TIDMOCN
RNS Number : 1803S
Ocean Wilsons Holdings Ltd
15 March 2021
The information communicated within this announcement is deemed
to constitute inside information. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
Ocean Wilsons Holdings Limited
Preliminary results for the year ended 31 December 2020
Ocean Wilsons Holdings Limited ("Ocean Wilsons" or the
"Company") today announces its preliminary results for the year
ended 31 December 2020.
Highlights
-- Profit after tax for the year of US$48.0 million which is US$13.0 million lower than the prior
year (2019: US$61.0 million) principally due to the impact of foreign exchange losses and
increased income tax.
-- The investment portfolio (including cash under management) increased US$25.0 million to US$310.3
million (2019: US$285.3 million).
-- Operating profit decreased 2.9% to US$66.9 million (2019: US$68.9 million) mainly due to foreign
exchange losses of $7.6 million (2019: $0.1 million) driven by a weaker Brazilian Real ("BRL")
against the US$ and there being no impairment charge in the current year (2019: US $13.0 million).
Overall expenses were lower year over year. Raw materials costs were 23.8% lower reflecting
lower shipyard activity and other operating expenses declined reflecting the reduction of
operational activity as a result of Covid-19.
-- Group revenue for the year was 13.1% lower at US$352.8 million (2019: US$406.1 million) principally
due to the impact of the weaker BRL and lower revenues at the offshore bases due to the impact
of Covid-19 on the oil industry.
-- Net cash inflow from operating activities for the year was US$105.7 million (2019: US$106.3
million).
-- Proposed dividend unchanged at US 70 cents per share (2019: US 70 cents per share).
-- Earnings per share for the year down US 23 cents per share to US 109.5 cents (2019: US 132.5
cents per share).
About Ocean Wilsons Holdings Limited
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
listed on both the London Stock Exchange and the Bermuda Stock
Exchange. It has two principal subsidiaries: Wilson Sons Limited
and Ocean Wilsons (Investments) Limited (together with the Company
and their subsidiaries, the "Group").
Wilson Sons Limited ("Wilson Sons") is a Bermuda company listed
on the São Paulo Stock Exchange (BOVESPA) and Luxembourg Stock
Exchange. At 31 December 2020 Ocean Wilsons holds a 57.77% interest
in Wilson Sons which is fully consolidated in the Group accounts
with a 42.23% non-controlling interest. Wilson Sons is one of the
largest providers of maritime services in Brazil with over three
thousand employees and activities including towage, container
terminals, offshore oil and gas support services, small vessel
construction, logistics and ship agency.
Ocean Wilsons (Investments) Limited is a wholly owned Bermuda
investment company and holds a portfolio of international
investments .
Objective
Ocean Wilsons focuses on long-term performance and value
creation. This approach applies to both the investment portfolio
and our investment in Wilson Sons. The long-term strategy, managed
by the Board, enables Wilson Sons' investments to grow and develop
sustainable results with less pressure to produce short-term
performance at the expense of longer-term value creation. This same
view allows our Investment Manager to make investment decisions to
achieve long-term capital growth.
Chairman's Statement
Introduction
While this year has presented the most challenging economic and
operational environment for businesses globally due to the Covid-19
pandemic, it is important to remember that our business has been
through other challenges in the past that have had a significant
impact on our results in Wilson Sons and our investment portfolio,
including the world financial crisis in 2008 and 2009 and the
Brazilian market crash of 2015 and 2016. For most economies and
industries, the longer-term financial and social impacts from this
pandemic are likely to be far more significant than those two
events combined. The economic uncertainty in the earlier days of
the pandemic were demonstrated by the global financial market crash
and significant terminal activity decline in the operations of
Wilson Sons. As the year progressed, markets recovered beyond most
forecasters expectations and Wilson Sons' results proved to be more
resilient than originally feared.
Wilson Sons' container terminal operations have been negatively
impacted by the Covid-19 pandemic resulting in lower import
volumes. However, towage volumes improved in the fourth quarter,
and Wilson Sons' fourth quarter after tax profit increased and
their liquidity remains strong as the Brazilian economy works
toward recovery and the new normal.
The investment portfolio performed well while markets recovered
from the initial Covid-19 market crash in March. Driven by rising
equity markets, the investment portfolio rose 10.9% on a
time-weighted net return basis over the year to US$310.3 million
(2019: US$285.3 million), outperforming its benchmark of 4.4%.
Growth in the Brazilian economy has been a struggle since the
2015-2016 crash and is now exacerbated with the uncertainty of the
economic impact of the Covid-19 pandemic. Real GDP growth in 2019
was 1.1%, compared to negative 4.0% real GDP in 2020. Additionally,
the BRL fell 28.9% against the US$. Notwithstanding these economic
headwinds, Wilson Sons reported better than expected trade linked
volumes in its container terminal business and increased days in
operation of its Offshore Vessels.
These key operational indicators at our container terminals and
towage businesses declined only slightly by year end against the
2019 comparative, as trade volumes increased in the second half of
the year both domestically and internationally.
Operating volumes 2020 2019 % Change
--------------------------------------------------------- ------- ------- --------
Container Terminals (container movements in TEU '000s) * 1,017.6 1,027.3 (1.0%)
Towage (number of harbour manoeuvres performed) 52,873 53,088 (0.4%)
Offshore Vessels (days in operation) 5,356 5,128 4.4%
--------------------------------------------------------- ------- ------- --------
*TEUs stands for "twenty-foot equivalent units".
Results
Profit for the year at US$48.0 million was US$13.0 million lower
than the prior year (2019: US$61.0 million) primarily due to the
significant impact of the BRL weakening against the US$ by 28.9%
during the year and the impact of Covid-19 on offshore services to
the oil and gas industry. While the investment portfolio increased
10.9%, returns on the investment portfolio were US$1.3 million
lower than the prior year at US$33.4M (2019: US$34.7 million).
Operating profit at US$66.9 million (2019: US$68.9 million)
declined by US$2.0 million, due to increased foreign exchange
losses because of the weaker BRL. Operating expenses generally
declined with austerity measures taken to improve liquidity as part
of managing through the Covid-19 pandemic and there being no
impairment charge in the current year.
Earnings per share for the year were US 109.5 cents compared
with US 132.5 cents in 2019.
Covid-19
The priority during the Covid-19 crisis is to protect our
employees and balance the needs of our stakeholders. In response to
the pandemic, the Group has implemented working practices and
protocols to ensure the health and safety of our teams and all
stakeholders across our businesses and is focused on business
continuity and fiscal prudence. During the year multiple austerity
measures were put in place and Wilson Sons was granted "stand-still
agreements" with lenders that allowed for the postponement of loan
repayment instalments to reinforce liquidity during this market
uncertainty. A detailed overview of our Covid-19 response and
business risk assessments can be found in Note 37 to the Financial
Statements.
Wilson Sons
In October 2020, Wilson Sons concluded a US$110 million
expansion project at the Salvador container terminal which extended
the terminal's principal quay to 800 metres. This allows for the
simultaneous berthing of two super-post-Panamax ships which will
increase our capacity to handle more volumes of containers and
improve operational efficiency. The completion of this extension
solidifies the Group's position as operating the only dedicated
terminal in Bahia, the largest economy in the Northeast of Brazil,
which connects Brazil to all major worldwide markets. Additionally,
this extra capacity supports initiatives to reinforce economic
growth and job creation in this region.
During the year, the Brazilian Government designated Wilson Sons
as an essential service provider, removing any operation
restrictions during Covid-19 restrictions. This allowed us to
remain operational, albeit with lower overall demand and volumes
due to the pandemic.
Container volumes at the Salvador terminal grew 2.4% in 2020 to
342,400 TEUs despite the impact of Covid-19 with increased
transhipment volumes. Import, export and cabotage volumes were
lower year over year at both the Salvador and Rio Grande terminals
as global and domestic demand for goods were negatively impacted by
the pandemic. Rio Grande volumes declined 2.6% to 675,200 TEUs
(2019: 693,100). In the fourth quarter of 2020, the Rio Grande
terminal was certified with a deeper draft for the navigation
channel that will allow for the berthing of the larger super-post
Panamax vessels which is expected to increase volumes for
transhipment containers. Transhipment volumes at the Rio Grande
Terminal increased 5.7% in 2020.
Wilson Sons continues to be the leader in Brazilian towage
services. With a fleet of 80 tugboats, we have the largest and most
modern fleet in the country. The number of harbour towage
manoeuvres performed in the year was consistent at 52,873 (2019:
53,088). Towage revenue results continued to improve despite volume
declines as pricing has improved. Six new 80-tonne tugboats have
been approved for construction to be completed during 2022-2025
which will support the capacity of our expanded terminals and the
increased number of larger ships calling in Brazil.
Our offshore support bases and our offshore support fleet, which
service the oil and gas industries continue to face demand
weakness. The support base revenue declined US$11.3 million to
US$8.0 million (2019: US$19.3 million). The number of operating
days at our offshore vessel joint venture, Wilson Sons Ultratug
Offshore, at 5,356 was 4.4% higher than the prior year (2019:
5,128) although our share of revenue was 7.8% lower at US$ 60.8
million (2019 US$65.5 million) due to softer average daily rates on
new contracts given current market conditions. Our joint venture
continues to explore alternative revenue streams for our off-hire
vessels. During the year, the platform support vessels ("PSV")
Cormoran, Sterna and Torda commenced new two-year contracts. At the
year end, the joint venture had a fleet of 23 offshore support
vessels ("OSVs") of which 16 were under contract. Subsequent to
year end, 18 vessels are under contract with the remainder
available in the Brazilian spot market or laid up until market
conditions improve.
Investment Portfolio Performance
The investment portfolio out-performed the 2020 benchmark of
4.4% (2019: 5.3%) by 6.5% (2019: 6.8%) despite the Covid-19 market
crash in March 2020. With a rebound in both equity and bond markets
globally, the portfolio's holdings produced better than originally
anticipated results. The portfolio increased US$25.0 million to
US$310.3 million (2019: US$285.3 million) after paying dividends of
US$5.0 million to Ocean Wilsons Holdings Limited and deducting
management and other fees of US$2.8 million. This represents a net
return in the year of 10.9%. Over the three-year period ended 31
December 2020, the portfolio produced a time-weighted net return of
6.0% per annum compared with the performance benchmark of 4.9% per
annum.
At 31 December 2020 the top ten investments account for 46.7% of
the investment portfolio valuation (US$144.9 million).
Investment Manager and Management Fee
Ocean Wilson (Investments) Limited ("OWIL"), a wholly owned
subsidiary of the Company registered in Bermuda, holds the Group's
investment portfolio. OWIL has appointed Hanseatic Asset Management
LBG, a Guernsey registered and regulated investment group, as its
Investment Manager.
The Investment Manager receives an investment management fee of
1% of the valuation of funds under management and an annual
performance fee of 10% of the net investment return which exceeds
the benchmark, provided that the high-water mark has been exceeded.
The portfolio performance is measured against a benchmark
calculated by reference to Urban Consumers NSA plus 3% per annum
over rolling three-year periods. Payment of performance fees are
subject to a high-water mark and are capped at a maximum of 2% of
the portfolio NAV. 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 Company's investment objectives while
having a linkage to economic factors.
In 2020, the investment management fee paid was US$2.8 million
(2019: US$2.8 million) and a US$0.3 million performance fee is
payable to the Investment Manager (2019: US$0.7 million).
Net Asset Value
At the close of markets on 31 December 2020, the Wilson Sons'
share price was R$45.30 (US$8.73), resulting in a market value for
the Ocean Wilsons holding of 41,444,000 shares (57.77% of Wilson
Sons) totalling approximately US$361.5 million which is the
equivalent of US$10.22 (GBP7.48) per Ocean Wilsons share.
Adding the market value per share of Wilsons Sons of US$10.22
and the investment portfolio at 31 December 2020 of US$8.77 results
in a net asset value per Ocean Wilsons Holdings Limited share of
US$19.00 (GBP13.89). The Ocean Wilsons Holdings Limited share price
was GBP8.45 at 31 December 2020.
Dividend
Dividends are set in US Dollars and are normally paid annually.
The Ocean Wilsons dividend policy is to pay a percentage of the
average capital employed in the investment portfolio determined
annually by the Board and the Company's full dividend received from
Wilson Sons in the period after deducting funding for the parent
company costs. The Board may review and amend the dividend policy
from time to time in light of our future plans and other
factors.
The Board is recommending a dividend of US 70 cents per share to
be paid on 4 June 2021 to shareholders of the Company as of the
close of business on 14 May 2021. Shareholders will receive
dividends in Sterling by reference to the exchange rate applicable
to the USD on the dividend record date (14 May 2021) except for
those shareholders who elect to receive dividends in USD. Based on
the current share price and exchange rates a dividend of US 70
cents per share represents a dividend yield of approximately
6.1%.
Brexit
Shareholders will be aware that the United Kingdom ("UK") left
the European Union ("EU") on 31 January 2020 ("Brexit"). The
Company is domiciled in Bermuda and does not operate directly
within the EU, however Ocean Wilsons (Investments) Limited invests
in investment vehicles domiciled both within and outside the EU,
and a number of those investment vehicles have direct and / or
indirect exposure to the UK and/or the EU.
We are not aware of any tangible direct or indirect impact on
the investment portfolio's performance arising from Brexit. The
consequences of Brexit for London financial markets, in which some
of the investment vehicles participate and where the Company's
shares are traded on the London Stock Exchange, is uncertain.
Environmental Social and Governance Practices (ESG)
The Group is continuously improving and monitoring its ESG
practices. In September 2020, Wilson Sons published its Greenhouse
Gas Emissions Inventory for 2019 emissions. Since 2013, emissions
have been reduced by 12%. As part of our plan to improve on
emission reduction rates, we seek increasingly advanced
technologies to utilise that will contribute to these reductions.
For example, Wilson Sons has implemented diesel-electric systems on
offshore vessels, moved to the use of electric yard cranes and when
commissioning new vessels, ensures that they are compliant with EU
emission standards.
Workplace safety at Wilson Sons, is ingrained in the day-to-day
operations with a relentless commitment to ensuring the safety of
our employees and reducing accident rates through a safety
programme in partnership with DuPont. Our target was to reduce and
maintain a lost-time injury frequency rate (LTIFR) below or equal
to 0.5 per million hours worked. The Company has successfully met
this target with a 91% reduction in LTIFR from 2011 to 2020. LTIFR
was 0.42 (2019: 0.48).
The Board has established corporate governance arrangements
which it believes are appropriate for the operation of the Company.
The Board has considered the principles and recommendations of the
2018 UK Corporate Governance Code ("the Code") issued by the
Financial Reporting Council and decided to apply those aspects
which are appropriate to the business. This reflects the fact that
Ocean Wilsons is an investment holding company incorporated in
Bermuda with significant operations in Brazil. The Company complies
with the Code where it is appropriate for both its wider
stakeholders and its business to do so. The areas where the Company
does not comply with the Code, and an explanation of why, are
contained in the section on Corporate Governance in the Annual
Report. The position is regularly reviewed and monitored by the
Board.
Board Appointments and Retirements
During the year we were pleased to announce the appointment of
two new independent non-executive directors, Ms. Fiona Beck and Ms.
Caroline Foulger. Ms. Beck joined the Board effective 13 April 2020
and Ms. Foulger joined the Board effective 1 June 2020. Ms. Foulger
will be subject to election as a director at the Company's next
Annual General Meeting.
Mr. Colin Maltby retired from the Board effective 1 January 2021
and Mr. Keith Middleton will be retiring from the Board and the
Company on March 26, 2021. I would like to thank both Mr. Maltby
and Mr. Middleton for their time and dedication to the Group.
Outlook
While there has been some worsening in numbers relating to the
pandemic in Brazil recently, the forecasts for economic growth in
2021 remain positive with exports expecting to rise due to the
depreciation of the BRL in 2020 and a recovery in global economic
activity. The impacts from the Covid-19 pandemic in 2020 on our
results were less than we initially anticipated when news of the
pandemic broke. While it is unclear how the pandemic will playout
in 2021, we expect our operations to continue to be affected and
the safety protocols and other measures that were implemented
during 2020 to remain in place for the foreseeable future. The roll
out of the vaccines are a positive development although the new
variant mutations make it unclear how the pandemic will unfold. The
Brazilian offshore oil and gas market is expected to remain soft in
2021. However, we are seeing some green shoots and expect some
recovery from 2022 onwards as the offshore oil concessions move
towards production. The competitive Brazilian towage market we have
experienced in the last few years remains unchanged. The coming
year will continue to present a number of challenges for the Group.
However, the resilient performance delivered by the Group in 2020
means we are confident in the strength of our Brazilian businesses
and believe that the Group will continue to
prosper as Brazil and the World recovers from the Covid-19
pandemic.
The financial markets closed 2020 with major equity indices
increasing with the MSCI World up 16.2% and the S&P 500 up
18.4% notwithstanding one of the biggest post-war market crashes in
March. Bond markets also performed surprisingly well with the
global bond index rising 9.5%. Investor confidence continues to be
strong as vaccines are being administered globally, spurring
anticipation of the world getting back to the normal that we once
knew, and we continue to have a positive view on equity markets
going into 2021. However, we continue to be alert and exercise
caution for any events that could cause the markets to slide. We
have particular focus on the impacts of the Biden administration on
US and global markets and the speed and success of the Covid-19
vaccine roll-out which is anticipated to allow more social movement
that will stimulate and drive economic recovery in those sectors
hit hard by the pandemic.
Management and Employees
On behalf of the Board and shareholders, I would like to thank
our management and employees for their efforts and hard work during
this incredibly difficult year. We understand that our workforce
has been faced with day to day personal and professional struggles
as we navigate through the new normal of living and working through
this pandemic. We are extremely proud of how our teams have managed
and responded to the challenges that Covid-19 has created.
J F Gouvêa Vieira
Chairman
Ocean Wilsons Holdings Limited
12 March 2021
Financial Review
Operating Profit
Operating profit of US$66.9 million was US$2.0 million lower
than prior year (2019: US$68.9 million) principally due to the
negative impact of the BRL devaluation against the US, lower
revenues being offset by reduced operating costs and no impairment
charges in the current financial year (2019: US$13.0 million).
Operating margin for the year was 18.9% (2019: 20.2% - excluding
the impairment charge) principally due to the increase in foreign
exchange losses on monetary items, negatively offsetting lower
operating costs as the Company implemented cost savings strategies
in the face of Covid-19 and lower depreciation expense.
Raw materials and consumables used were US$6.0 million lower at
US$19.3 million (2019: US$25.3 million) reflecting lower shipyard
activity. Employee expenses were US$30.3 million lower at US$110.0
million (2019: US$140.3 million) principally due to the effect of
the stronger average USD/BRL exchange rate. Amortisation of
right-of-use assets was $10.7 million (2019: US$12.4 million).
The headcount at the year-end was 3,675 compared with 3,939 in
2019. Employee expenses as a percentage of revenue declined from
34.6% in 2019 to 31.2% in the current year. Other operating
expenses were US$4.9 million lower at US$87.7 million (2019:
US$92.6 million) largely driven by a weaker BRL exchange rate
throughout 2020. Depreciation and amortisation expense at US$50.6
million was US$3.1 million lower than the comparative period (2019:
US$53.7 million) due to the devaluation of the BRL during the
year.
Revenue from Maritime Services
Group revenue for the year in BRL terms increased by 13.3% while
in USD terms revenue was 13% lower at US$352.8 million (2019:
US$406.1 million). The decline in revenue is principally due to the
negative impact of BRL devaluation against the USD, with volume
declines in logistics revenues due to the end of a specific high
value contract, lower offshore support base revenues against a
backdrop of lower demand in the oil and gas sector and the overall
impact of Covid-19 on operations and trading volumes.
Towage and agency services revenue at US$181.7 million was
US$12.9 million higher than the prior year (2019: US$168.8 million)
with increased volumes in ports that operate larger ships, a focus
on improving the revenue mix and the full year impact of firming
market prices from the end of the prior year. Harbour towage
manoeuvres performed in the year decreased 0.4% to 52,873 (2019:
53,088). Special operations revenues increased US$3.2 million to
US$14.5 million (2019: US$11.1 million). Special operations are
project based, with current year revenue increases being driven by
support to two vessels that suffered damage in accidents. Ship
agency revenue at US$8.1 million was 12% lower than the prior year
(2019: US$9.2 million).
Port terminals revenue at US$140.2 million was US$47.0 million
lower than the prior year (2019: US$187.2 million) principally due
to the lower average BRL exchange rate and the reduction in
economic activity caused by Covid-19 on both imports and exports
and oil and gas support base activity. Container volumes handled
fell 1.0% to 1,017,600 TEUs (2019: 1,027,600 TEUs) mainly due to
lower volumes in imports and cabotage flows. Due to the decrease in
container volumes handled, lower import warehouse revenue and the
higher average USD/BRL exchange rate in the year container terminal
revenue declined 21.2% to US$132.2 million (2019: US$167.8
million). Revenue at our offshore support base decreased US$11.3
million to US$8.0 million (2019: US$19.4 million) mainly due to
reduced or delayed activity as the oil and gas sector manage
reduced oil demand and currency impacts.
Revenue at our logistics business was 37% lower at US$28.6
million (2019: US$45.7 million) primarily as a result of the ending
of a large warehousing contract at one of our logistics centres,
the impact of Covid-19 on import volumes driving lower demand for
logistics services and the lower average BRL exchange rate.
Third-party shipyard revenue was US$2.3 million lower at US$2.2
million (2019: US$4.5 million). The shipyard continues to provide
important vessel construction and maintenance services for our
towage and joint venture offshore vessel fleets.
All Group revenue is derived from Wilson Sons' operations in
Brazil.
Share of Results of Joint Ventures
The share of results of joint ventures is Wilson Sons' 50% share
of net profit for the period from our offshore joint ventures. Our
joint ventures had 16 offshore support vessels under contract out
of a total fleet of 23 at year end. Operating profit for a 50%
share in the joint ventures in the year decreased US$3.3 million to
US$5.5 million compared to US$8.9 million in 2019. Revenue was 7%
lower at US$60.8 million (2019: US$65.5 million) while operating
days at 5,356 days were 4.4% higher than the prior year (2019:
5,128). The reduction in operating profit, driven by lower revenues
and increased exchange losses on monetary items of US$9.1 million
for the period resulted in a loss for the year of US$4.2 million
(2019: US$0.6 million profit).
Returns on the Investment Portfolio at Fair Value Through Profit
or Loss
Returns on the investment portfolio of US$33.4 million (2019:
US$34.7 million) comprise realised profits on the disposal of
financial assets at fair value through profit or loss of US$1.0
million (2019: US$7.5 million), income from underlying investment
vehicles of US$3.3 million (2019: US$2.8 million) and unrealised
gains on financial assets at fair value through profit or loss of
US$29.1 million (2019: US$24.4 million).
Other Investment Income
Other investment income for the year declined US$4.5 million to
US$1.6 million (2019: US$6.1 million). Lower interest on bank
deposits of US$1.1million (2019: US$1.7 million) and lower other
interest income of US$0.6 million (2019: US$4.3 million) were the
contributing factors. Other interest in the prior year of US$4.3
million included a one-time income adjustment on the judicial
deposits of US$2.8 million and US$0.6 million on tax credits.
Finance Costs
Finance costs for the year at US$23.2 million were US$4.5
million lower than the prior year (2019: US$27.7 million) as
interest on lease liabilities decreased US$3.1 million to US$12.8
million (2019: US$15.9 million). Exchange losses on foreign
currency borrowings were zero (2019: US$0.8 million) as the Group
repaid borrowings in currencies other than the functional
currencies of the subsidiaries in the prior period. Interest on
bank loans and overdrafts decreased US$0.5 million to US$10.3
million (2019: US$10.8 million) due to lower variable interest
rates.
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 both positively
and negatively from year to year. During 2020 the BRL depreciated
28.9% against the USD from R$4.03 at 1 January 2020 to R$5.20 at
the year end. In 2019 the BRL depreciated 4.0% against the USD from
R$3.87 at 1 January 2019 to R$4.03 at the year end. The principal
effects from the movement of the BRL against the USD on the income
statement are set out in the table below:
2020 2019
US$ million US$ million
-------------------------------------------------- ----------- -----------
Exchange losses on monetary items(i) (7.4) (0.6)
Exchange losses on foreign currency borrowings - (0.8)
Deferred tax on retranslation of fixed assets(ii) (14.0) 0.6
Deferred tax on exchange variance on loans(iii) 15.1 (2.0)
-------------------------------------------------- ----------- -----------
Total (6.3) (2.8)
-------------------------------------------------- ----------- -----------
(i) This arises from the translation of BRL denominated monetary items in USD functional currency
entities.
(ii) The Group's fixed assets are located in Brazil and therefore future tax deductions from depreciation
used in the Group's tax calculations are denominated in BRL. When the BRL depreciates against
the US Dollar the future tax deduction in BRL terms remain unchanged but is reduced in US
Dollar terms.
(iii) Deferred tax credit arising from the exchange losses on USD denominated borrowings in Brazil.
The movement of the BRL against the USD in 2020 resulted in a
negative impact of US$6.3 million on the income statement in the
year compared with a US$2.8 million negative impact in 2019.
A currency translation adjustment loss of US$51.8 million (2019:
US$11.1 million) on the translation of operations with a functional
currency other than USD is included in other comprehensive expense
for the year and recognised in other comprehensive income.
The average USD/BRL exchange rate during 2020 was 30.6% higher
than prior year at 5.16 (2019: 3.95). A higher average exchange
rate negatively affects BRL denominated revenues and positively
impacts BRL denominated costs when converted into our USD reporting
currency.
Profit Before Tax
Profit before tax for the year decreased US$7.9 million to
US$74.6 million compared to US$82.5 million in 2019. The decline in
profit before tax is primarily due to the US$4.7 million negative
movement of results from joint ventures, US$1.3 million in lower
returns from the investment portfolio, US$7.4 million negative
movement in foreign exchange losses on monetary items and a US$4.4
million reduction in other investment income. Prior year other
investment income included a one-time adjustment on US$2.8 million
in judicial deposits.
