TIDMBMS
RNS Number : 5586R
Braemar Shipping Services PLC
09 March 2021
9 March 2021
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO
CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE
REGULATION (EU NO. 596/2014) WHICH IS PART OF UK LAW BY VIRTUE OF
THE EUROPEAN UNION (WITHDRAWAL) ACT 2018. UPON THE PUBLICATION OF
THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE
IN THE PUBLIC DOMAIN.
BRAEMAR SHIPPING SERVICES PLC
("Braemar", the "Company" or the "Group")
Trading and Strategic Update
and
Board Change
Braemar, a leading international Shipbroker and provider of
expert advice in shipping investment, chartering and risk
management , is pleased to provide a trading and strategic update
for the year ended 28 February 2021.
Trading Update
-- Strong trading in the last two months has meant that
underlying trading performance for the year ended 28 February 2021
will be above market expectations*. Revenue has been higher than
expected and cost levels continue to benefit from lower company
expenses due to the COVID-19 restrictions. Underlying operating
profit is expected to be at least GBP8.7m (29 February 2020:
GBP9.6m).
-- The Shipbroking Division, in particular, traded well in the
second half. Market share was maintained in weaker tanker markets
and Dry Cargo and Sale and Purchase desks outperformed expectations
with stronger performances than in the first half of the year. The
forward order book is expected to close at around $43m, compared
with $50m last year, which was unusually high due to the strong
tanker market in the months running up to 29 February 2020. Further
additions have been made since the year end in a strong start to
the new financial year.
-- The Financial Division, Braemar Naves, earned several
transaction-based success fees in the second half of the year and
will end the year in line with the previous year. However, its deal
flow pipeline is strong and there are multiple current mandates and
live transactions that are expected to close in the coming
months.
-- The Logistics Division, Cory Brothers, traded well and
finished slightly ahead of the previous year.
-- The Group's associate, AqualisBraemar LOC, has reported a
profit of $1.5m for its year to 31 December 2020 of which Braemar's
share is GBP0.3m. The Group has received dividends from
AqualisBraemar LOC of GBP0.6m during the year ended 28 February
2021.
-- 9.6m shares in AqualisBraemar LOC were sold by the Group in
January 2021 for net proceeds of GBP6.0m which has reduced our
ownership from c20% to c10% and significantly reduced our closing
net debt.
-- Net bank debt is expected to be substantially reduced at
around GBP10m at 28 February 2021 (GBP21m: 29 February 2020) and
total net debt including deferred acquisition consideration around
GBP18m (GBP30m: 29 February 2020).
-- Results for the year ended 28 February 2021 will be announced on 3 June 2021.
Strategic developments
Several steps have also been made in the rationalisation of
Braemar's business towards the development of a new strategy
centred on Shipbroking:
Braemar Naves - extension of payment timeline
-- A rescheduling of deferred consideration amounts still owed
to the previous owners in respect of the 2017 acquisition of Naves
has recently been agreed in principle. It means that over EUR2.9m
of amounts due for payment in the next 12 months will be
rescheduled to be paid no earlier than September 2025.
-- In addition, Braemar will be able to satisfy up to EUR0.75m
of outstanding payments by the issue of new equity in place of
certain deferred consideration payments and thereby tie in the
management and extend their commitment to the Group.
-- The agreement will also see the integration of the Financial
Division into the Shipbroking Division (with their results being
reported together). This combined approach will further improve
collaboration and enhance client service.
-- A further announcement will be made in due course with more
detail once the agreements have been completed.
Wavespec
-- The sale process for the Group's Engineering Division,
Wavespec, is ongoing and the Board will make a further announcement
on the process when appropriate.
Cory Brothers
-- A non-binding term sheet has been signed with Vertom UCS
Holdings BV with the intention of forming a joint venture with Cory
Brothers to create a port agency business with stronger reach and
breadth than either business alone. The two businesses already work
together with smaller scale joint ventures in the
Amsterdam/Rotterdam region and in Gibraltar.
-- It is intended that the two businesses will work more closely
together in the coming year with certain profit-sharing
arrangements to be put in place, with a view to exploring a full
corporate joint venture in the future.
-- The Board believes that by working together Cory and Vertom
will have the prospect of growing faster as a larger combined
business than either could whilst operating alone.
