Final Results

Ocean Wilsons Holdings Ld 26 April 2004 Ocean Wilsons Holdings Limited Preliminary Announcement Chairman's Statement Chairman's Statement Introduction I am pleased to report another year of excellent progress by your Company following the strong performance reported at the half year. We have improved our performance against all the key measures, including profit before tax and earnings per share, whilst the balance sheet has also strengthened reflecting strong cash generation combined with the strengthening of the $Real over the year. This improvement was due to both the strong market positions of the Group's businesses in Brazil as the macroeconomic background improved, as well as actions taken by the Group to enhance its performance, thus evidencing the excellent progress made by our core businesses during the year. Additionally, we benefited from the appreciation of the Brazilian Real against the US Dollar which substantially reversed the 2002 currency losses. Reporting currency As we announced in February 2004, the Board approved a change in the Group's reporting currency for the year ended 31 December 2003 from Sterling to US Dollars. As the majority of the Group's transactions are in US Dollars and currencies linked to it, the Board considers that US Dollar reporting reflects the Group's financial position and performance more appropriately than Sterling reporting. Prior year comparatives have been represented accordingly. However, there remains the potential for large swings in foreign exchange rates to impact the Group from time to time, given its exposure to the Brazilian Real ('$Real'). Under United Kingdom Generally Accepted Accounting Principles the Group will continue to be required to recognise the impact of such fluctuations in its annual results. Results Following the strong first half performance reported in September, operating profit for the year as a whole remained broadly unchanged at US$27.7m (2002: US$27.2m) on turnover that increased by 20.0% to US$144.5m (2002: US$120.5m). In local currency terms, turnover increased 26.2% largely reflecting increased volumes and improved market conditions. At the pre-tax level, the Group benefited from a 22% appreciation of the $Real against the US Dollar, which resulted in a net exchange gain of US$17.8m (2002: US$35.2m loss) during the year, a significant swing compared to last year of US$53.0m. Thus profit before tax was US$51.8m (2002: US$0.2m loss). Earnings per share benefited similarly increasing to 83.89 cents (2002: 3.53 cents). Brazil 2003 was a critical year for Brazil following the election of a new government in October 2002. Despite a change in the political complexion of the winning party, markets have reacted favourably to continuity in key areas of economic policy and continued success in running a budget surplus and meeting the conditions of Brazil's IMF loan. The $Real has responded positively to these developments as well as benefiting from the weakness of the US Dollar. Nominal interest rates fell during the year but remain high at 16.0%, and with inflation running at around 6%, real interest rates are high, although this is helping to keep inflation under control. The export sector, which has been an important driver of the Group's activities, is undergoing a significant boom driven in part by increased world demand for commodities; Brazil is running a large trade surplus as a result. Exchange rates The $Real appreciated 22% against the US Dollar from 3.54 at 1 January 2003 to 2.89 by the year end. The average rate of exchange in the year used to translate the Group's Brazilian results into US Dollars depreciated by 5% against the US Dollar from 2.92 to 3.07. The Group's Brazilian subsidiaries continue to have significant US Dollar loans and $Real denominated loans that are monetarily corrected by the movement in the US Dollar/ $Real exchange rate. The appreciation of the $Real against the US Dollar has generated a US$17.8 million gain (2002: US$35.2 million loss) on the Group's US Dollar and US dollar linked loans. Under UK GAAP the Group is required to recognise this result in the profit and loss account in the period in which it occurs. The cash flow effect of these exchange movements will only be realised over the life of the loans when repayments are made. Whilst the value of the loans remain unchanged in US Dollars, repayments need to be made in local currency. The Board, in internally evaluating the Group's performance, spreads the exchange gain / loss on borrowings over the remaining life of the loans. On the basis of spreading the exchange gains / losses, the portion of current exchange gains and past exchange losses attributable to the period would be a loss of