Taxation
Although taxable profit was US$7.9 million lower at US$74.6
million, (2019: US$82.5 million), the tax charge for the year at
US$26.6 million was US$5.1 million higher than prior year (2019:
US$21.5 million). This represents an effective tax rate for the
year of 36.0% (2019: 26.0%) compared with the corporate tax rate
prevailing in Brazil of 34%. The higher effective tax rate is
principally due to higher net expenses not included in determining
taxable profit. Net expenses not included in determining taxable
profit were higher due to higher foreign exchange losses and losses
at our joint ventures.
The principal impacts from these items on the tax charge in the
income statement are set out in the table below:
2020 2019
% of % of
US$ taxable US$ taxable
million profit million profit
----------------------------------------------------------------- ------- ------- ------- -------
Deferred tax items not included in determining taxable profit(i) (2.2) (3.0%) (1.2) (1.5%)
Net expenses not included in determining taxable profit(ii) (7.9) (10.6%) (1.7) (2.1%)
Net income/(expenses) incurred outside Brazil 8.9 12.0% 9.7 11.6%
Total (1.2) (1.6%) 6.6 8.0%
----------------------------------------------------------------- ------- ------- ------- -------
(i) The principal deferred tax items not included in determining taxable
profit are a deferred tax credit arising on the retranslation of BRL
denominated fixed assets in Brazil, the deferred tax charge on the
exchange losses on USD denominated borrowings and tax losses at our
Brazilian subsidiaries not recognised in deferred tax.
(ii) The main items not included in determining taxable profit are the
tax effect of foreign exchange gains/(losses) on monetary items, the
tax effect of the share of results of joint ventures and non-deductible
expenses.
A more detailed breakdown is provided in note 10.
Profit for the Year
Profit attributable to equity holders of the parent company for
the year is US$38.7 million (2019: US$46.9 million) after deducting
profit attributable to non-controlling interests of US$9.3 million
(2019: US$14.2 million).
Earnings per Share
Earnings per share for the year was US 109.5 cents compared with
US 132.5 cents in 2019.
Cash Flow
Net cash inflow from operating activities for the period at
US$105.7 million was US$0.6 million lower than prior year (2019:
US$106.3 million) mainly due to the lower operating profit in the
year offset by improvements in working capital balances. Capital
expenditure in the year at US$58.4 million was US$27.3 million
lower than the prior year (2019: US$85.7 million) as capital
expenditure in 2019 on the expansion of Wilson Sons Salvador
container terminal contributed to higher spend. This work has now
been completed.
The Group drew down new loans of US$51.5 million (2019: US$113.6
million) to finance capital expenditure, while making loan
repayments of US$25.7 million in the year (2019: US$85.9 million).
Dividends of US$24.8 million were paid to shareholders (2019:
US$24.8 million) with a further US$17.4 million paid to
non-controlling interests in our subsidiary (2019: US$$17.4
million).
Cash and cash equivalents at 31 December 2020 decreased US$5.7
million from the prior year end to US$63.3 million, (2019: US$69.0
million) of which US$53.8 million was denominated in Brazilian Real
(2019: US$35.7 million). Wilson Sons held a further US$39.6 million
in USD denominated fixed rate certificates which are classified as
financial assets at fair value through profit or loss (2019:
US$14.1 million) which are not part of the Group's investment
portfolio managed by Hanseatic Asset Management LBG and are
intended to fund Wilson Sons.
Balance Sheet
Equity attributable to shareholders of the parent company at the
balance sheet date was US$14.0 million lower at US$555.8 million
compared with US$569.8 million at 31 December 2019. The main
movements in equity in the year were profits for the period of
US$38.7 million, less dividends paid of US$24.8 million and a
negative currency translation adjustment of US$29.8 million. The
currency translation adjustment arises from exchange differences on
the translation of operations with a functional currency other than
USD.
Net Debt and Financing
All debt at the year-end was held in the Wilson Sons group with
no recourse to the parent company, Ocean Wilsons, or the investment
portfolio held by Ocean Wilsons (Investments) Limited. The Group's
borrowings are used principally to finance vessel construction and
the development of our container terminal business.
Borrowings are mainly long-term with defined repayment schedules
payable over different periods of up to 18 years. At 31 December
2020 all the Group's borrowings are denominated in BRL with 65%
linked to the USD and the remaining 35% denominated in BRL. The
Group's borrowings denominated in BRL linked to the USD loans are
fixed rate loans while BRL denominated debt is variable rate. A
significant portion of the Group's Brazilian pricing is denominated
in USD which acts as a natural hedge to our long-term exchange rate
exposure. In addition to borrowings, the Group has lease
liabilities of US$157.9 million (2019: US$194.1 million).
Net debt including lease liabilities at 31 December 2020 was
US$397.7 million (2019: US$446.0 million) as set out in the
following table:
2020 2019
US$ million US$ million
-------------------------- ----------- -----------
Debt
Short-term 76.9 58.6
Long-term 423.7 470.5
Total debt 500.6 529.1
Short term investments (39.6) (14.1)
Cash and cash equivalents (63.3) (69.0)
-------------------------- ----------- -----------
Net debt 397.7 446.0
-------------------------- ----------- -----------
The Group's reported borrowings do not include US$211.9 million
(2019: US$220.3 million) of debt from the Company's 50% share of
borrowings in our Offshore Vessel joint venture.
Leslie J. Rans, CPA
Chief Operating and Financial Officer
Ocean Wilsons Holdings Limited
12 March 2021
Wilson Sons Limited
The Wilson Sons 2020 Earnings Report released on 12 March 2021
is posted on www.wilsonsons.com.br.
In the report, Mr. Cezãr Baião, Deputy Chairman of Wilson Sons,
said:
"Wilson Sons reported that cash flows from operating activities
of US$114.5 million increased 3.0% against 2019 (US$111.1 million)
remaining very resilient notwithstanding the Covid-19 pandemic. In
BRL terms, operating cash flow grew 34.5%. A weaker average BRL
exchange rate reduced revenues and costs, with costs being further
reduced, driven by austerity measures in addressing the financial
impacts of Covid-19 on our business.
Container terminal results were impacted by lower import volumes
during the year due to the pandemic with business confidence and
Brazilian economic indicators remaining soft through Q4. The
Salvador terminal reported a 2.4% increase in annual operating
volumes and civil works to extend the terminal's principal quay
were completed in October 2020. The Rio Grande terminal was
certified with a 15-metre draft for the navigation channel in 4Q20
allowing the terminal to receive larger super-post-Panamax vessels,
further increasing the terminal's competitiveness as a hub port and
potentially attracting more transhipment volume. Although the Rio
Grande terminal showed a 2.5% decrease in annual operating volumes,
transhipment volume was up 5.6% over the prior year.
Towage results continued to be solid despite the competitive
environment and Covid-19 crisis. We recently approved the
construction of six new 80-tonne tugboats to be delivered by our
shipyard between 2022 and 2025. These new vessels will further
expand the capacity of our towage fleet to service the larger ships
now calling in to Brazilian ports.
Our oil services businesses, including offshore support vessels
("OSV") and support bases, still face weak demand, although we
expect to see a recovery in the medium term. We continue to explore
alternative revenue streams for the base areas and our off-hire
vessels, which are well positioned to profit from the expected
recovery in the industry.
The outlook heading into 2021 remains a challenging operational
environment with the persisting effects of Covid-19 and exchange
rate volatility remains an item to be monitored. We expect trade
flows to recover faster than oil and gas services. Debt standstill
agreements have benefitted a number of businesses through this
unique period.
In this context, we reaffirm our commitment to the safety and
well-being of our employees, clients, suppliers and the communities
in which we operate to ensure the continuity of the essential
services that we provide. All our operations and facilities are
applying rigorous health and safety protocols established by
Brazilian authorities and agencies, and we are closely monitoring
the evolution of the pandemic in the country."
The Wilson Sons Strategy
The Wilson Sons strategy is to grow and strengthen its
businesses while looking for new opportunities in the maritime and
transport sector, focusing on Brazil and Latin America. Wilson Sons
looks to develop its businesses by maximising economies of scale
and efficiency and improving the quality and range of services it
provides to customers. Wilson Sons' principal services are
container terminals, logistics, oil and gas support terminals,
towage, shipyard and through our joint venture, offshore support
vessels.
Utilising capacity in our container terminals. To meet demand
from domestic and international trade, we have expanded both
container terminals since the beginning of the concessions. By
maximising installed capacity utilisation, we can continue to
increase productivity and the level of service to our clients
through economies of scale. Additionally, we will evaluate new
opportunities to invest in the development of new terminals, and
the ability for these opportunities to provide a strong return on
shareholders' equity.
Maximising capacity utilization of our offshore support bases.
Our bases in Niterói and Rio de Janeiro have a total capacity of
eight berths which provide logistics support for offshore vessels.
With excellent access to the Campos and Santos petroleum basins,
including to the pre-salt region, our assets are strategically
positioned as one of the largest operators of offshore support
bases in Brazil. We continuously monitor the offshore exploration
and production activities across the Brazilian coast to meet demand
as activity in this sector improves.
Strengthening our position as the leading provider of towage
services in Brazil. We will continue to modernise and expand our
tugboat fleet to consistently provide high-quality services to our
customers and solidify our leading position in the Brazilian towage
market. We also look to contribute to the expansion of activities
in the Brazilian ports, offering state-of-the-art vessels that are
suitable for the operation of new classes of ships, as well as for
the oil and gas industry. We regularly review our fleet deployment
to optimise efficiency and to seek out new market niches where we
may be able to provide additional services or expand our
geographical footprint to new ports in Brazil.
Maximising the potential of our shipyard facilities. Through a
mix of in-house and third-party vessel construction, repair,
maintenance, conversion and dry-docking services we seek to
maximise the potential of our shipyards to meet the demands of
local and international shipowners operating in Brazil.
Solidifying our offshore support vessel services to oil and gas
platforms. Using our knowledge and experience, we look to
consolidate our activities maintaining our position amongst the
leading suppliers of services to the offshore oil and gas industry
in Brazil. We are exploring alternative revenue streams to increase
utilisation of our offshore support vessel fleet.
Exploring innovative opportunities and strategies to provide the
best and most complete set of services to our customers. We will
continue to foster a culture of innovation and digital
transformation. We have formed relationships with technology
start-ups, to strive for innovative digital solution to support
strategic goals of creating efficiencies, improving margins and
driving improved customer service throughout our businesses. We are
always looking to provide innovative services to our customers, as
well as to anticipate their needs. Through a solid nationwide
footprint, we will continue our strategy of providing comprehensive
logistics solutions to support domestic and international trade
activities, as well as the oil and gas industry.
Increasing economies of scale, productivity, synergies, and cost
savings across our segments. We continuously seek to optimise our
operations productivity and reduce costs through digital
transformation and synergies among our businesses. We will continue
to be focused on driving digital transformation of Wilson Sons to
meet stakeholder needs in a rapidly changing market as well as
integrating similar activities to achieve economies of scale and
reduce costs wherever possible.
Economic Social and Governance (ESG) best practices are key to
our overall strategy. We will ensure that ESG best practices are
implemented throughout the organization to achieve and maintain
excellence in these areas, in line with our strategy of a
sustainable and ethical business.
Investment Portfolio
Investment Objective
Ocean Wilsons is run with a long-term outlook. The objective of
the investment portfolio is to make investments that create
long-term capital growth without pressure to produce short-term
results at the expense of long-term value creation.
Investment Policy
The Investment Manager will seek to achieve the investment
objective through investments in publicly quoted and private
(unquoted) assets across three 'silos':
(i) Core regional funds which form the core of our holdings, enabling us to capture the natural
beta within markets;
(ii) Sector specific silo, represented by those sectors with long-term growth attributes, such
as technology and biotechnology; and
(iii) Diversifying silo, which are those asset classes and sectors which will add portfolio protection
as the business cycle matures. Cash levels will be managed to meet future commitments (e.
g. to private assets) whilst maintaining an appropriate balance for opportunistic investments.
Commensurate with the long-term horizon, it is expected that the
majority of investments will be concentrated in equity, across both
'public' and 'private' markets. In most cases, investments will be
made either through collective funds or limited partnership
vehicles, working alongside expert managers in specialised sectors
or markets to access the best opportunities.
The Investment Manager maintains a global network to find the
best opportunities across the three silos worldwide. The portfolio
contains a high level of investments which would not normally be
readily accessible to investors without similar resources.
Furthermore, a large number of holdings are closed to new
investors. There is currently no gearing although the Board would,
under the appropriate circumstances, be open-minded to modest
levels of gearing. Likewise, the Board may, from time to time,
permit the Investment Manager opportunistically to use derivative
instruments (such as index hedges using call and put options) to
actively protect the portfolio.
Investment Process
Manager selection is central to the successful management of the
investment portfolio. Potential individual investments are
considered based on their risk--adjusted expected returns in the
context of the portfolio as a whole. Initial meetings are usually a
result of: (i) a 'top-down' led search for exposure to a certain
geography or sector; (ii) referrals from the Investment Manager's
global network; or (iii) relationships from sell-side institutions
and other introducers. The Investment Manager reviews numerous
investment opportunities each year, favouring active specialist
managers who can demonstrate an ability to add value over the
longer-term, often combining a conviction-based approach, an
unconstrained mandate and the willingness to take unconventional
decisions (e.g., investing according to conviction and not fearing
short-term underperformance versus an index).
Excessive size is often an impediment to continued
outperformance and the bias is therefore towards managers who are
prepared to restrict their assets under management to a level
deemed appropriate for the underlying opportunity set. Track
records are important, but transparency is an equally important
consideration. Alignment of interests is essential, and the
Investment Manager will always seek to invest on the best possible
terms. Subjective factors are also important in the decision-making
process - these qualitative considerations would include an
assessment of the integrity, skill and motivation of a fund
manager.
When the Investment Manager believes there is a potential fit,
thorough due diligence is performed to verify the manager's
background and identify the principal risks. The due diligence
process would typically include visiting the manager in their
office (in whichever country it may be located), onsite visits to
prospective portfolio companies, taking multiple references and
seeking a legal opinion on all relevant documentation. With travel
restrictions related to Covid-19, the due diligence process has
been amended to include virtual meetings and onsite visits will
resume once travel restrictions have been removed.
All investments are reviewed on a regular basis to monitor the
ongoing compatibility with the portfolio, together with any 'red
flags' such as signs of 'style drift', personnel changes or lack of
focus. Whilst the Investment Manager is looking to cultivate
long-term partnerships, every potential repeat investment with an
existing manager is assessed as if it were a new relationship.
Portfolio Characteristics
The portfolio has several similarities to the 'endowment model'.
These similarities include an emphasis on generating real returns,
a perpetual time horizon and broad diversification, whilst avoiding
asset classes with low expected returns (such as government bonds
in the current environment). This diversification is designed to
make the portfolio less vulnerable to permanent loss of capital
through inflation, adverse interest rate fluctuations and currency
devaluation and to take advantage of market and business cycles.
The Investment Manager believes that higher returns can be
generated from investments in illiquid asset classes (such as
private equity). In comparison to public markets, the pricing of
assets in private markets is less efficient and the outperformance
of superior managers is more pronounced.
Investment Manager's Report
Market Backdrop
Had you asked at the beginning of 2020 how stock markets would
fair in the face of a global pandemic, one of the deepest post-war
economic declines and with companies in many sectors on the brink
of bankruptcy, it would not have been unreasonable to expect
responses of 20%, 30% or even 50% declines. The fact that this
happened when we were in the eleventh year of one of the longest
market cycles in history, arguably made the market even more
vulnerable to bad news.
It seems surreal then that the year ended with major equity
indices increasing 16.2%, 18.4% and 29.5% for the MSCI World,
S&P 500 and MSCI China. German and French indices somewhat
lagged, up by 13.5% and 3.5% respectively and the UK and EMs
ex-Asia declined by 10.5% and 10.0%. The MSCI Information
Technology index was up 45.6% for the year while the MSCI World
Value index was down by 1.2% with sub-sectors such as retail and
leisure falling sharply over the period.
The bond markets were also robust at the headline level with the
global bond index rising by 9.5% for the year. Investment grade
debt rose by 10.4% and high yield by 7.0% but at the trough in
March, they were down 10.4% and 21.2% respectively when the
prospect of widespread corporate default seemed very real.
The commodity markets were a case of contrasting fortunes.
Gold's defensive attributes came to the fore as is often the case
at points of extreme distress, rising by 25.1% over the year. In
contrast, oil, which saw demand fall sharply due to a collapse in
travel, especially air travel, fell by 20.5% over the year.
Cumulative portfolio returns
2020 3 years p.a. 5 years p.a. 10 years p.a.
----------------------------------------------- ----- ------------ ------------ -------------
OWIL 12.2% 7.3% 7.8% 5.0%
OWIL (Net)(1) 10.9% 6.0% 6.6% 3.9%
Performance benchmark(2) 4.4% 4.9% 4.9% 4.0%
MSCI ACWI + FM NR 16.2% 10.0% 12.2% 9.1%
MSCI Emerging Markets NR 18.3% 6.2% 12.8% 3.6%
Bloomberg Barclays Global Treasury TR Unhedged 9.5% 4.8% 4.7% 2.2%
Barclays 3 Month US$ LIBOR 0.3% 1.8% 1.5% 0.9%
----------------------------------------------- ----- ------------ ------------ -------------
1. The OWIL net performance is after charging investment management and
performance fees.
2. The OWIL performance benchmark which came into effect on 1st January
2015 is US CPI Urban Consumers NSA +3% p.a. This has been combined
with the old benchmark (USD 12 Month LIBOR +2%) for periods prior
to the adoption of the current benchmark.
Portfolio Review
The investment portfolio returned 10.9% on a net basis over the
year, whilst its benchmark returned 4.4%. Despite the COVID-19
induced crash in March, markets tended to take a longer-term view
into 2021 looking past the pandemic with vaccine announcements and
the eventual election of Joe Biden as US President seeing investors
become increasingly bullish towards the end of the year.
The portfolio's public market investments in North America
continued to be some of the larger contributors to performance.
Pershing Square Holdings generated excellent returns with a yearly
gain of 85.5%. The manager placed a lucrative credit hedge at the
beginning of the year, before most investors realized the impact
COVID-19 would have on markets, which then significantly benefited
from the market falls in March. The manager subsequently ploughed
these profits into equity markets, particularly consumer focused
companies including Chipotle Mexican Grill and Starbucks, who have
both been able to successfully adapt their operations to cater
towards delivery and takeaway services. Both have rebounded
significantly following the market sell-off, with Chipotle more
than doubling its value from its trough in mid-March to the end of
2020. Other contributors in North America were Vulcan Value Equity,
Select Equity and Findlay Park American which were up 9.5%, 16.0%
and 15.8%, respectively, over the year.
Our emerging markets holdings NTAsian Discovery, a value-biased
fund, had a rollercoaster year ending with an annual return of
10.6%. There was a large drawdown in the first quarter caused by
the COVID-19 driven market sell off with the performance then
rebounding over the rest of the year, particularly during a strong
final quarter when the fund was up 25.3%. One of the investments,
BFI Finance, an Indonesian consumer finance firm, saw a significant
rally in its share price during the final quarter as it reported a
significant drop in debt levels and continued to have a lower ratio
of non-performing loans than its peers. Another of the fund's
investments, I.T, a Hong Kong based fashion brand, was another
strong contributor as the firm announced that it was teaming up
with a private equity fund to take itself private at a 54.6%
premium over the closing share price.
Schroder Asia Total Return, another fund in the Asian segment,
was up 31.0% over the year. The fund's 28% exposure to information
technology benefited it this year with large holdings in TSMC and
Samsung Electronics increasing significantly in value over the
course of the year. The focus that Prince Street Opportunities has
on emerging and frontier market companies that use data and
technology to build market share led it to perform very strongly,
gaining 35.7% over the last twelve months. Holdings such as Public
Power Corp in Greece and Sea Ltd in Singapore were among the fund's
biggest contributors.
In Europe, Adelphi European Select Equity and BlackRock European
Hedge Fund continue to exhibit great performance, up 19.7% and
39.5% for 2020, respectively. The portfolio's Japanese holdings
have been more mixed with Indus Japan Long Only performing strongly
returning 27.4% while Goodhart Partners: Hanjo returned only 4.9%
as Japanese small cap stocks lagged their large cap comparators
over the course of the year.
In the portfolio's thematic holdings, the technology focused GAM
Disruptive Growth produced a strong annual return, up 62.8%. The
fund benefited from a wide variety of holdings such as Walt Disney
which was up 25% over the year following the successful launch of
its streaming service, and Uber which gained 71% on the back of a
surge in demand for its food delivery service. Impax Environmental
Markets also performed well with an annual return of 28.8%. Energy
transition holdings saw a rally in their share prices following
Biden's US election victory with his campaign promising a US$2
trillion green energy plan. Ormat Technologies, a renewable energy
developer, performed well following management changes including a
new CEO. Other positions which positively contributed were PTC Inc,
a software company, and Clean Harbors, a waste disposal and
generator firm. The portfolio's healthcare holdings all enjoyed
positive years with RA Capital International Healthcare, BB Biotech
and Worldwide Healthcare Trust returning 34.2%, 27.4% and 22.9%,
respectively.
In the diversifying segment, Global Event Partners returned
15.6% over the year. Despite the pandemic the year was a busy one
in terms of mergers with an investment in the LVMH/Tiffany proving
turbulent but ultimately contributing positively as both companies
settled litigation and moved forward with the acquisition at a
modestly reduced price. CZ Absolute Alpha had a positive year with
an annual return of 4.2%. The market neutral equity long/short fund
struggled for much of the year with its strong value bias meaning
that its investments typically underperformed the market in the
second and third quarters. Large positions that did perform well
were William Hill where the manager felt the stock was oversold in
March, providing an entry opportunity, before bouncing back and
then being boosted by takeover approaches by Caesars Entertainment
and Apollo in the final quarter of the year. Hudson Bay
International and BioPharma Credit were also positive contributors
returning 16.3% and 7.7%, respectively.
On the private asset side of the portfolio, the delayed nature
of private asset valuations means that the impact of the strong
market performance towards the end of the year will not yet have
fully fed through. KKR Americas XII, LP has been busy deploying
capital with over 50% of the fund now committed. This 2017 vintage
fund is carried at a 1.3x net multiple and a 15.9% net IRR with
several investments looking like they will be strong performers.
AppLovin Corporation, a high-growth mobile gaming platform that
publishes its own games as well as enabling user acquisition and
monetization for the global mobile gaming market, increased
significantly in value over the latter part of 2020 with the gaming
industry being a beneficiary of the COVID-19 crisis. The company
also acquired two complementary businesses in Machine Zone and
Zenlife with their integration the current focus. Nature's Bounty,
a manufacturer of vitamins, supplements and nutrition products, is
an older investment that is also performing well having
significantly increased in value during the last quarter of the
year. Many of the investments in this fund are still held at around
cost and so we would expect to see some of them moving up in value
over the next year as the manager starts to enact their growth plan
for each business.
Baring Asia Private Equity Fund VII, LP is a more recent
Asia-focused commitment that has started to accelerate this year
with several investments growing strongly. JD Health, one of the
two largest e-commerce platforms for consumer health and pharma
products in China, has seen a 35% increase in the number of active
users this year. The fund invested more capital in a recent
fundraising round to enable the company to continue to expand the
number of services it can provide to customers through its online
platform. The company has now gone through an IPO which was
received well by the market. TS Group, a recruitment agency for
care and construction workers in Japan, has also reported strong
growth with revenue and EBITDA up 28% and 9% year-on-year
respectively despite the COVID-19 pandemic. The fund has made two
recent investments in Shinhan Financial Group, Korea's largest
financial group, and Hexaware, an Indian IT and business process
outsourcing services provider, with the fund now looking to
implement their business plans. This fund is currently held at a
1.5x net multiple and a 53.5% net IRR, albeit still at an early
stage of its life.
More mature investments in the portfolio that have performed
well include TA XII-B, LP (2.0x net multiple, 33.2% net IRR) and
Great Point Partners II, LP (2.4x net multiple, 27.5% net IRR).
Greenspring Global Partners IV, LP (2.8x net multiple, 17.7% net
IRR) and Greenspring Global Partners VI, LP (2.7x net multiple,
23.3% net IRR) also continued to perform strongly returning
significant capital to investors throughout the course of the
year.
Summary
Whilst clearly not yet of out woods, especially as we sit here
at home writing these comments in the midst of yet another
lockdown, 2021 is looking more optimistic as the vaccine roll-out
programme starts in earnest. The blend of better growth together
with still abundant liquidity should serve to underpin risk assets
and, as a result, we see little reason to deviate from our positive
stance on equities and more cautious view on bonds. There are
clearly risks to this scenario and, not least, the amount of good
news already baked into markets as we enter the year will
undoubtedly make them vulnerable to any disappointments.
Most worrying would be anything that derails the expected
rebound in economic growth. Be it delays in the vaccine roll-out
programme or, worse, that vaccines are found to be ineffective in
treating new variants of the virus, these outcomes would be
extremely damaging to sentiment given the already considerable
growth expectations built into asset prices. We continue to be
optimistic on most markets for 2021 but as ever remain alert for
any events that could cause market disruption.
