Ocean Wilsons Holdings Ltd. - Preliminary Results Announcement (Excerpt)

Hamilton, Bermuda – 02 April, 2014 – In a filing with the Bermuda Stock Exchange, Ocean Wilsons Holdings Limited (the “Company” or “Ocean Wilson”; Ticker: OCN.BH) announces its preliminary results for the year ended 31 December, 2013.

Highlights

•               Reported sales up 8% to US$660.1 million (2012: US$610.4 Million)

•               Operating profit up 40% to US$119.0 million (2012: US$ 84.7 million)

•               Dividend declared of 60 cents per share (2012: 42 cents per share) up 43%

•               Investment portfolio up US$11.3 million to US$249.0 million (2012: US$237.7 million)

•               Operating cash flow of US$108.4 million (2012: US$110.1 million)

•               Concluded Briclog acquisition in July 2013 for US$40.5 million

•               Completion of second shipyard at Guarujá, Sao Paulo.

José Francisco Gouvêa Vieira, Chairman of Ocean Wilson’s, said: “Ocean Wilsons delivered a good performance in 2013. Revenue for the full year grew 8% to US$660.1 million due to increased revenue from our shipyard, terminals and towage businesses. Operating profit at US$119.0 million was US$34.3 million higher reflecting the higher turnover, profit on the disposal of property plant and equipment and lower employee costs.  Profit before tax at US$100.5 million was in line with 2012. The US$34.3 million increase in operating profit was partially offset by a US$19.0 million increase in exchange losses on monetary items, US$11.9 million increase in finance costs and reduced gains from the investment portfolio.”

Ocean Wilsons Holdings Limited

Highlights

Reported sales up 8% to US$660.1 million (2012: US$610.4 million)

Operating profit up 40% to US$119.0 million (2012: US$84.7 million)

Dividend declared of 60 cents per share (2012: 42 cents per share) up 43%

Investment portfolio up US$11.3 million to US$249.0 million (2012: US$237.7 million)

Operating cash flow of US$108.4 million (2012: US$110.1 million)

Concluded Briclog acquisition in July 2013 for US$40.2 million

Completion of second shipyard at Guarujá, Sao Paulo

About Ocean Wilsons Holdings Limited

Ocean Wilsons Holdings Limited (“Ocean Wilsons” or the “Company”) is a Bermuda based investment holding company, and, through its subsidiaries, operates a maritime services company in Brazil and holds a portfolio of international investments. The Company is listed on both the Bermuda Stock Exchange and the London Stock Exchange. It has two principal subsidiaries: Wilson Sons Limited and Ocean Wilsons Investments Limited (together with the Company and their subsidiaries, the “Group”).

Wilson Sons Limited (“Wilson Sons”) is an autonomous Bermuda company listed on the Sao Paulo Stock Exchange (BOVESPA) and Luxembourg Stock Exchange. Ocean Wilsons holds a 58.25% interest in Wilson Sons which is fully consolidated in the Group accounts with a 41.75% non-controlling interest. Wilson Sons is one of the largest providers of maritime services in Brazil. Wilson Sons activities include harbour and ocean towage, container terminal operation, offshore support services, logistics, small vessel construction and ship agency. Wilson Sons has over six thousand employees.

Ocean Wilsons Investments Limited is a wholly owned Bermuda investment company. The company holds a portfolio of international investments.

Objective

Ocean Wilsons Holdings Limited is run on a long-term basis. This applies to both the investment portfolio and our investment in Wilson Sons. The long-term view taken by the Board allows Wilson Sons to grow and develop its businesses without being pressured to produce short-term results at the expense of long-term value creation. The same long-term view allows our investment managers to make investment decisions that create long-term capital growth.

The success of this strategy is reflected in the growth in the Ocean Wilsons share price and total returns to shareholders. In the 10 years to 31 December 2013 the share price has risen 585% from 152p to 1,042p and total returns to shareholders in the period (assuming dividends are reinvested in Ocean Wilsons shares) of 806%.

Chairman’s Statement

Introduction

Ocean Wilsons delivered a good performance in 2013.

Wilson Sons has progressed significantly during 2013, with our shipyard, terminal and offshore businesses completing key steps in their growth strategy. The year began with the successful completion of our second shipyard, Guarujá II, in Sao Paulo state. US$60 million was invested in the facility, doubling our shipbuilding capacity. The new 26-metre wide dry dock permits the construction of larger and more complex vessels as evidenced by our new contracts to build Oil Spill Recovery Vessels (OSRVs) and Remotely Operated Vehicle Support Vessels (ROVSVs).The new shipyard is also an important addition in maintaining and repairing our fleet of towage and offshore vessels.