US$3.0 million as compared to the reported exchange gain of US$17.8 million. Balance sheet and cash flow One of the financial features of the Group is that it is highly cash generative, and 2003 was no exception with operating cash flow once again exceeding operating profits. This strong cash flow enables the Group to increase dividends, having continued to invest in the core business by means of capital expenditure in core assets, and whilst repaying its loans on schedule. Net debt during the year thus declined by US$9.2million to US$40.2million (2002: US$49.4million), representing net gearing, being the ratio of net debt to net assets, of 37% (2002: 76%). The Group continues to be conservatively financed, with strong cash balances, in part held outside Brazil, and long maturity profiles for its debt repayments. In addition the Group continues to hold an investment portfolio outside of Brazil valued at US$42.9million (2002: US$26.1 million). At the year end the Group's net assets amounted to US$114.6million (2002: US$67.7million). This increase is attributable to the combination of strong underlying profits and to the appreciation of the $Real as the greater part of the Group's net assets are $Real denominated and financed in US Dollars. This translates into net assets per share of 324.0c per share (31 December 2002: 191.5c). Net assets located in Brazil account for 193.2c (31 December 2002: 76.7c) and net assets outside Brazil for 130.8c (31 December 2002: 114.8c). The investment portfolio (including cash under management) represented 149.3c per share (2002: 97.5c). Dividends The Board is recommending payment of a final dividend of 16 cents per share (2002: 7.52 cents per share) to be paid on 18 June 2004 to shareholders on the register at close of business on 28 May 2004, making a total dividend for the year of 17.6 cents per share (2002: 9.03 cents per share). The increase reflects the excellent performance of the Group during the year and the Board's confidence in the future prospects of your Company. Shareholders will continue to receive dividends in sterling determined by reference to the exchange rate applicable to the US Dollar on the dividend record date, except for those shareholders that elect to receive dividends in US dollars. The Chairman has already written to shareholders explaining the procedure for electing to receive a dividend in US Dollars. The Board's dividend practice takes into consideration all aspects of the Group's financial performance and prospects, but especially profitability and free cash flow. However, shareholders need to appreciate that in future the level of the dividend payment in sterling terms will depend on the exchange rate between sterling and the US Dollar. Corporate social responsibility As part of our corporate strategy, the Board is committed to being a socially responsible corporate citizen and is pleased to include a review of its activities in this area in this year's Annual Report, which will continue to be a feature in years to come. Taxes In 2003 the Group paid more than US$ 39.4 million in Brazilian income, payroll and sales taxes. Local employment We directly employed more than 2,900 people in Brazil at the end of 2003 and created numerous additional employment opportunities through our suppliers and sub-contractors. We continue to have an active and constructive relationship with the local and national trade unions in Brazil that represent our employees and negotiate wage agreements on their behalf. Best employment practice As part of our commitment to best employment practice, all employees and their dependants (6,088 people) receive private medical cover at a cost of US$2.2 million to the Group. A further US$1.2 million is spent on food assistance and US$268,000 on education and professional development for employees. The Group will continue to invest heavily in these areas. Charitable donations In line with our policy to support local charities, the Group gave financial support totalling US$ 117,000 for charitable purposes in Brazil during the year. The emphasis of our charitable efforts is directed towards projects helping homeless children and adolescents. Principal among these charities were Pastoral do Menor and Casa Jimmy in Rio de Janeiro and Casa da Crianca in Salvador. As well as lending financial support, the Group encourages employees to participate in social programmes. The Group intends to continue to provide support in these areas. Strategy The Groups' strategy is to build upon its position as the leading supplier of maritime services in Brazil by continuing to focus on its core business activities of Towage services and Shipyards, Ship Agency services, Port Operations and Logistics. The Group