Braemar (LSE:BMS) — Final results for the year ended 28 February 2026

0:00 Good afternoon, and welcome to the BRAEMAR PLC investor presentation. Throughout today's recorded presentation, attendees will be in listen only mode. Questions are encouraged and can be submitted via the q and a tab situated on the right hand side of your screen. Before we begin, I'd just like to submit the following poll, which I kindly ask you to submit your responses to. I'd now like to hand over to CEO, James Gundy. James, good afternoon. Good afternoon, and thank you, and welcome, everyone, and and welcome to BRAEMAR's twenty six twenty five, twenty six full year results. My name is James Gundy, and Grant Fowler's CFO. But as you know from presentation, Grant will be taking over my place as I step down. So to start the presentation, it's a little bit about a little short intro on where we were and where we are today from when I took over five years ago.

0:50 Just quickly, I when I came into the business, I had a very clear vision of simplifying the business, reducing the debt of the business, and buying more and and building out the security business, which we built into in 2017, which I'd complement our presence in. So you can see from this chart, which is in front of you, you can see we were in 2021 at $883,700,000 revenue then. Now we're at $1.35.6, And you can see from below that, you can see the charting percentages there at 27%. Investment advisers, which is which is sale and purchase and finance, 44%.

1:35 And you can see risk adviser, which is a security business, has driven risen by 785%. We're proud of that. The underlying operating profit from '21 to '26 has gone 7.7, which is 13,200,000. And the net debt, as you can see, has been hugely reduced. And in fact, Grant will tell you a bit later on that the net debt going into beginning of March fell to into cash positive position. Okay? So I can literally say the business has totally transformed, and it's a business now that we can say that we fully we fully we fully understand and we've and we brought it back, as I said, to very much the basic model. And you can see the margin has very much improved.

2:21 The revenue per head has increased from 21 at £233 to £350 We've increased our global footprint across the world. We've gone from 14 offices now to 19 offices. We've expanded some really crucial parts of the world, especially in The U. S. We opened up recently an office in Cape Town, South Africa. The forward order book, which is an important part of our business, it helps us to budget when we come to the start of the year. That's moved from $43,400,000 to $72,500,000 I think Grant mentioned it a bit later on where it is at present day. So you can see the diversity on the next slide, you can see how diversified.

3:09 The most important thing about this slide, which I'm most proud about, is the fact it's more equilibrium as opposed to in one sector. The previous in '21, it's majority chartering. Securities is like 4%. S and P and finance, 26%. But if you move towards the right hand side, you can see how we're now more equal where we've grown the security business to 21% of our business, S and P is 24%, and the chartering is 55%. Okay. Thanks, Vikram. Thanks, James. So I'll talk through the financial performance. So FY 2026 saw a resilient financial performance in line with expectations.

3:56 Revenue at £135,600,000 was 4% lower than the prior year, and that decrease was really driven by weaker chartering rates, particularly in the first half. We did see an improvement in rates and activity as we went into the second half, and you can see here the split of first half, second half revenues with a 12% increase from the first half to the second half, reflecting those improvements. Underlying operating profit at GBP 13,200,000 was 21% lower than the prior year, and that was really driven by the lower revenues that we saw coming through. Underlying operating profit margin was down to 10%, which reflects the operational leverage in the business. As we grow the revenue, we saw that operational leverage coming through. And as the revenue did improve in the second half, you can see quite clearly there that the first half margin was 9%, but as revenues improved, that grew quite quickly to 11% in the second half.

4:55 Now as James mentioned, the forward order book remained strong at $72,500,000 And although it's lower than the prior year, which reflects a decrease in our chartering forward order book, Pleasingly, that has grown since the year end and is now just under $78,000,000 at the end of April. The board was recommending a final dividend of 4.5p per share, which takes our full year dividend to 7p per share. And that's unchanged from the previous year and in line with our capital allocation framework that we launched last year. Net debt at the year end was £2,900,000 which is as expected cycle, and we returned to a net cash position shortly after the year end in March.

