Unaudited Interim Results for the Six Months Ended 31 August 2020

Shipbroking drives stronger performance

Braemar Shipping Services plc (LSE: BMS), a leading international provider of shipbroking, financial
advisory, and logistics services principally to the shipping and energy industries, today announces its
unaudited half-year results for the six months ended 31 August 2020.

 

Underlying results* Reported results**
H1 2020/21 H1 2019/20 Change H1 2020/21 H1 2019/20
£m £m % £m £m
Revenue 56.3 57.6 2%  56.3 57.6
Operating profit/(loss) 5.6 4.2 33% 3.6 (0.6)
Profit/(loss) before tax 5.7 3.5 63% 3.7 (0.8)
Earnings/(loss) per share 16.3p 11.2p 47% 3.5p (6.8)p
Dividend per share 5.0p (100%) 5.0p

 

* Underlying profit measures above are before non-recurring specific items, including acquisition-related charges and loss from discontinued operations.
** Reported results are from continuing operations only, comparatives have been re-presented in relation to discontinued operations.

OPERATIONAL KEY POINTS

• Strong first half trading performance ahead of expectations – growth in underlying operating profit of 33%
• Another strong performance by Shipbroking especially from Tankers
• Steady trading in Logistics with operating profit unchanged
• Increased success fees in the Financial Division, although offset by bad debt provisions
• Completion of Strategic Review and decision to divest the Engineering Division, Wavespec
• Share of AqualisBraemar underlying profits increased to £0.6 million (2019: £0.0m)
• Employee safety prioritised and transition to home working completed again in response to recent English lock down

FINANCIAL KEY POINTS

• Revenue 2% lower in the first half at £56.3 million (2019: £57.6m)
• Underlying operating profit from continuing operations increased substantially by 33% to £5.6 million (2019: £4.2m)
• Reported continuing profit before tax of £3.7 million (2019: £(0.8)m)
• Wavespec now engaged in sale process and presented as discontinued operations
• Net debt of £19.3 million (2019: £18.8 million)

Trading update and Outlook

• Appointment of James Gundy, Braemar’s Head of Shipbroking, to the position of Group Chief Executive with effect from 1 January 2021
• Future strategic direction to be shaped around continuing to grow the Shipbroking business
• As recently announced, new strategic investment in the Shipbroking and trading technology space via Zuma Labs
• Shipping markets seasonally weak and future trading uncertainties persist
• Trading for the full financial year remains in line with current expectations

Ronald Series, Executive Chairman of Braemar, commenting on the performance and outlook said: “Whilst markets remain volatile, we remain optimistic that trading for the year will be in line with expectations. Shipbroking remains central to everything that we do, and we are pleased with the progress that we’ve made so far this year in focussing on and developing our global shipbroking business and we look forward to further growth initiatives next year and in the years to come.”

Results briefing

A presentation for analysts will be held at 10.00am today via conference call and audiocast, please contact the team at Buchanan for details on [email protected]

A copy of the audiocast will be made available on the Investor Relations website after noon today: https://braemar.com/investors/

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

For further information, contact:

Braemar Shipping Services
Ronald Series, Executive Chairman Tel +44 (0) 20 3142 4100
Nicholas Stone, Chief Operating Officer and Finance Director Tel +44 (0) 20 3142 4100

finnCap
Matt Goode/ James Thompson/ Kate Washington Tel +44 (0) 20 7220 0500

Buchanan
Charles Ryland / Stephanie Watson / Matilda Abraham Tel +44 (0) 20 7466 5000

About Braemar Shipping Services plc
Braemar Shipping Services plc is a leading international provider of shipbroking, financial advisory,
and logistics services to the shipping and energy industries. Founded in 1972, Braemar employs
approximately 530 people in 28 offices 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

Reconciliation of underlying profit before tax to reported profit/(loss) after tax for the period

H1 2020/21 H1 2019/20
Underlying profit before tax £5.7 £3.5m
Acquisition related and disposal charges £(2.0)m £(3.4)m
Restructuring cost

Specific finance costs

Specific share of associate profit

£(0.2)m

£(0.2)m

£(1.4)m

£(0.3)m

£(0.8)m

Reported profit from continuing operations before tax

Taxation

Loss from discontinued operations

£3.7m

£(0.6)m

£(2.0)m

£(0.8)m

£(0.1)m

£(1.2)m

Reported profit / (loss) after tax £1.1m £(2.1)m

 

Acquisition related charges includes costs directly associated with the purchase of NAVES and Atlantic as well as the run off of the equity-based retention programme established in connection with the merger with ACM Shipping Group plc. Specific costs in the prior period relate to restructuring costs in the Logistics Division and Board changes during the period.

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, underlying profit before tax and underlying earnings per share. Explanations of these terms and their calculation are shown in the summary above and in detail in our Financial Review.