operates through three divisions based on these areas of activity. The Group's activities are focused in the export / imports sectors and as a result are most affected by the level of Brazilian trade. The Board believes that the Group is well positioned to take advantage of the rapid growth of the Brazilian export sector. Exports are currently booming largely due to increased demand for commodities and a pick up in demand for iron ore and steel products from China. The Board intends to continue implementing its successful growth strategy of developing the Group by organic investment in its operations, particularly by replacing and building up its tug fleet, through capital expenditure on new equipment and facilities. Management and staff On behalf of the Board and shareholders, I would like to thank our management and staff for their efforts and support during the year and for delivering a successful performance. We continue to invest in their futures through training and incentive programmes. Future prospects The Group entered 2004 in its strongest position for many years, and is expecting to benefit from the management actions it took last year as well as the continued improvements in the performance of the Brazilian export sector. In 2004, the Board is reviewing a number of further opportunities for organic investment including further investment in Platform Supply Vessels to serve the offshore oil and gas industry and expansion of the Tecon Rio Grande container terminal. Results for the first quarter of 2004 have made good underlying progress, but are below the corresponding period in 2003 due to changes in federal tax legislation. The $Real continues to trade around 2.90 to the US Dollar, similar to its year end level. In conclusion, we are confident of another strong year for the Group. Operating Review Introduction The Group is the leading supplier of maritime services in Brazil and as such is the largest provider of Towage services, as well as being a significant Ship Agent, and operator of Ports and Logistics businesses. Towage and shipyard The Towage business had another very busy and successful year. Revenue in US Dollar terms rose 11%, although in local currency terms margins fell due to the appreciation of the $Real against the US Dollar and because $Real denominated operating costs rose some 10%, largely due to local inflationary pressures. Although market share was relatively unchanged, we increased the number of vessels attended, benefiting from a good Brazilian soya bean harvest and increases in exports of iron ore and steel products to China. In addition, we saw increased towage support for offshore platforms mainly in Rio de Janeiro and Sepetiba on the back of the booming Brazilian offshore oil and gas market. We also completed the construction of two PSV's (Platform Supply Vessels) begun last year at our own Guaruja shipyard, and as expected these two ships are now being successfully operated on charter to Petrobras (the Brazilian oil and gas major). The Group's strategy is to link towage tariffs to the cost of finance where possible, providing a natural hedge for the US Dollar linked borrowings used to finance the construction of our tug fleet. Management successfully implemented this strategy in 2002 and 2003, so that some 75% of our towage income is now linked to the US Dollar. From January 2004 the Brazilian federal government extended the ISS service tax to the majority of services rendered in Brazil including towage at the rate of 2% to 5% and increased the Cofins sales tax from 3% to 7.6 %. Management expect that this tax increase will have an adverse impact on our costs. Our towage joint venture, Consorcio Baia de Sao Marcos, continued to perform well, increasing its volumes due to an increase in iron ore exports, with an 8% increase in ships attended. The two PSV's (Platform Supply Vessels), PSV Albatroz and PSV Gaivota constructed at our shipyard in Guaruja were completed during the year. Both vessels are under long term, six year contracts to Petrobras operating out of Macae in the state of Rio de Janeiro. Performance is in line with expectations. The Group's planned tug fleet renewal programme recommenced in earnest in 2003 and will continue in 2004. The first tug Plutao was completed at our shipyard in August. Two further tugs are forecast for delivery in July 2004 and December 2004, respectively, which will be followed by a second phase of a further two tugs. Dragaport Adverse market conditions continued to impact results at our associate dredging company, Dragaport. In the first half of 2003 no dredging tenders were issued by either the federal or state governments or any private terminals. Performance improved in the second half