5:45 So if we move on now to the income statement, as I said, revenue down 4%, really driven by that weaker chartering revenue, which was rate driven, and we'll come on to that. Operating expenses remained well controlled, a decrease of 2% in the year, mainly due to lower bonus costs on the back of those lower revenues. And I said underlying operating profit margin of 10%. Underlying earnings per share, 24.23p, which is 23% lower than the prior year and the full year dividend of 7p per share. If we look at revenue now in a little bit more detail, total revenue is £135,600,000 which were £6,300,000 or 4% lower than the prior year.

6:33 Chartering revenue was 16% lower than the prior year, reflecting weaker chartering rates in the first half, particularly in tankers. Tankers was £9,600,000 lower than the previous year. Investment advisory increased by $2,000,000 As James said, that's mainly our sale and purchase and corporate finance divisions, which is 6%. Asset values remained strong throughout much of the year, which helped that activity. Risk advisory or our securities business performed very strongly, increasing by 29 to £28,800,000 And this was really driven by increased levels of volatility in the period and the launch of our U. K. Organized trading facility, which is building out our infrastructure for our securities business so we can continue to grow that.

7:19 In dollar terms, revenues were just 1% lower, but we saw a movement in the FX, The sterling revenues are dollar denominated. So in dollar terms, it was just 1% lower. Overall, I think this revenue performance clearly illustrates the benefits of our diversified revenue streams and how that is increasing resilience and delivering more sustainable revenues. So as I said, operating costs remain well controlled, reducing by £2,700,000 Staff costs were £2,700,000 lower, really reflecting lower bonus costs. We continue to invest in key hires, which is important for our our future growth, and that was £500,000.

8:06 T and E, travel and entertainment, was £700,000 lower, and that was really a reduced spend across the business, and there's a shipping event that happened prior year, which was inflated to costs. Office costs were £1,200,000 higher. We had some surplus space in our Londoner head office, which was previously sublet. That's now vacant, and we're actively looking to sublet that, and that will then reduce that cost hopefully in the coming period. So just looking at liquidity. The group continues to generate strong cash flow, pounds 12,100,000 operating cash flows of £12,100,000 for the year. During the year, we paid dividends of £1,600,000 £2,000,000 of share were purchased through our share buyback program that we announced last year and £4,100,000 of shares were purchased for the employee share ownership plan.

9:01 Pounds 2,600,000 was paid to settle the outstanding convertible loan notes that we had on our balance sheet, and that was the final payment in respect of the Navios transaction that we completed some time ago. In addition, the provision that was held on our balance sheet relating to the independent investigation of £1,900,000 was settled and paid in the period. So as I said, net debt position at the end of the year, £2,900,000.400000 higher than a year earlier, and we've shortly returned to a cash positive position. So to summarize our financial performance, so I said a resilient revenue performance with significant improvement in the second half as we saw rates and activity improve. Improvement in revenue per head, which is GBP 3 and 50,000.

9:50 Reduction in operating profit margin for the year, it is important to look first half, second half where you see that move from 9% to 11%. The forward order book continues to be strong and continues to improve. Net debt, broadly unchanged and a full year dividend of 7p unchanged on the prior year and in line with our capital allocation framework. James and I will now just talk about what we're seeing in the market. So moving on. Obviously, a lot is happening with regards to the war in The Middle East and its impact on the business. So if we look at this slide and we look at the impact that we're seeing on tankers, if you look here, you can see this darker line here is the traffic that goes through the Strait Of Hormuz.

10:38 And you can see that once facilities commence, the the the those passengers, the traffic through the Strait drops to almost from from, right, about 45, 50 a day on tankers to almost zero. Now what we saw in that period as well is that the rates for that route have increased dramatically. However, that's really irrelevant because the rate is a true measure because, no, you can't fix a ship. So whilst rates have increased, you can't actually fix a ship. Now offsetting that, what we've seen as the conflict has continued is this green this lighter green line here, which is the transits to The U. S. Gulf. So what we're seeing is more ships move towards The U. S. Gulf, and they are then they're taking on cargoes, and then they're servicing other parts of the world. And so what we're seeing is new routes being established that were historically being serviced through The Middle East. A lot of that's coming out of The U. S. Now.

