Braemar Shipping Services — Update 24 January 2017

Braemar (LSE: BMS)

Last close As at 23/05/2024

GBP3.00

−10.00 (−3.23%)

Market capitalisation

GBP99m

More on this equity

Research: Industrials

Braemar Shipping Services — Update 24 January 2017

Braemar Shipping Services

Andy Chambers

Written by

Andy Chambers

Director, Industrials

Industrials

Braemar Shipping Services

Cyclical challenges continue

Trading update

Industrial support services

24 January 2017

Price

245.0p

Market cap

£74m

Net cash (£m) at 31 December 2016

1.7

Shares in issue

30.2m

Free float

70%

Code

BMS

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(11.7)

(27.3)

(43.1)

Rel (local)

(12.8)

(28.6)

(52.5)

52-week high/low

469.0p

245.0p

Business description

Braemar Shipping Services is a leading global shipping services group, with interests ranging from shipbroking (44% of FY16 revenues) to the supply of specialist technical (34%) and logistics (22%) support to various parties involved in the transport of goods by sea and in the energy sector.

Next events

FY17 results

May 2017

Analysts

Andy Chambers

+44 (0)20 3681 2525

Nigel Harrison

+44 (0)20 3077 5700

Braemar Shipping Services is a research client of Edison Investment Research Limited

While the shipbroking activity continues to trade in line with expectations, weakness in the oil & gas market has continued to adversely impact the Technical division. Corrective actions have been accelerated, with £6m of benefit expected in FY18. FY17 EBIT guidance is cut to £3-3.5m and the reduced dividend should more closely reflect the underlying earnings potential, with an historic yield of 5.7% likely to build as earnings recover.

Year
end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

02/15

145.6

11.22

32.3

26.0

7.6

10.6

02/16

159.1

13.37

34.7

26.0

7.1

10.6

02/17e

140.0

3.0

8.0

14.0

30.6

5.7

02/18e

138.0

7.7

20.6

14.0

11.9

5.7

Note: *PBT and EPS are normalised, excluding acquired intangibles and exceptional items.

Oil & gas spending crunch persists

Shipbroking, which generates over 40% of revenues, continues to trade in line with expectations for FY17. However, weaker trading elsewhere in Braemar’s diversified portfolio has led to a significant profit warning. The deterioration in trading conditions for the Technical division noted at the interims has worsened further, leading to an extension of the previously announced realignment programme. The weakness has been driven by the depressed spending levels in the oil & gas market, which have led to a “marked” reduction in replacement contracts. Corrective actions have included the installation of new management change and changes to a regional operating structure. In addition, the smaller Logistics division has seen weakness in its freight forwarding activity due to weak international trade flows, undermining the continued strength of the port agency business.

FY18 earnings recovery anticipated

Guidance has thus been cut significantly for FY17, with adjusted EBIT now expected to be £3.0-3.5m. Two significant one-offs are noted, although excluded from the adjusted EBIT. Braemar will book a £1.7m pre-tax gain from the disposal of its interest in the Baltic Exchange, and there is a charge of £2.7m relating to restructuring costs, which should yield in excess of £6m in benefits in FY18. Net cash balances at the end of December 2016 were £1.7m, some £3.3m better than the previous year, with significant capacity available through the £30m undrawn debt facility. The FY18 trading outlook also appears challenging with no indications of improved trading conditions across the group at present. We have reduced our PBT forecast by almost a third to £7.7m (from £11.7m), or EPS of 20.6p (29.4p.)

Valuation: Yield reduced but supportive

Management has decided to reduce the dividend payment for the year, reflecting the much reduced trading performance. The final dividend is cut to 5.0p from 17.0p, reducing the full year payment to 14.0p from 26.0p. Management intends to pay dividends on an appropriate level of cover in the medium term, which we believe should be around 1.2x to 1.3x, with a rebalancing of the split at the interim towards a normal 1/3:2/3 interim to final ratio.

Exhibit 1: Financial summary

£'000s

2014

2015

2016

2017e

2018e

February

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

125,531

145,601

159,125

140,000

138,000

Cost of Sales

(31,758)

(37,700)

(33,365)

(31,200)

(33,000)

Gross Profit

93,773

107,901

125,760

108,800

105,000

EBITDA

 

 

10,552

13,553

15,871

4,600

9,300

Operating Profit (before amort. and except.)