of the year, but without a significant improvement in market conditions, prospects remain poor. Ship agency The ship agency division had a good year due to the growing Brazilian export market, a full year of CCL's new trade to the Caribbean and Central America and an increase in the number of tramp vessels attended. Revenue increased 19% in US Dollar terms but margins declined due to the appreciation of the $Real against the US Dollar. Revenue is mainly received in US Dollars, whereas costs are largely $Real denominated. The Group attended 4,930 vessels in 2003, an increase of 267 over 2002. Our market share for tramp vessels continued to increase from 10% to 13% following our active marketing in this area. Port operations and logistics Tecon Rio Grande 2003 was another record year for Tecon Rio Grande as it moved its one millionth container since privatisation in 1997. Tecon Rio Grande continued to perform ahead of expectations with volumes handled at the terminal increasing 22% to 542,630 TEUs (twenty-foot equivalent units). Due to the strong growth in recent years, the terminal is now operating above optimal capacity, which has adversely affected margins. To meet the excess demand, a new Gottwald crane was purchased during the year and the Group is evaluating extending the existing berth and investing in additional equipment to expand capacity in anticipation of our obligation under the concession agreement. Tecon Salvador Tecon Salvador continued to make good progress in 2003 with a substantial improvement in the second half of the year. Volumes increased 35%, as a result of which both turnover and profit improved over 2002. Market share remained unchanged at 86%. Logistics The new Logistics business continued to make encouraging progress obtaining a number of new clients. Revenue growth was strong although increased headcount and new client start up costs adversely affected margins. We continue to develop our approach to this market. To improve commercial and operational synergy, we reorganised Eadi Santo Andre, CD Brasil and our road transport operation into one commercial and administrative structure. Eadi Santo Andre was a considerable disappointment during 2003 and we are taking action to improve the commercial performance and bring the cost base into line with current market conditions. Allink As expected operating profits at our NVOCC Allink (non-vessel operating cargo consolidator) were lower than last year. Strong market pressures caused significant price reductions causing revenues and profits to suffer accordingly. Brasco Revenues at our associate company, Brasco, were also below expectations due to the reduction in clients' drilling operations in the second half of 2003. The new onshore base in Niteroi, Rio de Janeiro, supports the offshore oil and gas markets including operations for Campos and Santos. However, we remain optimistic about the future, as fields move from the exploration to the development phase and clients seek longer-term supply contracts. WR Operadores Portuarios Limitada (WR) Our joint venture WR, operating in the port of Sao Francisco do Sul, Santa Catarina had an excellent year. Turnover and margins benefited from the successful renegotiations of tariffs undertaken at the beginning of 2003. Volumes handled by the joint venture in 2003 at 252,361 TEU's were in line with 2002 at 258,826 TEU's. Insurance The traditional accounting for Lloyds insurance market is three years in arrears to permit a proper evaluation of the development of the underwriting of that year. Our underwriting subsidiary at Lloyd's has produced a break-even result in 2001 (its first year of trading). This is a very creditable result when the events of that year are considered. In this year's interim report we anticipate being able to provide detailed results on 2001. At this time we can say the 2002 year of account looks set to produce a commendable profit and the outlook for 2003 is also encouraging at this early stage. It is too early to make meaningful comment on the 2004 year of account except to say that underwriting rates held up better than expected and we have made a modest reduction in our level of underwriting. Investment portfolio Hanseatic Asset Management LBG which manages the Group's investment portfolio report as follows: General The fortunes of equity markets reversed in 2003. The unprecedented level of policy reflation in the United States finally achieved traction and this, together with rapid growth in China, were the themes that dominated markets. The Federal Reserve Board in America continued its low interest rate policy and additional stimulus to the economy was provided by tax cuts, higher government spending and a lower dollar. After