TIDMBMS
RNS Number : 1835R
Braemar Shipping Services PLC
03 November 2021
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO
CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE
REGULATION (EU NO. 596/2014) WHICH IS PART OF UK LAW BY VIRTUE OF
THE EUROPEAN UNION (WITHDRAWAL) ACT 2018. UPON THE PUBLICATION OF
THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE
IN THE PUBLIC DOMAIN
3 November 2021
BRAEMAR SHIPPING SERVICES PLC
("Braemar", the "Company" or the "Group")
Unaudited interim results for the six months ended 31 August
2021
Strategic ambition set out
Strong performance laying solid foundations for growth
strategy
Braemar Shipping Services Plc (LSE: BMS), a leading
international Shipbroker and provider of expert advice in shipping
investment, chartering, risk management and logistics services,
today announces its unaudited half-year results for the six months
ended 31 August 2021.
The board is delighted with the performance of the business in
the first half, a period in which the new management team laid
solid foundations from which to launch its growth strategy.
STRONG PERFORMANCE LAYING SOLID FOUNDATIONS
-- Refocused the Group on its core Shipbroking and corporate finance business.
-- 11% increase in revenue in the period from continuing
operations to GBP47.4m (H1 2020/21: GBP42.8m).
-- 10% increase in underlying operating profit to GBP5.6m (H1 2020/21: GBP5.1m).
-- 23% increase in operating profit including the Logistics
Division, Cory Brothers, to GBP6.9m (H1 2020/21: GBP5.6m).
-- 28% increase in the forward order book to US$55.5m (28 February 2021: US$43.4m).
-- Balance sheet strengthened - net debt reduced by 23% to
GBP14.7m as at 31 August 2021 (28 February 2021: GBP19.1m), well
below the board's target net debt to EBITDA ratio of 1.5x.
-- Interim dividend of 2.0 pence per share declared to reflect
the strong cashflow and confidence in the business.
-- Trading continues in line with the announced upgraded expectations for the full year.
-- Cory Brothers held for sale as discussions with Vertom
Agencies on a potential joint venture progress.
-- Disposal of non-core investment in AqualisBraemar LOC
("AqualisBraemar") and Engineering Division, Wavespec,
completed.
NEW STRATEGIC AMBITION
The board has set a strategic ambition to double the size of the
Group's core business over the next four years. The Group is
targeting both organic growth and complementary, value-added
acquisitions, and the board believes that consolidation is likely
in the Shipbroking space over the next few years.
Scale is increasingly important within the industry, which in
turn will increase our market share, diversify our revenue stream
and build on what is already a global brand within the Shipbroking
world.
OUTLOOK
The board continues to look forward with confidence as it sets
about delivering on its growth strategy centred on Shipbroking,
with a more streamlined business, and expects that revenue and
profit for the full year will exceed the previous year and meet
current upgraded expectations of operating profit.
Strong trading within Shipbroking, especially Dry Cargo, Sale
and Purchase, and Securities, looks set to continue in the second
half of the financial year, as the demand for the dry bulk sector
and container capacity remains high. Investment in these areas over
the last few years has strengthened our revenue line and market
share within the industry. The resurgent interest in the shipping
industry from both a lending and equity investment point of view
has meant that the Group's Financial Division, Braemar Naves, is
trading well ahead of last year and has completed two significant
transactions in the first six months of the year with a third
expected to complete before the end of the financial year.
Additionally, the Group's forward order book has increased by 28%
to US$55.5 million - predominantly with new building orders and Dry
Cargo - compared with US$43.4 million at the beginning of the
period.
In the previous financial year, we saw an unprecedented surge in
deep-sea tanker rates fuelled by contango storage demand. This
financial year, we have seen this unwind and a huge cut-back in oil
demand due to the COVID-19 pandemic. As the world starts to move
back to normality, and exports of oil increase, we believe that a
consequent increase in deep-sea tanker rates is likely and that
Braemar is in an ideal position to take full advantage.
James Gundy, Group Chief Executive Officer of Braemar,
commenting on the Group's growth strategy, said:
"The board has focused and delivered on simplifying the Group
and reducing debt, which in turn allows us to concentrate our
attention on growing our core business, something we fully
understand. Scale is increasingly important within the industry,
and, if we are to best service the growing needs of our clients, we
must continue to provide further geographical reach and push for
diversification. The board believes that building scale will
further strengthen our client base, counterparties, employees and
shareholders, as well as allowing us to reduce the impact of
cyclical markets.
