TIDMBMS
RNS Number : 6580E
Braemar Shipping Services PLC
10 May 2017
BRAEMAR SHIPPING SERVICES PLC
("Braemar", the "Company" or the "Group")
10 May 2017
Preliminary results for the year ended 28 February 2017
Braemar Shipping Services plc (LSE: BMS), a leading
international provider of broking, consultancy, technical and other
services to the shipping, marine, energy, offshore and insurance
industries, today announces results for the year ended 28 February
2017.
FINANCIAL KEY POINTS
-- After a challenging year, the overall results are ahead of the revised market expectations
-- Revenue of GBP139.8 million (2015/16: GBP159.1 million)
-- Underlying operating profit of GBP3.5 million (2015/16: GBP13.8 million)
-- Underlying operating profit excludes:
-- Gain on sale of shares in The Baltic Exchange of GBP1.7 million
-- One off business restructuring costs of GBP3.0 million, largely in the Technical division
-- Acquisition related expenditure of GBP2.5 million
-- Underlying basic EPS of 8.7p (2015/16: 34.7p)
-- Net cash of GBP7.1 million at 28 February 2017 (29 February 2016: GBP9.2 million)
-- As indicated the recommended final dividend of 5.0p per share
is confirmed, giving a full year dividend of 14.0p (2015/16:
26.0p)
OPERATIONAL KEY POINTS
-- Shipbroking division achieved a resilient performance in
difficult market conditions, with increased transaction volumes in
almost all areas
-- As previously announced, the Technical division suffered from
an industry wide reduction in activity, especially in oil and gas
exploration. A programme of business restructuring, led by a new
management team, has already been completed and is expected to
yield circa GBP6.0 million of annualised cost savings starting from
2017/18
-- Logistics division grew its Agency business significantly,
winning several global contracts. In addition, we are implementing
a business improvement programme in its smaller Freight Forwarding
arm
David Moorhouse CBE, Chairman of Braemar, commenting on the
results and the outlook said:
"As previously announced, Braemar experienced a challenging year
and all of our divisional teams worked hard to deliver business
performance for the Group. Tough action was taken in the Technical
division to restructure our businesses and address the cost base in
this economic climate. Despite this we have maintained our core
skills and capabilities and, as a result, are well placed for the
future."
"The current financial year has started in line with the Board's
expectations and we remain confident in our long term strategy to
grow the business through both organic and acquisitive business
development."
SUMMARY FINANCIAL RESULTS
Underlying* Results Reported Results
2016/17 2015/16 2016/17 2015/16
-------------------- ---------- ---------- ---------- ----------
Revenue GBP139.8m GBP159.1m GBP139.8m GBP159.1m
Operating Profit GBP3.5m GBP13.8m GBP(0.3)m GBP10.3m
/ (Loss)
Basic Earnings
per Share 8.73p 34.70p (1.66)p 23.23p
Full Year Dividend
per Share 14.0p 26.0p 14.0p 26.0p
-------------------- ---------- ---------- ---------- ----------
* Underlying measures above are before non recurring specific
items, including restructuring costs, gain on sale of shares in The
Baltic Exchange and acquisition related costs:
Specific Items
2016/17 2015/16
-------------------- ---------- ----------
Restructuring costs GBP(3.0)m -
Gain on sale of GBP1.7m -
investment
Acquisition related GBP(2.5)m GBP(2.7)m
expenditure
Acquisition related - GBP(0.8)m
restructuring
-------------------- ---------- ----------
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
For further information, contact:
Braemar Shipping Services
James Kidwell, Chief Executive Tel +44 (0) 20 3142
4100
Louise Evans, Finance Director Tel +44 (0) 20 3142
4100
Stockdale Securities
Robert Finlay / Antonio Tel +44 (0) 20 7601
Bossi / Henry Willcocks 6100
Buchanan
Charles Ryland / Victoria Tel +44 (0) 20 7466
Hayns / Stephanie Watson 5000
Alternative Profit Measures ("APMs")
Braemar uses APMs as key financial indicators to assess the
underlying performance of the Group. Management considers the APMs
used by the Group to better reflect business performance and
provide useful information to investors and other interested
parties. Our APMs include underlying operating profit and
underlying earnings per shares. Explanations of these terms and
their calculation are shown in summary above and in detail in our
Financial Review.
About Braemar Shipping Services plc
Braemar Shipping Services plc is a leading international
provider of knowledge and skill-based services to the shipping,
marine, energy, offshore and insurance industries. Founded in 1972,
Braemar employs approximately 850 people in more than 70 locations
worldwide across its Shipbroking, Technical and Logistics
divisions.
Braemar joined the Official List of the London Stock Exchange in
November 1997 and trades under the symbol BMS.
For more information, including our investor presentation, visit
www.braemar.com
PRELIMINARY ANNOUNCEMENT - YEARED 28 FEBRUARY 2017
CHAIRMAN'S STATEMENT
Results for the year
Revenue for the year was GBP139.8 million which compared with
GBP159.1 million in 2016/17. Underlying operating profit from
continuing operations was GBP3.5 million compared with GBP13.8
million in 2015/16 and underlying earnings per share were 8.7 pence
compared with 34.7 pence last year. These results were adversely
impacted by market conditions and reflect the challenging year that
Braemar has experienced.
The Shipbroking division, the largest part of the Group, traded
well throughout the year and, although underlying operating profit
was lower than last year, we were pleased with the resilience this
division has shown.
The Technical division's performance was negatively impacted by
the reduced levels of activity in the oil and gas markets. In
response to this, we appointed a new management team which
completed a significant restructuring programme to reshape the
business and cut costs. This action has created a unified
management and operating structure under the "Braemar" brand.
Our Logistics division reported a lower level of profitability
due to weakness in the freight forwarding sector. Its agency
business continues to show strong growth having won several major
contracts. The division made progress on its long-term strategy to
grow the existing business in the UK and Singapore and expand its
presence in the US and Europe.