a nervous start to the year ahead of military action in Iraq, bourses rallied around the world and the MSCI World Equity Index posted a gain of 19.3% expressed in sterling. This was the first positive annual return since 1999. Europe, especially some of the severely depressed areas such as Germany, produced the best returns amongst developed markets. However, it was also a very good year for emerging markets, which again outperformed developed ones. The Far Eastern markets were strong after a difficult start to the year caused by the SARS epidemic. The prospect of a recovery in world economic activity, together with the breathtaking pace of industrialisation in China in particular, is propelling the Asian region, including Japan. The dollar continued to fall against most currencies over the year, the Euro appreciating by 19.6%. Oil prices remained firm in dollar terms but the largest moves in commodity prices occurred in the industrial metals sector. Rising demand levels from China helped drive prices forward. For instance, copper appreciated by 47.5% and nickel by 131.4% during the year. Performance The portfolio performed well in this environment. Despite exposure to hedge funds and cash accounting for almost half of its value, it matched the gain in the MSCI index and rose by 19.8%. Both asset allocation and investment selection contributed positively. The portfolio benefited from its overweight exposure to the Far East and emerging markets. Stock selection added value both within funds, notably the Close Finsbury Japan Fund, but also direct holdings such as Scientific Games in the United States and Amersham and Galen in the United Kingdom. Portfolio activity During the year there were purchases totalling US$11.0 million, sales proceeds of US$ 5.2 million and additional resources of US$6.5 million were placed under management. New purchases included two additional funds in the Far East, SR Asia and Aberdeen Asia, an additional fund in Japan managed by Orbis and the Merrill Lynch World Mining Trust. Two recently formed hedge funds were also added to the portfolio, Valu-Trac Strategic and Russian Century managed by Alfa Bank. The more significant sales included the Finsbury Smaller Quoted investment trust following a decision for it to wind up, and the Mariner Fund after disappointing performance. Profits were realised in several positions, notably Gartmore Irish and Amersham International. Outlook It seems prudent to anticipate a more 'mixed' year for equities in 2004. A revival in the global economy and the pressures to pursue accommodative policies in an electoral year in the United States form a generally supportive backdrop. However, short term interest rates are lower than economically justified. Equity markets risk being unsettled by rate rises. The strategy employed at present is to continue to favour the Far East markets specifically and emerging markets generally and to reduce volatility through holdings in hedge funds. However, it needs to be acknowledged that although the Far East and Emerging Markets continue to have strong fundamentals a more bullish consensus has emerged over this than certainly was the case a year ago implying lower levels of gains in prospect. The Japanese exposure has been increased as underweight local institutions, together with attractive valuations, should underpin the rally in Japanese shares. Financial Review Revenues Revenues benefited from a better macroeconomic environment following the continued improvement in the Brazilian economy and the start of a global economic resurgence led by the USA. In addition, the many management actions taken by Group were also a significant contributor. Specific contributors to increased revenues were the renegotiation of towage tariffs and an increase in volumes across all operating divisions. The start up of the new PSV operations was another important factor. Operating margins and profit Operating margins for the year remained strong at 19.2% although lower than the 22.6% reported for 2002. This was principally due to the appreciation of the $Real against the US Dollar combined with Brazilian inflationary pressures and increased personnel costs. As the majority of our tariffs are linked to the US Dollar, any $Real appreciation against the US Dollar reduces revenue in $Real terms. At the same time operating costs, which rose due to the inflation referred to above, are priced in $Real. Group margins were also impacted by Tecon Rio Grande's reduced productivity caused by capacity constraints. Operating profit remained broadly unchanged at US$27.7 million (2002: US$27.2 million). Share of operating profit from joint ventures and associates fell from US$ 5.0 million to US$ 3.9 million. This