Hanseatic Asset Management LBG
March 2021
Investment Portfolio at 31 December 2020
Fair market
value % of
US$000 NAV Primary Focus
--------------------------------------------------------- ----------- ----- -------------------------------------
Findlay Park American Fund 31,896 10.3 US Equities - Long Only
Adelphi European Select Equity Fund 18,155 5.8 Europe Equities - Long Only
BlackRock European Hedge Fund 16,419 5.3 Europe Equities - Hedge
Egerton Long - Short Fund Limited 15,238 4.9 Europe/US Equities - Hedge
GAM Star Fund PLC - Disruptive Growth 14,435 4.6 Technology Equities - Long Only
Select Equity Offshore, Ltd. 11,568 3.7 US Equities - Long Only
Vulcan Value Equity Fund 10,776 3.5 US Equities - Long Only
Goodhart Partners: Hanjo Fund 9,642 3.1 Japan Equities - Long Only
Schroder ISF Asian Total Return Fund 9,604 3.1 Asia ex-Japan Equities - Long Only
Pangea II, LP 7,186 2.3 Private Assets - GEM
--------------------------------------------------------- ----------- ----- -------------------------------------
Top 10 Holdings 144,919 46.7
--------------------------------------------------------- ----------- ----- -------------------------------------
NG Capital Partners II, LP 6,375 2.1 Private Assets - Latin America
Greenspring Global Partners, VI, LP 5,864 1.9 Private Assets - US Venture Capital
Pershing Square Holdings Ltd. 5,770 1.9 US Equities - Long Only
Hudson Bay International Fund Ltd. 5,528 1.8 Market Neutral - Multi Strategy
NTAsian Discovery Fund 5,499 1.8 Asia ex-Japan Equities - Long Only
Prince Street Opportunities Fund 5,128 1.7 Emerging Markets Equities - Long Only
Indus Japan Long Only Fund 5,125 1.7 Japan Equities - Long Only
Helios Investors II, LP 4,862 1.6 Private Assets - Africa
Impax Environmental Markets Fund 4,798 1.5 Environmental Equities - Long Only
Silver Lake Partners IV, LP 4,723 1.5 Private Assets - Global Technology
--------------------------------------------------------- ----------- ----- -------------------------------------
Top 20 Holdings 198,591 64.0
--------------------------------------------------------- ----------- ----- -------------------------------------
Primary Capital IV, LP 4,521 1.5 Private Assets - Europe
Global Event Partners Ltd. 4,494 1.4 Market Neutral - Event-Driven
Worldwide Healthcare Trust PLC 4,217 1.4 Healthcare Equities - Long Only
Dynamo Brazil VIII 3,922 1.3 Brazil Equities - Long Only
Greenspring Global Partners IV, LP 3,845 1.2 Private Assets - US Venture Capital
Silver Lake Partners V, LP 3,724 1.2 Private Assets - Global Technology
Prosperity Quest Fund 3,702 1.2 Russia Equities - Long Only
EQT Mid-Market Europe, LP 3,390 1.1 Private Assets - Europe
KKR Americas XII, LP 3,360 1.1 Private Assets - North America
BB Biotech AG 3,273 1.1 Healthcare Equities - Long Only
--------------------------------------------------------- ----------- ----- -------------------------------------
Top 30 Holdings 237,039 76.3
--------------------------------------------------------- ----------- ----- -------------------------------------
Remaining Holdings 67,635 21.8
--------------------------------------------------------- ----------- ----- -------------------------------------
Cash, money market funds and other working capital items 5,633 1.8
--------------------------------------------------------- ----------- ----- -------------------------------------
TOTAL 310,307 100.0
--------------------------------------------------------- ----------- ----- -------------------------------------
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2020
Year ended Year ended
31 December 31 December
2020 2019
Notes US$'000 US$'000
Revenue 3 352,792 406,128
Raw materials and consumables used (19,266) (25,290)
Employee charges and benefits expense 6 (110,016) (140,348)
Depreciation & amortisation expense (owned assets) 5 (50,617) (53,733)
Amortisation of right-of-use assets 5, 15.3 (10,706) (12,389)
Reversal/(impairment charge) 13 382 (13,025)
Other operating expenses (87,731) (92,624)
Gain/(loss) on disposal of property, plant and equipment (317) 294
Foreign exchange losses on monetary items (7,551) (79)
---------------------------------------------------------------------- ------- ----------- -----------
Operating profit 66,905 68,934
Share of results of joint ventures 18 (4,142) 564
Returns on investment portfolio at fair value through profit or loss 7 33,383 34,716
Other investment income 3,8 1,644 6,052
Finance costs 9 (23,210) (27,736)
Profit before tax 5 74,580 82,530
Income tax expense 10 (26,577) (21,481)
---------------------------------------------------------------------- ------- ----------- -----------
Profit for the year 5 48,003 61,049
---------------------------------------------------------------------- ------- ----------- -----------
Other comprehensive income:
Items that will never be reclassified subsequently to profit and loss
Post-employment benefits 351 (1,168)
Items that are or may be reclassified subsequently to profit and loss
Exchange differences arising on translation of foreign operations (51,824) (11,137)
Effective portion of changes in fair value of derivatives (35) 689
---------------------------------------------------------------------- ------- ----------- -----------
Other comprehensive expense for the year (51,508) (11,616)
---------------------------------------------------------------------- ------- ----------- -----------
Total comprehensive income/(expense) for the year (3,505) 49,433
---------------------------------------------------------------------- ------- ----------- -----------
Profit for the period attributable to:
Equity holders of parent 38,712 46,852
Non-controlling interests 9,291 14,197
---------------------------------------------------------------------- ------- ----------- -----------
48,003 61,049
---------------------------------------------------------------------- ------- ----------- -----------
Total comprehensive income/(expense) for the period attributable to:
Equity holders of parent 9,064 40,030
Non-controlling interests (12,569) 9,403
---------------------------------------------------------------------- ------- ----------- -----------
(3,505) 49,433
---------------------------------------------------------------------- ------- ----------- -----------
Earnings per share
Basic and diluted 12 109.5c 132.5c
---------------------------------------------------------------------- ------- ----------- -----------
Consolidated Balance Sheet
as at 31 December 2020
As at As at
31 December 31 December
2020 2019
Notes US$'000 US$'000
Non-current assets
Goodwill 13,14 13,429 14,090
Right-of-use assets 15 149,278 189,011
Other intangible assets 16 16,967 22,313
Property, plant and equipment 17 579,138 627,049
Deferred tax assets 25 29,716 31,820
Investment in joint ventures 19 26,185 30,334
Related party loans 34 30,460 30,132
Recoverable taxes 23 11,006 26,501
Other non-current assets 27 4,905 9,407
Other trade receivables 22 9 354
------------------------------------------------------- ----- ----------- -----------
861,093 981,011
------------------------------------------------------- ----- ----------- -----------
Current assets
Inventories 21 11,764 10,507
Financial assets at fair value through profit and loss 20 347,464 298,840
Trade and other receivables 22 47,807 56,743
Recoverable taxes 23 22,479 25,547
Cash and cash equivalents 63,255 68,979
------------------------------------------------------- ----- ----------- -----------
492,769 460,616
------------------------------------------------------- ----- ----------- -----------
Total assets 1,353,862 1,441,627
------------------------------------------------------- ----- ----------- -----------
Current liabilities
Trade and other payables 26 (47,298) (56,608)
Tax liabilities (114) (496)
Lease liabilities 15.2 (18,192) (21,938)
Bank overdrafts and loans 24 (58,672) (36,636)
------------------------------------------------------- ----- ----------- -----------
(124,276) (115,678)
------------------------------------------------------- ----- ----------- -----------
Net current assets 368,493 344,938
------------------------------------------------------- ----- ----------- -----------
Non-current liabilities
Bank loans 24 (283,989) (298,342)
Post-employment benefits 36 (1,641) (2,369)
Deferred tax liabilities 25 (50,987) (52,525)
Provisions for tax, labour and civil cases 27 (9,560) (14,643)
Lease liabilities 15 (139,702) (172,210)
------------------------------------------------------- ----- ----------- -----------
(485,879) (540,089)
------------------------------------------------------- ----- ----------- -----------
Total liabilities (610,155) (655,767)
------------------------------------------------------- ----- ----------- -----------
Net assets 743,707 785,860
------------------------------------------------------- ----- ----------- -----------
Capital and reserves
Share capital 28 11,390 11,390
Retained earnings 603,996 588,160
Capital reserves 31,991 31,991
Translation and hedging reserve (91,595) (61,748)
------------------------------------------------------- ----- ----------- -----------
Equity attributable to equity holders of the parent 555,782 569,793
Non-controlling interests 187,925 216,067
------------------------------------------------------- ----- ----------- -----------
Total equity 743,707 785,860
------------------------------------------------------- ----- ----------- -----------
The accounts were approved by the Board 12 March 2021. The
accompanying notes are part of this Consolidated Balance Sheet.
F. Beck K. W. Middleton
Director Director
Consolidated Statement of Changes in Equity
for the year ended 31 December 2020
Hedging Attributable
and to equity Non-
Share Retained Capital Translation holders of controlling Total
capital earnings reserves reserve the parent interests equity
For the year ended 31 December 2019 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 January 2019 11,390 566,678 31,760 (55,603) 554,225 223,484 777,709
Currency translation adjustment - - - (6,546) (6,546) (4,591) (11,137)
Post-employment benefits (note 36) - (677) - - (677) (491) (1,168)
Effective portion of changes in fair
value of derivatives - - - 401 401 288 689
Profit for the year - 46,852 - - 46,852 14,197 61,049
Total comprehensive income/(expense)for
the year - 46,175 - (6,145) 40,030 9,403 49,433
Dividends - (24,754) - - (24,754) (17,428) (42,182)
Tax incentives - - 231 - 231 166 397
Share options exercised in subsidiary
(note 28) - 61 - - 61 72 133
Share based payment expense (note 6) - - - - - 370 370
Balance at 31 December 2019 11,390 588,160 31,991 (61,748) 569,753 216,067 785,860
For the year ended 31 December 2020
Balance at 1 January 2020 11,390 588,160 31,991 (61,748) 569,753 216,067 785,860
Currency translation adjustment - - - (29,827) (29,827) (21,997) (51,824)
Post-employment benefits (note 36) - 199 - - 199 152 351
Effective portion of changes in fair
value of derivatives - - - (20) (20) (15) (35)
Profit for the year - 38,712 - - 38,712 9,291 48,003
Total comprehensive income/(expense)
for the year - 38,911 - (29,847) 9,064 (12,569) (3,505)
Dividends - (24,754) - - (24,754) (17,455) (42,209)
Tax incentives - - - - - 19 19
Share options exercised in subsidiary
(note 28) - 1,679 - - 1,679 1,657 3,336
Share based payment expense (note 6) - - - - - 206 206
Balance at 31 December 2020 11,390 603,996 31,991 (91,595) 555,782 187,925 743,707
Share capital
The Group has one class of ordinary share which carries no right
to fixed income.
Capital reserves
The capital reserves arise principally from transfers from
profit and loss reserve to capital reserves made in the Brazilian
subsidiaries arising in the following circumstances:
(a) profits of the Brazilian subsidiaries and Brazilian holding company which in prior periods
were required by law to be transferred to capital reserves and other profits not available
for distribution; and
(b) Wilson Sons bye-laws require the company to credit an amount equal to 5% of the company's
net profit to a retained earnings account to be called legal reserve until such amount equals
20% of the Wilson Sons share capital.
Hedging and translation reserve
The hedging and translation reserve arises from exchange
differences on the translation of operations with a functional
currency other than US Dollars and effective movements on
designated hedging relationships.
Amounts in the statement of changes of equity are stated net of
tax where applicable.
Consolidated Cash Flow Statement
for the year ended 31 December 2020
Year ended Year ended
31 December 31 December
2020 2019
Notes US$'000 US$'000
------------------------------------------------------------------------------------ ------ ----------- -----------
Net cash inflow from operating activities 29 105,700 106,309
------------------------------------------------------------------------------------ ------ ----------- -----------
Investing activities
Interest received 1,749 3,379
Dividends received from trading investments 7 3,327 2,781
Proceeds on disposal of trading investments 20 45,154 55,882
Purchase of trading investments 20 (63,723) (35,489)
Proceeds on disposal of property, plant and equipment 1,259 871
Purchase of property, plant and equipment (58,360) (85,686)
Purchase of intangible assets 16 (1,085) (1,545)
Capital increase - Wilson, Sons Ultratug Participações S.A 17 (23) (3,527)
------------------------------------------------------------------------------------ ------ ----------- -----------
Net cash used in investing activities (71,702) (63,334)
------------------------------------------------------------------------------------ ------ ----------- -----------
Financing activities
Dividends paid 11 (24,754) (24,754)
Dividends paid to non-controlling interests in subsidiary (17,455) (17,428)
Repayments of borrowings (25,725) (85,856)
Payments of lease liabilities (6,345) (6,424)
New bank loans drawn down 51,455 113,629
Derivative payments - (339)
Net cash inflow arising from issue of new shares in subsidiary under employee stock
option
scheme 29, 31 3,336 133
------------------------------------------------------------------------------------ ------ ----------- -----------
Net cash used in financing activities (19,488) (21,039)
------------------------------------------------------------------------------------ ------ ----------- -----------
Net increase in cash and cash equivalents 14,510 21,936
------------------------------------------------------------------------------------ ------ ----------- -----------
Cash and cash equivalents at beginning of year 68,979 43,801
------------------------------------------------------------------------------------ ------ ----------- -----------
Effect of foreign exchange rate changes (20,234) 3,242
------------------------------------------------------------------------------------ ------ ----------- -----------
Cash and cash equivalents at end of year 63,255 68,979
------------------------------------------------------------------------------------ ------ ----------- -----------
Notes to the Accounts
for the year ended 31 December 2020
1. General Information
The financial statements have been prepared on the historical
cost basis except for the revaluation of financial investments. The
accounting policies are consistent with those set out in the 2019
Group annual report except for new standards and interpretations
adopted .
2. Significant accounting policies and critical accounting judgements
Basis of accounting
The financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRSs") adopted for
use by the International Accounting Standards Board ("IASB").
The financial statements have been prepared on the historical
cost basis, except for the revaluation of financial instruments and
share-based payments liabilities that are measured at fair value.
The principal accounting policies adopted are set out below.
Going concern
The Group has considerable financial resources including US$63.3
million in cash and cash equivalents and the Group's borrowings
have a long maturity profile. The Group's business activities
together with the factors likely to affect its future development
and performance are set out in the Chairman's Statement, Financial
Report and Investment Manager's Report. The financial position,
cash flows and borrowings of the Group are set out in the Financial
Review on pages 6 to 16. In addition, note 35 to the financial
statements includes details of its financial instruments and
hedging activities and its exposure to credit risk and liquidity
risk. Details of the Group's borrowings are set out in note 24.
The Group closely monitors and manages its liquidity risk and
does so in a manner that reflects it structure, of two distinct
businesses, being the parent company along with Ocean Wilsons
(Investments) Limited, and Wilson Sons Limited. In performing its
going concern assessment, the Board considered the 15 month period
to 31 March 2022.
Ocean Wilsons Holdings Limited and Ocean Wilsons (Investments)
Limited
The parent company and Ocean Wilson (Investments) Limited have
combined cash and cash equivalents of US$4.6 million and further
highly liquid investments in excess of US$90.0 million as at 31
December 2020. They have no debts but have made commitments in
respect of investment subscriptions amounting to US$45.3 million,
details are provided in note 32. The timing of the investment
commitments may be accelerated or delayed in comparison with those
indicated in note 32. However, the highly liquid investments held
are significantly in excess of the commitments. Neither Ocean
Wilsons, nor Ocean Wilsons (Investments) Limited have made any
commitments or have obligations towards Wilsons Sons and its
subsidiaries and their creditors or lenders. Therefore, in the
unlikely circumstance that Wilsons Sons was to encounter financial
difficulty, the parent company and its subsidiary have no
obligations to provide support and have sufficient cash and other
liquid resources to continue as a going concern on a standalone
basis.
Wilson Sons Limited
Wilson Sons has cash and cash equivalents of US$58.6 million and
further highly liquid investments of US$39.0 million. All of the
debt, as set out in note 24, and all of the lease liabilities, as
set out in note 15, relate to Wilson Sons, and have a long maturity
profile. The debt held by Wilson Sons is subject to covenant
compliance tests as summarised in note 24, which were in compliance
with at 31 December 2020 and are forecast to be complied with
throughout the forecast period.
The covenants are most sensitive to changes in EBITDA, debt
service costs and asset values. The Board reviewed Wilson Sons'
15-month forecasts for the financial year 2021 and the first
quarter of 2022 which included analysis of cash flows and loan
covenant compliance for the forecasting period. Budgets are
compared with prior period actual results and previous forecasts so
as to identify variances and understand the drivers of the changes
and their future impact so as to allow management to take action as
appropriate. Additional market analysis is performed to corroborate
other key assumptions underpinning the forecasts. In preparing the
forecasts consideration has been given to the commitments Wilson
Sons has to its joint ventures in respect of their loan agreements
as set out in note 19 and possible cash outflows these may give
rise to, should the joint ventures breach their loan covenants.
Cash flow and loan covenant compliance forecasts were then
reverse stress tested to understand the headroom available before a
covenant breach occurs or liquidity is exhausted. Consideration was
then given as to whether the principal risks attributable to
Wilsons Sons would give rise to severe downside scenarios that
could cause loan covenant breaches or exhausting of liquidity, such
as significant reductions in revenues. The possibility of these
scenarios happening are considered remote when contemplating Wilson
Sons' financial performance during Brazil's economic crisis in 2015
and 2016 and in the Covid-19 pandemic in 2020 and given the outlook
for the global and Brazilian economies in 2021 and beyond. The
potential impact of Covid-19 has been considered as part of the
going concern assessment. Whilst the going concern assessment does
not indicate it will be necessary, should it required, Wilson Sons
has the ability to delay or cancel forecast capital expenditure in
order to manage liquidity and or loan covenant compliance.
This assessment confirmed that Wilson Sons has adequate cash,
other liquid resources and undrawn credit facilities to enable it
to meet its obligations as they fall due in order to continue its
operations during the going concern forecast period.
Based on the Board's review of Wilson Sons' going concern
assessment and the liquidity and cash flow reviews of the Company
and its subsidiary Ocean Wilsons Investments, the Directors have a
reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable
future. Accordingly, the Directors continue to adopt the going
concern basis in preparing the Annual report and accounts.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) up to 31 December each year (collectively 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 results of subsidiaries acquired or disposed of during the
year are included in the consolidated statement of comprehensive
income from the effective date of acquisition or up to the
effective date of disposal as appropriate. Where necessary,
adjustments are made to the financial statements of subsidiaries to
bring their accounting policies in line with those used by other
members of the Group. All intra-group transactions, balances,
income and expenses are eliminated on consolidation.
Non-controlling interests in the net assets of consolidated
subsidiaries are identified separately from the Group's equity
therein. Non-controlling interests consist of the amount of those
interests at the date of the original business combination and the
non-controlling interest's 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.
Foreign currency
The functional currency for each Group entity is determined as
the currency of the primary economic environment in which it
operates (its functional currency). 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
retranslated at year end exchange rates. Exchange differences
arising on the settlement of monetary items and on the
retranslation of monetary items are included in the statement of
comprehensive income for the period. Non-monetary items that are
measured in terms of historical cost in a foreign currency are not
retranslated.
On consolidation, the statement of comprehensive income of
entities with a functional currency other than US Dollars are
translated into US Dollars, the Group's presentational currency, at
average rates of exchange for the year. Balance sheet items are
translated into US Dollars at year end exchange rates. Exchange
differences arising on consolidation of entities with functional
currencies other than US Dollars are classified as equity and are
recognised in the Group's translation reserve.
Investments in joint ventures
Interests in joint ventures
A joint venture is a contractual agreement where the Group has
rights to the net assets of the contractual arrangement and is not
entitled to specific assets and liabilities arising from the
agreement. Investments in joint venture entities are accounted for
using the equity method. After initial recognition, the financial
statements include the Group's share in the profit or loss for the
year and other comprehensive income of the joint venture until the
date that significant influence or joint control ceases.
Interests in joint operations
A joint operation is a contractual arrangement whereby the Group
and other parties undertake an economic activity that is subject to
joint control which is when the strategic financial and operating
policy decisions relating to the activities require the unanimous
consent of the parties sharing control. The joint operation's
assets and any liabilities incurred jointly with other ventures are
recognised in the financial statements of the relevant entity and
classified according to their nature. The Group's share of the
assets, liabilities, income and expenses of joint operation
entities are combined with the equivalent items in the consolidated
financial statements on a line-by-line basis.
The consolidated financial statements include the accounts of
joint ventures and joint operations which are listed in Note
18.
Employee Benefits
Short-term employee benefits
Obligations of short-term employee benefits are recognised as
personnel expenses as the corresponding service is provided. The
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.
Stock option plan
For equity settled share-based payment transactions, the Group
measures the options granted, and the corresponding increase in
equity, directly at the fair value of the option grant. Subsequent
to initial recognition and measurement, the estimate of the number
of equity instruments for which the service and non-market
performance conditions are expected to be satisfied is revised
during the vesting period. The cumulative amount recognised is
based on the number of equity instruments for which the service and
non-market related vesting conditions are expected to be satisfied.
No adjustments are made in respect of market related vesting
conditions.
Share-based payment transactions
The fair value of the amount payable to an employee regarding
the rights on the valuation of the shares, which is settled in
cash, is recognised as an expense with a corresponding increase in
liabilities during the period that the employee is unconditionally
entitled to payment. The liability is remeasured at each balance
sheet date and at settlement date based on the fair value of the
rights on valuation. Any changes in the fair value of the liability
are recognised in the statement of comprehensive income as
personnel expenses.
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 on the net amount of defined
benefit liabilities for the period by multiplying them by the
discount rate used to measure the defined health benefit
obligation. Defined benefit liabilities for the period take into
account the balance at the beginning of the period covered by the
financial statements and any changes in the defined health benefit
net liability 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 the statement of
comprehensive income.
When the benefits of a plan are increased, the portion of the
increased benefit relating to past services rendered by employees
is recognised immediately in the statement of comprehensive income.
The Group recognises gains and losses on the settlement of a
defined health benefit plan when settlement occurs.
Other long-term employee benefits
The Group's net obligation in respect of other long-term
employee benefits is the amount of future benefit that employees
receive in return for the service rendered in the current year and
previous years. That benefit is discounted to determine its present
value. Any revision to the calculations is recognised in the
statement of comprehensive income.
Benefits of termination of employment relationship
The benefits of termination of an employment relationship are
recognised as an expense when the Group can no longer withdraw the
offer of such benefits and when the Group recognises the costs of
restructuring. If payments are settled after 12 months from the
balance sheet date, then they are discounted to their present
values.
Taxation
Tax expense for the period comprises current tax and deferred
tax.
The current tax is based on taxable profit for the year. Taxable
profit differs from profit as reported in the consolidated
statement of 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 the tax expected to be payable or recoverable on
temporary differences and tax losses (i.e., differences between the
carrying amounts of assets and liabilities in the financial
statements and the corresponding tax basis used in the computation
of taxable profit). Deferred tax liabilities are generally
recognised for all taxable temporary differences except where 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 assets arising from
deductible temporary differences associated with such investments
and interests are only recognised to the extent that it is probable
that there will be sufficient taxable profits against which to
utilise the benefits of the temporary differences and they are
expected to reverse in the foreseeable future. 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
sufficient taxable profits will be available to allow all or part
of the asset to be recovered. Such deferred tax assets and
liabilities are not recognised if the temporary difference arises
from goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the
accounting profit.
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 realised, 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
liabilities and assets reflects the tax consequences that would
follow from the manner in which the Group expects, at the end of
the reporting period, to recover or settle the carrying amount of
its assets and liabilities.
The Company offsets current tax assets against current tax
liabilities when these items are in the same entity and relate to
income taxes levied by the same taxation authority and the taxation
authority permits the Company to make or receive a single net
payment. In the consolidated financial statements, a deferred tax
asset of one entity in the Group cannot be offset against a
deferred tax liability of another entity in the Group as there is
no legally enforceable right to offset tax assets and liabilities
between Group companies.
Current and deferred tax are recognised as an expense or income
in profit or loss, except when they relate to items charged or
credited directly to equity, in which case the tax is also taken
directly to equity. Current tax is based on assessable profit for
the year.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and any accumulated impairment losses.
Depreciation is charged so as to write off the cost or valuation
of assets, other than freehold land or assets under construction
over their estimated useful lives, using the straight-line method
as follows:
Freehold Buildings: 25 to 60 years
Leasehold Improvements: Lower of the rental period or useful life considering residual values
Floating Craft: 25 years
Vehicles: 5 years
Plant and Equipment: 5 to 30 years
The estimated useful lives, residual values and depreciation
method are reviewed at the end of each reporting period with the
effect of any changes in estimate accounted for on a prospective
basis.
Assets in the course of construction are carried at cost less
any recognised impairment loss. Costs include professional fees and
borrowing costs for qualifying assets. Depreciation of these
assets, on the same basis as other property assets, commences when
the assets are ready for intended use.
Assets held under leases are depreciated 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 the asset shall be fully depreciated
over the shorter of the lease term and its useful life.
Dry docking costs are capitalised and depreciated over the
period in which the economic benefits are received which is the
period of the next scheduled dry docking or the end of the vessel's
useful life. Docking costs are included in the floating craft
category.
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
the disposal or retirement of an asset is determined as the
difference between the sales proceeds and the carrying amount of
the asset and is recognised in the statement of comprehensive
income.
Subsequent expenditure is capitalised only when it is probable
that the future economic benefits associated with the expenditure
will flow to the Group.
Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for
their intended use or sale, are added to the cost of those assets
until such time as the assets are substantially ready for their
intended use or sale. Investment income earned on the temporary
investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for
capitalisation. All other borrowing costs are recognised in the
profit or loss in the period in which they are incurred.
Goodwill
Goodwill arising on an acquisition of a business is carried at
cost as established at the date of acquisition of the business less
accumulated impairment losses.
Sale of non-controlling interest
Non-controlling interests in the net assets of consolidated
subsidiaries are identified separately from the Group's equity
therein. Non-controlling interests consist of the amount of those
interests at the date of the original business combination and the
non-controlling interest's share of changes in profit, other
comprehensive income and equity since the date of the
combination.
Intangible assets
Intangible assets with finite useful lives that are acquired
separately are carried at cost less accumulated amortisation and
accumulated impairment losses. Amortisation is recognised on a
straight-line basis over their estimated useful lives as follows.
The estimated useful life and amortisation method are reviewed at
the end of each annual reporting period, with the effect of any
changes in estimate being accounted for on a prospective basis.
There is no indefinite life intangible asset.
Concession rights: 10 to 33 years
Computer software: 3 to 5 years
An intangible asset is derecognised on disposal or when no
future economic benefits are expected from use or disposal. Gains
or losses arising from derecognition are measured as the difference
between the net disposal proceeds and the carrying amount of the
asset and are recognised in the income statement when the asset is
derecognised.
Impairment
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. An impairment loss
is recognised if the carrying amount of an asset or cash-generating
unit (CGU) exceeds its recoverable amount.