Dividend
The Directors are recommending, for approval at the Annual
General Meeting on 22 June 2017, a final dividend of 5 pence per
share. The Board's intention is to pay a dividend appropriately
covered by earnings from underlying operations in both the medium
and longer term.
This dividend will be paid on 28 July 2017 to those on the
register at close of business on 30 June 2017. Together with the 9
pence interim dividend, the Company's dividend for the year will be
14 pence (2016: 26 pence).
Colleagues
The quality of our people is at the centre of what we do and it
is the hard work and loyalty of our staff that enables Braemar to
build the long-term strength of our brand and reputation to develop
and grow our business. The Board would like to recognise and thank
everyone who has worked for the Group during a difficult year to
help us shape the business for the future.
Outlook
The Board remains committed to its long-term strategy to develop
further a diversified portfolio of broking and advisory businesses
within its market sectors, through organic and acquisitive growth.
We believe the actions we have taken in the Technical division have
reset the business platform to be competitive during a challenging
part of the cycle. Overall we are confident that the Group is
efficiently structured and well positioned to move forward in the
years to come.
David Moorhouse CBE
Chairman
9 May 2017
CHIEF EXECUTIVE'S STATEMENT
Trading performance
Braemar is a diversified group which operates in the shipping,
marine, energy, offshore and insurance markets. The Group's lower
overall performance for the year was impacted mainly by the
difficulties in our Technical division. As a result revenue for the
year fell from GBP159.1 million to GBP139.8 million and underlying
operating profit was reduced from GBP13.8 million to GBP3.5
million.
Revenue in our Shipbroking division in 2016/17 was GBP63.1
million compared with GBP70.7 million in 2015/16 and underlying
operating profit was GBP7.9 million compared with GBP9.7 million in
2015/16. This result highlights the weaker overall rates
experienced in shipping markets during the year. However, our teams
performed well and recorded an increase in transaction volumes on
most of our desks. As expected the tanker markets softened during
the year which impacted the overall result, although transaction
volumes remained strong. The dry bulk shipping market rose during
the second half and we were able to benefit from our earlier
investment in a new team. Our sale and purchase department
performed well, however we saw little change in the offshore market
compared with the previous year.
The Technical division felt the effect of the weaker oil and gas
market conditions this year with revenue falling to GBP42.9 million
from GBP54.3 million last year and an underlying operating loss of
GBP2.9 million compared with an underlying operating profit of
GBP5.2 million in 2015/16. The division suffered as significant
contract work in the offshore oil and gas markets came to an end
and replacement project work was difficult to find. We took action
to restructure the division in order to maintain our core skill
sets necessary to carry out the full range of services we offer,
whilst scaling the business to match current market activity levels
and have reduced the headcount in the division by over 25% to 332
at the end of the year. We also worked hard to ensure our services
are commonly-branded and marketed under the Braemar name, on a
global basis. The actions already taken will realise annualised
cost savings of circa GBP6.0 million which will be evident in
2017/18.
Revenue in the Logistics division reduced slightly from GBP34.1
million to GBP33.8 million and underlying operating profit was
GBP1.3 million compared with GBP1.6 million in 2015/16. Our port
agency business performed extremely well in 2016/17 winning a
number of important new customers. However, the freight forwarding
side of the business was affected by a reduction in market
activity. We continue the strategy to develop our international
business as well as grow our strong UK presence.
Strategy
We remain focused on our long-term strategy of building our
business and the range of services we offer across our worldwide
network of offices.
Our Executive Committee continued to review opportunities for
expansion through strategic acquisitions when those opportunities
fit with our long-term objectives for the Group. Our structured
financing arrangement with HSBC provides us with up to GBP30
million available for future business development, including an
accordion facility of GBP15 million specifically to support
acquisitions. We also continue to seek opportunities to develop our
Group organically, specifically targeting strategic recruitment of
key individuals or teams to expand and strengthen our service
offering.
Our ongoing investment in our global infrastructure continued
during the year. We largely completed the roll out of our new
common accounting system across all divisions and are now focusing
on improved business management tools to better facilitate cross
business working to improve client service. These platforms will
also provide the basis for future integration of acquired
businesses.
We remain committed to the development of all our staff so that
individuals' careers can grow over time and to enable succession to
take place naturally at any level in the Group.
Our services will not, in our view, be materially impacted by
the economic volatility arising from geopolitical events such as
changes in US government policy, the Brexit process and forthcoming
UK General Election. However, there may be second order economic
effects that are difficult to foresee at this time.
There is no doubt that the Group experienced a difficult year.
We have significantly reduced the cost base and I believe we
started 2017/18 in a stronger position due to the actions taken. We
are able to service our clients through a skilled and dedicated
team that is capable of delivering to the highest standards.
Despite challenging markets, we continue to focus on Braemar's
long-term strategy to develop a valued global provider of knowledge
and skill-based services to the shipping, marine, energy, offshore
and insurance markets.
James Kidwell
Chief Executive
9 May 2017
REVIEW OF OPERATIONS
Shipbroking 2016/17 2015/16
--------------------- ---------------- ----------------
Revenue GBP63.1 million GBP70.7 million
Underlying operating GBP7.9 million GBP9.7 million
profit
The Shipbroking division reported a solid performance in 2016/17
with all market sectors achieving profits. As expected the business
faced tough market conditions marked by falling tanker rates and
continued low offshore rates, but managed to deliver strong results
in the circumstances. Overall divisional revenues and underlying
operating profits were lower than 2015/16 though the strength of
our broking teams ensured that our transaction volumes increased in
virtually all sectors. Our total forward order book at the year-end
was $39 million, of which $20 million relates to 2017/18. We
continue our growth strategy by investing in strategic hires of
individuals and teams. During the year, we hired a team of dry
cargo brokers to build our London dry cargo team, which has proved
a successful investment.
Deep Sea Tankers
Following a very strong year in 2015/16, the deep sea tanker
market weakened in 2016/17 as the growth in tonnage drove freight
rates down and the beneficial effects of low oil prices wore off.