Five new vessels were added to our operating fleet during the year: four new platform supply vessels (PSVs) and one new tugboat. Three of these PSVs were built at the Wilson Sons shipyard for our offshore joint venture, Wilson Sons Ultratug Offshore. With a top speed of thirteen knots, these vessels were specifically designed for operations in the pre-salt oil fields located over 300 kilometres from the Brazilian coast. Wilson Sons Ultratug Offshore now operates a fleet of eighteen PSVs and remains focused on expanding and developing its business. Our tugboat fleet remains the largest in Brazil with 63 tugboats operating in 26 ports.

Tecon Salvador successfully completed the first year of operation following the terminal expansion in 2012, moving a record 289,600 TEUs (Twenty-foot equivalent units) in the year, a 6% increase from 2012. The terminal benefited from a significant increase in import and cabotage volumes. In July Brasco completed the acquisition of Brazilian Intermodal Complex S/A (“Briclog”), an important step in expanding our capacity to offer onshore support base services to the offshore oil and gas industry. The demand for onshore support base services remains strong and the availability of suitable operating areas limited. Your Board believes the 30-year operating lease acquired will prove to be a valuable asset for the Group. In February, Wilson Sons Logistics inaugurated the Suape logistics centre in Pernambuco, an important step in developing our logistics operations in the North East of Brazil. The centre boasts a 23,000m² warehouse and a 25,000m² yard with direct access to the port of Suape and the surrounding area.

The investment portfolio continued to grow during the year adding US$16.3 million in value, a time weighted return of 7.7%. At 31 December 2013, the investment portfolio was US$249.0 million representing US$7.04 per share (2012: US$237.7 million and US$6.72 per share).

Group Results

Revenue for the full year grew 8% to US$660.1 million (2012: US$610.4 million) due to increased revenue from our shipyard, terminals and towage businesses.

Operating profit at US$119.0 million was US$34.3 million higher (2012: US$84.7 million) reflecting the higher turnover, profit on the disposal of property plant and equipment and lower employee costs.

Profit before tax at US$100.5 million was in line with 2012 (US$98.6 million). The US$34.3 million increase in operating profit was partially offset by a US$19.0 million increase in exchange losses on monetary items, US$11.9 million increase in finance costs and reduced gains from the investment portfolio.

Higher deferred tax charges raised the income tax expense for the year to US$42.3 million from US$33.7 million in 2012.

Profit per share based on ordinary activities after taxation and non-controlling interests was 107.1 cents (2012: 116.7 cents).

Investment portfolio performance

Your Board reviews the performance of the investment portfolio over the longer-term and the longer-term performance remains solid. In the ten year period to 31 December 2013, the portfolio returned 106.3% against the performance benchmark of 52.7% and a MSCI cumulative world index of 99.5%.

At 31 December 2013 the trading investment portfolio and cash under management was US$249.0 million (2012: US$237.7 million). The investment portfolio added US$16.3 million in value during the year (after deducting expenses) representing a time weighted return of 7.7%. During the year, capital redemptions of US$5.0 million were paid to the parent company. Dividend income received by the portfolio increased 30% to US$5.2 million (2012: US$4.0 million).

The best performing portfolio segments in 2013 were global equities, which delivered an 11.4% return, and private assets, 6.7% return. Although global equities was our best performing segment, returns were adversely impacted by our over weighted exposure to emerging markets and natural resources which both performed poorly in the year. Emerging markets accounted for 37% and natural resources 10% of the portfolio net asset value at yearend.

Private assets are at a relatively immature stage of value realisation with approximately 80% allocated to post 2008 crisis investments. We are seeing some distributions from earlier investments with US$8.0 million in distributions received in the year and cumulative distributions received of US$20.2 million. Net cash flow to this segment for the year (US$3.6 million outflow) remained negative with US$11.6 million in capital drawdowns. At yearend outstanding capital commitments were US$44.5 million. As these investments mature, we are confident that over the full cycle they will generate valuable returns for the portfolio. To date African Development Partners, Greenspring Global Partners, China Harvest II and Capital International Private Equity Fund have all performed particularly strongly.

At yearend, the portfolio was invested in global equities, 62%, private assets 23%, 8% in market neutral funds and 7% in bonds and cash. The increased weighting of the portfolio in global equities (62% v 52% in 2012) is due to the outperformance of this asset class relative to the remainder of the portfolio in the year and additional investments made principally in JO Hambro Japan Fund, Hirzel Capital Fund, Blackrock European Hedge Fund and Odey Absolute Return Fund.