The recoverable amount of an asset or CGU is the greater of its
value in use and its fair value less costs to sell. In assessing
value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks
specific to the asset or CGU. 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 CGUs. Subject to an operating
segment ceiling test, CGUs to which goodwill has been allocated are
aggregated so that the level at which impairment testing is
performed reflects the lowest level at which goodwill is monitored
for internal reporting purposes. Goodwill acquired in a business
combination is allocated to groups of CGUs that are expected to
benefit from the synergies of the combination.
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. Assets
that are subject to amortisation or depreciation are reviewed for
impairment whenever events or changes in circumstances indicate
that their carrying amounts may not be recoverable.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost comprises direct materials, spare parts and, where
applicable, direct labour costs and those overheads that have been
incurred in bringing the inventories to their present location and
condition. Net realisable value represents the estimated selling
price less all estimated costs of completion and costs to be
incurred in marketing, selling and distribution.
Financial instruments
Financial assets and liabilities are recognised in the Group's
balance sheet when the Group becomes a party to the contractual
provisions of the instrument.
a. Financial assets
Financial assets are classified at initial recognition as
subsequently measured at amortised cost, fair value through profit
or loss (FVTPL) and fair value through other comprehensive income
(OCI). The classification of financial assets at initial
recognition depends on the financial asset's contractual cash flow
and the Group's business model for managing them.
In order for a financial asset to be classified and measured at
amortised cost or fair value through OCI, it needs to give rise to
cash flows that are solely payments of principal and interest
(SPPI) on the principal amount outstanding. This assessment is
referred to as the SPPI test and is performed at an instrument
level.
The Group's business model for managing financial assets refers
to how it manages its financial assets in order to generate cash
flows. The business model determines whether cash flows will result
from collecting contractual cash flows, selling the financial
assets, or both.
Financial assets at amortised cost
The following instruments have been classified and measured at
amortised cost using the effective interest method, less any
impairment loss:
-- Cash and Cash Equivalents/Investments: Cash and cash equivalents
comprise cash on hand and other short-term highly liquid cash equivalents
with maturities of less than 90 days which are subject to an insignificant
risk of changes in value and Investments comprise cash in hand
and other investments with more than 90 days of maturity.
-- Trade Insurance and Other Receivables: Trade receivables, insurance
receivables and other receivables are stated at the present value
of the amounts, reduced by any impairment loss.
The effective interest method is a method of calculating the
amortised cost of a debt instrument and of allocating interest
income over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash receipts
(including all fees paid or received that form an integral part of
the effective interest rate, transaction costs and other premiums
or discounts) through the expected life of the debt instrument, or
where appropriate, a shorter period, to the net carrying amount on
initial recognition.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include
financial assets held for trading, financial assets designated upon
initial recognition at fair value through profit or loss or
financial assets mandatorily required to be measured at fair value.
Financial assets at fair value through profit or loss are carried
in the balance sheet at fair value with net changes in fair value
recognised in the statement of profit or loss. Changes in fair
value are recognised in the profit or loss under "financial income"
or "financial expenses", depending on the results obtained.
Impairment of financial assets
Financial assets that are measured at amortised cost are
assessed for indicators of impairment at the end of each reporting
period. Financial assets are considered to be impaired when there
is objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the
estimated future cash flows of the investment have been
affected.
Objective evidence of impairment could include:
-- Significant financial difficulty of the issuer or counterparty;
-- Default or delinquency in interest or principal payments;
-- It becoming probable that the borrower will enter bankruptcy
or financial re-organisation; or
-- The disappearance of an active market for that financial
asset due to financial difficulties.
For trade receivables, the Group applies a simplified approach
in calculation an allowance for expected credit losses. Details are
disclosed in Note 21.
For financial assets carried at amortised cost, the amount of
the impairment loss recognised is the difference between the
asset's carrying amount and the present value of estimated future
cash flows, reflecting the impact of collateral and guarantees,
discounted at the financial asset's original effective interest
rate.
The carrying amount of the financial asset is reduced by the
impairment loss directly for all financial assets with the
exception of trade receivables where the carrying amount is reduced
through the use of an allowance account.
When a trade receivable is considered uncollectible it is
written off against the allowance account. Subsequent recoveries of
amounts previously written off are credited against the allowance
account. Changes in the carrying amount of the allowance account
are recognised in profit or loss.
Derecognition of financial assets
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire or when
it transfers the financial asset and substantially all the risks
and rewards of ownership of the asset to another entity. If the
Group neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred
asset, the Group recognises its retained interest in the asset and
an associated liability for amounts it may have to pay. If the
Group retains substantially all the risks and rewards of ownership
of a transferred financial asset, the Group continues to recognise
the financial asset and also recognises a collateral borrowing for
the proceeds received.
b. Financial liabilities
Financial liabilities are classified as either "FVTPL" or "other
financial liabilities". Financial liabilities are classified as at
FVTPL when the financial liability is either held for trading or it
is designated as at FVTPL. Other financial liabilities are
initially measured at fair value, net of transaction costs and then
subsequently measured at amortisation cost using the effective
interest method with interest expense recognised on an effective
yield basis.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
through the expected life of the financial liability, or (where
appropriate) a shorter period, to the net carrying amount on
initial recognition.
There are no financial liabilities classified at FVTPL.
Other financial liabilities
-- Bank loans: Interest-bearing bank loans are recorded at the proceeds
received net of direct issue costs. Finance charges including
premiums payable on settlement or redemption and direct issue
costs are accounted for on the accruals basis to the income statement
using the effective interest method and are added to the carrying
amount of the instrument to the extent that they are not settled
in the period in which they arise.
-- Trade Payables: Trade payables and other amounts payable are measured
at fair value, net of transaction costs.
Derecognition of financial liabilities
The Group derecognises financial liabilities only when the
Group's obligations are discharged, cancelled or they expire.
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. When some
or all of the economic benefits required to settle a provision are
expected to be recovered from a third party, a receivable is
recognised as an asset if it is virtually certain that
reimbursement will be received, and the amount of the receivable
can be measured reliably.
Revenue
Revenue is measured at fair value of the consideration received
or receivable for goods and services provided in the normal course
of business net of trade discounts and other sales related
taxes.
Shipyard revenue
Revenue related to services and construction contracts is
recognised throughout the period of the project when the work in
proportion to the stage of completion of the transaction contracted
has been performed .
Port terminals revenue
Revenue from providing container movement and associated
services is recognised on the date that the services have been
performed.
Oil & Gas support base revenue
Revenue from providing vessel turnarounds is recognised on the
date that the services have been performed.
Towage revenue
Revenue from towage services is recognised on the date that the
services have been performed.
Ship agency and logistics revenues
Revenue from providing agency and logistics services is
recognised when the agreed services have been performed.
Interest income
Interest income is recognised when it is probable that the
economic benefits will flow to the Group and the amount of revenue
can be measured reliably. Interest income is accrued on a time
basis by reference to the principal outstanding and at the
effective interest rate applicable.
Dividend income
Dividend income from investments is recognised when the
shareholders right to receive payment has been established.
Construction contracts
Construction contracts in progress represent the gross amount
expected to be collected from customers for contract work performed
to date. When the outcome of a construction contract can be
estimated reliably, revenue and costs are recognised by reference
to the stage of completion of the contract activity at the end of
the reporting period, measured based on the proportion of contract
costs incurred for work performed to date relative to the estimated
total contract costs, except where this would not be representative
of the stage of completion. Variations in contract work, claims and
incentive payments are included to the extent that the amount can
be measured reliably, has been agreed with the customer and
consequently is considered probable.
When the outcome of a construction contract cannot be estimated
reliably, contract revenue is recognised to the extent it is
probable contract costs incurred will be recoverable. Contract
costs are recognised as expenses in the period in which they are
incurred.
When it is probable that total contract costs will exceed total
contract revenue, the expected loss is recognised as an expense
immediately.
Construction contracts in progress are presented as part of
trade and other payables and trade and other receivables in the
statement of financial position for all contracts in which costs
incurred plus recognised profits exceed progress billings and
recognised losses.
Leased assets
The Group as a lessee
For any new contracts, the Group considers whether a contract
is, or contains a lease. A lease is defined as 'a contract, or part
of a contract, that conveys the right to use an asset (the
underlying asset) for a period of time in exchange for
consideration'. To apply this definition the Group assesses whether
the contract meets three key criteria:
-- The contract contains an identified asset, which is either explicitly
identified in the contract or implicitly specified by being identified
at the time the asset is made available to the Group;
-- The Group has the right to obtain substantially all of the economic
benefits from use of the identified asset throughout the period of
use, considering its rights within the defined scope of the contract;
and
-- The Group has the right to direct the use of the identified asset
throughout the period of use. The Group assesses whether it has the
right to direct 'how and for what purpose' the asset is used throughout
the period of use.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use
asset and a lease liability on the balance sheet. The right-of-use
asset is measured at cost, which is made up of the initial
measurement of the lease liability, any initial direct costs
incurred by the Group, an estimate of any costs to dismantle and
remove the asset at the end of the lease, and any lease payments
made in advance of the lease commencement date (net of any
incentives received).
The Group measures the lease liability at the present value of
the lease payments unpaid at that date using the interest rate
implicit in the lease, if that rate can be readily determined. If
that rate cannot be readily determined, the lessee shall use the
lessee'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
single discount rate.
Lease payments included in the measurement of the lease
liability are made up of 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 expensed as incurred.
In accessing certain commitments related to the rent of
buildings, the Group cannot readily determine the lease term as
these can be terminated with no penalty every year. For these
cases, the Group defines a standard lease term of 5 years. For
machinery which the Group cannot readily determine the lease term,
the Group defines the lease term as the useful life of the
machinery.
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.
When the lease liability is revised, the corresponding
adjustment is reflected in the right-of-use asset. When the
right-of-use asset is reduced to zero, the amount is recognised in
the statement of comprehensive income.
The Group amortises the right-of-use assets on a straight-line
basis from the lease commencement date to the earlier of the end of
the useful life of the right-of-use asset or the end of the lease
term.
The Group has elected to account for short-term leases and
leases of low-value assets using the practical expedients method.
Instead of recognising a right-of-use asset and lease liability,
the payments in relation to these are recognised as an expense in
the statement of comprehensive income on a straight-line basis over
the lease term.
Finance income and finance costs
Finance income comprises interest income on funds invested, fair
value gains on financial assets recognised through profit or loss
and gains on hedging instruments that are recognised in profit or
loss. Interest income is recognised as it accrues in the profit or
loss using the effective interest method.
Finance costs comprise interest expense on borrowings, unwinding
of the discount on provisions and deferred consideration, fair
value losses on financial assets at fair value through profit or
loss and contingent consideration losses on hedging instruments
that are recognised in profit or loss.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of the consolidated financial statements in
conformity with IFRS requires management to make judgements,
estimates and assumptions that affect the application of 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,
which are described above, management has made the following
judgements that have the most significant effect on the amounts
recognised in the financial statements as mentioned below.
a. Provisions for tax, labour and civil risks - Judgement
In the normal course of business in Brazil the Group is exposed
to local legal cases. Provisions for legal cases are made when the
Group's management, together with their legal advisors, consider
the probable outcome is a financial settlement against the Group.
Provisions are measured at managements' best estimate of the
expenditure required to settle the obligation based upon legal
advice received. For labour claims, the provision is based on prior
experience and management's best knowledge of the relevant facts
and circumstances.
The amount of provisions for tax, labour and civil risks at the
end of the reporting period was US$9.6 million (2019: US$14.6
million). Details are disclosed in Note 26.
b. Impairment loss on non-financial assets - Judgement and estimation
Impairment losses occur when book value of an asset or cash
generating unit exceeds its recoverable value, which is the highest
of fair value less selling costs and value in use. Calculation of
fair value less selling costs is based on information available on
similar assets' selling transactions or market prices less
additional costs to dispose of the asset. The value-in-use
calculation is based on the discounted cash flow model. The
recoverable value of the cash-generating unit is defined as the
higher of the fair value less sales costs and value in use.
The main non-financial assets for which this assessment was made
are goodwill and the tangible assets of offshore support bases.
Goodwill
Goodwill is associated with two cash-generating units "CGU"
(Tecon Salvador and Tecon Rio Grande) in Wilson Sons.
The carrying amount of goodwill at the end of the reporting
period was US$13.4 million (2019: US$14.1 million). In the prior
year, an impairment was identified on the Brasco CGU and a charge
of $12.7 million was recognized, reducing the goodwill of the
Brasco CGU to zero. There was no impairment to the carrying value
of goodwill in 2020. After completing annual impairment tests, the
level of headroom for Tecon Grand Rio Grande and Tecon Salvadoris
was significant. There is no plausible change in forecast
assumptions to give rise to any impairment. Details are disclosed
in Note 13.
Tangible assets
Due to the impairment loss recognised in 2019 attributed to
offshore support bases and the level of headroom for the Brasco
CGU, the Company expanded the impairment procedures for the
tangible assets of this CGU. Details are disclosed in Note 13.
c. Valuation of unquoted investments - Judgement and estimation
The fair value of financial assets and liabilities that are not
traded in an active market is determined using valuation
techniques. The Group uses a variety of methods and makes
assumptions that are based on market conditions existing at each
reporting date. Valuation techniques used include the use of
comparable recent arm's length transactions, reference to other
instruments that are substantially the same, discounted cash flow
analysis, option pricing models and other valuation techniques
commonly used by market participants making the maximum use of
market inputs and relying as little as possible on entity-specific
inputs.
Through the Investment Manager, the Directors have considered
the valuation of investments in particular Level 2 and 3 assets and
they consider that the position taken represents the best estimate
at the balance sheet date.
The amount of Level 3 assets at the end of the reporting period
was US$99.1 million (2019: US$101.3 million). The amount of Level 2
assets at the end of the reporting period was US$189.1 million
(2019: US$165.0 million). Details are disclosed in note 35.
Changes in accounting policies and disclosures
Several amendments and interpretations apply for the first time
in 2020, but do not have an impact on the consolidated financial
statements of the Group. The Group adopted the following amendment
early for the current year.
Amendments to IFRS 16 Covid-19 Related Rent Concessions
On 28 May 2020, the IASB issued Covid-19-Related Rent
Concessions - amendment to IFRS 16 Leases. The amendments provide
relief to lessees from applying IFRS 16 guidance on lease
modification accounting for rent concessions arising as a direct
consequence of the Covid-19 pandemic. As a practical expedient, a
lessee may elect not to assess whether a Covid-19 related rent
concession from a lessor is a lease modification. A lessee that
makes this election accounts for any change in lease payments
resulting from the Covid-19 related rent concession the same way it
would account for the change under IFRS 16, if the change were not
a lease modification.
The amendment applies to annual reporting periods beginning on
or after 1 June 2020. Earlier application is permitted and the
Group adopted the amendment in 2020. This amendment impacted
US$0.02 million in discounts obtained and US$0.2 million in payment
deferrals from 2020 to 2021.
Other amendments
The following new or amended standards did not have a
significant impact on the Group's consolidated financial
statements:
Amendments to IFRS 3
The amendments to IFRS3 clarify that, to be considered a
business, an integrated set of activities and assets must include,
at least, an inflow of funds and a substantive process that
together contribute significantly to the capacity to generate the
outflow of funds. Moreover, it clarified that a business can exist
without including all the inflows of funds and processes necessary
to create outflows of funds. These amendments had no impact on the
Company's individual and consolidated financial statements but may
impact future periods if the Group enters into any business
combination.
Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate Benchmark
Reform
The amendments to IFRS 9 and IAS 39 Financial Instruments:
Recognition and Measurement provide a number of reliefs, which
apply to all hedging relationships that are directly affected by
interest rate benchmark reform. A hedging relationship is affected
if the reform gives rise to uncertainty about the timing and/or
amount of benchmark-based cash flows of the hedged item or the
hedging instrument. These amendments have no impact on the
consolidated financial statements of the Group as it does not have
any interest rate hedge relationships.
Amendments to IAS 1 and IAS 8 Definition of Material
The amendments provide a new definition of material that states,
"information is material if omitting, misstating or obscuring it
could reasonably be expected to influence decisions that the
primary users of general purpose financial statements make on the
basis of those financial statements, which provide financial
information about a specific reporting entity." The amendments
clarify that materiality will depend on the nature or magnitude of
information, either individually or in combination with other
information, in the context of the financial statements. A
misstatement of information is material if it could reasonably be
expected to influence decisions made by the primary users. These
amendments had no impact on the consolidated financial statements
of, nor is there expected to be any future impact to the Group.
Conceptual Framework for Financial Reporting issued on 29 March
2018.
The revised standard outlines some new concepts, provides
updated definitions and recognition criteria for assets and
liabilities and clarifies some important concepts. These changes
did not affect the financial statements of the Company.
Standards issued but not yet effective
The Group has listed all new standards and interpretations
issued, but not yet effective. The Group will not early adopt any
new or amended standards but will adopt when required to do so. The
Group is assessing the impact that these new standards and
interpretations may have at this time.
-- Insurance Contracts (IFRS 17), effective for periods beginning on
or after 1 January 2023;
-- Reference to Conceptual Framework - Amendments to IFRS 3, effective
for periods beginning on or after 1 January 2022;
-- Amendments to IAS 1: Classification of Liabilities as Current or
Non-current, effective for periods beginning on or after 1 January
2023;
-- Property, Plant and Equipment: Proceeds before Intended Use - Amendments
to IAS 16, effective for periods beginning on or after 1 January
2022;
-- Onerous Contracts - Costs of Fulfilling a Contract - Amendments
to IAS 37, effective for periods beginning on or after 1 January
2022;
-- IFRS 1 First-time Adoption of International Financial Reporting
Standards - Subsidiary as a first-time adopter, effective for periods
beginning on or after 1 January 2022;
-- IFRS 9 Financial Instruments - Fees in the '10 per cent' test for
derecognition of financial liabilities, effective for periods beginning
on or after 1 January 2022; and
-- IAS 41 Agriculture - Taxation in fair value measurements, effective
for periods beginning on or after 1 January 2022 .
3. Revenue
An analysis of the Group's revenue is as follows:
Year ended Year ended
31 December 31 December
2020 2019
US$'000 US$'000
---------------------------------------------------- ----------- -----------
Sales of services 352,792 406,128
Revenue from construction contracts - -
---------------------------------------------------- ----------- -----------
352,792 406,128
---------------------------------------------------- ----------- -----------
Income from underlying investment vehicles (note 7) 3,327 2,781
Other investment income (note 8) 1,644 6,039
---------------------------------------------------- ----------- -----------
357,763 414,948
---------------------------------------------------- ----------- -----------
The following is an analysis of the Group's revenue from
continuing operations for the period:
3.1 Disaggregated revenue information
Set out below is the disaggregation of the Group's revenue from
contracts with customers.
Year ended Year ended
31 December 31 December
2020 2019
US$'000 US$'000
Towage and ship agency services
Harbour manoeuvres 159,134 148,330
Special operations 14,462 11,194
Ship agency 8,122 9,241
-------------------------------- ----------- -----------
Total 181,718 168,765
-------------------------------- ----------- -----------
Port terminals
-------------------------------- ----------- -----------
Container handling 71,401 92,341
Warehousing 28,727 33,545
Ancillary services 18,534 21,607
Oil & Gas support bases 8,045 19,357
Other services 13,514 20,317
-------------------------------- ----------- -----------
Total 140,221 187,167
-------------------------------- ----------- -----------
Logistics
Logistics 28,616 45,691
-------------------------------- ----------- -----------
Total 28,616 45,691
-------------------------------- ----------- -----------
Shipyard
Shipyard construction contracts -
Repairs/dry-docking 2,237 4,505
-------------------------------- ----------- -----------
Total 2,237 4,505
-------------------------------- ----------- -----------
Other services
Other services -
-------------------------------- ----------- -----------
Total 352,792 406,128
-------------------------------- ----------- -----------
Year ended Year ended
31 December 31 December
2020 2019
US$'000 US$'000
------------------------------ ----------- -----------
Timing of revenue recognition
At a point of time 350,555 401,623
Over time 2,237 4,505
------------------------------ ----------- -----------
352,792 406,128
------------------------------ ----------- -----------
3.2 Contract balance
Trade receivables are generally received within 30 days. The
carrying amount of operational trade receivables at the end of the
reporting period was US$40.6 million (2019: US$47.2 million). These
amounts include US$10.4 million (2019: US$12.4 million) of contract
assets (unbilled accounts receivables).
There were no contract liabilities as at 31 December 2020.
3.3 Performance obligations
Information about the Group's performance obligations are
summarised below:
Performance obligation When performance obligation is typically satisfied
-------------------------------- --------------------------------------------------
Towage and agency services
Harbour Manoeuvres At a point in time
Special Operations At a point in time
Ship Agency At a point in time
-------------------------------- --------------------------------------------------
Port Terminals
Container handling At a point in time
Warehousing At a point in time
Ancillary services At a point in time
Oil & Gas support bases At a point in time
Other services At a point in time
-------------------------------- --------------------------------------------------
Logistics
Logistics At a point in time
-------------------------------- --------------------------------------------------
Shipyard
Ship construction contracts Over time
Technical assistance/dry-docking Over time
-------------------------------- --------------------------------------------------
The majority of the Group's performance obligations are
satisfied at a point in time, upon delivery of the service and
payment is generally due within 30 days from completion of the
service.
The performance obligation of ship construction contracts,
technical assistance and drydocking is satisfied over time and the
revenue related to these contracts is recognised when the work in
proportion to the stage of completion of the transaction contracted
has been performed. On 31 December 2020, there were no warranties
or refund obligations associated with ship construction
contracts.
There are no significant judgements in the determination of when
performance obligations are typically satisfied.
All revenue is derived from continuing operations.
4. Business and geographical segments
Business segments
Ocean Wilsons has two reportable segments: maritime services and
investments. These segments report their financial and operational
data separately to the Board. The Board considers these segments
separately when making business and investment decisions. The
maritime services segment provides towage and ship agency, port
terminals, offshore, logistics and shipyard services in Brazil. The
investment segment holds a portfolio of international investments.
Segment information relating to these businesses is presented
below.
Maritime
Services Investment Unallocated Consolidated
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2020 2020 2020 2020
For the year ended 31 December 2020 US$'000 US$'000 US$'000 US$'000
--------------------------------------------------------- ----------- ----------- ----------- --------------
Revenue 352,792 - - 352,792
Result
Segment result 80,279 (3,315) (2,508) 74,456
Share of results of joint ventures (4,142) - - (4,142)
Return on investment portfolio at fair value through P&L - 33,383 - 33,383
Other investment income 1,644 - - 1,644
Finance costs (23,210) - - (23,210)
Foreign exchange (losses)/profit on monetary items (7,444) (12) (95) (7,551)
--------------------------------------------------------- ----------- ----------- ----------- ------------
Profit/(loss) before tax 47,127 30,056 (2,603) 74,580
Tax (26,577) - - (26,577)
--------------------------------------------------------- ----------- ----------- ----------- ------------
Profit/(loss) after tax 20,550 30,056 (2,603) 48,003
--------------------------------------------------------- ----------- ----------- ----------- ------------
Other information
Total current assets 178,281 - - 178,281
Capital additions 62,486 - - 62,486
Right-of-use asset additions 5,200 - - -
Depreciation, amortisation and impairment (50,617) - - (50,617)
Amortisation of right-of-use assets 10,706 - - (10,706)
Total comprehensive income (loss) (30,956) - - (30,956)
Balance Sheet
Segment assets 1,039,374 310,882 3,606 1,353,862
Segment liabilities (609,104) (621) (430) (610,155)
--------------------------------------------------------- ----------- ----------- ----------- ------------
Maritime
Services Investment Unallocated Consolidated
Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December
2019 2019 2019 2019
For the year ended 31 December 2019 US$'000 US$'000 US$'000 US$'000
--------------------------------------------------------- ----------- ----------- ----------- --------------
Revenue 406,128 - - 406,128
Result
Segment result 75,200 (3,648) (2,539) 69,013
Share of results of joint ventures 564 - - 564
Return on investment portfolio at fair value through P&L - 34,716 - 34,716
Other investment income 6,045 7 - 6,052
Finance costs (27,736) - - (27,736)
Foreign exchange (losses)/profit on monetary items (634) (14) 569 (79)
--------------------------------------------------------- ----------- ----------- ----------- ------------
Profit/(loss) before tax 53,439 31,061 (1,970) 82,530
Tax (21,481) - - (21,481)
--------------------------------------------------------- ----------- ----------- ----------- ------------
Profit/(loss) after tax 31,958 31,061 (1,970) 61,049
--------------------------------------------------------- ----------- ----------- ----------- ------------
Other information
Total current assets 170,009 170,009
Capital additions 89,482 - - 89,482
Right-of-use asset additions 14,434 - - 14,434
Depreciation, amortisation and impairment (66,758) - - (66,758)
Amortisation of right-of-use assets (12,389) - - (12,389)
Total comprehensive income (loss) 20,294 20,294
Balance Sheet
Segment assets 1,151,527 286,009 4,091 1,441,627
Segment liabilities (654,018) (923) (826) (655,767)
--------------------------------------------------------- ----------- ----------- ----------- ------------
Finance costs and associated liabilities have been allocated to
reporting segments where interest costs arise from loans used to
finance the construction of fixed assets in that segment.
Geographical Segments
The Group's operations are located in Bermuda and Brazil. The
Group, through its participation in an offshore vessel joint
venture in Panama, earns income in that country and in Uruguay. All
the Group's sales are derived in Brazil.
The following is an analysis of the carrying amount of segment
assets, and additions to property, plant and equipment and
intangible assets, analysed by the geographical area in which the
assets are located.