Our strategic ambition is to push towards doubling the size of
the Group within four years, through organic growth and
complementary, value-added acquisitions.
I also want to thank our staff for their continued efforts in
what can only be described as abnormal working conditions over the
last six months."
FINANCIAL HIGHLIGHTS
Revenue H1 21/22 H1 20/21 Change
GBPm GBPm %
--------- --------- -------
Dry Cargo 10.9 6.5 68%
Sale & Purchase 9.8 5.7 72%
Deep-sea Tankers 8.9 16.3 (45)%
Securities 5.5 4.2 31%
Financial 5.2 3.5 49%
Specialised Tankers (including
Chemicals, LPG, LNG and Gas) 5.1 5.2 (2)%
Offshore and Renewables 2.0 1.4 43%
--------- --------- -------
Total 47.4 42.8 11%
--------- --------- -------
Underlying results* Reported results**
Profit, EPS and Dividend H1 21/22 H1 20/21 H1 21/22 H1 20/21
GBPm GBPm GBPm GBPm
---------- ---------- ---------- ---------
Operating profit 5.6 5.1 5.5 4.1
Operating profit including
Cory Brothers*** 6.9 5.6 6.9 5.6
Profit on sale of AqualisBraemar
investment 4.4 - 4.4 -
Profit before tax 4.9 4.5 7.2 3.3
Earnings per share 18.0p 16.2p 36.5p 3.5p
Dividend per share 2.0p - 2.0p -
---------- ---------- ---------- ---------
* Underlying results measures above are before non-recurring
specific items, including acquisition and disposal-related charges
and profit/loss from discontinued operations.
** Reported results are from continuing operations only,
comparatives have been re-presented in relation to discontinued
operations.
*** Operating profit including Cory Brothers contains the
trading profits of Cory Brothers which are reported as discontinued
operations.
Results briefing
A presentation for analysts will be held at 10.00am today via
conference call. Please contact the team at Buchanan for details on
braemar@buchanan.uk.com .
A copy of the presentation and call recording will be made
available on the Investor Relations section of Braemar's website
after noon today: https://braemar.com/investors/ .
For further information, contact:
Braemar Shipping Services
James Gundy, Group Chief Executive
Officer
Nick Stone, Chief Financial Officer Tel +44 (0) 20 3142 4100
Investec Bank Plc Tel +44 (0) 20 7597 5970
Gary Clarence / Alex Penney /
Alice King
Buchanan
Charles Ryland / Victoria Hayns Tel +44 (0) 20 7466 5000
/ Stephanie Whitmore / Matilda
Abraham
About Braemar Shipping Services Plc
Braemar Shipping Services Plc (LSE: BMS), a leading
international Shipbroker and provider of expert advice in shipping
investment, chartering, risk management and logistics services.
Braemar employs approximately 540 people in 30 offices worldwide
across its Shipbroking, Financial and Logistics Divisions. Braemar
joined the Official List of the London Stock Exchange in November
1997 and trades under the symbol BMS. For more information,
including our investor presentation, visit www.braemar.com .
Reconciliation of underlying profit before tax to reported
profit after tax for the period
H1 21/22 H1 20/21
GBPm GBPm
--------- ---------
Underlying operating profit 5.6 5.1
Specific items 2.3 (1.0)
Net finance costs (0.7) (0.8)
--------- ---------
Profit before taxation 7.2 3.3
Taxation (0.5) (0.4)
Discontinued operations* 4.7 (1.8)
Reported profit after tax 11.4 1.1
*Discontinued operations includes Wavespec and the non-core
investment in AqualisBraemar that have both been disposed of in the
period and Cory Brothers which is classified as "held for
sale".
Calculation of operating profit including Cory Brothers
H1 21/22 H1 20/21
GBPm GBPm
--------- ---------
Underlying operating profit 5.6 5.1
Cory Brothers profit before tax (see Note 6) 1.3 0.5
--------- ---------
Underlying operating profit including Cory Brothers 6.9 5.6
--------- ---------
Alternative Performance Measures ("APM"s)
Braemar uses APMs as key financial indicators to assess the
underlying performance of the Group. Management considers the APMs
used by the Group to better reflect business performance and
provide more useful information to investors and other interested
parties. Our APMs include underlying operating profit, underlying
profit before tax, underlying operating profit including Cory
Brothers, underlying earnings per share and net debt. Explanations
of these terms and their calculation are shown in the summary above
and in detail in our Financial Review.
