26th Oct 2006 07:01
Braemar Seascope Group PLC26 October 2006 BRAEMAR SEASCOPE GROUP plc PRESS RELEASE Interim Results - 6 months ended 31 August 2006 Braemar Seascope Group plc (the "Group"), an international provider of shippingservices, today announced half-year results for the six months ended 31 August2006. HIGHLIGHTS • Turnover £50.5m (2005/6: £30.6m) • Pre-tax profit before impairment charge £5.0m (2005/6: £5.3m) • Reported pre-tax profit £4.1m (2005/6: £5.3m) • Basic EPS before impairment charge 16.88p (2005/6: 18.29p) • Reported EPS 12.03p (2005/6: 18.29p) • Increased interim dividend declared 6.75p per share (2005/6: 6.50p) • Net cash £8.1m (31 August 2005: £9.3m, February 2006: £13.6m) Commenting on the results and outlook, Sir Graham Hearne, Chairman, said: "The overall performance in shipbroking has been good and our forward order bookis at a record level reflecting a shift towards longer-term business." "The outlook for the remainder of the year is positive. The diversity of ourshipbroking activities tends to moderate the influence of any one aspect ofshipping on our earnings. Overall conditions are expected to remain favourableand, taking into account the level of business already concluded this year, weexpect second half earnings to show an improvement over the first half." For further information, contact: Braemar Seascope Group plc Alan Marsh Tel 020 7535 2650 James Kidwell Tel 020 7535 2881 Aquila Financial Peter Reilly Tel 020 7202 2601 Charles Stanley Securities Philip Davies Tel 020 7149 6457 Notes to editors: Through its subsidiaries Braemar Seascope Group plc's services comprise: Braemar Seascope Limited Specialised shipbroking and consultancy services to international ship owners and charterers in the tanker, gas, offshore, container and dry bulk markets. www.braemarseascope.com DV Howells Limited Environmental services provided principally to the oil, marine, rail industries www.dvhowells.co.uk Cory Brothers Shipping Agency Limited Freight forwarding and logistics and port agency services within the UK. www.cory.co.uk Wavespec Limited Marine engineering and naval architecture consultants to the shipping and offshore markets. www.wavespec.com INTERIM ANNOUNCEMENT - SIX MONTHS ENDED 31 AUGUST 2006 CHAIRMAN'S STATEMENT I am pleased to announce another strong set of results for the first half of theyear. The markets in which the Group operates have for the most part remainedbuoyant, though perhaps at somewhat lower levels than experienced in 2004 and2005. The overall performance in shipbroking has been good and our forwardorder book is at a record level reflecting a shift towards longer-term business.In August 2006 we were able to complete the acquisition of the 50 per centinterest in Braemar Container Shipping and Chartering Limited which the Groupdid not already own for £1.3m, thereby consolidating our interest in theimportant chartering and sale and purchase broking for container vessels. Our non-broking businesses - Cory Brothers and Wavespec - also achieved goodresults and contributed 20 per cent of our underlying operating profits. Thisis a useful start towards our objective of broadening the range of shippingservices we can provide outside of the pure shipbroking field. A further step in this direction was achieved with the establishment of anenvironmental services business through the acquisition of DV Howells in March2006 and Hi-bar in September for a maximum combined consideration of £1.0m.Services provided include pollution incident response, training and consultancymainly for the oil majors and other transportation companies. We also increasedour presence in the UK agency market, particularly in Liverpool, through thepurchase of Gorman Cory which will take place over two years. Pre-tax profits in the first half were £4.1m compared to £5.3m in the first halfof last year and earnings per share were 12.03 pence per share compared to 18.29pence per share in 2005/6. The difference was mainly attributable to animpairment charge of £0.95m against goodwill on the acquisition of ourAustralian dry cargo business due to a lower trading performance and arestructuring of its business operations. Excluding this impairment charge,pre-tax profits were £5.0m (2005/6: £5.3m) and earnings per share were 16.88pence per share (2005/6:18.29 pence per share). The outlook for the remainder of the year is positive. The diversity of ourshipbroking activities tends to moderate the influence of any one aspect ofshipping on our earnings. Overall, conditions are expected to remain favourableand, taking into account the level of business already concluded this year, weexpect second half earnings to show an improvement over the first half. In light of the positive outlook the Directors have declared an interim dividendof 6.75 pence per share. The interim dividend will be paid on 13 December 