Additions to
property, plant and
Carrying amount of equipment, right of use assets,
segment assets and intangible assets
------------------------ ---------------------------------
Year ended Year ended
31 December 31 December 31 December 31 December
2020 2019 2020 2019
US$'000 US$'000 US$'000 US$'000
-------- ----------- ----------- ---------------- ---------------
Brazil 994,826 1,109,485 67,686 104,416
Bermuda 359,036 332,142 - -
-------- ----------- ----------- ---------------- ---------------
1,353,862 1,441,627 67,686 104,416
-------- ----------- ----------- ---------------- ---------------
5. Profit for the year
Profit for the year has been arrived at after charging:
Year ended Year ended
31 December 31 December
2020 2019
US$'000 US$'000
Depreciation of property, plant and equipment 47,793 50,353
Impairment charge - 13,025
Amortisation of intangible assets 2,824 3,380
Amortisation of right-of-use assets 10,706 12,389
Auditor's remuneration (see below) 672 795
Non-executive directors' emoluments 898 521
---------------------------------------------------------------------- ----------- -----------
A more detailed analysis of auditor's remuneration is provided below:
Auditor's remuneration for audit services 672 732
Other services - 63
---------------------------------------------------------------------- ----------- -----------
672 795
---------------------------------------------------------------------- ----------- -----------
6. Employee charges and benefits expense
Year ended Year ended
31 December 31 December
2020 2019
US$'000 US$'000
---------------------------------- ----------- -----------
Aggregate remuneration comprised:
Wages, salaries and benefits 87,852 111,066
Share based payments 206 370
Social security costs 21,271 28,157
Other pension costs 687 755
---------------------------------- ----------- -----------
110,016 140,348
---------------------------------- ----------- -----------
7. Returns on investment portfolio at fair value through profit or loss
Year ended Year ended
31 December 31 December
2020 2019
US$'000 US$'000
---------------------------------------------------------------------------- ----------- -----------
Unrealised gains on financial assets at fair value through profit or loss 29,055 24,438
Income from underlying investment vehicles 3,327 2,781
Profit on disposal of financial assets at fair value through profit or loss 1,001 7,497
---------------------------------------------------------------------------- ----------- -----------
33,383 34,716
---------------------------------------------------------------------------- ----------- -----------
8. Other investment income
Year ended Year ended
31 December 31 December
2020 2019
US$'000 US$'000
-------------------------- ----------- -----------
Interest on bank deposits 1,078 1,740
Other interest 566 4,312
-------------------------- ----------- -----------
1,644 6,052
-------------------------- ----------- -----------
9. Finance costs
Year ended Year ended
31 December 31 December
2020 2019
US$'000 US$'000
--------------------------------------------- ----------- -----------
Interest on lease liabilities 12,836 15,912
Interest on bank overdrafts and loans 10,262 10,823
Exchange loss on foreign currency borrowings - 778
Other interest 112 223
--------------------------------------------- ----------- -----------
23,210 27,736
--------------------------------------------- ----------- -----------
Borrowing costs incurred on qualifying assets of US$3.0 million
(2019: US$2.3 million) were capitalised in the year at an average
interest rate of 2.76% (2019: 2.85%).
10. Taxation
Year ended Year ended
31 December 31 December
2020 2019
US$'000 US$'000
Current
Brazilian taxation
Corporation tax 20,912 16,202
Social contribution 8,276 6,155
---------------------------------------------------------------------- ----------- -----------
Total current tax 29,188 22,357
---------------------------------------------------------------------- ----------- -----------
Deferred tax - origination and reversal of timing differences
Charge/(credit) for the year in respect of deferred tax liabilities 17,601 (5)
Credit for the year in respect of deferred tax assets (20,212) (871)
---------------------------------------------------------------------- ----------- -----------
Total deferred tax (2,611) (876)
---------------------------------------------------------------------- ----------- -----------
Total taxation charge 26,577 21,481
---------------------------------------------------------------------- ----------- -----------
Brazilian corporation tax is calculated at 25% (2019: 25%) of
the assessable profit for the year. Brazilian social contribution
tax is calculated at 9% (2019: 9%) of the assessable profit for the
year.
At the present time, no income, profit, capital or capital gains
taxes are levied in Bermuda and accordingly, no provision for such
taxes has been recorded by the Company. In the event that such
taxes are levied, the Company has received an undertaking from the
Bermuda Government exempting it from all such taxes until 31 March
2035.
The charge for the year can be reconciled to the profit per the
statement of comprehensive income as follows:
Year ended Year ended
31 December 31 December
2020 2019
US$'000 US$'000
------------------------------------------------------------------------------- ----------- -----------
Profit before tax 74,580 82,530
Tax at the aggregate Brazilian tax rate of 34% 25,357 28,060
Utilisation of net operating losses - (506)
Net operating losses in the period 2,869 1,712
Exchange variance on loans (14,631) (804)
Tax effect of share of results of joint ventures 1,408 (192)
Tax effect of foreign exchange gains or losses on monetary items 4,248 494
Retranslation of non-current assets 13,972 (592)
Share option scheme 43 126
Non-deductible expenses 2,018 1,701
Leasing (108) (133)
Resolution of tax litigation (209) (126)
Impairment charge - (1,438)
Other 519 -
Effect of different tax rates of subsidiaries operating in other jurisdictions (8,909) (6,821)
------------------------------------------------------------------------------- ----------- -----------
Tax expense for the year 26,577 21,481
------------------------------------------------------------------------------- ----------- -----------
Effective rate for the year 36% 26%
------------------------------------------------------------------------------- ----------- -----------
The Group earns its profits primarily in Brazil. Therefore, the
tax rate used for tax on profit on ordinary activities is the
standard rate in Brazil of 34% (2019: 34%), consisting of
corporation tax (25%) and social contribution (9%).
11. Dividends
Year ended Year ended
31 December 31 December
2020 2019
US$'000 US$'000
----------------------------------------------------------------------------------------- ----------- -----------
Amounts recognised as distributions to equity holders in the period:
Dividends paid for the year ended 31 December 2019 of 70c (2018: 70c) per share 24,754 24,754
Proposed final dividend for the year ended 31 December 2020 of 70c (2019: 70c) per share 24,754 24,754
----------------------------------------------------------------------------------------- ----------- -----------
12. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
Year ended Year ended
31 December 31 December
2020 2019
US$'000 US$'000
-------------------------------------------------------------------------------------------- ----------- -----------
Earnings:
Earnings for the purposes of basic earnings per share being net profit attributable to
equity
holders of the parent 38,712 46,852
Number of shares:
-------------------------------------------------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares for the purposes of basic and diluted earnings
per share 35,363,040 35,363,040
-------------------------------------------------------------------------------------------- ----------- -----------
13. Impairment Test of Cash Generating Units (CGUs)
13.1 Tecon Rio Grande and Tecon Salvador
The cash flows of these CGUs are derived from operating budgets,
historical and prospective data, and include the following forecast
assumptions: (i) revenue; (ii) costs and expenses; (iii)
investments; and (iv) discount rate.
The key assumptions used in determining value in use relate to
growth rate, discount rate and inflation rate. Further assumptions
include sales and operating margins which are based on past
experience taking into account the effect of known, or likely,
changes in market or operating conditions. Projected volumes for
Tecon Rio Grande and Tecon Salvador were based on the expected
performance of the Brazilian economy until reaching operating
capacity for each.
The discount rate was based on weighted average cost of captal
("WACC") , whereas the growth rate for projection, is based on the
inflation rate only after reaching operating capacity.
The estimated average growth rate used does not exceed the
historical average for Tecon Rio Grande and Tecon Salvador and the
discount rate used in 2020 was 8.4% (9.3% on 31 December 2019).
Review tests were performed on these CGUs and concluded that
there are not factors that indicate impairment, since the
recoverable amount significantly exceeded the book value.
13.2 Offshore support bases
In 2019 the Company recognised an impairment loss of US$ 13.3
million (R$ 53.5 million), of which US$ 12.8 million (R$ 51.6
million) related to Goodwill and the remaining against other
intangible assets. Goodwill for this CGU was then fully
written-off.
Due to the impairment loss recognised in 2019 attributed to
offshore support bases, the Company expanded the impairment
procedures for the tangible assets of this CGU.
The Company determines its cash flow bases on the budgets and
historical and prospective data, including the following main
assumptions: (i) revenue; (ii) costs and expenses; (iii)
investments; (iv) projection period; and (v) discount rates based
on weighted average cost of capital ("WACC").
(i) Revenue
Occupancy rate
The projected quantity of vessel turnarounds considers the
estimated pace of growth in oil & gas offshore exploration and
production, based on data from Brazilian Petroleum National Agency
(ANP), Energy Research Agency (EPE, subordinated to Ministry of
Energy), Oil Companies' releases and specialised industry reports.
In the market reports reviewed there is a consensus that in the
next 10 years there will be significant increases in oil
exploration and production activities in Brazil.
Based on the specialised industry reports, management estimates
that the oil companies will undertake an estimated 6,729 berthing
operations per year until 2024 for the exploration blocks and oil
fields located in the Company's area of influence (southern region
of Campos Basin and Santos Basin), thus representing an increase of
1,840 annual berths compared to 2019 (4,888 berths/ year).
The Company predicts it will sucessfully capture part of the
above metioned increase in demand for berthing space considering
the competitive landscape in the service Guanabara Bay area and
expects to reach from 2026 onwards operating levels attained prior
to the economic and oil and gas market crises. In forecasting
expected growth over the period to 2024, the Company has taken
account of current tender activity and expected tender activity to
come, and has identified those projects it expects to secure based
on an assessment of competitive advantage. The average growth rate
is 23% each year until 2024.
Longer term growth rates after 2024 are aligned with the
expected growth in the Brazilian oil and gas sector, and the region
in which the Company operates which gives raise to an average
growth rate after 2024 of 15% per annum.
Due to the impact of the COVID-19 pandemic and the resultant oil
price shock during 2020 a number of Oil Companies have sought
postponement of their start date for exploration and development of
oil fields in Brazil and the ANP has granted concessions in this
regard. The Company has made adjustments to their previous
forecasts to take account of new information available, principally
by amending the cashflow by delaying them by one year to take
account of the impacts of the economic crises and the above
mentioned postponements.
Sales prices
In the short term (2021-2023), the Company's financial
projections do not consider an increase with regard to the pricing
currently in place. For the long term (2024-2030), the projections
consider the unit price of 2023 adjusted for inflation over
time.
Stress testing
The Company prepared a stress testing considering the following
scenarios taking account of the different growth rates forecast to
2024 and longer term:
-- Revenue aggregate: the revenue would have to decrease by 5.3% each
year (not compounded) in the model to achieve break even.
-- Revenue short term (2021 - 2023): the revenue would have to decrease
12.0% (not compounded) from 2021 to 2023 in the model to achieve break
even.
The short term revenue is a sensitive assumption to be extremely
dependent from the results of tenders submitted and tenders
expected to be submitted that the Company expects to have a high
change of securing. Revenue growth rates below those outlined in
the above sensitivity would lead to impairment.
(ii) Costs and expenses
For all years forecast, variable costs are forecast to increase
in line with forecast increases in activity. For the period to
2023, the Company's forecasts its fixed costs will not increase
above current levels. For the long term (2024-2030), the
projections are adjusted for inflation over time.
(iii) Investments
As per IAS 36, the company is required to include in the
estimated cash outflows only the investment required to maintain
the level of economic rewards expected from the assets in their
current conditions. The Company did not include any expansion
investment in the model.
(iv) Projection period
The Company has prepared the cash flow projection considering a
period over a 10 year period plus a perpetuity. The oil and gas
industry life cycle is at least 10 years, due to the life cycle of
investment in an oil field from exploration to sustainable
production. The company assumes a growth in the perpetuity
calculation limited to inflation which is predicted to be 4% per
annum.
(v) Discount rates
The discount rate represents the current market assessment of
the risks specific to the CGU, taking into consideration the time
value of money and individual risks of the underlying assets that
have not been incorporated in the cash flow estimates. The discount
rate calculation is based on the specific circumstances of the CGU
and its operating segments and is a weighted average cost of
capital (WACC). The WACC takes into account both cost of debt and
equity. The cost of equity is derived from the expected return on
investment by potential investors. The cost of debt is based on an
assessment of the interest-bearing borrowings the CGU is able to
borrow in the market. Segment-specific risk is incorporated by
applying beta factors. The beta factors are evaluated annually
based on publicly available market data.
The Company has determined the discount rate using reputable
sources to capture macroeconomic assumptions and information from
comparator companies in the oilfield and maritime services sector,
in which Brasco operates. The discount rate used was 11.3% (14.5%
as at 31 December 2019). The reduction in discount rate from 2019
to 2020 was principally driven by a reduction of cost of equity,
due to the macroeconomic assumptions update over the last twelve
months (i.e. decrease in risk free rate, unleveraged beta, Country
Risk Premium, reduction in Equity Risk Premium and amendments to
the debt/equity ratio). For 2019, the Company included a risk
premium in the WACC recognising the risks inherent in the forecast
cashflows. The company has not done so this year, as it considers
its forecast cashflows are not as inhrently risky compared to the
prior years forecasts..
Stress testing
The discount rate would have to increase by 0.9% (ie. to 12.2%)
for the impairment model to achieve break even.
The Company, having carried out the impairment tests above,
concluded that no impairment needed to be recorded, since the
recoverable amount exceeded the book value. The carrying value of
Brasco's assets of US$46.3 million (R$240.0 million) was lower than
the the value in use of US$57.2 million (R$296.8 million).
In addition, the Company reversed the impairment of US$0.4
million (R$2.0 million) related to intangible assets other than
goodwill recognised in 2019.
However, according to the stress testing scenarios above, the
Company would need to record an impairment losses if at least one
of this following scenarios was to occur in isolation:
-- Revenue aggregate would have to decrease by more than 5.3% each year;
-- Revenue short term (2021 - 2023) would have to decrease by more than 12.0% each year; or
-- Discount rate would have to increase by more than 0.9%.
14. Goodwill
Tecon Rio Grande Tecon Salvador Brasco Total
US$'000 US$'000 US$'000 US$'000
----------------------- ---------------- -------------- -------- --------
Carrying Value:
At 1 January 2019 11,728 2,480 13,307 27,515
Impairment - - (12,536) (12,536)
Exchange differences (118) - (770) (889)
----------------------- ---------------- -------------- -------- --------
At 1 January 2020 11,610 2,480 - 14,090
Impairment - - - -
Exchange differences (661) - - (661)
----------------------- ---------------- -------------- -------- --------
At 31 December 2020 10,949 2,480 - 13,429
----------------------- ---------------- -------------- -------- --------
Carrying amount
----------------------- ---------------- -------------- -------- --------
31 December 2020 10,949 2,480 - 13,429
----------------------- ---------------- -------------- -------- --------
31 December 2019 11,609 2,480 - 14,090
----------------------- ---------------- -------------- -------- --------
The goodwill associated with each cash-generating unit "CGU"
(Tecon Salvador and Tecon Rio Grande) is attributed to the Port
Terminals segment. The movement in goodwill balances in the year is
due to the depreciation of the Brazilian Real against the US
Dollar.
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.
In 2019, as a result of impairment test it was concluded that
carrying value of Brasco's assets of US$83.6 million (R$337.2
million) exceeded the value in use of US$70.4 million (R$283.7
million). As a result of this analysis, an impairment charge of
US$13.3 million (R$53.5 million) was recognised in 2019, of which
US$12.5 million (R$51.6 million) against goodwill and the remaining
against other intangible assets.
Details of the impairment test are disclosed in note 13.
15. Lease arrangements
15.1 Right-of-use assets
Operational Vehicles, plant
facilities Floating craft Buildings and equipment Total
US$'000 US$'000 US$'000 US$'000 US$'000
----------------------------------------------- ----------- -------------- --------- --------------- --------
Cost or valuation
At 1 January 2020 186,026 4,481 6,449 12,703 209,659
Transfers from property, plant and equipment - - - 495 495
Contractual amendments 9,376 52 201 83 9,712
Additions 1,553 3,504 19 124 5,200
Exchange differences (42,245) (759) (772) (1,745) (45,521)
Terminated contracts - - (200) (1,911) (2,111)
----------------------------------------------- ----------- -------------- --------- --------------- --------
At 31 December 2020 154,710 7,278 5,697 9,749 177,434
----------------------------------------------- ----------- -------------- --------- --------------- --------
Accumulated amortisation
At 1 January 2020 8,269 2,276 1,469 8,634 20,648
Transfers from property, plant and equipment - - - 471 471
Charge for the year 7,280 2,995 1,099 1,062 12,436
Exchange differences (1,810) (521) (77) (1,060) (3,468)
Terminated contracts - - (70) (1,861) (1,931)
----------------------------------------------- ----------- -------------- --------- --------------- --------
At 31 December 2020 13,739 4,750 2,421 7,246 28,156
----------------------------------------------- ----------- -------------- --------- --------------- --------
Carrying Amount
----------------------------------------------- ----------- -------------- --------- --------------- --------
At 31 December 2020 140,971 2,528 3,276 2,503 149,278
----------------------------------------------- ----------- -------------- --------- --------------- --------
Operational Vehicles, plant
facilities Floating craft Buildings and equipment Total
US$'000 US$'000 US$'000 US$'000 US$'000
----------------------------------------------- ----------- -------------- --------- --------------- --------
Cost or valuation
At 1 January 2019 178,841 4,525 6,714 4,053 194,133
Transfers from property, plant and equipment - - - 9,798 9,798
Contractual amendments 14,748 173 (218) (269) 14,434
Additions - - 65 161 226
Exchange differences (7,563) (217) (112) (578) (8,470)
Terminated contracts - - - (462) (462)
----------------------------------------------- ----------- -------------- --------- --------------- --------
At 31 December 2019 186,026 4,481 6,449 12,703 209,659
----------------------------------------------- ----------- -------------- --------- --------------- --------
Accumulated amortisation
At 1 January 2019
Transfers from property, plant and equipment - - - 7,969 7,969
Charge for the year 8,422 2,321 1,473 1,326 13,542
Exchange differences (153) (45) (4) (330) (532)
Terminated contracts - - - (331) (331)
----------------------------------------------- ----------- -------------- --------- --------------- --------
At 31 December 2019 8,269 2,276 1,469 8,634 20,648
----------------------------------------------- ----------- -------------- --------- --------------- --------
Carrying Amount
----------------------------------------------- ----------- -------------- --------- --------------- --------
At 31 December 2019 177,757 2,205 4,980 4,069 189,011
----------------------------------------------- ----------- -------------- --------- --------------- --------
Operational facilities
The main lease commitments included as operational facilities
are described below:
Tecon Rio Grande
The Tecon Rio Grande lease was signed on 3 February 1997 for a
period of 25 years renewable for a further 25 years. Tecon Rio
Grande was granted the right to renew the lease as set out in the
contract amendment signed on 7 March 2006 due to compliance with
the contractual requirements to make additional investments in
expanding the terminal by constructing a third berth and achieving
the minimum annual container volume handled.
Among the commitments set forth in the lease agreement and its
addendum are the following:
-- A monthly payment for facilities and leased areas;
-- A contractual payment per container moved based on minimum forecast
volumes. If container volumes moved through the terminal exceed forecast
volumes in any given year, additional payments are required; and
-- A payment per tonne in respect of general cargo handling and unloading.
Tecon Salvador
Tecon Salvador S.A. has the right to lease and operate the
container terminal and heavy cargo terminal in the Port of Salvador
for 25 years renewed in 2016 for a further 25 years. The total
lease term of 50 years, until March 2050, is provided in the second
addendum to the rental agreement. This addendum requires the Group
to make a minimum specified investment in expanding the leased
terminal area.
Among the commitments set forth in the lease agreement and its
addendum are the following:
-- A monthly payment for facilities and leased areas;
-- Lease payments for the existing area and the additional area added
under the terms of the second contractual addendum; and
-- A contractual payment per container moved based on minimum forecast
volumes and a fee per ton of non-containerised cargo moved based
on minimum forecast volumes.
Wilson Sons shipyard
Lease commitments mainly refer to a 60-year right to lease from
June 2008 and operate an area located adjacent to our shipyard in
Guarujá, São Paulo state. The initial lease of 30 years is
renewable for a further period of 30 years at the option of the
Group. The area has been used to expand and develop the Wilson Sons
shipyard. Management's intention is to exercise the renewal
option.
Brasco
The Brasco lease commitments mainly refers to a 30-year lease
expiring in 2043 to operate a port area in Caju, Rio de Janeiro,
Brazil with convenient access to service the Campos and Santos oil
producing basins.
Logistics
Lease commitments mainly refer to the bonded terminals and
distribution centres located in Santo André, São Paulo state and
Suape, Pernambuco state with terms ranging between 18 and 24
years.
Floating craft
Variable chartering of vessels for maritime transport between
port terminals. Payments made relating to the number of vessel
trips were not included in the measurement of lease liabilities
because they relate to variable payments.
Buildings
The Group has lease commitments for its Brazilian business
headquarters, branches and commercial offices in several Brazilian
cities.
Vehicles, plant and equipment
Rental contracts mainly for forklifts, vehicles for operational,
commercial and administrative activities and other operating
equipment.
15.2 Lease liabilities
31 December 31 December
2020 2019
Discount rate US$'000 US$'000
------------------------------------ --------------- ----------- -----------
Lease liabilities by class of asset
Operational facilities 8.75% 150,513 183,895
Buildings 8.75% 2,932 5,072
Vehicles, plant and equipment 8.88% - 12.90% 1,690 2,887
Floating craft 9.25% 2,759 2,294
------------------------------------ --------------- ----------- -----------
Total 157,894 194,148
------------------------------------ --------------- ----------- -----------
Total current 18,192 21,938
------------------------------------ --------------- ----------- -----------
Total non-current 139,702 172,210
------------------------------------ --------------- ----------- -----------
31 December 31 December
2020 2019
US$'000 US$'000
-------------------------------------------------------- ----------- -----------
Maturity analysis - contractual undiscounted cash flows
Within one year 19,153 22,918
In the second year 17,365 20,456
In the third to fifth years inclusive 49,353 60,954
After five years 292,766 371,236
-------------------------------------------------------- ----------- -----------
Total cash flows 378,637 475,564
-------------------------------------------------------- ----------- -----------
Adjustment to present value (220,743) (281,416)
-------------------------------------------------------- ----------- -----------
Total lease liabilities 157,894 194,148
-------------------------------------------------------- ----------- -----------
Inflation adjustment of the lease liabilities
The table below presents the lease liabilities balance
considering the projected future inflation rate in the discounted
payment flows. For the purposes of this calculation, all other
assumptions were maintained.
31 December 31 December
2020 2019
US$'000 US$'000
------------------ ----------- -----------
Actual flow 378,637 475,564
Lease liabilities (220,743) (281,416)
------------------ ----------- -----------
Embedded interest 157,894 194,148
------------------ ----------- -----------
15.3 Amounts recognised in profit and loss
31 December 31 December
2020 2019
US$'000 US$'000
----------------------------------------------------------------------------------- ----------- -----------
Amortisation of right-of-use assets (12,436) (13,542)
Amortisation of PIS and COFINS 1,730 1,153
----------------------------------------------------------------------------------- ----------- -----------
Net Amortisation of right-of-use assets (10,706) (12,389)
----------------------------------------------------------------------------------- ----------- -----------
Interest on lease liabilities (14,096) (16,799)
Interest on PIS and COFINS 1,260 887
Variable lease payments not included in the measurement of lease liabilities(1, 2) (2,037) (2,222)
Expenses relating to short-term leases (23,392) (15,852)
Expenses relating to low-value assets (1,093) (908)
----------------------------------------------------------------------------------- ----------- -----------
1. The amounts refer to payments which exceeded the minimum
forecast volumes of Tecon Rio Grande and Tecon Salvador.
2. The payments related to the number of vessel trips which were
not included in the measurement of lease liabilities.
The Group is unable to estimate the future cash outflows
relating to variable lease payments due to operational, economic
and foreign exchange uncertainties.
15.4 Amounts recognised in the cash flow statement
31 December 31 December
2020 2019
US$'000 US$'000
-------------------------------- ----------- -----------
Payment of lease liability (6,345) (6,424)
Interest paid - lease liability (14,111) (16,806)
Short-term leases paid (23,392) (15,852)
Variable lease payments (2,037) (2,727)
Low-value leases paid (1,093) (908)
-------------------------------- ----------- -----------
Total (46,978) (42,717)
-------------------------------- ----------- -----------
16. Other intangible fixed assets
Computer Software Concession-rights Other Total
US$'000 US$'000 US$'000 US$'000
--------------------------------------------- ----------------- ----------------- ------- -------
Cost
At 1 January 2019 42,349 21,724 64 64,137
Additions 1,473 - - 1,473
Disposals (927) (422) (1) (1,350)
Exchange differences (475) (841) (2) (1,318)
--------------------------------------------- ----------------- ----------------- ------- -------
At 1 January 2020 42,420 20,461 61 62,942
Additions 1,085 - - 1,085
Transfers to property, plant and equipment 99 - - 99
Disposals (43) - - (43)
Exchange differences (2,454) (4,448) (14) (6,916)
--------------------------------------------- ----------------- ----------------- ------- -------
At 31 December 2020 41,107 16,013 47 57,167
--------------------------------------------- ----------------- ----------------- ------- -------
Amortisation
At 1 January 2019 31,708 6,961 - 38,669
Charge for the year 2,822 558 - 3,380
Impairment Charge - 488 - 488
Disposals (926) (422) - (1,348)
Exchange differences (278) (281) - (559)
--------------------------------------------- ----------------- ----------------- ------- -------
At 1 January 2020 33,326 7,304 - 40,630
Charge for the year 2,394 430 - 2,824
Reversal of Impairment - (382) - (382)
Disposals (42) - - (42)
Exchange differences (1,330) (1,500) - (2,830)
--------------------------------------------- ----------------- ----------------- ------- -------
At 31 December 2020 34,348 5,852 - 40,200
--------------------------------------------- ----------------- ----------------- ------- -------
Carrying amount
31 December 2020 6,759 10,161 47 16,967
--------------------------------------------- ----------------- ----------------- ------- -------
31 December 2019 9,094 13,158 61 22,313
--------------------------------------------- ----------------- ----------------- ------- -------
17. Property, plant and equipment
Land and Vehicles, plant Assets under
buildings Floating Craft and equipment construction Total
US$'000 US$'000 US$'000 US$'000 US$'000
---------------------------------------- --------- -------------- --------------- ------------ ---------
Cost or valuation
At 1 January 2019 282,506 488,722 230,564 10,133 1,011,925
Transfers to right-of-use-assets - - (9,798) - (9,798)
Additions 40,320 14,450 27,235 5,842 87,937
Transfers 212 15,712 (241) (15,683) -
Transfers from intangible assets (11) (22) 105 - 72
Exchange differences (9,301) - (7,662) - (16,963)
Disposals (294) (2,501) (9,067) - (11,862)
---------------------------------------- --------- -------------- --------------- ------------ ---------
At 1 January 2020 313,432 516,361 231,226 292 1,061,311
Transfers to right-of-use assets - - (495) - (495)
Additions 25,901 10,216 25,284 - 61,401
Transfers 148 (124) (24) - -
Transfers to/from intangible assets - - (99) - (99)
Exchange differences (56,443) - (42,819) - (99,262)
Disposals (3,725) (969) (4,039) - (8,733)
---------------------------------------- --------- -------------- --------------- ------------ ---------
At 31 December 2020 279,313 525,484 209,034 292 1,014,123
---------------------------------------- --------- -------------- --------------- ------------ ---------
Accumulated depreciation and impairment
At 1 January 2019 87,135 192,820 129,519 - 409,474
Charge for the year 8,018 26,741 15,594 - 50,353
Transfers to right-of-use assets - - (7,969) - (7,969)
Elimination on construction contracts - 128 - - 128
Exchange differences (2,974) - (4,001) - (6,975)
Disposals (234) (2,320) (8,195) - (10,749)
---------------------------------------- --------- -------------- --------------- ------------ ---------
At 1 January 2020 91,945 217,369 124,948 - 434,262
Transfers to right-of-use assets - - (471) - (471)
Charge for the year 6,774 29,030 11,989 - 47,793
Elimination on construction contracts - 13 - - 13
Exchange differences (16,691) - (22,764) - (39,455)
Disposals (2,400) (829) (3,928) - (7,157)
---------------------------------------- --------- -------------- --------------- ------------ ---------
At 31 December 2020 79,628 245,583 109,774 - 434,985
---------------------------------------- --------- -------------- --------------- ------------ ---------
Carrying Amount
---------------------------------------- --------- -------------- --------------- ------------ ---------
At 31 December 2020 199,685 279,901 99,260 292 579,138
---------------------------------------- --------- -------------- --------------- ------------ ---------
At 31 December 2019 221,487 298,992 106,278 292 627,049
---------------------------------------- --------- -------------- --------------- ------------ ---------
Land and buildings with a net book value of US$0.2 million
(2019: US$0.2 million) and plant and machinery with a net book
value of US$0.1 million (2019: US$0.2 million) have been given in
guarantee of various legal processes.
