Ocean Wilsons Holdings Limited
Preliminary results for the year ended 31 December 2022
STRATEGIC REPORT
About Ocean Wilsons Holdings Limited
Ocean Wilsons Holdings Limited ("Ocean Wilsons" or the "Company") is a Bermuda investment holding company which, through its subsidiaries, holds a portfolio of international investments and operates a maritime services company in Brazil. The Company is listed on both the London Stock Exchange and the Bermuda Stock Exchange.
Principal Activities
The Company's principal activities are the management of a diverse global investment portfolio and the provision of maritime and logistics services in Brazil.
Ocean Wilsons has two operating subsidiaries: Ocean Wilsons (Investments) Limited ("OWIL") and Wilson Sons Holdings Brasil S.A. ("Wilson Sons") (together with the Company and their subsidiaries, the "Group").
The Company owns 57% of Wilson Sons which is fully consolidated in the financial statements with a 43% non-controlling interest. Wilson Sons is one of the largest providers of maritime services in Brazil with activities including towage, container terminals, offshore oil and gas support services, small vessel construction, logistics and ship agency.
Objective
The Company's objective is to focus on long-term value creation through both the investment portfolio and the investment in Wilson Sons. This longer-term view directs an OWIL investment strategy of a balanced thematic portfolio of funds leveraging our long-standing investment market relationships and through detailed insights and analysis. The Wilson Sons strategy focuses on providing best in class or innovative solutions in a rapidly growing maritime logistics market.
Data Highlights
| Key Data at 31 December (In US$ millions) |
2022 |
2021 |
Change |
| Revenue | $440.1 | $396.4 | +11.0% |
| Operating Profit | $112.1 | $97.0 | +15.6% |
| Profit after tax | $11.5 | $82.5 | -86.1% |
| Investment portfolio net return | ($51.0) | $44.5 | ($95.5) |
| Investment portfolio assets | $293.8 | $351.8 | ($58.0) |
| Net assets | $754.1 | $783.7 | -3.8% |
| Net debt | $442.3 | $440.9 | +0.3% |
| Net cash inflow from operating activities | $97.1 | $106.1 | -8.5% |
| Share Data at 31 December |
2022 |
2021 |
Change |
| Earnings per share | USD (52.8) cents | USD 180.1 cents | USD (232.9) cents |
| Proposed/Actual dividend per share | US 70 cents | US 70 cents | - |
| Share price discount to net asset value | 50.5% | 41.6% | -8.9% |
| Implied net asset value per share* | GBP 18.78 | GBP 15.95 | +17.7% |
| Share price | GBP 9.30 | GBP 9.32 | -0.2% |
*net asset value per share of Ocean Wilsons based on the market value of each operating subsidiary
The Chair's Statement
I am delighted to report that, in spite of a challenging 2022, the business has navigated the year with confidence and delivered both strong operational results and investment returns that are respectable compared to benchmarks. Elevated risks and uncertainties with respect to the supply chain challenges and the impacts of the sanctions on shipping markets, coupled with inflation and the effects of the fears of recession on global financial markets all had a dampening effect. Notwithstanding these headwinds, the Group performed particularly well in our maritime operations, and our defensive positions minimized losses in the investment portfolio against index comparatives.
Our investment portfolio was, of course, not immune to the global market volatility spurred by inflationary fears and geopolitical instability. However, the portfolio loss of 13.8% compared favourably to a notional balanced portfolio of global equities and government bonds, which fell by 18.2% for the year. In the most challenging investment year in a decade, it is important to remember that the fundamental tenet of our investment strategy is the long-term generation of capital through the cycle. In addition to our equity and diversifying fund investments, our longstanding relationships with proven fund managers allows us to access compelling investment opportunities not always available to others that support our longer-term views. To reflect this, our portfolio continues to include a substantial weighting in private equity funds which are less correlated to equity market volatility and have outperformed those indices by over 100% since 2014.
Wilson Sons grew revenues despite lower container volumes as the business benefited from increases in volumes at its towage and offshore support base divisions. This rebalancing of product mix allowed Wilson Sons to pivot its operations and to harden pricing in the towage sector, fill empty capacity at the offshore support bases and improve margins to maximize profitability in the container terminals.
Results Overview
At the close of markets on 31 December 2022, the Wilson Sons' share price was R$10.81 (US$2.05), resulting in a market value for the Ocean Wilsons holding of 248,644,000 shares (57% of Wilson Sons) of US$509.7 million which is equivalent to US$14.41 (£11.91) per Ocean Wilsons share. This together with the value of the investment portfolio at 31 December 2022 of US$8.29 results in an implied net asset value per Ocean Wilsons Holdings Limited share of US$22.69 (£18.78). The Ocean Wilsons Holdings Limited share price was £9.30 at 31 December 2022.
Earnings per share for the year was a loss of US 52.8 cents compared with a profit of US 180.1 cents in 2021.
The Financial Report provides further details in relation to the performance of the Group.
Our Environmental Social and Governance (ESG) Practices
The Board is committed to driving and implementing responsible investing policies and operating practices for the Group. Ocean Wilsons' ESG practices and related strategy continued to receive close attention at our Board meetings over the past year.
The investment portfolio is managed by the investment manager, Hanseatic Asset Management LBG ("Hansa Capital"). During the year, Hansa Capital became a signatory to the internationally recognised United Nations' Principles for Responsible Investment in line with the Board's strategy to further its ESG commitment within its subsidiaries. While the Company does not have a specific ESG policy to exclude investments in companies or sectors, new investments which the Board believes will further the Company's long-term growth objectives are considered with an ESG lens in addition to other factors. Our Investment Manager follows a rigorous onboarding process for any new investments which include a review of the funds' ESG practices and philosophies.
On the Board's recent visit to our operations in Brazil, we were able to witness first-hand Wilson Sons' continued commitment to its corporate culture that drives innovation, sustainability, social and diversity initiatives and strong governance practices. Part of Wilson Sons' criteria when considering expansion and capital investments is the improvement of the Company's impact on the environment and climate, opportunities to improve employee engagement and to ensure its governance procedures are effective. For example, Wilson Sons recently launched the first two of six new tugs whose design reduces carbon emissions and have recently moved into new office space which is smaller and more energy efficient. Employees are encouraged to participate in corporate innovation think tanks and are rewarded when their ideas are implemented through donations to charities of their choice. These are just a few examples of the strong sense of commitment to being a better corporate citizen to all its stakeholders that embodies the corporate culture at Wilson Sons.
Further details of the Company's ESG practices and our TCFD disclosures are presented in the annual report.
The Board
I would like to take the opportunity to recognise that after 23 years as the Chair of Ocean Wilsons, José Francisco Gouvêa Vieira retired at the Annual General Meeting held in May 2022. On behalf of the Board and the shareholders, I would like to say thank you for his leadership and many contributions. We continue to benefit from his knowledge of Brazilian markets as he maintains his directorship on the Wilson Sons Board. We wish him well in his future endeavours.
Outlook
The first quarter of 2023, in terms of uncertainty, is reminiscent of the first quarter of 2022, which saw the Russian invasion of Ukraine and a commensurate change in the prevailing world order regarding supply chains, food security and armed conflict; 2023 has already been jolted by the effect on the US and global banking sectors from the demise of Silicon Valley Bank and Signature Bank and the current uncertainty around Credit Suisse and possible others. There is much debate as to the mid-term impact of this on financial markets, but what is clear is that there continues to be little expectation of predictability.
Our outlook for 2023, in terms of our investment portfolio, is that there are new opportunities with inflation beginning to decline, interest rates likely nearing their peak, some greens shoots of growth, albeit slow, lower valuations and an expectation that geo-political risks will continue to be a factor for the longer term. In anticipation of this, we broadened the investment portfolio by adding more exposure to value strategies to balance and complement our quality and growth holdings. The key investment objective for the portfolio remains unchanged; generate real returns through long-term capital growth rather than overly responding to short-term moves in equity markets.
We expect Wilson Sons to continue to leverage its strong market position in Brazil and seek opportunities to expand its maritime services and grow market share. Market consensus is for an easing of the constraints on the global shipping industry caused by the container shortages and supply chain interruptions in recent years. The Wilson Sons' management team will continue to drive results from its towage and offshore support bases to offset challenges in the container terminals sector. Fundamental to the continued success of Wilson Sons is their commitment to innovation which steers investment towards new technologies that promote revenue growth, sustainability and operating efficiency.
There are choppy waters ahead in the global economy, however the experience of 2022 has demonstrated that there are always navigation opportunities to be found and the Board believes that both our divisions are well placed to seek them out.
Caroline Foulger
Chair
23 March 2023
Business Review
Investment Manager's Report
Market Backdrop
After a highly volatile year, the MSCI ACWI + FM, a key benchmark index, finished down 18.4% with most equity markets across the world declining. It was a similar story in bond markets with the Bloomberg Global Treasury index down 17.5%. The start of the year was fraught with concerns about growing inflation and increasing interest rates before Russia's invasion of Ukraine dominated the news and impacted global prices of energy and commodities. These worries over inflation, interest rates and commodity prices eased slowly through the year, leading to stronger market performance in the last quarter.
Cumulative Portfolio Returns
|
| 2022 | 2021 | 3 years p.a. | 5 years p.a. |
| OWIL | -13.8% | 16.1% | 3.9% | 4.3% |
| OWIL (Net)* | -14.7% | 14.5% | 2.7% | 3.1% |
| Performance Benchmark** | 9.5% | 10.0% | 7.9% | 6.8% |
| MSCI ACWI + FM NR US$ | -18.2% | 18.5% | 0.3% | 2.3% |
| Bloomberg Global Treasury TR US$ (Unhedged) | -18.4% | -6.6% | 4.0% | 5.2% |
| MSCI Emerging Markets NR US$ | -20.1% | -2.5% | 2.7% | -1.4% |
*Net of management and performance fees. No performance fees were earned in 2022.
** The OWIL Performance Benchmark is an absolute benchmark of US CPI Urban Consumers NSA +3% p.a.
Portfolio Commentary
The investment portfolio declined by 13.8% over the year in contrast to a comparable portfolio represented by a 60:40 composite of the MSCI ACWI + FM index and the Bloomberg Global Treasury which fell by 18.2%. The portfolio's absolute benchmark (US CPI Urban Consumers NSA + 3%), which is inflation based, returned +9.5%, boosted by rising inflation.
Within the public market equity investments, the MSCI North American Net Return USD Index declined by 19.5% and the MSCI Europe Net Return USD Index declined by 15.1%. Long duration sectors, such as technology, which dominates the US market, were hit hard by concerns over rising interest rates while more traditional industries, such as energy, commodities and utilities, benefited. The market rotation away from growth stocks towards value stocks drove the decision to add Beutal Goodman US Value and Schroders ISF Global Recovery to the portfolio with both performing positively, returning 1.7% and 13.7%, respectively. Our largest position, Findlay Park American, declined 21.5% leaving it slightly behind the US index. Several thematic investments were more resilient, in terms of the market environment, with energy and commodities gaining 24.0% and declining 6.1%, respectively. A new position initiated in Polar Capital Global Insurance gained 12.9%. Our health care holdings were more mixed with Worldwide Healthcare Trust down 18.9% while RA Capital Healthcare fared relatively better, declining 10.5%.
The portfolio's private market investments were more resilient with many still seeing their value increasing and returning significant capital to investors. While there is often a time lag between public and private markets, several of our private investments in Europe, healthcare and venture continue to add value to their portfolios and be able to achieve strong exits of their portfolio companies. Additionally, many of our North American funds are now able to purchase assets at far more attractive prices.
Those of our investments that are designed to be less correlated to equity markets had a particularly strong year. The non-directional hedge funds, MKP Opportunity (+8.9%), Hudson Bay (+3.2%) and Keynes Dynamic Beta (+10.2%) all finished the year with a positive return as did the trend-following CTA funds, GAM Systematic Core Macro and Schroder GAIA BlueTrend. Our investment in BioPharma Credit, a healthcare secured lending specialist, also performed well returning 9.9%, as did our long/short government bond fund, Brevan Howard Absolute Return Government Bond (+7.5%), with its ability to go short proving crucial given the broad declines seen in world bond markets.
Looking Forward
Despite the rally of the past few months being underpinned by expectations that inflation and interest rates may have peaked and that some of the more pessimistic outlooks for the economy are now looking to be overly cautious, we would still advocate proceeding with some caution. We are yet to see a weakening of the economy or corporate earnings, many important economic indicators are still in expansionary territory and employment figures remain very strong in many key markets. With regards to inflation, whilst it is encouraging that some of the more cyclical factors appear to be rolling over, there is concern that some of the more structural factors will be more persistent and challenging to eliminate. This combination of stronger than expected growth together with stickier inflation is likely to make it harder for central banks to cut rates.
It seems likely that markets will face a period of continued uncertainty. It is very possible that the rally seen at the end of the year continues in the first part of 2023 with reports of inflation coming off its highs and global growth bolstered by China's reopening process. In contrast, if there is a growing realisation that inflation will be more permanent than many believe, then markets may well experience a setback. Weaker growth would suggest that central bank policy measures are working, in contrast, stronger growth is likely to lead to central banks being more aggressive, forcing rates higher, and ultimately driving economies into a much deeper recession. Hence, at this stage, while the building blocks are being put in place for better market conditions, our approach will be more circumspect with a longer-term view.
Hanseatic Asset Management LBG
March 2023
Investment Portfolio at 31 December 2022
| | Market Value US$000 | % of NAV | Primary Focus |
| Findlay Park American Fund | 24,154 | 8.2 | US Equities - Long Only |
| BlackRock Strategic Equity Hedge Fund | 12,920 | 4.4 | Europe Equities - Hedge |
| Select Equity Offshore, Ltd | 10,597 | 3.6 | US Equities - Long Only |
| NG Capital Partners II, LP | 7,465 | 2.5 | Private Assets - Latin America |
| Pangaea II, LP | 6,823 | 2.3 | Private Assets - GEM |
| BA Beutel Goodman US Value Fund | 6,317 | 2.2 | US Equities - Long Only |
| Stepstone Global Partners VI, LP | 6,117 | 2.1 | Private Assets - US Venture Capital |
| Pershing Square Holdings Ltd | 5,836 | 2.0 | US Equities - Long Only |
| iShares Core MSCI Europe UCITS ETF | 5,758 | 2.0 | Europe Equities - Long Only |
| Schroder ISF Asian Total Return Fund | 5,669 | 1.9 | Asia ex-Japan Equities - Long Only |
| Top 10 Holdings | 91,656 | 31.2 | |
| Polar Capital Global Insurance Fund | 5,304 | 1.8 | Financials Equities - Long Only |
| Silver Lake Partners IV, LP | 5,304 | 1.8 | Private Assets - Global Technology |
| Hudson Bay International Fund Ltd | 5,266 | 1.8 | Market Neutral - Multi-Strategy |
| Egerton Long - Short Fund Limited | 4,957 | 1.7 | Europe/US Equities - Hedge |
| NTAsian Discovery Fund | 4,948 | 1.7 | Asia ex-Japan Equities - Long Only |
| KKR Americas XII, LP | 4,731 | 1.6 | Private Assets - North America |
| Navegar I, LP | 4,481 | 1.5 | Private Assets - Asia |
| Indus Japan Long Only Fund | 4,226 | 1.4 | Japan Equities - Long Only |
| iShares Core S&P 500 UCITS ETF | 4,165 | 1.4 | US Equities - Long Only |
| TA Associates XIII-A, LP | 4,152 | 1.4 | Private Assets - Global Growth |
| Top 20 Holdings | 139,190 | 47.4 |
|
| Baring Asia Private Equity Fund VII, LP | 4,101 | 1.4 | Private Assets - Asia |
| Schroder GAIA BlueTrend | 3,771 | 1.3 | Market Neutral - Multi-Strategy |
| Global Event Partners Ltd | 3,647 | 1.2 | Market Neutral - Event-Driven |
| Silver Lake Partners V, LP | 3,616 | 1.2 | Private Assets - Global Technology |
| Goodhart Partners: Hanjo Fund | 3,563 | 1.2 | Japan Equities - Long Only |
| GAM Star Fund PLC - Disruptive Growth | 3,554 | 1.2 | Technology Equities - Long Only |
| Schroder ISF Global Recovery | 3,549 | 1.2 | Market Neutral - Multi-Strategy |
| GAM Systematic Core Macro (Cayman) Fund | 3,342 | 1.1 | Market Neutral - Multi-Strategy |
| Worldwide Healthcare Trust PLC | 3,295 | 1.1 | Healthcare Equities - Long Only |
| Reverence Capital Partners Opportunities Fund II | 3,222 | 1.1 | Private Assets - Financials |
| Top 30 Holdings | 174,850 | 59.5 |
|
| Remaining Holdings | 98,081 | 33.4 |
|
| Cash and cash equivalents | 20,895 | 7.1 |
|
| TOTAL | 293,826 | 100.0 |
|
Wilson Sons Management Report
The Wilson Sons 2022 Earnings Report was released on 23 March 2023 and is posted on www.wilsonsons.com.br.
