REG - Ocean Wilsons Hldgs - Preliminary results for the year ended 31 Dec 2023
22/03/2024 07:00
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RNS Number : 8154H Ocean Wilsons Holdings Ltd 22 March 2024
Ocean Wilsons Holdings Limited
Preliminary results for the year ended 31 December 2023
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 S.A. ("Wilson Sons") (together with the
Company and their subsidiaries, the "Group").
The Company owns 100% of OWIL and 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) 2023 2022 Change
Revenue $486.6 $440.1 +10.6%
Operating profit $125.7 $113.8 +10.5%
Profit after tax $103.1 $11.5 +796.5%
Investment portfolio net return $26.1 ($51.0) +$77.1
Investment portfolio assets $310.9 $293.8 +5.8%
Net assets $815.8 $754.1 +8.2%
Net debt $479.1 $440.2 +8.8%
Net cash inflow from operating activities $128.7 $98.9 +30.1%
Share Data at 31 December
2023 2022 Change
Share price GBP 12.00 GBP 9.30 29.0%
Earnings per share USD 189.6 cents USD (52.8) cents +USD 242.4 cents
Actual dividend per share USD 70 cents USD 70 cents -
Proposed dividend per share USD 85 cents
The Chair's Statement
I am delighted to report that 2023 was an excellent year for Ocean Wilsons.
Our operations at Wilson Sons delivered their best financial performance ever
and our investment portfolio returned strong results after a loss in 2022.
These accomplishments resulted in solid returns, allowing us to propose an
annual dividend of US 85 cents per share for our shareholders to be paid 14
June 2024, an increase from the 70 cents dividend paid in recent years.
In a geopolitical sense, turmoil in the world has increased since last year
with the ongoing war in Ukraine seeming to be now dug in for a longer
conflict, the recent hostilities in the Middle East which continue and the
tension between China and Taiwan escalating. Inflation remains a concern,
albeit at a reduced level from a year ago, but the projections for 2024 remain
mixed, with inflation and interest rates considered likely to remain unsettled
for the short term. The fears of a global recession, whilst somewhat
mitigated, have not gone away and we remain in uncertain times. With that
backdrop, we are particularly pleased with the performance of both of our
subsidiaries.
Wilson Sons yet again grew revenues with container volumes and maritime
operations now firmly back on a pre-pandemic growth trajectory, with each
division contributing to a record overall profit. It ended the year with an
all-time high stock price of BRL17.46 (US$3.61) reflecting this performance.
We announced in June 2023 that we were performing a strategic review of our
Brazilian operations which remains ongoing at the date of this report. I would
like to take this opportunity to commend the Board and the leadership team at
Wilson Sons for maintaining their focus on operations at a time when such a
review can be distracting to day-to-day business.
Our investment portfolio results returned to a profit after the loss in 2022.
Whilst a loss-making result is never something to celebrate, our results last
year were very creditable compared to the market which saw heavy falls in
equities and bonds. Similarly in 2023, the team have delivered a gross return
of 10.1% on the portfolio compared to the benchmark of 6.4%, albeit the
high-water mark in place for the performance fee arrangements was not reached
and no performance fee is payable relating to 2023. We thank our team at
Hanseatic Asset Management LBG ("Hanseatic") for their delivery this year.
Results Overview
The key metrics to highlight here are a growth in revenues of just over 10%,
an increase in net earnings to $103 million this year and earnings per share
for the year of US189.6 cents compared to a loss of US 52.8 cents a year ago.
Distributions from Wilson Sons increased significantly, enabling us to propose
the higher dividend referred to above. The share price of Wilson Sons
increased by 62% during the year and that of Ocean Wilsons by 29%. Some of
this is no doubt due to the market's view of the ongoing strategic review,
however the undisturbed prices have also increased, reflecting the quality of
the underlying performance.
The Financial Report provides further details in relation to the performance
of the Group.
Our Commitment to Responsible Investing and Corporate Sustainability
Over the past year, your Board has remained committed to driving and
implementing responsible investing policies and operating practices across the
Group and on our Environmental, Social, and Governance ("ESG") strategies.
These commitments are integral to our operations in Brazil and they represent
one of several factors that guide our investment decisions for our investment
portfolio.
Hanseatic is a signatory to the United Nations' Principles for Responsible
Investment ("UNPRI"). Whilst our approach to investing is ESG-informed rather
than ESG-led and does not exclude specific sectors or companies, we do
prioritise new investments that are aligned with our long-term ESG objectives
as well as our broader growth strategy. We are delighted that, subsequent to
the year end, Hanseatic was reviewed by the UNPRI for the first time and
exceeded the median in 7 out of 9 of the UNPRI categories.
In a significant development this year, Wilson Sons has been admitted to the
Corporate Sustainability Index ("ISE") of the Brazilian stock exchange. The
ISE, a pioneer in Latin America and the fourth sustainability index globally,
is recognised as a benchmark for companies exemplifying a strong commitment to
corporate sustainability. Wilson Sons' inclusion in the ISE is not only a
testament to our commitment to ESG principles but also positions us among a
select group of companies in Brazil leading the way in sustainable business
practices. This recognition underscores our proactive approach in contributing
to a more sustainable and responsible business landscape.
Further details of the Company's ESG practices and our Task Force for Climate
Related Financial Disclosures are presented in the annual report.
The Board
Your Board membership was unchanged in 2023 after the changes made over the
three previous years. We have been fortunate to retain the services of Mr
Andrey Berzins, particularly as we go through our strategic review of Wilson
Sons. His expertise and longevity bring great value to the Board deliberations
and balances the relatively new tenure of the other independent Directors. As
our strategic review completes in 2024, we will review the Board composition
in that context.
Outlook
As we look forward to 2024, whilst we are starting from a position of strength
with a solid platform of performance in 2023, the outlook remains uncertain
with continuing armed conflicts in several regions and key elections this year
in both the US and the UK. The geopolitical outlook feels as though it has
never been more uncertain. The global issues faced a year ago such as supply
chains and banking failures are not currently top of mind, but as 2023 has
amply demonstrated, the world is no longer as stable as it was and there will
continue to be surprises.
The Wilson Sons' management team have demonstrated their ability to navigate
challenges and to innovate and embrace technology which they will continue to
do. As such, we expect Wilson Sons to continue to capitalise on its strong
market position in Brazil and to take advantage of the more stable global
shipping industry compared to a year ago.
We believe our investment portfolio is well positioned for the uncertain times
ahead and proved the benefit of its long-term strategy and perspective in
2023. We continue to overweight investments in private assets as the best way
to achieve real returns through long term capital growth, whilst making
smaller moves into fixed income, value strategies and climate related
holdings.
As I said to you last year, there are choppy waters ahead, albeit the reasons
for that choppiness differ somewhat from those a year ago. The results of 2023
demonstrate that there are always opportunities to be found in times of
turmoil and the Board believes that both of our subsidiaries are well placed
to steer a good path through the turbulent waters.
Caroline Foulger
Chair
21 March 2024
Business Review
Investment Manager Report
Market Backdrop
This past year was marked by the multitude of global economic uncertainties in
terms of inflation, economic growth, interest rates and a particularly
unstable geopolitical backdrop, the most important factor in 2023 for markets
being inflation. In the US and Europe inflation had already started to fall
back by the start of 2023 but the big questions were how quickly it would
continue to fall and where it would eventually settle. However, the challenge
arises when inflation begins to decline, as was the case in 2023. While
central bankers remained hawkish, continuing to signal higher interest rates,
the actual need for such measures may diminish as inflation falls. This
creates a contradiction between the backward-looking nature of inflation and
the forward-looking impact of interest rate policy.
Against this backdrop, the investment portfolio had a gross return of 10.1%
and a net return of 8.9%, while the portfolio's absolute benchmark (US CPI
Urban Consumers NSA + 3%), which is inflation based, returned 6.4%.
Cumulative Portfolio Returns
2023 2022 3 years p.a. 5 years p.a.
OWIL 10.1% -13.8% 3.2% 6.9%
OWIL (Net)* 8.9% -14.7% 2.0% 5.7%
Performance Benchmark** 6.4% 9.5% 8.6% 7.1%
MSCI ACWI + FM NR US$ 22.2% -18.4% 5.7% 11.7%
Bloomberg Global Treasury TR US$ (Unhedged) 4.2% -17.5% -7.1% -1.5%
MSCI Emerging Markets NR US$ 9.8% -20.1% -5.1% 3.7%
*Net of management and performance fees. No performance fees were earned in
2023 and 2022 as the high-water mark was not exceeded.
** The OWIL Performance Benchmark is an absolute benchmark of US CPI Urban
Consumers NSA +3% p.a.
Portfolio Commentary
The investment portfolio's strategy is designed to offer investors a balanced
portfolio of assets that combines exposure to both public and private equities
with a more defensive portion of the portfolio that is invested in assets that
provide diversified returns. Given the market uncertainties, during the year
the investment portfolio was broadened by adding in more value-oriented funds
and by slightly increasing the weight of the defensive assets, neutrally
positioning the portfolio.
Ultimately, the year was unusual in that market performance was largely
propelled by the seven largest US mega-cap technology companies - Apple,
Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla - which collectively
surged by 107% over the year. However, as these same seven companies
experienced a collective decline of 45.3% in 2022, underscoring the risks
associated with adopting such a narrow portfolio construction strategy, we
emphasise the importance of a more diversified approach for long-term returns.
It is worth mentioning that a more balanced portfolio, represented by a 60:40
composite using an equally weighted equity benchmark, would have returned a
more modest 8.9% during the same period in 2023.
Public Equity and Directional Hedge Funds
The investment portfolio's public equity and directional hedge funds segment
include long-only funds and directional funds. In 2023, the US market and the
technology sector were the primary contributors to the portfolio's
performance. Public equity funds contributed 5.4% to the portfolio gross
return, while directional hedge funds contributed 2.6%, for a combined
contribution to the portfolio gross return of 8.0%.
The portfolio's largest holding, Findlay Park American Fund, was one of the
best performers for the year, gaining 27.0% and contributing 2.3% to the
portfolio gross return, largely attributable to its substantial investment in
Microsoft. Microsoft's robust performance was fuelled by growing investor
interest in artificial intelligence (AI). The fund's investment manager has
also been transitioning to holding more mid-cap names and having a slightly
more diversified portfolio which they hope will grow long term returns.
Another noteworthy performer was Pershing Square Holdings Ltd, with a return
of 33.8%, contributing 0.7% to the portfolio gross return. The fund
capitalised on opportunities, particularly by initiating a new position in
Alphabet during a period of perceived undervaluation in Q1 2023. As
anticipated, Alphabet's strong presence in several core markets including
cloud computing, digital advertising, and AI technology, notably the
development of proprietary chips designed specifically for AI applications,
supported a strong performance in the following quarters.
