of up to 99.2% (2021: 80.0%) would not result in
an impairment loss.
19 Trade and other payables
Trade and other payables are classified as follows:
2022 2021
Trade payables (25,583) (29,242)
Accruals (8,550) (7,424)
Other payables (479) (441)
Provisions for employee benefits (21,365) (19,547)
Deferred income (2,360) (1,859)
Total trade and other payables (58,337) (58,513)
Trade creditors and accruals principally comprise amounts outstanding for
trade purposes and ongoing costs. 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.
20 Bank loans
The movement in bank loans is as follows:
2022 2021
Opening - 1 January (301,599) (342,661)
Additions (59,793) (19,438)
Principal amortisation 49,349 57,926
Interest amortisation 13,333 10,390
Accrued interest (17,437) (16,246)
Exchange difference (5,744) 8,430
Closing - 31 December (321,891) (301,599)
The terms and conditions of outstanding bank loans are as follows:
2022 2021
Lender Currency Annual interest rate % Year of maturity Carrying value Fair Carrying value Fair
value value
BNDES linked to US Dollar 2.30% - 3.71% 2035 (129,231) (129,231) (110,514) (110,514)
BNDES linked to US Dollar 2.07% - 4.08% 2028 (21,477) (21,477) (25,161) (25,161)
BNDES linked to US Dollar 5.00% 2022 - - (177) (177)
BNDES Real 15.91% 2034 (50,148) (50,148) (45,264) (45,264)
BNDES Real 14.65% 2029 (5,816) (5,816) (6,241) (6,241)
BNDES Real 9.79% 2027 (564) (564) (638) (638)
Banco do Brasil linked to US Dollar 2.00% - 4.00% 2035 (66,110) (66,110) (71,854) (71,854)
Bradesco Real 10.08% - 10.45% 2024 (19,571) (19,718) (27,248) (27,417)
Bradesco Real 10.75% 2023 (2,406) (2,411) (4,494) (4,489)
Banco Santander US Dollar 2.63% 2023 (20,288) (20,304) (10,008) (10,008)
Banco Santander Real 15.59% 2025 (6,280) (6,279) - -
Total bank loans (321,891) (322,058) (301,599) (301,763)
The breakdown of bank loans by maturity is as follows:
2022 2021
Within one year (59,881) (45,287)
In the second year (56,022) (47,961)
In the third to fifth years (inclusive) (91,037) (86,671)
After five years (114,951) (121,680)
Total bank loans (321,891) (301,599)
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
At 31 December 2022, the Group had US$37.1 million (2021: US$78.8 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 EBITDA/Net operating revenue, EBITDA/Debt service,
Equity/Total assets and Net debt/EBITDA. At 31 December 2022 and 2021, 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
30.
21 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:
2022 2021
Opening balance - 1 January (1,562) (1,641)
Current service cost (7) (3)
Interest expense (146) (133)
Contributions to the plan (14) (30)
Changes in economic and financial assumptions 228 522
Changes in biometric and demographic assumptions (126) (391)
Exchange differences (110) 114
Closing balance - 31 December (1,737) (1,562)
The calculation of the liability generated by the defined health benefits plan
involves actuarial assumptions that are based on market conditions. The
principal actuarial assumptions, and the impact of a change (keeping the other
assumptions constant) on the defined benefit obligation valuation are as
follows:
2022 2021
Annual interest rate 9.18% 8.67%
Estimated inflation rate in the long-term 3.00% 3.00%
Impact of 0.5% increase (214) (195)
Impact of 0.5% decrease 247 223
Medical cost trend rate 5.58% 5.58%
Impact of 0.5% increase 255 229
Impact of 0.5% decrease (222) (199)
22 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 2022 (6,190) (1,295) (1,422) (8,907)
Additional provisions (288) (1,536) (263) (2,087)
Unused amounts reversed 1,385 165 463 2,013
Utilisation of provisions 524 5 30 559
Exchange difference (409) (71) (95) (575)
At 31 December 2022 (4,978) (2,732) (1,287) (8,997)
The contingent liabilities at the end of each period are as follows:
Labour claims Tax cases Civil and environmental cases Total
At 31 December 2021 (4,968) (52,793) (14,881) (72,642)
At 31 December 2022 (6,002) (66,071) (11,158) (83,231)
Other non-current assets of US$3.5 million (2021: US$3.6 million) represent
legal deposits required by the Brazilian legal authorities as security to
contest legal actions.