In the report, Mr Fernando Salek, CEO of Wilson Sons, said:
"Wilson Sons' 2022 revenues of US$440.1 million were 11.0% higher than the prior year (2021: US$396.4 million), and EBITDA of US$181.8 million (R$939.0 million) was 14.1% above the comparative with resilient towage and logistics results. In R$ terms, EBITDA increased 9.3% year-over-year.
Towage results rose 4.1% with an increase in average revenue per manoeuvre and special operations. During the year, our shipyard delivered WS Centaurus and WS Orion, the first two of a six-tugboat series with over 90 tonnes of bollard pull. Both vessels are in operation serving the largest bulk carriers currently calling at Brazilian ports, with capacities reaching 400,000 tonnes deadweight.
Container terminal results were impacted by the global limited availability of empty containers and logistics bottlenecks causing vessel call cancellations. However, the situation has started to improve with aggregated volumes up 16.1% year-over-year in January 2023.
Demand for our offshore energy-linked services improved markedly as vessel turnarounds in our offshore support base division increased 30.6% over 2021 and operating days in our non-consolidated offshore support vessel joint venture rose 20.1% year-over-year. In the last quarter of 2022, new support-base contracts were signed with Petronas and 3R Petroleum. Under the Petrobras support-base contract, PSVs Torda, Biguá and Fulmar also began new four-year operating contracts.
Looking back over the past two years of turmoil to global supply chains created by the pandemic we are pleased to report that Wilson Sons performed and managed these challenges while continuing growth, ensuring the safety of our employees, and the continuity of excellent service to our customers and trade flow partners. We continue to advance the world-class performance of our infrastructure, maintain the safety levels of our operations, and consistently seek opportunities to leverage our market position, the resilience of our business model and the versatility of our services to challenge and transform maritime transport for the benefit of all our stakeholders."
| KPIs | 2022 | 2021 | Change |
| Towage | | | |
| Number of harbour manoeuvres | 54,865 | 54,389 | 0.9% |
| Offshore support bases | | | |
| Number of vessel turnarounds | 785 | 601 | 30.6% |
| Number of operating days | 6,488 | 5,400 | 20.1% |
| Container terminal - aggregated Volumes | | | |
| Exports - full containers | 254.5 | 306.2 | -16.9% |
| Imports - full containers | 129.3 | 150.4 | -14.0% |
| Cabotage - full containers | 122.7 | 121.1 | 1.3% |
| Inland Navigation - full containers | 21.3 | 22.2 | -4.1% |
| Transhipment - full containers | 142.2 | 160.2 | -11.2% |
| Empty containers | 245.8 | 282.2 | -12.9% |
| Total Volume | 915.8 | 1,042.3 | -12.1% |
Financial Report
Operating Profit
Operating profit of US$112.1 million (2021: US$97.0 million) was US$15.1 million better than the prior year. Operating margin improved year over year to 25.5% (2021: 24.5%) principally due to an 11.0% increase in revenues and lower foreign exchange losses on monetary items.
Operating expenses increased US$31.0 million driven by higher costs for both raw materials and employee related costs. Raw materials and consumables used were US$9.0 million higher at US$33.0 million (2021: US$24.0 million). Employee charges and benefits expenses were US$14.3. million higher at US$126.3 million (2021: US$112.0 million) although remained relatively unchanged as a percentage of revenue at 28.7% (2021: 28.3%). Other operating expenses increased US$7.8 million to US$106.1 million (2021: US$98.3 million) driven by increases in freight charges and utilities costs. Depreciation increased to US$62.0 million (2021: US$58.7 million) due to the planned increases in capital spending during the year.
Revenue from Maritime Services
Revenue for the year increased by 11.0% to US$440.1 million (2021: US$396.4 million) attributed to higher towage manoeuvres, growth in the offshore support bases contracts, warehousing and ship agency services. Harbour manoeuvre revenues increased 12.8% to US$201.4 million (2021: US$178.6 million) and the offshore support bases revenue increased 47.2% to US$10.6 million (2021: US$7.2 million) with the start of new contracts during the year.
Returns on the Investment Portfolio
Returns on the investment portfolio were a loss of US$47.9 million (2021: gain of US$49.5 million) and comprised realised profits on the disposal of financial assets of US$24.3million (2021: US$11.9 million), net income from underlying investments of US$11.8 million (2021: US$3.8 million) and unrealised losses of US$80.0 million (2021: unrealised gains of US$33.9 million). Additionally, the only Russia focused investment was written off during the year for a loss of US$4.1 million.
Other Investment Income
Other investment income for the year increased US$4.3 million to US$8.4 million (2021: US$4.1 million). Increased interest on bank deposits and higher other interest income were the contributing factors.
Finance Costs
Finance costs for the year at US$34.5 million were US$4.3 million higher than the prior year (2021: US$30.2 million) due to interest on lease liabilities and interest on bank loans increasing.
Exchange Rates
The Group reports in USD and has revenues, costs, assets and liabilities in both BRL and USD. Therefore, movements in the USD/BRL exchange rate influence the Group's results either positively or negatively from year to year. During 2022 the BRL appreciated 6.5% against the USD from R$5.58 at 1 January 2022 to R$5.22 at the year end. In 2021 the BRL depreciated 7.1% against the USD from R$5.20 at 1 January 2021 to R$5.57 at the year end. The foreign exchange gains on monetary items were US$1.6 million in 2022, compared to a loss of US$3.1 million in 2021.
Profit Before Tax
Profit before tax for the year decreased US$72.3 million to US$38.1 million compared to US$110.4 million in 2021. The decline in profit is primarily due to the unrealised losses in valuation of the investment portfolio which contributed negative returns of US$47.9 million compared to a positive return of $49.5 million in the prior year in common with macro trends globally.
The tax charge for the year at US$26.7 million was US$1.2 million lower than prior year (2021: US$27.9 million). The Company is taxed on its maritime services operations. This represents an effective tax rate for the year of 29% (2021: 40%) for maritime services. A more detailed breakdown of taxation reconciling the effective tax rate is provided in note 9 to the consolidated financial statements.
Loss/Profit for the year
The loss for the year attributable to the equity holders of the Company is US$18.6 million (2021: US$63.7 million profit) and the profit attributable to the non-controlling interests is US$30.2 million (2021: US$18.8 million profit). While the US$25.1 million increase in Wilson Sons' profit after tax was attributed to both the equity holders of the Company and the non-controlling interests based on ownership, the US$47.9 million loss on the investment portfolio (2021: US$49.5 million gain) was only attributed to the equity holders of the Company since the Company has full ownership of it.
Cash Flows
Net cash inflow from operating activities for the period at US$97.1 million was US$9.0 million lower than prior year (2021: US$106.1 million). Capital expenditure for the year at US$63.3 million was US$15.9 million higher than the prior year (2021: US$47.4 million).
The Group drew down new bank loans of US$59.8 million (2021: US$19.4 million) to finance capital expenditure, while making repayments of US$49.3 million (2021: US$57.9 million). Dividends of US$24.8 million were paid to shareholders of Ocean Wilsons (2021: US$24.8 million).
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31 December 2022
(Expressed in thousands of US Dollars)
| | Note | 2022 | 2021 |
| Sales of services | 5 | 440,107 | 396,376 |
| Raw materials and consumables used | | (32,956) | (24,036) |
| Employee charges and benefits expenses | 6 | (126,330) | (112,026) |
| Other operating expenses | 7 | (106,055) | (98,289) |
| Depreciation of owned assets | 14 | (48,473) | (46,631) |
| Depreciation of right-of-use assets | 15 | (13,573) | (12,063) |
| Amortisation of intangible assets | 16 | (2,389) | (2,718) |
| Gain/(loss) on disposal of property, plant and equipment and intangible assets | | 100 | (499) |
| Foreign exchange gains/(losses) on monetary items | | 1,620 | (3,100) |
| Operating profit | | 112,051 | 97,014 |
| Share of results of joint ventures and associates | 13 | 3,165 | (5,029) |
| Returns on investment portfolio at fair value through profit or loss | 5 | (47,947) | 49,474 |
| Investment portfolio performance and management fees | | (3,047) | (4,954) |
| Other investment income | 5 | 8,421 | 4,113 |
| Finance costs | 8 | (34,509) | (30,227) |
| Profit before tax | | 38,134 | 110,391 |
| Tax expense | 9 | (26,656) | (27,925) |
| Profit for the year | | 11,478 | 82,466 |
| Other comprehensive income: | | | |
| Items that will not be reclassified subsequently to profit or loss | | | |
| Post-employment benefits remeasurement | 21 | 93 | 108 |
| Purchase price adjustment of associate | 13 | 159 | - |
| Items that will be or may be reclassified subsequently to profit or loss | | | |
| Exchange differences arising on translation of foreign operations | | 7,128 | (7,459) |
| Effective portion of changes in fair value of derivatives | | 9 | 158 |
| Other comprehensive income/(loss) for the year | | 7,389 | (7,193) |
| Total comprehensive income for the year | | 18,867 | 75,273 |
| (Loss)/profit for the year attributable to: | | | |
| Equity holders of the Company | | (18,675) | 63,687 |
| Non-controlling interests | 26 | 30,153 | 18,779 |
| | | 11,478 | 82,466 |
| Total comprehensive (loss)/income for the year attributable to: | | | |
| Equity holders of the Company | | (14,484) | 59,604 |
| Non-controlling interests | 26 | 33,351 | 15,669 |
| | | 18,867 | 75,273 |
| Earnings per share: | | | |
| Basic and diluted | 28 | (52.8)c | 180.1c |
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statement of Financial Position
At 31 December 2022
(Expressed in thousands of US Dollars)
| | Note | 2022 | 2021 |
| Current assets | | | |
| Cash and cash equivalents | | 75,724 | 28,565 |
| Financial assets at fair value through profit and loss | 10 | 275,080 | 392,931 |
| Recoverable taxes | 9 | 34,515 | 25,380 |
| Trade and other receivables | 11 | 67,136 | 59,350 |
| Inventories | 12 | 17,579 | 12,297 |
| | | 470,034 | 518,523 |
| Non-current assets | | | |
| Other trade receivables | 11 | 1,456 | 1,580 |
| Related party loans receivable | 23 | 11,176 | 10,784 |
| Other non-current assets | 22 | 3,506 | 3,582 |
| Recoverable taxes | 9 | 15,143 | 12,816 |
| Investment in joint ventures and associates | 13 | 81,863 | 61,553 |
| Deferred tax assets | 9 | 21,969 | 22,332 |
| Property, plant and equipment | 14 | 589,629 | 563,055 |
| Right-of-use assets | 15 | 178,699 | 157,869 |
| Other intangible assets | 16 | 14,392 | 14,981 |
| Goodwill | 17 | 13,420 | 13,272 |
| | | 931,253 | 861,824 |
| Total assets | | 1,401,287 | 1,380,347 |
|
| |
|
|
| Current liabilities | | | |
| Trade and other payables | 19 | (58,337) | (58,513) |
| Tax liabilities | 9 | (10,290) | (8,057) |
| Lease liabilities | 15 | (24,728) | (19,449) |
| Bank loans | 20 | (59,881) | (45,287) |
| | | (153,236) | (131,306) |
| | | | |
| Net current assets | | 316,798 | 387,217 |
|
| |
|
|
| Non-current liabilities | | | |
| Bank loans | 20 | (262,010) | (256,312) |
| Post-employment benefits | 21 | (1,737) | (1,562) |
| Deferred tax liabilities | 9 | (49,733) | (50,194) |
| Provisions for legal claims | 22 | (8,997) | (8,907) |
| Lease liabilities | 15 | (171,448) | (148,394) |
| | | (493,925) | (465,369) |
| Total liabilities | | (647,161) | (596,675) |
| | | | |
| Capital and reserves | | | |
| Share capital | 24 | 11,390 | 11,390 |
| Retained earnings | | 634,910 | 678,006 |
| Translation and hedging reserve | | (91,692) | (95,739) |
| Equity attributable to equity holders of the Company | | 554,608 | 593,657 |
| Non-controlling interests | 26 | 199,518 | 190,015 |
| Total equity | | 754,126 | 783,672 |
Signed on behalf of the Board
F. Beck A. Berzins
Director Director
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
(Expressed in thousands of US Dollars)
| | Share capital | Retained earnings | Hedging and Translation reserve | Attributable to equity holders of the Company | Non-controlling interests | Total equity |
| Balance at 1 January 2021 | 11,390 | 635,987 | (91,595) | 555,782 | 187,925 | 743,707 |
| Currency translation adjustment | - | - | (4,234) | (4,234) | (3,225) | (7,459) |
| Effective portion of changes in fair value of derivatives | - | - | 90 | 90 | 68 | 158 |
| Post-employment benefits (note 21) | - | 61 | - | 61 | 47 | 108 |
| Profit for the year | - | 63,687 | - | 63,687 | 18,779 | 82,466 |
| Total comprehensive income/(loss) for the year | - | 63,748 | (4,144) | 59,604 | 15,669 | 75,273 |
| Dividends (notes 26, 27) | - | (24,754) | - | (24,754) | (17,808) | (42,562) |
| Equity transactions in subsidiaries (note 25) | - | 3,025 | - | 3,025 | 4,229 | 7,254 |
| Balance at 31 December 2021 | 11,390 | 678,006 | (95,739) | 593,657 | 190,015 | 783,672 |
| | | | | | | |
| Balance at 1 January 2022 | 11,390 | 678,006 | (95,739) | 593,657 | 190,015 | 783,672 |
| Currency translation adjustment | - | - | 4,042 | 4,042 | 3,086 | 7,128 |
| Effective portion of changes in fair value of derivatives | - | - | 5 | 5 | 4 | 9 |
| Post-employment benefits (note 21) | - | 54 | - | 54 | 39 | 93 |
| Purchase price adjustment of associate (note 13) | - | 90 | - | 90 | 69 | 159 |
| (Loss)/profit for the year | - | (18,675) | - | (18,675) | 30,153 | 11,478 |
| Total comprehensive (loss)/income for the year | - | (18,531) | 4,047 | (14,484) | 33,351 | 18,867 |
| Dividends (notes 26, 27) | - | (24,754) | | (24,754) | (25,173) | (49,927) |
| Equity transactions in subsidiaries (note 25) | - | 189 | - | 189 | 1,325 | 1,514 |
| Balance at 31 December 2022 | 11,390 | 634,910 | (91,692) | 554,608 | 199,518 | 754,126 |
Hedging and translation reserve
The hedging and translation reserve arises from exchange differences on the translation of operations with a functional currency other than US Dollars and effective movements on designated hedging relationships.
Amounts in the statement of changes in equity are stated net of tax where applicable.
