Braemar — Suspension lifted; interims due 29 November

Braemar (LSE: BMS)

Last close As at 23/02/2024

GBP2.75

8.00 (3.00%)

Market capitalisation

GBP88m

More on this equity

Research: Industrials

Braemar — Suspension lifted; interims due 29 November

Following the release of the delayed, but in-line FY23 results covering the period to February 2023, trading in Braemar shares recommenced on 21 November. Now that the internal investigation into the accounting treatment of historical transactions has concluded, Braemar is due to release its H124 results on 29 November. The company remains well-positioned to drive its future growth strategy, as previously outlined. The trading outlook is promising and Braemar should be able to leverage its strong balance sheet in pursuit of strategic growth. We have maintained our underlying profit estimate for FY24 and trimmed it for FY25, but retain our 520p/sh valuation.

Andy Murphy

Written by

Andy Murphy

Director, Financials & Industrials

Black cargo ship

Industrials

Braemar

Suspension lifted; interims due 29 November

FY23 results

Industrial support services

22 November 2023

Price

280p

Market cap

£92m

US$1.22

Net cash (£m) at 28 February 2023

6.9

Shares in issue

32.9m

Free float

85%

Code

BMS

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

20.2

20.2

(10.5)

Rel (local)

17.8

16.7

(10.9)

52-week high/low

331p

224p

Business description

Braemar is the second largest shipbroker in the world, providing broking services to the dry cargo, deep sea tanker, specialised tanker and sale and purchase markets. It also addresses the fast-growing areas of offshore and renewables, securities and financial markets.

Next events

Interims

November 2023

FY trading update

February 2024

Analyst

Andy Murphy

+44 (0)20 3077 5700

BraemarBraemar is a research client of Edison Investment Research Limited

Following the release of the delayed, but in-line FY23 results covering the period to February 2023, trading in Braemar shares recommenced on 21 November. Now that the internal investigation into the accounting treatment of historical transactions has concluded, Braemar is due to release its H124 results on 29 November. The company remains well-positioned to drive its future growth strategy, as previously outlined. The trading outlook is promising and Braemar should be able to leverage its strong balance sheet in pursuit of strategic growth. We have maintained our underlying profit estimate for FY24 and trimmed it for FY25, but retain our 520p/sh valuation.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

02/22

101.3

8.9

23.1

9.0

12.1

3.2

02/23

152.9

18.0

45.5

12.0

6.9

4.3

02/24e

150.2

15.0

40.5

13.5

7.1

4.8

02/25e

150.2

15.6

39.9

14.0

7.2

5.0

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Strong growth highlighted by in-line results

Braemar’s delayed FY23 results confirmed that revenue rose 51% to £152.9m and that underlying operating profit almost doubled to £20.1m, both figures in line with previous guidance. Underlying EPS increased by 65% to 46.22p and a total dividend for the year of 12.0p (FY22: 9.0p) was declared, implying almost four times cover. Braemar ended the year with net cash of £6.9m, a positive swing of £16.2m from last year’s net debt position of £9.3m.

Investigation leads to modest BS reclassification

An internal independent investigation carried out this year into several historical transactions between 2006 and 2013 meant that Braemar was unable to publish its FY23 Report and Accounts by 30 June. This resulted in the suspension of trading on 3 July. The investigation has now concluded with a £2.0m balance sheet reclassification. The company can now proceed as ‘normal’ and the shares have been relisted. H124 results are due to be released on 29 November.

Valuation: DDM based valuation retained at 520p/sh

The outlook statement contained within the FY23 results suggests a robust trading environment in FY24 and into FY25 and an expectation that underlying operating profit from FY25 would be ‘not less than £18m’, excluding c £1.1m of costs relating to the acquisition of the Madrid office. Previously we had forecast underlying operating profit in FY24 and FY25 of £18.0m and £19.2m, respectively, which moves down to £16.7m and £17.1m, including the acquisition costs that will be included in the underlying operating profit figure, but in reality are not seen by Braemar as ‘underlying costs’. Therefore, adding back these costs gives a ‘true’ underlying operating profit of £18m and £18.2m, which is unchanged in FY24 and a £1.0m cut in FY25, reflecting increased caution further out. However, we retain our dividend discount model-based valuation of 520p/sh as dividend forecasts are unchanged.

Exhibit 1: Financial summary

£'m

2019

2020

2021

2022

2023

2024e

2025e

2026e

28-February

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

117.9

117.7

83.7

101.3

152.9

150.2

150.2

150.2

EBITDA

 

 

10.4

14.4

11.4

13.5

23.4

20.1

20.4

20.8

Normalised operating profit

 

 

9.1

11.0

7.7

10.1

20.1

16.7

17.1

17.4

Exceptionals

(12.5)

(3.8)

(1.5)

(0.3)

(2.5)

(1.3)

(1.3)

0.0

Impairment

0.0

0.0

0.0

0.0

(9.1)

0.0

0.0

0.0

Other

0.5

0.7

0.0

0.0

3.0

(2.5)

0.0

0.0

Reported operating profit

(2.9)

7.9

6.2

9.7

11.5

15.4

15.8

17.4

Net Interest

(0.2)

(1.4)

(1.1)

(1.2)

(2.0)

(1.8)

(1.5)

(0.6)

Joint ventures & associates (post tax)

0.0

(0.3)

0.0

(0.0)

(0.0)

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

8.9

9.4

6.7

8.9

18.0

15.0

15.6

16.8

Profit Before Tax (reported)

 

 

(3.1)

6.3

5.1

8.5

9.5

11.2

14.2

16.8

Reported tax

(1.5)