Our deep-sea tanker department represents the largest contributor
to the Shipbroking division and our teams across our offices
performed well and recorded an increased volume of transactions
compared with the previous year.
High product stocks and lower refinery runs caused product
carrier earnings to fall steadily throughout the year. Linked
closely to developments in the charter markets, tanker asset values
continued the steady decline that started in early 2014 for
newbuilding prices and the end of 2015 for second hand values. As
the world became accustomed to the lower oil price, its impact on
oil demand was less marked. Oil demand grew in 2016, driven by
transport and petrochemical demand in China and India but also by
consumption growth in Europe and the US. Some of last year's demand
was drawn out of ample local product stocks, or from cheap LPG
which is likely to continue displacing naphtha as a feedstock for
steam crackers, but product stocks are already returning to
longer-term average levels. Crude stocks are volatile, and will
ultimately hinge on the effectiveness of OPEC's efforts to remove
crude supply from the market.
Heavy delays to newbuildings under construction mean that
tankers scheduled for delivery in 2016 slipped into 2017 and beyond
and resulted in lower overall fleet growth in 2016 than expected.
In 2017, it is expected that there will be similar slippage and
also a slightly higher level of demolition, but that overall
capacity will increase. This fleet growth is likely to outweigh
growth in seaborne trade volume, but tankers' trading should be
protected to some extent by an average lengthening of voyage
distance as Atlantic basin sweet light crudes replace lost
heavy/medium sour crude production in the Middle East. In 2017,
freight rates will reduce if seaborne imports are replaced from
local stocks but will hold up if crude exports from the US, Nigeria
or Libya rise to fill a void left by others. Refining margins could
suffer if crude prices rise and the resulting drop in run rates
could hurt the crude sector. However, both crude and product tanker
rates stand to recover once local product stocks are drained.
Specialised Tankers
Our specialised tanker department covers the transportation of
LNG, LPG, petrochemical gases, chemicals and smaller parcels of
products. There has been a continued expansion to the fleet of LPG
and LNG vessels, in particular VLGCs, which has put pressure on
freight rates in the spot market and challenged demand for time
charters. However, fixture volumes remained steady and the teams
overall maintained their level of earnings compared with the
previous year.
After a challenging first half of 2016, the LNG shipping market
saw spot/short-term charter rates improve modestly. The start-up of
several new projects in 2016, in the USA, Australia and Malaysia
has driven supply to record levels. Asia continued to be the
largest importer of LNG during the year, representing 73% of global
LNG demand and Qatar retained its position as the biggest LNG
exporter, supplying nearly a third of the world's LNG exports. In
2017 Australia is expected to surpass Qatar to become the biggest
LNG exporter and it is expected that global LNG production capacity
will increase in 2017 led by Australia and the USA. However, there
is uncertainty over the exact timing of first production from
Australian projects scheduled for start-up in 2017, partly because
new LNG capacity will enter the market at a time of weak global LNG
demand growth.
LPG freight markets weakened in 2016, with significant downward
pressure felt in the VLGC sector. Despite the fall in earnings the
spot market remained active, with seaborne LPG trade expanding
during the year with most of the growth in LPG exports coming from
production in the USA. Saudi Arabia LPG exports rose in 2016
although export growth from other Middle Eastern producers was
flat. The opening of the Panama Canal locks in June 2016 provided a
shorter route for VLGCs moving LPG from the US Gulf to the Far East
and most VLGC trade from Houston to the Far East has taken
advantage of the shorter passage.
The petrochemical gas market was turbulent during the year with
a significant increase in the number of newbuilding vessels
adversely impacting freight, with larger vessels competing for
smaller cargoes. As the shipping surplus became evident owners
cancelled new-building orders during the year. There was limited
new production in the petrochemical segment. In 2017, there is
likely to be a significant number of new vessels delivered into the
market with apparently very limited product supply growth.
Offshore
Our offshore desk, which operates out of London, Aberdeen,
Singapore and Houston, continued to experience challenging markets
as global oil and gas exploration and production activity remained
low. The team performed well in these tough market conditions to
deliver a profitable result for the year. We don't expect much
improvement in the market over the next year and it will take some
time for any recovery to take effect once exploration and
production expenditure increases. We have ensured that our
experienced core team has been maintained in this area in readiness
for a cyclical recovery.
Dry Bulk
Freight rates in the dry bulk market, which hit an all-time low
during the year, were depressed in the first half of the year
caused by over-capacity and weaker commodity demand in the core
markets. Capesize time charters hit their lowest point in March
2016 while the main Panamax, Supramax and Handysize time charter
indices all dropped to levels that did not cover daily operating
costs. However, by the end of 2016, spot rates were hitting their
best levels in two years, with time charter rates and vessel values
appreciating as the market recovered. During the first half of the
year, we carried out a cost control programme to ensure the global
department is structured appropriately and invested in key hires to
strengthen our Cape team. Despite fewer staff, our teams achieved a
similar number of transactions compared to the previous year.
In 2017, growth in dry bulk demand is expected to continue
considering widely-expected global economic recovery. In the
short-term the Chinese government's strategy for the steel and coal
sectors will ultimately determine import demand for the two largest
dry bulk trades of iron ore and thermal coal that dominate the Cape
and Panamax markets. However, there are also positive developments
in grain and agricultural trade which are expected to continue
growing.
In 2016 the dry bulk fleet grew as the delivery of new vessels
exceeded vessels removed from the market for demolition. In 2017
and beyond the main uncertainty is when newbuild ordering will
return to a level that will push future supply growth above what is
predicted to be stable demand growth.
Sale and Purchase
The sale and purchase team operates out of London, Singapore,
Beijing and Shanghai. In 2016/17 the team concluded a higher volume
of second hand and demolition vessel transactions compared with
2015/16. However, the average value of vessels was reduced.