23 Related party transactions
Transactions between the Group and its subsidiaries 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)
2022 2021 2022 2021
Joint ventures
Wilson, Sons Ultratug Participações S.A.(1) 2,778 524 11,176 10,784
Others
Hanseatic Asset Management LBG(2) (3,047) (4,876) (484) (2,133)
Hansa Capital Partners(3) (32) - - -
Gouvêa Vieira Advogados(4) (28) (21) - -
(1) Related party loans with Wilson, Sons Ultratug Participações S.A.
(interest - 3.6% per year with no maturity date).
(2) Mr. W Salomon is chairman and Mr. C Townsend is a director of
Hanseatic Asset Management LBG. Fees were paid to Hanseatic Asset Management
LBG for acting as Investment Manager of the Group's investment portfolio.
(3) Mr. W Salomon is a partner of Hansa Capital Partners. Office facilities
charges were paid to Hansa Capital Partners.
(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.
Mr. J F Gouvêa Vieira is a Director of Jofran Services. During the year ended
31 December 2022, directors' fees of US$0.04 million were paid to Mr. J F
Gouvêa Vieira through Jofran Services (2021: US$0.10 million).
Mr. C Townsend is a Director of Hansa Capital GmbH. During the year ended 31
December 2022, directors' fees of US$0.09 million were paid to Mr. C Townsend
through Hansa Capital GmbH (2021: US$0.09 million).
Remuneration of key management personnel
The remuneration of the executive directors and other key management of the
Group is as follows:
2022 2021
Short-term employee benefits (4,914) (6,131)
Post-employment benefits (70) (67)
Share based payment expense (306) (236)
Total remuneration of key management personnel (5,290) (6,434)
24 Share capital
2022 2021
Authorised
50,060,000 ordinary shares of 20p each 16,119 16,119
(2021: 50,060,000 ordinary shares of 20p each)
Issued and fully paid
35,363,040 ordinary shares of 20p each 11,390 11,390
(2021: 35,363,040 ordinary shares of 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$1.61 to £1.
25 Equity transactions in subsidiaries
On 13 May 2022, the Group's subsidiary Wilson Sons Holdings Brasil S.A. (WSSA)
executed a 1:6 stock split, previously approved by the shareholders of WSSA on
26 April 2022. Comparative data presented within this note has been updated to
reflect the stock split.
Share options in subsidiary
On 8 January 2014, the shareholders of the subsidiary WSSA approved a share
option plan which allowed for the grant of options to eligible participants,
including an increase in the authorised capital of WSSA through the creation
of up to 26,465,562 new shares.
The options provide participants with the right to acquire shares in WSSA at a
predetermined fixed price, following a vesting period of 3 to 5 years, and
expire 10 years from the grant date, or immediately on the resignation of the
employee, whichever is earlier. Options lapse if not exercised within 6 months
of the date that the participant ceases to be employed within the Group by
reason of injury, disability or retirement.
The movement in share options and related weighted average exercise prices in
Brazilian Real (R$) is as follows:
2022 2021
Number of WAEP (R$) Number of shares WAEP (R$)
shares
Opening balance - 1 January 9,153,840 6.34 13,280,940 5.33
Granted during the period - - 2,700,000 8.66
Exercised during the period (3,726,240) 5.21 (6,743,100) 5.28
Expired during the period - - (84,000) 6.33
Outstanding at 31 December 5,427,600 7.12 9,153,840 6.34
Exercisable at 31 December 2,654,160 5.56 6,284,520 5.34
The options outstanding at 31 December 2022 had an exercise price in the range
of R$5.21 to R$8.66 (2021: R$5.21 to R$8.66) and a weighted-average
contractual life of 5.4 years (2021: 4.7 years). The weighted average share
price at the date of exercise for the year ended 31 December 2022 was R$9.11
(2021: R$5.58).