was due to the poor results from our associate company Dragaport. Dividends received from joint ventures were significantly higher at US$4.5 million (2002: US$2.5 million). At the pre-tax level, the Group benefited from a strengthening of the $Real against the US Dollar, which resulted in a net exchange gain relating to borrowings of US$17.8m (2002: US$35.2m loss) during the year, a significant swing of US$53.0m. Profit on disposal of interest in associate A profit of US$ 0.6 million was recorded from the disposal of our interest in NST, a paper terminal operator. Interest The Group's net interest receivable was US$0.7 million (2002: US$1.7 million). This excludes the net exchange movements on foreign currency borrowings held by the Brazilian subsidiaries, which are shown separately in the profit and loss account. The Group's Brazilian subsidiaries have significant US dollar loans and $Real denominated loans that are monetarily corrected by the movement in the US dollar / $Real exchange rate. The Group assumes this risk as there is no long-term financing denominated in $Real available to it for capital expenditure. Current interest rates on $Real commercial borrowings in Brazil are in excess of 25% per annum. Due to the prohibitive cost of hedging the $Real, the Group does not hedge its long term net exposure, although management use available instruments to manage the short term cash flow exchange risk on the current repayments. The table below shows the forecast interest payments for the next five years based on the Group's debt profile at 31 December 2003 and using year end interest and exchange rates. US$ million 2004 2005 2006 2007 2008 Interest payments 3.9 3.7 3.6 3.3 3.0 Taxation The US$ 19.1 million tax charge (2002: US$0.3 million credit) for the year represents an effective tax rate for the period of 37%. The corporate tax rate prevailing in Brazil is 34%, although there is no Group tax relief so that losses and profits in separate companies cannot be offset. Corporation and social contribution tax paid in the period was US$11.2 million (2002: US$6.9 million) a significant increase, due to the improvement in profit before tax. Cash flow Cash flow performance was again excellent. Operating net cash inflow of US$36.4 million (2002: US$37.1million) once again exceeded operating profits of US$28.3 million (2002: US$27.3 million), having reversed the adverse movement in working capital reported at the half year. Free cash flow, defined as net cash inflow from operations US$36.4 million (2002: US$37.1 million) less net capex US$ 13.3 million (2002: US$ 20.3 million), tax payments US$11.1 million (2002: US$6.9 million) and net interest payable US$0.1 million (2002: receivable US$2.6 million), was US$11.9 million (2002: US$12.5 million). Higher tax payments and interest were offset by lower capital expenditure. Capital expenditure of US$14.0 million (2002: US$21.1 million) was invested mainly in vessel construction and terminal equipment. Budgeted capital expenditure in 2004 is US$21.6 million. Debt Net debt during the year declined by US$9.2 million to US$40.2 million (2002: US$49.4 million), representing gearing of 37% (2002: 76%). The Group continues to be conservatively financed, with strong cash balances, in part held outside Brazil, and long maturity profiles for its debt repayments. The majority of the Group's debt, US$65.1 million, has been used to finance vessel construction and is repayable over periods up to 16 years with an average maturity of 13.7 years. During 2003 the Group made capital repayments on existing loans in accordance with repayment schedules of US$10.8 million (2002: US$8.8 million) and raised new loans of US$0.5 million (2002: US$15.6 million). Risk management Treasury The Group has a centralised Treasury operation in Brazil, which manages the investment of surplus funds and borrowings. Clear guidelines have been established relating to cash management authority levels and investment limits. The guidelines prohibit taking speculative financial instrument positions and regular financial management reports are supplied to senior management. The main financial risks facing the Group are those related to funding, interest rate, currency and market price. Funding risk The Group trades principally in Brazil and holds a portfolio of internationally listed investments outside Brazil. The Group borrows to fund capital projects and looks to cash flow from these projects to meet repayments. Working capital is funded through cash generated by operating revenues. There is limited long term commercial funding available in Brazil except from the Banco Nacional do Desenvolvimento Economico e Social (BNDES). All long term funding is obtained by our