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2022
(Expressed in thousands of US Dollars)
| | Notes | 2022 | 2021 |
| Operating activities | |
|
|
| Profit for the year | | 11,478 | 82,466 |
| | | | |
| Adjustment for: | | | |
| Depreciation & amortisation | 14,15,16 | 64,435 | 61,412 |
| (Gain)/loss on disposal of property, plant and equipment and intangible assets | |
(100) | 499 |
| Share of results of joint ventures and associates | 13 | (3,165) | 5,029 |
| Returns on investment portfolio at fair value through profit or loss | 5 | 47,947 | (49,474) |
| Other investment income | 5 | (8,421) | (4,113) |
| Finance costs | 8 | 34,509 | 30,227 |
| Foreign exchange (gains)/losses on monetary items | | (1,620) | 3,100 |
| Share based payment expense | 25 | 334 | 369 |
| Post-employment benefits | 21 | (170) | 136 |
| Tax expense | 9 | 26,656 | 27,925 |
| | | | |
| Changes in: | | | |
| Inventories | 12 | (5,282) | (533) |
| Trade and other receivables | 11, 23 | (8,054) | (13,629) |
| Other current and non-current assets | 9,22 | (11,386) | (3,388) |
| Trade and other payables | 9,19 | 2,057 | 19,158 |
| Provisions for legal claims | 22 | 90 | (653) |
| | | | |
| Taxes paid | | (22,070) | (27,256) |
| Interest paid | | (30,143) | (25,161) |
| Net cash inflow from operating activities |
| 97,095 | 106,114 |
| Investing activities | | | |
| Income received from trading investments | | 16,348 | 5,700 |
| Purchase of trading investments | | (70,864) | (72,811) |
| Proceeds on disposal of trading investments | | 128,959 | 73,064 |
| Purchase of property, plant and equipment | 14 | (63,268) | (47,352) |
| Proceeds on disposal of property, plant and equipment | | 726 | 304 |
| Purchase of intangible assets | 16 | (1,386) | (1,375) |
| Proceeds on disposal of intangible assets | | - | 517 |
| Investment in joint ventures and associates | 13 | (17,016) | (20,016) |
| Net cash used in investing activities |
| (6,501) | (61,969) |
| Financing activities | | | |
| Dividends paid to equity holders of the Company | 27 | (24,754) | (24,754) |
| Dividends paid to non-controlling interests in subsidiary | 26 | (25,173) | (17,808) |
| Repayments of borrowings | 20 | (49,349) | (57,926) |
| Payments of lease liabilities | 15 | (8,591) | (8,473) |
| New bank loans drawn down | 20 | 59,793 | 19,438 |
| Shares repurchased in subsidiary | 25 | (2,549) | - |
| Issue of new shares in subsidiary under employee share option plan | 25 | 3,729 | 6,885 |
| Net cash used in financing activities |
| (46,894) | (82,638) |
| | | | |
| Net increase/(decrease) in cash and cash equivalents | | 43,700 | (38,493) |
|
| | | |
| Cash and cash equivalents at beginning of year | | 28,565 | 63,255 |
|
| | | |
| Effect of foreign exchange rate changes | | 3,459 | 3,803 |
| | | | |
| Cash and cash equivalents at end of year | | 75,724 | 28,565 |
The accompanying notes are an integral part of these consolidated financial statements.
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(Expressed in thousands of US Dollars)
1 General Information
Ocean Wilsons Holdings Limited ("Ocean Wilsons" or the "Company") is a Bermuda investment holding company which, through its subsidiaries, operates a maritime services company in Brazil and holds a portfolio of international investments. The Company is incorporated in Bermuda under the Companies Act 1981 and the Ocean Wilsons Holdings Limited Act, 1991. The Company's registered office is Clarendon House, 2 Church Street, Hamilton, Bermuda. These consolidated financial statements comprise the Company and its subsidiaries (the "Group").
These consolidated financial statements were approved by the Board 23 March 2023.
2 Significant accounting policies and critical accounting judgements
Basis of accounting
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") and are presented in US Dollars, which is the Company's functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.
These consolidated financial statements have been prepared on the historical cost basis, except for the revaluation of financial instruments, share-based payments liabilities and defined health benefit plan liabilities that are measured at fair value.
Basis of consolidation
These consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company. The Group controls an entity when it is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. The financial statements of subsidiaries are prepared in accordance with the accounting policies set out in note 2. All intra-group transactions and balances are eliminated on consolidation.
Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling interests' share of changes in equity since the date of the combination. Where a change in percentage of interests in a controlled entity does not result in a change of control, the difference between the consideration paid for the additional interest and the book value of the net assets in the subsidiary at the time of the transaction is taken directly to equity. When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling interests and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.
Joint ventures and associates
A joint venture is a contractual agreement where the Group has joint control and has rights to the net assets of the contractual arrangement, rather than being entitled to specific assets and liabilities arising from the agreement. An associate is an entity in which the Group has significant influence, but not control or joint control, over the financial and operating policies.
Investments in joint ventures and associates are accounted for using the equity method and are initially recognised at cost. The Group's share in the profit or loss and other comprehensive income of the joint ventures and associates is included in these consolidated financial statements, until the date that significant influence or joint control ceases.
Foreign currency
The functional currency of each entity of the Group is established as the currency of the primary economic environment in which it operates. Transactions other than those in the functional currency of the entity are translated at the exchange rate prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Exchange differences arising on the settlement and on the translation of monetary items are included in profit or loss for the period.
On consolidation, the statement of profit or loss and comprehensive income of entities with a functional currency other than US Dollars are translated into US Dollars, at the average exchange rates for the period. Statement of financial position items are translated into US Dollars at the exchange rate at the reporting date. Exchange differences arising on consolidation of entities with functional currencies other than US Dollars are recognised in other comprehensive income and accumulated in the translation reserve, less the translation difference allocated to non-controlling interest.
Revenue
Revenue is measured at the fair value of the consideration received or receivable for goods and services provided in the normal course of business net of trade discounts and sales related taxes.
Ship agency and logistics revenues
Revenue from providing agency and logistics services is recognised when the agreed services have been performed.
Towage and port terminals revenues
Revenue from providing towage services, vessel turnarounds, container movement and associated services is recognised on the date that the services have been performed.
Shipyard revenue
Revenue related to services and construction contracts is recognised throughout the period of the project when the work in proportion to the stage of completion of the transaction contracted has been performed.
Employee Benefits
Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Share option plan
For equity settled share-based payment transactions, the Group measures the options granted, and the corresponding increase in equity, directly at the fair value of the option grant. Subsequent to initial recognition and measurement, the estimate of the number of equity instruments for which the service and non-market performance conditions are expected to be satisfied is revised during the vesting period. The cumulative amount recognised is based on the number of equity instruments for which the service and non-market related vesting conditions are expected to be satisfied. No adjustments are made in respect of market related vesting conditions.
Defined contribution plan
Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
Defined health benefit plans
The Group's net obligation regarding defined health benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees receive in return for their service in the current period and prior periods. That health benefit is discounted to determine its present value. The calculation of the liability of the defined health benefit plan is performed annually by a qualified actuary using the projected unit credit method. Remeasurements of the net defined health benefit obligation, which include actuarial gains and losses, are immediately recognised in other comprehensive income.
The Group determines the net interest expense on the net defined benefit liabilities for the period by multiplying them by the discount rate used to measure the defined health benefit obligations. Defined health benefit liabilities for the period take into account any changes during the period due to the payment of contributions and benefits. Net interest and other expenses related to defined health benefit plans are recognised in profit or loss. When the benefits of a health plan are changed, the portion of the change in benefits relating to past services rendered by employees is recognised immediately in profit or loss. The Group recognised gains and losses on the settlement of a defined health benefit plan when settlement occurs.
Termination benefits
Termination benefits are recognised as an expense when the Group can no longer withdraw the offer of such benefits. If payments are settled after 12 months from the reporting date, then they are discounted to their present values.
Finance income and finance costs
The Group's finance income and finance costs include interest income, interest expense and the net gain or loss on the disposal on financial assets at fair value through profit or loss. Interest income or expense is recognised in profit or loss using the effective interest method.
Taxation
Tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income, in which case the tax is also recognised directly in equity or in other comprehensive income.
Current tax is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated statement of profit or loss and other comprehensive income because it excludes or includes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's current tax expense is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is generally recognised for all taxable temporary differences except for when the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is not recognised if the temporary difference arises from goodwill or from the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that the related tax benefit will be realised. Prior reductions are reversed when the probability of future taxable profits improves.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is recognised, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
The Company offsets current tax assets against current tax liabilities when these items are in the same entity and relate to taxes levied by the same taxation authority and the taxation authority permits the Company to make or receive a single net payment.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and other short-term highly liquid cash equivalents.
Financial instruments
Recognition and initial measurement
Trade and other receivables are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instruments. Trade and other receivables are initially measured at the transaction price which reflects fair value. All other financial assets and financial liabilities are initially measured at fair value plus transaction costs that are directly attributable to their acquisition or issue.
Classification and subsequent measurement
Management determines the classification of its financial instruments at the time of initial recognition. The classification depends on the purpose for which the financial instruments were acquired or issued, their characteristics and the Group's designation of such instruments.
Financial assets
A financial asset is classified as measured at amortised cost if it is not designated as at fair value through profit and loss and if it is held within a business model whose objective is to hold assets to collect contractual cash flows and if its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. These assets are subsequently measured at amortised cost using the effective interest method, reduced by any impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.
A financial asset is classified as measured at fair value through other comprehensive income if it is not designated as at fair value through profit and loss and if it is held within a business model whose objective is to both hold assets to collect contractual cash flows and to sell financial assets, and if its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, dividends, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to profit or loss.
A financial asset is classified as measured at fair value through profit and loss if it is not classified as measured at amortised cost or at fair value through other comprehensive income, or if it is designated as such by management on initial recognition. Financial assets held for trading are classified as measured at fair value through profit and loss. These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.
The Group makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes the stated policies and objectives for the portfolio, how the performance of the portfolio is evaluated and reported to the Group's management and the risks that affect the performance of the business model and how those risks are managed. In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument, including assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition.
Financial liabilities
Financial liabilities are classified as at fair value through profit and loss when the financial liability is either held for trading or it is designated as such by management on initial recognition. These liabilities are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss.
Financial liabilities that are not classified as at fair value through profit and loss are classified as other financial liabilities and are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.
The following summarises the classification the Group applies to each of its significant categories of financial instruments:
| Category | Classification |
| Trade and other receivables | Amortised cost |
| Financial assets at fair value through profit and loss | At fair value through profit and loss |
| Cash and cash equivalents | Amortised cost |
| Trade and other payables | Other financial liabilities |
| Bank loans | Other financial liabilities |
Derecognition
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire or when it transfers the rights to receive the contractual cash flows in a transaction in which the Group either substantially transfers all of the risks and rewards of ownership of the financial asset or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value.
Hedge Accounting
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss.
When the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously deferred in other comprehensive income are transferred from equity and included in the measurement of the initial carrying amount of the asset or liability. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss.
Impairment of financial assets
The Group recognises an allowance for expected credit losses ("ECLs") for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
For financial assets measured at amortised cost, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the receivables and the economic environment.
The Group considers a financial asset in default when contractual payments are 180 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
Impairment losses are recognised in profit and loss and reflected in an allowance account against trade and other receivables. If, in a subsequent period, an event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit and loss.
Inventories
Inventories are measured at the lower of cost and net realisable value. Cost comprises direct materials, spare parts and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Property, plant and equipment
Property, plant and equipment is measured at cost, which includes capitalised borrowing costs, less accumulated depreciation and any accumulated impairment losses. Subsequent expenditure is recognised only when it is probable that the future economic benefits associated with the expenditure will flow to the Group.
Depreciation is calculated to write off the cost less the estimated residual value of items of property, plant and equipment, other than freehold land or assets under construction, over their estimated useful lives, using the straight-line method. Land is not depreciated, and assets under construction are not depreciated until they are transferred to the appropriate category of property, plant and equipment when the assets are ready for intended use. Depreciation is recognised in profit or loss.
The estimated useful life of the different categories of property, plant and equipment are as follows:
| Freehold Buildings: | 25 to 35 years |
| Leasehold Improvements: | 5 to 52 years, shorter of the rental period or the useful life of the underlying asset |
| Floating Craft: | 25 years |
| Vehicles: | 5 to 10 years |
| Plant and Equipment: | 10 to 20 years |
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period with the effect of any changes in estimate accounted for on a prospective basis.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. The gain or loss arising on disposal or retirement of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
Leased assets
At inception of a contract, the Group assesses whether it is a lease or contains a lease component, which it is if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
At the lease commencement date, the Group recognises a right-of-use asset and a lease liability. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset, less any incentives received.
The lease liability is initially measured at the present value of the lease payments unpaid at the commencement date using the interest rate implicit in the lease, or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Generally, the Group applies the incremental borrowing rate. For a portfolio of leases with similar characteristics, lease liabilities are discounted using a single discount rate.
Lease payments included in the measurement of the lease liability comprises fixed payments, variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee, and payments arising from options reasonably certain to be exercised. Variable lease payments not related to an index or rate are recognised in profit or loss as incurred.
Right-of-use assets are depreciated using the straight-line method, from the lease commencement date to the earlier of the end of their useful life or the end of the lease term, over their expected useful lives, on the same basis as owned assets except when there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, in which case the right-of-use asset shall be fully depreciated over the shorter of the lease term and its useful life. Right-of-use assets are reduced by impairment losses, if any, and adjusted for remeasurements of the lease liability.
Subsequent to the initial measurement, the carrying amount of the liability is reduced to reflect the lease payments made and increased to reflect the interest payable. If there is a change in the expected cash flows arising from and index or rate, the lease liability is recalculated. If the modification is related to a change in the amounts to be paid, the discount rate is not revised. Otherwise, if a modification is made to a lease, the Group revises the discount rate as if a new lease arrangement had been made.
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases and leases of low-value assets. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
Intangible assets
Intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and any accumulated impairment losses. Subsequent expenditure is recognised only when it is probable that the future economic benefits associated with the expenditure will flow to the Group.
Amortisation is calculated to write off the cost less the estimated residual values of intangible assets, using the straight-line method. Amortisation is recognised in profit or loss.
The estimated useful life of the different category of intangible assets are as follows:
| Concession rights: | 30 to 33 years |
| Computer software: | 5 years |
The estimated useful life, residual values and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
An intangible asset is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. The gain or loss arising on disposal or retirement of an intangible asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
Goodwill
Goodwill arising on an acquisition of a business is measured at cost as established at the date of acquisition of the business less accumulated impairment losses. Goodwill is not amortised.
Impairment of non-financial assets
The carrying amounts of the Group's non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. Goodwill is tested annually for impairment.
For impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units (CGUs). Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or a CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period taking into account the risks and uncertainties surrounding the obligation.
Use of judgements, estimates and assumptions
The preparation of these consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
In the process of applying the Group's accounting policies, the following judgements, estimates and assumptions made by management have the most significant effect on the amounts recognised in these consolidated financial statements:
a. Provisions for tax, labour and civil risks - Judgement
Provisions for legal cases are made when the Group's management, together with their legal advisors, consider the probable outcome is a financial settlement against the Group. Provisions are measured at management's best estimate of the expenditure required to settle the obligation based upon legal advice received. For labour claims, the provision is based on prior experience and management's best knowledge of the relevant facts and circumstances.
b. Impairment loss on non-financial assets - Judgement, estimates and assumptions
Impairment losses occur when book value of an asset or cash generating unit exceeds its recoverable value, which is the higher of fair value less selling costs and value in use. Calculation of fair value less selling costs is based on information available on similar assets' selling transactions or market prices less additional costs to dispose of the asset. The value-in-use calculation is based on the discounted cash flow model. The recoverable value of the cash-generating unit is defined as the higher of the fair value less sales costs and value in use.
c. Valuation of unquoted investments - Judgements, estimates and assumptions
The fair value of financial assets and liabilities that are not traded in an active market is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Valuation techniques used include the use of comparable recent arm's length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity-specific inputs.
Changes in significant accounting policies
A number of new or amended standards are effective for annual periods beginning after 31 December 2021, but do not have a significant impact on the preparation of the consolidated financial statements of the Group.
Standards issued but not yet effective
Several new or amended standards are effective for annual periods beginning after 31 December 2022 with early adoption permitted. The Group has elected to not adopt early the following new or amended standards and is assessing their impact on the preparation of its consolidated financial statements.