During the year ended 31 December 2022, 3,726,240 share options of the
subsidiary WSSA were exercised (2021: 6,743,100), resulting in an increase in
non-controlling interest of 0.48% (2021: 0.89%).
Share buyback in subsidiary
On 13 May 2022, the Board of Directors of the subsidiary WSSA approved a share
buyback program, which allows for the repurchase of the subsidiary's own
common shares. The program is to be executed within 18 months of its approval
and is limited to 8,181,000 common shares to be acquired at market price.
The weighted average share price at the date of repurchase for the year ended
31 December 2022 was R$9.28 (2021: n/a).
During the year ended 31 December 2022, 1,427,200 shares of the subsidiary
WSSA were repurchased (2021: n/a), resulting in a decrease in non-controlling
interest of 0.19% (2021: n/a).
26 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 2022 Wilson Sons Holdings Brasil S.A. Total
Other
Net assets attributable to non-controlling interest 199,004 514 199,518
Profit allocated to non-controlling interest 27,858 2,295 30,153
Other comprehensive income allocated to non-controlling interest 3,213 (15) 3,198
Dividends to non-controlling interest 22,728 2,445 25,173
For the year ended 31 December 2021 Wilson Sons Holdings Brasil S.A. Total
Other
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
27 Dividends
The following dividends were declared and paid by the Company to its
shareholders:
2022 2021
70c per share (2021: 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:
2022 2021
70c per share (2021: 70c per share) 24,754 24,754
28 Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
2022 2021
(Loss)/profit for the year attributable to equity holders of the Company (18,675) 63,687
Weighted average number of ordinary shares 35,363,040 35,363,040
Earnings per share - basic and diluted (52.8)c 180.1c
The Company has no dilutive or potentially dilutive ordinary shares.
29 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 20 and the lease liabilities included in note 15,
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 2022, the Group continued to assess and
evaluate risks relating to climate change, including those related to existing
and emerging regulatory requirements. The Group's process for managing climate
related risks is grounded in its emissions monitoring work, which includes
greenhouse gas (GHG) emissions, water consumption and solid waste disposal
within its operating entity. 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. The approach to evaluating climate
related risks in the investment portfolio includes gaining insight on the
approach funds take to climate change across categories such as
decarbonisation policy, technology, legal and reputational.
30 Financial instruments
Accounting classification and fair value
The classification, carrying value and fair value of financial instruments is
as follows:
2022 2021
Classification Carrying Fair Carrying Fair
value value value value
Financial assets
Cash and cash equivalents Amortised cost 75,724 75,724 28,565 28,565
Financial assets at fair value through profit and loss At fair value through profit and loss 275,080 275,080 392,931 392,931
Trade and other receivables Amortised cost 67,136 67,136 59,350 59,350
Financial liabilities
Trade and other payables Other financial liabilities (58,337) (58,337) (58,513) (58,513)
Bank loans Other financial liabilities (321,891) (322,058) (301,599) (301,763)
The carrying value of cash and cash equivalents, trade and other receivables
and trade and other payable is a reasonable approximation of fair value.
The fair value of bank 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 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 2022
Financial assets at fair value through profit and loss 31,925 122,789 120,366 275,080
Bank loans - (321,891) - (321,891)
31 December 2021
Financial assets at fair value through profit and loss 67,177 196,069 129,685 392,931
Bank loans - (301,599) - (301,599)
During the year ended 31 December 2022, no financial instruments were
transferred between Level 1 and Level 2 (2021: none). The movement in Level 3
financial instruments for the year is as follows:
2022 2021
Balance at 1 January 129,685 99,137
Transfers from Level 2 to Level 3 - 77
Purchases of investments and drawdowns of financial commitments 12,830 15,379
Sales of investments and repayments of capital (9,231) (12,992)
Realised gains 4,526 6,873
Unrealised (losses)/gains (17,444) 21,211
Balance at 31 December 120,366 129,685
Cost 130,183 125,983
Cumulative unrealised (losses)/gains (9,816) 3,702
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,
based on the assumptions that the proceeds realised will be decreased by 5%,
10% or 20%, with all other variables held constant.
