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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
The strong full year trading update confirms that Braemar is in a good position to capitalise further on robust markets and management action taken over the last two years. The debt-free balance sheet leaves Braemar 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 raised our FY24 and FY25 estimates but retain our DDM-based 520p per share valuation.
Braemar |
Year-end strength drives upgrades |
Forecast upgrades |
Industrial support services |
4 April 2023 |
Share price performance
Business description
Next events
Analyst
Braemar is a research client of Edison Investment Research Limited |
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The strong full year trading update confirms that Braemar is in a good position to capitalise further on robust markets and management action taken over the last two years. The debt-free balance sheet leaves Braemar 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 raised our FY24 and FY25 estimates but retain our DDM-based 520p per share valuation.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
02/21 |
83.7 |
6.7 |
16.2 |
5.0 |
19.9 |
1.5 |
02/22 |
101.3 |
8.9 |
23.1 |
9.0 |
14.0 |
2.8 |
02/23e |
151.7 |
19.2 |
45.9 |
12.0 |
7.0 |
3.7 |
02/24e |
153.1 |
17.5 |
39.9 |
13.5 |
8.1 |
4.2 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Solid end to year sees U/L operating profit double
Following a positive trading update issued on 14 February, Braemar confirmed in its 22 March trading update that for the year ending 28 February 2023 trading had remained brisk through to year end, and that it had achieved record revenue and operating profit. Revenue is expected to be ‘not less than £150m’ (FY22: £101.3m), and underlying operating profit ‘not less than £20m’ (FY22: £10.1m), almost double the previous year. There were numerous drivers of growth, including robust underlying markets, a successful change of strategy, two acquisitions and a tailwind from US dollar strength. Finally, Braemar announced that it intends to pay a final dividend of 8p/share for FY23, which equates to a total dividend of 12p for the year, an increase of 33% y-o-y.
Balance sheet strength offers M&A optionality
Following the streamlining of the business by disposing of non-core activities, Braemar has restructured and simplified the reporting lines into three divisions. Management believes that the outlook is encouraging too, with net cash of £6.9m on the balance sheet at year end. We estimate that this will grow this year to c £13m and that Braemar is likely to seek further acquisitions of teams to fill the gaps that it has in unserved, or underserved, markets. These potential deals are not reflected in our estimates and therefore represent upside.
Valuation: 520p/share valuation retained
The trading update confirmed the positive underlying conditions for FY23 and the positive outlook for FY24, driven by good markets and strategic progress. Following the trading update, we retain our existing FY23 underling operating profit estimates, but raise FY24 and FY25 estimates due to more favourable FX assumptions, where we previously assumed that US dollar strength would reverse. This no longer seems likely in these more stable times, hence we assume a rate of US$1.22/£, down from US$1.37/£, in FY24 and FY25. We retain our dividend discount model (DDM) based valuation of 520p/share as our dividend forecasts are unchanged.
FY24 revenue and profit estimates upgraded materially
For FY23, we have raised revenue estimates as the markets have proven to be somewhat stronger than we had previously expected. However, additional costs relating to investment in the business, bonus accruals, share-based payments and the related higher National Insurance costs have resulted in no change at the operating profit level. For FY24, we have made a material change to our US dollar/ sterling exchange rate assumption, moving from c US$1.37/£, to US$1.22/£. We had previously made the cautious assumption that sterling could strengthen back to the c US$1.37/£ level, similar to the rate seen in FY22, but this now seems unlikely as markets are arguably stabilised somewhat. This change in the exchange rate is the material driver of revenue, which partly feeds down to profits, although the increased costs mentioned above feed through into FY24, resulting in a y-o-y decline in operating profit, despite the overall uplift. A similar trend is seen in our FY25 estimates, not shown here.