- Amendments to IAS 1: Classification of Liabilities as Current or Non-current, effective for periods beginning after 31 December 2022
- Amendments to IAS 8: Definition of Accounting Estimates, effective for periods beginning after 31 December 2022
- Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies, effective for periods beginning after 31 December 2022
- Amendments to IAS 12: Deferred Tax related to Assets and Liabilities arising from a Single Transaction, effective for periods beginning after 31 December 2022
3 Group composition
Ocean Wilsons has direct ownership in the following subsidiaries:
|
| Place of incorporation |
| Ownership interest | |
| Subsidiaries | and operation | Segment | 2022 | 2021 |
| Investments | | |
| |
| Ocean Wilsons (Investments) Limited | Bermuda | Investment | 100% | 100% |
| | | |
| |
| Holdings | | |
| |
| Ocean Wilsons Overseas Limited | Bermuda | Unallocated | 100% | 100% |
Ocean Wilsons Overseas Limited has direct ownership in the following subsidiary:
|
| Place of incorporation |
| Ownership interest | |
| Subsidiaries | and operation | Segment | 2022 | 2021 |
| Holdings | | |
| |
| OW Overseas (Investments) Limited | United Kingdom | Unallocated | 100% | 100% |
OW Overseas (Investments) Limited has direct ownership in the following subsidiary:
|
| Place of incorporation |
| Ownership interest | |
| Subsidiaries | and operation | Segment | 2022 | 2021 |
| Holdings | | |
| |
| Wilson Sons Holdings Brasil S.A. | Brazil | Maritime service | 56.58% | 56.88% |
| | | |
| |
The change in ownership interest in Wilson Sons Holdings Brasil S.A. from the year ended 31 December 2021 to 31 December 2022 is due to the exercise of share options and the repurchase of shares in subsidiaries, for which the details are presented in note 25. The information on non-controlling interests is presented in note 26.
Wilson Sons Holdings Brasil S.A. has direct ownership in the following subsidiaries:
|
| Place of incorporation |
| Ownership interest | |
| Subsidiaries | and operation | Segment | 2022 | 2021 |
| Shipyard | | | | |
| Wilson Sons Estaleiros Ltda. | Brazil | Maritime service | 100% | 100% |
| | | | | |
| Ship agency | | | | |
| Dock Market Soluções Ltda. | Brazil | Maritime service | 90% | 90% |
| Wilson Sons Shipping Services Ltda. | Brazil | Maritime service | 100% | 100% |
| | | | | |
| Logistics | | | | |
| Wilson Sons Terminais e Logística Ltda. | Brazil | Maritime service | 100% | 100% |
| Allink Transportes Internacionais Ltda. | Brazil | Maritime service | 50% | 50% |
| | | | | |
| Container terminal | | | | |
| Tecon Rio Grande S.A. | Brazil | Maritime service | 100% | 100% |
| Tecon Salvador S.A. | Brazil | Maritime service | 100% | 100% |
| | | | | |
| Offshore support bases and towage | | | | |
| Wilson Sons Serviços Marítimos Ltda. | Brazil | Maritime service | 100% | 100% |
4 Business and geographical segments
The Group has two reportable segments: maritime services and investments. These segments report their financial and operational data separately to the Board. The Board considers these segments separately when making business and investment decisions. The maritime services segment provides towage and ship agency, port terminals, offshore, logistics and shipyard services in Brazil. The investment segment holds a portfolio of international investments and is a Bermuda based company.
| For the year ended 31 December 2022 | Brazil - Maritime Services | Bermuda - Investment | Unallocated | Consolidated |
| Result | | | | |
| Sale of services | 440,107 | - | - | 440,107 |
| Net return on investment portfolio at fair value through profit or loss | - | (50,994) | - | (50,994) |
| Operating expenses | (261,461) | (202) | (3,578) | (265,241) |
| Depreciation and amortisation | (64,435) | - | - | (64,435) |
| Share of results of joint ventures and associates | 3,165 | - | - | 3,165 |
| Other investment income | 8,421 | - | - | 8,421 |
| Finance costs | (34,509) | - | - | (34,509) |
| Foreign exchange gains/(losses) on monetary items | 1,837 | (159) | (58) | 1,620 |
| Profit/(loss) before tax | 93,125 | (51,355) | (3,636) | 38,134 |
| Tax | (26,656) | - | - | (26,656) |
| Profit/(loss) after tax | 66,469 | (51,355) | (3,636) | 11,478 |
| | | | | |
| Financial position | | | | |
| Current assets | 167,140 | 293,717 | 9,177 | 470,034 |
| Investment in joint ventures and associates | 81,863 | - | - | 81,863 |
| Property, plant and equipment | 589,629 | - | - | 589,629 |
| Right-of-use assets | 178,699 | - | - | 178,699 |
| Other intangible assets | 14,392 | - | - | 14,392 |
| Goodwill | 13,420 | - | - | 13,420 |
| Other non-current assets | 53,250 | - | - | 53,250 |
| Segment assets | 1,098,393 | 293,717 | 9,177 | 1,401,287 |
| Segment liabilities | (646,339) | (509) | (313) | (647,161) |
| | | | | |
| Other information | | | | |
| Capital additions | 64,654 | - | - | 64,654 |
| Right-of-use assets additions | 5,222 | - | - | 5,222 |
| For the year ended 31 December 2021 | Brazil - Maritime Services | Bermuda - Investment | Unallocated | Consolidated |
| Result | | | | |
| Sale of services | 396,376 | - | - | 396,376 |
| Net return on investment portfolio at fair value through profit or loss | - | 44,520 | - | 44,520 |
| Operating expenses | (231,476) | (212) | (3,162) | (234,850) |
| Depreciation and amortisation | (61,412) | - | - | (61,412) |
| Share of results of joint ventures and associates | (5,029) | - | - | (5,029) |
| Other investment income | 4,113 | - | - | 4,113 |
| Finance costs | (30,227) | - | - | (30,227) |
| Foreign exchange losses on monetary items | (2,990) | (6) | (104) | (3,100) |
| Profit/(loss) before tax | 69,355 | 44,302 | (3,266) | 110,391 |
| Tax | (27,925) | - | - | (27,925) |
| Profit/(loss) after tax | 41,430 | 44,302 | (3,266) | 82,466 |
| | | | | |
| Financial position | | | | |
| Current assets | 163,967 | 351,774 | 2,782 | 518,523 |
| Investment in joint ventures and associates | 61,553 | - | - | 61,553 |
| Property, plant and equipment | 563,055 | - | - | 563,055 |
| Right-of-use assets | 157,869 | - | - | 157,869 |
| Other intangible assets | 14,981 | - | - | 14,981 |
| Goodwill | 13,272 | - | - | 13,272 |
| Other non-current assets | 51,094 | - | - | 51,094 |
| Segment assets | 1,025,791 | 351,774 | 2,782 | 1,380,347 |
| Segment liabilities | (594,218) | (2,211) | (246) | (596,675) |
| | | | | |
| Other information | | | | |
| Capital additions | 48,727 | - | - | 48,727 |
| Right-of-use assets additions | 7,718 | - | - | 7,718 |
5 Revenue
An analysis of the Group's revenue is as follows:
| | 2022 | 2021 |
| Sale of services | 440,107 | 396,376 |
| Net income from underlying investment vehicles | 11,809 | 3,754 |
| Profit on disposal of financial assets at fair value through profit or loss | 24,316 | 11,870 |
| Unrealised (losses)/gains on financial assets at fair value through profit or loss | (79,995) | 33,850 |
| Write down of Russia-focused investments (note 10) | (4,077) | - |
| Returns on investment portfolio at fair value through profit or loss | (47,947) | 49,474 |
| Interest on bank deposits | 4,146 | 2,254 |
| Other interest | 4,275 | 1,859 |
| Other investment income | 8,421 | 4,113 |
| Total Revenue | 400,581 | 449,963 |
The Group derives its revenue from contracts with customers from the sale of services in its Brazil - Maritime services segment. The revenue from contracts with customers can be disaggregated as follows:
|
| 2022 | 2021 |
| Harbour manoeuvres | 201,429 | 178,552 |
| Special operations | 17,633 | 20,558 |
| Ship agency | 9,910 | 8,774 |
| Towage and ship agency services | 228,972 | 207,884 |
| Container handling | 73,166 | 72,402 |
| Warehousing | 40,946 | 35,036 |
| Ancillary services | 20,932 | 21,283 |
| Offshore support bases | 10,617 | 7,234 |
| Other services | 13,360 | 13,040 |
| Port terminals | 159,021 | 148,995 |
| Logistics | 47,591 | 35,142 |
| Shipyard | 4,523 | 4,355 |
| Total Revenue from contracts with customers | 440,107 | 396,376 |
Contract balance
Trade receivables are generally received within 30 days. The carrying amount of operational trade receivables at the end of the reporting period was US$54.5 million (2021: US$49.1 million). These amounts include US$12.0 million (2021: US$13.5 million) of contract assets (unbilled accounts receivables). There were no contract liabilities as of 31 December 2022 (2021: none).
Performance obligations
Revenue is measured based on the consideration specified in a contract with a customer. The Group recognises revenue when it transfers control over a good or service to a customer, and the payment is generally due within 30 days. Information about the Group's performance obligations timing is as follows:
| Performance obligation | When performance obligation is typically satisfied |
| Towage and ship agency services | |
| Harbour manoeuvres | At a point in time |
| Special operations | At a point in time |
| Ship agency | At a point in time |
| | |
| Port Terminals | |
| Container handling | At a point in time |
| Warehousing | At a point in time |
| Ancillary services | At a point in time |
| Offshore support bases | At a point in time |
| Other services | At a point in time |
| | |
| Logistics | At a point in time |
| | |
| Shipyard | Over time |
The disaggregation of revenue from contracts with customers based on the timing of performance obligations is as follows:
| | 2022 | 2021 |
| At a point of time | 435,584 | 392,021 |
| Over time | 4,523 | 4,355 |
| Total Revenue from contracts with customers | 440,107 | 396,376 |
The performance obligation of shipyard is satisfied over time and the revenue related to these contracts is recognised when the work in proportion to the stage of completion of the transaction contracted has been performed. At 31 December 2022 and 2021, there were no warranties or refund obligations associated with ship construction contracts.
There are no significant judgements in the determination of when performance obligations are typically satisfied.
All revenue is derived from continuing operations.
6 Employee charges and benefits expenses
Employee charges and benefits expenses are classified as follows:
| | 2022 | 2021 |
| Wages, salaries and benefits | (102,397) | (90,868) |
| Social security costs | (22,701) | (20,062) |
| Other pension costs | (904) | (772) |
| Share based payments | (328) | (324) |
| Total employee charges and benefits expenses | (126,330) | (112,026) |
Defined contribution retirement benefit schemes
The Group operates defined contribution retirement benefit schemes for all qualifying employees in its Brazilian operations. The assets of the scheme are held separately from those of the Group in funds under the control of independent managers. An expense of US$0.9 million (2021: US$0.7 million) recognised under other pension costs represents contributions payable to the scheme by the Group at rates specified in the rules of the plan.
Information regarding the defined health benefit plans is detailed in note 21.
7 Other operating expenses
Other operating expenses are classified as follows:
| | 2022 | 2021 |
| Utilities and communications | (13,616) | (12,309) |
| Insurance | (3,483) | (4,076) |
| Corporate, governance and compliance costs | (3,292) | (2,359) |
| Short-term or low-value asset leases | (33,432) | (32,881) |
| Service costs | (24,925) | (24,401) |
| Freight | (17,320) | (10,717) |
| Port expenses | (7,168) | (6,629) |
| Other operating expenses | (2,819) | (4,917) |
| Total other operating expenses | (106,055) | (98,289) |
8 Finance costs
Finance costs are classified as follows:
| | 2022 | 2021 |
| Interest on lease liabilities | (15,798) | (13,882) |
| Interest on bank loans | (17,160) | (16,219) |
| Exchange loss on foreign currency borrowings | (248) | (32) |
| Other interest costs | (1,303) | (94) |
| Total finance costs | (34,509) | (30,227) |
9 Taxation
At the present time, no income, profit, capital or capital gains taxes are levied in Bermuda and accordingly, no expenses or provisions for such taxes has been recorded by the Group for its Bermuda operations. The Company has received an undertaking from the Bermuda Government exempting it from all such taxes until 31 March 2035.
Tax expense
The reconciliation of the amounts recognised in profit or loss is as follows:
|
| 2022 | 2021 |
| Current tax expense | | |
| Brazilian corporation tax | (17,018) | (17,239) |
| Brazilian social contribution | (8,340) | (7,114) |
| Total current tax expense | (25,358) | (24,353) |
| Deferred tax - origination and reversal of timing differences | | |
| Charge for the year in respect of deferred tax liabilities | (14,123) | (6,737) |
| Credit for the year in respect of deferred tax assets | 12,825 | 3,165 |
| Total deferred tax expense | (1,298) | (3,572) |
| Total tax expense | (26,656) | (27,925) |
Brazilian corporation tax is calculated at 25% (2021: 25%) of the taxable profit for the year. Brazilian social contribution tax is calculated at 9% (2021: 9%) of the taxable profit for the year.
The reconciliation of the effective tax rate is as follows:
| | 2022 | 2021 |
| Profit before tax | 38,134 | 110,391 |
| Less: Loss/(profit) before tax of Bermuda and unallocated segments | 54,991 | (41,036) |
| Profit before tax - Maritime services | 93,125 | 69,355 |
| Tax at the aggregate Brazilian tax rate of 34% (2021: 34%) | (31,663) | (23,581) |
| Net operating losses in the period | (788) | (816) |
| Non-deductible expenses | (863) | (554) |
| Foreign exchange variance on loans | (3,008) | 1,142 |
| Tax effect of share of results of joint ventures and associates | 1,076 | (1,710) |
| Tax effect of foreign exchange gains or losses on monetary items | 625 | (881) |
| Retranslation of non-monetary items | 11,592 | 228 |
| Share option scheme | - | (110) |
| Leasing | 64 | 158 |
| Other | (3,691) | (1,801) |
| Tax expense for the year | (26,656) | (27,925) |
| Effective rate for the year - Maritime services | 29% | 40% |
| Effective rate for the year - Group | 70% | 25% |
The tax expense related to amounts recognised in other comprehensive income is as follows:
| For the year ended 31 December 2022 | Before tax | Tax (expense)/ credit | Net of tax |
| Items that will not be reclassified subsequently to profit or loss | | | |
| Post-employment benefits | 124 | (31) | 93 |
| Purchase price adjustment of associate | 213 | (54) | 159 |
| Items that will be or may be reclassified subsequently to profit or loss | | | |
| Exchange differences arising on translation of foreign operations | 9,551 | (2,423) | 7,128 |
| Effective portion of changes in fair value of derivatives | 12 | (3) | 9 |
| Total amounts recognised in other comprehensive income | 9,900 | (2,511) | 7,389 |
| For the year ended 31 December 2021 | Before tax | Tax (expense)/ credit | Net of tax |
| Items that will not be reclassified subsequently to profit or loss | | | |
| Post-employment benefits | 164 | (56) | 108 |
| Items that will be or may be reclassified subsequently to profit or loss | | | |
| Exchange differences arising on translation of foreign operations | (11,302) | 3,843 | (7,459) |
| Effective portion of changes in fair value of derivatives | 239 | (81) | 158 |
| Total amounts recognised in other comprehensive income | (10,899) | 3,706 | (7,193) |
Deferred tax
The following are the major deferred tax assets and liabilities recognised by the Group and their movements during the current and prior reporting period:
| | Tax depreciation | Foreign exchange variance on loans | Tax losses | Profit on construction contracts | Other timing differences | Retranslation of non-monetary items | Total |
| At 1 January 2021 | (29,483) | 36,457 | 14,705 | 15,523 | 6,184 | (64,657) | (21,271) |
| (Charge)/credit to income | (2,497) | 1,251 | (4,159) | (632) | 2,237 | 228 | (3,572) |
| Other adjustments | - | - | - | (83) | (1,456) | - | (1,539) |
| Exchange differences | 2,130 | (2,436) | (868) | - | (429) | 123 | (1,480) |
| At 31 December 2021 | (29,850) | 35,272 | 9,678 | 14,808 | 6,536 | (64,306) | (27,862) |
| (Charge)/credit to income | (1,711) | (8,433) | (4,112) | (534) | 1,900 | 11,592 | (1,298) |
| Other adjustments | (1,510) | (68) | 151 | 82 | 1,438 | 1 | 94 |
| Exchange differences | (2,168) | 2,200 | 703 | - | 678 | (111) | 1,302 |
| At 31 December 2022 | (35,239) | 28,971 | 6,420 | 14,356 | 10,552 | (52,824) | (27,764) |
Certain tax assets and liabilities have been offset on an entity-by-entity basis. After offset, deferred tax balances are disclosed in the statement of financial position as follows:
| | 2022 | 2021 |
| Deferred tax assets | 21,969 | 22,332 |
| Deferred tax liabilities | (49,733) | (50,194) |
| Net deferred tax balance | (27,764) | (27,862) |
At 31 December 2022, the Group had unused tax losses of US$31.2 million (2021: US$39.0 million) available for offset against future profits in the company in which they arose.