9,283

11,671

13,758

3,300

8,000

Intangible Amortisation

(432)

(1,772)

(1,080)

(400)

(400)

Exceptionals

0

(4,316)

(2,365)

(2,600)

(1,600)

Operating Profit

8,851

5,583

10,313

300

6,000

Net Interest

196

(293)

(387)

(300)

(300)

Share in profits from joint ventures

(88)

(162)

0

0

0

Discontinued

(2,209)

0

0

0

0

Profit Before Tax (norm)

 

 

9,391

11,216

13,371

3,000

7,700

Profit Before Tax (FRS 3)

 

 

6,750

5,128

9,926

0

5,700

Tax

(2,268)

(2,187)

(2,826)

(600)

(1,500)

Profit After Tax (norm)

7,023

8,310

10,173

2,400

6,200

Profit After Tax (FRS 3)

4,482

2,941

7,100

(600)

4,200

Average Number of Shares Outstanding (m)

20.9

25.7

29.3

30.1

30.1

EPS - normalised (p)

 

 

33.5

32.3

34.7

8.0

20.6

EPS - normalised and fully diluted (p)

 

32.1

29.5

31.5

7.3

18.8

EPS - (IFRS) (p)

 

 

21.4

11.4

24.2

(2.0)

14.0

Dividend per share (p)

26.0

26.0

26.0

14.0

14.0

Gross Margin (%)

74.7

74.1

79.0

77.7

76.1

EBITDA Margin (%)

8.4

9.3

10.0

3.3

6.7

Operating Margin (before GW and except.) (%)

7.4

8.0

8.6

2.4

5.8

BALANCE SHEET

Fixed Assets

 

 

40,959

87,553

88,769

90,069

89,569

Intangible Assets

31,460

79,371

79,596

79,196

78,796

Tangible Assets

6,140

5,106

5,459

5,359

5,259

Investments

3,359

3,076

3,714

5,514

5,514

Current Assets

 

 

61,681

73,731

69,632

66,541

69,389

Stocks

0

0

0

0

0

Debtors

47,351

57,442

58,135

60,248

59,387

Cash

13,694

16,289

11,497

6,293

10,002

Other

636

0

0

0

0

Current Liabilities

 

 

(36,488)

(51,162)

(48,422)

(52,159)

(51,719)

Creditors

(36,488)

(44,362)

(46,622)

(47,659)

(47,219)

Short term borrowings

0

(6,800)

(1,800)

(4,500)

(4,500)

Long Term Liabilities

 

 

(866)

(5,849)

(2,674)

(6,347)

(3,847)

Long term borrowings

0

(2,300)

(500)

0

0

Other long term liabilities

(866)

(3,549)

(2,174)

(6,347)

(3,847)

Net Assets

 

 

65,286

104,273

107,305

98,103

103,392

CASH FLOW

Operating Cash Flow

 

 

2,158

7,259

13,459

4,081

9,495

Net Interest

196

(293)

(387)

(300)

(300)

Tax

(1,358)

(3,534)

(2,688)

(1,157)

(1,275)

Capex

(1,247)

5,512

(2,209)

(1,200)

(1,200)

Acquisitions/disposals

(524)

(10,851)

0

0

0

Financing

(197)

601

357

(1,000)

0

Dividends

(5,441)

(6,201)

(7,648)

(7,829)

(3,011)

Other including FX exchange differences

(3,170)

1,002

1,124

0

0

Net Cash Flow

(9,583)

(6,505)

2,008

(7,404)

3,709

Opening net debt/(cash)

 

 

(23,277)

(13,694)

(7,189)

(9,197)

(1,793)

HP finance leases initiated

0

0

0

0

0

Other

0

0

0

0

0

Closing net debt/(cash)

 

 

(13,694)

(7,189)

(9,197)

(1,793)

(5,502)

Source: Company reports, Edison Investment Research estimates

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Braemar Shipping Services and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Braemar Shipping Services and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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