CHAIRMAN'S STATEMENT
Strong Trading Results
I am delighted with the performance of the Group since the
beginning of the financial year, a period in which trading has not
only exceeded our expectations but the board has also successfully
executed the necessary actions in order to position the business
for further growth.
Revenue for the period increased by 11% to GBP47.4 million (H1
2020/21: GBP42.8 million) and operating profit including Cory
Brothers increased by 23% to GBP6.9 million (H1 2020/21: GBP5.6
million), ahead of the board's previously upgraded
expectations.
Underlying earnings per share were 18.0p compared with 16.2p in
the first half of 2020/21. Reported earnings per share, which
amongst other things includes the benefit of the sale of the
non-core investment in AqualisBraemar, the restated cost of prior
acquisitions and the cost of disposing of Wavespec were 36.5p, up
943% as compared with 3.5p per share in the first half of
2020/21.
New Strategic Ambition and Direction
The board has continued to develop its growth strategy in order
to build on the successful actions already taken by the new
management team to simplify and refocus the Group on its core
Shipbroking business and to position it for further growth. As a
result of the strategic development work that the board has carried
out, the board has identified that its key ambition is to double
the size of the business over the next three to four years.
We believe that scale is becoming increasingly important within
the industry in order to service the expectations of our clients,
provide the Group with sufficient geographical and product
diversification to meet such expectations on an increasingly global
basis, reduce the impact of cyclical markets, and create cost
efficiencies. Buoyant shipping markets, a strong market share and a
strong forward order book, position us well to grow at an
accelerated pace.
The board believes that the delivery of the Group's core
strategic ambition will require both organic growth and value-added
acquisitions. In addition to expanding the reach of its existing
service lines, we will seek to recruit additional brokers covering
not only existing products and geographies, but also new
supplementary markets. We have also identified several potential
complementary, value-added acquisition targets to grow our business
lines. As a publicly listed market leader, we can take advantage of
the likely consolidation in the Shipbroking market.
The board also believes that the delivery of the Group's core
strategic ambition will require further investment in both its
business support infrastructure and its technology. Robust support
infrastructure is essential to lay the foundations for a business
twice as big as it is today, and to ensure that Braemar can
continue to meet the ever-increasing demands of its clients. The
Group will also build on the bespoke technology solutions that have
been developed in partnership with Zuma Labs, such as the
technology platforms that have been successfully launched for
sharing information across certain broking desks and clients. The
board will now accelerate the next stage of technology development
across all broking desks in order to further improve access to data
and market information for staff and clients.
The strategic development work that the board has carried out
also covered the Group's branding and positioning. Amongst other
branding initiatives, the Group will launch a new website to
communicate the Group's objectives, purpose and values, as well as
demonstrating the Group's focus on compliance and ESG, including
new growth opportunities created by the rapidly developing area of
environmental sustainability.
Strengthening the Balance Sheet and well-covered Interim
Dividend
Reducing net debt
The board previously stated that that it had set a target of
achieving a net debt to EBITDA ratio sustainably below 1.5 times on
average over the seasonal working capital cycle. I am pleased to
report that excellent progress has been made towards this goal with
the ratio falling to 1.23 times for the 12 months to 31 August
2021, down from 2.03 times for the prior year.
Interim dividend
Recognising the importance of dividends to shareholders and the
strong cash generation from Shipbroking, the board has decided to
supplement its growth strategy with a progressive dividend policy
involving the payment of dividends to shareholders each year,
subject to financial performance. The board has declared a
well-covered interim dividend of 2.0p per share (2020: nil)
following the first half's improved performance. The final dividend
of 5.0p pence per share in respect of the year ended 28 February
2021 was paid on 1 September 2021.
This interim dividend will be paid on 16 December 2021 to
shareholders on the register at the close of business on 12
November 2021, with a corresponding ex-dividend date of 11 November
2021. The last date for Dividend Reinvestment Plan (DRIP) elections
will be 25 November 2021.
Braemar Naves Consideration Restructuring
On 3 June 2021, the Group also agreed a restructuring of
deferred consideration amounts owed in relation to its acquisition
of Braemar Naves in 2017. The restructuring of the deferred
consideration will see over GBP2.5 million (EUR2.9 million), which
was previously due for repayment before the end of December 2022,
deferred to be paid no earlier than September 2025. In addition, a
further amount of approximately GBP0.7 million (EUR0.75 million) is
to be satisfied by the issue of new ordinary shares in the capital
of the Company in three tranches. The first tranche of GBP0.4
million (EUR0.5 million) was completed with the issue of 157,339
new ordinary shares in October 2021, and the other two tranches are
due in December 2021 and December 2022.