As part of the investment strategy to increase value exposure, positions in BA
Beutel Goodman US Value Fund and Schroder ISF Global Recovery Fund were taken
in the last quarter of 2022. Despite challenging market conditions in 2023 for
value investing, both funds delivered solid gains of 11.2% and 20.2%,
respectively, contributing a combined 0.6% to the portfolio gross return. Both
funds had large positions in financial services which performed strongly as
interest rates rose throughout the year. The Schroder fund had a position in
Micron Technology, a US-based semiconductor manufacturer, that significantly
benefited from the increased interest in AI.
To further diversify the portfolio, a new position was taken in Armistice
Capital Offshore Fund, a New York-based directional, event-driven hedge fund.
The fund's manager has extensive experience in the healthcare sector and is
looking for companies which the market has mispriced. This is often after
clinical trial results are announced and the market overreacts, both
positively and negatively. The largest positions will be in those companies
that the manager thinks are significantly undervalued, have a clear catalyst
that will drive a re-rating and have some sort of clinically proven advantage.
Private Markets
In 2023, the portfolio's private market investments showed a lower performance
compared to their public market counterparts, contributing 1.6% to the
portfolio gross return. However, it is important to highlight that this came
after a robust relative performance in 2022, as private assets yielded a
return of -1.6% against a significant downturn in public markets, which
experienced a decline of 18.4%.
Several new private market commitments were made in 2023 to ensure a steady
pipeline of assets within the portfolio, poised for value appreciation over
the next decade. The focus during the early part of the year was primarily on
venture capital, with commitments made to Khosla Ventures VIII Seed F, GGV
Discovery IV-Asia, GGV Discovery IV-US, and a new fund-of-funds manager,
TrueBridge Capital Partners VIII and Direct Fund III. The portfolio strategy
is based on the premise that the US, and Silicon Valley in particular, has a
unique ecosystem that supports innovative founders to launch the next
generation of companies. Khosla Ventures and GGV are amongst the top tier of
venture capital funds who are very difficult to access for the average
investor. The Company's Investment Manager's strategy of establishing
relationships with such top-tier funds over the years has been pivotal, given
the high degree of persistency of returns associated with the best managers in
venture capital that the average investor would not typically have access to.
For the more mature private funds, 2023 has been a difficult environment to
exit investments. This is due to a combination of volatile public markets,
making initial public offerings less attractive, and higher interest rates
pushing up borrowing costs for private market groups.
Defensive Positioning
The defensive silo of the portfolio comprises non-directional hedge funds and
bond funds, engineered to exhibit lower correlation to equity markets and
deliver less volatile performance, contributing 0.5% to the portfolio gross
return. In recent years, this segment has primarily consisted of
non-directional hedge funds, as bonds appeared less appealing amid the
prolonged period of extremely low yields over the past decade. However, the
bond landscape is shifting, and the portfolio's bond exposure is being
increased on the back of the higher yields now available.
One modest new position was taken in the defensive segment, Nephila Iron
Catastrophe Fund Ltd, which specialises in catastrophe risk insurance,
primarily focusing on US property risk. Catastrophe risk is a highly volatile
line of business within the insurance sector, presenting the potential for
significantly higher losses compared to other insurance lines and therefore
commanding strong premiums. Nephila distinguishes itself in the sector
through its high-quality data, essential for accurate risk pricing. The
catastrophe insurance industry became more compelling in 2023 as pricing
increased due to a capital shortfall in the sector. Since investing in May
2023, the fund has gained 20.7%, albeit due to the modest position we have
taken, contributing 0.1% to the portfolio gross return.
Looking Forward
The past year was all about inflation with few market participants predicting
the extent to which it would pull back which set-off a domino effect of missed
growth targets, interest rates remaining high and surprisingly strong equity
markets going into 2024.
Inflation is still likely to play an important role in the year ahead with the
focus now on whether inflation can be brought back to central bank targets,
freeing up central bankers to start cutting rates and avoiding a hard landing.
Previously, we were of the view that this last slice of inflation was likely
to prove more challenging to remove and creating scope for disappointment as
rates stayed higher for longer. More recently, however, we have become more
sympathetic to this rump inflation also dropping out as important inflationary
components such as shelter inflation and wages become less problematic. Wage
inflation is perhaps the biggest factor, especially with unemployment
remaining low, but even here there are signs of movement.
This backdrop should create a reasonable environment for global markets with
falling inflation, peak rates and a soft landing good for both equities and
bonds. Volatility is, however, likely to remain a feature. The inflationary
journey will in all probability be a mixed one, and certainly not linear. As
alluded to above, there is the real risk of policy missteps by central banks.
Similarly, we do not think that we are returning to the backdrop we saw in the
2010's. As we have discussed in the past, we view this period as being
something of an anomaly and think it unlikely that we will return to an
environment dominated by low volatility, deflation and zero rates any time
soon. Hence, whilst remaining broadly pro-risk as we enter 2024, we have
introduced more balance into portfolios both at the country level, including a
meaningful overweight to Japan, but also across asset classes with bonds
becoming a genuine alternative to equities. We have also blended styles
through owning value and growth instead of the rather unidirectional
portfolios we ran over the last cycle. We remain vigilant and think that
active management will be even more important for the period ahead.
Hanseatic Asset Management LBG
March 2024
Investment Portfolio Allocations
Asset Class Allocation % of NAV Sector Exposure % of NAV Geographic Exposure % of NAV
Private Markets 38.0% Information Technology 23.4% North America 50.5%
Equities 31.6% Health Care 13.6% Asia Pacific ex Japan 13.0%
Hedge Funds (directional) 17.9% Financials 12.7% Diversified 11.5%
Hedge Funds (non-directional) 8.0% Consumer Discretionary 12.3% Developed Europe ex UK 10.3%
Bonds 3.5% Diversified 11.5% Latin America 4.6%
Cash/Liquidity Funds 1.0% Industrials 10.3% Japan 3.5%
Total 100% Materials 3.6% UK 3.0%
Communications Services 3.6% Middle East & Africa 2.1%
Consumer Staples 3.3% Cash/Liquidity Funds 1.1%
Energy 2.5% Emerging Europe 0.4%
Real Estate 1.4% Total 100%
Cash/Liquidity Funds 1.1%
Utilities 0.7%
Total 100%
Investment Portfolio Component Contributions
Market Value (US$000) % of Component % of NAV
Public Equity and Directional Hedge Funds
Findlay Park American Fund 30,677 19.9% 9.9%
BlackRock Strategic Equity Hedge Fund 15,026 9.8% 4.8%
Select Equity Offshore, Ltd 12,386 8.0% 4.0%
BA Beutel Goodman US Value Fund 9,551 6.2% 3.1%
Pershing Square Holdings Ltd 7,809 5.1% 2.5%
Remaining holdings 78,381 51.0% 25.2%
Total Public Equity and Directional Hedge Funds 153,830 100.0% 49.5%
Market Value (US$000) % of Component % of NAV
Private Markets
NG Capital Partners II, LP 6,823 5.8% 2.2%
Navegar I, LP 6,723 5.7% 2.1%
Stepstone Global Partners VI, LP 5,269 4.4% 1.7%
KKR Americas XII, LP 5,004 4.2% 1.6%
Silver Lake Partners IV, LP 4,820 4.1% 1.6%
Remaining holdings 89,632 75.8% 28.8%
Total Private Markets 118,271 100.0% 38.0%
Market Value (US$000) % of Component % of NAV
Defensive Positioning
Hudson Bay International Fund Ltd 5,515 14.2% 1.8%
Global Event Partners Ltd 3,988 10.3% 1.3%
GAM Systematic Core Macro (Cayman) Fund 3,461 8.9% 1.1%
Schroder GAIA BlueTrend 3,427 8.8% 1.1%
Selwood AM - Liquid Credit Strategy 2,918 7.5% 0.9%
Remaining holdings 19,535 50.3% 6.3%
Total Defensive Positioning 38,844 100.0% 12.5%
Investment Portfolio at 31 December 2023
Market Value US$000 % of NAV Primary Focus
Holding
Findlay Park American Fund 30,677 9.9 US Equities - Long Only
BlackRock Strategic Equity Hedge Fund 15,026 4.8 Europe Equities - Hedge
Select Equity Offshore, Ltd 12,386 4.0 US Equities - Long Only
BA Beutel Goodman US Value Fund 9,551 3.1 US Equities - Long Only
Pershing Square Holdings Ltd 7,809 2.5 US Equities - Long Only
iShares Core MSCI Europe UCITS ETF 6,894 2.2 Europe Equities - Long Only
NG Capital Partners II, LP 6,823 2.2 Private Assets - Latin America
Navegar I, LP 6,723 2.1 Private Assets - Asia
Schroder ISF Global Recovery 6,569 2.1 Global Equities - Long Only
Schroder ISF Asian Total Return Fund 6,455 2.1 Asia ex-Japan Equities - Long Only
Top 10 Holdings 108,913 35.0
Polar Capital Global Insurance Fund 5,697 1.8 Financials Equities - Long Only
Hudson Bay International Fund Ltd 5,515 1.8 Market Neutral - Multi-Strategy
NTAsian Discovery Fund 5,480 1.8 Asia ex-Japan Equities - Long Only
iShares Core S&P 500 UCITS ETF 5,278 1.7 US Equities - Long Only
Stepstone Global Partners VI, LP 5,269 1.7 Private Assets - US Venture Capital
Armistice Capital Offshore Fund Ltd 5,087 1.6 US Equities - Hedge
KKR Americas XII, LP 5,004 1.6 Private Assets - North America
Indus Japan Long Only Fund 4,948 1.6 Japan Equities - Long Only
Silver Lake Partners IV, LP 4,820 1.6 Private Assets - Global Technology
Pangaea II, LP 4,471 1.4 Private Assets - GEM
Top 20 Holdings 160,482 51.6
TA Associates XIII-A, LP 4,328 1.4 Private Assets - Global Growth
Global Event Partners Ltd 3,988 1.3 Market Neutral - Event-Driven
Simplex Value Up Company 3,835 1.2 Japan Equities - Long Only
Dynamo Brasil VIII 3,674 1.2 Brazil Equities - Long Only
BPEA Private Equity Fund VII, L.P. 3,618 1.2 Private Assets - Asia
Silver Lake Partners VI, LP 3,493 1.1 Private Assets - Global Technology
GAM Systematic Core Macro (Cayman) Fund 3,461 1.1 Market Neutral - Multi-Strategy
Schroder GAIA BlueTrend 3,427 1.1 Market Neutral - Multi-Strategy
Reverence Capital Partners Opportunities Fund II 3,414 1.1 Private Assets - Financials
Worldwide Healthcare Trust PLC 3,374 1.1 Healthcare Equities - Long Only
Top 30 Holdings 197,094 63.4
Remaining Holdings 112,064 36.0
Cash and Cash Equivalents 1,787 0.6
TOTAL 310,945 100.0
Wilson Sons Management Report
The Wilson Sons 2023 Earnings Report was released on 21 March 2024 and is
posted on www.wilsonsons.com.br.
