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Ocean Group Plc Business Information, Profile, and History

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Ocean House, The Ring
Bracknell, Berkshire RG12 1AN
United Kingdom

History of Ocean Group Plc

Ocean Group's main business is international freight management. Its largest subsidiary, MSAS Cargo International, is one of the world's leading freight forwarders and is among the top five companies in air freight forwarding, with over 220 offices in 30 countries.

Ocean's other businesses also center on transport. Its distribution services sector includes McGregor Cory, which undertakes contract distribution and warehousing in half a dozen European countries, and Panocean Storage & Transport, which specializes in moving and storing bulk liquids in Europe and the United States. The marine services sector includes O.I.L. Ltd, which provides support services for the offshore oil industry worldwide and is the second largest in the world, while Cory Towage provides towage services in certain parts of the world.

The company has also built up a stake in the environmental services industry. In the United Kingdom it disposes of a fifth of London's refuse, among other contracts, and in the United States it operates a chain of 20 environmental testing laboratories.

Ocean Group underwent restructuring in 1989. For most of its long history, Ocean's only business was shipowning and management. From the 1860s to the 1970s it operated the Blue Funnel Line, which was one of the leading cargo fleets traveling between Europe and the Far East throughout that period. Then, with the dawn of a new method of shipping known as containerization, it exchanged its own fleet for a substantial share in the new large-container ship line, Overseas Containers Ltd. (OCL), and began to diversify into other businesses related to shipping. Finally, in the 1980s, the company decided to withdraw from shipowning altogether in order to expand more rapidly in its new fields of business.

The history of Ocean Group begins in 1865, when two brothers, Alfred and Philip Holt of Liverpool, set up the Ocean Steam Ship Company. Its purpose was to provide a regular steamship cargo service from England to China, at first via the Cape of Good Hope. At that time the steamship was not considered an economical long distance cargo carrier, but the Holt brothers planned to use a new type of steamer, which they were convinced could compete effectively with sail on this route.

This was an ambitious project requiring a large investment. It involved building three ships, each of 2,280 tons, iron-hulled, and powered by a new type of compound steam engine designed by Alfred Holt, who was an engineer. He and his brother were the sons of a wealthy Liverpool cotton broker, and they had already proven the potential of this type of ship in West Indian trade. By selling the five ships they had owned in that trade they were able to put up almost half the capital needed for the new enterprise. The rest of the money came from other members of the family and their business friends in Liverpool. The company was founded before the days of limited liability, so all the shareholders were taking a considerable risk. The two Holt brothers, then aged 37 and 36, took on the management of the ships.

Their gamble paid off. The ships performed well and the cargoes followed: in the early days the chief goods transported were cotton textiles, which went from England to China, and tea, which went from China back to England. The Holts' ships became well known for their classical names (Agamemnon, Ajax, and Achilles were the first three) and their trademark blue funnels. Although the company was officially called Ocean it was much more often referred to as 'Holts' or the 'Blue Funnel Line.'

The commercial success of the line was due partly to the Holts' high standing in the Liverpool business world and partly to their shrewd choice of agents. In some cases their agents were also shareholders in the company and therefore had a double incentive to bring business to the line. A prime example was the firm of John Swire & Sons. The Swire brothers who built up this eastern trading business were also from Liverpool and were contemporaries and friends of the Holt brothers. They invested in each other's businesses, and when the Swires set up shop in Shanghai (as Butterfield & Swire) it was partly to act as agents for the Holts. This partnership was so successful that Swires later became agents for Holts in London and other Far Eastern ports.

Another fruitful agency appointment, and one which owed nothing to the Liverpool connection, was that of Mansfields in Singapore. The enterprise of this firm in developing trade with neighboring territories made Singapore a rich source of business for the line.

Only three years after the Holts started their China service, Far Eastern trade was transformed by the opening of the Suez Canal. By dramatically shortening the route to China, this greatly stimulated business. On the downside, however, it also attracted new competitors. In the next 20 years the Blue Funnel Line grew to 30 ships, all financed out of profits. The main route from Liverpool to Shanghai was extended to Nagasaki as trade with Japan grew, and the volume of traffic all along the route was increased by feeder services. The Swires operated services along the Yangtze River and around the coast of China, while the Holts and Mansfields started feeder services centering on Singapore. Another profitable sideline was the carrying of passengers, particularly Chinese emigrants and Moslem pilgrims en route to and from Mecca in Saudi Arabia.