A credit of GBP2.4 million has been recognised in finance income
in respect of the accounting for the restructuring. The majority of
this modification gain relates to a number of management estimates
and judgements primarily on the amount of interest that would be
payable under the terms of the original deal.
The development of Braemar Naves as the corporate finance
business of the Group's overall Shipbroking offering is progressing
well.
Refocusing on Shipbroking
Vertom Cory Joint Venture
As previously announced, a non-binding term sheet has been
signed with Vertom BV to form a joint venture with Cory Brothers to
create a port agency business with stronger reach and breadth than
either business alone. Discussions are ongoing, working towards
completion in the second half of the financial year. The term sheet
contemplates the disposal of the current Cory Brothers legal
entities in exchange for a significant minority stake in the
combined business. The joint venture should provide a strong
platform from which to accelerate growth. The Group's share of
profit from the new joint venture would be accounted for as an
associate.
Disposal of Investment in AqualisBraemar
On 19 May 2021, the Group sold 9,640,621 shares of its non-core
investment in AqualisBraemar for cash proceeds of GBP7.2 million.
After legal costs and recycling of foreign exchange, the Group
realised a profit on disposal of GBP4.4 million. Following the
sale, the Group's interest in AqualisBraemar was limited to its
holding of 6,523,977 performance-based warrants. On 20 August 2021,
1,000,000 warrants vested and were exercised and the remaining
warrants lapsed. The resulting shares were sold for additional cash
proceeds of GBP0.7 million on 31 August 2021.
Disposal of Wavespec
On 31 March 2021, the Group completed the disposal of its
loss-making Engineering Division, Wavespec, for a maximum
consideration of GBP2.6 million. The consideration was intended to
be satisfied by the issuance of a promissory note with a maturity
date of 31 March 2026. The recognised fair value of the
consideration of GBP2.4 million was based on the net present value
of the promissory note and this resulted in a profit on disposal of
GBP1.6 million.
As of 31 August 2021, the buyer had not delivered on its
obligations to secure the promissory note and the board took a
prudent view that the promissory note was unlikely to be honoured
and that consequently the consideration has been credit impaired.
The overall total amount recognised in discontinued operations in
respect of the Wavespec disposal is a net loss of GBP0.9 million,
including trading prior to disposal.
Board Changes
With effect from 1 August 2021, Tristram ("Tris") Simmonds and
Elizabeth Gooch MBE were appointed to the board of the Company as
Chief Operating Officer (Executive) and Non-Executive Director
respectively. Tris was previously the Managing Director of Braemar
Atlantic Securities, the Group's derivative brokerage business.
Tris has over 30 years' experience in the commodities industry,
having founded Atlantic Brokers in 2013 which was sold to Braemar
in 2018.
Elizabeth has over 16 years' experience of governance,
compliance and financial reporting of publicly listed companies,
having founded and run an AIM-quoted software company EG Solutions
Plc from 2005 until its acquisition by Verint Systems Inc. in 2017.
Elizabeth has joined the Group's Audit and Nomination Committees
and has chaired the Group's Remuneration Committee since Jürgen
Breuer stood down from the board on 26 August 2021.
I am delighted to welcome Tris and Elizabeth to the board. The
addition of Tris creates a stronger executive team with the
bandwidth and experience needed to deliver the board's growth
aspirations for the benefit of all stakeholders of the Group.
Elizabeth's prior governance, Plc and technology experience in
growth-oriented people-based businesses is highly complementary to
the Group's strategy and existing Non-Executive skill base.
Our people
The calibre of our people is central to the high quality of
service that we provide to our clients, and it is their hard work
and creativity that enables Braemar to continue to build its brand
and reputation as we develop our business.
The COVID-19 pandemic has been challenging for staff, but all
adapted and performed well. I am pleased that the Group has been
able to welcome staff around the world back to their offices as
local government rules allow. The results for the first half of the
year are a tribute to the dedication and expertise of our people
and I would like to thank them for their continuing efforts on
behalf of the Group.
Outlook
The board continues to look forward with confidence as it sets
about delivering on its growth strategy centred on Shipbroking,
with a more streamlined business, and expects that revenue and
profit for the full year will exceed the previous year and meet
current upgraded expectations of operating profit.