In the report, Mr Fernando Salek, CEO of Wilson Sons, said:
"Wilson Sons' 2023 net revenues increased 10.6% at US$486.6 million (2022:
US$440.1 million) mainly due to excellent results in towage and container
terminals and a strong performance in offshore energy-related services.
Towage revenues rose 11.8% due to higher volumes and an increase in average
revenue per manoeuvre, and special operations. In 2023, our shipyard delivered
two 90-tonne bollard pull tugboats, with two more elite newbuilds due to join
our fleet in 2024. In February 2024, our tugs welcomed the largest
containerships ever to dock in Brazilian ports, measuring 366 metres in length
and with a capacity of over 14,000 TEU.
Container terminal revenues rose 15.9%, with a 16.2% volume increase driven by
gains in all trade flows. The Rio Grande terminal experienced a significant
21.9% surge in volume, while the Salvador terminal saw a 7.9% growth in TEUs
handled. The quay reinforcement completed in August 2023 has greatly improved
our service offering in Salvador, a development highlighted by Maersk's recent
decision to reinstate its United States Gulf Coast - South America East
Coast ("UCLA") line to the terminal.
Demand for our offshore energy-related services has improved markedly, as
evidenced by a 37.6% increase in vessel turnarounds at our offshore support
bases and a 13.6% rise in operating days for our offshore support vessel joint
venture.
In 2023, Wilson Sons was again honoured with the Gold Seal in the Brazilian
GHG Protocol programme and the Great Place to Work certifications, and our
offshore support vessel joint venture won first place in the Petrobras
operational excellence programme. In January 2024, our stock joined the B3
Corporate Sustainability Index, a select portfolio of companies recognised for
their exceptional dedication to ESG principles. These distinguished awards
reinforce one of our core values and demonstrate our unwavering commitment to
sustainability.
In conclusion, our outstanding performance in 2023 highlights the significant
organic growth across our portfolio. We hold a very optimistic view of the
core strengths of our operations, spanning towage and container terminals, as
well as the invigorated demand for our offshore energy-related services. As we
navigate forward, charting a course for trade prosperity, we are confident
that our firm commitment to safety, asset utilisation, prudent cost
management, and disciplined capital allocation will yield even more remarkable
outcomes for our customers, shareholders, employees and the wider community,
steering us all towards a brighter future."
KPIs 2023 2022 Change
Towage
Number of harbour manoeuvres 57,107 54,865 4.1%
Offshore support bases
Number of vessel turnarounds 1,080 785 37.6%
Number of operating days 7,371 6,489 13.6%
Container terminal - aggregated Volumes
Exports - full containers 306.0 254.5 20.2%
Imports - full containers 131.2 129.3 1.5%
Cabotage - full containers 128.3 122.7 4.6%
Inland Navigation - full containers 26.3 21.4 22.9%
Transhipment - full containers 168.6 142.2 18.5%
Empty containers 303.8 245.8 23.6%
Total Volume 1,064.2 915.9 16.2%
Financial Report
Operating Profit
Operating profit of US$125.7 million (2022: US$113.8 million) was US$11.9
million higher than the prior year, principally due to a 10.6% increase in
revenue. Operating margin was stable year over year at 25.8% (2022: 25.9%).
Operating expenses increased US$34.6 million to US$360.9 million (2022:
US$326.3 million). Increased expenses across operating categories are
correlated with the increase in operating activities from revenue growth in
maritime services. Raw materials and consumables used were US$2.5 million
higher at US$35.5 million (2022: US$33.0 million). Employee charges and
benefits expenses were US$16.1 million higher at US$142.4 million (2022:
US$126.3 million) although remained relatively unchanged as a percentage of
revenue at 29.3% (2022: 28.7%). Other operating expenses, which include US$1.5
million in expenses related to the Company's strategic review, increased
US$8.9 million to US$113.2 million (2022: US$104.3 million). Depreciation
increased to US$69.8 million (2022: US$62.0 million).
Revenue from Maritime Services
Revenue for the year increased to US$486.6 million (2022: US$440.1 million)
which is attributed to higher towage manoeuvres, container terminal volumes
and increased offshore support bases contracts. Harbour manoeuvre revenues
increased 10.0% to US$221.3 million (2022: US$201.1 million), container
handling revenues increased 19.3% to US$87.3 million (2022: US$73.2 million)
and the offshore support bases revenue increased 64.2% to US$17.4 million
(2022: US$10.6 million) with the start of new contracts during the year.
Returns on the Investment Portfolio
Returns on the investment portfolio were a gain of US$29.1 million (2022: loss
of US$47.9 million) and comprised profit on the disposal of portfolio assets
of US$9.1 million (2022: US$24.3 million), net income from portfolio assets of
US$2.0 million (2022: US$11.8 million) and unrealised gains on portfolio
assets of US$18.0 million (2022: unrealised losses and write down of US$84.0
million).
Finance Costs
Finance costs for the year at US$35.4 million were US$0.9 million higher than
the prior year (2022: US$34.5 million) due to interest on lease liabilities
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
2023 the BRL appreciated 7.3% against the USD from R$5.22 at 1 January 2023 to
R$4.84 at the year end. In 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. The foreign exchange gains
on monetary items were US$0.2 million in 2023, compared to a gain of US$1.6
million in 2022.
Profit Before Tax
Profit before tax for the year increased US$92.6 million to US$130.7 million
compared to US$38.1 million in 2022, driven by the increase in operating
profit of US$11.9 million and an increase in the investment portfolio returns
of US$77.0 million year over year.
The tax charge for the year at US$27.6 million was US$0.9 million higher than
prior year (2022: US$26.7 million). The Company is taxed on its maritime
services operations. This represents an effective tax rate for the year of 25%
(2022: 29%) for maritime services. A more detailed breakdown of taxation
reconciling the effective tax rate is provided in note 9 to the consolidated
financial statements.
Profit for the year
The profit for the year attributable to the equity holders of the Company was
US$67.0 million (2022: loss of US$18.7 million) and the profit attributable to
the non-controlling interests was US$36.0 million (2022: US$30.2 million).
While the US$14.9 million increase in Wilson Sons' profit after tax is
attributed to both the equity holders of the Company and the non-controlling
interests based on ownership, the US$77.0 million increase in returns on the
investment portfolio (2022: decrease of US$95.7 million) is only attributed to
the equity holders of the Company.
Cash Flows
Net cash inflow from operating activities for the period at US$128.7 million
was US$29.8 million higher than prior year (2022: US$98.9 million). Capital
expenditure for the year at US$65.1 million was US$1.8 million higher than the
prior year (2022: US$63.3 million).
The Group drew down new bank loans of US$53.3 million (2022: US$59.8 million)
to finance capital expenditure, while making principal repayments of US$61.1
million (2022: US$49.3 million). Dividends of US$24.8 million were paid to
shareholders of Ocean Wilsons (2022: US$24.8 million).
Viability Statement
In accordance with the UK Corporate Governance Code, the Directors have
assessed the viability of the Group over a three-year period to 31 December
2026, taking into account the current position and the potential impact of the
principal risks and uncertainties. Based on this assessment, the Directors
confirm that they have a reasonable expectation that the Company will be able
to continue in operation and meet its liabilities as they fall due over the
period to 31 December 2026.
Whilst the Directors have no reason to believe the Company will not be viable
over a longer period, given the uncertainties involved in longer term
forecasting and the current global dislocation, the Directors have determined
that a three-year period to 31 December 2026 is an appropriate period over
which to provide its viability statement. The three-year period also aligns
with the rolling three-year investment portfolio performance benchmark.
In making the assessment, the Directors have considered a number of factors
that affect the Group, including the principal risks and mitigating factors.
The Directors also took into account that the Group has two distinctly
separate operating segments and that there is no recourse between them.
Wilson Sons Limited
The assessment considered that the Wilson Sons business model has proven to be
strong in the long term with a range of businesses that have consistently
demonstrated their ability to trade positively. Operational activities are
funded by cash generated from operations while borrowings are used to finance
capital expenditure. The Wilson Sons borrowings are generally long-term with
defined repayment schedules over different periods of up to 22 years. There is
no recourse from Wilson Sons to the rest of the Group in respect of these
borrowings. Wilson Sons is not reliant on one customer: no single customer
constituted 10% or more of its revenue or accounts receivable in 2023 or 2022.
Ocean Wilsons (Investments) Limited
In making the assessment for the investment portfolio, the Board has
considered matters such as the potential for significant stock market
volatility and significant reduction in the liquidity of the portfolio. The
investment portfolio and cash under management at 31 December 2023 was
US$310.9 million with outstanding capital commitments of US$53.8 million and
no debt. At 31 December 2023 the investment portfolio had US$1.8 million in
cash and cash equivalents and daily liquidity of $114.1 million. This
available liquidity covers 212% of the capital commitments on the remote
chance that there was a need to fund all of the commitments at one time.
The Directors' assessment is that if severe but plausible downside scenarios
were to crystallise, many of the individual risks disclosed would be likely to
be confined to one of either Wilson Sons or Ocean Wilsons (Investments)
Limited. The risk is to the Group's net asset valuation rather than to the
viability of the Group.
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31 December 2023
(Expressed in thousands of US Dollars)
Note 2023 2022
Sales of services 5 486,646 440,107
Raw materials and consumables used (35,467) (32,956)
Employee charges and benefits expenses 6 (142,391) (126,330)
Other operating expenses 7 (113,242) (104,265)
Depreciation of owned assets 16 (55,466) (48,473)
Depreciation of right-of-use assets 17 (14,305) (13,573)
Amortisation of intangible assets 18 (1,997) (2,389)
Gain on disposal of property, plant and equipment 1,713 100
Foreign exchange gains on monetary items 246 1,620
Operating profit 125,737 113,841
Share of results of joint ventures and associates 15 6,447 3,165
Returns on investment portfolio 5 29,120 (47,947)
Investment portfolio management fees (2,996) (3,047)
Other income 5 7,798 6,631
Finance costs 8 (35,425) (34,509)
Profit before tax 130,681 38,134
Tax expense 9 (27,609) (26,656)
Profit for the year 103,072 11,478
Other comprehensive income:
Items that will not be reclassified subsequently to profit or loss
Post-employment benefits remeasurement 23 32 93
Purchase price adjustment of associate 15 - 159
Items that will be or may be reclassified subsequently to profit or loss
Exchange differences arising on translation of foreign operations 8,831 7,137
Other comprehensive income for the year 8,863 7,389
Total comprehensive income for the year 111,935 18,867
Profit/(loss) for the year attributable to:
Equity holders of the Company 67,048 (18,675)
Non-controlling interests 28 36,024 30,153
103,072 11,478
Total comprehensive income/(loss) for the year attributable to:
Equity holders of the Company 72,059 (14,484)
Non-controlling interests 28 39,876 33,351
111,935 18,867
Earnings per share:
Basic and diluted 30 189.6c (52.8)c
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Statement of Financial Position
At 31 December 2023
(Expressed in thousands of US Dollars)
Note 2023 2022
Current assets
Cash and cash equivalents 10 69,367 77,873
Investment portfolio 11 309,158 272,931
Recoverable taxes 9 47,708 34,515
Trade receivables 12 65,694 54,537
Other current assets 13 13,281 9,908
Inventories 14 18,171 17,579
523,379 467,343
Non-current assets
Other receivables 12 13,041 12,632
Other non-current assets 13 5,792 6,197
Recoverable taxes 9 20,680 15,143
Investment in joint ventures and associates 15 96,084 81,863
Deferred tax assets 9 22,827 21,969
Property, plant and equipment 16 614,099 589,629
Right-of-use assets 17 198,508 178,699
Other intangible assets 18 13,858 14,392
Goodwill 19 13,597 13,420
998,486 933,944
Total assets 1,521,865 1,401,287
Current liabilities
Trade and other payables 21 (71,768) (58,337)
Bank loans 22 (70,856) (59,881)
Tax liabilities 9 (10,831) (10,290)
Lease liabilities 17 (28,783) (24,728)
(182,238) (153,236)
Net current assets 341,141 314,107
Non-current liabilities
Bank loans 22 (253,345) (262,010)
Deferred tax liabilities 9 (65,596) (49,733)
Lease liabilities 17 (195,503) (171,448)
Provisions for legal claims 24 (7,322) (8,997)
Post-employment benefits 23 (2,047) (1,737)
(523,813) (493,925)
Total liabilities (706,051) (647,161)
Capital and reserves
Share capital 26 11,390 11,390
Retained earnings 676,817 634,910
Translation reserve (86,703) (91,692)
Equity attributable to equity holders of the Company 601,504 554,608
Non-controlling interests 28 214,310 199,518
Total equity 815,814 754,126
The accompanying notes are an integral part of these consolidated financial
statements.