No deferred tax asset has been recognised in respect of US$4.0 million (2021: US$7.6 million) due to the unpredictability of future profit streams, as a tax asset of one entity of the Group cannot be offset against a tax liability of another entity of the Group as there is no legally enforceable right to do so. The Group expects to recover the deferred tax assets between three and five years.
Deferred tax on foreign exchange variance on loans arises from exchange gains or losses on the Group's US Dollar and Brazilian Real denominated loans linked to the US Dollar that are not deductible or payable for tax in the period they arise. Exchange gains on these loans are taxable when settled and not in the period in which gains arise.
Retranslation of non-monetary items deferred tax arises on Brazilian property, plant and equipment held in subsidiaries with US Dollar as their functional currency. Deferred tax is calculated on the difference between the historical US Dollar balances recorded in the Group's accounts and the Brazilian Real balances used in the Group's Brazilian tax calculations.
Recoverable and payable taxes
The Group reviews taxes and levies impacting its business to ensure that payments are accurately made. In the event that tax credits arise, the Group intends to use them in future years within their legal term. If the Group does not utilise the tax credit within their legal term, a reimbursement of such amounts will be requested from the Brazilian Internal Revenue Service.
The recoverable taxes relate to Brazilian federal taxes, Brazilian sales and rendering of services taxes, Brazilian payroll taxes, Brazilian income tax, Brazilian social contributions, and judicial bonds related to these items. The recoverable taxes are classified as current if they are expected to be used or reimbursed within 12 months of the end of the period, otherwise they are classified as non-current, and are as follows:
| | 2022 | 2021 |
| Recoverable taxes - current | 34,515 | 25,380 |
| Recoverable taxes - non-current | 15,143 | 12,816 |
| Total recoverable taxes | 49,658 | 38,196 |
The payable taxes relate to Brazilian federal taxes, Brazilian rendering of services taxes, Brazilian payroll taxes and Brazilian income tax. The payable taxes are classified as current if they are payable within 12 months of the end of the period, otherwise they are classified as non-current, and are as follows:
| | 2022 | 2021 |
| Taxes payable - current | (10,290) | (8,057) |
| Taxes payable - non-current | - | - |
| Total taxes payable | (10,290) | (8,057) |
10 Financial assets at fair value through profit or loss
The movement in financial assets at fair value through profit or loss is as follows:
| | 2022 | 2021 |
| Opening balance - 1 January | 392,931 | 347,464 |
| Additions, at cost | 70,864 | 72,811 |
| Disposals, at market value | (128,959) | (73,064) |
| (Decrease)/increase in fair value of financial assets at fair value through profit or loss | (79,995) | 33,850 |
| Write down of Russia-focused investments1 | (4,077) | - |
| Profit on disposal of financial assets at fair value through profit or loss | 24,316 | 11,870 |
| Closing balance - 31 December | 275,080 | 392,931 |
| Bermuda - Investment segment | 272,931 | 349,613 |
| Brazil - Maritime services segment | 2,149 | 43,318 |
1 During the year ended 31 December 2022, the Company wrote down the full value of its investment in Prosperity Quest Fund, a Russia-focused equity fund held within the investments segment portfolio, following the issue of an investor notice announcing the suspension of its net asset valuation, subscriptions and redemptions.
Bermuda - Investment segment
The financial assets at fair value through profit or loss held in this segment represent investments in listed equity securities, funds and unquoted equities that present the Group with opportunity for return through dividend income and capital appreciation.
Included in financial assets at fair value through profit or loss are open ended funds whose shares may not be listed on a stock exchange but are redeemable for cash at the current net asset value at the option of the Group. They have no fixed maturity or coupon rate. The fair values of these securities are based on quoted market prices where available. Where quoted market prices are not available, fair values are determined by third parties using various valuation techniques that include inputs for the asset or liability that are not based on observable market data.
The Investment Manager receives an investment management fee of 1% of the valuation of funds under management and an annual performance fee of 10% of the net investment return which exceeds the benchmark, provided that the high-water mark has been exceeded. The portfolio performance is measured against a benchmark calculated by reference to the US CPI Urban Consumers index not seasonally adjusted plus 3% per annum over rolling three-year periods. Payment of performance fees are subject to a high-water mark and are capped at a maximum of 2% of the portfolio net asset value. The Board considers a three-year measurement period appropriate due to the investment mandate's long-term horizon and an absolute return inflation-linked benchmark appropriately reflects the Group's investment objectives while having a linkage to economic factors.
At the end of the reporting period, the Group had entered into commitment agreements with respect to the investment portfolio for capital subscriptions. The classification of those commitments based on their expiry date is as follows:
| | 2022 | 2021 |
| Within one year | 5,951 | 5,219 |
| In the second to fifth year inclusive | 2,346 | 2,946 |
| After five years | 42,129 | 35,056 |
| Total commitment for capital subscriptions | 50,426 | 43,221 |
The exact timing of capital calls made in respect of the above commitments are at the discretion of the manager of the underlying structure. If required, amounts expected to be settled within one year will be met from the realisation of liquid investment holdings. There may be situations when commitments may be extended by the manager of the underlying structure beyond the initial expiry date dependent upon the terms and condition of each individual structure.
Brazil - Maritime Services segment
The financial assets at fair value through profit or loss held in this segment are held and managed separately from the Bermuda - Investment segment portfolio and consist of US Dollar denominated depository notes, an investment fund and an exchange traded fund both privately managed. Those funds' financial obligations are limited to service fees to the asset management company employed to execute investment transactions, audit fees and other similar expenses. The funds' underlying investments are highly liquid and readily convertible.
Information about the Group's exposure to financial risks and fair value information related to financial assets at fair value through profit or loss is included in note 30.
11 Trade and other receivables
Trade and other receivables are classified as follows:
| | 2022 | 2021 |
| Non-current |
| |
| Other trade receivables | 1,456 | 1,580 |
| Total other trade receivables | 1,456 | 1,580 |
| | | |
| Current | | |
| Trade receivable for the sale of services | 43,293 | 35,915 |
| Unbilled trade receivables | 12,036 | 13,517 |
| Total gross current trade receivables | 55,329 | 49,432 |
| Allowance for expected credit loss | (792) | (338) |
| Total current trade receivables | 54,537 | 49,094 |
| Prepayments | 4,887 | 6,646 |
| Insurance claim receivable | 981 | 632 |
| Employee advances | 1,449 | 1,236 |
| Disposal proceeds of financial assets at fair value through profit or loss receivable | 2,181 | - |
| Other receivables | 3,101 | 1,742 |
| Total other current receivables | 12,599 | 10,256 |
| Total trade and other receivables | 67,136 | 59,350 |
The aging of the trade receivables is as follows:
| | 2022 | 2021 |
| Current | 44,699 | 43,160 |
| From 0 - 30 days | 5,997 | 4,098 |
| From 31 - 90 days | 2,461 | 858 |
| From 91 - 180 days | 1,236 | 988 |
| More than 180 days | 936 | 328 |
| Total gross trade receivables | 55,329 | 49,432 |
The movement in allowance for expected credit loss is as follows:
| | 2022 | 2021 |
| Opening balance - 1 January | (338) | (554) |
| (Increase)/decrease in allowance recognised in profit or loss | (419) | 188 |
| Exchange differences | (35) | 28 |
| Closing balance - 31 December | (792) | (338) |
Information about the Group's exposure to credit risks related to trade receivables is included in note 30.
12 Inventories
Inventories are classified as follows:
| | 2022 | 2021 |
| Operating materials | 13,727 | 10,829 |
| Raw materials for third party vessel construction | 3,852 | 1,468 |
| Total inventories | 17,579 | 12,297 |
Inventories are presented net of provision for obsolescence, amounting to US$0.3 million (2021: US$0.4 million).
13 Joint ventures and associates
The Group holds the following significant interests in joint ventures and associates at the end of the reporting period:
| | Place of incorporation | Proportion of ownership | |
| | and operation | 2022 | 2021 |
| Joint ventures |
|
| |
| Logistics | | | |
| Porto Campinas Logística e Intermodal Ltda | Brazil | 50% | 50% |
| Offshore | |
| |
| Wilson Sons Ultratug Participações S.A. | Brazil | 50% | 50% |
| Atlantic Offshore S.A. | Panamá | 50% | 50% |
| Associates | |
| |
| Argonáutica Engenharia e Pesquisas S.A. | Brazil | 32.32% | - |
The aggregated Group's interests in joint ventures and associates are equity accounted. The financial information of the joint ventures and associates and reconciliations to the share of result of joint ventures and associates and the investment in joint ventures and associates recognised for the period are as follows:
| | 2022 | 2021 |
| Sales of services | 182,882 | 118,049 |
| Operating expenses | (116,046) | (70,364) |
| Depreciation and amortisation | (53,212) | (50,962) |
| Foreign exchange gains/(losses) on monetary items | 5,057 | (3,904) |
| Results from operating activities | 18,681 | (7,181) |
| Finance income | 2,656 | 302 |
| Finance costs | (14,756) | (15,789) |
| Profit/(loss) before tax | 6,581 | (22,668) |
| Tax (expense)/credit | (253) | 12,610 |
| Profit/(loss) for the year | 6,328 | (10,058) |
| Total profit/(loss) for the year - joint ventures | 6,334 | (10,058) |
| Participation | 50% | 50% |
| Share of profit/(loss) for the year for joint ventures | 3,167 | (5,029) |
| Total profit/(loss) for the year - associates | (6) | - |
| Participation | 32.32% | N/A |
| Share of profit/(loss) for the year for associates | (2) | - |
| Share of result of joint ventures and associates | 3,165 | (5,029) |
| | 2022 | 2021 |
| Cash and cash equivalents | 5,747 | 7,541 |
| Other current assets | 51,260 | 46,548 |
| Non-current assets | 551,921 | 584,886 |
| Total assets | 608,928 | 638,975 |
| Trade and other payables | (46,506) | (66,567) |
| Other current liabilities | (56,833) | (49,173) |
| Non-current liabilities | (324,012) | (375,988) |
| Total liabilities | (427,351) | (491,728) |
| Total net assets | 181,577 | 147,247 |
| Total net assets - joint ventures | 180,079 | 147,247 |
| Participation | 50% | 50% |
| Group's share of net assets - joint ventures | 90,040 | 73,624 |
| Total net assets - associates | 1,498 | - |
| Participation | 32.32% | N/A |
| Group's share of net assets - associates | 484 | - |
| Goodwill and surplus generated on associate purchase | 1,711 | - |
| Cumulative elimination of profit on construction contracts | (10,372) | (12,071) |
| Investment in joint ventures and associates | 81,863 | 61,553 |
The movement in investment in joint ventures and associates is as follows:
|
| 2022 | 2021 |
| Opening balance - 1 January | 61,553 | 26,185 |
| Share of result of joint ventures and associates | 3,165 | (5,029) |
| Capital increase | 17,016 | 40,207 |
| Elimination of profit on construction contracts | (158) | 17 |
| Purchase price adjustment of associate | 159 | - |
| Post-employment benefits | - | 10 |
| Translation reserve | 128 | 163 |
| Closing balance - 31 December | 81,863 | 61,553 |
During the year ended 31 December 2022, the Group increased its invested capital in Wilson Sons Ultratug Participações S.A. with a cash contribution of US$14.9 million and in Porto Campinas Logística e Intermodal Ltda with a cash contribution of US$0.1 million and acquired a 32.32% participation in Argonáutica Engenharia e Pesquisas S.A. with a cash contribution of US$2.0 million.
During the year ended 31 December 2021, the Group increased its invested capital in Wilson Sons Ultratug Participações S.A. with a cash contribution of US$20.0 million, and in Atlantic Offshore S.A. with the conversion in capital of a US$20.2 million related party loan.
Guarantees
Wilson Sons Ultratug Participações S.A. has loans with the Brazilian Development Bank guaranteed by a lien on the financed supply vessels and by a corporate guarantee from its participants, proportionate to their ownership. The Group's subsidiary Wilson Sons Holdings Brasil Ltda. is guaranteeing US$163.7 million (2021: US$160.4 million).
Wilson Sons Ultratug Participações S.A. has a loan with Banco do Brasil guaranteed by a pledge on the financed offshore support vessels, a letter of credit issued by Banco de Crédito e Inversiones and its long-term contracts with Petrobras. The joint venture has to maintain a cash reserve account until full repayment of the loan agreement amounting to US$1.7 million (2021: US$2.1 million) presented as long-term investment.
Covenants
On 31 December 2022 and 2021, Wilson Sons Ultratug Participações S.A. was not in compliance with one of its covenants' ratios with Banco do Brasil, resulting in a required increase in capital within a year of US$1.8 million (2021: US$ 5.5 million). As the capital will be increased to that amount within a year, management will not negotiate a waiver letter with Banco do Brasil. There are no other capital commitments for the joint ventures and associates as of 31 December 2022 (2021: none).
14 Property, plant and equipment
| | Land and buildings | Floating Craft | Vehicles, plant and equipment | Assets under construction | Total |
| Cost | | | | | |
| At 1 January 2021 | 279,313 | 525,484 | 209,034 | 292 | 1,014,123 |
| Additions | 8,992 | 22,152 | 6,919 | 9,289 | 47,352 |
| Transfers from joint operations | - | 1,350 | 32 | - | 1,382 |
| Transfers | (16) | 1,462 | (1,446) | - | - |
| Disposals | (1,998) | (9,196) | (4,607) | - | (15,801) |
| Exchange differences | (11,608) | - | (11,468) | - | (23,076) |
| At 1 January 2022 | 274,683 | 541,252 | 198,464 | 9,581 | 1,023,980 |
| Additions | 10,835 | 15,493 | 9,936 | 27,004 | 63,268 |
| Transfers | (112) | 24,623 | (2,317) | (22,194) | - |
| Transfers to intangible assets | - | - | (60) | - | (60) |
| Disposals | (1,955) | (4,477) | (4,892) | - | (11,324) |
| Exchange differences | 11,084 | - | 10,854 | - | 21,938 |
| At 31 December 2022 | 294,535 | 576,891 | 211,985 | 14,391 | 1,097,802 |
|
| | | | | |
| Accumulated depreciation |
|
|
|
|
|
| At 1 January 2021 | 79,628 | 245,583 | 109,774 | - | 434,985 |
| Charge for the year | 7,989 | 26,070 | 12,572 | - | 46,631 |
| Elimination on construction contracts | - | 25 | - | - | 25 |
| Disposals | (1,193) | (6,842) | (3,053) | - | (11,088) |
| Exchange differences | (3,773) | - | (5,855) | - | (9,628) |
| At 1 January 2022 | 82,651 | 264,836 | 113,438 | - | 460,925 |
| Charge for the year | 8,518 | 27,831 | 12,124 | - | 48,473 |
| Elimination on construction contracts | - | 87 | - | - | 87 |
| Disposals | (1,645) | (4,426) | (4,609) | - | (10,680) |
| Exchange differences | 3,644 | - | 5,724 | - | 9,368 |
| At 31 December 2022 | 93,168 | 288,328 | 126,677 | - | 508,173 |
|
| | | | | |
| Carrying Amount | | | | | |
| At 31 December 2021 | 192,032 | 276,416 | 85,026 | 9,581 | 563,055 |
| At 31 December 2022 | 201,367 | 288,563 | 85,308 | 14,391 | 589,629 |
Land and buildings with a net book value of US$0.2 million (2021: US$0.2 million) and plant and equipment with a carrying amount of US$0.1 million (2021: US$0.1 million) have been given in guarantee for various legal processes.