Strong trading within Shipbroking, especially Dry Cargo, Sale
and Purchase, and Securities, looks set to continue in the second
half of the financial year, as the demand for the dry bulk sector
and container capacity remains high. Investment in these areas over
the last few years has strengthened our revenue line and market
share within the industry. The resurgent interest in the shipping
industry from both a lending and equity investment point of view
has meant that the Group's Financial Division, Braemar Naves, is
trading well ahead of last year and has completed two significant
transactions in the first six months of the year with a third
expected to complete before the end of the financial year.
Additionally, the Group's forward order book has increased by 28%
to US$55.5 million - predominantly with new building orders and Dry
Cargo - compared with US$43.4 million at the beginning of the
period.
In the previous financial year, we saw an unprecedented surge in
deep-sea tanker rates fuelled by contango storage demand. This
financial year, we have seen this unwind and a huge cut-back in oil
demand due to the COVID-19 pandemic. As the world starts to move
back to normality, and exports of oil increase, we believe that a
consequent increase in deep-sea tanker rates is likely and that
Braemar is in an ideal position to take full advantage.
OPERATING AND FINANCIAL REVIEW
The trading performance in our major business units for the six
months ended 31 August 2021 is detailed below.
SHIPBROKING DIVISION
H1 2021/22 H1 2020/21 Change %
Revenue GBP42.2 million GBP39.3 million 7%
Underlying operating profit GBP5.9 million GBP6.1 million (3)%
----------------- ---------------- --------
The Shipbroking Division has again performed well during the
first half of the year and achieved revenue growth of 7%. Overall
profitability has reduced slightly as the cost savings seen from
reductions in travel and entertainment are no longer there after
the easing of lockdown restrictions and the resumption of normal
business activities.
The total forward order book was US$55.5 million as at 31 August
2021 compared to US$42.4 million as at 31 August 2020 and US$43.4
million as at 28 February 2021, an increase of US$13.1 million.
Approximately US$29.5 million of this is deliverable in the second
half of this financial year.
Revenues from the Dry Cargo, Sale and Purchase, and Securities
and operations were considerably higher than the comparative
period. Chinese and other East Asian imports are a key driver of
demand in Dry Cargo, and the Dry Cargo desk has benefitted from
investment in recent years. Dry Cargo demand has also benefitted
from government stimulus spending in China, and more recently in
the US and Europe, focused on steel-intensive infrastructure
projects. Both container and dry bulk markets have seen ships
delayed for extended periods in heavily congested ports - the
result of high activity levels and the COVID-19 pandemic related
logistical bottlenecks.
The Securities desk has also benefitted from investment,
particularly in respect of the strategic partnership with Zuma
Labs. The Securities desk has successfully launched a bespoke
platform for Dry Cargo Forward Freight Agreements ('FFAs'),
"Venetian", the technology from which is also being utilised by
other desks within the Shipbroking Division. "Venetian" is a live
portal for price discovery and analytics for internal and external
use and it has proved to be very popular with clients given the
volatility in current shipping markets.
The Sale and Purchase desk has been active on the back of
buoyant dry bulk and container markets, in particular sales values
of second-hand container ships have increased.
As anticipated, the deep-sea tanker market continues to be
affected by the COVID-19 pandemic-related weaker demand for oil, in
comparison with the exceptional conditions seen in the previous
year that were driven by demand for storage capacity. Some
restrictions on mobility continue to be enforced, particularly in
countries that have been slower to vaccinate their populations. Air
travel has been very slow to recover and jet fuel demand has
therefore remained weak. However, recent spikes in LNG and thermal
coal prices are seeing greater use of diesel for power generation.
OPEC+ producers are expected to release more crude oil into the
market as consumer stocks are drawn down and oil prices continue to
rise. Whilst freight rates are weak, the Group has maintained its
market share and, as the world starts to move back to normality,
and exports of oil increase, we believe that a consequent increase
in deep-sea tanker rates is likely and that Braemar is in an ideal
position to take full advantage.
FINANCIAL DIVISION - BRAEMAR NAVES
H1 2021/22 H1 2020/21 Change %
Revenue GBP5.2 million GBP3.5 million 49%
Underlying operating
profit GBP1.7 million GBP0.7 million 143%
---------------- --------------- --------
Braemar Naves provides maritime-related corporate finance advice
to international clients covering finance raising advisory,
restructuring, M&A, asset brokerage, and financial management
including loan servicing. It earns fees through retainer
arrangements with clients but mainly through success related
transaction fees. As a result, the level of revenue in any one
period can be hard to forecast and subject to project success and
timing.