Signed on behalf of the Board
F. Beck A. Berzins
Director Director
Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
(Expressed in thousands of US Dollars)
Share capital Retained earnings Translation reserve Attributable to equity holders of the Company Non-controlling interests Total equity
Balance at 1 January 2022 11,390 678,006 (95,739) 593,657 190,015 783,672
Currency translation adjustment - - 4,047 4,047 3,090 7,137
Post-employment benefits (note 23) - 54 - 54 39 93
Purchase price adjustment of associate (note 15) - 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 28, 29) - (24,754) (24,754) (25,173) (49,927)
Equity transactions in subsidiaries (note 27) - 189 - 189 1,325 1,514
Balance at 31 December 2022 11,390 634,910 (91,692) 199,518 754,126
554,608
Balance at 1 January 2023 11,390 634,910 (91,692) 554,608 199,518 754,126
Currency translation adjustment - - 4,989 4,989 3,842 8,831
Post-employment benefits (note 23) - 22 - 22 10 32
Profit for the year - 67,048 - 67,048 36,024 103,072
Total comprehensive income for the year - 67,070 4,989 72,059 39,876 111,935
Dividends (notes 28, 29) - (24,754) - (24,754) (25,248) (50,002)
Equity transactions in subsidiaries (note 27) - (409) - (409) 164 (245)
Balance at 31 December 2023 11,390 676,817 (86,703) 601,504 214,310 815,814
The accompanying notes are an integral part of these consolidated financial
statements.
Translation reserve
The translation reserve arises from exchange differences on the translation of
operations with a functional currency other than US Dollars.
Amounts in the statement of changes in equity are stated net of tax where
applicable.
Consolidated Statement of Cash Flows
For the year ended 31 December 2023
(Expressed in thousands of US Dollars)
Notes 2023 2022
Operating activities
Profit for the year 103,072 11,478
Adjustment for:
Depreciation and amortisation 16,17,18 71,768 64,435
Gain on disposal of property, plant and equipment 16 (1,713) (100)
Provisions for legal claims 24 (2,326) 90
Share of results of joint ventures and associates 15 (6,447) (3,165)
Returns on investment portfolio 5 (29,120) 47,947
Other income 5 (7,798) (6,631)
Finance costs 8 35,425 34,509
Foreign exchange gains on monetary items (246) (1,620)
Share based payment expense in subsidiary 27 306 334
Post-employment benefits 23 185 (170)
Tax expense 9 27,609 26,656
Changes in:
Inventories 14 (592) (5,282)
Trade and other receivables 12,25 (11,561) (5,687)
Other current and non-current assets 9,24 (2,968) (13,753)
Trade and other payables 9,21 13,426 2,057
Interest paid 8,17 (32,385) (30,143)
Taxes paid 9 (27,900) (22,070)
Net cash inflow from operating activities 128,735 98,885
Investing activities
Income received from financial assets 5 9,820 14,558
Purchase of investment portfolio assets 11 (42,674) (68,715)
Proceeds on disposal of investment portfolio assets 11 33,545 85,641
Purchase of property, plant and equipment 16 (65,136) (63,268)
Proceeds on disposal of property, plant and equipment 16 1,958 726
Purchase of intangible assets 18 (1,132) (1,386)
Investment in joint ventures and associates 15 (7,520) (17,016)
Net cash used in investing activities (71,139) (49,460)
Financing activities
Dividends paid to equity holders of the Company 29 (24,754) (24,754)
Dividends paid to non-controlling interests in subsidiary 28 (25,248) (25,173)
Repayments of bank loans principal 22 (61,148) (49,349)
Payments of lease liabilities 17 (10,087) (8,591)
New bank loans drawn down 22 53,259 59,793
Shares repurchased in subsidiary 27 (2,338) (2,549)
Issue of new shares in subsidiary under employee share option plan 27 1,787 3,729
Net cash used in financing activities (68,529) (46,894)
Net (decrease)/increase in cash and cash equivalents (10,933) 2,531
Cash and cash equivalents at beginning of year 77,873 71,883
Effect of foreign exchange rate changes 2,427 3,459
Cash and cash equivalents at end of year 69,367 77,873
The accompanying notes are an integral part of these consolidated financial
statements.
Notes to the Consolidated Financial Statements
For the year ended 31 December 2023
(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 on 21 March
2024.
2 Material 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 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 Group. 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.
Sales of services
Revenue derived from sales of services is measured based on the consideration
specified in a contract with a customer for goods and services provided in the
normal course of business, net of trade discounts and sales related taxes, and
is recognised when the performance obligation towards the customer is
satisfied.
Typically, revenue from providing agency and logistics services is recognised
when the agreed services have been performed and revenue from providing towage
services, vessel turnarounds, container movement and associated services is
recognised on the date that the services have been performed. 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.
The timing of when performance obligations are satisfied by type of revenue
derived from sales of service is as follows:
Performance obligation Timing of revenue recognition
Towage and ship agency services At a point in time
Port Terminals At a point in time
Logistics At a point in time
Shipyard Over time
There are no significant judgements in the determination of when performance
obligations are satisfied.
Employee charges and 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.
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
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 Group 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 Group to make or
receive a single net payment.
Financial instruments
Recognition and initial measurement
Trade and other receivables are initially recognised when they are originated.
All other financial assets and financial liabilities are initially recognised
when the Group becomes a party to the contractual provisions of the
instruments. Trade and other receivables are initially measured at the
transaction price which reflects fair value. All other financial assets and
financial liabilities are initially measured at fair value plus transaction
costs that are directly attributable to their acquisition or issue.
Classification and subsequent measurement
Management determines the classification of its financial instruments at the
time of initial recognition. The classification depends on the purpose for
which the financial instruments were acquired or issued, their characteristics
and the Group's designation of such instruments.
Financial assets are classified as measured at amortised cost if they are not
designated as at fair value through profit and loss and if they are held
within a business model whose objective is to hold assets to collect
contractual cash flows and if the 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.
Financial assets are classified as measured at fair value through profit and
loss if they are not classified as measured at amortised cost, or if they are
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 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. 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 classification the Group applies to each of its significant categories of
financial instruments is as follows:
Financial instruments Classification
Cash and cash equivalents At fair value through profit and loss
Investment portfolio assets At fair value through profit and loss
Trade and other receivables Amortised cost
Trade and other payables Other financial liabilities
Bank loans Other financial liabilities
Cash and cash equivalents comprise cash on hand and short-term investments
that are highly liquid, readily convertible to known amounts of cash without
being subject to material risk of changes in value, and not kept within a
managed investment portfolio as part of a broader investment strategy.
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.
Impairment of financial assets
The Group considers a financial asset to be in default when internal or
external information indicates that the Group is unlikely to receive the
outstanding contractual amounts. A financial asset is written off when there
is no reasonable expectation of recovering the contractual cash flows and
impairment losses are recognised in profit and loss. 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, 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 are 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 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:
Category Useful life
Buildings 25 to 35 years
Leasehold Improvements 5 to 52 years(1)
Floating Craft 25 years
Vehicles 5 to 10 years
Plant and Equipment 10 to 20 years
(1) shorter of the rental period or the useful life of the underlying asset
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.
Lease arrangements
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 will 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.
The term of contracts and average discount rate of the different category of
lease arrangements are as follows:
Category Term of contracts Average discount rate
Operational facilities 5 to 50 years 9.05%
Floating craft 2 to 5 years 10.16%
Buildings 1 to 10 years 10.77%
Vehicles, plant and equipment 1 to 15 years 17.25%
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:
Category Useful life
Computer software 5 years
Concession rights 30 to 33 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 a 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, 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 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 material accounting policies
A number of new or amended standards are effective for annual periods
beginning on or after 1 January 2023, but none 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 1 January 2023 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 and Non-current Liabilities with Covenants, effective
for periods beginning on or after 1 January 2024
- Amendments to IFRS 16: Lease Liability in a Sale and
Leaseback, effective for periods beginning on or after 1 January 2024
- Amendments to IAS 7 and IFRS 7: Supplier Finance
Arrangements, effective for periods beginning on or after 1 January 2024
- Amendments to IAS 21: Lack of Exchangeability, effective for
periods beginning on or after 1 January 2025
3 Group composition
Ocean Wilsons has direct ownership in the following subsidiaries:
Place of incorporation Ownership interest
Subsidiaries and operation Segment 2023 2022
Investments
Ocean Wilsons (Investments) Limited Bermuda Investment 100% 100%
Holdings
Ocean Wilsons Overseas Limited Bermuda Corporate 100% 100%
Ocean Wilsons Overseas Limited has direct ownership in the following
subsidiary:
Place of incorporation Ownership interest
Subsidiaries and operation Segment 2023 2022
Holdings
OW Overseas (Investments) Limited United Kingdom Corporate 100% 100%
OW Overseas (Investments) Limited has direct ownership in the following
subsidiary:
Place of incorporation Ownership interest
Subsidiaries and operation Segment 2023 2022
Holdings
Wilson Sons S.A. Brazil Maritime services 56.52% 56.58%
The change in ownership interest in Wilson Sons S.A. from the year ended 31
December 2022 to 31 December 2023 is due to the exercise of share options and
the repurchase of shares in subsidiaries, for which the details are presented
in note 27. The information on non-controlling interests is presented in note
28.