The Group has pledged assets with a carrying amount of US$230.2 million (2021: US$251.6 million) to secure loans granted to the Group.
The amount of borrowing costs capitalised in 2022 was US$0.1 million at an average interest rate of 5.6% (2021: none).
The Group has contractual commitments to suppliers for the acquisition and construction of property, plant and equipment amounting to US$19.9 million (2021: US$14.2 million).
15 Lease arrangements
Right-of-use assets
Right-of-use assets are classified as follows:
| | Operational facilities | Floating craft | Buildings | Vehicles, plant and equipment | Total |
| Cost | | | | | |
| At 1 January 2021 | 154,710 | 7,278 | 5,697 | 9,749 | 177,434 |
| Additions | - | 7,353 | 176 | 189 | 7,718 |
| Contractual amendments | 33,466 | (838) | 119 | 40 | 32,787 |
| Terminated contracts | (15,662) | - | (177) | (806) | (16,645) |
| Exchange differences | (5,396) | (716) | (427) | (326) | (6,865) |
| At 1 January 2022 | 167,118 | 13,077 | 5,388 | 8,846 | 194,429 |
| Additions | - | 3,018 | 1,305 | 899 | 5,222 |
| Contractual amendments | 17,901 | 5,793 | 63 | 117 | 23,874 |
| Terminated contracts | - | (2,796) | (3,771) | (58) | (6,625) |
| Exchange differences | 10,313 | 510 | 96 | 328 | 11,247 |
| At 31 December 2022 | 195,332 | 19,602 | 3,081 | 10,132 | 228,147 |
|
|
|
|
|
|
|
| Accumulated depreciation | | | | | |
| At 1 January 2021 | 13,739 | 4,750 | 2,421 | 7,246 | 28,156 |
| Charge for the year | 7,410 | 4,187 | 980 | 748 | 13,325 |
| Terminated contracts | (3,264) | - | (504) | (598) | (4,366) |
| Exchange differences | 413 | (743) | 63 | (288) | (555) |
| At 1 January 2022 | 18,298 | 8,194 | 2,960 | 7,108 | 36,560 |
| Charge for the year | 8,244 | 4,825 | 912 | 916 | 14,897 |
| Terminated contracts | - | (1,226) | (2,424) | (44) | (3,694) |
| Exchange differences | 1,104 | 242 | 63 | 276 | 1,685 |
| At 31 December 2022 | 27,646 | 12,035 | 1,511 | 8,256 | 49,448 |
|
|
|
|
|
|
|
| Carrying Amount | | | | | |
| At 31 December 2021 | 148,820 | 4,883 | 2,428 | 1,738 | 157,869 |
| At 31 December 2022 | 167,686 | 7,567 | 1,570 | 1,876 | 178,699 |
Operational facilities
Tecon Rio Grande
Lease commitments to operate the container terminal and heavy cargo terminal in the Port of Rio Grande, expiring in 2047. The commitments include a monthly payment for facilities and leased areas, a contractual payment per container moved based on minimum forecast volumes and a payment per tonne in respect of general cargo handling and unloading.
Tecon Salvador
Lease commitments to operate the container terminal and heavy cargo terminal in the Port of Salvador, expiring in 2050. The commitments require the Group to make a minimum specified investment to expand the leased terminal area and include a monthly payment for facilities and leased areas, a contractual payment per container moved based on minimum forecast volumes and a fee per tonne of non-containerised cargo moved based on minimum forecast volumes.
Shipyard
Lease commitments to operate an area used to expand and develop a Group's shipyard, expiring in 2038 and renewable for a further period of 30 years at the option of the Group. Management's intention is to exercise the renewal option.
Offshore support base
Lease commitments to operate a port area with convenient access to service oil producing basins, expiring in 2043.
Logistics
Lease commitments for a distribution centre, expiring in 2026.
Floating craft
Lease commitments for the chartering of vessels for maritime transport between port terminals.
Buildings
Lease commitments for the Brazilian headquarters, branches and commercial offices in several Brazilian cities.
Vehicles, plant and equipment
Lease commitments mainly for forklifts, vehicles for operational, commercial and administrative activities and other operating equipment.
Lease liabilities
Lease liabilities are classified as follows:
| | Average discount rate | 2022 | 2021 |
| Operational facilities | 8.55% | (184,591) | (159,444) |
| Floating craft | 9.61% | (7,605) | (4,823) |
| Buildings | 9.75% | (2,121) | (2,139) |
| Vehicles, plant and equipment | 12.12% | (1,859) | (1,437) |
| Total |
| (196,176) | (167,843) |
| Total current | | (24,728) | (19,449) |
| Total non-current | | (171,448) | (148,394) |
The contractual undiscounted cash flows related to leases liabilities are as follows:
| | 2022 | 2021 |
| Within one year | (25,958) | (20,323) |
| In the second year | (23,101) | (37,535) |
| In the third to fifth years inclusive | (56,682) | (32,767) |
| After five years | (355,360) | (313,102) |
| Total cash flows | (461,101) | (403,727) |
| Adjustment to present value | 264,925 | 235,884 |
| Total lease liabilities | (196,176) | (167,843) |
The lease liabilities balance considering the projected future inflation rate in the discounted payment flows is as follows:
| | 2022 | 2021 |
| Actual outflow | (461,101) | (403,727) |
| Embedded interest | 264,925 | 235,884 |
| Lease liabilities | (196,176) | (167,843) |
| | | |
| Inflated flow | (284,773) | (426,694) |
| Inflated embedded interest | 204,117 | 252,974 |
| Inflated lease liabilities | (80,656) | (173,720) |
Amounts recognised in profit and loss
| | 2022 | 2021 |
| Depreciation of right-of-use assets | (14,897) | (13,325) |
| PIS and COFINS taxes | 1,324 | 1,262 |
| Net depreciation of right-of-use assets | (13,573) | (12,063) |
| Interest on lease liabilities | (16,810) | (14,771) |
| PIS and COFINS taxes | 1,012 | 889 |
| Interest on lease liabilities | (15,798) | (13,882) |
| Variable lease payments not included in the measurement of lease liabilities1 | (2,376) | (2,332) |
| Expenses relating to short-term leases | (29,778) | (29,641) |
| Expenses relating to low-value assets | (1,281) | (897) |
| Total | (62,806) | (58,815) |
1. The amounts refer to payments which exceeded the minimum forecast volumes of Tecon Rio Grande and Tecon Salvador and payments related to the number of vessel trips which were not included in the measurement of lease liabilities.
Amounts recognised in the cash flow statement
| | 2022 | 2021 |
| Payment of lease liability | (8,591) | (8,473) |
| Interest paid - lease liability | (16,810) | (14,771) |
| Short-term leases paid | (29,778) | (29,641) |
| Variable lease payments | (2,376) | (2,332) |
| Low-value leases paid | (1,281) | (897) |
| Total cash outflow | (58,836) | (56,114) |
16 Other intangible assets
Other intangible assets cost and related accumulated amortisation are classified as follows:
|
| Computer software | Concession- rights | Other | Total |
| Cost | | | | |
| At 1 January 2021 | 41,107 | 16,013 | 47 | 57,167 |
| Additions | 1,375 | - | - | 1,375 |
| Disposals | (925) | - | - | (925) |
| Exchange differences | (634) | (512) | (2) | (1,148) |
| At 1 January 2022 | 40,923 | 15,501 | 45 | 56,469 |
| Additions | 1,386 | - | - | 1,386 |
| Transfers from right-of-use | 60 | - | - | 60 |
| Disposals | (1,105) | - | - | (1,105) |
| Exchange differences | 558 | 277 | 2 | 837 |
| At 31 December 2022 | 41,822 | 15,778 | 47 | 57,647 |
|
| | | | |
| Accumulated amortisation | | | | |
| At 1 January 2021 | 34,348 | 5,852 | - | 40,200 |
| Charge for the year | 2,298 | 420 | - | 2,718 |
| Disposals | (695) | - | - | (695) |
| Exchange differences | (411) | (324) | - | (735) |
| At 1 January 2022 | 35,540 | 5,948 | - | 41,488 |
| Charge for the year | 1,965 | 424 | - | 2,389 |
| Disposals | (1,105) | - | - | (1,105) |
| Exchange differences | 381 | 102 | - | 483 |
| At 31 December 2022 | 36,781 | 6,474 | - | 43,255 |
|
|
|
|
|
|
| Carrying amount | | | | |
| 31 December 2021 | 5,383 | 9,553 | 45 | 14,981 |
| 31 December 2022 | 5,041 | 9,304 | 47 | 14,392 |
17 Goodwill
Goodwill is classified as follows:
|
| Tecon Rio Grande | Tecon Salvador | Total |
| Carrying Value | | | |
| At 1 January 2021 | 10,949 | 2,480 | 13,429 |
| Exchange differences | (157) | - | (157) |
| At 1 January 2022 | 10,792 | 2,480 | 13,272 |
| Exchange differences | 148 | - | 148 |
| At 31 December 2022 | 10,940 | 2,480 | 13,420 |
The goodwill associated with each cash-generating unit "CGU" (Tecon Salvador and Tecon Rio Grande) is attributed to the Brazil - Maritime Services segment.
Each CGU is assessed for impairment annually and whenever there is an indication of impairment. The carrying value of goodwill has been assessed with reference to its value in use reflecting the projected discounted cash flows of each CGU to which goodwill has been allocated.
Details of the impairment test are disclosed in note 18.
18 Impairment Test of Cash Generating Units
Tecon Rio Grande and Tecon Salvador
The Tecon Rio Grande and Tecon Salvador CGUs contains goodwill and as such are tested annually for impairment. The cash flows of these CGUs are derived from operating budgets, historical and prospective data, and include forecast assumptions on revenue, costs and expenses, investments, and projection period. The key assumptions used in determining value in use are as follows:
|
| Tecon Rio Grande | Tecon Salvador | ||
|
| 2022 | 2021 | 2022 | 2021 |
| Discount rate | 8.5% | 9.2% | 8.5% | 9.5% |
| Growth rate | 5.8% | 4.3% | 3.4% | 3.4% |
| Inflation rate | 3.3% | 3.7% | 3.3% | 3.7% |
Further assumptions include sales and operating margins, which are based on past experience considering the effect potential changes in market or operating conditions. Projected volumes for both CGUs were based on the expected performance of the Brazilian economy until reaching operating capacity for each. The discount rate was based on weighted average cost of capital ("WACC"), whereas the growth rate for projection is based on the inflation rate only after reaching operating capacity.
At 31 December 2022 and 2021, the estimated recoverable amount of these CGUs significantly exceeded their carrying value and as such no impairment loss was recognised. An increase in the discount rate of up to 32.7% (2021: 33.7%) for Tecon Rio Grande and 6.6% (2021: 6.4%) for Tecon Salvador would not result in an impairment loss.
Offshore support bases
For the year ended 31 December 2022 and 2021, the offshore support bases CGU, which is part of the Brazil - Maritime Services segment, reported negative earnings before taxes, and as such was tested for impairment. The cash flows of this CGU are derived from operating budgets, historical and prospective data, and include the following forecast assumptions: (i) revenue, (ii) costs and expenses, (iii) investments, (iv) projection period and (v) discount rate.
(i) Revenue: The assumption considers the estimated pace of growth in oil & gas offshore exploration and production. Data from the Brazilian Petroleum National Agency, the Energy Research Agency, oil companies' releases and specialised industry reports all support a significant increase in oil exploration and production activities in Brazil in the next 10 years. The Group assesses it will successfully capture part of that increase in demand and expects from 2028 onwards to reach operating levels attained prior to the economic and oil and gas market crises. Based on current and expected future tender activity and competitive advantage, the average growth rate is estimated at 15.2% each year until 2028. For 2032 onward, the growth rate is estimated at 1.0%, based on the expected growth in the Brazilian oil and gas sector and in the region in which the CGU operates. Projections for 2023 include a 4.6% increase in average contract prices in relation to current pricing and a 7.5% increase in public prices for Spot berthing compared to 2022. From 2024 onwards, prices are adjusted for inflation.
(ii) Costs and expenses: Projections for 2023 are in line with the budget and include an increase in fixed costs of 26% over 2022. From 2024 onwards, costs are forecasted to increase in line with the increase in activity.
(iii) Investments: The Group did not include any expansion investment within its projections.
(iv) Projection period: The Group has prepared the projections using a 10-year period plus a perpetuity, as the oil and gas industry life cycle is at least 10 years, due to the life cycle of investment in an oil field from exploration to sustainable production.
(v) Discount rate: The discount rate calculation is based on the specific circumstances of the CGU, taking into consideration the time value of money and individual risks of the CGU that have not been incorporated in the cash flow estimates, and is a weighted average cost of capital (WACC). The Group has determined the discount rate using reputable sources to capture macroeconomic assumptions and information from comparable companies in the oil field and the maritime services sector in which the CGU operates. For the year ended 31 December 2022, the discount rate was estimated at 10.2% (2021: 10.1%).
At 31 December 2022, the estimated recoverable amount of the CGU of US$91.9 million (2021: US$72.1 million) exceeded its carrying value of US$47.6 million (2021: US$42.9 million) and as such no impairment loss was recognised. While maintaining all other assumptions constant, either an increase in the discount rate of up to 3.6% (2021: 2.5%), a decrease in revenue over the projected period of up to 11.1% (2021: 7.8%), or a decrease in revenue over the first 3 years of the projected period of up to 99.2% (2021: 80.0%) would not result in an impairment loss.
19 Trade and other payables
Trade and other payables are classified as follows:
| | 2022 | 2021 |
| Trade payables | (25,583) | (29,242) |
| Accruals | (8,550) | (7,424) |
| Other payables | (479) | (441) |
| Provisions for employee benefits | (21,365) | (19,547) |
| Deferred income | (2,360) | (1,859) |
| Total trade and other payables | (58,337) | (58,513) |
Trade creditors and accruals principally comprise amounts outstanding for trade purposes and ongoing costs. For most suppliers, interest is charged on outstanding trade payable balances at various interest rates. The Group has financial risk management policies in place to ensure that payables are paid within the credit timeframe agreed with each vendor.
20 Bank loans
The movement in bank loans is as follows:
| | 2022 | 2021 |
| Opening - 1 January | (301,599) | (342,661) |
| Additions | (59,793) | (19,438) |
| Principal amortisation | 49,349 | 57,926 |
| Interest amortisation | 13,333 | 10,390 |
| Accrued interest | (17,437) | (16,246) |
| Exchange difference | (5,744) | 8,430 |
| Closing - 31 December | (321,891) | (301,599) |
The terms and conditions of outstanding bank loans are as follows:
| | | | | 2022 | 2021 | ||
| Lender | Currency | Annual interest rate % | Year of maturity | Carrying value | Fair value | Carrying value | Fair value |
| BNDES | linked to US Dollar | 2.30% - 3.71% | 2035 | (129,231) | (129,231) | (110,514) | (110,514) |
| BNDES | linked to US Dollar | 2.07% - 4.08% | 2028 | (21,477) | (21,477) | (25,161) | (25,161) |
| BNDES | linked to US Dollar | 5.00% | 2022 | - | - | (177) | (177) |
| BNDES | Real | 15.91% | 2034 | (50,148) | (50,148) | (45,264) | (45,264) |
| BNDES | Real | 14.65% | 2029 | (5,816) | (5,816) | (6,241) | (6,241) |
| BNDES | Real | 9.79% | 2027 | (564) | (564) | (638) | (638) |
| Banco do Brasil | linked to US Dollar | 2.00% - 4.00% | 2035 | (66,110) | (66,110) | (71,854) | (71,854) |
| Bradesco | Real | 10.08% - 10.45% | 2024 | (19,571) | (19,718) | (27,248) | (27,417) |
| Bradesco | Real | 10.75% | 2023 | (2,406) | (2,411) | (4,494) | (4,489) |
| Banco Santander | US Dollar | 2.63% | 2023 | (20,288) | (20,304) | (10,008) | (10,008) |
| Banco Santander | Real | 15.59% | 2025 | (6,280) | (6,279) | - | - |
| Total bank loans | | |
| (321,891) | (322,058) | (301,599) | (301,763) |
The breakdown of bank loans by maturity is as follows:
| | 2022 | 2021 |
| Within one year | (59,881) | (45,287) |
| In the second year | (56,022) | (47,961) |
| In the third to fifth years (inclusive) | (91,037) | (86,671) |
| After five years | (114,951) | (121,680) |
| Total bank loans | (321,891) | (301,599) |
Guarantees
The loan agreements with BNDES and Banco do Brasil rely on corporate guarantees from the Group's subsidiary party to the agreement. For some contracts, the corporate guarantee is in addition to a pledge of the respective financed tugboat or a lien over the logistics and port operations equipment financed.