0.0

(1.6)

(1.8)

(4.9)

(2.8)

(3.6)

(4.2)

Profit After Tax (norm)

7.3

9.4

5.1

7.0

13.2

12.2

12.0

12.6

Profit After Tax (reported)

(4.7)

6.3

3.6

6.7

4.6

8.4

10.7

12.6

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Discontinued operations

(22.7)

(2.3)

1.0

7.2

0.0

0.0

0.0

0.0

Net income (normalised)

7.3

9.4

5.1

7.0

13.2

12.2

12.0

12.6

Net income (reported)

(27.4)

4.0

4.5

13.9

4.6

8.4

10.7

12.6

Basic average number of shares outstanding (m)

31

31

31

31

29

30

30

30

EPS - basic normalised (p)

 

 

23.78

30.19

16.23

23.06

45.48

40.54

39.90

41.91

EPS - diluted normalised (p)

 

 

21.79

27.28

13.43

18.79

37.85

33.99

33.45

35.14

EPS - basic reported (p)

 

 

(88.63)

12.88

14.45

45.56

15.85

27.83

35.49

41.91

Dividend (p)

5.00

5.00

5.00

9.00

12.00

13.50

14.00

15.00

Revenue growth (%)

14.4

(-0.2)

(-28.9)

21.0

50.9

(-1.8)

0.0

0.0

EBITDA Margin (%)

8.8

12.3

13.6

13.4

15.3

13.4

13.6

13.8

Normalised Operating Margin

7.7

9.4

9.2

9.9

13.1

11.1

11.4

11.6

BALANCE SHEET

Fixed Assets

 

 

91.7

114.7

106.6

99.8

97.7

94.2

90.7

87.2

Intangible Assets

86.0

86.2

86.1

80.9

75.4

74.2

73.1

72.0

Tangible Assets

2.0

11.9

9.8

7.1

5.3

3.0

0.6

(1.8)

Investments & other

3.7

16.5

10.7

11.9

17.0

17.0

17.0

17.0

Current Assets

 

 

71.9

68.3

50.3

49.8

80.3

85.1

91.9

100.2

Debtors

37.1

39.5

33.4

35.8

43.3

51.1

51.1

51.1

Cash & cash equivalents

24.1

28.7

16.4

14.0

36.0

33.1

39.8

48.2

Other

10.6

0.0

0.4

0.0

1.0

1.0

1.0

1.0

Current Liabilities

 

 

92.0

78.9

54.0

43.4

65.8

68.6

71.5

74.2

Creditors

44.9

47.6

47.8

39.9

58.4

61.2

61.2

61.2

Tax and social security

1.4

1.3

1.3

1.6

4.1

2.1

2.8

3.5

Short term borrowings

35.8

25.1

0.0

0.0

0.0

0.0

0.0

0.0

Other

9.8

4.8

4.9

1.9

3.3

5.4

7.4

9.5

Long Term Liabilities

 

 

13.2

44.9

39.9

34.8

35.4

35.4

35.4

35.4

Long term borrowings

4.6

2.6

2.7

2.8

2.9

2.9

2.9

2.9

Other long term liabilities

8.6

42.2

37.3

32.0

32.6

32.6

32.6

32.6

Net Assets

 

 

58.4

59.2

62.9

71.5

76.7

75.3

75.6

77.8

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

58.4

59.2

62.9

71.5

76.7

75.3

75.6

77.8

CASH FLOW

Op Cash Flow before WC and tax

(1.8)

9.7

8.8

12.0

12.8

14.5

17.6

20.2

Working capital

4.6

(0.4)

4.1

5.2

4.1

(2.9)

2.1

2.1

Exceptional & other

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Tax

(1.1)

1.2

(0.8)

(2.2)

(4.4)

(4.9)

(2.8)

(3.6)

Other

6.1

1.4

1.8

6.2

11.4

2.9

2.7

1.8

Net operating cash flow

 

 

7.8

11.8

13.9

21.3

23.9

9.7

19.6

20.5

Capex

(2.4)

(1.7)

(1.1)

(1.2)

(0.8)

(1.6)

(1.6)

(1.6)

Acquisitions/disposals

(1.7)

(6.3)

3.7

(8.1)

5.4

1.3

1.3

1.3

Net interest

(0.9)

(1.5)

(1.2)

(0.8)

(1.8)

(1.8)

(1.5)

(0.6)

Equity financing

23.0

3.9

(28.9)

(2.5)

1.4

1.4

1.4

1.4

Dividends

(4.6)

(4.6)

0.6

(2.1)

(3.2)

(3.9)

(4.4)

(4.6)

Other

(2.4)

0.0

(0.9)

(7.0)

(6.8)

(8.0)

(8.0)

(8.0)

Net Cash Flow

18.7

1.6

(13.9)

(0.5)

18.1

(2.9)

6.7

8.4

Opening net debt/(cash)

 

 

2.4

11.7

20.0

8.8

9.3

(6.9)

(4.0)

(10.8)

FX

(1.1)

(0.8)

(0.7)

0.3

2.6

0.0

0.0

0.0

Other non-cash movements

(26.9)

(9.0)

25.8

(0.3)

(4.5)

0.0

0.0

0.0

Closing net debt/(cash)

 

 

11.7

20.0

8.8

9.3

(6.9)

(4.0)

(10.8)

(19.2)

Source: Company data and Edison Investment research


General disclaimer and copyright

This report has been commissioned by Braemar and prepared and issued by Edison, in consideration of a fee payable by Braemar. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Braemar and prepared and issued by Edison, in consideration of a fee payable by Braemar. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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