11:42 So we're now seeing routes going as far as The U. S. To Australia or West And East Africa, which would have typically been serviced out of The Middle East. So we're seeing that type of activity. We've seen rates increase globally given what's going on. So broadly for us, at the moment, because we are well diversified and we have a strong U. S. Business, we're seeing a net neutral from a revenue perspective. So what we're losing on the fixtures that we would have been seeing in The Middle East, We're gaining on what we're servicing and fixing in The U. S. So we're broadly seeing a revenue neutral picture for the first two months of the year. And if we look a little bit further on, there's clearly some short term uncertainty.

12:31 But once the Strait reopens, we do believe that it will present opportunities. We're now almost three months into the conflict. And as I've said, we're seeing lower Middle East or reduced Middle East fixtures offset by increased fixtures elsewhere at higher rates. We're also seeing those new trade routes established, which I just mentioned, and that's really trying to meet that demand that was being serviced from The Middle East. You're seeing that demand being serviced from different places. Now once the Strait reopens, we believe there will be significant global demand that will need to be met. And we expect that strategic and commercial oil reserves will need to be replenished, so definitely will need to be replenished. And much of that tonnage, the ships to do that, are likely to be in the wrong location geographically.

13:18 So if we look further ahead, we do believe that this situation will take some time to resolve itself. The strategic inventories will probably be replaced gradually, and possibly, countries will actually look to increase their reserves to build increased energy security. There's also the potential, yes, depending on what a reopening of the Strait looks like and the terms of that, the owners may remain cautious, and they may want not want to use the straight. So that could lead to a change in trading patterns, and that's likely to increase freight costs through longer voyage times and more tonne miles. But overall, once it reopens, we believe it will be positive. So looking at rates during the year.

14:08 Yeah. No. Just quickly just adding on to to what Grant said, and we obviously I'm sure you have a few questions at the end of this presentation regarding the the hormones, etcetera, what's going on there so we can answer those questions more in-depth then. But on this slide here, on Slide 16, you can see our BRAEMAR index. The BRAEMAR index is something we do every presentation that shows you where the global shipping fleet, that's everything as a response again from containers to tankers to dry cargo. And you can see where where the average is at present. So the market's still looking strong, just reemphasizing the fact that we are in every market. We're not a singular broker where it is in certain markets. We are in all shipping and chartering markets.

14:54 The BRAEMAR index for tankers, although I think you're seeing, as Grant said in the results, the first half of our year was more difficult as the rates were lower, especially in tankers. But the back end of the year, that financial year, the market, you can see, especially going into the conflict, you see the market rates moving back up again. And the BRAEMAR dry index, speaking to the analysts only yesterday, you know, the outlook is looking very strong for dry. We're seeing some strong numbers on The Capes and throughout the business. Dry cargo market isn't so affected with the the conflicts in The Middle East. It's only really fertilized on the ships that are really is a big impact there, but everything else can be sourced elsewhere.

15:42 So, you know, that's positive as well. We have a big business in Australia and dry cargo as well as London. Right. Going on to Slide 17. The demand side still looks very positive. I mean, the global GDP, you know all about that. That's still an upward trajectory. The China industrial growth still looks positive. We show that as far as iron imports there and oil demand is still very strong. Yes. They're maintaining their oil exports as far as products concerned using their refinery products within the within the country. And the oil index is still showing a positive graph there. So we have to emphasize once again, and I think it's important to see the fact that shipping shipping as far as global goods is from 85%.

16:31 So you can see it's really it's really a big indicator on some of these graphs. Right. This is one that just shows you a little bit about the global fleet. So you can see the global fleet is is growing. Once again, that helps us having multiple desks covering all markets, but the situation with when back in 2006, it was probably more unique as far as what ships were being built, more driven towards tankers and dry cargo. As we move on into the last couple of years, it's more driven by containers and LNG over and above those sectors. The fleet is aging. That's undoubtedly. Ships have been having we use we this sort of indicate max fifteen years of age, but ships go on longer, moving towards more more twenty years of age, but the fleet is aging compared to what's coming in.