The net asset value per share at the end of December 2013 of the investment portfolio was US$7.04, a 4.8% increase over 2012 (US$6.72).

Investment managers

The Group’s investment portfolio is held by Ocean Wilson Investments Limited (“OWIL”) a wholly owned subsidiary registered in Bermuda. OWIL has appointed Hanseatic Asset Management LBG a Guernsey registered and regulated investment group as its investment manager. During 2013, Alec Letchfield joined the Hanseatic Asset Management Group and part of his remit is responsibility for managing the Ocean Wilsons’ portfolio.

Investment management fee

The investment managers receive an investment management fee based on the valuation of the funds under management and an annual performance fee of 10% of the annual performance which exceeds the benchmark, provided that the high water mark has been exceeded. The investment management fee is an annual rate of 1% payable monthly in arrears. The performance fee is measured against an absolute benchmark derived from the one year USD LIBOR, prevailing at the commencement of each calendar year, plus 2%. In 2013 the investment management fee was US$2.4 million and no performance fee was payable.

Net asset value

At the close of business on the 31 December 2013, the Wilson Sons’ share price was R$30.92, resulting in a market value for the Ocean Wilsons holding of 41,444,000 shares (58.25% of Wilson Sons) of approximately US$542.5 million which is the equivalent of US$15.34 (£9.27) per Ocean Wilsons Holdings Limited share.

Adding together the market value per share of Wilsons Sons, US$15.34 and the investment portfolio US$7.07 results in a net asset value per Ocean Wilsons Holdings Limited share of approximately US$22.41 (£13.53). The Ocean Wilsons Holdings Limited share price of £10.43 at 31 December 2013 represented an implied discount of 23%.

I am pleased to note the narrowing of the implied discount from 38% at last yearend to the current 23%. The implied discount has fluctuated significantly since the IPO in May 2007 but we do not seek to manage the discount, as we believe long-term shareholder value will best benefit from the continued strong performance of our underlying businesses.

Dividend

The Board is declaring a full year dividend of 60 cents per share (2012: 42 cents per share) to be paid on 6 June 2014, to shareholders of the Company as of the close of business on 9 May 2014. This represents a 43% increase over the 2012 full year dividend.

The dividend cost of US$21.2 million for the year represents the full dividend to be received from Wilson Sons relating to 2013 of US$15.7 million plus US$5.5 million in distributions from the investment portfolio.

The increased dividend to be received from Wilson Sons reflects their new dividend policy to increase dividend payments to shareholders. This revised policy follows completion of the current investment cycle in 2013 and an expected increase in free cash flow.

The Ocean Wilsons Holdings Limited dividend policy is to pay the Company’s full dividend to be received from Wilson Sons in the period and a percentage of the average capital employed in the investment portfolio to be determined annually by the Board. Dividends are set in US Dollars and paid annually. In 2013, the Board decided going forward to no longer pay an interim dividend and combine the normal interim dividend payment of 4 cents a share into the final dividend. This change does not affect the total dividend paid in the year.

Shareholders receive dividends in Sterling by reference to the exchange rate applicable to the USD on the dividend record date, except for those shareholders who elect to receive dividends in USD.

The Board of Directors may review and amend the dividend policy from time to time in light of our future plans and other factors. The payment of dividends cannot be guaranteed and may be discontinued or varied at the discretion of the Board.

Briclog acquisition

In July we were pleased to announce that through our subsidiary Brasco Logística Offshore Limitada ("Brasco"), we concluded the acquisition of Briclog for R$89.8 million (US$40.2 million) with debt of R$32.1 million (US$14.5 million) assumed on acquisition. In the business acquired, the Group obtained a 30-year lease to operate an onshore base in Guanabara Bay, Rio de Janeiro, Brazil with excellent access to the Campos and Santos oil producing basins. The area has been renamed Brasco Cajú.

Brasco intends to phase investments in the expansion of Brasco Cajú by extending the existing berth a further 428m to 500m and reforming the site. Civil works on the expansion commenced in the second half of this year, which when completed will triple Brasco’s capacity and consolidate Brasco’s position as one of the largest offshore support base operators for the Oil and Gas industry in Brazil. Following completion of the civil works, up to six vessels will be able to dock at Brasco Cajú simultaneously.

Warehouse fire

A fire at our new shipyard warehouse in May destroyed large parts of our material inventory. Some delays were experienced to our vessel delivery schedule although components lost in the fire were substituted by items already included in our supply chain for future vessel construction. There were no injuries as a result of the fire and the Group holds insurance to cover the warehouse damage and materials inventory.

Brazilian port law

In June this year, the Brazilian congress approved a new law aimed at increasing private investment in Brazilian ports and improving efficiency.