Brazilian subsidiaries from the BNDES or International Finance Corporation (IFC, part of the World Bank) except for specific equipment supplier financing when available at favourable terms. The Board will not consider short-term borrowing in the Brazilian commercial markets while prohibitive interest rates prevail. At year end the Group had US$100.8 million in borrowings repayable over periods of up to 16 years. The Group also held approximately US$47.7 million in $Real denominated cash deposits in Brazil and US$12.6 million in sterling and US Dollar denominated deposits outside Brazil. The company maintains these large cash balances as it continues to look for investment opportunities in Brazil and to manage short term fluctuations in cash flow. Interest rate risk During 2003 the Group did not use interest rate swaps, options or forward rate agreements to manage interest rate exposure on its debt positions. However the Group actively reviews risk profiles and considers undertaking interest rate swaps if necessary subject to Board approval. The Group has three main types of borrowings, $Real denominated, $Real denominated linked to the US Dollar and US Dollar borrowings. Currency risk The Group operates principally in Brazil with a substantial proportion of the Group's revenue, expenses and assets denominated in $Real. Consequently currency translation movements can significantly affect the Group's income and balance sheet and the Group faces significant currency exposures when translating results into US Dollars. Due to the prohibitive cost of hedging the $Real, the Group does not hedge its net exposure to the $Real as the Board considers it uneconomic. The Group's US Dollar debt has defined repayments during the life of the loans. Management reviews hedging these repayments for periods of up to one year by investing surplus funds in US Dollar linked Brazilian Government bonds or by purchasing foreign exchange options. The Group has significant long-term borrowings in US Dollars and in $Real denominated loans linked to the US Dollar. These are used to finance $Real denominated capital projects. This exposes the Group to a potential currency mismatch of costs and revenues. The Group undertakes this risk as there is no source of long term financing denominated in $Real available to the Group. The $Real denominated loans linked to the US Dollar are monetarily corrected by the movement in the US Dollar/$Real exchange rate and bear interest of between 2.0 - 4.5 % per annum. The majority of the Group's US Dollar loans bear interest between Libor + 2.75% and Libor + 4.0 % and are repayable in periods up to six years. In addition the Group has loans, which bear interest linked to the performance of Tecon RG, that vary between Libor +2.0% and Libor +6.0%. Cash and investments held outside Brazil are principally in US Dollar and Sterling denominated assets. Market price risk The Group invests in internationally listed securities or funds principally for the long-term. The Group's exposure to market price risk arises mainly from potential loss the Group may suffer through holding market positions due to price movements or currency fluctuations. Ocean Wilsons Holdings Limited Preliminary Announcement At a board meeting held on 23 April 2004 the following announcement of the unaudited results of the Company and its subsidiary companies for the year ended 31 December 2003 were approved by the Directors. Consolidated Profit and Loss Account Unaudited Audited year to 31 year to 31 December December 2003 2002 US$'000 US$'000 Turnover Turnover and share of joint ventures' turnover 160,952 133,528 Less: share of joint venture turnover (16,442) (13,005) Existing operations Acquisitions Group turnover 144,510 120,523 Operating costs (109,301) (86,436) Depreciation (7,505) (6,848) Amortisation Operating profit Existing operations Acquisitions Group operating profit 27,704 27,239 Share of operating profit in joint ventures 4,973 4,286 Share of operating (loss)/profit in associates (1,052) 728 Income from fixed asset investments 307 689 Realised surpluses on sale of investments 633 293 Profit on disposals of fixed assets 188 42 Profit on disposal of interest in associate 595 - Interest receivable and similar income 6,650 7,032 Interest payable (5,948) (5,368) Net exchange gain/(loss) on foreign currency 17,795 (35,180) borrowings Profit/(loss) on ordinary activities before taxation 51,845 (239) Taxation on profit/(loss) on ordinary activities (19,132) 336 Profit on ordinary activities after taxation 32,713 97 Minority interests (3,048) 1,151 Profit for the year 29,665 1,248 Dividends Paid and Payable (6,247) (3,194) Retained profit/(loss) for the year 23,418 (1,946) Earnings per share basic