Wilson Sons S.A. has direct ownership in the following subsidiaries:
Place of incorporation Ownership interest
Subsidiaries and operation Segment 2023 2022
Shipyard
Wilson Sons Estaleiros Ltda. Brazil Maritime services 100% 100%
Ship agency
Dock Market Soluções Ltda.(1) Brazil Maritime services 0% 90%
Wilson Sons Shipping Services Ltda. Brazil Maritime services 100% 100%
Logistics
Wilson Sons Terminais e Logística Ltda. Brazil Maritime services 100% 100%
Allink Transportes Internacionais Ltda. Brazil Maritime services 50% 50%
Container terminal
Tecon Rio Grande S.A. Brazil Maritime services 100% 100%
Tecon Salvador S.A. Brazil Maritime services 100% 100%
Offshore support bases and towage
Wilson Sons Serviços Marítimos Ltda. Brazil Maritime services 100% 100%
( )
(1) The subsidiary Dock Market Soluções Ltda. was dissolved in June 2023.
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 investments segment holds a portfolio of international investments and is
a Bermuda based company. The corporate segment includes the holding
subsidiaries and their related corporate costs.
The financial information by segment is as follows:
For the year ended 31 December 2023 Brazil - maritime services Bermuda - investments Corporate Consolidated
Result
Sale of services 486,646 - - 486,646
Net returns on investment portfolio - 26,124 - 26,124
Operating expenses (284,828) (282) (4,277) (289,387)
Depreciation and amortisation (71,768) - - (71,768)
Share of results of joint ventures and associates 6,447 - - 6,447
Other income 7,593 - 205 7,798
Finance costs (35,425) - - (35,425)
Foreign exchange gains/(losses) on monetary items 326 (19) (61) 246
Profit/(loss) before tax 108,991 25,823 (4,133) 130,681
Tax expense (27,609) - - (27,609)
Profit/(loss) after tax 81,382 25,823 (4,133) 103,072
Financial position
Current assets 192,693 310,944 19,742 523,379
Investment in joint ventures and associates 96,084 - - 96,084
Property, plant and equipment 614,099 - - 614,099
Right-of-use assets 198,508 - - 198,508
Other intangible assets 13,858 - - 13,858
Goodwill 13,597 - - 13,597
Other non-current assets 62,340 - - 62,340
Segment assets 1,191,179 310,944 19,742 1,521,865
Segment liabilities (704,976) (779) (296) (706,051)
Other information
Capital additions 66,268 - - 66,268
Right-of-use assets additions 3,534 - - 3,534
For the year ended 31 December 2022 Brazil - maritime services Bermuda - investments Corporate Consolidated
Result
Sale of services 440,107 - - 440,107
Net returns on investment portfolio - (50,994) - (50,994)
Operating expenses (259,671) (202) (3,578) (263,451)
Depreciation and amortisation (64,435) - - (64,435)
Share of results of joint ventures and associates 3,165 - - 3,165
Other income 6,631 - - 6,631
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 expense (26,656) - - (26,656)
Profit/(loss) after tax 66,469 (51,355) (3,636) 11,478
Financial position
Current assets 164,449 293,717 9,177 467,343
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 55,941 - - 55,941
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
5 Revenue
An analysis of the Group's revenue is as follows:
2023 2022
Sale of services 486,646 440,107
Net income from investment portfolio 2,022 11,809
Profit on disposal of investment portfolio assets 9,080 24,316
Unrealised gains/(losses) on investment portfolio assets 18,018 (79,995)
Write down of Russia-focused investments (note 11) - (4,077)
Returns on investment portfolio 29,120 (47,947)
Income generated by cash and cash equivalents 4,157 4,146
Tax credits and legal deposits monetary adjustments 2,699 1,963
Other income 942 522
Other income 7,798 6,631
Total Revenue 523,564 398,791
All revenue for the year ended 31 December 2023 and 2022 was derived from
continuing operations.
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:
2023 2022
Harbour manoeuvres 221,257 201,106
Special operations 23,403 17,633
Ship agency 10,980 9,910
Towage and ship agency services 255,640 228,649
Container handling 87,327 73,166
Warehousing 41,189 40,946
Ancillary services 24,339 20,932
Offshore support bases 17,378 10,605
Other services 19,633 13,743
Port terminals 189,866 159,392
Logistics 35,415 47,555
Shipyard 5,725 4,511
Total Revenue from contracts with customers 486,646 440,107
At 31 December 2023 and 2022, there were no warranties or refund obligations
associated with shipyard contracts, for which performance obligation are
satisfied over time.
The revenue from contracts with customers based on the timing of performance
obligations can be disaggregated as follows:
2023 2022
At a point of time 480,921 435,596
Over time 5,725 4,511
Total Revenue from contracts with customers 486,646 440,107
At 31 December 2023 and 2022, no single customer represented 10% or more of
the Group's revenue from contracts with customers or related trade
receivables.
Contract balance
Operational trade receivables are generally due and received within 30 days.
The carrying amount of operational trade receivables at the end of the
reporting period was US$65.7 million (2022: US$54.5 million). These amounts
include US$20.9 million (2022: US$12.0 million) of contract assets (unbilled
accounts receivables). There were no contract liabilities as of 31 December
2023 (2022: none).
6 Employee charges and benefits expenses
Employee charges and benefits expenses are classified as follows:
2023 2022
Wages, salaries, and benefits (116,172) (102,397)
Social security costs (25,434) (22,701)
Other pension costs (466) (904)
Share based payments (319) (328)
Total employee charges and benefits expenses (142,391) (126,330)
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$1.0 million (2022: US$0.9 million) recognised under employee
charges and benefits expenses 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 23.
7 Other operating expenses
Other operating expenses are classified as follows:
2023 2022
Utilities and communications (17,147) (13,616)
Insurance (3,940) (3,483)
Corporate, governance and compliance costs (4,193) (3,292)
Short-term or low-value asset leases (37,134) (33,432)
Service costs (26,184) (24,925)
Freight (10,470) (17,320)
Port expenses (8,202) (7,168)
Other operating expenses (8,224) (2,819)
Discounts obtained 2,252 1,790
Total other operating expenses (113,242) (104,265)
8 Finance costs
Finance costs are classified as follows:
2023 2022
Interest on lease liabilities (17,098) (15,798)
Interest on bank loans (16,875) (17,160)
Exchange loss on foreign currency borrowings - (248)
Other interest costs (1,452) (1,303)
Total finance costs (35,425) (34,509)
9 Taxation
At the present time, no income, profit, capital or capital gains taxes are
applicable to the Group's operations in Bermuda and accordingly, no expenses
or provisions for such taxes have 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. During the
year ended 31 December 2023, the Bermuda Corporate Income Tax Act of 2023 was
enacted by the Bermuda government, which may supersede such exemptions. As the
Company is currently not in scope for this new legislation, the exemptions
provided by the Bermuda government undertaking still apply.
Tax expense
The reconciliation of the amounts recognised in profit or loss is as follows:
2023 2022
Current tax expense
Brazilian corporation tax (8,771) (17,018)
Brazilian social contribution (3,571) (8,340)
Total current tax expense (12,342) (25,358)
Deferred tax - origination and reversal of timing differences
Charge for the year in respect of deferred tax liabilities (31,542) (14,123)
Credit for the year in respect of deferred tax assets 16,275 12,825
Total deferred tax expense (15,267) (1,298)
Total tax expense (27,609) (26,656)
Brazilian corporation tax is calculated at 25% (2022: 25%) of the taxable
profit for the year. Brazilian social contribution tax is calculated at 9%
(2022: 9%) of the taxable profit for the year.
The reconciliation of the effective tax rate is as follows:
2023 2022
Profit before tax 130,681 38,134
Less: (Profit)/loss before tax of Bermuda - investment and corporate segments (21,690) 54,991
Profit before tax of Brazil - maritime services segment 108,991 93,125
Aggregate Brazilian tax rate 34% 34%
Tax at the aggregate Brazilian tax rate (37,057) (31,663)
Tax adjustments for:
Net operating losses in the period (165) (788)
Non-deductible expenses 861 (863)
Foreign exchange variance on loans (5,035) (3,008)
Tax effect of share of results of joint ventures and associates 2,192 1,076
Tax effect of foreign exchange gains or losses on monetary items 111 625
Retranslation of non-monetary items 13,149 11,592
Leasing 31 64
Other adjustments (1,696) (3,691)
Tax expense (27,609) (26,656)
Effective tax rate for the Brazil - maritime services segment 25% 29%
Effective tax rate for the Group 21% 70%
The tax expense related to amounts recognised in other comprehensive income is
as follows:
Before tax Tax Net of tax
expense
For the year ended 31 December 2023
Items that will not be reclassified subsequently to profit or loss:
Post-employment benefits 43 (11) 32
Items that will be or may be reclassified subsequently to profit or loss:
Exchange differences arising on translation of foreign operations 11,834 (3,003) 8,831
Total amounts recognised in other comprehensive income 11,877 (3,014) 8,863
For the year ended 31 December 2022
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 9,563 (2,426) 7,137
Total amounts recognised in other comprehensive income 9,900 (2,511) 7,389
Deferred tax
The major categories of deferred tax assets and liabilities recognised by the
Group and their movements during the current and prior reporting period are as
follows:
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 2022 (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)
(Charge)/credit to income (1,896) (29,646) 1,578 70 1,478 13,149 (15,267)
Other adjustments - - 22 - 5 - 27
Exchange differences (2,798) 1,780 561 - 806 (114) 235
At 31 December 2023 (39,933) 1,105 8,581 14,426 12,841 (39,789) (42,769)
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:
2023 2022
Deferred tax assets 22,827 21,969
Deferred tax liabilities (65,596) (49,733)
Net deferred tax balance (42,769) (27,764)
At 31 December 2023, the Group had unused tax losses of US$33.7 million (2022:
US$31.2 million) available for offset against future profits in the entity in
which they arose.
No deferred tax asset has been recognised in respect of US$4.4 million (2022:
US$4.0 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.
Recoverable and payable taxes
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:
2023 2022
Recoverable taxes - current 47,708 34,515
Recoverable taxes - non-current 20,680 15,143
Total recoverable taxes 68,388 49,658
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:
2023 2022
Taxes payable - current (10,831) (10,290)
Total taxes payable (10,831) (10,290)
10 Cash and cash equivalents
The composition of cash and cash equivalents is as follows:
2023 2022
Cash and bank deposits 19,799 53,710
Time deposits 19,920 -
Exchange funds - 2,149
Fixed income investments 29,648 22,014
Total cash and cash equivalents 69,367 77,873
Following a change in classification, exchange funds with a value of US$2.1
million at 31 December 2022 that were previously included in the investment
portfolio assets have been reclassified to cash and cash equivalents.
Fixed income investments include an investment fund and an exchange traded
fund both privately managed within the Brazil - maritime service segment.
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.