Following the completion of these steps, Braemar will have a
more focussed look and structure. Braemar's heritage was centred on
Shipbroking, which has also been its most successful Division in
recent years and is now once again the main focus of future
strategy and growth.
Braemar has a broad and increasingly diverse footprint within
global Shipbroking markets and a very strong reputation and brand
name that is highly regarded in the business. To build on this
strong base, new geographies and markets are being identified in
which to invest and further increase the scale and success of the
business. Growth areas will include strengthening our presence in
the US market, focussing on the offshore renewables market, and
widening the capability within the Securities business to
complement the physical markets that are already covered.
Opportunities have also been identified for further technology
products to offer our clients as part of the recent collaboration
with Zuma Labs and in support of efforts within the shipping
industry to introduce carbon offsetting for voyages.
Balance Sheet strengthening
The Group will look to strengthen its balance sheet further in
the coming months, in order to improve its ability and flexibility
to refocus and invest in its Shipbroking Division. In doing so, the
Board will be looking to achieve a net debt to EBITDA ratio
sustainably below 1.5 times on average over the seasonal working
capital cycle. Net debt to EBITDA is expected to be around 1.7
times at 28 February 2021 and on average approximately 2.2 times
during the 2020 / 2021 financial year.
Dividends
The Board's renewed focus on growth opportunities means that it
will continue to review the Group's ability to recommend a dividend
as part of its determination of the optimum use of available
profits/free cash flow. It will not be recommending a dividend
until the balance sheet has been strengthened sufficiently to
support the growth ambitions.
Board Changes
Braemar also announces today that the Chairman, Ronald Series,
has decided to step down from the Board of the Company. Ron joined
the Board as Chairman in April 2019 and stepped up to become
Executive Chairman on the retirement of the CEO, James Kidwell, in
July 2019, with a strong emphasis on restructuring and refocussing
the strategy on Braemar's shipbroking heritage, and positioning the
Company for growth. Both of these objectives have now been
achieved, and with the recent appointment of shipbroking head James
Gundy as Group Chief Executive Officer driving the new strategy,
Ron felt that this was an appropriate time to step down.
Ron will stay on as Chairman until a suitable successor has been
appointed. A search process is underway and is progressing
well.
Capital Markets Event
Group Chief Executive Officer, James Gundy, and other members of
the management team will be presenting Braemar's growth strategy
and its view on shipping markets at a virtual capital markets event
scheduled for 15.00 London time today. The presentation is taking
place for institutional investors and sell-side analysts, but the
slides will be made available on Braemar's website shortly before
the presentation commences.
Please contact Buchanan at Braemar@buchanan.uk.com if you wish
to attend.
Outlook
-- Braemar is confident that shipping markets will steadily
recover from the COVID-19 slow down over the coming year and the
freight forward rates in Braemar's markets are already indicating
increases later in 2021.
-- Braemar earns the majority of its income in US Dollars and,
whilst the coming year is expected to show revenue growth in
original currency terms, if the Sterling exchange rate remains at
current levels, it will mean a reduction in Sterling terms. A
hedging program is in place, which provides a significant
protection of the Sterling value worth GBP1.7m at current levels
but is not expected to close the gap in full.
James Gundy, Group Chief Executive Officer of Braemar commented:
'I am looking forward to completing the rationalisation of the
historic divisional structure and the continuation of the growth of
the Shipbroking business at the heart of Braemar's future growth
strategy. I would also like to pay tribute to all of our employees
who have maintained an excellent service to our clients during the
unprecedented challenges caused by the COVID-19 pandemic, and I am
looking forward to welcoming them back into our offices as soon as
it is safe to do so.'
* Market expectations mean the forecasts from finnCap prior to
the date of this announcement.
For further information, contact:
Braemar Shipping Services plc
James Gundy, Group Chief Executive Tel +44 (0) 20 3142 4100
Officer
Nick Stone, Group Chief Operating Officer
and Finance Director
finnCap
Matt Goode/ James Thompson (Corporate Tel +44 (0) 20 7220 0500
Finance)
Andrew Burdis (ECM)
Buchanan
Charles Ryland / Stephanie Watson / Tel +44 (0) 20 7466 5000
Matilda Abraham
Notes to Editors:
About Braemar
Braemar is a leading international Shipbroker and provider of
expert advice in shipping investment, chartering and risk
management. Braemar employs approximately 530 people in 30
locations worldwide across its Shipbroking, Financial 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
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END
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