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Currency in GBP
Last close As at 26/05/2023
GBP2.95
▲ −5.00 (−1.67%)
Market capitalisation
GBP95m
Research: Industrials
Management action and strong markets over the last 18 months have led Braemar to a position where it is now free of non-core activities and is able to focus on its future growth strategy, as previously outlined. Furthermore, non-material accounting issues have been identified and resolved that explain the delayed preliminary results. The trading outlook is promising and Braemar will be able to leverage off its strong balance sheet in pursuit of growth. As a result, we have raised FY23 and FY24 PBT forecasts by 66% and 31% respectively and lifted our valuation from 400p to 520p per share on raised dividend expectations.
Braemar Shipping Services |
Steaming purposefully into clear waters |
FY22 preliminary results |
Industrial support services |
30 August 2022 |
Share price performance
Business description
Next events
Analyst
Braemar Shipping Services is a research client of Edison Investment Research Limited |
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Management action and strong markets over the last 18 months have led Braemar to a position where it is now free of non-core activities and is able to focus on its future growth strategy, as previously outlined. Furthermore, non-material accounting issues have been identified and resolved that explain the delayed preliminary results. The trading outlook is promising and Braemar will be able to leverage off its strong balance sheet in pursuit of growth. As a result, we have raised FY23 and FY24 PBT forecasts by 66% and 31% respectively and lifted our valuation from 400p to 520p per share on raised dividend expectations.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
02/21 |
83.7 |
6.7 |
16.2 |
5.0 |
17.9 |
1.7 |
02/22 |
101.3 |
8.9 |
23.1 |
9.0 |
12.6 |
3.1 |
02/23e |
130.6 |
19.1 |
46.3 |
12.0 |
6.3 |
4.1 |
02/24e |
112.5 |
15.9 |
36.9 |
13.5 |
7.9 |
4.7 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
FY22 results exceed management expectations
Generally favourable trading conditions and the disruption to global shipping markets were mostly supportive of activities and charter rates in FY22. As a result, most divisions reported strong revenue growth and the group was therefore able to report a 21% increase in revenue to £101.3m. Underlying operating profit increased 31% to £10.1m reflecting operational gearing and was comfortably higher than previously raised management guidance of ‘at least £9.8m’. The FY22 dividend was raised 80% to 9p/share.
Disposals and internal audit offer future clarity
2022 was a year of clearing the decks with Braemar delivering on its strategy to focus on its core shipbroking and finance activities. Consequently, it completed the disposal of three businesses, Cory Brothers, AqualisBraemar and Wavespec, and restructured the outstanding consideration of Braemar Naves, which is now the ‘Financial’ division. Furthermore, non-material errors in accounting in previous years were discovered, investigated and resolved, which has bolstered the accounting procedures internally and explains the deferred results timing.
Valuation: Revised DDM model suggests 520p/share.
We have materially raised our FY23 and FY24 estimates to reflect the better-than-expected FY22 results, solid underlying growth and, especially in FY23 to date, the strong US dollar, which materially adds to revenue but has little impact on costs, which are predominantly priced in local currency. For FY24, we expect underlying growth but take a cautious view on FX rates and assume a reversal to rates similar to FY22. This implies that after reporting underlying operating profit of £10.1m for FY22, our FY23 and FY24 operating profit estimates rise from £12.1m to £20.1m, and from £12.3m to £16.4m respectively. Higher profits lead to higher dividends and using our dividend discount model (DDM) our valuation rises from 400p to 520p per share.
Exhibit 1: Financial summary
£m |
2019 |
2020 |
2021 |
2022 |
2023e |
2024e |
2025e |
||
Year end 28 February |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||||
Revenue |
|
|
117.9 |
117.7 |
83.7 |
101.3 |
130.6 |
112.5 |
115.8 |
EBITDA |
|
|
10.4 |
14.4 |
11.4 |
13.5 |
23.6 |
19.9 |
16.3 |
Normalised operating profit |
