Braemar Shipping Services plc (LSE: BMS), a leading international provider of shipbroking, financial advisory, logistics and engineering services principally to the shipping and energy industries, provides the following trading update in light of current market conditions including the impact of COVID-19.
The welfare of all of Braemar’s employees and their families is of utmost importance to the Group and we are pleased to confirm that we have been able to continue providing our clients with a high level of service, whilst the vast majority of our employees are now working from home for their protection. The robustness of the Group’s I.T. infrastructure has enabled us to continue trading, providing advice, market intelligence/research and our other services to all of our clients whilst our employees are working remotely. We thank all of our employees for their dedication and hard work in this difficult time to ensure that our service to all of our clients remains at the high level that they expect.
Trading in the new financial year from 1 March 2020 has started in line with the guidance we provided on 3 March 2020. On the assumption that world trade slowly returns to a degree of normality over the next three months and there is no widespread second wave COVID-19 lockdown, we expect trading to continue in line with those expectations
Braemar’s Shipbroking business, its largest division, has experienced high activity and transaction levels in some of its markets, contrasting with a slow-down in some other areas. The Tankers market, in particular, has seen high rates in its chartering operations driven by an oversupply of crude oil. This has led to demand for vessels to be utilized for storage of both crude and oil products as land-based storage is filling up. The level of longer-term time chartering has also increased, leading to further growth in the forward order book from $50m at the last year-end, 29 February 2020, to $52m at 31 March 2020. The current market is driven by the oil supply and demand imbalance, which, although hard to predict, isn’t forecast to last for a prolonged period. Once the market settles we expect a normalisation of charter rates.
The Securities market has also had high activity levels due to the market volatility and the Braemar Freight Derivatives desk has gained market share so far this year. Other markets have seen weaker trading, notably Offshore, driven by the reduction in oil exploration spend. Sales and Purchase activity levels have also seen a reduction across the board but it is expected that buyers will seek to take advantage of the dislocation in pricing as the year progresses. The Dry Cargo market has also had a slow start to the year but is already showing signs of improvement in the larger sizes and is expected to continue to pick up as Chinese imports recover.
Braemar Naves, the group’s corporate finance business, achieved a strong start to the financial year and has secured new transaction fees during the first month. Activity levels have also increased as vessel owners have looked to secure alternative financing arrangements necessitated by current market conditions. Given that the Braemar Naves business grew out of the distressed ship financing market following the financial crash ten years ago, it is well placed and experienced to take advantage of such opportunities in the current market.
Braemar’s logistics division, Cory Brothers, has seen a relatively strong start to the year in its Agency business driven by both its tanker customers and UK exports. By contrast it has seen some impact from COVID-19 on freight forwarding, in particular a slow down of UK imports following the shutdown in China, which has now been further impacted by reduced UK demand. However, cost-saving activities implemented during the previous financial year are expected to reduce the overall impact of this slowdown. LNG Engineering The review of the Wavespec engineering business continues and opportunities to cut its operating costs are being taken wherever possible in the short term. The market’s acknowledgement of Braemar Wavespec’s expertise in the LNG market continues to provide introductions into a number of large long-term projects.
We noted in our Trading Update of 3 March 2020 that we expect COVID-19 to have an effect our earnings in the first quarter of the current year, although we remain positive about the medium-term outlook for the global shipping market. As noted above, we are pleased to report that in our first trading month of the new financial year, our financial performance has held up, in line with our March update. Whilst the COVID-19 outbreak persists there remains raised levels of uncertainty in the market and the Board will provide further updates on trading as the situation becomes clearer.
Liquidity and Dividend
We are also keeping our liquidity and banking covenants under careful oversight. Consequently, to ensure that the Group’s liquidity position is as robust as it can be, the Board has prudently decided that it will not recommend a final dividend for the year to 28 February 2020. It is the Board’s intention to return to paying a dividend once the economic outlook is clearer, provided that the Company’s financial position is robust enough to do so.
We have a supportive relationship and regular engagement with our main lending bankers HSBC, with whom the Group has a £35m RCF and an additional £5m accordion facility. Under our current assumptions and forecasts, these facilities should provide adequate liquidity and covenant headroom.
Braemar results for the year ended 29 February 2020 will be released in early June with the precise date to be confirmed closer to the time.
James Gundy, Head of Shipbroking, commented: ‘I am very pleased with the way Braemar’s Shipbroking desks have responded to this crisis to ensure our services remain at the highest level that our clients expect. The diversification we have achieved in recent years and our lean structure has ensured that we have been able to remain robust and focused in the face of the current challenges.’
Ron Series, Executive Chairman, commented: “We are pleased with the continuing strong performance of Shipbroking, and the commitment of all of our people in supporting our clients throughout these difficult circumstances. I thank them all for their dedication to our company. We are now focused on a number of initiatives to ensure that we maintain sufficient liquidity to continue to operate efficiently.”
For further information, contact:
Braemar Shipping Services plc
Ron Series, Executive Chairman
Nick Stone, Finance Director
Tel +44 (0) 20 3142 4100
Matt Goode/ James Thompson/ Kate Washington (Corporate Finance) Andrew Burdis (ECM)
Tel +44 (0) 20 7220 0500
Charles Ryland / Victoria Hayns / Stephanie Watson / Matilda Abraham
Tel +44 (0) 20 7466 5000
Notes to Editors: About Braemar Shipping Services plc
Braemar Shipping Services plc is a leading international provider of shipbroking, financial advisory, logistics and engineering services principally to the shipping and energy industries. Founded in 1972, Braemar employs approximately 530 people in 30 locations worldwide across its Shipbroking, Financial, Logistics and Engineering 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