The Group has pledged assets having a carrying amount of
US$253.6 million (2019: US$269.3 million) to secure loans granted
to the Group.
The amount of borrowing costs capitalised in 2020 is US$3.0
million (2019: US$2.3 million) at an average interest rate of
2.76%.
18. Principal subsidiaries
Place of Method used
incorporation Effective to account
and operation interest* for investment
---------------------------------------------------------------------------- ------------- --------- --------------
OCEAN WILSONS (INVESTMENTS) LIMITED Bermuda 100%** Consolidation
Investment holding and dealing company
WILSON SONS LIMITED Bermuda 57.77%** Consolidation
Holding company
WS PARTICIPACIONES S.A. Uruguay 57.77% Consolidation
Holding company
WILSON, SONS ADMINISTRAÇÃO DE BENS LTDA Brazil 57.77% Consolidation
Holding company
SAVEIROS CAMUYRANO SERVIÇOS MARÍTIMOS LTDA Brazil 57.77% Consolidation
Tug operators
WILSON, SONS S.A., COMÉRCIO, INDÚSTRIA, E AGÉNCIA
DENAVEGAÇÃO LTDA Brazil 57.77% Consolidation
Shipbuilders
WILSON, SONS ESTALEIRO LTDA Brazil 57.77% Consolidation
Shipbuilders
WILSON SONS AGENCIA MARÍTIMA LTDA Brazil 57.77% Consolidation
Ship Agency
DOCK MARKET SOLUCOES LTEDA Brazil 57.77% Consolidation
Shipping Agency
WILSON, SONS LOGÍSTICA LTDA Brazil 57.77% Consolidation
Logistics
WILPORT OPERADORES PORTUÁRIOS LTDA Brazil 57.77% Consolidation
Port operator
EADI SANTO ANDRÉ TERMINAL DE CARGA LTDA Brazil 57.77% Consolidation
Bonded warehousing
TECON RIO GRANDE S.A. Brazil 57.77% Consolidation
Port operator
BRASCO LOGÍSTICA OFFSHORE LTDA Brazil 57.77% Consolidation
Port operator
TECON SALVADOR S.A. Brazil 57.77% Consolidation
Port operator
---------------------------------------------------------------------------- ------------- --------- --------------
* Effective interest is the net interest of Ocean Wilsons
Holdings Limited after non-controlling interests.
** Ocean Wilsons Holdings Limited holds direct interests in
Ocean Wilsons (Investments) Limited and Wilsons Sons Limited.
All of the above entities with material non-controlling interest
are included in the maritime services segment in note 4 where
summarised financial information is included in the aggregate.
19. Joint ventures
The Group holds the following significant interests in joint
operations and joint ventures at the end of the reporting
period:
Place of Proportion of ownership
-------------------------
incorporation 31 December 31 December
and operation 2020 2019
----------------------------------------------------------- -------------- ------------ -----------
Towage
Consórcio de Rebocadores Barra de Coqueiros(1) Brazil - 50%
Consórcio de Rebocadores Baia de São Marcos(2) Brazil 50% 50%
Logistics
Porto Campinas, Logística e Intermodal Ltda Brazil 50% 50%
Offshore
Wilson, Sons Ultratug Participações S.A.(3) Brazil 50% 50%
Atlantic Offshore S.A.(4) Panamá 50% 50%
----------------------------------------------------------- --------------- ------------ -----------
1 In November 2020 the joint operation was dissolved.
2 Joint Operation.
3 Wilson, Sons Ultratug Participações S.A. controls Wilson,
Sons Offshore S.A. and Magallanes Navegação Brasileira S.A.
These latter two companies are indirect joint ventures of the Company.
4 Atlantic Offshore S.A. controls South Patagonia S.A. This company
is an indirect joint venture of the Company.
Joint operations-continuing activities
The following amounts are included in the Group's financial
information as a result of proportional consolidation of joint
operations listed above:
Year ended Year ended
31 December 31 December
2020 2019
US$'000 US$'000
Income 4,067 13,310
Expenses (2,449) (7,397)
-------------------- ----------- -----------
Profit for the year 1,618 5,913
-------------------- ----------- -----------
31 December 31 December
2020 2019
US$'000 US$'000
------------------------------ ----------- -----------
Property, plant and equipment 1,842 2,619
Right-of-use assets - 3
Intangible assets 2 13
Inventories 186 482
Trade and other receivables 990 2,365
Cash and cash equivalents 1,408 874
------------------------------ ----------- -----------
Total assets 4,428 6,356
------------------------------ ----------- -----------
Trade and other payables (4,237) (6,235)
Deferred tax liabilities (191) (118)
Lease liabilities - (3)
------------------------------ ----------- -----------
Total liabilities (4,428) (6,356)
------------------------------ ----------- -----------
Joint ventures-continuing activities
The aggregated Group's interests in joint ventures are equity
accounted.
Year ended Year ended
31 December 31 December
2020 2019
US$'000 US$'000
--------------------------------------------------- ----------- -----------
Revenue 121,616 130,911
Raw materials and consumables used (7,080) (7,590)
Employee benefits expense (36,031) (40,594)
Amortisation of right-of-use assets (10,446) (10,205)
Depreciation and amortisation expenses (40,753) (39,636)
Other operating expenses (16,233) (15,037)
Loss on disposals of property, plant and equipment - (2)
--------------------------------------------------- ----------- -----------
Results from operating activities 11,073 17,847
--------------------------------------------------- ----------- -----------
Finance income 65 747
Finance costs (17,415) (18,236)
Foreign exchange losses on monetary items (16,998) (2,073)
--------------------------------------------------- ----------- -----------
Loss before tax (23,275) (1,715)
--------------------------------------------------- ----------- -----------
Income tax credit 14,991 2,843
--------------------------------------------------- ----------- -----------
Profit/(loss) for the year (8,284) 1,128
--------------------------------------------------- ----------- -----------
Participation 50% 50%
Equity result (4,142) 564
--------------------------------------------------- ----------- -----------
31 December 31 December
2020 2019 *
US$'000 US$'000
------------------------------ ----------- -----------
Right-of-use assets 9,784 20,280
Property, plant and equipment 568,444 596,213
Long-term investment 2,133 2,185
Other assets 10,373 11,753
Trade and other receivables 37,942 35,182
Derivatives - 3
Cash and cash equivalents 15,219 21,183
------------------------------ ----------- -----------
Total assets 643,895 686,799
------------------------------ ----------- -----------
Bank overdrafts and loans 423,762 440,561
Lease liabilities 10,081 20,685
Other non-current liabilities 31,646 39,884
Trade and other payables 98,145 93,305
Equity 80,261 92,364
------------------------------ ----------- -----------
Total liabilities and equity 643,895 686,799
------------------------------ ----------- -----------
* The prior year numbers have been restated. Right of use assets
was amended by US$19.1m to US$20.3m. Trade and other receivables
was amended by US$0.7m to US$35.2m. Lease liabilities was amended
by US$20.3m to US$20.7m. Trade and other payables was amended by
US$0.7m to US$93.3m. Equity was amended by US$1.2m to US$92.7m.
The movement in Equity shown above is not reflective of the
share of loss of the joint ventures, as in determining the share of
the (loss)/profit for the year, the result is impacted by the
elimination of profit margin on construction/dry-docking contracts
amounting to US$3.7 million (2019: US$3.7 million). Without this
impact, the joint venture result of the period would have been a
loss of US$12.0 million (2019: US$2.6 million profit).
The Group has not given separate disclosure of each of our
material joint ventures because they belong to the same economic
group. Wilson Sons holds a non-controlling interest in Wilson Sons
Ultratug Particpações S.A. and Atlantic Offshore S.A.
Wilson, Sons Ultratug Participações S.A. is a controlling
shareholder of Wilson Sons Offshore S.A. and Magallanes Navegação
Brasileira S.A., while Atlantic Offshore S.A. is a controlling
shareholder of South Patagonia S.A.
Guarantees
Wilson Sons Ultratug Participações S.A. loans with the BNDES are
guaranteed by a lien on the financed supply vessel and in the
majority of the contracts a corporate guarantee from both Wilson
Sons de Administração e Comércio Ltda and Remolcadores Ultratug
Ltda, each guaranteeing 50% of its subsidiary's debt balance with
BNDES. A 50% share of the loan agreements amount to US$170.7
million (2019: US$176.5 million).
Wilson Sons Ultratug Particpações S.A. subsidiary's loan with
Banco do Brasil is guaranteed by a pledge over the financed supply
vessels. The security package also includes a standby letter of
credit issued by Banco de Crédito e Inversiones - Chile for part of
the debt balance, assignment of Petrobras' long-term contracts and
a corporate guarantee issued by Inversiones Magallanes Ltda -
Chile. A cash reserve account, accounted for under long-term
investments and funded with US$2.1 million, is to be maintained
until full repayment of the loan agreement. A 50% share of the loan
agreements amount to US$25.7 million (2019: US$28.2 million).
The loan that Atlantic Offshore S.A. has with Deutsche
Verkehrs-Bank and Norddeutsche Landesbank Girozentrale Trade for
the financing of the offshore support vessel "Pardela" is
guaranteed by a pledge over the vessel, the shares of Atlantic
Offshore S.A. and a corporate guarantee for half of the credit from
Wilson Sons de Administração e Comércio Ltda. Remolcadores Ultratug
Ltda, the 50% partner in the business, guarantees the other half of
the loan. A 50% share of the loan agreements amount to US$10.7
million (2019: US$11.7 million).
Covenants
On 31 December 2020, Wilson, Sons Ultratug Participações S.A.'s
subsidiary was not in compliance with one of the covenants ratios.
On the assumption of a non-attainment, the joint venture's
subsidiary has to increase its capital, within a year, to reach
US$5.8 million. As the capital will be increased, management's
understanding is that there is no breach of a clause or event that
prompts negotiation or a waiver letter from Banco do Brasil.
Atlantic Offshore S.A. has to comply with specific financial
covenants on its two loan agreements with Deutsche Verkehrs-Bank
and Norddeutsche Landesbank Girozentrale Trade. At 31 December 2020
the subsidiary was in compliance with all loan agreement
clauses.
There are no other capital commitments for any of the joint
ventures or joint operations.
Provisions for tax, labour and civil risks
In the normal course of business in Brazil, the joint ventures
remain exposed to numerous local legal claims. It is the joint
ventures' policy to vigorously contest such claims, many of which
appear to have little merit, and to manage such claims through
their legal counsel.
Wilson, Sons Ultratug Participações S.A. booked provisions
related to labour claims amounting to US$0.1 million, whose
probability of loss was estimated as probable.
In addition to the cases for which the joint ventures have made
a provision, there are other tax, civil and labour disputes
amounting to US$6.1 million (2019: US$15.5 million) whose
probability of loss was estimated by legal counsel as possible.
The breakdown of aggregated possible losses is as follows:
31 December 31 December
2020 2019
US$'000 US$'000
-------------- ----------- -----------
Tax cases 5,611 8,304
Labour claims 505 7,192
Civil cases 4 6
-------------- ----------- -----------
Total 6,120 15,502
-------------- ----------- -----------
Below is the reconciliation of the investment in joint ventures
recognised in the balance sheet including the impact of profit
recognised by joint ventures:
US$'000
-------------------------------------- -------
At 1 January 2019 26,528
Share of result of joint ventures 564
Capital increase 3,527
Elimination on construction contracts 156
Post-employment benefits (51)
Derivatives (380)
Exchange movements (10)
-------------------------------------- -------
At 1 January 2020 30,334
Share of result of joint ventures (4,142)
Capital increase 23
Elimination on construction contracts 45
Post-employment benefits 24
Derivatives (36)
Exchange movements (63)
-------------------------------------- -------
At 31 December 2020 26,185
-------------------------------------- -------
20. Financial assets at fair value through profit or loss
2020 2019
US$'000 US$'000
-------------------------------------------------------------------------------- -------- --------
Financial assets at fair value through profit or loss
At 1 January 298,839 287,298
Additions, at cost 63,723 35,489
Disposals, at market value (45,154) (55,882)
Increase in fair value of financial assets at fair value through profit or loss 29,055 24,438
Profit on disposal of financial assets at fair value through profit or loss 1,001 7,497
-------------------------------------------------------------------------------- -------- --------
At 31 December 347,464 298,840
-------------------------------------------------------------------------------- -------- --------
Ocean Wilsons (Investment) Limited Portfolio 307,874 284,763
Wilson Sons Limited 39,590 14,077
-------------------------------------------------------------------------------- -------- --------
Financial assets at fair value through profit or loss held at 31 December 347,464 298,840
-------------------------------------------------------------------------------- -------- --------
Wilson Sons Limited
The Wilson Sons investments are held and managed separately from
the Ocean Wilsons (Investments) Limited portfolio and consist of US
Dollar denominated depository notes.
Ocean Wilsons (Investments) Limited portfolio
The Group has not designated any financial assets that are not
classified as trading investments as financial assets at fair value
through profit or loss.
Financial assets at fair value through profit or loss above
represent investments in listed equity securities, funds and
unquoted equities that present the Group with opportunity for
return through dividend income and capital appreciation.
Included in financial assets at fair value through profit or
loss are open ended funds whose shares may not be listed on a
recognised stock exchange but are redeemable for cash at the
current net asset value at the option of the Group. They have no
fixed maturity or coupon rate. The fair values of these securities
are based on quoted market prices where available. Where quoted
market prices are not available, fair values are determined by
third parties using various valuation techniques that include
inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
21. Inventories
31 December 31 December
2020 2019
US$'000 US$'000
-------------------------------------------------- ----------- -----------
Operating materials 9,404 9,228
Raw materials for third party vessel construction 2,360 1,279
-------------------------------------------------- ----------- -----------
Total 11,764 10,507
-------------------------------------------------- ----------- -----------
Inventories are expected to be recovered in less than one year
and there were no obsolete items (2019: none).
22. Trade and other receivables
31 December 31 December
2020 2019
US$'000 US$'000
------------------------------------------- ----------- -----------
Trade and other receivables
Other trade receivables 9 354
------------------------------------------- ----------- -----------
Total other non-current trade receivables 9 354
------------------------------------------- ----------- -----------
Amount receivable for the sale of services 41,152 47,991
Allowance for bad debts (554) (837)
------------------------------------------- ----------- -----------
Total current trade receivables 40,598 47,154
------------------------------------------- ----------- -----------
Prepayments 4,252 6,452
Insurance claim receivable 995 1,972
Other receivables 1,962 1,165
------------------------------------------- ----------- -----------
Total other current trade receivables 7,200 9,589
------------------------------------------- ----------- -----------
Total current trade and other receivables 47,807 56,743
------------------------------------------- ----------- -----------
31 December 31 December
2020 2019
Ageing of trade receivables US$'000 US$'000
---------------------------- ----------- -----------
Current 34,561 37,146
From 0 - 30 days 4,800 7,641
From 31 - 90 days 852 1,434
From 91 - 180 days 197 694
More than 180 days 742 1,076
---------------------------- ----------- -----------
Total 41,152 47,991
---------------------------- ----------- -----------
Generally, interest of 1% per month plus a 2% penalty is charged
on overdue balances. Allowances for bad debts are recognised as a
reduction of receivables and are recognised whenever a loss is
identified. The Group recognizes an allowance for bad debts taking
into account an expected credit loss model that involves historical
evaluation of effective losses over billing cycles. The period of
review is 3.5 years, reassessed every 180 days. The measurement of
the default rate considers the recoverability of receivables and
will apply according to the payment profile of debtors. Debts are
written off when a customer has gone into liquidation or there is
an adjustment in a receivable balance as a result of a judicial
proceeding. The Group will calibrate, when appropriate, the matrix
to adjust the historical credit loss experience with
forward-looking information. The provision matrix is disclosed in
note 35. Due to the Covid-19 pandemic, the Company has reviewed the
variables that make up the methodology of measurement of estimated
losses. There has been no increase in customer default rate due to
the outbreak. Additionally, the Company created a credit committee
to monitor and, if necessary, propose payment terms to those
customers with credit risk.
2020 2019
Movement in the allowance for bad debts US$'000 US$'000
--------------------------------------------------- ------- -------
Balance at 1 January 2020 837 1,490
Amounts written off as uncollectable - (28)
Decrease in allowance recognised in profit or loss (99) (534)
Exchange differences (184) (91)
--------------------------------------------------- ------- -------
Balance at 31 December 2020 554 837
--------------------------------------------------- ------- -------
The Directors consider that the carrying amount of trade and
other receivables approximates their fair value and that no
additional provision is required in the allowance for bad
debts.
23. Recoverable taxes
2020 2019
US$'000 US$'000
----------------------------------------------- ------- -------
PIS and COFINS recoverable(1) 8,226 18,467
FUNDAF recoverable(2) - 4,578
Judicial bond recoverable 2,192 2,698
Other recoverable taxes 588 758
----------------------------------------------- ------- -------
Total recoverable taxes non-current 11,006 26,501
----------------------------------------------- ------- -------
PIS and COFINS recoverable(1) 12,700 11,764
Income tax and social contribution recoverable 6,987 8,377
FUNDAF recoverable(2) 237 1,954
Judicial bond recoverable 1,333 1,911
ISS recoverable(3) 934 1,264
INSS recoverable(4) 203 238
Other recoverable taxes 85 39
----------------------------------------------- ------- -------
Total recoverable taxes current 22,479 25,547
----------------------------------------------- ------- -------
Total 33,485 52,048
----------------------------------------------- ------- -------
1 The PIS (Program of Social Integration) and COFINS (Contribution for
the Financing of Social Security) are Brazilian federal taxes based
on the turnover of companies.
2 FUNDAF (Fundo Especial de Desenvolvimento e Aperfeiçoamento das
Atividades de Fiscalização) is a Brazilian sales tax charged
on the gross sales revenue in ports and bonded airports.
3 The Brazilian Municipal Service Tax, ISS (Imposto Sobre Serviços)
is a tax levied on the provision of services.
4 INSS (Instituto Nacional do Seguro Social) is a Brazilian payroll tax.
The Group reviews taxes and levies impacting its business to
ensure that payments are accurately made. In the event that tax
credits arise, the Group intends to use them in future years within
their legal term. If the Group does not utilise the tax credit
within their legal term, a reimbursement of such amounts will be
requested from the Brazilian Internal Revenue Service ("Receita
Federal do Brasil").
24. Bank loans and overdrafts
Annual 31 December 31 December
interest rate 2020 2019
% US$'000 US$'000
--------------------------------------------- -------------- ----------- -----------
Secured borrowings
BNDES - FMM linked to US Dollar(1) 2.07% to 5% 146,446 148,564
BNDES - Real 5.95% to 8.54% 55,177 39,807
BNDES - FMM Real(1) 9.28% 805 1,064
BNDES - Finame Real(2) 4.50% to 5.50% - 35
--------------------------------------------- -------------- ----------- -----------
Total BNDES 202,428 189,470
--------------------------------------------- -------------- ----------- -----------
Banco do Brasil - FMM linked to US Dollar(1) 2.00% - 4.00% 75,795 79,535
Bradesco - NCE - Real(3) 2.83% - 3.20% 38,660 50,043
Itaú - NCE - Real(3) 3.38% 4,056 15,930
Santander - Real 6.44% 8,056 -
China Construction Bank - Real 5.65% 13,666 -
Total others 140,233 145,508
--------------------------------------------- -------------- ----------- -----------
Total 342,661 334,978
--------------------------------------------- -------------- ----------- -----------
1. As an agent of Fundo da Marinha Mercante's ("FMM"), Banco Nacional
de Desenvolvimento Econômico e Social ("BNDES") and Banco do
Brasil ("BB") finances the construction of tugboats and shipyard facilities.
2. Finame is the financing for the acquisition of machinery and equipment.
3. NCE is an export credit note.
The breakdown of bank overdrafts and loans by maturity is as
follows:
31 December 31 December
2020 2019
US$'000 US$'000
-------------------------------------------- ----------- -----------
Within one year 58,672 36,636
In the second year 44,707 41,492
In the third to fifth years (inclusive) 96,250 106,523
After five years 143,032 150,327
-------------------------------------------- ----------- -----------
Total 342,661 334,978
-------------------------------------------- ----------- -----------
Amounts due for settlement within 12 months 58,672 36,636
-------------------------------------------- ----------- -----------
Amounts due for settlement after 12 months 283,989 298,342
-------------------------------------------- ----------- -----------
The analysis of borrowings by currency is as follows:
BRL
linked to
BRL US Dollars US Dollars Total
US$'000 US$'000 US$'000 US$'000
----------------- ------- ---------- ---------- -------
31 December 2020
Bank loans 120,420 222,241 - 342,661
----------------- ------- ---------- ---------- -------
Total 120,420 222,241 - 342,661
----------------- ------- ---------- ---------- -------
31 December 2019
Bank loans 106,879 228,099 - 334,978
----------------- ------- ---------- ---------- -------
Total 106,879 228,099 - 334,978
----------------- ------- ---------- ---------- -------
Loan agreement for civil works
In December 2018, the subsidiary Tecon Salvador S.A. signed a
US$67.9 million financing agreement with the BNDES, to be used for
civil works during the terminal's expansion. The civil works for
this expansion were completed in October 2020.
Guarantees
Loans with the BNDES and Banco do Brasil rely on corporate
guarantees from Wilson Sons de Administração e Comércio Ltda. For
some contracts, the corporate guarantee is in addition to a pledge
of the respective financed tugboat or a lien over the logistics and
port operations equipment financed.
The loan agreement for Tecon Rio Grande from Banco Santander for
the purchase of equipment relies on a corporate guarantee from
Wilson, Sons de Administração e Comércio Ltda.
The loan agreement for Tecon Rio Grande from Banco Itaú for the
purchase of equipment relies on a corporate guarantee from Wilport
Operadores Portuários Ltda.
The loan agreement for Tecon Salvador from Banco Bradesco for
purchase of equipment relies on a corporate guarantee from Wilport
Operadores Portuários Ltda.
Undrawn credit facilities
At 31 December 2020, the Group had available US$19.1 million
(R$99.3 million) (2019: US$104.3 million (R$420.6 million)) of
undrawn borrowing facilities available in relation to (i) the
Salvador Terminal expansion and (ii) the dry-docking, maintenance
and repair of tugs. Additionally, the Group has US$9.4 million
(R$48.8 million) in contracted financing for the future
construction of tugboats which is pending amendment to the contract
related to vessel specification changes.
Covenants
Wilson, Sons de Administração e Comércio Ltda. as corporate
guarantor must comply with annual loan covenants for both Wilson
Sons Estaleiros, Brasco Logística Offshore and Saveiros Camuryano
Serviços Maritimos S.A. in respect of loan agreements signed with
BNDES.
Wilport Operadores Portuários Ltda as corporate guarantor for
loan agreements signed between BNDES and Tecon Salvador S.A. must
comply with annual loan covenants including ratios of debt service
coverage, net debt ratio over EBITDA and equity over total assets.
For the BNDES agreements Tecon Salvador has to comply with a debt
service coverage ratio covenant. The ratios are calculated
excluding the impact of IFRS16.
Tecon Rio Grande S.A. must comply with loan covenants from
Santander including a minimum liquidity ratio and capital
structure.
At 31 December 2020, the Group was in compliance with all
covenants in the above mentioned loan contracts.
Fair value
The Directors estimate the fair value of the Group's borrowings
as follows:
31 December 31 December
2020 2019
US$'000 US$'000
-------------------------- ----------- -----------
Bank loans
BNDES 202,428 189,470
Banco do Brasil 75,795 79,535
Bradesco - NCE - Real 40,577 50,043
Itaú 4,060 15,930
Santander 8,045 -
China Construction Bank 13,657 -
Total 344,562 334,978
-------------------------- ----------- -----------
25. Deferred tax
The following are the major deferred tax assets and liabilities
recognised by the Group and movements thereon during the current
and prior reporting period.