Towards the end of the year an increased interest in the market
for older vessels caused the second hand value of bulk carriers to
rise substantially. There has also been some renewed interest in
newbuilding bulk carriers. As new ballast water treatment
regulations come into effect in 2019/20, there is likely to be an
increase in the scrapping of older vessels potentially either
reducing the overall fleet and/or stimulating newbuilding
demand.
Sale and purchase activity in the tanker market has been
relatively quiet as tanker freight rates have remained at a level
where owners have been able to achieve good earnings from the
relatively new fleet.
Technical 2016/17 2015/16
--------------------- ---------------- ----------------
Revenue GBP42.9 million GBP54.3 million
Underlying operating GBP(2.9)million GBP5.2 million
(loss) / profit
The division reported revenue of GBP42.9 million in 2016/17
compared with GBP54.3 million in 2015/16. The underlying operating
loss was GBP2.9m compared with an underlying operating profit of
GBP5.2 million last year. The performance of the division was
severely affected by the slowdown in oil and gas exploration and
production development activity where a significant proportion of
revenue has previously been earned.
In the oil and gas sectors, the upstream sector was hit as the
benefits of pre-existing hedging and long term contracts came to an
end and producers advised that debt incurred in anticipation of
ongoing high commodity prices had become onerous. Drilling activity
has also reduced which affected service companies and suppliers
across the globe with demand for offshore construction, heavy lift
vessels, supply boats and anchor handlers all reducing
significantly. This fall in drilling activity caused a significant
reduction in offshore energy premiums for insurance services
businesses. Finally, although the world shipping fleet continued to
grow, there was a general downward trend in claim numbers and claim
values with premium levels in the hull and machinery and cargo
sectors continuing to decline.
The focus of the Technical division in 2016/17 was to realign
all areas of the business to form an appropriate structure for the
future with no diminution in service capability. We put in place a
new management team in the first half of the year under a newly
appointed divisional Managing Director, Grant Smith. Fundamental to
the future success of the division was creating a unified business
which focuses on customer service through the development and
implementation of uniform best practice under a matrix service
structure. A new senior management team has been put in place which
share responsibility for the service lines we offer and the regions
in which we operate. Michael Chan takes responsibility for our
offshore energy marine warranty surveying service line and regional
responsibility for the Asia Pacific region. Geoff Jones takes
global responsibility for both adjusting and marine service lines
and heads our Europe, Middle East and Africa ("EMEA") region.
Sheila McClain has taken on the responsibility for engineering and
naval architecture as well as regional responsibility for the
Americas. Finally, Zal Rustom has responsibility for our global
response service business.
This new structure has taken affect from the start of 2017/18
and we believe will create greater internal and external clarity of
the way in which we operate, as well as enabling more efficient
utilisation of fee-earning staff. The division, which will
ultimately operate under a single brand name, will continue to
develop standardised processes and procedures across all our
offices. Our substantial restructuring programme is now complete
and we expect the effect of our actions to generate circa GBP6
million annualised cost savings and generate opportunities for
revenue growth through closer cooperation.
The performance of the division in 2016/17 is summarised as
follows:
Offshore
Braemar Offshore, our marine warranty surveying and engineering
consultancy business located in the Asia Pacific region, was
affected considerably by project delays and reduced activity due to
the low oil price and reduced exploration and construction activity
in the region. We have reduced the cost base across all offices in
the region. Our workforce is now scaled appropriately to operate
efficiently in current and foreseeable market conditions.
Engineering
Braemar Engineering, our consulting engineering business,
successfully concluded its three-year project for the design, site
supervision and crew training for six LNG ("liquefied natural gas")
carriers in the first half of the year. On completion of this
material project and in response to the downturn in LNG sector
activity, we took the opportunity to refocus the team in the UK by
targeting core skills and re-locating staff to our integrated
divisional London office. Our office in Houston continued its
involvement in the development of new technology for the
containment of LNG which it started in 2015. Our teams in both
London and Houston are now focusing on growing our engineering
activity and, at the end of the year, started to see an increase in
tender enquiries in both the marine and onshore LNG markets.
Adjusting
Braemar Adjusting, our energy loss adjusting business, reported
a profitable performance in the year despite challenging market
conditions. Our office in the Middle East performed particularly
well with a high level of utilisation. We continue to maximise the
utilisation of staff across the business by relocating staff to
project locations whenever possible.
Marine
Braemar Marine, (formerly the Salvage Association), which
specialises in hull and machinery damage surveying and marine
consultancy, experienced reduced activity with a lower level of
instructions received. The business has also taken action to
address its cost base to ensure it is appropriately resourced for
the future and towards the end of the year, we saw an increase in
utilisation as a result of these actions.
Response
Braemar Response (formerly Braemar Howells), our incident
response and environmental consultancy services business, carried
out a routine level of work with no significant project work
undertaken in the period. During the year, the business focused on
developing its UK operations, particularly retained services and
framework agreements with major customers. We terminated our
activities in West and Central Africa at the end of contracted
business. Braemar Response reset its cost base to cater for this
change in focus while ensuring that its core skill and knowledge
will enable it to provide response to larger incidents as
required.
Logistics 2016/17 2015/16
--------------------- ---------------- ----------------
Revenue GBP33.9 million GBP34.1 million
Underlying operating GBP1.3 million GBP1.6 million
profit
Cory Brothers has extensive industry experience and maintains a
worldwide reputation for meeting customer's expectations as
measured by their key performance indicators. The business
performed well in competitive Ship Agency and Freight Forwarding
markets. In particular we have developed our international
presence, notably in the US and Europe. The business provides a
high quality service which is carried out from an efficient office
network.
Port Agency
The Ship Agency business services UK ports, the port of
Singapore, North America and Amsterdam and has joint arrangements
with a number of worldwide agency partners. During the year, we
have achieved strong business development and an improved financial
performance. We have won a number of substantial client accounts
and are developing them internationally by delivering consistently
high levels of service. As well as maintaining our strong UK
business, our key focus remains the expansion of our service in
North America and Europe.
