Braemar Plc · LSE:BMS
Braemar — Braemar Shipping Services — FY2017/18 Earnings Presentation
41 slides from Braemar's earnings presentation, May 2018
Slide 1: Preliminary Results Year Ended 28 February 2018
Braemar Shipping Services plc Preliminary Results Year Ended 28 February 2018 May 2018
Slide 2: Agenda
Agenda Strategic Delivery Financial Results Shipbroking Division Technical Division Financial Division Logistics Division Earnings & Dividend Investment Case 2 www.braemar.com
Slide 3: Strategic Delivery
Strategic Delivery • Technical Division returned to profit • Entry into financial advisory market via acquisition of Braemar NAVES • Executed strategic recruitment plan to build key shipbroking market segments • Stabilised Logistics division following management change • Entry into the commodity der
Slide 4: Braemar's Key Drivers
Braemar’s Key Drivers Shipbroking Financial Key Drivers • Global trade & economic growth • Chartering • Restructuring • Sale and Purchase • Debt advisory • Supply and demand for • Valuations • Loan Service Monitoring commodities and tonne miles • Research and Analysis • Corporate finance • Oil price
Slide 5: Segmental Results
Segmental Results FY 2017/18 FY 2016/17 FY 2015/16 Revenue Profit Margin Revenue Profit Margin Revenue Profit Margin £m £m % £m £m % £m £m % Shipbroking 61.8 7.7 12.5% 63.1 7.9 12.5% 70.7 9.7 13.7% Technical° 34.6 0.7 2.1% 39.0 (2.2) (5.6)% 54.3 5.2 9.6% Logistics 33.2 0.8 2.3% 33.9 1.3 3.7% 34.1 1.
Slide 6: Specific Items
Specific Items FY 2017/18 FY 2016/17 FY 2015/16 £m £m £m Amortisation (2.4) (0.5) (1.1) Acquisition Items • ACM (0.6) (1.5) (2.4) • Braemar-Naves (5.1) (0.1) - • Braemar-Atlantic (0.6) - - • Other (0.4) (0.4) - (6.7) (2.0) (2.4) Restructuring Costs - (2.9) - Gain on sale of investment - 1.7 - (9.1)
Slide 7: Group Balance Sheet
Group Balance Sheet FY 2017/18 FY 2016/17 FY 2015/16 £m £m £m Goodwill and other intangibles 92.4 80.0 79.6 Non current assets 8.1 9.9 9.2 Current assets 55.6 57.2 58.1 Current liabilities (44.4) (48.6) (46.6) Acquisition liabilities (10.7) - - Pension (3.4) (4.3) (1.2) Provisions / Other (1.4) (1.1
Slide 8: Group Cashflow Statement
Group Cashflow Statement FY 2017/18 FY 2016/17 FY 2015/16 £m £m £m Cashflow from operations 9.5 6.8 10.4 Acquisitions (12.3) - - Capital expenditure (1.0) (1.0) (2.2) Restructuring cash outflow - (2.2) - Proceeds from sale of investment - 1.8 - Dividends/purchase of own shares (4.0) (8.3) (7.7) FX I
Slide 9: Shipbroking Division
Shipbroking Division FY 2017/18 FY 2016/17 FY 2015/16 Revenue £61.8m £63.1m £70.7m Underlying Operating Profit £7.7m £7.9m £9.7m Operating Margin 12.5% 12.5% 13.7% Staff 298 291 334 Forward Order Book $44m $39m $49m Total Transactions 6,073 6,454 6,643 Resilient performance in turbulent markets
Slide 10: Shipbroking – Revenue and Staff by Desk
Shipbroking – Revenue and Staff by Desk Year Ended 28 February 2018 Revenue Staff Derivatives 1% Derivatives 2% Dry Cargo 19% Dry Cargo 30% Tankers 41% Tankers 49% S&P 26% S&P 18% Offshore 8% Offshore 5% 10 www.braemar.com
Slide 11: Overview of Trends in Shipbroking
Overview of Trends in Shipbroking Rates Transaction Demand Supply numbers Crude Tankers Product Tankers Specialised Tankers Dry bulk sector Offshore sector Newbuilding Second-hand S&P Demolition 11 www.braemar.com
Slide 12: Dry Bulk Spot Market
Dry Bulk Spot Market Recovery enters third year Baltic Dry Index Baltic Dry Index 12,000 1,600 10,000 8,000 1,200 6,000 800 4,000 400 2,000 Q1 as annual low point 0 0 1985 2003 1987 1989 1991 1993 1995 1997 1999 2001 2005 2007 2009 2011 2013 2015 2017 Dec 15 Jun 16 Dec 16 Jun 17 Mar 16 Mar 17 Dec 17
Slide 13: Dry Bulk Fleet Development
Dry Bulk Fleet Development Dry Bulk Fleet Development (m DWT) 120 900 100 800 Forecast Scrap 80 700 Scrap 60 600 Forecast Orders 40 500 Slip/Cancel 20 400 Sched Delivery - 300 Delivered -20 200 Fleet Size (RHS) -40 100 -60 - 13 www.braemar.com
Slide 14: Dry Bulk Market Share
Dry Bulk Market Share Spot Iron Ore $65 Source: FMG-Metalytics 14 www.braemar.com