Unrealised
foreign
exchange Retranslation of
Accelerated tax variance on Other non-current asset
depreciation loans differences valuation Total
US$'000 US$'000 US$'000 US$'000 US$'000
-------------------------- --------------- ----------- ----------- ----------------- --------
At 1 January 2019 (38,328) 32,174 36,386 (52,032) (21,800)
(Charge)/credit to income (587) (1,978) 3,381 592 876
Exchange differences 1,641 (817) (720) 126 219
-------------------------- --------------- ----------- ----------- ----------------- --------
At 1 January 2020 (37,274) 29,379 39,047 (51,314) (20,162)
-------------------------- --------------- ----------- ----------- ----------------- --------
(Charge)/credit to income (638) 15,135 2,086 (13,972) 2,611
Exchange differences 8,429 (8,057) (4,721) 629 (3,720)
-------------------------- --------------- ----------- ----------- ----------------- --------
At 31 December 2020 (29,483) 36,457 36,412 (64,657) (21,271)
-------------------------- --------------- ----------- ----------- ----------------- --------
Certain tax assets and liabilities have been offset on an
entity-by-entity basis. The following is the analysis of the
deferred tax balances (after offset) for financial reporting
purposes.
31 December 31 December
2020 2019
US$'000 US$'000
------------------------- ----------- -----------
Deferred tax liabilities (50,987) (52,036)
Deferred tax assets 29,716 31,874
------------------------- ----------- -----------
(21,271) (20,162)
------------------------- ----------- -----------
At the balance sheet date, the Group had unused tax losses of
US$64.4 million (2019: US$64.1 million) available for offset
against future profits in the company in which they arose. No
deferred tax asset has been recognised in respect of US$6.9 million
(2019: US$6.3 million) due to the unpredictability of future profit
streams. In Brazil, a tax asset of one entity in a group cannot be
offset against a tax liability of another entity in the group as
there is no legally enforceable right to offset tax assets and
liabilities between group companies.
Retranslation of non-current asset valuation deferred tax arises
on Brazilian property, plant and equipment held in US dollar
functional currency businesses. Deferred tax is calculated on the
difference between the historical US Dollar balances recorded in
the Group's accounts and the Brazilian Real balances used in the
Group's Brazilian tax calculations.
Deferred tax on exchange variance on loans arises from exchange
gains or losses on the Group's US Dollar and Brazilian Real
denominated loans linked to the US Dollar that are not deductible
or payable for tax in the period they arise. Exchange gains on
these loans are taxable when settled and not in the period in which
gains arise.
26. Trade and other payables
31 December 31 December
2020 2019
US$'000 US$'000
--------------------------------------------- ----------- -----------
Trade creditors 17,451 20,400
Other taxes 6,232 9,848
Salaries, provisions and social contribution 16,516 18,544
Accruals and deferred income 6,913 7,630
Share based payment liability 186 186
--------------------------------------------- ----------- -----------
Total 47,298 56,608
--------------------------------------------- ----------- -----------
Trade creditors and accruals principally comprise amounts
outstanding for trade purposes and ongoing costs.
The average credit period for trade purchases is 29 days (2019:
29 days). For most suppliers, interest is charged on outstanding
trade payable balances at various interest rates. The Group has
financial risk management policies in place to ensure that payables
are paid within the credit timeframe agreed with each vendor.
The Directors consider that the carrying amount of trade
payables approximates their fair value.
26.1 Taxes Payable
2020 2019
US$'000 US$'000
---------------------------- ------- -------
INSS payable 1,885 4,041
PIS and COFINS payable 541 1,853
ISS payable 1,676 1,686
Income tax payable 1,121 1,365
FGTS(1) payable 483 668
Other payable taxes 526 235
---------------------------- ------- -------
Total current taxes payable 6,232 9,848
---------------------------- ------- -------
1. FGTS is Fundo de Garantia do Tempo de Serviço and is a fund
for dismissed employees.
27. Provisions for tax, labour, civil cases and contingent liabilities
Labour claims Tax cases Civil cases Total
US$'000 US$'000 US$'000 US$'000
----------------------------------- ------------- --------- ----------- -------
Cost
At 1 January 2019 13,813 2,838 684 17,335
Increase in provision in the year 1,326 399 1,455 3,180
Unused amounts reversed (2,957) (61) (307) (3,325)
Utilisation of provisions (921) (993) (11) (1,925)
Exchange difference (557) (731) 8 (622)
----------------------------------- ------------- --------- ----------- -------
At 1 January 2020 10,704 2,110 1,829 14,643
Increase in provisions in the year 904 82 11 997
Unused amounts reversed (663) (488) (1,012) (2,163)
Utilisation of provisions (572) (21) (51) (644)
Exchange difference (2,388) (481) (404) (3,273)
----------------------------------- ------------- --------- ----------- -------
At 31 December 2020 7,985 1,202 373 9,560
----------------------------------- ------------- --------- ----------- -------
In the normal course of business in Brazil, the Group is exposed
to numerous local legal claims. It is the Group's policy to
vigorously contest such claims, many of which appear to have little
substance or merit, and to manage such claims through its legal
counsel. Both provisions and contingent liabilities can take a
significant amount of time to resolve.
Other non-current assets of US$4.9 million (2019: US$9.4
million) represent legal deposits required by the Brazilian legal
authorities as security to contest legal actions.
In addition to the cases where the Group has recorded a
provision, there are other tax, civil and labour disputes amounting
to US$77.4 million (2019: US$103.6 million) where the probability
of loss was estimated by the legal counsels as possible.
The analysis of possible claims by type is as follows:
31 December 31 December
2020 2019
US$'000 US$'000
------------------------------ ----------- -----------
Tax cases 58,809 78,258
Labour claims 13,318 14,223
Civil and environmental cases 5,264 11,108
------------------------------ ----------- -----------
Total 77,391 103,589
------------------------------ ----------- -----------
The main probable and possible claims against the Group are
described below:
Tax cases - The Group defends against government tax assessments
when the Group considers it has a chance of successfully defending
its position.
Labour claims - Most claims involve payment of health risks,
additional overtime and other allowances.
Civil and environmental cases - Indemnification claims involving
material damage, environmental and shipping claims and other
contractual disputes.
The procedure for classification of legal liabilities identifies
claims as probable, possible or remote, as assessed by external
lawyers is:
-- upon receipt of notices of new lawsuits, external lawyers
generally classify the claim as possible recorded at the total
amount at risk. The Group uses the estimated value at risk and not
the total claim value involved in each process;
-- if there is sufficient knowledge from the beginning that
there is a very high or very low risk of loss, the lawyer may
classify the claim as a probable loss or remote loss;
-- during the course of the lawsuit the lawyer may re-classify
the claim as a probable loss or remote loss based on information
available including judicial decisions, legal precedents, claimant
arguments, applicable laws, defence documentation and other
variables; and
-- when classifying the claim as a probable or possible loss,
the lawyer estimates the amount at risk for the claim.
Management is not able to give an indication of when the
provisions are likely to be utilised as the majority of the
litigation involves a high degree of uncertainty as to when the
cases will be resolved and can take many years to come to a
conclusion.
28. Share capital
2020 2019
US$'000 US$'000
--------------------------------------- ------- -------
Authorised
50,060,000 ordinary shares of 20p each 16,119 16,119
--------------------------------------- ------- -------
Issued and fully paid
35,363,040 ordinary shares of 20p each 11,390 11,390
--------------------------------------- ------- -------
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 presentational
currency changed from Sterling to US Dollars, being US$1.61 to
GBP1.
29. Exercise of stock options in subsidiary
During 2020 participants of the Wilson Sons stock option scheme
exercised 475,050 options. As a result, the non-controlling
interest in Wilson Sons increased from 41.84% at 31 December 2019
to 42.23% at 31 December 2020. The Group received US$3,336,000
(2019: US$133,000) from the exercise of stock options in the
period.
2020 2019
US$'000 US$'000
--------------------------- ------- -------
The following amounts have
been recognised in the
consolidated statement
of comprehensive income
Movement attributable to
equity holders of parent 1,679 61
Movement attributable to
non-controlling interest 1,657 72
--------------------------- ------- -------
30. Notes to the cash flow statement
Year ended Year ended
31 December 31 December
2020 2019
US$'000 US$'000
--------------------------------------------------------- ----------- -----------
Reconciliation from profit before tax to net cash from
operating activities
Profit before tax 74,580 82,530
Share of results of joint venture 4,142 (564)
Returns on investment portfolio at FVTPL (33,383) (34,716)
Other investment income (1,644) (6,052)
Finance costs 23,210 27,736
Operating profit 66,905 68,934
Adjustments for:
Amortisation of right-of-use assets 10,706 12,389
Depreciation of property, plant and equipment 47,793 50,353
Impairment charge (382) 13,025
Amortisation of intangible assets 2,824 3,380
Share based payment credit 127 370
Loss on disposal of property, plant and equipment 317 (294)
Post-employment benefits 134 -
Decrease in provisions 1,030 421
--------------------------------------------------------- ----------- -----------
Operating cash flows before movements in working capital 129,454 148,578
(Increase)/decrease in inventories (1,257) 368
Decrease in receivables 8,141 16,213
Decrease in payables (8,914) (1,525)
(Increase)/decrease in other non-current assets 22,565 (5,123)
Foreign exchange losses on monetary items 7,551 79
--------------------------------------------------------- ----------- -----------
Cash generated by operations 157,540 158,590
Income taxes paid (29,137) (23,324)
Interest paid (22,703) (28,957)
--------------------------------------------------------- ----------- -----------
Net cash from operating activities 105,700 106,309
--------------------------------------------------------- ----------- -----------
Non-cash movements in financing
In addition to the cash flow movements in financing arrangements
the group was subject to the following cash and non-cash
movements:
Loans and Borrowings Lease Liabilities Total Liabilities from
financing activities
US$'000 US$'000 US$'000
------------------------------ --------------------- ------------------ -----------------------------
At 1 January 2019 307,306 194,133 501,439
Cash flows (85,856) (6,424) (92,820)
Foreign exchange gains/(losses) (1,947) (8,470) (10,417)
New loans/leases 113,629 226 113,855
Contractual amendments - 14,434 14,434
Interest paid (11,840) (16,806) (28,646)
Interest accrued 13,062 16,799 29,861
Other 624 256 880
-------------------------------- --------------------- ------------------ -----------------------------
At 1 January 2020 334,978 194,198 529,126
Cash flows (25,725) (6,345) (32,070)
Foreign exchange gains/(losses) (23,818) (45,521) (68,839)
New loans/leases 51,455 5,695 57,150
Contractual amendments - 9,712 9,712
Interest paid (8,569) (14,111) (22,680)
Interest accrued 13,840 14,096 27,936
Other - 220 220
At 31 December 2020 342,661 157,894 500,555
-------------------------------- --------------------- ------------------ -----------------------------
The Group classifies interest paid as cash flows from operating
activities.
Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and
short-term bank deposits with an original maturity of three months
or less. The carrying amount of these assets approximates their
fair value.
Exclusive investment fund
The Group has investments in an exclusive investment fund
managed by Itaú BBA S.A. that is consolidated in these financial
statements. The fund portfolio is marked to fair value on a daily
basis. This fund's financial obligations are limited to service
fees to the asset management company employed to execute investment
transactions, audit fees and other similar expenses. The fund's
investments are highly liquid, readily convertible to known amounts
of cash and subject to insignificant risk of changes in value.
Additionally, the Group has investments in an exchange fund
managed by Itaú Cambial FICFI to reduce the currency volatility of
US Dollar linked commitments.
Cash and cash equivalents held in Brazil amount to US$53.8
million (2019: US$35.7 million).
Cash equivalents are held for the purpose of meeting short-term
cash commitments and not for investment purposes.
31. Share options
Stock option scheme
On 13 November 2013, the board of Wilson Sons approved a Stock
Option Plan which allowed for the grant of options to eligible
participants to be selected by the board. The shareholders of
Wilson Sons in a special general meeting approved the plan on 8
January 2014 including an increase in the authorised capital of
Wilson Sons through the creation of up to 4,410,927 new shares. The
options provide participants with the right to acquire shares via
BDRs in Wilson Sons at a predetermined fixed price not less than
the three-day average mid-price for the days preceding the date of
option issuance. The Stock Option Plan is detailed below:
Original Exercise
Grant vesting Expiry price Outstanding Total
Options
series date date date (R$) Number Expired Exercised Vested not Vested Subsisting
-------- ----------- ----------- ----------- -------- --------- --------- --------- --------- ----------- ----------
07 ESO -
3 Year 10/01/2014 10/01/2017 10/10/2024 31.23 961,653 (178,695) (192,505) 590,453 - 590,453
07 ESO -
4 Year 10/01/2014 10/01/2018 10/01/2024 31.23 961,653 (178,695) (192,506) 590,452 - 590,452
07 ESO -
5 Year 10/01/2014 10/01/2019 10/01/2024 31.23 990,794 (184,110) (186,099) 620,585 - 620,585
07 ESO -
3 Year 13/11/2014 13/11/2017 13/11/2024 33.98 45,870 (17,490) (3,630) 24,750 - 24,750
07 ESO -
4 Year 13/11/2014 13/11/2018 13/11/2024 33.98 45,870 (17,490) (3,630) 24,750 - 24,750
07 ESO -
5 Year 13/11/2014 13/11/2019 13/11/2024 33.98 47,260 (18,020) (3,740) 25,500 - 25,500
07 ESO -
3 Year 11/08/2016 11/08/2019 11/08/2026 34.03 82,500 - (5,000) 77,500 - 77,500
07 ESO -
4 Year 11/08/2016 11/08/2020 11/08/2026 34.03 82,500 - (5,000) 77,500 - 77,500
07 ESO -
5 Year 11/08/2016 11/08/2021 11/08/2026 34.03 85,000 - - - 85,000 85,000
07 ESO -
3 Year 16/05/2017 16/05/2020 15/05/2027 38.00 20,130 - - 20,130 - 20,130
07 ESO -
4 Year 16/05/2017 16/05/2021 15/05/2027 38.00 20,130 - - - 20,130 20,130
07 ESO -
5 Year 16/05/2017 16/05/2022 15/05/2027 38.00 20,740 - - - 20,740 20,740
07 ESO -
3 Year 09/11/2017 09/11/2020 09/11/2027 40.33 23,760 (11,880) - 11,880 - 11,880
07 ESO -
4 Year 09/11/2017 09/11/2021 09/11/2027 40.33 23,760 (11,880) - - 11,880 11,880
07 ESO -
5 Year 09/11/2017 09/11/2022 09/11/2027 40.33 24,480 (12,240) - - 12,240 12,240
-------- ----------- ----------- ----------- -------- --------- --------- --------- --------- ----------- ----------
Total 3,436,100 (630,500) (592,110) 2,063,500 149,990 2,213,490
----------------------------------------------- -------- --------- --------- --------- --------- ----------- ----------
The following table illustrates the number and weighted average
exercise prices (WAEP) of and movements in share options over the
last two years.
Number WAEP (R$)
------------------------------- --------- ---------
Subsisting at 1 January 2019 2,755,940 31.96
Exercised during the year(1) (17,400) 31.23
Expired during the year (36,000) 40.33
------------------------------- --------- ---------
Subsisting at 31 December 2019 2,702,540 31.85
Exercised during the year(2) (475,050) 31.23
Expired during the year (14,000) 33.98
------------------------------- --------- ---------
Subsisting at 31 December 2020 2,213,490 31.96
------------------------------- --------- ---------
1 The weighted average share price at the date of exercise of these options was R$40.87.
2 The weighted average share price at the date of exercise of these options was R$45.76.
The options terminate on the expiry date or immediately on the
resignation of the director or senior employee, whichever is
earlier. Options lapse if not exercised within 6 months of the date
that the participant ceases to be employed or hold office within
the Group by reason of, amongst others, injury, disability,
retirement or dismissal without just cause.
The following Fair Value expense of the grant to be recorded as
a liability in the respective accounting periods was determined
using the Binomial model based on the assumptions detailed
below:
Projected IFRS2
Fair Value expense
Period US$'000
---------------- ------------------
10 January 2014 2,826
10 January 2015 3,296
10 January 2016 3,409
10 January 2017 2,331
10 January 2018 1,303
10 January 2019 370
10 January 2020 206
10 January 2021 99
10 January 2022 27
---------------- ------------------
Total 13,867
---------------- ------------------
10 January 13 November 11 August 16 May 9 November
2014 2014 2016 2017 2017
------------------------------ ---------- ----------- --------- -------- ----------
Closing share price (in Real) R$30.05 R$33.50 R$32.15 R$38.00 R$38.01
Expected volatility 28.00% 29.75% 31.56% 31.82% 31.82%
Expected life 10 years 10 years 10 years 10 years 10 years
Risk free rate 10.8% 12.74% 12.03% 10.17% 10.17%
Expected dividend yield 1.7% 4.8% 4.8% 4.8% 4.8%
------------------------------ ---------- ----------- --------- -------- ----------
Expected volatility was determined by calculating the historical
volatility of the Wilson Son's share price. The expected life used
in the model has been adjusted based on management's best estimate
for exercise restrictions and behavioural considerations.
32. Commitments
At 31 December 2020 the Group had entered into commitment
agreements with respect to the investment portfolio. These
commitments relate to capital subscription agreements entered into
by Ocean Wilsons (Investments) Limited. The expiry dates of the
outstanding commitments in question may be analysed as follows:
2020 2019
US$'000 US$'000
-------------------------------------- ------- -------
Within one year 4,670 2,978
In the second to fifth year inclusive 5,153 4,453
After five years 35,495 32,222
-------------------------------------- ------- -------
45,318 39,653
-------------------------------------- ------- -------
The expiry date is not indicative of when commitment calls may
be made and could be accelerated. 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 conditions of each individual structure.
At 31 December 2020, the Group had entered into contractual
commitments for the acquisition of property, plant and equipment
amounting to US$1.6 million (2019: US$3.0 million). The amount
mainly relates to capital expenditure for the Salvador container
terminal.
33. Retirement benefit schemes
Defined contribution schemes
The Group operates defined contribution retirement benefit
schemes for all qualifying employees of its Brazilian business. The
assets of the scheme are held separately from those of the Group in
funds under the control of independent managers.
The total cost charged to the income statement of US$0.6 million
(2019: US$0.7 million) represents contributions payable to the
scheme by the Group at rates specified in the rules of the
plan.
34. Related party transactions
Transactions between the Company and its subsidiaries which are
related parties have been eliminated on consolidation and are not
disclosed in this note. Transactions between the Group and its
associates, joint ventures and other investments are disclosed
below:
Revenue from services Amounts paid/Cost of services
------------------------ -------------------------------
31 December 31 December 31 December 31 December
2020 2019 2020 2019
US$'000 US$'000 US$'000 US$'000
--------------------------------------------------------- ----------- ----------- --------------- --------------
Joint ventures
1. Allink Transportes Internacionais Limitada(1) - - (223) (339)
2. Consórcio de Rebocadores Barra de Coqueiros - - - -
3. Consórcio de Rebocadores Baía de São
Marcos 150 470 (154) -
4. Wilson Sons Ultratug Participações S.A.
and subsidiaries(7) 506 584 - -
5. Atlantic offshore S.A.(8) - - - -
Others
6. Hanseatic Asset Management LBG(2) - - (3,130) (3,417)
7. Gouvêa Vieira Advogados(3) - - (51) (66)
8. CMMR. Intermediacão Comercial Limitada(4) - - (6) (81)
9. Jofran Services(5) - (156) (178)
10. Hansa Capital GMBH(6) - (93) (98)
--- ---------------------------------------------------- ----------- ----------- --------------- --------------
Amounts owed Amounts owed
by related parties to related parties
------------------------ ------------------------
31 December 31 December 31 December 31 December
2020 2019 2020 2019
US$'000 US$'000 US$'000 US$'000
--------------------------------------------------------------- ----------- ----------- ----------- -----------
Joint ventures
1. Allink Transportes Internacionais Limitada(1) - - - (28)
2. Consórcio de Rebocadores Barra de Coqueiros - 62 - -
3. Consórcio de Rebocadores Baía de São Marcos 1,535 2,383 - -
4. Wilson Sons Ultratug and subsidiaries(7) 10,346 10,088 - -
5. Atlantic offshore S.A.(8) 20,617 20,167 - -
Others
6. Hanseatic Asset Management LBG(2) - - (599) (902)
7. Gouvêa Vieira Advogados(3) - - - -
8. CMMR. Intermediacão Comercial Limitada(4) - - - -
9. Jofran Services(5) - - - -
10. Hansa Capital GMBH(6) - - - -
--- ---------------------------------------------------------- ----------- ----------- ----------- -----------
1. Mr. A C Baião, a director of Wilson Sons Limited is a shareholder
and Director of Allink Transportes Internacionais Limitada. Allink
Transportes Internacionais Limitada is 50% owned by the Group.
2. Mr. W H Salomon is chairman of Hanseatic Asset Management LBG. Fees
were paid to Hanseatic Asset Management LBG for acting as Investment
Manager of the Group's investment portfolio.
3. Mr. J F Gouvêa Vieira is a partner in the law firm Gouvêa
Vieira Advogados. Fees were paid to Gouvêa Vieira Advogados for
legal services.
4. Mr. C M Marote, a Director of Wilson Sons Limited is a shareholder
and Director of CMMR. Intermediacão Comercial Limitada. Fees were
paid to CMMR. Intermediacão Comercial Limitada for consultancy
services.
5. Mr. J F Gouvêa Vieira is a Director of Jofran Services. Directors'
fees were paid to Jofran Services.
6. Mr. C Townsend is a Director of Hansa Capital GmbH. Directors' fees
were paid to Hansa Capital GmbH.
7. Related party loans with Wilson, Sons Ultratug Participações
S.A. (interest - 0.3% per month with no maturity date) and other trade
payables and receivables from Wilson, Sons Offshore S.A. and Magallanes
Navegação Brasileira S.A.
8. Related party loans with Atlantic Offshore S.A. (with no interest and
with no maturity date).
Remuneration of key management personnel
The remuneration of the executive directors and other key
management of the Group is set out below in aggregate for the
categories specified in IAS 24 Related Party Disclosures.
Year ended Year ended
2020 2019
US$'000 US$'000
-------------------------------------- ---------- ----------
Short-term employee benefits 9,297 7,958
Other long-term employee benefits 468 344
Defined contribution pension payments 647 725
Share based payment expense 206 370
10,618 9,397
-------------------------------------- ---------- ----------
35. Financial instruments
Capital risk management
The Group manages its capital to ensure that entities in the
Group are viable and will be able to continue as a going concern.
The capital structure of the Group consists of debt, which is long
term in nature, which includes the borrowings disclosed in note 23
and also the lease liabilities included in note 15, cash and cash
equivalents, investments, and equity attributable to equity holders
of the parent comprising issued capital, reserves and retained
earnings disclosed in the consolidated statement of changes in
equity.
The Group borrows to fund capital projects and looks to cash
flow from these projects to meet repayments. Working capital is
funded through cash generated by operating revenues. There were so
significant changes in capital during the year relative to the
Group policy.
Externally imposed capital requirement
The Group is not subject to any externally imposed capital
requirements.
Significant accounting policies
Details of significant accounting policies and methods adopted,
including the criteria for recognition, the basis of measurement
and the basis on which income and expense are recognised, in
respect of each class of financial asset, financial liability and
equity instrument are disclosed in note 2 to the financial
statements.
Categories of financial instruments
31 December 31 December
2020 2019
US$'000 US$'000
------------------------------------------------------------------ ----------- -----------
Financial assets
Designated as fair value through profit or loss 307,874 284,763
Receivables (including cash and cash equivalents) 186,017 141,943
Financial liabilities
Financial instruments classified as amortised cost (500,555) (575,866)
Financial instruments classified as cash flow hedge (Derivatives) - -
------------------------------------------------------------------ ----------- -----------
Financial risk management objectives
The Wilson Sons corporate treasury function provides services to
the business, co-ordinates access to domestic and international
financial markets and manages the financial risks relating to the
operations of the company. A financial risk committee meets
regularly to assess financial risks and decide mitigation based on
guidelines stated in the Wilson Sons financial risk policy. The
primary objective is to minimise exposure to those risks by
assessing and controlling the credit and liquidity risks. These
risks include market risk (including currency risk, interest rate
risk and price risk), credit risk and liquidity risk.
Ocean Wilsons (Investments) Limited does not have a policy of
borrowing to invest and so is not exposed to interest rate risk
directly. The fund has significant liquid assets, the Company is
therefore no exposed to liquidity risks. The principal risk faced
by the fund is market price risk.
The Group may use derivative financial instruments to hedge
these risk exposures. The Group does not enter into trading
financial instruments, including derivative financial instruments
for speculative purposes.
Credit risk
The Group's principal financial assets are cash, trade and other
receivables, related party loans and financial assets designated as
fair value through profit or loss. The Group's credit risk is
primarily attributable to its bank balances, trade receivables,
related party loans and investments. The amounts presented as
receivables in the balance sheet are shown net of allowances for
bad debts.
The Wilson Sons group invests temporary cash surpluses in
government and private bonds, according to regulations approved by
management, which follow the Wilson Sons group policy on credit
risk concentration. Credit risk on investments in non-government
backed bonds is mitigated by investing only in assets issued by
leading financial institutions. The Group stipulates a cash
allocation limit per bank, in addition to investment rules
according to rating classification. The Company invests in banks
with rating classification BBB (limited to a maximum of 15%), from
A to AA (limited to a maximum of 40%) or AAA (limited to a minimum
of 40% and maximum of 100%).
The credit risk on liquid funds is limited because the
counterparties are banks with high credit ratings assigned by
international credit-rating agencies. The credit risk on
investments held for trading is limited because the counterparties
with whom the Group transacts are regulated institutions or banks
with high credit ratings. The Company's appointed Investment
Manager, Hanseatic Asset Management LBG, evaluates the credit risk
on trading investments prior to and during the investment
period.
The Group has no significant concentration of credit risk.
Regular credit evaluation is performed on the financial condition
of accounts receivable.
Operational trade receivables
An impairment analysis is performed at each reporting date using
a provision matrix to measure expected credit losses. The provision
matrix is initially based on the Group's historical observed
default rates. The Group evaluates the concentration of risk with
respect to trade receivables and contract assets as low, as
historically trade receivables are generally received in 30
days.