Exhibit 1: Revised estimates
2022 |
2023e |
2024e |
|||||
Old |
New |
% chg |
Old |
New |
% chg |
||
Revenue |
101.3 |
130.6 |
151.7 |
16.2% |
112.5 |
153.1 |
36.1% |
Y-o-y % change |
21.0% |
28.9% |
49.7% |
- |
-13.9% |
0.9% |
- |
EBITDA – Edison basis |
13.5 |
23.6 |
23.6 |
0.0% |
19.9 |
21.5 |
8.1% |
Y-o-y % change |
18.6% |
74.3% |
74.3% |
- |
-15.7% |
-8.8% |
- |
Underlying operating profit |
10.1 |
20.1 |
20.1 |
0.1% |
16.4 |
18.0 |
10.0% |
Y-o-y % change |
30.3% |
99.8% |
100.1% |
- |
-18.4% |
-10.4% |
- |
Normalised operating profit |
10.1 |
20.1 |
20.1 |
0.1% |
16.4 |
18.0 |
10.0% |
Y-o-y % change |
30.3% |
99.8% |
100.1% |
- |
-18.4% |
-10.4% |
- |
PBT (reported, pre-exceptionals) |
8.5 |
19.2 |
19.2 |
(-0.2%) |
15.9 |
17.5 |
10.2% |
Y-o-y % change |
66.3% |
124.7% |
124.4% |
- |
-17.2% |
-8.6% |
- |
EPS – diluted, normalised (p) |
18.8 |
38.2 |
37.9 |
(0.8%) |
30.5 |
33.0 |
8.2% |
Y-o-y % change |
40.0% |
103.3% |
101.7% |
- |
-20.2% |
-12.9% |
- |
DPS (p) |
9.0 |
12.0 |
12.0 |
0.0% |
13.5 |
13.5 |
0.0% |
Y-o-y % change |
80.0% |
33.3% |
33.3% |
- |
12.5% |
12.5% |
- |
Net debt (pre IFRS 16) |
-9.3 |
5.9 |
7.0 |
18.1% |
11.2 |
12.8 |
14.0% |
Y-o-y % change |
5.1% |
-163.5% |
-175.0% |
- |
89.8% |
83.2% |
- |
Source: Braemar Shipping Services, Edison Investment Research
At this stage we have retained our existing dividend estimates, but should these be lifted due to better trading, it is possible that our DDM-based valuation of 520p could rise.
Exhibit 2: Financial summary
£m |
2020 |
2021 |
2022 |
2023e |
2024e |
2025e |
||
Year end 28 February |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
||||||||
Revenue |
|
|
117.7 |
83.7 |
101.3 |
151.7 |
153.1 |
157.7 |
EBITDA |
|
|
14.4 |
11.4 |
13.5 |
23.6 |
21.5 |
22.7 |
Normalised operating profit |
|
|
11.0 |
7.7 |
10.1 |
20.1 |
18.0 |
19.2 |
Exceptionals |
(3.8) |
(1.5) |
(0.3) |
0.0 |
0.0 |
0.0 |
||
Other |
0.7 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Reported operating profit |
7.9 |
6.2 |
9.7 |
20.1 |
18.0 |
19.2 |
||
Net Interest |
(1.4) |
(1.1) |
(1.2) |
(1.0) |
(0.5) |
(0.3) |
||
Joint ventures & associates (post tax) |
(0.3) |
0.0 |
(0.0) |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
9.4 |
6.7 |
8.9 |
19.2 |
17.5 |
18.9 |
Profit Before Tax (reported) |
|
|
6.3 |
5.1 |
8.5 |
19.2 |
17.5 |
18.9 |
Reported tax |
0.0 |
(1.6) |
(1.8) |
(4.2) |
(4.4) |
(4.7) |
||
Profit After Tax (norm) |
9.4 |
5.1 |
7.0 |
15.0 |
13.1 |
14.2 |
||
Profit After Tax (reported) |
6.3 |
3.6 |
6.7 |
15.0 |
13.1 |
14.2 |
||
Discontinued operations |
(2.3) |
1.0 |
7.2 |
0.0 |
0.0 |
0.0 |
||
Net income (normalised) |
9.4 |
5.1 |
7.0 |
15.0 |
13.1 |
14.2 |
||
Net income (reported) |
4.0 |
4.5 |
13.9 |
15.0 |
13.1 |
14.2 |
||
Basic average number of shares outstanding (m) |
31 |
31 |
31 |
33 |
33 |
33 |
||
EPS – basic normalised (p) |
|
|
30.19 |
16.23 |
23.06 |
45.93 |
39.91 |
42.91 |
EPS – diluted normalised (p) |
|
|
27.28 |
13.43 |
18.79 |
37.9 |
32.99 |
35.49 |
EPS – basic reported (p) |
|
|
12.88 |
14.45 |
45.56 |
45.93 |
39.91 |
42.91 |
Dividend (p) |
5.00 |
5.00 |
9.00 |
12.00 |
13.50 |
14.00 |
||
Revenue growth (%) |
(-0.2) |
(-28.9) |
21.0 |
49.7 |
0.9 |
0.0 |
||
EBITDA Margin (%) |
12.3 |
13.6 |
13.4 |
15.6 |
14.1 |
14.4 |
||
Normalised Operating Margin (%) |
9.4 |
9.2 |