H1 2021/22 H1 2020/21 Change %
----------------
Retainer income GBP1.5 million GBP1.6 million (6)%
Success fees GBP3.7 million GBP1.9 million 95%
---------------- ----------------
Total GBP5.2 million GBP3.5 million 49%
---------------- ----------------
The resurgent interest in the shipping industry from both a
lending and equity investment point of view has meant that the
Division had a successful first half of the year. Revenue for the
period has increased due to an increased level of success fees; but
by contrast the level of retainer fees has declined as the focus of
the work has transitioned from advisory to transactional. Two
significant transactions completed during the first half of the
year: a leasing transaction in the container market and a
restructuring transaction in respect of financing for an offshore
heavy lift vessel. A third significant transaction is expected to
complete before the end of the financial year. Whilst the nature of
the corporate finance work that is done by Braemar Naves means that
revenues can be unpredictable, current activity levels point to a
strong year as a whole.
LOGISTICS DIVISION - CORY BROTHERS
H1 2021/22 H1 2020/21 Change %
Revenue GBP21.3 million GBP13.5 million 58%
Underlying operating
profit GBP1.3 million GBP0.6 million 117%
----------------- ----------------- ---------
Cory Brothers had a very strong first half of the year,
particularly from its Freight Forwarding activities. The pressure
on container space and Brexit-related import/export complexities
has led to greater demand for its services with a consequent
increase in revenue and profits compared to the same period last
year. A number of new clients have been won on the back of these
market conditions but also from investment in business development
activity in 2020. Trading has also been good on the Port Agency
side with levels of activity remaining relatively high, despite
imports of jet fuel and other oil products being lower than
previous years. The US office has grown strongly on the back of
higher export volumes and investment in new staff and capabilities
in the local offices.
Discussions are ongoing with Vertom BV, working towards the
proposed divestment of Cory Brothers into a joint venture with
Vertom Agencies in the second half of the financial year. As
previously announced, a non-binding term sheet has been signed with
Vertom BV to create a joint venture that should provide a strong
platform from which the combined business can accelerate growth.
The Group's share of profit from the new joint venture would be
accounted for as an associate.
OTHER OPERATING COSTS
Central costs H1 2021/22 H1 2020/21 Change %
Central costs GBP2.1 million GBP1.7 million 24%
---------------- ---------------- ---------
Central costs were 24% higher than the previous year, primarily
due to the cost of reverting from an Executive Chairman to a CEO
and Non-Executive Chairman and additional fees in connection with
the renewal of the Group's revolving credit facility.
Specific items H1 2021/22 H1 2020/21 Change %
Acquisition and disposal-related
charges GBP0.1 million GBP1.0 million (90)%
----------------- ----------------- ---------
The Group has separately identified certain items that are not
part of the underlying trade of the Group. These specific items are
material in both size and/or nature and the Directors believe they
may distort understanding of the underlying performance of the
business. The majority of these costs relate to acquisitions
completed in previous financial years and are primarily
non-cash.
Expenditure of GBP0.1 million (2020: GBP0.7 million) is directly
linked to the acquisition of NAVES Corporate Finance GmbH. In the
comparative period last year, the Group also incurred GBP0.3
million of costs directly linked to the acquisition of Atlantic
Brokers Holdings Limited and ACM Shipping Group Plc.
Discontinued operations
The results of the Wavespec and the non-core investment in
AqualisBraemar that have both been disposed of in the period and
Cory Brothers which is classified as "held for sale" have been
presented as discontinued operations in the current and comparative
period.
Profit/(loss) from H1 2021/22 H1 2020/21 Change %
discontinued operations
net of tax
Wavespec GBP(0.9) million GBP(2.0) million (55)%
Cory Brothers GBP1.1 million GBP0.5 million 120%
AqualisBraemar GBP4.4 million GBP(0.2) million (2300)%
------------------ ------------------ ----------
Total GBP4.6 million GBP(1.7) million (371)%
------------------ ------------------ ----------
A loss of GBP0.9 million (2020: GBP2.0 million) was recognised
in respect of Wavespec, which was sold on 31 March 2021. This
consists of a trading loss of GBP0.1 million (2020: GBP0.5
million), a profit on disposal of GBP1.6 million and a credit
impairment of GBP2.4 million. In the comparative period, GBP1.5
million relates to the impairment of assets and other costs of
disposal.
Profit after taxation of GBP1.1 million (2020: GBP0.5 million)
relating to the first half trading of Cory Brothers was
reclassified to discontinued operations as discussions with Vertom
Agencies on a potential joint venture progress. The signed,
non-binding term sheet contemplates Braemar's disposal of the
current Cory Brothers legal entities in exchange for a significant
minority stake in a much larger European port agency business.