Freight Forwarding
The Freight Forwarding business experienced a tough market this
year resulting in a lower level of activity. We have performed a
detailed review of all aspects of the business and we are
implementing a business improvement programme across all service
areas which we expect to generate an improved performance in the
future.
FINANCIAL REVIEW
Summary Income Statement
2017 2016 2015
GBP'000 GBP'000 GBP'000
------------------------ --------- --------- --------
Revenue 139,842 159,125 145,601
Cost of sales (28,339) (33,365) (37,700)
Operating costs (105,287) (109,329) (93,749)
Central costs (2,721) (2,673) (2,621)
======================== ========= ========= ========
Underlying operating
profit before specific
items 3,495 13,758 11,531
Restructuring costs (3,008) - -
Gain on disposal of
investment 1,664 - 5,409
Acquisition-related
expenditure (2,485) (2,668) (3,738)
Acquisition-related
restructuring - (777) (7,619)
======================== ========= ========= ========
Operating (loss) /
profit (334) 10,313 5,583
======================== ========= ========= ========
Divisional highlights
2017 2016 2015
GBP'000 GBP'000 GBP'000
===================== ======== ======== ========
Shipbroking
===================== ======== ======== ========
Revenue 63,132 70,699 53,589
Underlying operating
profit 7,882 9,653 5,588
Underlying operating
profit margin 12.5% 13.7% 10.4%
Employee numbers(i) 291 334 327
===================== ======== ======== ========
Technical
===================== ======== ======== ========
Revenue 42,860 54,283 49,646
Underlying operating
(loss) / profit (2,920) 5,201 6,289
Underlying operating
profit margin (6.8)% 9.6% 12.7%
Employee numbers(i) 350 444 410
===================== ======== ======== ========
Logistics
===================== ======== ======== ========
Revenue 33,850 34,143 42,366
Underlying operating
profit 1,254 1,577 2,275
Underlying operating
profit margin 3.7% 4.6% 5.4%
Employee numbers(i) 206 189 192
===================== ======== ======== ========
(i) Average annual equivalent number of employees. Note that the
Technical Division have substantially reduced headcount during the
year and employed 332 staff at 28 February 2017. The Shipbroking
and Logistics employee numbers at 28 February 2017 were materially
in line with the annual average.
Overview
Group revenue has fallen across each of our divisions and
primarily reflects the prevailing market conditions that each of
them has faced during the year. This has had an impact on the
underlying operating profit and margin in each division. The
combination of underlying performance and the net impact of the
Specific Items (detailed below) has resulted in an operating loss
of GBP0.3 million for the year (2015/16: GBP10.3 million
profit).
Direct and operating costs
Cost of sales comprises freight and haulage costs incurred in
the Logistics division and payments to sub-contractors, materials,
and other costs directly associated with the revenue to which they
relate in other divisions. Costs of sales are lower than the
previous year, principally due to the lower levels of
sub-contracted activity in the Technical division. In particular,
Braemar Engineering completed the project for the design, site
supervision and crew training for six LNG carriers in May 2016
which has significantly reduced comparative cost of sales.
Operating costs are also lower than the previous year, reflecting
the lower average number of staff employed by the Group during the
year.
Specific Items
We have separately identified certain items that we do not
consider to be part of the ongoing trade of the Group. These
significant items are material in both size and nature and we
believe may distort understanding of the underlying performance of
the business. These include:
Restructuring costs
During the year we incurred GBP3.0 million of restructuring
related costs. GBP2.8 million of these costs were in the Technical
division and relate to the restructure of the division to create a
more aligned business with an appropriate cost base for the future.
The effect of this restructure is expected to generate annualised
cost savings of circa GBP6.0 million.
Gain on sale of investment
During the year we disposed of our shares in The Baltic Exchange
to the Singapore Exchange. We recognised a profit on sale of the
shares of GBP1.7 million including a special dividend of GBP0.2
million which was linked to the sale.
Acquisition-related expenditure
We incurred GBP2.5 million (2015/16: GBP2.7 million)
acquisition-related expenditure during the year. When we acquired
ACM Shipping Group plc in July 2014, we established a share plan
which we put in place to retain key staff. The cost of this share
plan is categorised as acquisition-related expenditure and the
charge in the year was GBP1.5 million (2015/16: GBP1.6 million).
The annual charge relating to these awards will reduce as these
awards vest, and we will incur approximately GBP1.1 million in
2017/18. During the year we also incurred a charge of GBP0.5
million (2015/16: GBP1.1 million) in relation to the amortisation
of intangible assets arising from acquisitions and GBP0.5 million
associated with other acquisition related activity.
There were no acquisition-related restructuring costs during the
year. The costs incurred in the prior year related to the
completion of the integration of the Shipbroking businesses
following the merger of Braemar Seascope and ACM Shipping.
Finance costs
The net finance cost for the year of GBP0.3 million (2015/16:
GBP0.4 million) reflects the cost of working capital and the
facilities structures that we have in place with HSBC.
Capital expenditure
In 2016/17 total capital expenditure was GBP1.0 million
(2015/16: GBP2.1 million). The most significant item of capital
expenditure was the implementation of our new global accounting
system which is now largely complete. The level of capital
expenditure is lower than the last two years when we invested a
significant amount in our offices in London.
Balance sheet
Net assets at 28 February 2017 were GBP100.2 million (2016:
GBP107.3 million). There have been no significant capital
transactions during the year and the main movement in the year has
been the revaluation of the defined benefit pension scheme (noted
below).
The Group has focused on working capital improvement and cash
collections and in particular the level of provision against trade
receivables to ensure that the policy is appropriate for the
different industries across the Group. At the end of the year trade
and other receivables had fallen by GBP0.9 million to GBP57.2
million and the value of the provision against trade receivables
fell from 13.6% to 12.9%. The effect of the strengthening of the US
dollar versus pound sterling has increased the value of our trade
receivables by approximately GBP3 million.