9.9 |
13.3 |
11.8 |
12.2 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
114.7 |
106.6 |
99.8 |
97.3 |
94.7 |
92.2 |
Intangible Assets |
86.2 |
86.1 |
80.9 |
81.1 |
81.4 |
81.6 |
||
Tangible Assets |
11.9 |
9.8 |
7.1 |
4.3 |
1.5 |
(1.3) |
||
Investments & other |
16.5 |
10.7 |
11.9 |
11.9 |
11.9 |
11.9 |
||
Current Assets |
|
|
68.3 |
51.7 |
52.8 |
85.0 |
93.9 |
103.2 |
Debtors |
39.5 |
34.8 |
38.8 |
54.8 |
57.8 |
59.9 |
||
Cash & cash equivalents |
28.7 |
16.4 |
14.0 |
30.3 |
36.2 |
43.3 |
||
Other |
0.0 |
0.4 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Liabilities |
|
|
78.9 |
51.9 |
42.8 |
66.2 |
69.1 |
71.9 |
Creditors |
47.6 |
45.6 |
39.3 |
59.8 |
61.9 |
63.8 |
||
Tax and social security |
1.3 |
1.3 |
1.6 |
4.0 |
4.1 |
4.5 |
||
Short term borrowings |
25.1 |
0.0 |
0.0 |
0.3 |
0.6 |
0.9 |
||
Other |
4.8 |
4.9 |
1.9 |
2.2 |
2.5 |
2.8 |
||
Long Term Liabilities |
|
|
44.9 |
39.9 |
34.8 |
34.8 |
34.8 |
34.8 |
Long term borrowings |
2.6 |
2.7 |
2.8 |
2.8 |
2.8 |
2.8 |
||
Other long term liabilities |
42.2 |
37.3 |
32.0 |
32.0 |
32.0 |
32.0 |
||
Net Assets |
|
|
59.2 |
66.5 |
75.1 |
81.3 |
84.8 |
88.8 |
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Shareholders' equity |
|
|
59.2 |
66.5 |
75.1 |
81.3 |
84.8 |
88.8 |
CASH FLOW |
||||||||
Op Cash Flow before WC and tax |
9.7 |
8.8 |
12.0 |
22.7 |
21.0 |
22.4 |
||
Working capital |
(0.4) |
4.1 |
5.2 |
4.8 |
(0.6) |
(0.0) |
||
Exceptional & other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
1.0 |
||
Tax |
1.2 |
(0.8) |
(2.2) |
(1.8) |
(4.2) |
(4.4) |
||
Other |
1.4 |
1.8 |
6.2 |
0.6 |
0.2 |
(0.0) |
||
Net operating cash flow |
|
|
11.8 |
13.9 |
21.3 |
26.2 |
16.4 |
18.9 |
Capex |
(1.7) |
(1.1) |
(1.2) |
(1.3) |
(1.3) |
(1.3) |
||
Acquisitions/disposals |
(6.3) |
3.7 |
(8.1) |
1.3 |
1.3 |
1.3 |
||
Net interest |
(1.5) |
(1.2) |
(0.8) |
(1.0) |
(0.5) |
(0.3) |
||
Equity financing |
3.9 |
(28.9) |
(2.5) |
(2.5) |
(2.5) |
(2.5) |
||
Dividends |
(4.6) |
0.6 |
(2.1) |
(2.9) |
(3.9) |
(4.4) |
||
Other |
0.0 |
(0.9) |
(7.0) |
(3.5) |
(3.5) |
(3.5) |
||
Net Cash Flow |
1.6 |
(13.9) |
(0.5) |
16.3 |
5.9 |
8.1 |
||
Opening net debt/(cash) |
|
|
11.7 |
20.0 |
8.8 |
9.3 |
(7.0) |
(12.8) |
FX |
(0.8) |
(0.7) |
0.3 |
0.0 |
0.0 |
0.0 |
||
Other non-cash movements |
(9.0) |
25.8 |
(0.3) |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
20.0 |
8.8 |
9.3 |
(7.0) |
(12.8) |
(20.9) |
Source: Braemar Shipping Services, Edison Investment Research
|
|
Research: TMT
EQS remains in the frustrating position of having a strong commercial proposition in digital whistleblowing still awaiting the impetus of full legislative implementation in its home market of Germany. The timing of this boost remains uncertain, so some caution is built into current year guidance, which is predicated on the law coming into full force in Q323. Financial results will therefore be weighted to H223. The strategy remains sound, in our view, in establishing a much wider pool of customers for cross- and up-selling of other corporate compliance cloud-based services. Upcoming EU regulation on ESG monitoring and reporting should provide substantial further opportunities. Despite the delays, the shares continue to trade well below the level indicated by our DCF.
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