2006to shareholders on the register at the close of business on 17 November 2006,with an ex-dividend date of 15 November 2006. Sir Graham HearneChairman25 October 2006 CHIEF EXECUTIVE'S REVIEW OF ACTIVITIES Shipbroking The tanker chartering market remained healthy for the first half of ourfinancial year, after a slow start in the first calendar quarter. Over thesummer, demand for sweet crudes produced in Atlantic regions for Far Eastdestinations served to increase voyage lengths for many of the larger crudetankers and by the end of the second quarter freight rates improved to thelevels seen in 2005. However, the recent reduction in oil prices has now hadsome effect on the crude tanker chartering, although since refining marginsremain good the volume of product shipments is being sustained. There is concernthat oil production may be constrained and that this could have some effect onthe freight markets, although this may be offset by rising global demandespecially from China and India and seasonal increases in crude shipments. The chemical sector is currently enjoying sustained growth both on volume andrates and this should only be strengthened with the change in regulations forthe transport of biofuels which will mean those cargoes falling more under the'chemical shipping' banner in the future. During the first half the gas sector remained reasonably strong but startedweakening in the third calendar quarter, associated with a high crude price.However, as crude prices have fallen certain sectors of the gas market haveshown marked increases in volumes moved. The average of the Baltic Dry Index for the first half was 2,837 (first half of2005: 2,959) having declined quite sharply in the early part of the year beforeundergoing a steady recovery since August. Our volume of fixtures has increased,particularly for smaller Handymax vessels, but a larger proportion of businesswritten so far this year is period charter business where commissions will beearned evenly over the duration of the charters. Forecasts for the dry cargomarket are positive and the outlook for the remainder of the year is promising.We opened new offices in Singapore in March and in Brazil in September, toservice the growing importance of both places for ship owners and charterers.There are significant fiscal incentives for ship operators who base theiroperations in Singapore and our new office has been staffed from our Australiancompany, in recognition of the attraction to clients. Sale and purchase activity has seen a shift in the activity mix from second handto newbuilding. There have been fewer high value second hand transactions thishalf, especially when compared with the first half of 2005/6 which benefitedfrom a number of deals financed by new capital raised in the public markets.Offsetting this is a substantial increase in newbuilding orders placed atshipyards in China, Japan, Korea, Vietnam and Poland. This is despite theextensiveness of shipyards' order books, which is an indication of theconfidence in the long-term returns that can be made from shipping assets. Thenewbuilding forward order book is now at its highest level (both in terms of thenumber of ships and commission value) with ship deliveries stretching out to2010/11. There is a steady rise in demolition business, which we expect willincrease as the phase-out of single hull tankers accelerates. Our Offshore team had their most successful ever six months in a market that hasseen greater exploration activity in the North Sea and around the World. Thestimulus for this activity has been provided by a higher oil price. Day ratesand spot activity have both been high and the addition of good period charterand project business has increased an already extensive forward book. The Container chartering market was relatively stable during the first half andour business has grown through involvement in both chartering and sale andpurchase transactions. The first half results are reflected as a 50 per centjoint venture and, following our buyout of the other shareholders, the secondhalf will include 100 per cent of the results. The market is expected to softenin the coming months providing new opportunities for our young team, which willbe well placed to take advantage of greater liquidity in the charter market asmore tonnage becomes available for employment. Technical shipping support - Wavespec Both revenue and profits have increased significantly as the company is nowbenefiting from the plan approval and supervisory work at three shipyards forthe construction of up to 48 new LNG vessels in connection with the Qatargas IIproject. This project is expected to generate income for the company forseveral years. Wavespec and Braemar Seascope together are playing a leading rolein the development of the seaborne transportation of Compressed Natural Gas,both in a technical and