Slide 15: Tanker Fleet Development
Tanker Fleet Development Additions* vs. removals 15 www.braemar.com
Slide 16: Tanker Demand Growth
Tanker Demand Growth 16 www.braemar.com
Slide 17: Environmental Regulations
Environmental Regulations • Reduction of SOX from 3.5% to 0.5% from January 2020 • Purchase low sulphur fuel at a premium • Fit Scrubbers: Cost $1-3m. Pay back 3-5 years • Scrapping uneconomic tonnage • Newbuildings with NOX Tier 3 post Jan 2016 • Longer run: demand for LNG or Methanol fuelled vesse
Slide 18: Shipbroking – Divisional Objectives for 2018/19
Shipbroking – Divisional Objectives for 2018/19 • Maintain our market share in the tankers market • Expand presence in the dry cargo market • Build presence in chemical chartering market • Build presence in the regulated commodity future market via Braemar- Atlantic • Continue to develop synergies b
Slide 19: Technical Division
Technical Division EVENT-LED PROJECT-LED Marine Adjusting Engineering Offshore Dynamic Marine Warranty Consultancy Loss Adjusting Positioning, Surveys FMEA, Audits LNG, Afloat, Offshore Surveys Litigation Support Onshore & Installation bunkering Engineering Offshore Specialist Vessel Ports & Harbour
Slide 20: Technical Division
Technical Division FY 2017/18 FY 2016/17° FY 2015/16 Revenue £34.6m £39.0m £54.3m Underlying Operating Profit/(Loss) £0.7m £(2.2)m £5.2m Operating Margin 2.1% (5.6)% 9.6% Restructuring Costs* - £(2.9)m - Staff 261 303 444 Considerable management action taken Returned to profit during H2 2017/18
Slide 21: Technical Division Results
Technical Division Results Underlying Operating Profit (£m) 4.0 3.0 2.0 1.0 0.0 H1 2015/16 H2 2015/16 H1 2016/17 H2 2016/17 H1 2017/18 H2 2017/18 -1.0 -2.0 -3.0 21 www.braemar.com
Slide 22: Technical – Divisional objectives for 2018/19
Technical – Divisional objectives for 2018/19 • Increase focus on division’s specialisms • Enhance tendering capabilities via selective recruitment • Utilise links with Financial division to provide technical due diligence services to debt and equity providers • Sell Braemar Response 22 www.braemar.
Slide 23: Financial Division
Financial Division FY 2017/18 FY 2016/17 FY 2015/16 Revenue £3.7m - - Underlying Operating Profit £1.8m - - Operating Margin 47.6% - - • Acquisition of NAVES Corporate Finance GmbH completed on 26/9/2017, for €24-35 million (depending on performance) • Braemar NAVES - a new division offering wide ra
Slide 24: Financial Division
Financial Division Braemar Naves develops and implements corporate finance and financial asset management solutions Services include: • Transactions and capital raising • Restructuring • Financial management and loan servicing • Insolvency advisory services 24 www.braemar.com
Slide 25: Synergy Opportunities
Synergy Opportunities Asset inspection Technical Financial analysis of the borrower Financial Advice on outlook based on fundamental research Shipbroking Expert opinion on asset value Shipbroking Opinion on recovery potential and proposal of alternative Financial solutions / restructuring concepts S
Slide 26: Financial – Divisional objectives for 2018/19
Financial – Divisional objectives for 2018/19 • Leverage relationship with sale and purchase Shipbroking • Develop international presence in London and other locations • Develop deeper links with the Technical to provide packaged services to the financial sector • Obtain appropriate licenses to prov
Slide 27: Logistics Division – Port Agency
Logistics Division – Port Agency FY 2017/18 FY 2016/17 FY 2015/16 Revenue £8.2m £7.8m £6.9m Underlying Operating Profit £0.6m £0.8m £0.7m Margin 7.3% 10.7% 9.8% New management team in place and performing well Revenue increased, particularly in UK ports and key client hub services High client
Slide 28: Logistics Division – Freight Forwarding
Logistics Division – Freight Forwarding FY 2017/18 FY 2016/17 FY 2015/16 Revenue £25.0m £26.1m £27.3m Underlying Operating Profit £0.2m £0.5m £0.9m Margin 0.8% 1.9% 3.3% Focus on key client and specialist cargos delivers value Challenging market with increasing price competition makes general wo