A gain of GBP4.4 million (2020: loss of GBP0.2 million) relates
to the Group's investment in AqualisBraemar, which was recognised
following the disposal of the Group's Technical Division in 2019.
Following the full disposal of this investment these amounts were
reclassified to discontinued operations. Included in the gain on
disposal is a gain of GBP3.8 million on the sale of the shares, a
gain of GBP0.6 million in respect of recycling amounts previously
held in other comprehensive income, a gain of less than GBP0.1
million in respect of the Group's share of AqualisBraemar's results
to 19 May 2021 and a cost of less than GBP0.1 million in respect of
the vesting of the warrants and subsequent sale of shares. The loss
of GBP0.2 million in the comparative period represents profit of
GBP0.8 million from Braemar's share of AqualisBraemar's profit for
the period and GBP1.0 million of costs in respect of fair value
movements on warrants held over AqualisBraemar shares.
Foreign exchange
The US dollar exchange rate relative to sterling strengthened
from US$1.39:GBP1 at 1 March 2021 to US$1.38:GBP1 at 31 August
2021. A significant proportion of the Group's revenue is earned in
US dollars. At 31 August 2021, the Group held forward currency
contracts to sell US$50.3 million at an average rate of
US$1.375/GBP1.
The Group also has material liabilities in Euros and the Euro
rate weakened against Sterling from EUR1.15:GBP1 at 1 March 2021 to
EUR1.17:GBP1 at 31 August 2021.
Balance sheet
Net assets at 31 August 2021 were GBP68.3 million (31 August
2020: GBP59.1 million, 28 February 2021: GBP63.6 million). A review
aimed at identifying evidence of impairment of intangible assets
was carried out and no such impairment was identified. An interim
dividend of 2.0 pence per ordinary share was declared in respect of
the period (GBPnil in the period to 31 August 2020) and 1,635,164
shares were purchased for the Employee Share Ownership Plan.
As a result of the classification of Cory Brothers as held for
sale, trade and other receivables decreased by GBP5.4 million to
GBP29.4 million compared with GBP34.8 million at 28 February 2021
and GBP34.9 million at 31 August 2020. On the same basis, trade and
other payables have decreased by GBP19.9 million to GBP26.3 million
compared to GBP46.2 million at 28 February 2021 and GBP44.0 million
at 31 August 2020.
The Group's volume of business was slightly higher in the first
half of FY21/22 compared to the second half of FY20/21. If Cory
Brothers had not been classified as held for sale, trade and other
receivables would have increased by GBP8.6 million while trade and
other payables would have increased by GBP2.9 million compared to
28 February 2021.
The pension deficit has increased by GBP1.5 million to GBP4.9
million during the period (31 August 2020: GBP3.4 million, 28
February 2021: GBP3.8 million) as a result of the most recent
actuarial valuation.
Shares to be issued has increased by GBP3.4 million from GBP0.5
million at 31 August 2020 to GBP3.9 million due to additional
shares purchased by the Group's Employee Share Ownership Plan. At
28 February 2021, shares to be issued amounted to GBP1.4
million.
Borrowings and cash
On 25 May 2021, the Group completed an extension and amendment
to its revolving credit facility with HSBC ("RCF"). The RCF
facility limit was reduced from GBP35.0 million to GBP30.0 million
while the accordion limit was increased from GBP5.0 million to
GBP10.0 million. Consequently, at the balance sheet date, the Group
had bank facilities totalling GBP40.0 million, made up of the RCF
of GBP30.0 million and the accordion facility of GBP10.0 million.
Drawdown of the accordion facility is subject to additional credit
approval. The RCF has a number of covenants, in particular the
ratio of debt to rolling 12-month EBITDA. This covenant has a limit
of 3x until January 2022 after which it will revert to 2.5x until
the facility expires in September 2023. The Group also has access
to global cash management arrangements, notably in our regional
hubs of UK, Germany and Singapore.
At 31 August 2021, the Group held cash of GBP17.0 million (31
August 2020: GBP12.7 million, 28 February 2021: GBP14.2 million).
The increase in cash is largely attributable to the sale of shares
in AqualisBraemar. GBP1.7 million of cash used to fund the dividend
paid on 1 September 2021 had already been transferred to the
Group's registrars prior to the balance sheet date.