commercial capacity. Ship agency, forwarding and logistics - Cory Brothers Cory Brothers has shown an improved performance across all activities. Agencyvolumes at all offices have continued strongly following the increases seen inthe latter part of 2005. The acquisition of the business and assets of GormanShipping, which handles over 750 vessels per annum concentrated on the Merseyand the Manchester Ship Canal, has strengthened our UK agency activities. Thebusiness has been combined with the existing Cory Liverpool office making it oneof the foremost ships' agents in the area. The Liner, Logistics and Forwardingbusinesses continue to grow their income from most key logistics contracts andsupplemented these with a number of one-off projects. The acquisitions made in2005 have both performed in line with expectations. Morrison Tours has added toits customer base and improved the take-up of the shore excursions on offer,whilst in forwarding, Planetwide has seen significant growth of existingservices and added new consolidation routes to the Middle East. Recently Coryhas been successful in winning several new pieces of business such that activitylevels should be at least maintained in the second half of the year. Environmental services - DV Howells DV Howells has had a promising first six months in the Group, maintainingactivity with its core customers while focusing on growing its customer base.The success in winning the prestigious MOD contract is an indication of thepotential the company has to build its business within the UK and beyond. Thepurchase of Hi-bar's business in September 2006 has completed the incidentresponse coverage within the UK and enhanced the company's training andconsultancy capability. Bunker trading Bunker sales have been lower than expected due to the high oil price which hasto some extent limited demand in the Australasian region. The second half isexpected to benefit from an upturn associated with the cruise season in thePacific and also the recent drop in the crude oil price which has resulted inlower bunker prices. Financial The Group's profits and earnings are seen most clearly in the analysis belowwhich shows the figures before the Braemar Seascope Pty goodwill impairmentcharge, which is not a cash cost. The impairment has arisen because the earningsderived from the Australian business have been less than expected at acquisitionmainly as a result of a weaker handymax chartering market in the Pacific region. First half 2006/7 First half 2005/6 £000 £000Profit before impairment charge and tax 5,023 5,297Impairment of Braemar Seascope Pty goodwill (950) -Reported profit before tax 4,073 5,297 pence PenceEPS (pre impairment charge) 16.88 18.29Impairment of goodwill (4.85) -Basic EPS 12.03 18.29 The majority of the Group's income is US$ denominated and the average rate ofexchange for conversion of US$ income in the six months to August 2006 was $1.81/£ (Interim 2005/6: $1.80/£, Full Year 2005/6: $1.80/£). The rate oftranslation at 31 August 2006 was $1.90/£. The estimated full year tax rate on profits has been applied at the half year.This rate was 33.0% excluding the impact of the impairment charge which isnon-deductible for tax (Interim 2005/6: 33.3%, Full year 2005/6: 30.3%). Net cash was £8.1m at 31 August 2006 compared with net cash of £13.6m as at 28February 2006. This excludes £4.9m of restricted cash, which the company washolding as escrow agent for certain clients pending completion of transactionsin which the company acted as broker. The Group normally generates most of itsannual cash flow in the second half of the year and the reduction in cashprincipally reflects the payment of the annual broking bonus and full yeardividend relating to the prior year. Net cash expended on acquiring businesses was £1.1m in respect of DV Howells, 50per cent of Braemar Container Shipping and Chartering and 41 per cent of GormanCory. This is net of £0.7m of cash in the acquired balance sheets but does notinclude further potential cash consideration of, in aggregate, £0.9m dependenton profitability. Alan MarshChief Executive25 October 2006 Income statement for the six months ended 31 August 2006 Unaudited Unaudited Unaudited Six months to Six months to Year ended 31 Aug 2006 31 Aug 2005 28 Feb 2006Continuing operations Notes £'000 £'000 £'000 Revenue 2 50,512 30,592 68,497 Operating costs (46,725) (25,381) (58,607)Amortisation of other intangibles (62) (172) (287)Impairment of goodwill (950) - -Operating costs excluding amortisation of other intangibles and impairment of goodwill (45,713) (25,209) (58,320) Operating profit 2 3,787 5,211 9,890 Finance income 148 47 162Finance costs (4) (15) (2)Share of post-tax profit from joint ventures 142 54 243 Profit before taxation 4,073 5,297 10,293Taxation 3 (1,657) (1,769) (3,115) Profit for the period 2,416 3,528 7,178 Attributable