CHAIRMAN’S STATEMENT

Results
A strong performance in the Shipbroking Division led to improved profits in the first half of the current
financial year despite a small decrease in revenues. Operating profits increased significantly in Shipbroking due in part to lower costs but were unchanged from last year in the Logistics Division and slightly lower in the Financial Division.

Revenue for the period decreased only by 2% to £56.3 million (2019: £57.6 million) but underlying operating profit from continuing operations was up strongly by 33% at £5.6 million compared with £4.2 million in the previous year. Included within reported underlying earnings is the Group’s underlying share of associate profits for AqualisBraemar of £0.6 million (2019/20 £0.0 million) which shows good progress in the integration of the two businesses since the merger completed on 21 June 2019.

The reported profit after tax from continuing operations was £3.1 million compared with a loss of £(0.9) million in 2019/20. This reflects lower levels of deferred accounting charges in relation to the Group’s acquisitions of Braemar NAVES and Braemar Atlantic than in the previous year as well as the improved underlying trading performance.

Underlying earnings per share were 16.3p compared with 11.2p in the first half of 2019/20 and the reported earnings per share were 3.5p compared with a loss of (6.8)p per share in the first half of 2019/20. Comparatives for 2019/20 have been represented in relation to discontinued operations.

Trading
In what was a very challenging period, the Shipbroking Division achieved revenue growth of 2% and underlying operating profit growth of 24%, mainly due to cost savings. This was driven by Tankers but it was pleasing to see improved performances from both Dry Cargo and Sale and Purchase as we progressed through the period. The Logistics Division traded steadily and the Financial Division remained very busy, earning retainer income and a number of additional success fees during the period.

As stated in our announcement of 2 November 2020, AqualisBraemar is performing strongly, referenced in the recent Q3-2020 trading update: https://aqualisbraemar.com/all-media/news/investor-news/2020/q3-2020-financial-results/

Following the Strategic Review which was completed during the first half of the financial year, the Board made the decision in August 2020 that the Engineering Division, Wavespec, is now sub-scale, and that it would be in both the Group’s and Wavespec’s best interest to divest this business. The disposal process is now well underway and discussions are ongoing with a number of interested parties. The Strategic Review determined that the disposal would enable greater focus of both capital and management resources in more profitable areas of the Group. Therefore, the results of this Division have been accounted for as discontinued operations and the assets shown as held for sale on the balance sheet.

Appointment of Group Chief Executive
As separately announced, we have today appointed James Gundy, our Head of Shipbroking, to the position of Group Chief Executive. James has done a superb job in integrating the Braemar and ACM shipbroking businesses since the merger in 2014, and we all look forward to working closely with him as we continue to grow the Braemar business. James will take up his new post on 1 January 2021, at which time I will revert to being non-executive Chairman.

Future Strategy
With the decision to sell the Engineering Division and the appointment of James as the Group CEO, the future direction and strategy for the Group will be increasingly centred around Shipbroking and associated activities. I believe we are in a strong position to build on the success of the Shipbroking division in recent years as a trusted advisor for Shipping investment, chartering and risk management. I am looking forward to James leading the development and implementation of this strategy in the coming years.

Our people
The calibre of our people is central to the high level of service that we provide to our clients, and it is their hard work and creativity that enables Braemar to continue to build our brand and reputation as we develop our business. The first half of the current financial year was extremely challenging from a personal perspective for all of our employees who had to adapt quickly to working in a very different environment. The results for the first half of the year are a tribute to the dedication and expertise they have shown in delivering them. I would like to thank all of our people for their continuing efforts on behalf of the Group.

Dividend
The Board has decided not to declare an interim dividend for the period. This reflects the continuing uncertainties in future trading arising from the impacts of the ongoing COVID-19 pandemic but also allows continued investment in the Shipbroking business. An interim dividend of 5.0p per share was declared following the first half’s trading last year. The Board will further review the Group’s ability to recommend a dividend at the year end and will return to dividend payments as soon as it is appropriate to do so.

Outlook
Despite the shipping market being subject to a great deal of volatility due to the impact of COVID-19 on global trading, especially during the first quarter of our Financial Year, our broking services have been in demand from our clients and we have achieved a good performance overall. In the last few months the markets have settled down, the Dry Cargo market has improved as Chinese imports have picked up and there has been an increase in demand in the gas markets. However, reductions in crude oil supply has led to decreased demand and weaker shipping markets and we have not yet seen the usual seasonal pick-up in demand at this time of year so the outlook for the Shipbroking Division remains mixed. The Logistics Division is on track to achieve its budget, and the Financial Division has reasonable expectations that a number of success fees will be earned in the second half of the year. Overall, trading for the year is in line with current market expectations.

Ronald Series
Executive Chairman
11 November 2020

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