Charitable donations

We are pleased to support a number of local causes in Brazil during the year. Group donations for charitable purposes amounted to US$156,000 (2012: US$113,000). The Group’s principal contributions in 2013 were:

Escola de Gente – raising awareness and promoting social inclusion for all parts of the community. Located in Barra da Tijuca, Rio de Janeiro.                                                                                                                                           http://www.escoladegente.org.br/

De Peito Aberto – Promotes social development through educational, cultural and sporting activities.

http://www.depeitoaberto.com.br/  

Brigada Mirim ecologica – maintaining the ecology of Ilha Grande in the state of Rio de Janeiro and raising the awareness of visitors and the local population about the environment.                                                                     http://www.brigadamirim.org.br/

Criando Laços – The Wilson Sons corporate programme ‘Criando Laços” (Creating ties) provides financial support and promotes voluntary employee involvement in social initiatives.                                                             http://www.wilsonsons.com.br/

Health, safety and education

The safety of our workers is of utmost importance to us. The Group implemented the WS+ safety programme to promote improved safety throughout the Group through training of Company personnel and the promotion of a safety oriented environment and culture. In conjunction with DuPont, the programme was developed during 2010, before a pilot project was implemented at our shipyard in 2011, which was then replicated to other businesses across the Group. The objective is to have the project implemented across the entire Group by the end of 2014. This programme has received a positive response from our workforce and produced excellent results. Between January 2010 and August 2013, the Group registered a 64% decrease in the frequency of accidents requiring a leave of absence.

We continue to invest in the training and development of our staff. To meet the demand for labour at our new and existing shipyards, we set up an in-house training centre in collaboration with SENAI (Serviço Nacional de Aprendizagem Industrial) at our shipyard to train boilermakers, welders and painters. Since the end of 2012 the Group has trained almost 400 professionals. Graduating workers leave with a recognised trade qualification from SENAI permitting holders to work at shipyards throughout Brazil. Amongst our other training initiatives is a dedicated ship crew training facility in Guarujá that uses a state of the art simulator to further train ship captains and crew. In 2013 110 ship captains and 30 ship engineers completed courses at our facility.

Corporate governance

The Board has put in place corporate governance arrangements which it believes are appropriate for the operation of your Company. The Board has considered the principles and recommendations of the 2010 and 2012 UK Corporate Governance Code (“the Codes”) issued by the Financial Reporting Council and decided to apply those aspects which are appropriate to the business. This reflects the fact that Ocean Wilsons Holdings Limited is an investment holding company incorporated by an act of parliament in Bermuda with significant operations in Brazil. The Company complies with the Code where it is beneficial for both its shareholders and its business to do so, and has done so throughout the year and up to the date of this report, but it does not fully comply with the Code. The areas where the Company does not comply with the Code, and an explanation of why we do not comply, are contained in the section on corporate governance in the Annual Report. The position is regularly reviewed and monitored by the Board.

Outlook

The Group enters 2014 in a strong position with an impressive and diversified range of businesses. Demand from the offshore oil and gas sector remains strong. Our shipyard business has a strong order book from both in-house projects and third party orders. During the year, we expect to deliver a further five new tugboats to our towage division as part of our fleet renewal programme. A further six vessels are forecast to be built in 2015 and 2016; all have financing from the Fundo da Marinha Mercante. Our offshore joint venture is programmed to receive one new PSV during the year and we expect to expand the fleet further in future years. Wilson Sons Ultratug is looking to diversify its fleet away from PSVs and operate Anchor Handling Tug Supply Vessels (AHTSs). We started civil works to extend the quay and reform the retro area at Brasco Cajú in 2013: this work will continue throughout 2014 and is forecast to be completed in the second quarter of 2015.

Global equity markets performed well in 2013. We remain confident that while the world economy will continue to recover from the financial crisis it will take time and growth will be uneven. Following a poor 2013, emerging equity markets performance may continue to suffer in the short term with lower economic growth and uncertainty about the effects of continued US tapering. However, emerging markets are better placed to withstand possible capital outflows than they were in previous crises and we remain positive on their long-term prospects.

Your board believes that the long-term outlook for the Group is strong.

Management and staff

On behalf of your Board and shareholders, I would like to thank our management and staff for their efforts and hard work during the year.

J F Gouvêa Vieira

Chairman

28 March 2014

Enquiries

For more information on the Company, including the full text of this release, visit http://www.oceanwilsons.bm/ , or,

Company Contact

Keith Middleton                                                           1 441 295 1309

Media

David Haggie                                                              020 7562 4444

Haggie Partners LLP

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