Borrowings and cash
At the balance sheet date, the Group had facilities of GBP30
million, made up of a revolving credit facility of GBP15 million
and an accordion facility of GBP15 million provided by HSBC. The
Group also has access to global cash management opportunities,
notably in our regional hubs of UK and Singapore. At the end of the
year the Group had net cash of GBP7.1 million (2016: GBP9.2
million) made up of GBP7.7 million of cash and GBP0.6 million of
net drawings of the revolving credit facilities against our pooled
cash.
Retirement benefits
The Group has a defined benefit pension scheme which was closed
to new members during 2015/16. The scheme has a net liability of
GBP4.3 million (2016: GBP1.2 million) which is recorded on the
balance sheet at 28 February 2017. The current level of scheme
specific funding is an annual cash contribution of GBP0.45 million
and the next triennial funding valuation for the scheme will be
carried out as at 31 March 2017.
Foreign exchange
The US dollar exchange rate has moved from US$1.39/GBP1 at the
start of the year to US$1.24/GBP1 at the end of the year. A
significant proportion of the Group's revenue is earned in US
dollars. At 28 February 2017, the Group held forward currency
contracts to sell US$20.5 million at an average rate of $1.325/GBP1
and options over a further US$4.5 million at an average rate of
$1.298:GBP1.
Taxation
The Group's effective tax rate in relation to continuing
operations in 2016/17 was 19.3% (2016: 23.9%). The rate is lower
than the UK standard rate of corporation tax of 20% due to the
impact of UK prior year adjustment credits and the real effective
tax rate is similar to prior year. In general, the effective rate
of tax is usually higher than the UK standard rate of corporation
tax as a result of disallowed business expenses, the effect of tax
deducted on repatriating cash from overseas and higher overseas
corporate tax rates. We expect the Group's effective tax rate to
follow the movement in UK standard rate of corporation tax as it
falls from 20% to 19% in 2017/18 and then to 18% in 2020/21.
Capital management
The Group manages its capital structure and adjusts it in
response to changes in economic conditions and its capital needs.
To maintain or adjust the capital structure, the Group may adjust
the dividend payment to shareholders, return capital to
shareholders or issue new shares. The Group has a policy of
maintaining positive cash balances whenever possible which can be
supported by short-term use of its revolving credit facility. This
is drawn down as required to provide cover against the cyclical
nature of the shipping industry.
ESOP Trust
During the year the Company requested that SG Kleinwort Hambros
Trust Company (CI) Ltd, as trustee of the Company's ESOP Trust,
purchase shares in Braemar Shipping Services plc. During the year
the trustees purchased 150,000 ordinary shares in the Company.
As announced on 2 March 2017, the Company entered into a trading
plan with the trustee for the period 6 March 2017 to 9 May 2017.
This plan enables the Trustee to operate with discretion and
independence to purchase ordinary shares in the Company for the
ESOP. During this period the Trustee has purchased 250,000 shares
in the Company. At 9 May 2017 the ESOP holds 786,386 shares.
Dividend
The directors are recommending, for approval at the Annual
General Meeting on 22 June 2017, a final dividend of 5 pence.
Together with the interim dividend, the Company's dividend for the
year will be 14 pence (2016: 26 pence). The Board's future
intention is to pay a dividend appropriately covered by earnings
from underlying operations. Our target is to achieve dividend cover
of 1.5 times in the medium to long term and pay interim and full
year dividends in a ratio of 1:2. However we may vary this policy
to ensure we have sufficient flexibility in our capital structure
to make appropriate financing and investment decisions.
Louise Evans FCA
Group Finance Director
9 May 2017
CONSOLIDATED INCOME STATEMENT
for the year ended 28 February 2017
28 Feb 2017 29 Feb 2016
--------------------------- =============================== ===============================
Specific Specific
Underlying items Total Underlying items Total
Continuing operations GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ---------- -------- --------- ---------- -------- ---------
Revenue 139,842 - 139,842 159,125 - 159,125
Cost of sales (28,339) - (28,339) (33,365) - (33,365)
============================ ========== ======== ========= ========== ======== =========
Gross profit 111,503 - 111,503 125,760 - 125,760
Operating income
/ (expense):
=========================== ========== ======== ========= ========== ======== =========
Other operating
costs (108,008) - (108,008) (112,002) - (112,002)
Restructuring costs - (3,008) (3,008) - - -
Gain on sale of
investment - 1,664 1,664 - - -
Acquisition-related
expenditure - (2,485) (2,485) - (2,668) (2,668)
Acquisition-related
restructuring - - - - (777) (777)
============================ ========== ======== ========= ========== ======== =========
(108,008) (3,829) (111,837) (112,002) (3,445) (115,447)
=========================== ========== ======== ========= ========== ======== =========
Operating profit
/ (loss) 3,495 (3,829) (334) 13,758 (3,445) 10,313
Finance income 61 - 61 45 - 45
Finance costs (364) - (364) (432) - (432)
Profit / (loss)
before taxation 3,192 (3,829) (637) 13,371 (3,445) 9,926
============================ ========== ======== ========= ========== ======== =========
Taxation (616) 764 148 (3,198) 372 (2,826)
============================ ========== ======== ========= ========== ======== =========
Profit / (loss)
for the year 2,576 (3,065) (489) 10,173 (3,073) 7,100
============================ ========== ======== ========= ========== ======== =========
Loss for the year
from discontinued
operations - - - - (290) (290)
Profit / (loss)
for the year attributable
to equity shareholders
of the parent 2,576 (3,065) (489) 10,173 (3,363) 6,810
============================ ========== ======== ========= ========== ======== =========
Earnings per ordinary
share
Basic 8.73p (1.66)p 34.70p 23.23p
Diluted 7.90p (1.66)p 31.53p 21.10p
============================ ========== ======== ========= ========== ======== =========
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 28 February 2017
28 Feb 29 Feb
2017 2016
GBP'000 GBP'000
---------------------------------------------- -------- --------
(Loss)/profit for the year (489) 6,810
Other comprehensive income/(expense)
Items that will not be reclassified