11 Investment portfolio
The movement in the investment portfolio is as follows:
2023 2022
Opening balance - 1 January 272,931 349,613
Additions, at cost 42,674 68,715
Disposals, at market value (33,545) (85,641)
Profit on disposal of investment portfolio assets 9,080 24,316
Unrealised gain/(loss) on investment portfolio assets 18,018 (79,995)
Write down of Russia-focused investments(1) - (4,077)
Closing balance - 31 December 309,158 272,931
( )
(1) During the year ended 31 December 2022, the Group wrote down the full
value of a Russia-focused equity fund held within the investment portfolio,
following the issue of an investor notice announcing the suspension of its net
asset valuation, subscriptions and redemptions.
The investment portfolio is held in the Bermuda - investments segment and
presents the Group with opportunity for return through generated income and
capital appreciation. It includes investments in listed equity securities,
open ended funds, limited partnerships and other private equity funds.
The Investment Manager of the investment portfolio 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, and is capped
at a maximum of 2% of the investment portfolio net asset value.
The investment 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 a rolling three-year period. 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. The performance benchmark was 6.4% for the year
ended 31 December 2023 (2022: 9.5%).
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:
2023 2022
Within one year 4,557 5,951
In the second to fifth year inclusive 4,621 2,346
After five years 44,585 42,129
Total commitment for capital subscriptions 53,763 50,426
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.
Information about the Group's financial instruments valuation and exposure to
financial risks is included in note 32.
12 Trade and other receivables
Trade and other receivables are classified as follows:
2023 2022
Current
Trade receivable for the sale of services 46,381 43,293
Unbilled trade receivables 20,936 12,036
Total gross current trade receivables 67,317 55,329
Allowance for expected credit loss (1,623) (792)
Trade receivables 65,694 54,537
Non-current
Receivables from related parties (note 25) 11,494 11,176
Other receivables 1,547 1,456
Total other receivables 13,041 12,632
Total trade and other receivables 78,735 67,169
The aging of the trade receivables is as follows:
2023 2022
Current 48,593 44,699
From 0 - 30 days 9,313 5,997
From 31 - 90 days 6,561 2,461
From 91 - 180 days 954 1,236
More than 180 days 1,896 936
Total gross trade receivables 67,317 55,329
The movement in allowance for expected credit loss is as follows:
2023 2022
Opening balance - 1 January (792) (338)
Increase in allowance recognised in profit or loss (733) (419)
Exchange differences (98) (35)
Closing balance - 31 December (1,623) (792)
Information about the Group's exposure to credit risks related to trade
receivables is included in note 32.
13 Other assets
Other current assets are classified as follows:
2023 2022
Prepayments 4,560 4,887
Insurance claim receivable 5,385 981
Employee advances 2,636 1,449
Accrued income and investment portfolio receivables 361 2,188
Other current assets 339 403
Total other current assets 13,281 9,908
Other non-current assets are classified as follows:
2023 2022
Escrow deposits 3,101 3,506
Investments in maritime start-ups 2,691 2,691
Total other non-current assets 5,792 6,197
14 Inventories
Inventories are classified as follows:
2023 2022
Operating materials 15,648 13,727
Raw materials for third party vessel construction 2,523 3,852
Total inventories 18,171 17,579
Inventories are presented net of provision for obsolescence, amounting to
US$0.5 million (2022: US$0.3 million).
15 Joint ventures and associates
The Group holds the following interests in joint ventures and associates at
the end of the reporting period:
Place of incorporation Proportion of ownership
and operation 2023 2022
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% 32.32%
The financial information of the joint ventures and associates and its
reconciliation to the share of result of joint ventures and associates is as
follows:
2023 2022
Sales of services 221,420 182,882
Operating expenses (143,425) (116,046)
Depreciation and amortisation (55,092) (53,212)
Foreign exchange gains on monetary items 6,040 5,057
Results from operating activities 28,943 18,681
Finance income 954 2,656
Finance costs (11,790) (14,756)
Profit before tax 18,107 6,581
Tax expense (5,114) (253)
Total profit for the year generated by joint ventures and associates 12,993 6,328
Joint ventures reconciliation:
Total profit for the year 12,712 6,334
Participation 50% 50%
Share of profit for the year from joint ventures 6,356 3,167
Associates reconciliation:
Total profit/(loss) for the year 281 (6)
Participation 32.32% 32.32%
Share of profit/(loss) for the year for associates 91 (2)
Share of result of joint ventures and associates 6,447 3,165
The financial information of the joint ventures and associates and its
reconciliation to the investment in joint ventures and associates is as
follows:
2023 2022
Cash and cash equivalents 19,410 5,747
Other current assets 65,531 51,260
Non-current assets 528,271 551,921
Total assets 613,212 608,928
Trade and other payables (32,019) (46,506)
Other current liabilities (58,779) (56,833)
Non-current liabilities (316,248) (324,012)
Total liabilities (407,046) (427,351)
Total net assets of joint ventures and associates 206,166 181,577
Joint ventures reconciliation:
Total net assets 204,655 180,079
Participation 50% 50%
Group's share of net assets of joint ventures 102,328 90,040
Associates reconciliation:
Total net assets 1,511 1,498
Participation 32.32% 32.32%
Group's share of net assets of associates 488 484
Adjustments for:
Goodwill and surplus generated on associate purchase 1,862 1,711
Cumulative elimination of profit on construction contracts (8,594) (10,372)
Total adjustments (6,732) (8,661)
Investment in joint ventures and associates 96,084 81,863
The movement in investment in joint ventures and associates is as follows:
2023 2022
Opening balance - 1 January 81,863 61,553
Share of result of joint ventures and associates 6,447 3,165
Elimination of profit on construction contracts (81) (158)
Share of other comprehensive income of joint ventures and associates 335 287
Capital increase 7,520 17,016
Closing balance - 31 December 96,084 81,863
During the year ended 31 December 2023, the Group increased its invested
capital in Wilson Sons Ultratug Participações S.A. by US$7.5 million (2022:
US$14.9 million) and in Porto Campinas Logística e Intermodal Ltda by US$0.04
million (2022: US$0.1 million).
During the year ended 31 December 2022, the Group acquired a 32.32%
participation in Argonáutica Engenharia e Pesquisas S.A. for US$2.0 million.
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 S.A. is guaranteeing US$155.3 million
(2022: US$163.7 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 del Estado de Chile and its long-term contracts with
Petrobras. The joint venture also has to maintain a cash reserve account until
full repayment of the loan agreement amounting to US$1.8 million (2022: US$1.7
million) presented as long-term investment.
Covenants and capital commitments
On 31 December 2023, Wilson Sons Ultratug Participações S.A. was in
compliance with all of its covenants' ratios related to its loans with the
Brazilian Development Bank and with Banco do Brasil. There were no capital
commitments for the joint ventures and associates as of 31 December 2023.
On 31 December 2022, 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. Management
planned to and did increase to that amount within a year, and as such did not
negotiate a waiver letter with Banco do Brasil. There were no capital
commitments for the joint ventures and associates as of 31 December 2022.
16 Property, plant and equipment
Property, plant and equipment assets are classified as follows:
Land, buildings and leasehold improvements Floating Craft Vehicles, plant Assets under Total
and equipment construction
Cost
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 1 January 2023 294,535 576,891 211,985 14,391 1,097,802
Additions 12,096 12,547 16,662 23,831 65,136
Transfers (27) 22,248 (1,284) (20,937) -
Transfers from intangible assets 25 - 8 - 33
Disposals (511) (75) (1,985) - (2,571)
Exchange differences 14,238 - 13,664 - 27,902
At 31 December 2023 320,356 611,611 239,050 17,285 1,188,302
Accumulated depreciation
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 1 January 2023 93,168 288,328 126,677 - 508,173
Charge for the year 9,330 33,647 12,489 - 55,466
Elimination on construction contracts - 2 - - 2
Disposals (406) (70) (1,850) - (2,326)
Exchange differences 5,008 - 7,880 - 12,888
At 31 December 2023 107,100 321,907 145,196 - 574,203
Carrying Amount
At 31 December 2022 201,367 288,563 85,308 14,391 589,629
At 31 December 2023 213,256 289,704 93,854 17,285 614,099
Land and buildings with a net book value of US$0.2 million (2022: US$0.2
million) and plant and equipment with a carrying amount of US$0.05 million
(2022: US$0.1 million) have been given in guarantee for various legal
processes.
The amount of borrowing costs capitalised in 2023 was US$0.3 million (2022:
US$0.1 million) at an average interest rate of 5.5% (2022: 5.6%).
The Group has contractual commitments to suppliers for the acquisition and
construction of property, plant and equipment amounting to US$7.9 million
(2022: US$19.9 million).
17 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 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 1 January 2023 195,332 19,602 3,081 10,132 228,147
Additions 83 2,136 61 1,254 3,534
Contractual amendments 9,146 10,197 70 (93) 19,320
Terminated contracts - - (368) (763) (1,131)
Exchange differences 14,839 706 229 417 16,191
At 31 December 2023 219,400 32,641 3,073 10,947 266,061
Accumulated depreciation
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 1 January 2023 27,646 12,035 1,511 8,256 49,448
Charge for the year 8,973 5,351 498 915 15,737
Terminated contracts - - (326) (651) (977)
Exchange differences 2,300 492 198 355 3,345
At 31 December 2023 38,919 17,878 1,881 8,875 67,553
Carrying Amount
At 31 December 2022 167,686 7,567 1,570 1,876 178,699
At 31 December 2023 180,481 14,763 1,192 2,072 198,508
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.
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
The movement in lease liabilities is as follows:
2023 2022
Opening - 1 January (196,176) (167,843)
Additions (3,534) (5,222)
Termination of contracts 335 2,728
Contracts remeasurement (19,320) (23,874)
Principal amortisation 28,384 25,401
Interest (18,297) (16,810)
Exchange differences (15,678) (10,556)
Closing - 31 December (224,286) (196,176)
Lease liabilities are classified as follows:
2023 2022
Operational facilities (204,424) (184,591)
Floating craft (15,625) (7,605)
Buildings (1,984) (2,121)
Vehicles, plant and equipment (2,253) (1,859)
Total (224,286) (196,176)
Total current (28,783) (24,728)
Total non-current (195,503) (171,448)
The contractual undiscounted cash flows related to leases liabilities are as
follows:
2023 2022
Within one year (30,196) (25,958)
In the second year (27,100) (23,101)
In the third to fifth years inclusive (68,652) (56,682)
After five years (382,424) (355,360)
Total cash flows (508,372) (461,101)
Adjustment to present value 284,086 264,925
Total lease liabilities (224,286) (196,176)
The lease liabilities balance considering the projected future inflation rate
in the discounted payment flows is as follows:
2023 2022
Actual outflow (508,372) (461,101)
Embedded interest 284,086 264,925
Lease liabilities (224,286) (196,176)
Inflated flow (544,640) (488,950)
Inflated embedded interest 309,488 284,773
Inflated lease liabilities (235,152) (204,177)
Lease arrangements
The amounts recognised in profit and loss related to lease arrangements are as
follows:
2023 2022
Depreciation of right-of-use assets (15,737) (14,897)
PIS and COFINS taxes 1,432 1,324
Net depreciation of right-of-use assets (14,305) (13,573)
Interest on lease liabilities (18,297) (16,810)
PIS and COFINS taxes 1,199 1,012
Interest on lease liabilities (17,098) (15,798)
Variable lease payments not included in the measurement of lease (2,732) (2,376)
liabilities(1)
Expenses relating to short-term leases (32,447) (29,778)
Expenses relating to low-value assets (1,960) (1,281)
Total (68,542) (62,806)
(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.