17:26 And new building book, older book on the right hand side, you can see still down from the highs of 2005 for the financial crisis, but the fact is it has to be replenished. We have a big new building department as big as in the department, so we need to be able to see revolt revolt in all those transactions. I'll pass him back to. Thanks. I'll I'll give a strategy update. So we've made good progress on our strategic framework that we launched last year during the course of FY '26. We said that we were gonna hire 10 new brokers, senior brokers. We actually hired 16, and that's across all parts of the business, all of our shipbroking businesses as well as our risk advisory businesses.

18:13 We said we'd expand into one new jurisdictions, and we opened our first office in Africa. And that really does expand our geographic and strategic reach. We focused on efficiencies. We employed a global head of tanker operations. During the course of the year, we reduced headcount, we centralized the claims areas, and we implemented 20 fourseven coverage to really improve service and response times. We said that we'd aim to complete a transaction during the course of the year, and we evaluated a select number of complementary transactions. Now we focus on opportunities that will really create sustainable value for our shareholders. And whilst those select number did go through to due diligence, no transaction was completed in the year. And it's really because we give a very strong discipline and rigor to the transactions that we evaluate. We've got very firm. We've got lots of good opportunities going inorganically in the business. And when we look at transactions, it really does need to ensure it's complementary and create shareholder value.

19:20 So whilst we didn't complete the transaction, we remain well positioned to capitalize on the right opportunity. But come back to that point, we maintain discipline and a rigorous approach to what we look at. So in line with our strategic framework, we've now set new targets for this new financial year. We have maintained our hiring target of 10 new brokers in the year. We will continue to build resilience and diversification across the group, and we will establish a new securities desk, and we have plans for that. And that's really building on the infrastructure that we've put in place over the last few years and how we could bring these desks on board. Our focus on efficiency continues, and we're embedding AI across the business. We're initially focusing on areas where it can bring real productivity and efficiency gains in some of the corporate support functions and in some of the shipbroking areas where there's perhaps more manual tasks that we can initially automate using AI.

20:25 And finally, as I said, we remain focused on completing a complementary transaction during the year. Now we've said that we want to have £200,000,000 worth of revenues by FY 'thirty, and we continue to have confidence in that target. We have a clear path to get down. In FY 'twenty one, as you heard from James, the business generated £81,000,000 of revenues. In FY 'twenty six, it generated £136,000,000 If you look how we got there, part of that growth was organic through hiring individuals and teams of teams of people at desks to join the business. And the remainder was from inorganic growth, and it was the acquisitions of Southport and Madrid Shipping Advisors that generated £16,000,000 Now how we see the next stage of growth to get us from where we are today is that 200,000,000 It broadly splits fifty-fifty in that we will continue to make the hires. So we hired those 16 people in the last financial year. We've got a target of £10,000,000 and we'll do that for the following years. That quite quickly compounds, and you start to see that revenue come through. So that's part of the growth, and the remainder is through transactions.

21:39 Now the market remains very fragmented. There are opportunities there. But, again, we remain focused on doing the right transaction that adds shareholder value. And it may be that other organic opportunities come along, and so we actually hire more than our target in one particular year if there's desks, etcetera, available. So we're flexible on that, but we have confidence that we can get to that $200,000,000 revenue target. So just to summarize, we've delivered a robust financial performance in line with expectations, and that's been against a fairly challenging market backdrop in the first half. We've continued to generate strong operational cash flow, net debt broadly unchanged, but cash positive in March.