to profit or loss:
Actuarial loss on employee benefit schemes
- net of tax (2,956) (296)
Items that are or may be reclassified
to profit or loss:
Foreign exchange differences on retranslation
of foreign operations 2,172 2,461
Cash flow hedges - net of tax 305 (937)
Total comprehensive (expense) / income
for the year attributable to equity
shareholders of the parent (968) 8,038
=============================================== ======== ========
CONSOLIDATED BALANCE SHEET
as at 28 February 2017
As at As at
28 Feb 29 Feb
2017 2016
GBP'000 GBP'000
------------------------------------ -------- --------
Non-current assets
Goodwill 77,806 76,912
Other intangible assets 2,215 2,684
Property, plant and equipment 4,561 5,104
Investments 1,356 1,537
Deferred tax assets 3,584 2,177
Other long-term receivables 385 355
===================================== ======== ========
89,907 88,769
Current assets
Trade and other receivables 57,199 58,135
Cash and cash equivalents 7,674 11,497
===================================== ======== ========
64,873 69,632
Total assets 154,780 158,401
===================================== ======== ========
Liabilities
Current liabilities
Derivative financial instruments 852 1,233
Trade and other payables 45,855 43,020
Short-term borrowings 622 1,800
Current tax payable 996 1,640
Provisions 854 729
===================================== ======== ========
49,179 48,422
Non-current liabilities
Long-term borrowings - 500
Deferred tax liabilities 836 430
Provisions 288 533
Pension deficit 4,305 1,211
===================================== ======== ========
5,429 2,674
Total liabilities 54,608 51,096
Total assets less total liabilities 100,172 107,305
===================================== ======== ========
Equity
Share capital 3,018 3,011
Share premium 52,510 52,314
Shares to be issued (2,962) (3,439)
Other reserves 28,951 26,474
Retained earnings 18,655 28,945
===================================== ======== ========
Total equity 100,172 107,305
===================================== ======== ========
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 28 February 2017
28 Feb 29 Feb
2017 2016
GBP'000 GBP'000
---------------------------------- -------- --------
Cash flows from operating
activities
Cash generated from operations 6,630 13,459
Interest received 61 45
Interest paid (364) (432)
Tax paid (1,656) (2,688)
=================================== ======== ========
Net cash generated from operating
activities 4,671 10,384
=================================== ======== ========
Cash flows from investing
activities
Purchase of property, plant
and equipment and
computer software (990) (2,098)
Proceeds from sale of investments 1,779 -
Other long-term assets (30) (111)
=================================== ======== ========
Net cash used in investing
activities 759 (2,209)
=================================== ======== ========
Cash flows from financing
activities
Proceeds from borrowings 622 -
Repayment of borrowings (2,300) (6,800)
Proceeds from issue of ordinary
shares, excluding acquisitions 203 357
Dividends paid (7,858) (7,648)
Purchase of own shares (650) (428)
=================================== ======== ========
Net cash used in financing
activities (9,983) (14,519)
=================================== ======== ========
(Decrease)/increase in cash
and cash equivalents (4,553) (6,344)
Cash and cash equivalents
at beginning of the period 11,497 16,289
Foreign exchange differences 730 1,552
=================================== ======== ========
Cash and cash equivalents
at end of the period 7,674 11,497
=================================== ======== ========
CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
for the year ended 28 February 2017
Shares
Share Share to Other Retained Total
capital premium be issued reserves earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============================= ======== ======== ========== ========= ========= ========
At 1 March 2015 2,998 51,970 (3,611) 24,950 27,966 104,273
============================= ======== ======== ========== ========= ========= ========
Profit for the year - - - - 6,810 6,810
Actuarial loss on employee
benefits schemes - net
of tax - - - - (296) (296)
Foreign exchange differences - - - 2,461 - 2,461
Cash flow hedges net
of tax - - - (937) - (937)
============================= ======== ======== ========== ========= ========= ========
Total recognised income
in the year - - - 1,524 6,514 8,038
============================= ======== ======== ========== ========= ========= ========
Dividends paid - - - - (7,648) (7,648)
Issue of shares 13 344 - - - 357
Purchase of own shares - - (428) - - (428)
ESOP shares allocated - - 600 - (600) -
Credit in respect of
share option schemes - - - - 2,698 2,698
Deferred tax on items
taken to equity - - - - 15 15
============================= ======== ======== ========== ========= ========= ========
At 29 February 2016 3,011 52,314 (3,439) 26,474 28,945 107,305
============================= ======== ======== ========== ========= ========= ========
Loss for the year - - - - (489) (489)
Actuarial loss on employee
benefits schemes - net
of tax - - - - (2,956) (2,956)
Foreign exchange differences - - - 2,172 - 2,172
Cash flow hedges net
of tax - - - 305 - 305
============================= ======== ======== ========== ========= ========= ========
Total recognised income
in the year - - - 2,477 (3,445) (968)
============================= ======== ======== ========== ========= ========= ========
Dividends paid - - - - (7,858) (7,858)
Issue of shares 7 196 - - - 203
Purchase of own shares - - (650) - - (650)
ESOP shares allocated - - 1,127 - (1,127) -
Credit in respect of
share option schemes - - - - 2,793 2,793
Deferred tax on items
taken to equity - - - - (653) (653)
============================= ======== ======== ========== ========= ========= ========
At 28 February 2017 3,018 52,510 (2,962) 28,951 18,655 100,172
============================= ======== ======== ========== ========= ========= ========
Note 1 - General Information
The financial information set out above does not constitute the
Group's statutory accounts for the years ended 28 February 2017 or
29 February 2016 but is derived from those accounts. Statutory
accounts for 2016 have been delivered to the registrar of
companies, and those for 2017 will be delivered in due course. The
auditor has reported on those accounts; their reports were (i)
unqualified; (ii) did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying their report; and (iii) did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006.