Slide 29: Logistics – Divisional Objectives for 2018/19
Logistics – Divisional Objectives for 2018/19 AGENCY • Target dry cargo and offshore port agency in UK • Build further internal synergies with shipbroking division FREIGHT FORWARDING • Drive new sales initiatives and resources • Increase gross margin through improved procurement 29 www.braemar.com
Slide 30: Dividend and Earnings
Dividend and Earnings 2017/18 2016/17 2015/16 Half Year Dividend 5.0p 9.0p 9.0p Full Year Dividend 10.0p 5.0p 17.0p Total Dividend 15.0p 14.0p 26.0p Underlying Basic EPS 21.1p 10.7p 34.7p Cover 1.4 0.8 1.3 • Proposed final dividend of 10p (at a cost of c£3m), payable on 27 July 2018 • Full year divi
Slide 31: Investment Case
Investment Case • Continue to follow a diversified portfolio strategy • Unique intragroup synergies and client service offering • Serve interrelated end-markets through the life cycle of a vessel • All divisions benefit from growth in world trade • Trading on a conservative PE rating compared with p
Slide 32: Any Questions?
ANY QUESTIONS? 33 www.braemar.com
Slide 33: Appendices – Additional Information
Appendices– Additional Information • Accounting for acquisition of NAVES Corporate Finance GmbH • Accounting for acquisition of Atlantic Brokers Holdings Ltd • Disclaimers 33 www.braemar.com
Slide 34: Naves acquisition deal structure
Naves acquisition deal structure Total Consideration Capped at €35m (cash and principal value of loan notes) Core Consideration €24m Core Consideration: • €14.8m on completion 50% in cash, and 50% in convertible loan notes pro- rata to all sellers • €1.5m paid to non management in shares (based on 3
Slide 35: Naves acquisition deal structure
Naves acquisition deal structure Convertible Loan Notes • Convertible at a fixed 30% (390.3p) / 50% (450.3p) premium for Management and Non-Management shareholders respectively, to 300.2p completion equity price • Euro denominated, 3% p.a. coupon, redeemable two years after issue by Braemar or holde
Slide 36: Naves acquisition accounting treatment
Naves acquisition accounting treatment Braemar’s accounting policy is to exclude Specific Items from underlying profits. The following specific transaction items will be recognised within reported operating profit but excluded from underlying operating profit: • Transaction expenses • Fair value mov
Slide 37: Naves acquisition future accounting
Naves acquisition future accounting 2018/19 2019/20 2020/21 2021/22 2022/23 £m £m £m £m £m Acquisition Costs - - - - - Retention 2.3 1.2 0.5 0.2 0.1 Maximum earn-out 5.7 2.1 0.7 - - 8.0 3.3 1.2 0.2 0.1 • All future payments to management sellers will be treated as specific item costs in income state
Slide 38: Atlantic acquisition deal structure
Atlantic acquisition deal structure Total Consideration £4.8m (cash and equity) Consideration terms • £2.7m in cash • £2.1m in ordinary shares • All working sellers (90.5%) subject to 3 year clawback based on employment Atlantic acquisition accounting treatment Braemar’s accounting policy is to excl
Slide 39: Atlantic acquisition future accounting
Atlantic acquisition future accounting 2018/19 2019/20 2020/21 £m £m £m Acquisition Costs 0.2 - - Consideration 1.6 1.6 1.4 1.8 1.6 1.4 • All payments to working sellers will be treated as specific item costs in income statement • All completion consideration paid to working sellers as subject to a
Slide 40: Disclaimers
Disclaimers This presentation (this "presentation") is for general information only and is the property of Braemar Shipping Services Plc ("Braemar"). Making this presentation available in no circumstances whatsoever implies the existence of a commitment or contract by or with Braemar, or any of its
Slide 41: Contact details
James Kidwell E: [email protected] T: 020 3142 4100 Louise Evans E: [email protected] T: 020 3142 4100
Braemar Shipping Services — FY2017/18 Earnings Presentation on 6ix