22:28 We've made significant strategic progress opening in a new geography, expanding our capability and hiring new brokers. We completed our £2,000,000 share buyback and maintained our dividend at 7p per share in line with our capital allocation framework. As we look further ahead into the new financial year, we've seen strong momentum in the latter half of FY 2026, which is carried into this year with a strong trading performance for the first two months of the year. The forward order book has strengthened to $78,000,000 We have received approval to open our office in the Dubai International Financial Centre, which again is part of the infrastructure to grow our risk advisory or securities business, and we expect our European OTF to be approved in the first half of this financial year.

23:16 We continue to look at complementary acquisitions. As you've heard from James, the market fundamentals remain robust, and we're confident in our FY 'thirty targets. So we've built a very strong platform here to support the growth of the business going forward. So I'd also much like to take the opportunity on the call to thank James for all of his work as group CFO. I think you can see from the first few slides that we went through that the business has been transformed under James' tenure, and it's been great to work with James. I'm delighted James is staying with the business, just focusing on the his his ship broking, and I'm very excited to be taking over in the CEO role, but looking forward to continuing to work with James. Thank you, Grant. I'll just like to say to add to that that I have utmost faith in Grant doing a stellar job coming into the role.

24:09 For me, it's stepping back into full time broking, but I've only I've always never stopped broking. I've always been on the desk. So for me, it's not such a difficult transition. And I just wish wish him all the very best, and that's all to say as well. Thank you. So we'll now go to the Q and A, and thank you for those that have submitted their questions. And if you want to submit a question, please do. So I'll just work through these, if that's okay. First question is how are you actively working to become a more sustainable business? So I think from what talked about from a I'll take it two ways. If we look at revenue sustainability, first of all, I think you've heard that what we've done over the last few years to make the business more diversified gives us that level of sustainability.

24:59 So you have clearly seen here weaker chartering, partially offset by strong performances from risk advisory and investment advisory. If you look back a couple of years, you'd probably see we would definitely see the converse of that. So it's really important that we continue. We're not going to start doing anything outside of ship broking and securities, but that we continue to expand our offering in those spaces and become a more diversified and resilient business, which will deliver those sustainable revenues. I think if we're looking at sustainability from an environmental standpoint, we obviously work very closely with our clients when they're looking at purchasing ships to ensure that, you know, they're they're doing the right thing for the environment. So we have people internally who provide consultancy to help our clients make the right decision when they're when they're investing in vessels.

25:54 Just next question. On new CFO, can you give any further update on appointing a new head of finance? Yes. We're making good progress on that. We're now down to a very, very short list, and I'm hoping that we'll have that over the line certainly well before the AGM when I officially step into the CEO role. In off next question. In offshore, with the elevated oil price and perhaps prospects of more exploration activity, would you expect to see more ordering of offshore support vessels? Yeah. I think I think we can answer that question. You had to remember there was first of all, the offshore supply vessels have a lot longer longevity compared to the, what we would say, the tankers.

26:41 We saw an explosion as in like many ships being built in the during before the financial crisis. I mean, we saw we saw the layup scenario. We saw we saw lots recycling in that market as well. So the good thing is the market is now rebounding. It's a very strong market. So I think the players in that market are actually taking their time to rebound into the new building market. But our desks alone are involved in those deals, and we are seeing it. So we would expect that to happen to grow to grow into that market further. We have opened the offices now. We have offices in offshore in Singapore, London, and Houston. Thank you. Next question. You've made good progress on hiring new brokers, but can you talk about departures and staff turnover generally?

27:33 I think I think that's typically high or a lower level. I think I I think I I think I can start start the question. Look. The most important is, look. We're in a we're in a high margin business. It's a it's a broker environment. It's a people's business. And being being a business that is very much in the limelight at the moment, it does it does what we do see is outside is trying to break into new markets as we have seen that. At the same time, I can tell you now from my ACM shipping days when we were very much one dimensional tanker market, First thing I knew when we came into BRAEMAR, the first thing I said when coming into the actual, you know, seat of CEO was to build our breadth, remove ourselves from noncore business, move into higher margin business, and protect the business from any one potential, what we would say, being attacked in one market. So what we can sit here and say is, yes, we've lost some people, but b, we've rehired very quickly on the back of those losses.