Note 2 - Accounting Policies
Whilst the financial information included in this preliminary
announcement has been prepared in accordance with International
Financial Reporting Standards (IFRSs) adopted for use in the
European Union, this announcement does not itself contain
sufficient information to comply with IFRSs. The Group expects to
distribute full accounts that comply with IFRSs as adopted for use
in the European Union on 1 June 2016.
Note 3 - Segmental Results
Shipbroking Technical Logistics Central Total
2017 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ----------- --------- --------- -------- --------
Revenue 63,132 42,860 33,850 - 139,842
================================ =========== ========= ========= ======== ========
Underlying operating profit 7,882 (2,920) 1,254 (2,721) 3,495
Restructuring costs (64) (2,852) (92) - (3,008)
Gain on sale of investment 1,538 - 126 - 1,664
Acquisition-related expenditure (1,707) (236) (33) (509) (2,485)
Operating profit / (loss) 7,649 (6,008) 1,255 (3,230) (334)
================================ =========== ========= ========= ======== ========
Finance expense - net (303)
================================ =========== ========= ========= ======== ========
Loss before taxation (637)
Taxation 148
================================ =========== ========= ========= ======== ========
Profit for the year from
continuing operations (489)
================================ =========== ========= ========= ======== ========
Shipbroking Technical Logistics Central Total
2016 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ----------- --------- --------- -------- --------
Segment revenue 70,699 55,612 34,143 - 160,454
Inter-segment revenue - (1,329) - - (1,329)
================================== =========== ========= ========= ======== ========
Revenue 70,699 54,283 34,143 - 159,125
================================== =========== ========= ========= ======== ========
Underlying operating profit 9,653 5,201 1,577 (2,673) 13,758
Acquisition-related expenditure (2,476) (159) (33) - (2,668)
Acquisition-related restructuring (777) - - - (777)
================================== =========== ========= ========= ======== ========
Operating profit 6,400 5,042 1,544 (2,673) 10,313
================================== =========== ========= ========= ======== ========
Finance expense - net (387)
================================== =========== ========= ========= ======== ========
Profit before taxation 9,926
Taxation (2,826)
================================== =========== ========= ========= ======== ========
Profit for the year from
continuing operations 7,100
================================== =========== ========= ========= ======== ========
Note 4 - Specific Items
The following is a summary of specific items incurred:
2017 2016
GBP'000 GBP'000
------------------------------------------------- -------- --------
Restructuring costs (3,008) -
------------------------------------------------- -------- --------
Gain on sale of investment 1,664 -
------------------------------------------------- -------- --------
Acquisition-related expenditure
------------------------------------------------- -------- --------
Amortisation charge of intangible assets (501) (1,080)
Group share retention plan directly attributable
to the acquisition of ACM Shipping Group
plc (1,475) (1,588)
Other acquisition related costs (509) -
================================================= ======== ========
(2,485) (2,668)
================================================= ======== ========
Acquisition-related restructuring
================================================= ======== ========
Acquisition-related restructuring following
the acquisition of ACM Shipping Group plc - (777)
------------------------------------------------- -------- --------
Note 5 - Dividend
The Directors are proposing a final dividend in respect of the
financial year ended 28 February 2017 of 5 pence per share, taking
the total dividend for the year to 14 pence (2016: 26 pence). This
will absorb an estimated GBP1.5 million (2016: GBP5.0 million) of
shareholders funds.
Note 6 - Earnings per share
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the year, excluding
657,123 ordinary shares held by the Employee Share Ownership Plans
(2016: 760,409 shares) which are treated as cancelled.
For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
dilutive ordinary shares. The Group has one class of potential
dilutive ordinary shares being those options granted to employees
where the exercise price is less than the average market price of
the Company's ordinary shares during the year.
2017 2016
Total operations GBP'000 GBP'000
======================================== ======== ========
(Loss)/profit for the year attributable
to shareholders (489) 6,810
======================================== ======== ========
pence pence
======================================== ======== ========
Basic earnings per share (1.66) 23.23
Effect of dilutive share options - (2.13)
======================================== ======== ========
Diluted earnings per share (1.66) 21.10
======================================== ======== ========
2017 2016
Underlying operations GBP'000 GBP'000
============================================ ========== ==========
Underlying profit for the year attributable
to shareholders 2,576 10,173
============================================ ========== ==========
pence pence
============================================ ========== ==========
Basic earnings per share 8.73 34.70
Effect of dilutive share options (0.83) (3.17)
============================================ ========== ==========
Diluted earnings per share 7.90 31.53
============================================ ========== ==========
Shares shares
============================================ ========== ==========
Weighted average number of ordinary shares 29,514,736 29,318,887
Effect of dilutive share options 3,096,058 2,947,075
============================================ ========== ==========
Diluted weighted average number of ordinary
shares 32,610,794 32,265,962
============================================ ========== ==========
Note 7 - Reconciliation of operating profit to net cash flow
from operating activities
2017 2016
GBP'000 GBP'000
------------------------------------ -------- --------
(Loss)/profit before tax for the
year from continuing operations (637) 9,926
Loss before tax for the year from
discontinued operations - (290)
Adjustments for:
- Depreciation of property, plant
and equipment 1,083 1,540
- Amortisation of computer software 549 573
Specific Items
- Restructuring costs 3,008 -
- Gain on disposal of investment (1,664) -
- Amortisation of other intangible
assets 501 1,080
- Other specific items 1,984 2,365
- Finance income (61) (45)
- Finance expense 364 432
- Share-based payments (excluding
restricted share plan) 1,315 1,110
- Net foreign exchange gains and
financial instruments (307) (524)
Changes in working capital:
- Trade and other receivables 254 (1,527)
- Trade and other payables 3,062 750
Contribution to defined benefit
pension scheme (450) (488)
Expenditure on restructuring (2,152) (1,632)
Provisions (219) 189
==================================== ======== ========
Cash generated from operations 6,630 13,459
==================================== ======== ========
This information is provided by RNS
The company news service from the London Stock Exchange
END
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