The loan agreements with Bradesco and Banco Santander rely on corporate guarantees from the Group's subsidiary party to the agreement.
Undrawn credit facilities
At 31 December 2022, the Group had US$37.1 million (2021: US$78.8 million) of undrawn borrowing facilities available in relation to the Salvador Terminal expansion and the dry-docking, maintenance and repair of tugs.
Covenants
Some of the loan agreements include obligations related to financial indicators, including EBITDA/Net operating revenue, EBITDA/Debt service, Equity/Total assets and Net debt/EBITDA. At 31 December 2022 and 2021, the Group was in compliance with all covenants related to its loan agreements.
Information about the Group's exposure to financial risks is included in note 30.
21 Post-employment benefits
The Group operates a private medical insurance scheme for its employees in its Brazilian operations, which requires the eligible employees to pay fixed monthly contributions. In accordance with Brazilian law, eligible employees with greater than ten years' service acquire the right to remain in the plan following retirement or termination of employment. Ex-employees remaining in the plan will be liable for paying the full cost of their continued scheme membership.
The future actuarial liability for the Group relates to the potential increase in plan costs resulting from additional claims due to the expanded membership of the scheme.
The movement in the present value of the actuarial liability for the year is as follows:
| | 2022 | 2021 |
| Opening balance - 1 January | (1,562) | (1,641) |
| Current service cost | (7) | (3) |
| Interest expense | (146) | (133) |
| Contributions to the plan | (14) | (30) |
| Changes in economic and financial assumptions | 228 | 522 |
| Changes in biometric and demographic assumptions | (126) | (391) |
| Exchange differences | (110) | 114 |
| Closing balance - 31 December | (1,737) | (1,562) |
The calculation of the liability generated by the defined health benefits plan involves actuarial assumptions that are based on market conditions. The principal actuarial assumptions, and the impact of a change (keeping the other assumptions constant) on the defined benefit obligation valuation are as follows:
| | 2022 | 2021 |
| Annual interest rate | 9.18% | 8.67% |
| Estimated inflation rate in the long-term | 3.00% | 3.00% |
| Impact of 0.5% increase | (214) | (195) |
| Impact of 0.5% decrease | 247 | 223 |
| Medical cost trend rate | 5.58% | 5.58% |
| Impact of 0.5% increase | 255 | 229 |
| Impact of 0.5% decrease | (222) | (199) |
22 Legal claims
In the normal course of its operations in Brazil, the Group is exposed to numerous local legal claims. The Group's policy is to vigorously contest those claims, many of which appear to have little substance or merit, and manage such claims through its legal counsel.
Labour claims - Claims involving payment of health risks, additional overtime and other allowances.
Tax cases - Claims involving government tax assessments when the Group considers it has a chance of successfully defending its position.
Civil and environmental cases - Claims involving indemnification for material damage, environmental and shipping claims and other contractual disputes.
Claims deemed probable and subject to reasonable estimation by management and its legal counsel are recorded as provisions, whereas claims deemed only reasonably possible are disclosed as contingent liabilities. Both provisions and contingent liabilities are subject to uncertainties around the timing and amount of possible cash outflows as the outcome is heavily dependent on court proceedings.
The movement in the carrying amount of each class of provision for legal claims for the period is as follows:
| | Labour claims | Tax cases | Civil and environmental cases | Total |
| At 1 January 2022 | (6,190) | (1,295) | (1,422) | (8,907) |
| Additional provisions | (288) | (1,536) | (263) | (2,087) |
| Unused amounts reversed | 1,385 | 165 | 463 | 2,013 |
| Utilisation of provisions | 524 | 5 | 30 | 559 |
| Exchange difference | (409) | (71) | (95) | (575) |
| At 31 December 2022 | (4,978) | (2,732) | (1,287) | (8,997) |
The contingent liabilities at the end of each period are as follows:
| | Labour claims | Tax cases | Civil and environmental cases | Total |
| At 31 December 2021 | (4,968) | (52,793) | (14,881) | (72,642) |
| At 31 December 2022 | (6,002) | (66,071) | (11,158) | (83,231) |
Other non-current assets of US$3.5 million (2021: US$3.6 million) represent legal deposits required by the Brazilian legal authorities as security to contest legal actions.
23 Related party transactions
Transactions between the Group and its subsidiaries have been eliminated on consolidation and are not disclosed in this note. Transactions and outstanding balances between the Group and its related parties are as follows:
| | Revenues/(Expenses) |
Receivable/(Payable) | ||
| | 2022 | 2021 | 2022 | 2021 |
| Joint ventures | | | | |
| Wilson, Sons Ultratug Participações S.A.1 | 2,778 | 524 | 11,176 | 10,784 |
| | | | | |
| Others | | | | |
| Hanseatic Asset Management LBG2 | (3,047) | (4,876) | (484) | (2,133) |
| Hansa Capital Partners3 | (32) | - | - | - |
| Gouvêa Vieira Advogados4 | (28) | (21) | - | - |
(1) Related party loans with Wilson, Sons Ultratug Participações S.A. (interest - 3.6% per year with no maturity date).
(2) Mr. W Salomon is chairman and Mr. C Townsend is a director of Hanseatic Asset Management LBG. Fees were paid to Hanseatic Asset Management LBG for acting as Investment Manager of the Group's investment portfolio.
(3) Mr. W Salomon is a partner of Hansa Capital Partners. Office facilities charges were paid to Hansa Capital Partners.
(4) Mr. J F Gouvêa Vieira is a partner in the law firm Gouvêa Vieira Advogados. Fees were paid to Gouvêa Vieira Advogados for legal services.
Mr. J F Gouvêa Vieira is a Director of Jofran Services. During the year ended 31 December 2022, directors' fees of US$0.04 million were paid to Mr. J F Gouvêa Vieira through Jofran Services (2021: US$0.10 million).
Mr. C Townsend is a Director of Hansa Capital GmbH. During the year ended 31 December 2022, directors' fees of US$0.09 million were paid to Mr. C Townsend through Hansa Capital GmbH (2021: US$0.09 million).
Remuneration of key management personnel
The remuneration of the executive directors and other key management of the Group is as follows:
| | 2022 | 2021 |
| Short-term employee benefits | (4,914) | (6,131) |
| Post-employment benefits | (70) | (67) |
| Share based payment expense | (306) | (236) |
| Total remuneration of key management personnel | (5,290) | (6,434) |
24 Share capital
| | 2022 | 2021 |
| Authorised | | |
| 50,060,000 ordinary shares of 20p each (2021: 50,060,000 ordinary shares of 20p each) | 16,119 | 16,119 |
| Issued and fully paid | | |
| 35,363,040 ordinary shares of 20p each (2021: 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 presentation currency changed from Sterling to US Dollars, being US$1.61 to £1.
25 Equity transactions in subsidiaries
On 13 May 2022, the Group's subsidiary Wilson Sons Holdings Brasil S.A. (WSSA) executed a 1:6 stock split, previously approved by the shareholders of WSSA on 26 April 2022. Comparative data presented within this note has been updated to reflect the stock split.
Share options in subsidiary
On 8 January 2014, the shareholders of the subsidiary WSSA approved a share option plan which allowed for the grant of options to eligible participants, including an increase in the authorised capital of WSSA through the creation of up to 26,465,562 new shares.
The options provide participants with the right to acquire shares in WSSA at a predetermined fixed price, following a vesting period of 3 to 5 years, and expire 10 years from the grant date, or immediately on the resignation of the employee, whichever is earlier. Options lapse if not exercised within 6 months of the date that the participant ceases to be employed within the Group by reason of injury, disability or retirement.
The movement in share options and related weighted average exercise prices in Brazilian Real (R$) is as follows:
| | 2022 | 2021 | ||
| | Number of shares | WAEP (R$) | Number of shares | WAEP (R$) |
| Opening balance - 1 January | 9,153,840 | 6.34 | 13,280,940 | 5.33 |
| Granted during the period | - | - | 2,700,000 | 8.66 |
| Exercised during the period | (3,726,240) | 5.21 | (6,743,100) | 5.28 |
| Expired during the period | - | - | (84,000) | 6.33 |
| Outstanding at 31 December | 5,427,600 | 7.12 | 9,153,840 | 6.34 |
| Exercisable at 31 December | 2,654,160 | 5.56 | 6,284,520 | 5.34 |
The options outstanding at 31 December 2022 had an exercise price in the range of R$5.21 to R$8.66 (2021: R$5.21 to R$8.66) and a weighted-average contractual life of 5.4 years (2021: 4.7 years). The weighted average share price at the date of exercise for the year ended 31 December 2022 was R$9.11 (2021: R$5.58).
During the year ended 31 December 2022, 3,726,240 share options of the subsidiary WSSA were exercised (2021: 6,743,100), resulting in an increase in non-controlling interest of 0.48% (2021: 0.89%).
Share buyback in subsidiary
On 13 May 2022, the Board of Directors of the subsidiary WSSA approved a share buyback program, which allows for the repurchase of the subsidiary's own common shares. The program is to be executed within 18 months of its approval and is limited to 8,181,000 common shares to be acquired at market price.
The weighted average share price at the date of repurchase for the year ended 31 December 2022 was R$9.28 (2021: n/a).
During the year ended 31 December 2022, 1,427,200 shares of the subsidiary WSSA were repurchased (2021: n/a), resulting in a decrease in non-controlling interest of 0.19% (2021: n/a).
26 Non-controlling interest
The following table summarises the information related to non-controlling interests. The non-controlling interests immaterial to the Group originate from the Brazil - Maritime services segment and are presented together as Other. The information on the Group's composition is presented in note 3.
| For the year ended 31 December 2022 | Wilson Sons Holdings Brasil S.A. |
Other | Total |
| Net assets attributable to non-controlling interest | 199,004 | 514 | 199,518 |
| Profit allocated to non-controlling interest | 27,858 | 2,295 | 30,153 |
| Other comprehensive income allocated to non-controlling interest | 3,213 | (15) | 3,198 |
| Dividends to non-controlling interest | 22,728 | 2,445 | 25,173 |
| For the year ended 31 December 2021 | Wilson Sons Holdings Brasil S.A. |
Other | Total |
| Net assets attributable to non-controlling interest | 189,336 | 679 | 190,015 |
| Profit allocated to non-controlling interest | 17,170 | 1,609 | 18,779 |
| Other comprehensive income allocated to non-controlling interest | (3,095) | (15) | (3,110) |
| Dividends to non-controlling interest | 16,533 | 1,275 | 17,808 |
27 Dividends
The following dividends were declared and paid by the Company to its shareholders:
| | 2022 | 2021 |
| 70c per share (2021: 70c per share) | 24,754 | 24,754 |
After the reporting date, the following dividends were proposed by the Board, but have not been recognised as liabilities:
| | 2022 | 2021 |
| 70c per share (2021: 70c per share) | 24,754 | 24,754 |
28 Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
| | 2022 | 2021 |
| (Loss)/profit for the year attributable to equity holders of the Company | (18,675) | 63,687 |
| Weighted average number of ordinary shares | 35,363,040 | 35,363,040 |
| Earnings per share - basic and diluted | (52.8)c | 180.1c |
The Company has no dilutive or potentially dilutive ordinary shares.
29 Risk management
Capital risk management
The Group manages its capital to ensure that entities within the Group are viable and will be able to continue as a going concern. The capital structure of the Group consists of debt, long term in nature, which includes the borrowings disclosed in note 20 and the lease liabilities included in note 15, cash and cash equivalents, investments, and equity attributable to equity holders of the Company comprising issued capital, reserves and retained earnings disclosed in the consolidated statement of changes in equity.
The Group borrows to fund capital projects and looks to cash flow from these projects to meet repayments. Working capital is funded through cash generated by operating activities. There were no significant changes during the year relative to the Group policy relating to capital management.
Climate change risk
The Group is exposed to both climate-related risks and opportunities. The two major categories of risk being transition and physical risk. Transition risks are those relating to the transition to a lower carbon economy and include risks such as policy and legal risk, technology risk, market risk and reputation risk. Physical risks are those relating to the physical impacts of climate change which can be acute (those from increased frequency and severity of climate related events) or chronic (due to longer-term shifts in climate patterns). The Group is more significantly affected by physical risk through its exposure to acute and chronic climate change. However, consideration must be, and is, given to transition and climate-related litigation risks.
During the year ended 31 December 2022, the Group continued to assess and evaluate risks relating to climate change, including those related to existing and emerging regulatory requirements. The Group's process for managing climate related risks is grounded in its emissions monitoring work, which includes greenhouse gas (GHG) emissions, water consumption and solid waste disposal within its operating entity. This intelligence enables the Group to mitigate potential risks and identify opportunities, particularly in the reduction of its direct emissions, and as a result to continue to adopt advancing technologies to reduce its GHG emissions. The approach to evaluating climate related risks in the investment portfolio includes gaining insight on the approach funds take to climate change across categories such as decarbonisation policy, technology, legal and reputational.
30 Financial instruments
Accounting classification and fair value
The classification, carrying value and fair value of financial instruments is as follows:
|
| | 2022 | 2021 | ||
|
| Classification | Carrying value | Fair value | Carrying value | Fair value |
| Financial assets | | | | | |
| Cash and cash equivalents | Amortised cost | 75,724 | 75,724 | 28,565 | 28,565 |
| Financial assets at fair value through profit and loss | At fair value through profit and loss | 275,080 | 275,080 | 392,931 | 392,931 |
| Trade and other receivables | Amortised cost | 67,136 | 67,136 | 59,350 | 59,350 |
| | | | | | |
| Financial liabilities | | | | | |
| Trade and other payables | Other financial liabilities | (58,337) | (58,337) | (58,513) | (58,513) |
| Bank loans | Other financial liabilities | (321,891) | (322,058) | (301,599) | (301,763) |
The carrying value of cash and cash equivalents, trade and other receivables and trade and other payable is a reasonable approximation of fair value.
The fair value of bank loans was established as their present value determined by future cash flows and interest rates applicable to instruments of similar nature, terms and risks or at market quotations of these securities.
The fair value of financial assets at fair value through profit and loss are based on quoted market prices at the close of trading at the end of the period if traded in active markets and based on valuation techniques if not traded in active markets. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates.
Fair value measurements recognised in the consolidated financial statements are grouped into levels based on the degree to which the fair value is observable.
Financial instruments whose values are based on quoted market prices in active markets are classified as Level 1. These include active listed equities.
Financial instruments that trade in markets that are not considered active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified as Level 2. These include certain private investments that are traded over the counter and debt instruments.
Financial instruments that have significant unobservable inputs as they trade infrequently and are not quoted in an active market are classified as Level 3. These include investments in limited partnerships and other private equity funds which may be subject to restrictions on redemptions such as lock up periods, redemption gates and side pockets.
Valuations are the responsibility of the Board of Directors of the Company. The Group's Investment Manager considers the valuation techniques and inputs used in valuing these funds as part of its due diligence prior to investing to ensure they are reasonable and appropriate. Therefore, the net asset value ("NAV") of these funds may be used as an input into measuring their fair value. In measuring this fair value, the NAV of the funds is adjusted, if necessary, for other relevant factors known of the fund. In measuring fair value, consideration is also paid to any clearly identifiable transactions in the shares of the fund.