1-30 31-90 91-180 More than
Current days days days 180 days Total
31 December 2020 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
-------------------------- ------- ------- ------- ------- --------- -------
Expected credit loss rate 0.09% 0.09% 3.30% 12.77% 62.48%
Receivables for services 34,561 4,800 852 197 742 41,152
Accumulated credit loss (35) (4) (28) (25) (462) (554)
-------------------------- ------- ------- ------- ------- --------- -------
1-30 31-90 91-180 More than
Current days days days 180 days Total
31 December 2019 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
-------------------------- ------- ------- ------- ------- --------- -------
Expected credit loss rate 0.19% 0.19% 1.78% 12.11% 60.38%
Receivables for services 37,146 7,641 1,434 694 1,076 47,991
Accumulated credit loss (63) (15) (26) (84) (649) (837)
-------------------------- ------- ------- ------- ------- --------- -------
Market risk
The Group's activities expose it primarily to the financial
risks of changes in foreign currency exchange rates, interest rates
and market prices.
Foreign currency risk management
The Group undertakes certain transactions denominated or linked
to foreign currencies and therefore exposures to exchange rate
fluctuations arise. The Group operates principally in Brazil with a
substantial proportion of the Group's revenue, expenses, assets and
liabilities denominated in the Real. Due to the high cost of
hedging the Real, the Group does not normally hedge its net
exposure to the Real, as the Board does not consider it
economically viable.
Payments from investments in fixed assets are denominated in
Real and US Dollars. These investments are subject to currency
fluctuations between the time that the price of goods or services
are settled and the actual payment date. The resources and their
application are monitored with the objective of matching the
currency cash flows and due dates. 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.
In general terms, for operating cash flows, the Group seeks to
neutralise the currency risk by matching assets (receivables) and
liabilities (payments). Furthermore, the Group seeks to generate an
operating cash surplus in the same currency in which the debt
service of each business is denominated.
The carrying amount of the Group's foreign currency denominated
monetary assets and monetary liabilities at the reporting date are
as follows:
Liabilities Assets
---------------- ----------------
2020 2019 2020 2019
US$'000 US$'000 US$'000 US$'000
--------- ------- ------- ------- -------
Real 354,244 381,839 156,099 173,593
Sterling 22 21 11,492 11,094
Euro - - 31,147 27,033
Yen - - 5,125 4,022
--------- ------- ------- ------- -------
354,266 382,306 203,863 217,049
--------- ------- ------- ------- -------
Foreign currency sensitivity analysis
The Group is primarily exposed to unfavourable movements in the
Real on its Brazilian liabilities held by US Dollar functional
currency entities.
The sensitivity analysis below refers to the position at 31
December 2020 and estimates the impacts of a Real devaluation
against the US Dollar. Three exchange rate scenarios are shown: a
likely scenario (probable) and two possible scenarios of a 25%
devaluation (possible) and a 50% devaluation (remote) in the
exchange rate. The Group uses the Brazilian Central Bank's "Focus"
report to determine the probable scenario.
31 December 2020
Exchange rates
----------------------------
Probable Possible Remote
Amount scenario scenario scenario
Operation Risk US Dollars Result (25%) (50%)
------------------ ----- ---------- ---------------- -------- -------- --------
Exchange rate 5.20 6.50 7.80
------------------------- ---------- ---------------- -------- -------- --------
Total assets BRL 156,099 Exchange effects (99) (31,299) (52,099)
Total liabilities BRL 354,244 Exchange effects 225 71,029 118,231
------------------ ----- ---------- ---------------- -------- -------- --------
Net effect 126 39,730 66,132
------------------------ ---------- ---------------- -------- -------- --------
31 December 2019
Exchange rates
----------------------------
Probable Possible Remote
Amount scenario scenario scenario
Operation Risk US Dollars Result (25%) (50%)
------------------ ----- ---------- ---------------- -------- -------- --------
Exchange rate 4.05 5.06 6.08
------------------------- ---------- ---------------- -------- -------- --------
US$'000 US$'000 US$'000
------------------ ----- ---------- ---------------- -------- -------- --------
Total assets BRL 174,900 Exchange effects (815) (34,844) (57,530)
Total liabilities BRL 382,285 Exchange effects 1,822 77,914 128,643
------------------ ----- ---------- ---------------- -------- -------- --------
Net effect 1,007 43,070 71,113
------------------------ ---------- ---------------- -------- -------- --------
The Real foreign currency impact is mainly attributable to the
exposure of outstanding Real receivables and payables of the Group
at the year end. In management's opinion, the sensitivity analysis
is unrepresentative of the inherent foreign exchange risk as the
year end exposure does not reflect the exposure during the
year.
Interest rate risk management
The Group is exposed to interest rate risk as entities in the
Group borrow funds at both fixed and floating interest rates. The
Group holds most of its debts linked to fixed rates. Most of the
Group's fixed rate loans are with the FMM (Fundo da Marinha
Mercante).
Other loans exposed to floating rates are as follows:
-- TJLP (Brazilian Long-Term Interest Rate) for Brazilian Real denominated
funding through a FINAME credit line for port and logistics operations
-- DI (Brazilian Interbank Interest Rate) for Brazilian Real denominated
funding in logistics operations; and
-- IPCA (Brazilian National Consumer Prices) for Brazilian Real denominated
funding in port operations and offshore support bases.
The Group's Brazilian Real-denominated investments yield
interest rates corresponding to the DI daily fluctuation for
privately issued securities and/or "Selic-Over" government-issued
bonds. The US Dollar-denominated investments are partly in time
deposits, with short-term maturities.
The Group has floating rate financial assets consisting of bank
balances principally denominated in US Dollars and Real that bear
interest at rates based on the banks' floating interest rate.
Interest rate sensitivity analysis
The following analysis concerns a possible fluctuation of income
or expenses linked to the transactions and scenarios shown, without
considering their fair value. For floating rate liabilities and
investments, the analysis is prepared assuming the amount of the
liability outstanding or cash invested at balance sheet date was
outstanding or invested for the whole year.
31 December 2020
----------------------------
Transaction Probable Possible Remote
scenario scenario scenario
(25%) (50%)
----------------------- -------- -------- --------
Loans - CDI(1) 2.95% 3.69% 4.43%
Loans - TJLP(2) 4.39% 5.49% 6.59%
Loans - IPCA(3) 4.31% 5.39% 6.47%
Investments - LIBOR(4) 1.36% 1.44% 1.53%
Investments - CDI 2.95% 3.69% 4.43%
----------------------- -------- -------- --------
Transaction Probable Possible Remote
Amount scenario scenario scenario
Risk US Dollars Result (25%) (50%)
US$'000 US$'000 US$'000
-------------------- ------ ---------- ---------- -------- -------- --------
Loans - CDI CDI 64,439 Interest - - -
Loans - TJLP TJLP 841 Interest (440) (746) (1,050)
Loans - IPCA IPCA 55,141 Interest - (6) (12)
Loans - Fixed N/A 222,240 None - (415) (825)
-------------------- ------ ---------- ---------- -------- -------- --------
Total loans 342,661 (440) (1,167) (1,887)
---------------------------- ---------- ---------- -------- -------- --------
Investments - LIBOR LIBOR 39,997 Income - 15 31
Investments - CDI CDI 52,995 Income 218 619 1,020
-------------------- ------ ---------- ---------- -------- -------- --------
Total investments 92,922 218 634 1,051
---------------------------- ---------- ---------- -------- -------- --------
Net Income (222) (533) (836)
--------------------------- ---------- ---------- -------- -------- --------
1. CDI - Information source: B3 (Brasil Bolsa Balcão), report dated 8 January 2021.
2. TJLP - Information source: BNDES (Banco Nacional de
Desenvolvimento Econômico e Social), report dated 8 January
2021.
3. IPCA - Information source: Bloomberg, report dated 8 January 2021.
4. LIBOR - Information source: BM&F (Bolsa de Mercadorias e
Futuros), report dated 6 January 2021.
The net effect was obtained by assuming a 12-month period
starting at 31 December 2020 in which interest rates vary and all
other variables are held constant. The scenarios represent the
difference between the weighted scenario rate and actual rate.
31 December 2019
----------------------------
Transaction Probable Possible Remote
scenario scenario scenario
(25%) (50%)
----------------------- -------- -------- --------
Loans - CDI(2) 4.50% 5.63% 6.75%
Loans - TJLP(3) 5.09% 6.36% 7.64%
Loans - IPCA 4.31% 5.39% 6.47%
Investments - LIBOR(1) 3.17% 3.67% 4.16%
Investments - CDI 4.50% 5.63% 6.75%
----------------------- -------- -------- --------
Transaction Probable Possible Remote
Amount scenario scenario scenario
Risk US Dollars Result (25%) (50%)
US$'000 US$'000 US$'000
-------------------- ------ ---------- ---------- -------- -------- --------
Loans - CDI CDI 65,974 Interest (47) (574) (1,095)
Loans - TJLP TJLP 1,190 Interest - (10) (20)
Loans - IPCA IPCA 39,680 Interest - (317) (632)
Loans - Fixed N/A 228,134 None - - -
-------------------- ------ ---------- ---------- -------- -------- --------
Total loans (47) (901) (1,747)
---------------------------- ---------- ---------- -------- -------- --------
Investments - LIBOR LIBOR 24,153 Income - 56 111
Investments - CDI CDI 34,739 Income 85 1,105 2,125
-------------------- ------ ---------- ---------- -------- -------- --------
Total investments 58,892 85 1,161 2,236
---------------------------- ---------- ---------- -------- -------- --------
Net Income 38 260 489
--------------------------- ---------- ---------- -------- -------- --------
1. LIBOR - Information source: Bloomberg, report dated 14 January 2020.
2. CDI - Information source: BM&F (Bolsa de Mercadorias e
Futuros), report dated 17 January 2020.
3. TJLP - Information source: BNDES (Banco Nacional de
Desenvolvimento Economico e Social), report 14 January 2020.
The net effect was obtained by assuming a 12-month period
starting 31 December 2019 in which interest rates vary and all
other variables are held constant. The scenarios represent the
difference between the weighted scenario rate and actual rate.
Investment portfolio
Interest rate changes will always impact equity prices. The
level and direction of change in equity prices is subject to
prevailing local and world economics as well as market sentiment
all of which are difficult to predict with any certainty.
Derivative financial instruments
The Group may enter into derivatives contracts to manage risks
arising from interest rate fluctuations. All such transactions are
carried out within the guidelines set by the Wilson Sons risk
management committee. Generally, the Group seeks to apply hedge
accounting in order to manage volatility.
Market price sensitivity
By the nature of its activities, the Group's investments are
exposed to market price fluctuations. However, the portfolio as a
whole does not correlate exactly to any Stock Exchange Index as it
is invested in a diversified range of markets. The Investment
Manager and the Board monitor the portfolio valuation on a regular
basis and consideration is given to hedging the portfolio against
large market movements.
The sensitivity analysis below has been determined based on the
exposure to market price risks at the year end and shows what the
impact would be if market prices had been 5, 10 or 20 percent
higher or lower at the end of the financial year. The amounts below
indicate an increase in profit or loss and total equity where
market prices increase by 5, 10 or 20 percent, assuming all other
variables are kept constant. A fall in market prices of 5, 10 or 20
percent would give rise to an equal fall in profit or loss and
total equity.
31 December 2020
-------------------------------
5% 10% 20%
scenario scenario scenario
US$'000 US$'000 US$'000
--------------- --------- --------- ---------
Profit or loss 15,394 30,787 61,574
Total equity 15,394 30,787 61,574
--------------- --------- --------- ---------
31 December 2019
-------------------------------
5% 10% 20%
scenario scenario scenario
US$'000 US$'000 US$'000
--------------- --------- --------- ---------
Profit or loss 14,238 28,476 56,953
Total equity 14,238 28,476 56,953
--------------- --------- --------- ---------
Credit risk management
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in a financial loss to the
Group. The Group has adopted a policy of only dealing with
creditworthy counterparties as a means of mitigating the risk of
financial loss from defaults.
The Group's sales policy is subordinated to the credit sales
rules set by Wilson Sons management which seek to mitigate any loss
from customers' delinquency.
Trade receivables consist of a large number of customers.
Regular credit evaluation is performed on the financial condition
of accounts receivable. Trade and other receivables disclosed in
the balance sheet are shown net of the allowance for bad debts. The
allowance is booked whenever a loss is identified based on past
experience or there is an indication of impaired cash flows.
Ocean Wilsons (Investments) Limited primarily transacts with
regulated institutions on normal market terms which are trade date
plus one to three days. The levels of amounts outstanding from
brokers are regularly reviewed by the Investment Manager. The
duration of credit risk associated with the investment transaction
is the period between the date the transaction took place, the
trade date and the date the stock and cash are transferred, and the
settlement date. The level of risk during the period is the
difference between the value of the original transaction and its
replacement with a new transaction.
Based on historical experience, the Company considers a
financial asset in default when contractual payments are 180 days
past due. So that, it is possible to consider that a default rate
should be the average of the default after 180 days, net of the
recoverability percentage of these receivables.
In addition, Ocean Wilsons (Investments) Limited invests in
limited partnerships and other similar investment vehicles. The
level of credit risk associated with such investments is dependent
upon the terms and conditions and the management of the investment
vehicles. The Board reviews all investments at its regular meetings
from reports prepared by the Company's Investment Manager.
Liquidity risk management
Liquidity risk is the risk that the Group will encounter
difficulty in fulfilling obligations associated with its financial
liabilities that are settled with cash payments or other financial
assets. The Group's approach in managing liquidity is to ensure
that the Group always has sufficient liquidity to fulfil its
obligations that expire, under normal and stressed conditions, to
avoid damage to the reputation of the Group. The Group manages
liquidity risk by maintaining adequate reserves, banking facilities
and reserve borrowing facilities by continuously monitoring
forecast and actual cash flows and matching the maturity profiles
of financial assets and liabilities.
The Group ensures it has sufficient cash reserves to meet the
expected operational expenses, including financial obligations.
This practice excludes the potential impact of extreme
circumstances that cannot be reasonably foreseen except for those
taken this year in response to Covid-19 liquidity management.
The following tables detail the Group's remaining contractual
maturity for its non-derivative financial liabilities. The tables
have been drawn up based on the undiscounted cash flows of
financial liabilities based on the earliest date on which the Group
can be required to pay. The table includes both interest and
principal cash flows.
Weighted
average
effective Less than
interest rate 12 months 1-5 years 5+ years Total
% US$'000 US$'000 US$'000 US$'000
----------------------------------- ------------- --------- --------- -------- -------
31 December 2020
Non-interest bearing - - - - -
Variable interest rate instruments 2.78% 35,923 61,088 49,272 139,983
Fixed interest rate instruments 2.75% 31,136 100,087 131,858 263,081
Lease liability (under IAS 17) 8.77% 19,153 66,718 292,766 378,637
86,212 227,893 467,596 781,701
----------------------------------- ------------- --------- --------- -------- -------
31 December 2019
Non-interest bearing - 57,104 - - 57,104
Variable interest rate instruments 3.07% 12,654 67,648 26,542 106,844
Fixed interest rate instruments 2.75% 30,869 101,423 138,093 270,385
Lease liability (under IAS 17) 3.17% 49 11 - 60
Lease liability 8.80% 22,918 81,410 371,236 475,564
----------------------------------- ------------- --------- --------- -------- -------
123,594 250,492 535,871 909,957
----------------------------------- ------------- --------- --------- -------- -------
The Group expects to meet its other obligations from operating
cash flows and proceeds of maturing financial assets.
Fair value of financial instruments
The fair value of financial assets and liabilities traded in
active markets are based on quoted market prices at the close of
trading on 31 December 2020. The quoted market price used for
financial assets held by the Company utilise the last traded market
prices.
Fair value measurements recognised in the statement of financial
position
IFRS 13 requires the disclosure of fair value measurements by
level of the following fair value measurement hierarchy:
Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
Level 2 Valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or
indirectly observable; and
Level 3 Valuation techniques for which the lowest level input
that is significant to the fair value measurement is
unobservable.
Assessing the significance of a particular input requires
judgement, considering factors specific to the asset or
liability.
The following table provides an analysis of financial
instruments recognised in the statement of financial position by
the level of hierarchy:
Level 1 Level 2 Level 3 Total
US$'000 US$'000 US$'000 US$'000
-------------------------------------------- ------- ------- ------- -------
31 December 2020
Financial assets at FVTPL
Non-derivative financial assets for trading 19,634 189,103 99,137 307,874
Short-term investments 39,590 - - 39,590
-------------------------------------------- ------- ------- ------- -------
Level 1 Level 2 Level 3 Total
US$'000 US$'000 US$'000 US$'000
-------------------------------------------- ------- ------- ------- -------
31 December 2019
Financial assets at FVTPL
Non-derivative financial assets for trading 18,490 165,010 101,263 284,763
Short-term investments 14,077 - - 14,077
-------------------------------------------- ------- ------- ------- -------
Valuation Process
Investments whose values are based on quoted market prices in
active markets and are classified within Level 1 include active
listed equities. The Group does not adjust the quoted price for
these investments.
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 within Level 2. These include
certain private investments that are traded over the counter.
Investments classified within Level 3 have significant
unobservable inputs as they trade infrequently and are not quoted
in an active market. The Group investments include holdings in
limited partnerships and other private equity funds which may be
subject to restrictions on redemptions such as lock up periods,
redemption gates and side pockets.
Valuations are the responsibility of the Board of Directors of
the Company. The Group's Investment Manager considers the valuation
techniques and inputs used in valuing these funds as part of its
due diligence prior to investing to ensure they are reasonable and
appropriate. Therefore, the net asset value ("NAV") of these funds
may be used as an input into measuring their fair value. In
measuring this fair value, the NAV of the funds is adjusted, if
necessary, for other relevant factors known of the fund. No such
adjustments were identified in the year. 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 Company values these based
on an estimate of their fair value, which is determined as follows.
The Group obtains the fair value of their holdings from valuation
statements provided by the managers of the invested funds. Where
the valuation statement is not stated as at the reporting date, the
Group adjusts the most recently available valuation for any capital
transactions made up to the reporting date. When considering
whether the NAV of the underlying managed funds represent fair
value, the Investment Manager considers the valuation techniques
and inputs used by the managed funds in determining their NAV.
The underlying funds use a blend of methods to determine the
value of their own NAV by valuing underlying investments using
methodology consistent with the International Private Equity and
Venture Capital Valuation Guidelines ('IPEV'). IPEV guidelines
generally provides five ways to determine the fair market value of
an investment:
(i) binding offer on the company
(ii) transaction multiples
(iii) market multiples
(iv) net assets
(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.
Periodically the Investment Manager considers historical
alignment to actual market transactions for a sample of realised
investments.
Investment in private equity funds require a long-term
commitment with no certainty of return and 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 then the
proceeds received may be less than the carrying value due to their
illiquid nature. The following table summarises the sensitivity of
the Company's Level 3 investments to changes in fair value due to
illiquidity at 31 December 2020. The analysis is based on the
assumptions that the proceeds realised will be decreased by 5%, 10%
or 20%, with all other variables held constant. This represents the
Directors' best estimate of a reasonable possible impact that could
arise from a disposal due to illiquidity.
31 December 2020
---------------------------------------
5% scenario 10% scenario 20% scenario
US$'000 US$'000 US$'000
--------------- ----------- ------------ ------------
Profit or loss 4,957 9,914 19,827
--------------- ----------- ------------ ------------
Total equity 4,957 9,914 19,827
--------------- ----------- ------------ ------------
31 December 2019
---------------------------------------
5% scenario 10% scenario 20% scenario
US$'000 US$'000 US$'000
--------------- ----------- ------------ ------------
Profit or loss 5,063 10,126 20,253
--------------- ----------- ------------ ------------
Total equity 5,063 10,126 20,253
--------------- ----------- ------------ ------------
Sensitivity analysis in relation to Level 3 investments has been
included in the market price risk management analysis where the
Group has shown impacts to the value of investments if market
prices had been 5%, 10% or 20% higher or lower at the end of the
financial year.
2020 2019
Reconciliation of Level 3 fair value measurements of financial assets: US$'000 US$'000
----------------------------------------------------------------------- ------- --------
Balance at 1 January 101,263 111,309
Transfers out of Level 3 to Level 2 - (10,732)
Total losses in the Statement of Comprehensive Income (1,952) (1,546)
Purchases and drawdowns of financial commitments 9,486 10,462
Repayments of capital (9,660) (8,230)
----------------------------------------------------------------------- ------- --------
Balance at 31 December 99,137 101,263
----------------------------------------------------------------------- ------- --------
During 2020, none of the investments moved between
classification levels.
36. Post-employment benefits
The Group operates a private medical insurance scheme for its
employees 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, generating a post-employment commitment for the Group.
Ex-employees remaining in the plan will be liable for paying the
full cost of their continued scheme membership. The present value
of actuarial liabilities at 31 December 2020 is approximately
US$1.6 million (2019: US$2.4 million). The future actuarial
liability for the Group relates to the potential increase in plan
costs resulting from additional claims as a result of the expanded
membership of the scheme.
31 December 31 December
2020 2019
US$'000 US$'000
--------------------------------------- ----------- -----------
Present value of actuarial liabilities 1,641 2,369
--------------------------------------- ----------- -----------
Actuarial assumptions
The calculation of the liability generated by the
post-employment commitment involves actuarial assumptions. The
following are the principal actuarial assumptions used:
Economic and Financial Assumptions
31 December 31 December
2020 2019
------------------------------------------ --------------------- --------------------
Annual interest rate 7.90% 6.76%
Estimated inflation rate in the long-term 3.50% 3.50%
Ageing Factor Based on the experience of Wilson Sons(1)
Medical cost trend rate 6.09% p.a. 6.09% p.a
------------------------------------------ --------------------- --------------------
1 The amount of current contributions of retirees and medical costs
used in the actuarial valuation, both in monthly amounts per health
care provider, may vary between R$117.06 and R$12,036.51 (absolute
value).
Biometric and Demographic Assumptions
31 December 31 December
2020 2019
--------------------------------------- ------------------------- -------------------------
Employee turnover 21.27% 21.27%
Mortality table AT-2000 AT-2000
Disability table Álvaro Vindas Álvaro Vindas
Retirement Age 100% at 62 100% at 62
Employees who opt to keep the
health plan after retirement
and termination 23% 23%
Probability of marriage 80% of the participants 80% of the participants
Men 3 years older than Men 3 years older than
Age difference for active participants the woman the woman
Composition of the family Composition of the family
Family composition after retirement group group
--------------------------------------- ------------------------- -------------------------
37. Coronavirus ("Covid-19")
37.1 General Context
Liquidity
At 31 December 2020 the Group's cash, cash equivalents and
short-term investments amounted to US$63.3 million. In the first
quarter of 2020 the Company signed financing agreements totalling
US$24.6M denominated in Brazilian Real to reinforce short-term
liquidity given the volatility caused by the Covid-19 crisis on
global markets.
In the second quarter of 2020 the Brazilian National Economic
and Social Development Bank (BNDES) granted Wilson Sons eligibility
for the Covid-19 "Standstill Agreement". This allows for the
postponement of principal and interest payments that occurred
between May and October 2020, a payment deferment of approximately
US$10.3 million for the Company's consolidated companies and US$9.9
million regarding the Company's 50% share in the offshore support
vessel joint venture. Loan repayments are to be made according to
the remaining terms of the contracts included in the scheme. In the
first quarter of 2021 the Company has signed for a second
five-month standstill to defer approximately US$7.5 million for the
Company's consolidated entities and US$8.9 million regarding the
Company's 50% share in the offshore support vessel joint venture
between January 2021 and May 2021.
Additionally, in the last quarter of 2020, the Company signed a
Covid-19 related "Standstill Agreement" with the Banco do Brazil
delaying repayment of approximately US$3.7 million for the
Company's consolidated companies and US$1.9 million regarding the
Company's 50% share in the offshore support vessel joint
venture.
As both BNDES and Banco do Brazil as state controlled entities
the deferrals and standstill agreements noted above are government
assistance that has been received in the year.
The Company has also implemented other austerity measures such
as a temporary dividend reduction which was later reinstated and
paid during the year and has also taken advantage of tax payment
deferrals in line with government incentives, which therefore
represent government assistance received during the year.
Covenants
On 31 December 2020 the Group was in compliance with all loan
covenants.
Estimated Credit Losses
In view of the current scenario of economic uncertainties caused
by the Covid-19 pandemic, the Group has reviewed the assumptions
that make up the methodology to measure expected credit losses and
has not observed an increase in customer default due to the
outbreak. It is worth mentioning that Management of Wilson Sons
continues to monitor collections and assess potential impacts that
could affect the Company's performance and consequently, the
measurement of expected credit losses.
Impairment
At the time of writing, Covid-19 impacts have not caused any
changes in the circumstances that could require an impairment
charge to be made against the Group's assets.
Management will continue to review key assumptions used in
determining value and carefully monitor short-term fluctuations and
macroeconomic assumptions related to the impact of Covid-19.
Lease Arrangements
At this time, there have been no long-term changes in the scope
of the Company's leases and right-of-use assets, including adding
or terminating the right to use one or more underlying assets, or
extending or reducing the term of the contractual leases. The
Company has obtained some short-term reductions and postponements
of lease payments, which according to the amendment to IFRS 16 that
the company adopted during the year were not considered
modifications to existing leases.
Investment Portfolio and Liquidity
In the Investment Manager Report, the Investment Manager,
details the impact of market volatility and market rebound during
the year after the initial market decline in March 2020 as it
related to the Covid-19 pandemic.
Cash requirements for the portfolio are closely monitored. If
sufficient resources are not available to meet short-term cash flow
requirements, the Investment Manager could meet that requirement
through a combination of a sale of liquid assets or the use of a
loan facility that if drawn is secured against the investment
portfolio. A significant percentage of the portfolio has daily or
weekly liquidity. The loan facility was used during the period to
manage short term cash flow requirements. There was no outstanding
balance for this facility at 31 December 2020.
Enquiries:
Company Contact:
Leslie Rans, CPA 1 (441) 295 1309
Media:
David Haggie 020 7562 4444
Haggie Partners LLP
Brokers:
Peel Hunt 020 7418 8900
Sam Cann, Charles Batten
Investment Banking
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END
FR EAEDAFAEFEAA
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