to:Ordinary shareholders 2,357 3,528 7,178Minority interest 59 - - Profit for the period 2,416 3,528 7,178 Earnings per ordinary share 5 Basic - pence 12.03 p 18.29 p 37.03 pDiluted - pence 11.84 p 17.79 p 36.18 p Consolidated Balance Sheet as at 31 August 2006 Unaudited Unaudited Unaudited As at As at As at 31 Aug 06 31 Aug 05 28 Feb 06Assets Notes £'000 £'000 £'000Non current assetsGoodwill 21,909 21,953 22,480Other intangible assets 1,812 245 462Property, plant and equipment 5,349 4,954 5,034Investments 1,481 1,410 1,611Deferred tax assets 566 269 510Other receivables 76 71 58 31,193 28,902 30,155Current assetsTrade and other receivables 18,732 15,591 17,717Financial assets- Derivative financial instruments 473 194 12Restricted cash 4,946 1,090 -Cash and cash equivalents 8,134 11,464 13,567 32,285 28,339 31,296 Total assets 63,478 57,241 61,451 LiabilitiesCurrent liabilitiesFinancial liabilities- Short term borrowings - 2,198 -- Derivative financial instruments - - 99Trade and other payables 21,831 18,929 25,490Current tax payable 2,362 4,148 2,224Finance leases - 31 11Provisions 210 - 288Client monies held as escrow agent 4,946 1,090 - 29,349 26,396 28,112Non-current liabilitiesDeferred tax liabilities 239 58 139Provisions 433 341 343 672 399 482 Total liabilities 30,021 26,795 28,594 Total assets less total liabilities 33,457 30,446 32,857 EquityShare capital 2,014 1,975 1,988Capital redemption reserve 396 396 396Share premium 8,434 7,880 8,046Merger reserve 21,346 21,346 21,346Shares to be issued (997) (637) (997)Other reserves 393 426 639 Retained earnings 1,541 (940) 1,439 33,127 30,446 32,857Minority interest 330 - - Total equity 33,457 30,446 32,857 Consolidated Cash Flow Statement Unaudited Unaudited Unaudited Six months Six months Year ended 31 Aug 06 31 Aug 05 28 Feb 06 Notes £'000 £'000 £'000Cash flows from operating activitiesCash generated from operations 6 (771) 5,732 13,769Interest received 148 43 156Interest paid (4) (16) (1)Tax paid (1,670) (1,389) (3,210) Net cash generated from operating activities (2,297) 4,370 10,714 Cash flows from investing activitiesDividends received from joint ventures 145 228 239Acquisition of subsidiaries, net of cashacquired (1,132) (274) (521)Purchase of property, plant and equipment (246) (115) (387)Proceeds from sale of property, plant andequipment - - 29Purchase of investments - (29) (36)Other long term receivables (18) 24 37Net cash used in investing activities (1,251) (166) (639) Cash flows from financing activitiesProceeds from issue of ordinary shares 414 405 535Dividends paid (2,255) (1,923) (3,194)Purchase of own shares - - (360)Payment of principal under finance leases (11) (11) (28)Net cash used in financing activities (1,852) (1,529) (3,047) Foreign exchange differences (33) 52 - (Decrease)/increase in cash and cashequivalents (5,433) 2,727 7,028Cash and cash equivalents at beginning of theperiod 13,567 6,539 6,539Cash and cash equivalents at end of theperiod 8,134 9,266 13,567 Consolidated Statement of changes in shareholders' equity Unaudited 2006 2005 Share Share Other Retained Total Total equity capital premium reserves earnings equity £'000 £'000 £'000 £'000 £'000 £'000 At 28 February 1,988 8,046 21,384 1,439 32,857 29,062Profit for the period - - - 2,357 2,357 3,528Cash flow hedges - - 364 - 364 (740)Exchange differences - - (17) - (17) 45Dividends paid - - - (2,255) (2,255) (1,902)Issue of shares 26 388 - - 414 405Consideration to be paid - - (738) - (738) -Credit in respect of share option schemes - - 145 - 145 48At 31 August 2,014 8,434 21,138 1,541 33,127 30,446 BRAEMAR SEASCOPE GROUP PLCNOTES TO THE FINANCIAL INFORMATIONFOR THE SIX MONTHS ENDED 31 AUGUST 2006 1. Basis of preparation This financial information comprises the consolidated interim balance sheets asof 31 August 2006 and 31 August 2005 and related consolidated interim statementsof income and cash flows and statement of changes in equity for the six monthsthen ended of Braemar Seascope Group PLC (herein after referred to as "financialinformation"). In preparing this financial information management has used theprincipal accounting policies as set out in the Group's financial statements forthe year ended 28 February 2006 on pages 22 to 25. The comparative figures for the financial year ended 28 February 2006 are notthe company's statutory accounts for that financial year, but have beenextracted from those accounts. Those accounts have been reported on by thecompany's auditors and delivered to the registrar of companies. The report ofthe auditors was (i) unqualified, (ii) did not include a reference to anymatters to which the auditors drew attention by way of emphasis withoutqualifying their report, and (iii) did not contain a statement under Section 237(2) or (3) of the Companies Act 1985. 