Depending on the nature and level of adjustments needed to the NAV and the level of trading in the fund, the Group classifies these funds as either Level 2 or Level 3. As observable prices are not available for these securities, the Group values these based on an estimate of their fair value. The Group obtains the fair value of their holdings from valuation statements provided by the managers of the invested funds. Where the valuation statement is not stated at the reporting date, the Group adjusts the most recently available valuation for any capital transactions made up to the reporting date. When considering whether the NAV of the underlying managed funds represent fair value, the Investment Manager considers the valuation techniques and inputs used by the managed funds in determining their NAV.
The underlying funds use a blend of methods to determine the value of their own NAV by valuing underlying investments using methodology consistent with the International Private Equity and Venture Capital Valuation Guidelines ('IPEV'). IPEV guidelines generally provides five ways to determine the fair market value of an investment: (i) binding offer on the company, (ii) transaction multiples, (iii) market multiples, (iv) net assets and (v) discounted cash flows. Such valuations are necessarily dependent upon the reasonableness of the valuations by the fund managers of the underlying investments. In the absence of contrary information, these values are relied upon.
The following table provides an analysis of financial instruments recognised in the statement of financial position by the level of hierarchy, excluding financial instruments for which the carrying amount is a reasonable approximation of fair value:
| | Level 1 | Level 2 | Level 3 | Total |
| 31 December 2022 |
|
|
|
|
| Financial assets at fair value through profit and loss | 31,925 | 122,789 | 120,366 | 275,080 |
| Bank loans | - | (321,891) | - | (321,891) |
| | | | |
|
| 31 December 2021 | | | |
|
| Financial assets at fair value through profit and loss | 67,177 | 196,069 | 129,685 | 392,931 |
| Bank loans | - | (301,599) | - | (301,599) |
During the year ended 31 December 2022, no financial instruments were transferred between Level 1 and Level 2 (2021: none). The movement in Level 3 financial instruments for the year is as follows:
| | 2022 | 2021 |
| Balance at 1 January | 129,685 | 99,137 |
| Transfers from Level 2 to Level 3 | - | 77 |
| Purchases of investments and drawdowns of financial commitments | 12,830 | 15,379 |
| Sales of investments and repayments of capital | (9,231) | (12,992) |
| Realised gains | 4,526 | 6,873 |
| Unrealised (losses)/gains | (17,444) | 21,211 |
| Balance at 31 December | 120,366 | 129,685 |
| Cost | 130,183 | 125,983 |
| Cumulative unrealised (losses)/gains | (9,816) | 3,702 |
Investment in private equity funds require a long-term commitment with no certainty of return. The Group's intention is to hold Level 3 investments to maturity. In the unlikely event that the Group is required to liquidate these investments, the proceeds received may be less than the carrying value due to their illiquid nature. The following table summarises the sensitivity of the Company's Level 3 investments to changes in fair value due to illiquidity, based on the assumptions that the proceeds realised will be decreased by 5%, 10% or 20%, with all other variables held constant.
|
| 5% scenario | 10% scenario | 20% scenario |
| 31 December 2022 | (6,018) | (12,037) | (24,073) |
| 31 December 2021 | (6,484) | (12,968) | (25,936) |
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. The Group's credit risk is primarily attributable to its bank balances, trade receivables, related party loans and investments. The amounts presented as receivables in the consolidated statement of financial position are shown net of allowances for credit loss.
The Bermuda - Investment segment primarily transacts with regulated institutions on normal market terms which are trade date plus one to three days. The levels of amounts outstanding from brokers are regularly reviewed by the Investment Manager. The duration of credit risk associated with the investment transaction is the period between the date the transaction took place, the trade date and the date the stock and cash are transferred, and the settlement date. The level of risk during the period is the difference between the value of the original transaction and its replacement with a new transaction.
The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies. The credit risk on investments held for trading is limited because the counterparties with whom the Group transacts are regulated institutions or banks with high credit ratings. The Group's appointed Investment Manager, Hanseatic Asset Management LBG, evaluates the credit risk on trading investments prior to and during the investment period.
In addition, the Bermuda - Investment segment invests in limited partnerships and other similar investment vehicles. The level of credit risk associated with such investments is dependent upon the terms and conditions and the management of the investment vehicles. The Board reviews all investments at its regular meetings from reports prepared by the Company's Investment Manager.
The Brazil - Maritime Services segment invests temporary cash surpluses in government and private bonds, according to regulations approved by management, which follow the Group policy on credit risk concentration. Credit risk on investments in non-government backed bonds is mitigated by investing only in assets issued by leading financial institutions. The Group stipulates a cash allocation limit per bank, in addition to investment rules according to rating classification. The Group invests in banks with rating classification BBB (limited to a maximum of 15%), from A to AA (limited to a maximum of 40%) or AAA (limited to a minimum of 40% and maximum of 100%).
The Group has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. The Group's sales policy is subordinated to the credit sales rules set by WSSA management which seek to mitigate any loss from customers' delinquency. The Group has no significant concentration of credit risk for trade receivables as they consist of a large number of customers. Regular credit evaluation is performed on the financial condition of accounts receivable.
Allowance for expected credit losses
Generally, an interest penalty is charged on overdue balances for trade receivables. The Group recognises an allowance for expected credit losses based on an expected credit loss model and a provision matrix that involves historical evaluation of effective losses over billing cycles. The provision matrix is initially based on the Group's historical observed default rates and is reassessed every 180 days. The period of review is 3.5 years, and the measurement of the default rate considers the recoverability of receivables and will be applied according to the payment profile of debtors. The Group will recalibrate, when appropriate, the matrix to adjust the historical credit losses experience with forward-looking information. Additionally, the Group created a credit committee to monitor and, if necessary, propose payment terms to those customers with credit risk.
The allowance for expected credit losses determined using a provision matrix is as follows:
| | Current | 1-30 days | 31-90 days | 91-180 days | More than 180 days | Total |
| 31 December 2022 | | | | | |
|
| Expected credit loss rate | 0.05% | 0.05% | 2.56% | 7.48% | 63.70% |
|
| Receivables for services | 44,699 | 5,997 | 2,461 | 1,236 | 936 | 55,329 |
| Allowance for expected credit losses | (24) | (3) | (63) | (92) | (610) | (792) |
| 31 December 2021 | | | | | |
|
| Expected credit loss rate | 0.05% | 0.05% | 1.67% | 8.65% | 60.08% |
|
| Receivables for services | 43,160 | 4,098 | 858 | 989 | 327 | 49,432 |
| Allowance for expected credit losses | (22) | (2) | (14) | (86) | (214) | (338) |
Foreign currency risk
The Brazil - Maritime services segment operates principally in Brazil with a substantial proportion of its revenue, expenses, assets and liabilities denominated in Real, exposing the Group to exchange rate fluctuations. Due to the high cost of hedging transactions denominated in Real, the Group does not normally hedge its net exposure to the Real, as the Board does not consider it economically viable.
Purchases and sales of goods and services are denominated in Real and US Dollars. These transactions are subject to currency fluctuations between the time that the price of goods or services are settled and the actual payment date. For investing and financing cash flows, the resources and their application are monitored with the objective of matching the currency cash flows and due dates. For operating cash flows, the Group seeks to neutralise the currency risk by matching assets (receivables) and liabilities (payments).
Furthermore, the Group has contracted US Dollar denominated and Real denominated debt, and the cash and cash equivalents balances are also US Dollar denominated and Real denominated. The Group seeks to generate an operating cash surplus in the same currency in which the debt service of each business is denominated.
The Bermuda - Investment segment operates internationally and holds monetary assets denominated in currencies other than the US Dollar, the functional currency. Foreign currency risk arises as the value of future transactions, recognised monetary assets and monetary liabilities denominated in other currencies fluctuate due to changes in foreign exchange rates.
The Company's policy is not to manage its exposure to foreign exchange movements by entering into any foreign exchange hedging transactions. Instead, when the Investment Manager formulates a view on the future direction of foreign exchange rates and the potential impact on the Company, the Investment Manager factors that into its portfolio allocation decisions.
The carrying amount of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows (presented in US Dollar):
| | Assets | Liabilities | ||
| | 2022 | 2021 | 2022 | 2021 |
| Real | 157,063 | 173,297 | (395,616) | (367,528) |
| Sterling | 12,241 | 11,603 | (19) | (22) |
| Swiss Franc | 2,341 | 3,305 | - | - |
| Euro | 15,083 | 31,549 | - | - |
| Yen | 4,226 | 5,394 | - | - |
| Total foreign currency denominated monetary items | 190,954 | 225,148 | (395,635) | (367,550) |
The Group is primarily exposed to unfavourable movements in the Real on its Brazilian monetary assets and liabilities held by US Dollar functional currency entities. The sensitivity analysis below refers to the position at the end of the reporting period and estimates the impacts of a Real devaluation against the US Dollar, considering three scenarios: a likely scenario (probable), a 25% devaluation scenario (possible) and a 50% devaluation scenario (remote). The Group uses the Brazilian Central Bank's "Focus" report to determine the probable scenario.
| | Currency | Amount ($US) | Probable scenario | Possible scenario (25%) | Remote scenario (50%) |
| 31 December 2022 | | | | | |
| Projected exchange rate | | | 5.25 | 6.56 | 7.88 |
| Total assets | BRL | 157,063 | (934) | (32,160) | (52,977) |
| Total liabilities | BRL | (395,616) | 2,434 | 81,070 | 133,495 |
| Net impact |
|
| 1,500 | 48,910 | 80,518 |
| | | | | | |
| 31 December 2021 | | | | | |
| Projected exchange rate | | | 5.59 | 6.99 | 8.39 |
| Total assets | BRL | 173,297 | (294) | (34,895) | (57,963) |
| Total liabilities | BRL | (367,528) | 625 | 74,005 | 122,926 |
| Net impact |
|
| 331 | 39,110 | 64,963 |
Market price risk
By the nature of its activities, the Bermuda - Investment segment's investments are exposed to market price fluctuations. However, the portfolio as a whole does not correlate directly to any Stock Exchange Index as it is invested in a diversified range of markets. The Investment Manager and the Board monitor the portfolio valuation on a regular basis and consideration is given to hedging the portfolio against large market movements.
The sensitivity analysis below has been determined based on the exposure to market price risks at the year end and shows what the impact would be if market prices had been 5, 10 or 20 percent higher or lower at the end of the financial year. The amounts below indicate an increase in profit or loss and total equity where market prices increase by 5, 10 or 20 percent, assuming all other variables are kept constant. A fall in market prices of 5, 10 or 20 percent would give rise to an equal fall in profit or loss and total equity.
| | 5% scenario | 10% scenario | 20% scenario |
| 31 December 2022 | 13,647 | 27,293 | 54,586 |
| 31 December 2021 | 17,481 | 34,961 | 69,922 |
Interest rate risk
The Group is exposed to interest rate risk as entities within the Group borrow funds at both fixed and floating interest rates. The Group holds most of its debts linked to fixed rates. The Group's Real denominated investments yield interest rates corresponding to the DI daily fluctuation for privately issued securities and/or "Selic-Over" government-issued bonds. The US Dollar denominated investments are partly in time deposits, with short-term maturities. The Group has floating rate financial assets consisting of bank balances principally denominated in US Dollars and Real that bear interest at rates based on the banks' floating interest rate.
The Group is primarily exposed to unfavourable movements in the interest rate impacting its floating interest rate borrowings, which are partially being offset by the impact on its floating interest rates investments. The sensitivity analysis below refers to the position at the end of the reporting period and estimates the impacts of unfavourable movement in the interest rates, considering three scenarios: a likely scenario (probable), a 25% devaluation scenario (possible) and a 50% devaluation scenario (remote). The net impact was obtained by assuming a 12-month period starting at the beginning of the period in which interest rates vary and all other variables are held constant. The Group uses the Brazilian Central Bank's "Focus" report to determine the probable scenario.
| | Risk | Amount ($US) | Probable scenario | Possible scenario (25%) | Remote scenario (50%) |
| 31 December 2022 | | | | | |
| Borrowing | Brazilian Interbank Interest Rate | (28,257) | (10) | (719) | (1,408) |
| Borrowing | Brazilian Long-Term Interest Rate | (564) | - | (6) | (12) |
| Borrowing | Brazilian National Consumer Prices | (55,964) | - | (788) | (1,566) |
| Borrowing | N/A (fixed interest rates) | (237,106) | - | - | - |
| Investments | Brazilian Interbank Interest Rate | 22,014 | 177 | 1,156 | 2,136 |
| Net impact | | | 167 | (357) | (850) |
| | | | | | |
| 31 December 2021 | | | | | |
| Borrowing | Brazilian Interbank Interest Rate | (31,743) | (615) | (1,342) | (2,053) |
| Borrowing | Brazilian Long-Term Interest Rate | (638) | - | (6) | (12) |
| Borrowing | Brazilian National Consumer Prices | (51,506) | - | (1,114) | (2,204) |
| Borrowing | N/A (fixed interest rates) | (217,712) | - | - | - |
| Investments | Brazilian Interbank Interest Rate | 18,626 | 2,207 | 4,111 | 4,089 |
| Net impact | | | 1,592 | 1,649 | (180) |
Derivative financial instruments
The Group may enter into derivatives contracts to manage risks arising from interest rate fluctuations. All such transactions are carried out within the guidelines set by the risk management committee. Generally, the Group seeks to apply hedge accounting in order to manage volatility.
Concentration risk
By the nature of its activities, the Bermuda - Investment segment's investments are exposed to concentration of credit risk and market risk based on geographic exposure and sector exposure. The Investment Manager and the Board monitor the portfolio composition on a regular basis to ensure it remains invested in a diversified range of markets to limit the concentration of exposure by geography and by sector.
At 31 December 2022, the Group has identified concentration risk for its financial assets at fair value through profit and loss within the Bermuda - Investment segment due to their geographic exposure of US$134.3 million in North America (2021: US$174.8 million) and their sector exposure of US$66.4 million in information technology (2021: US$94.6 million). These exposures are based on the immediate investment into investment vehicles and may be further affected by specific allocation of assets within those vehicles.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in fulfilling obligations associated with its financial liabilities that are settled with cash payments or other financial assets. The Group's approach in managing liquidity is to ensure that the Group always has sufficient liquidity to fulfil its obligations that expire and to meet the expected operational expenses, under normal and stressed conditions, to avoid damage to the reputation of the Group. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The Group expects to meet its other obligations from operating cash flows and proceeds of maturing financial assets.
The following table details the Group's remaining contractual maturity for its non-derivative financial liabilities, showing the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay, including both interest and principal payments.
| | Weighted average effective interest rate% | Less than 12 months | 1-5 years | 5+ years | Total |
| 31 December 2022 | | | | | |
| Variable interest rate instruments | 12.29% | (24,954) | (48,690) | (33,479) | (107,123) |
| Fixed interest rate instruments | 2.89% | (47,537) | (125,319) | (94,714) | (267,570) |
| Lease liability | 8.06% | (25,958) | (79,783) | (355,360) | (461,101) |
| Total contractual cash outflows | | (98,449) | (253,792) | (483,553) | (835,794) |
| | | | | | |
| 31 December 2021 | | | | | |
| Variable interest rate instruments | 4.26% | (22,445) | (48,787) | (35,792) | (107,024) |
| Fixed interest rate instruments | 2.73% | (34,651) | (112,903) | (98,390) | (245,944) |
| Lease liability | 10.49% | (20,323) | (70,302) | (313,102) | (403,727) |
| Total contractual cash outflows | | (77,419) | (231,992) | (447,284) | (756,695) |
Limitations of sensitivity analysis
The sensitivity information included in note 30 demonstrates the estimated impact of a change in a major input assumption while other assumptions remain unchanged. There are normally significant levels of correlation between the assumptions and other factors.
ENQUIRIES
Company Contact
Leslie Rans, CPA
1 (441) 295 1309
Media
David Haggie
Haggie Partners LLP
020 7562 4444
Brokers
Peel Hunt
Edward Allsopp/Charles Batten
020 7418 8900
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.