28:40 And the fact it's amazing how we see the market consolidating more and more that we feel we can attract. And because we have such diverse business across all sectors and those desks across there's lot of cross fertilization of those desks. We're attracting people. And so and also on top of that, we've got a young talent running the business who are attracting other talent as well. So for us, I think we're a positive what we're trying to do here. Yeah. And I I I know that that there was there was some start turnover in the earlier part of the year, and that seems to sell then in the latter part of the year. And we are, as Jane said, established talent as well as as well as a strong pipeline of of new talent. And you have to understand, it's not just charging we do. You look at our business now.

29:28 We were 4% in securities. We're now at 20% securities. So when you might ask about charging people, we're growing securities. So the revenue stream is growing across the business. Thank you. Next question. How disciplined will you remain around leverage and return thresholds when evaluating M and A opportunities given the fragmented market? Are valuation expectations becoming more reasonable as macro uncertainty increases. I think that we will be and if it always depends on the type of transaction, how you structure it, the free cash flows that you're getting, the synergies, particularly on a revenue perspective. I mean, if we look back a US transaction that we did a few years ago, there were clear revenue synergies by being part of a larger group. So there's a lot of things that we consider.

30:24 Would we consider increasing our leverage target slightly if we thought that it was the right deal to do and there was good strong free cash flow to reduce that quite quickly? Yes. If it delivered sustainable shareholder value and it was a complementary fit. So we're quite flexible around that. Then in terms of the valuations, we haven't seen that any sort of adjustment at the moment, but as you know, we're early days, and and we may say see that in in the coming period. With widespread interest in the shipping space as of late, including rumors of ICAP looking to acquire Albras, IFCOR, for a very high multiple. Are you seeing increased institutional interest in our shares, which are clearly undervalued?

31:17 I'll start there. Yeah. Well, I think I I one thing I have been saying for a very long time is the fact that, and I said it again today, is that we will see consolidation. I think you can see from this presentation very clearly that, yes, we're very much going into that IDV world ourselves. So we've branched out and and the breadth of the business into other sectors. There's only so many brokers you can have on one particular desk. So the importance is to grow into new sectors. We only heard about the rumors of this. Are we seeing the fact that we know that we do know our shares are undervalued very much compared to what we think the value of business is worth. But at the same time, we know that the small cap market has been undervalued for some time.

32:10 That helps you out. Our job is to build the business up to grow into moving to a slightly know, move above the £100,000,000 to show more interest to institutions. But we have big institutions involved in the business. We know one big institution. So but Yeah. And I'll I'll add to that. You know, we've we've obviously just announced our numbers today. We've got a good roadshow over the next week or so where we're meeting institutions. You know, I think our our our equity story is clear and and what we've delivered over the last five years. So I'm hopeful that we'll have a positive roadshow. It's only rumors the market say. I mean, mean, ICAP, as far as I know, haven't come out and said anything about it or denied or confirmed or said anything. So it's just market rumors as far as we're concerned.

32:56 Thank you. That's the last of the questions. Unless anyone has any other questions, please please feel free to. Perfect. Thank you both for answering those questions. Before we ask investors to share their feedback, which I know is important to you, James, if I could just ask you for a few closing comments to wrap up with, that would be great. This feels a bit strange. It's my last ones to be doing this. It's been going but at the same time, I want to thank you for taking time to listen to our presentation. I think you can see it's a very robust set of figures and the resilience. And I'd like to think you can see now the business is built at its breadth. It's a completely different business to it was five years ago. We know what we want to do. We know what we want to achieve. That is the key factor. And I also wanna wish once again Grant all the very best going forward. Thank you once again. Thank you.

33:45 Brilliant. Thank you, guys. Once again, ladies and gentlemen, could I ask that you don't close the session just yet as you'll now be automatically redirected to a page to give your feedback, which helps the company better understand your views and expectations. On behalf of the management team, we'd like to thank you for attending today's presentation. I wish you all a good afternoon. Thanks a lot.