The amounts recognised in the cash flow statement related to lease
arrangements are as follows:
2023 2022
Payment of lease liability (10,087) (8,591)
Interest paid - lease liability (18,297) (16,810)
Short-term leases paid (32,447) (29,778)
Variable lease payments (2,732) (2,376)
Low-value leases paid (1,960) (1,281)
Total cash outflow (65,523) (58,836)
18 Other intangible assets
Other intangible assets are classified as follows:
Computer software Concession Total
rights
Cost
At 1 January 2022 40,923 15,546 56,469
Additions 1,386 - 1,386
Transfers from right-of-use 60 - 60
Disposals (1,105) - (1,105)
Exchange differences 558 279 837
At 1 January 2023 41,822 15,825 57,647
Additions 1,132 - 1,132
Transfers to property, plant and equipment (33) - (33)
Disposals (41) - (41)
Exchange differences 735 462 1,197
At 31 December 2023 43,615 16,287 59,902
Accumulated amortisation
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 1 January 2023 36,781 6,474 43,255
Charge for the year 1,570 427 1,997
Disposals (41) - (41)
Exchange differences 574 259 833
At 31 December 2023 38,884 7,160 46,044
Carrying amount
31 December 2022 5,041 9,351 14,392
31 December 2023 4,731 9,127 13,858
19 Goodwill
Goodwill is classified as follows:
Tecon Tecon Total
Rio Grande Salvador
Carrying Value
At 1 January 2022 10,792 2,480 13,272
Exchange differences 148 - 148
At 1 January 2023 10,940 2,480 13,420
Exchange differences 177 - 177
At 31 December 2023 11,117 2,480 13,597
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 20.
20 Impairment Test of Cash Generating Units
Tecon Rio Grande and Tecon Salvador
The Tecon Rio Grande and Tecon Salvador CGUs, which are both part of the
Brazil - maritime services segment, contain goodwill and as such are tested
annually for impairment.
The cash flows of these CGUs are derived from sales and operating margins,
based on past experience considering the effect of known or likely changes in
market or operating conditions, and from projected volumes, based on the
expected performance of the Brazilian economy until operating capacity is
reached. The discount rate is based on the weighted average cost of capital
("WACC") of the CGU, while the growth rate is based on the inflation rate only
after reaching operational capacity. The key assumptions used in determining
the recoverable amount of each CGU are as follows:
Tecon Rio Grande Tecon Salvador
2023 2022 2023 2022
Discount rate 11.9% 8.5% 11.2% 8.5%
Growth rate 7.9% 5.8% 7.2% 3.4%
Projection period 25 years 26 years 28 years 29 years
At 31 December 2023 and 2022, the recoverable amount of these CGUs
significantly exceeded their carrying value and as such no impairment loss was
recognised.
Offshore support bases
For the year ended 31 December 2023 and 2022, 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 key
assumptions used in determining the recoverable amount of the CGU are as
follows:
(i) Revenue: Projections are based on the estimated pace of growth in offshore
energy market, specifically offshore exploration and production of oil and
gas. 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 and gas exploration and production activities in
Brazil in the next 10 years. Supported by this increase in demand, growth rate
is projected at an average of 10.3% per year until 2030. For 2031 onward, the
growth rate is projected at 2.1%, based on the expected growth in the
Brazilian offshore energy sector and in the region in which the CGU operates.
Projections for 2024 include a 14.9% increase in average contract prices in
relation to current pricing and a 98.1% increase in public prices for spot
berthing compared to 2023. From 2025 onwards, prices are adjusted for
inflation.
(ii) Costs and expenses: Projections for 2024 are in line with the budget and
include an increase in fixed costs of 7.6% over 2023. From 2025 onwards, costs
are forecasted to increase in line with the increase in volumes.
(iii) Investments: No expansion investments were included within the
projections.
(iv) Projection period: The projections are prepared using a 10-year period
plus a perpetuity growth, as the offshore energy industry life cycle is at
least 10 years, due to the life cycle of investment in hydrocarbon energy
reserve from exploration to sustainable production.
(v) The discount rate is based on the WACC of the CGU, adjusted for individual
risks of the CGU that have not been incorporated in the cash flow estimates,
and using reputable sources to capture macroeconomic assumptions and
information from comparator companies in the offshore energy and in the
maritime services sector. For the year ended 31 December 2023, the discount
rate was estimated at 10.0% (2022: 10.2%).
At 31 December 2023, the recoverable amount of the CGU of US$122.9 million
(2022: US$91.9 million) exceeded its carrying value of US$48.8 million (2022:
US$47.6 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 15.7% (2022: 3.6%) or a decrease in revenue over the projected
period of up to 1.2% (2022: 11.1%) would not result in an impairment loss.
21 Trade and other payables
Trade and other payables are classified as follows:
2023 2022
Trade payables and accruals (44,179) (34,133)
Other payables (226) (479)
Provisions for employee benefits (25,279) (21,365)
Deferred income (2,084) (2,360)
Total trade and other payables (71,768) (58,337)
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.
22 Bank loans
The movement in bank loans is as follows:
2023 2022
Opening - 1 January (321,891) (301,599)
Additions (53,259) (59,793)
Principal amortisation 61,148 49,349
Interest amortisation 14,088 13,333
Accrued interest (17,140) (17,437)
Exchange difference (7,147) (5,744)
Closing - 31 December (324,201) (321,891)
The terms and conditions, carrying value and fair value of outstanding bank
loans are as follows:
2023 2022
Lender Currency Annual interest Year of maturity Carrying value Fair Carrying value Fair
rate % value value
BNDES linked to US Dollar 2.30% - 4.43% 2041 (135,411) (135,411) (129,231) (129,231)
BNDES linked to US Dollar 2.07% - 4.08% 2028 (17,796) (17,796) (21,477) (21,477)
BNDES linked to US Dollar 2.38% - 4.43% 2045 (2,787) (2,787) - -
BNDES Real 9.85% 2034 (53,537) (53,537) (50,148) (50,148)
BNDES Real 8.59% 2029 (5,356) (5,356) (5,816) (5,816)
BNDES Real 10.24% 2027 (481) (481) (564) (564)
Banco do Brasil linked to US Dollar 2.00% - 4.00% 2035 (60,193) (60,193) (66,110) (66,110)
Bradesco Real 12.58% - 12.95% 2024 (10,519) (10,515) (19,571) (19,718)
Bradesco Real 15.25% 2023 - - (2,406) (2,411)
Banco Santander linked to US Dollar 4.82% 2024 (10,279) (10,270) (20,288) (20,304)
Banco Santander Real 13.59% 2025 (6,744) (6,582) (6,280) (6,279)
CCB Real 12.75% - 13.25% 2025 (21,098) (20,976) - -
Total bank loans (324,201) (323,904) (321,891) (322,058)
The breakdown of bank loans by maturity is as follows:
2023 2022
Within one year (70,856) (59,881)
In the second year (54,121) (56,022)
In the third to fifth years (inclusive) (91,027) (91,037)
After five years (108,197) (114,951)
Total bank loans (324,201) (321,891)
Guarantees
The Group has pledged assets with a carrying amount of US$262.4 million (2022:
US$230.2 million) to secure loans granted to the Group.
The loan agreements with BNDES and Banco do Brasil rely on corporate
guarantees from the Group's subsidiary party to the agreement. For some
agreements, the corporate guarantees are in addition to the assignment of
receivables, a pledge of the respective financed tugboat or a lien over the
logistics and port operations equipment financed.
The loan agreements with Bradesco rely on corporate guarantees from the
Group's subsidiary party to the agreement.
Undrawn credit facilities
At 31 December 2023, the Group had US$50.1 million (2022: US$37.1 million) of
undrawn borrowing facilities available in relation to the Salvador Terminal
expansion and the dry-docking, maintenance and repair of tugs.
Covenants
Some of the loan agreements include obligations related to financial
indicators, including EBITDA/Net operating revenue, EBITDA/Debt service,
Equity/Total assets and Net debt/EBITDA. At 31 December 2023 and 2022, 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
32.
23 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:
2023 2022
Opening balance - 1 January (1,737) (1,562)
Current service cost (8) (7)
Interest expense (168) (146)
Contributions to the plan (9) (14)
Changes in economic and financial assumptions (214) 228
Experience adjustments 231 (126)
Exchange differences (142) (110)
Closing balance - 31 December (2,047) (1,737)
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:
2023 2022
Annual interest rate 8.66% 9.18%
Estimated inflation rate in the long-term 3.00% 3.00%
Impact of 0.5% increase 235 214
Impact of 0.5% decrease (270) (247)
Medical cost trend rate 5.58% 5.58%
Impact of 0.5% increase (286) (255)
Impact of 0.5% decrease 234 222
24 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 - 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 cases Total
At 1 January 2023 (4,978) (2,732) (1,287) (8,997)
Additional provisions (766) (166) (280) (1,212)
Unused amounts reversed 1,156 1,546 35 2,737
Utilisation of provisions 767 34 - 801
Exchange difference (384) (158) (109) (651)
At 31 December 2023 (4,205) (1,476) (1,641) (7,322)
The contingent liabilities at the end of each period are as follows:
Labour claims Tax cases Civil cases Total
At 31 December 2022 (6,002) (66,071) (11,158) (83,231)
At 31 December 2023 (7,312) (75,982) (13,536) (96,830)
Other non-current assets of US$3.1 million (2022: US$3.5 million) represent
escrow deposits required by the Brazilian legal authorities as security to
contest legal actions.
25 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)
2023 2022 2023 2022
Joint ventures and associates
Wilson, Sons Ultratug Participações S.A.(1) 964 2,778 11,437 11,176
Argonáutica Engenharia e Pesquisas S.A.(2) (14) - (4) -
Others
Hanseatic Asset Management LBG(3) (2,996) (3,047) (759) (484)
Hansa Capital Partners LLP(4) (30) (32) - -
(1) Related party loans with Wilson, Sons Ultratug Participações S.A.
(interest - 3.6% per year with no maturity date) and services provided by the
Group.
(2) Contract for the implementation of a port traffic monitoring and port
traffic intelligence system.
(3) Mr William Salomon (Board Director) is chair and Mr Christopher Townsend
(Board Director) is a director of Hanseatic Asset Management LBG, to which
fees were paid for acting as Investment Manager of the Group's investment
portfolio.
(4) Mr Salomon is a senior partner of Hansa Capital Partners LLP. Office
facilities charges were paid to Hansa Capital Partners LLP.