|
|
9.1 |
11.0 |
7.7 |
10.1 |
20.1 |
16.4 |
13.8 |
Exceptionals |
(12.5) |
(3.8) |
(1.5) |
(0.3) |
0.0 |
0.0 |
0.0 |
||
Other |
0.5 |
0.7 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Reported operating profit |
(2.9) |
7.9 |
6.2 |
9.7 |
20.1 |
16.4 |
15.8 |
||
Net Interest |
(0.2) |
(1.4) |
(1.1) |
(1.2) |
(1.0) |
(0.5) |
(0.3) |
||
Joint ventures & associates (post tax) |
0.0 |
(0.3) |
0.0 |
(0.0) |
0.0 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
8.9 |
9.4 |
6.7 |
8.9 |
19.1 |
15.9 |
13.5 |
Profit Before Tax (reported) |
|
|
(3.1) |
6.3 |
5.1 |
8.5 |
19.1 |
15.9 |
16.5 |
Reported tax |
(1.5) |
0.0 |
(1.6) |
(1.8) |
(4.2) |
(4.0) |
(4.1) |
||
Profit After Tax (norm) |
7.3 |
9.4 |
5.1 |
7.0 |
14.9 |
11.9 |
10.4 |
||
Profit After Tax (reported) |
(4.7) |
6.3 |
3.6 |
6.7 |
14.9 |
11.9 |
12.4 |
||
Discontinued operations |
(22.7) |
(2.3) |
1.0 |
7.2 |
0.0 |
0.0 |
0.0 |
||
Net income (normalised) |
7.3 |
9.4 |
5.1 |
7.0 |
14.9 |
11.9 |
12.4 |
||
Net income (reported) |
(27.4) |
4.0 |
4.5 |
13.9 |
14.9 |
11.9 |
13.4 |
||
Basic average number of shares outstanding (m) |
31 |
31 |
31 |
31 |
32 |
32 |
32 |
||
EPS - basic normalised (p) |
|
|
23.78 |
30.19 |
16.23 |
23.06 |
46.32 |
36.91 |
38.21 |
EPS - diluted normalised (p) |
|
|
21.79 |
27.28 |
13.43 |
18.79 |
38.15 |
30.41 |
31.49 |
EPS - basic reported (p) |
|
|
(88.63) |
12.88 |
14.45 |
45.56 |
46.32 |
36.91 |
41.30 |
Dividend (p) |
5.00 |
5.00 |
5.00 |
9.00 |
12.00 |
13.50 |
14.00 |
||
Revenue growth (%) |
14.4 |
(-0.2) |
(-28.9) |
21.0 |
29.0 |
(-13.9) |
0.0 |
||
EBITDA Margin (%) |
8.8 |
12.3 |
13.6 |
13.4 |
18.1 |
17.7 |
14.1 |
||
Normalised Operating Margin |
7.7 |
9.4 |
9.2 |
9.9 |
15.4 |
14.6 |
11.9 |
||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
91.7 |
114.7 |
106.6 |
99.8 |
97.3 |
94.7 |
92.2 |
Intangible Assets |
86.0 |
86.2 |
86.1 |
80.9 |
81.1 |
81.4 |
81.6 |
||
Tangible Assets |
2.0 |
11.9 |
9.8 |
7.1 |
4.3 |
1.5 |
(1.3) |
||
Investments & other |
3.7 |
16.5 |
10.7 |
11.9 |
11.9 |
11.9 |
11.9 |
||
Current Assets |
|
|
71.9 |
68.3 |
51.7 |
52.8 |
78.2 |
76.0 |
83.9 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
1.0 |
||
Debtors |
37.1 |
39.5 |
34.8 |
38.8 |
49.0 |
41.6 |
44.0 |
||
Cash & cash equivalents |
24.1 |
28.7 |
16.4 |
14.0 |
29.2 |
34.4 |
38.8 |
||
Other |
10.6 |
0.0 |
0.4 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Liabilities |
|
|
92.0 |
78.9 |
51.9 |
42.8 |
59.4 |
52.5 |
54.5 |
Creditors |
44.9 |
47.6 |
45.6 |
39.3 |
52.9 |
45.7 |
47.0 |
||
Tax and social security |
1.4 |
1.3 |
1.3 |
1.6 |
4.0 |
3.7 |
3.9 |
||
Short term borrowings |
35.8 |
25.1 |
0.0 |
0.0 |
0.3 |
0.6 |
0.9 |
||
Other |
9.8 |
4.8 |
4.9 |
1.9 |
2.2 |
2.5 |
2.8 |
||
Long Term Liabilities |
|
|
13.2 |
44.9 |
39.9 |
34.8 |
34.8 |
34.8 |
34.8 |
Long term borrowings |
4.6 |
2.6 |
2.7 |
2.8 |
2.8 |
2.8 |
2.8 |
||
Other long term liabilities |
8.6 |
42.2 |
37.3 |
32.0 |
32.0 |
32.0 |
32.0 |
||
Shareholders' equity |
|
|
58.4 |
59.2 |
66.5 |
75.1 |
81.3 |
83.6 |
86.8 |
CASH FLOW |
|||||||||
Op Cash Flow before WC and tax |
(1.8) |
9.7 |
8.8 |
12.0 |
22.6 |
19.4 |
19.0 |
||
Working capital |
4.6 |
(0.4) |
4.1 |
5.2 |
3.7 |
0.4 |
(0.8) |
||
Exceptional & other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
1.0 |
||
Tax |
(1.1) |
1.2 |
(0.8) |
(2.2) |
(1.8) |
(4.2) |
(4.0) |
||
Other |
6.1 |
1.4 |
1.8 |
6.2 |
0.6 |
0.2 |
0.0 |
||
Net operating cash flow |
|
|
7.8 |
11.8 |
13.9 |
21.3 |
25.1 |
15.8 |
15.2 |
Capex |
(2.4) |
(1.7) |
(1.1) |
(1.2) |
(1.3) |
(1.3) |
(1.3) |
||
Acquisitions/disposals |
(1.7) |
(6.3) |
3.7 |
(8.1) |
1.3 |
1.3 |
1.3 |
||
Net interest |
(0.9) |
(1.5) |
(1.2) |
(0.8) |
(1.0) |
(0.5) |
(0.3) |
||
Equity financing |
23.0 |
3.9 |
(28.9) |
(2.5) |
(2.5) |
(2.5) |
(2.5) |
||
Dividends |
(4.6) |
(4.6) |
0.6 |
(2.1) |
(2.9) |
(3.9) |
(4.4) |
||
Other |
(2.4) |
0.0 |
(0.9) |
(7.0) |
(3.5) |
(3.5) |
(3.5) |
||
Net Cash Flow |
18.7 |
1.6 |
(13.9) |
(0.5) |
15.2 |
5.2 |
4.4 |
||
Opening net debt/(cash) |
|
|
2.4 |
11.7 |
20.0 |
8.9 |
9.3 |
(5.9) |
(11.1) |
FX |
(1.1) |
(0.8) |
(0.7) |
0.3 |
0.0 |
0.0 |
0.0 |
||
Other non-cash movements |
(26.9) |
(9.0) |
25.7 |
(0.2) |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
11.7 |
20.0 |
8.9 |
9.3 |
(5.9) |
(11.1) |
(15.5) |
Source: Braemar, Edison Investment Research
|
|
Research: Healthcare
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