and diluted 83.89c 3.53c Ocean Wilsons Holdings Limited Preliminary Announcement Consolidated Statement of Total Recognised Gains and Losses Unaudited Audited year to 31 year to 31 December December 2002 2003 US$'000 US$'000 Profit for the financial year 29,665 1,248 Unrealised gains/(losses) on investments 6,975 (3,901) Exchange differences 12,204 (11,599) Total gains and losses recognised since last annual report 48,844 (14,252) Ocean Wilsons Holdings Limited Preliminary Announcement Consolidated Balance Sheet Unaudited as at 31 Audited as at 31 December December 2003 2002 US$'000 US$'000 Fixed Assets 113,072 85,189 Investments 45,171 28,931 Current Assets Stocks 3,166 2,000 Debtors 45,152 30,356 Investment held for resale 2,919 2,384 Cash at Bank 60,302 53,586 111,539 88,326 Creditors (amounts falling due within one year) (56,323) (37,790) Net current assets 55,216 50,536 Total assets less current liabilities 213,459 164,656 Creditors (amounts falling due after one year) (88,391) (92,726) Provisions for liabilities and charges (10,480) (4,210) Net assets 114,588 67,720 Capital and reserves Called up share capital 11,390 11,390 Profit and loss account 66,239 37,598 Capital reserves 22,665 15,535 Revaluation reserve 7,411 585 Equity shareholders' funds 107,705 65,108 Minority interests 6,883 2,612 114,588 67,720 Net assets per share 324.0c 191.5c Ocean Wilsons Holdings Limited Preliminary Announcement Consolidated Cash flow Statement for the year ended 31 December 2003 Unaudited Audited Year to Year to 31 December 31 December 2003 2002 US$'000 US$'000 Net cash inflow from operating activities 36,421 37,126 Dividends from joint ventures 4,582 2,545 Returns on investments and servicing of finance 267 3,262 Taxation (11,191) (6,944) Capital expenditure and financial investment (19,171) (19,904) Acquisitions and disposals 1,090 (69) Equity dividends paid (3,470) (3,194) Cash inflow before management of liquid resources and financing 8,528 12,822 Management of liquid resources (27) (17,332) Financing (10,326) 6,870 (Decrease)/increase in cash in year (1,825) 2,360 Ocean Wilsons Holdings Limited Preliminary Announcement Notes to the Preliminary Accounts 1. Basis of Accounting The preliminary accounts have been prepared under the historical cost convention (except for the valuation of listed investments, which are shown in the accounts at market value at the end of the year) and the accounting policies set out on pages 21 to 24 of the Annual Report and Accounts for the year ended 31st December 2002. The Group has changed its functional currency to US Dollars. Since the US Dollar and currencies closely linked to it form the main currency in which the Group's business is transacted, the Group changed its reporting currency from pounds Sterling to US Dollars, with effect from 1st January 2003. For comparative purposes, the 2002 profit and loss account previously reported in pounds sterling has been translated into US Dollars at the average exchange rate for the year and the balance sheets have been translated into US Dollars at the closing rate as at 31st December 2002. 2. Basis of Preparation The financial information set out in the announcement does not constitute the company's statutory accounts for the years ended 31st December 2003 or 2002. The financial information for the year ended 31st December 2002 is derived from the statutory accounts for that year. The auditors reported on those accounts; their report was unqualified. The statutory accounts for the year ended 31st December 2003 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement. 3. Reconciliation of Operating Profit to net cash inflow from activities Unaudited Audited year to 31 year to 31 December December 2003 2003 US$ '000 US$ '000 Operating profit 27,704 27,239 Depreciation 7,505 6,848 Amortisation 53 56 (Increase)/decrease in stocks (1,166) 5 (Increase)/decrease in debtors (8,745) 2,345 Increase in creditors 10,423 853 Increase/(decrease) in provisions 647 (220) Net cash inflow from operating activities 36,421 37,126 4. Dividends The proposed final dividend of 16.00c per share will be paid on 18th June 2004 to shareholders on the register at close of business on 28th May 2004 if approved by shareholders at the annual general meeting to be held on the 18th June 2004. 5. Other information Additional copies of this announcement can be obtained from the Company's registered office, Clarendon House, Church Street, Hamilton, Bermuda or from the Company's UK transfer agent, Capita Registrars Group Plc, The Registry 34 Beckenham Road, Beckenham, Kent BR3 4TU. This information is provided by RNS The company news service from the London Stock Exchange

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