Mr Townsend is the investment director of Hansa Capital GmbH. During the year
ended 31 December 2023, directors' fees of US$0.1 million were paid to Mr. C
Townsend through Hansa Capital GmbH (2022: US$0.1 million).
Remuneration of key management personnel
The remuneration of the executive directors and other key management of the
Group is as follows:
2023 2022
Short-term employee benefits (5,007) (4,914)
Post-employment benefits (70) (70)
Share based payment expense (306) (306)
Total remuneration of key management personnel (5,383) (5,290)
26 Share capital
The number of Company's shares and corresponding share capital amounts are as
follows:
2023 2022
Authorised
50,060,000 ordinary shares of 20p each 16,119 16,119
(2022: 50,060,000 ordinary shares of 20p each)
Issued and fully paid
35,363,040 ordinary shares of 20p each 11,390 11,390
(2022: 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$1.61 to £1.
27 Equity transactions in subsidiaries
Share options in subsidiary
On 8 January 2014, the shareholders of the Group's subsidiary Wilson Sons S.A.
approved a share option plan which allowed for the grant of options to
eligible participants, including an increase in the authorised capital of
Wilson Sons S.A. through the creation of up to 26,465,562 new shares.
The options provide participants with the right to acquire shares in Wilson
Sons S.A. at a predetermined fixed price, following a vesting period of 3 to 5
years, and expire 10 years from the grant date, or immediately on the
resignation of the employee, whichever is earlier. Options lapse if not
exercised by the employee within 6 months following retirement.
The movement in share options and related weighted average exercise prices
("WAEP") in Brazilian Real (R$) is as follows:
2023 2022
Number of WAEP (R$) Number of shares WAEP (R$)
shares
Opening balance - 1 January 5,427,600 7.12 9,153,840 6.34
Granted during the period - - - -
Exercised during the period (1,680,600) 5.38 (3,726,240) 5.21
Expired during the period - - - -
Outstanding at 31 December 3,747,000 7.90 5,427,600 7.12
Exercisable at 31 December 1,047,000 5.93 2,654,160 5.56
The options outstanding at 31 December 2023 had an exercise price in the range
of R$5.67 to R$8.66 (2022: R$5.21 to R$8.66) and a weighted-average
contractual life of 6.1 years (2022: 5.4 years). The weighted average share
price at the date of exercise for the year ended 31 December 2023 was R$10.06
(2022: R$9.11).
During the year ended 31 December 2023, 1,680,600 share options of the Group's
subsidiary Wilson Sons S.A. were exercised (2022: 3,726,240), resulting in an
increase in non-controlling interest of 0.22% (2022: 0.48%).
Share buyback in subsidiary
On 13 May 2022, the board of directors of the Group's subsidiary Wilson Sons
S.A. approved a share buyback program which allows for the repurchase of the
subsidiary's own common shares at market price for an 18-month period, which
is concluded as of 31 December 2023.
The weighted average share price at the date of repurchase for the year ended
31 December 2023 was R$10.47 (2022: R$9.28).
During the year ended 31 December 2023, 1,150,500 shares of the Group's
subsidiary Wilson Sons S.A. were repurchased (2022: 1,427,200), resulting in a
decrease in non-controlling interest of 0.15% (2022: 0.19%).
28 Non-controlling interests
The information on the Group's composition is presented in note 3. The
non-controlling interests immaterial to the Group originate from the Brazil -
maritime services segment and are presented together as Other.
The information related to non-controlling interests is as follows:
Wilson Sons S.A. Other Total
For the year ended 31 December 2023
Net assets attributable to non-controlling interest 214,218 92 214,310
Profit allocated to non-controlling interest 34,899 1,125 36,024
Other comprehensive income allocated to non-controlling interest 3,855 (3) 3,852
Dividends to non-controlling interest 23,704 1,544 25,248
For the year ended 31 December 2022
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
29 Dividends
The dividends declared and paid by the Company to its shareholders were as
follows:
2023 2022
70c per share (2022: 70c per share) 24,754 24,754
After the reporting date, the dividends proposed by the Board but not
recognised as liabilities were as follows:
2023 2022
85c per share (2022: 70c per share) 30,059 24,754
30 Earnings per share
The calculation of the basic and diluted earnings per share is as follows:
2023 2022
Profit/(loss) for the year attributable to equity holders of the Company 67,048 (18,675)
Weighted average number of ordinary shares 35,363,040 35,363,040
Earnings per share - basic and diluted 189.6c (52.8)c
The Company has no dilutive or potentially dilutive ordinary shares.
31 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 22 and the lease liabilities included in note 17,
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.
32 Financial instruments
The carrying and fair value of financial instruments are as follows:
2023 2022
Carrying Fair Carrying Fair
value value value value
Financial assets
Cash and cash equivalents 69,367 69,367 77,873 77,873
Investment portfolio 309,158 309,158 272,931 272,931
Trade and other receivables 78,735 78,735 67,136 67,136
Financial liabilities
Trade and other payables (71,768) (71,768) (58,337) (58,337)
Bank loans (324,201) (323,904) (321,891) (322,058)
The carrying value of cash and cash equivalents, trade and other receivables,
and trade and other payable is a reasonable approximation of their 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 the investment portfolio assets 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 open ended funds, 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.
The Group 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 financial instruments recognised in the statement of financial position,
by level of hierarchy, excluding financial instruments for which the carrying
amount is a reasonable approximation of fair value, are as follows:
Level 1 Level 2 Level 3 Total
31 December 2023
Investment portfolio 34,058 156,829 118,271 309,158
Bank loans - (324,201) - (324,201)
31 December 2022
Investment portfolio 29,776 122,789 120,366 272,931
Bank loans - (321,891) - (321,891)
During the year ended 31 December 2023, no financial instruments were
transferred between Level 1 and Level 2 (2022: none).
During the year ended 31 December 2023, one open ended fund with a carrying
value of US$5.3 million was transferred from Level 3 to Level 2 because
alternative pricing sources supported by observable inputs became available
(2022: no transfers between Level 2 and Level 3).
The movement in Level 3 financial instruments for the year is as follows:
2023 2022
Balance at 1 January 120,366 129,685
Transfers from Level 3 to Level 2 (5,266) -
Purchases of investments and drawdowns of financial commitments 8,153 12,830
Sales of investments and repayments of capital (8,314) (9,231)
Realised gains 3,943 4,526
Unrealised losses (611) (17,444)
Balance at 31 December 118,271 120,366
Cost 130,927 130,183
Cumulative unrealised losses (12,656) (9,817)
Investment in limited partnerships and 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 sensitivity of the Level 3 investments to changes in fair value due to
illiquidity and its impact on proceeds received, while all other variables are
held constant, is as follows:
2023 2022
Decrease of 5% (5,914) (6,018)
Decrease of 10% (11,827) (12,037)
Decrease of 20% (23,654) (24,073)
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 cash and cash
equivalents, investments, and trade and other receivables. The amounts
presented as trade and other receivables in the consolidated statement of
financial position are shown net of allowances for credit loss.
Temporary cash surpluses are invested in time deposits, exchange funds, and
fixed income investments, according to regulations approved by management.
Credit risk is limited because the counterparties to those investments are
regulated institutions or leading financial institutions with high credit
ratings.
The level of credit risk associated with the investment portfolio is dependent
upon the terms and conditions and the management of each of the investment
vehicles. The Investment Manager evaluates the credit risk on trading
investments prior to and during the investment period, and the Board reviews
all investments at its regular meetings from reports prepared by the
Investment Manager.
The Group has no significant concentration of credit risk for trade
receivables as they consist of a large number of customers with no single
customer representing more than 10% of the total trade receivables.
Allowance for expected credit losses for trade receivables
The Group recognises an allowance for expected credit losses based on an
expected credit losses ("ECLs") model and a provision matrix, based on days
past due for groupings of various customer segments that have similar loss
patterns. The provision matrix is initially based on the Group's historical
observed default rates, and will be adjusted, when appropriate, to adjust the
historical credit losses experience with forward-looking information.
The allowance for expected credit losses is as follows:
Current 1-30 days 31-90 days 91-180 days More than 180 days Total
31 December 2023
Expected credit loss rate 0.04% 0.04% 2.56% 19.63% 64.73%
Receivables for services 48,593 9,313 6,561 954 1,896 67,317
Allowance for expected credit losses (17) (3) (168) (187) (1,248) (1,623)
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)
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 - investments 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 Group's policy is not to manage its exposure to foreign exchange movements
in the investment portfolio 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
investment portfolio, 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
2023 2022 2023 2022
Real 205,428 157,063 (461,336) (395,616)
Sterling 13,575 12,241 (20) (19)
Swiss Franc 1,983 2,341 - -
Euro 15,747 15,083 - -
Yen 4,948 4,226 - -
Total foreign currency denominated monetary items 241,681 190,954 (461,356) (395,635)
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 2023
Projected exchange rate 4.95 6.19 7.43
Total assets BRL 205,428 (4,511) (44,694) (71,483)
Total liabilities BRL (461,336) 10,131 100,372 160,532
Net impact 5,620 55,678 89,049
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
The US Dollar/Brazilian Real exchange rate was 4.84 at 31 December 2023 (2022:
5.22).
Market price risk
By the nature of its activities, the Bermuda - investments 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 of the investment portfolio to changes in market prices and
the impact on its fair value and returns at the end of the financial year,
while all other variables are held constant, is as follows:
2023 2022
Decrease of 5% (15,458) (13,647)
Decrease of 10% (30,916) (27,293)
Decrease of 20% (61,832) (54,586)
Interest rate risk
Entities within the Group borrow funds at both fixed and floating interest
rates. 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% increase in interest rates over the likely scenario (possible) and a 50%
increase in interest rates over the likely 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 2023
Borrowing Brazilian Interbank Interest Rate (38,361) 452 (265) (967)
Borrowing Brazilian Long-Term Interest Rate (481) - (5) (9)
Borrowing Brazilian National Consumer Prices (58,893) - (663) (1,319)
Borrowing N/A (fixed interest rates) (226,466) - - -
Investments Brazilian Interbank Interest Rate 29,649 (765) (183) 398
Net impact (313) (1,116) (1,897)
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)
Concentration risk
By the nature of its activities, the Bermuda - investments 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 2023, the Group has identified concentration risk for the
investment portfolio due to its geographic exposure of US$157.7 million or
51.0% in North America (2022: US$134.3 million or 49.2%) and its sector
exposure of US$73.7 million or 23.8% in information technology (2022: US$66.4
million or 24.3%). 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
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 2023
Variable interest rate instruments 11.06% (26,595) (50,002) (33,384) (109,981)
Fixed interest rate instruments 2.95% (48,629) (124,663) (94,574) (267,866)
Lease liability 13.07% (30,196) (95,752) (382,424) (508,372)
Total contractual cash outflows (105,420) (270,417) (510,382) (886,219)
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)
Limitations of sensitivity analysis
The sensitivity information included in note 32 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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