5% scenario 10% scenario 20% scenario
31 December 2022 (6,018) (12,037) (24,073)
31 December 2021 (6,484) (12,968) (25,936)
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, an interest 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 recalibrate, when appropriate, the matrix to adjust the historical credit
losses experience with forward-looking information. 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 2022
Expected credit loss rate 0.05% 0.05% 2.56% 7.48% 63.70%
Receivables for services 44,699 5,997 2,461 1,236 936 55,329
Allowance for expected credit losses (24) (3) (63) (92) (610) (792)
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)
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 to 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 sales 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 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
2022 2021 2022 2021
Real 157,063 173,297 (395,616) (367,528)
Sterling 12,241 11,603 (19) (22)
Swiss Franc 2,341 3,305 - -
Euro 15,083 31,549 - -
Yen 4,226 5,394 - -
Total foreign currency denominated monetary items 190,954 225,148 (395,635) (367,550)
The Group is primarily exposed to unfavourable movements in the Real on its
Brazilian monetary assets and 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 ($US) Probable scenario Possible scenario (25%) Remote scenario (50%)
31 December 2022
Projected exchange rate 5.25 6.56 7.88
Total assets BRL 157,063 (934) (32,160) (52,977)
Total liabilities BRL (395,616) 2,434 81,070 133,495
Net impact 1,500 48,910 80,518
31 December 2021
Projected exchange rate 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
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 directly 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 2022 13,647 27,293 54,586
31 December 2021 17,481 34,961 69,922
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 unfavourable 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 unfavourable movement in the interest
rates, considering three scenarios: a likely scenario (probable), a 25%
devaluation scenario (possible) and a 50% devaluation scenario (remote). 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 Group uses the Brazilian Central Bank's "Focus" report
to determine the probable scenario.
Risk Amount ($US) Probable scenario Possible scenario (25%) Remote scenario (50%)
31 December 2022
Borrowing Brazilian Interbank Interest Rate (28,257) (10) (719) (1,408)
Borrowing Brazilian Long-Term Interest Rate (564) - (6) (12)
Borrowing Brazilian National Consumer Prices (55,964) - (788) (1,566)
Borrowing N/A (fixed interest rates) (237,106) - - -
Investments Brazilian Interbank Interest Rate 22,014 177 1,156 2,136
Net impact 167 (357) (850)
31 December 2021
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 (fixed interest rates) (217,712) - - -
Investments Brazilian Interbank Interest Rate 18,626 2,207 4,111 4,089
Net impact 1,592 1,649 (180)
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.
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.
At 31 December 2022, 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$134.3 million in
North America (2021: US$174.8 million) and their sector exposure of US$66.4
million in information technology (2021: US$94.6 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 and to meet the expected operational
expenses, 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 expects to
meet its other obligations from operating cash flows and proceeds of maturing
financial assets.
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 2022
Variable interest rate instruments 12.29% (24,954) (48,690) (33,479) (107,123)
Fixed interest rate instruments 2.89% (47,537) (125,319) (94,714) (267,570)
Lease liability 8.06% (25,958) (79,783) (355,360) (461,101)
Total contractual cash outflows (98,449) (253,792) (483,553) (835,794)
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)
Total contractual cash outflows (77,419) (231,992) (447,284) (756,695)
Limitations of sensitivity analysis
The sensitivity information included in note 30 demonstrates the estimated
impact of a change in a major input assumption while other assumptions remain
unchanged. There are normally significant levels of correlation between the
assumptions and other factors.
ENQUIRIES
Company Contact
Leslie Rans, CPA
1 (441) 295
1309
Media
David Haggie
Haggie Partners LLP
020 7562 4444
Brokers
Peel Hunt
Edward Allsopp/Charles Batten
020 7418 8900
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