Braemar Shipping Services — Update 14 January 2016

Braemar (LSE: BMS)

Last close As at 21/05/2024

GBP3.10

12.00 (4.03%)

Market capitalisation

GBP97m

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Research: Industrials

Braemar Shipping Services — Update 14 January 2016

Braemar Shipping Services

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Industrials

Braemar Shipping Services

Delivering objectives

Trading update

Industrial support services

15 January 2016

Price

435.00p

Market cap

£131m

Net debt (£m) 31 August 2015

3.1

Shares in issue

30.1m

Free float

70%

Code

BMS

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

1.2

0.8

8.8

Rel (local)

1.0

6.1

15.0

52-week high/low

513.5p

412.0p

Business description

Braemar is a leading global shipping services group, with interests ranging from shipbroking to the supply of specialist technical and logistics support to the various parties involved in the transport of goods by sea and in the energy sector.

Next event

Preliminary results

May 2016

Analysts

Nigel Harrison

+44 (0)20 3077 5700

Roger Johnston

+44 (0)20 3077 5722

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

Management has done much to reduce the likely impact of the shipping cycle in recent years, as emphasised in the current trading update. The 22% discount rating to its peer group, the strong balance sheet and the 6% yield offer sound defensive qualities to the shares.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

02/14

125.5

9.39

32.1

26.0

13.6

6.0

02/15

145.8

10.96

28.6

26.0

15.2

6.0

02/16e

158.0

13.40

31.5

26.0

13.8

6.0

02/17e

165.0

13.90

32.7

26.0

13.3

6.0

Note: *PBT and EPS normalised (and fully diluted), excluding intangible amortisation and exceptional items.

Still on course

Braemar’s trading update highlights the group diversification strategy as a key factor behind trading in the year to February 2016 continuing on track to meet full-year market expectations. Strong activity in tanker markets, supplemented by useful Sale & Purchase business, is more than compensating for challenging conditions in dry cargo and offshore in the Shipbroking operations. Similarly, in Technical, the expected strong trading at Braemar Engineering (LNG tanker work) is more than balancing the impact of a tougher offshore market. Logistics continue to plan, with the further improvements to the longer-term outlook. We do not propose to adjust our estimates.

Strategy to continue to deliver

The figures reinforce management observations about the group diversification strategy. Acquisitions have reduced the reliance on the shipping cycle, with the group having introduced cash-generative businesses where demand is related either to the volume of seaborne trade or the oil and gas sector. Moreover, the broking business has been invigorated by the 2014 merger with ACM. The tone of the trading statement points positively to the medium term, despite challenging trading conditions in several areas of the group business.

Clean balance sheet

While working capital was slightly above expectations at August 2015, we continue to look for a small y-o-y increase in net funds to £8.0m at February 2016.

Valuation: Discount of 22%

Braemar’s share price is close to the level pending at the time of its October interim results announcement. By contrast, market-leader Clarkson saw a sharp adverse reaction to its autumn trading statement, while the share prices of other members of the peer group are higher by up to10% over the same period. On the basis of consensus estimates for calendar 2016, Braemar’s shares are rated at a 22% discount to the average (12.1-15.5x) of the other four companies; this discount fails to reflect the diversification strategy, the strong balance sheet and the above-average yield.

Exhibit 1: Financial summary

£000s

2013

2014

2015

2016e

2017e

February

UK GAAP

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

139,664

125,531

145,848

158,000

165,000

Cost of Sales

(43,599)

(31,758)

(37,700)

(38,000)

(41,000)

Gross Profit

96,065

93,773

108,148

120,000

124,000

EBITDA

 

 

12,066

10,552

13,154

15,600

16,200

Operating Profit (before amort. and except.)

10,828

9,283

11,272

13,600

14,100

Intangible Amortisation

(1,498)

(432)

(1,772)

(900)

(200)

Exceptionals

0

0

(4,413)

(1,500)

(1,600)

Operating Profit

9,330

8,851

5,087

11,200

12,300

Net Interest

255

196

(293)

(200)

(200)

Share in profits from joint ventures

62

(88)

(22)

0

0

Discontinued

(351)

(2,209)

0

0

0

Profit Before Tax (norm)

 

 

11,145

9,391

10,957

13,400

13,900

Profit Before Tax (FRS 3)

 

 

9,296

6,750

4,772

11,000

12,100

Tax

(2,447)

(2,268)

(2,187)

(3,200)

(3,300)

Profit After Tax (norm)

8,698

7,023

8,051

10,200

10,600

Profit After Tax (FRS 3)

6,849

4,482

2,585

7,800

8,800

Average Number of Shares Outstanding (m)

20.8

20.9

25.7

30.0

30.0

EPS - normalised (p)

 

 

41.7

33.5

31.3

34.0

35.4

EPS - normalised and fully diluted (p)

 

40.3

32.1

28.6

31.5

32.7

EPS - (IFRS) (p)

 

 

32.8

21.4

10.0

26.0

29.4

Dividend per share (p)

26.0

26.0

26.0

26.0

26.0

Gross Margin (%)

68.8

74.7

74.2

75.9

75.2

EBITDA Margin (%)

8.6

8.4

9.0

9.9

9.8

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

7.8

7.4

7.7

8.6

8.5

BALANCE SHEET

Fixed Assets

 

 

41,314

40,959

87,553

85,853

84,753

Intangible Assets

32,071

31,460

79,371

78,471

78,271

Tangible Assets

6,426

6,140

5,106

4,306

3,406

Investments

2,817

3,359

3,076

3,076

3,076

Current Assets

 

 

68,237

61,681

73,731

73,217

77,336

Stocks

0

0

0

0

0

Debtors

44,621

47,351

57,442

59,228

61,852

Cash

23,277

13,694

16,289

13,989

15,484

Other

339

636

0

0

0

Current Liabilities

 

 

(38,733)

(36,488)

(51,162)

(49,748)

(50,167)

Creditors

(38,733)

(36,488)

(44,362)

(43,748)

(45,667)

Short term borrowings

0

0

(6,800)

(6,000)

(4,500)

Long Term Liabilities

 

 

(975)

(866)

(5,849)

(3,847)

(3,847)

Long term borrowings

0

0

(2,300)

0

0

Other long term liabilities

(975)

(866)

(3,549)

(3,847)

(3,847)

Net Assets

 

 

69,843

65,286

104,273

105,475

108,075

CASH FLOW

Operating Cash Flow

 

 

14,996

2,158

7,259

12,947

15,469

Net Interest

251

196

(293)

(200)

(200)

Tax

(3,625)

(1,358)

(3,534)

(2,947)

(3,275)

Capex

(1,198)

(1,247)

5,512

(1,200)

(1,200)

Acquisitions/disposals

(279)

(524)

(10,851)

0

0

Financing

1,077

(197)

601

0

0

Dividends

(5,412)

(5,441)

(6,201)

(7,800)

(7,800)

Other including FX exchange differences

0

(3,170)

1,002

0

0

Net Cash Flow

5,810

(9,583)

(6,505)

800

2,994

Opening net debt/(cash)

 

 

(17,467)

(23,277)

(13,694)

(7,189)

(7,989)

HP finance leases initiated

0

0

0

0

0

Other

0

0

0

0

0

Closing net debt/(cash)

 

 

(23,277)

(13,694)

(7,189)

(7,989)

(10,984)

Source: Company accounts, Edison Investment Research. Note: Adjusted earnings exclude acquisition intangibles, amortisation and exceptional items. Normalised EPS not adjusted for share-based payments.

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Germany

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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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