2. Segmental informationRevenue Six months to Six months to Year ended 31 Aug 2006 31 Aug 2005 28 Feb 2006 £'000 £'000 £'000Shipbroking 17,348 21,838 39,745Ship agency, forwarding & logistics 10,904 6,433 15,851Technical shipping support 3,191 2,321 5,202Environmental services 1,121 - -Bunker trading 17,948 - 7,699 50,512 30,592 68,497Operating profitShipbroking 3,828 4,929 9,003Goodwill impairment charge - shipbroking (950) - - 2,878 4,929 9,003Ship agency, forwarding & logistics 588 180 568Technical shipping support 245 102 289Environmental services 68 - -Bunker trading 8 - 30 3,787 5,211 9,890 Net Assets As at As at As at 31 Aug 2006 31 Aug 2005 28 Feb 2006 £'000 £'000 £'000Shipbroking 26,261 23,885 19,355Ship agency, forwarding & logistics (1,888) (1,363) (755)Technical shipping support 1,377 1,185 1,599Environmental services 622 - -Bunker trading (495) - (667) Operating group 25,877 23,707 19,532Cash and cash equivalents 8,134 11,464 13,567Short term borrowings - (2,198) -Current and deferred taxation (2,035) (3,937) (1,853)Share of joint ventures 698 627 828Other investments 783 783 783 Group 33,457 30,446 32,857 3. Taxation The taxation charge for the half-year is calculated using the estimatedeffective tax rate for the full year applied to the pre-tax profits at the halfyear. 4. Dividends The following dividends were paid by the Group: Six months to Six months to Year ended 31-Aug-06 31-Aug-05 28-Feb-06 £000 £000 £000Interim dividend 6.5 pence per share - - 1,271Final dividend 11.5 pence (2005: 10 pence) per share 2,255 1,902 1,902 2,255 1,902 3,173 The Directors have declared a dividend of 6.75 pence per ordinary share, payableon 13 December 2006 to shareholders on the register on 17 November 2006. 5. Earnings per share Six months to Six months to Year ended 31 Aug 2006 31 Aug 2005 28 Feb 2006 £'000 £'000 £'000 Earnings - continuing operations 2,357 3,528 7,178Goodwill impairment charge 950 - - Earnings before impairment charge 3,307 3,528 7,178 Pence Pence PenceEarnings per share - pence 12.03 18.29 37.03 Goodwill impairment - pence 4.85 - - Earnings before impairment charge - pence 16.88 18.29 37.03 Shares Shares SharesWeighted average number of ordinary shares 19,586,694 19,293,750 19,385,615Share options 326,503 536,150 452,339 Diluted weighted average number of ordinary shares 19,913,197 19,829,900 19,837,954 BRAEMAR SEASCOPE GROUP PLCNOTES TO THE FINANCIAL INFORMATIONFOR THE SIX MONTHS ENDED 31 AUGUST 2006 6. Cash generated from operations £'000 £'000 £'000Profit for the period 2,416 3,528 7,178Adjustments for:-Tax 1,657 1,769 3,115-Depreciation 232 143 339-Amortisation 62 172 287-Goodwill impairment charge 950 - --Derivative financial instruments - 201 --Profit on sale of property plant and - - (17)equipment-Interest income (148) (47) (162)-Interest expense 4 15 2-Share of post-tax profits of joint ventures (142) (54) (243)-Stock option expense 145 48 244Changes in working capital-Trade and other receivables (625) (1,335) (129)-Trade and other payables (5,336) 1,106 2,913-Provisions 14 186 242 Cash generated from operations (771) 5,732 13,769 Independent review report to Braemar Seascope Group plc Introduction We have been instructed by the company to review the financial information forthe six months ended 31 August 2006 which comprises the consolidated interimbalance sheet as at 31 August 2006 and the related consolidated interimstatements of income, cash flows and changes in shareholders' equity and relatednotes for the six months then ended. We have read the other informationcontained in the interim report and considered whether it contains any apparentmisstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The Listing Rulesof the Financial Services Authority require that the accounting policies andpresentation applied to the interim figures should be consistent with thoseapplied in preparing the preceding annual accounts except where any changes, andthe reasons for them, are disclosed. This interim report has been prepared in accordance with the basis set out inNote 1. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the disclosed accounting policies havebeen applied. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit and therefore provides a lower level of assurance.Accordingly we do not express an audit opinion on the financial information.This report, including the conclusion, has been prepared for and only for thecompany for the purpose of the Listing Rules of the Financial Services Authorityand for no other purpose. We do not, in producing this report, accept or assumeresponsibility for any other purpose or to any other person to whom this reportis shown or into whose hands it may come save where expressly agreed by ourprior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 31 August 2006. PricewaterhouseCoopers LLPChartered AccountantsWest London25 October 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Braemar Shipping