Despite all this expansion, Ocean's profits began to decline in the 1880s. Competition from other steamship owners was driving freight rates down and the Blue Funnel ships were being overtaken in carrying capacity and speed by more modern ships. It became necessary to replace virtually the whole fleet if the company was to survive.

A decisive move was made in 1892, when four new ships were ordered and ten old ones transferred to feeder services. In the course of the 1890s, 23 new ships were added to the fleet and its total tonnage almost tripled. Ocean had to dig deep into its reserves and borrow from its bankers to make this investment, but it laid the foundations for another surge of growth in the next two decades.

Takeovers and joint enterprises played an important role in this second phase of growth. In 1902 Ocean became a limited company and bought one of its main competitors on the Liverpool-Far East route, the China Mutual Steam Navigation Company Ltd. This added another 13 modern ships to the Blue Funnel fleet. A few years earlier, Ocean had become the majority shareholder in an Amsterdam-based company, Nederlandsche Stoomvart Maatschappij Oceaan (NSMO), which came to control the bulk of the tobacco trade from the Dutch East Indies to Europe. Other purchases and joint ventures enabled Ocean to extend its routes to Australia and, after the opening of the Panama Canal, to New York.

However, it was internally generated growth that made these investments possible. World trade was growing fast, and the Holts and their agents were very active in developing new types of business. Tin and rubber from the Malay states, tobacco from the East Indies, and refrigerated fruit and meat from Australia all became important inward cargoes, while machinery and manufactured goods of all kinds filled the outward-bound ships.

By 1913 the Blue Funnel fleet numbered 77 ships and its total tonnage had nearly tripled again from its 1901 level. The years immediately before World War I brought record profits to Ocean, and the war pushed them still higher. Some of the company's ships were commandeered by the government at good rates, and freight rates also rose. The Far East trade was not affected much by the war, and Ocean was fortunate to lose relatively few of its ships before the fighting ended in 1918.

In retrospect, the end of the war and the short postwar boom proved to be the high watermark of the company's expansion. From then on, Ocean, along with other British shipowners, had to struggle to maintain business. In most of the interwar years world trade was below its 1913 level and later suffered a severe decline during the first four years of the Great Depression, from 1929 to 1933. At the same time, Britain's share of the traffic was being eroded as other countries built up their merchant fleets. Existing shipping lines were able to protect themselves to some extent by the conference system, a form of cartel, but were under constant pressure from nonconference companies. In these circumstances Ocean did well to keep the bulk of its business and to continue paying dividends throughout the period.

The depression brought about the collapse of one British shipping combine, the Royal Mail Group, and Ocean was in a strong enough position to be able to acquire parts of that business at bargain prices. It bought the Glen Line in 1935, which had ten ships serving the Far East from London, as opposed to Liverpool. The year after, it acquired a large holding in the Elder Dempster Line, which was strong in the West African trade.

Then came the World War II, which, unlike the First World War, had a devastating effect on Ocean's business. The Japanese occupation of China and much of Southeast Asia completely destroyed the Europe-Far East trade from 1941 to 1945. Half the Blue Funnel fleet was sunk by enemy action, and its Liverpool headquarters was destroyed by bombs.

When the war ended, the company--still headed by a member of the Holt family--courageously set about rebuilding the business. Its urgent need for more ships was met by buying some secondhand and by having others built abroad. Rebuilding the company's trading connections, however, was not so easy. Trade with China never recovered after the civil war and Communist takeover, but trade with Australia was buoyant and that with other territories was gradually restored.

By the late 1950s the Blue Funnel fleet again numbered almost 70 ships, still pursuing their traditional liner trade. Ocean was not at this stage interested in oil tankers or bulk carriers, and the day of the container had not yet arrived. As a company, Ocean was perhaps a shade too conservative at this time. It was still a family business, owned and managed mainly by descendants of the founders. All the directors sat in one room at the Liverpool head office, just as their predecessors had for almost a hundred years. Their standards in ship safety and efficiency were high and the company was universally respected. In 1965, Investors Chronicle, a financial paper, characterized Ocean as 'one of the largest British shipping companies, with a sound, steady profits record.'

By then, however, it was clear that things had to change. The success of containerization in the United States was forcing the company to contemplate radical changes, and to facilitate these it was decided that its shares should be traded on the stock exchange. (It was already a public company, but an unquoted one.) This change went into effect in March of 1965.

Later the same year, two other far-reaching decisions were made. The first was to start investing in containerization. This meant merging Ocean's main business into a larger grouping to finance the massive investment required. The other decision, linked to the first, was to start diversifying into other branches of the shipping business to provide new opportunities for Ocean's own organization.

The company was spurred into action by reports that the Australian government was keen to containerize and was negotiating with SeaLand, an American company. Neither Ocean nor its competitors in the Europe-Australia trade could risk losing this business, so four of the British companies, including Peninsular & Oriental Steam Navigation Company (P&O) and Ocean, jointly set up Overseas Containers Ltd. (OCL), to provide a container service on this route.

OCL began operations in 1969. Within a few years its Australian service was showing a profit, and it had joined a still larger international consortium to containerize the Europe-Far East route. At this point in the early 1970s, Ocean's stake in OCL grew to 49 percent and its Blue Funnel fleet became largely superfluous.

In anticipation of this, Ocean had been investing in other shipping businesses since 1965. That year it took over a company called Liner Holdings. This included the Elder Dempster Line, in which Ocean had held shares since 1936, and other subsidiaries. Over the next few years Ocean also acquired interests in tankers, bulk carriers, and cargo handling services, laying the foundations of much of the company's present business. For example, MSAS Cargo International began in 1968 as McGregor Swire Air Services, a joint venture between Ocean and its longtime partner, Swire. Panocean Storage & Transport was set up a year later in cooperation with P&O.

Another important move--because it put Ocean into land transport for the first time--was the purchase of William Cory & Son Ltd. in 1972. Cory was a long-established company that had first made its name carrying coal by sea from northeast England to London. From this it moved into the transport of fuel oil by sea and land and later again into food distribution. Cory also had offshoots in towage and waste disposal. The acquisition of this business increased Ocean's assets by over 40 percent.

It cannot be said that all Ocean's diversifications in the 1960s and 1970s were successful. There were a few expensive failures, and there were bad times when the company was itself threatened with takeover. Nevertheless, enough of the new ventures succeeded to provide a strong basis for future growth. The company's remaining shipowning interests, apart from OCL and Elder Dempster, were sold off in the late 1970s and early 1980s, and in 1986 a decision was made to withdraw from OCL. Ocean's then 33 percent holding was sold to P&O, and in a partial exchange, Ocean acquired P&O's holding in Panocean. Elder Dempster was sold in 1989.

After the sale of the OCL holding, Ocean was in possession of a large amount of cash in 1986, and this attracted an unwelcome takeover bid from New Zealand entrepreneur Ron Brierley. The company successfully resisted this and has since invested all its resources in building up its present four sectors. In particular, it has invested in overseas companies, with the result that its business is now very widely spread around the world.

The company's name changed twice in the latter half of the twentieth century to reflect its changing activities. In 1973, after the Cory takeover, it became Ocean Transport & Trading Ltd., and in 1990 it adopted the Ocean Group name. The last director with a family connection retired in 1976, and the company's head office moved from Liverpool to London in 1980, and then to Berkshire in 1992. Nicholas Barber, who joined Ocean in 1964, took over as chief executive in 1987.

Principal Subsidiaries: MSAS Cargo International Ltd.; Ocean Cory Trading Ltd. (trading as McGregor Cory); Panocean Storage & Transport Ltd.; Hull Blyth & Company Ltd.; O.I.L. Ltd.; Cory Towage Ltd.; Eastern Canada Towing Ltd. (Canada); Cory Environmental Ltd; National Environmental Testing Inc. (USA); NET (UK) Ltd. (trading as SAC Scientific); Ocean Ajax Insurance Brokers Ltd.; Jamieson, Grieve & Company Ltd.; Ocean Fleets; Transit (UK) Ltd.

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