31 August 31 August 2020 28 February
2021 GBPm 2021
GBPm GBPm
Cash at bank 9.1 12.7 14.1
Cash held for sale 7.9 - 0.1
---------- --------------- ------------
Total cash 17.0 12.7 14.2
---------- --------------- ------------
Net bank debt (excluding acquisition liabilities and IFRS 16
lease liabilities) was GBP8.0 million compared with net bank debt
of GBP19.3 million at 31 August 2020 and net bank debt of GBP8.8
million at 28 February 2021. Net debt (including acquisition
liabilities but excluding IFRS 16 lease liabilities) was GBP14.7
million compared with net debt of GBP30.2 million at 31 August 2020
and net debt of GBP19.1 million at 28 February 2021.
The operating cash flows of the Group exhibit seasonality in
that the majority bonus payments occur in the first half of the
financial year and it is therefore normal for the second half of
the year to generate more cash.
Assets held for sale
As discussions regarding the proposed joint venture between Cory
Brothers and Vertom Agencies progress, working towards completion
in the second half of the financial year, the assets of Cory
Brothers have been accounted for as assets held for sale under IFRS
5 'Non-Current Assets Held for Sale and Discontinued Operations'.
Trading profits of GBP1.3 million have been presented in
discontinued operations. The completion of the transaction is
expected to be concluded during the second half of the financial
year.
Taxation
The tax charge of GBP0.5 million (2020: GBP0.4 million)
comprises a current tax charge of GBP0.8 million and a deferred tax
credit of GBP0.3 million. Current tax is charged at 16.8% (2020
restated: 14.1%) representing the best estimate of the annual
effective tax rate, applied to the taxable profits of the interim
period. The rate is lower than the standard rate of UK corporation
tax due to utilisation of losses. Deferred tax is charged at 25.0%
(2020: 19.0%) based on the UK Government's Spring Budget which was
substantively enacted in May 2021.
Principal risks
The Directors consider that the principal risks and
uncertainties which could have a material effect on the Group's
performance identified on pages 34 to 39 of the Annual Report 2021
are also applicable for a period of six months from 31 August 2021.
These include risks associated with geopolitical and macroeconomic
changes, currency fluctuations, financial capacity, financial
liquidity, failure to attract and retain skilled individuals,
disruptive technology, cultural behaviours and corporate governance
and change management, compliance with laws and regulations,
cybercrime and data security, and major business disruption.
The Directors are considering the impact of climate change and
have appointed an external consultant to assist with the
development of the Group's ESG strategy and climate change risk
assessment.
The Directors continue to assess the potential impacts of Brexit
and the COVID-19 pandemic on the principal risks and uncertainties.
The experience of the last 18 months has shown that the business
can continue to operate successfully during lockdown restrictions,
although forecasting levels of transactions and income remains
difficult given the continuing volatility of the markets in which
we operate.
Going concern
Following a detailed review, no material uncertainty has been
identified and the interim condensed consolidated financial
statements have been prepared on a going concern basis. See Note
2.
Braemar Shipping Services Plc
Condensed Consolidated Income Statement
Six months ended 31
Six months ended August 2020
31 August 2021 Unaudited and restated
Unaudited *
Specific Specific
Underlying items Total Underlying items Total
Continuing operations Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------ ----------- ----------- --------- ----------- ----------- ---------
Revenue 4 47,410 - 47,410 42,788 - 42,788
Cost of sales (931) - (931) (1,446) - (1,446)
---------------------------- ------ ----------- ----------- --------- ----------- ----------- ---------
Gross profit 46,479 - 46,479 41,342 - 41,342
Operating expenses (40,890) - (40,890) (36,266) - (36,266)
---------------------------- ------ ----------- ----------- --------- ----------- ----------- ---------
Other operating
costs - - -
Acquisition related
expenditure 5 - (72) (72) - (1,016) (1,016)
( 40,962
(40,890) (72) ) (36,266) (1,016) (37,282)
Operating profit/(loss) 4 5,589 (72) 5,517 5,076 (1,016) 4,060
Share of associate
loss 10 (29) - (29) - - -
Finance income 5 40 2,386 2,426 128 - 128
Finance costs 5 (683) - (683) (730) (182) (912)
Profit/(loss) before
taxation 4,917 2,314 7,231 4,474 (1,198) 3,276
5 ,
Taxation 7 (483) - (483) (468) 28 (440)
---------------------------- ------ ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) from
continuing operations 4,434 2,314 6,748 4,006 (1,170) 2,836
---------------------------- ------ ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) from
discontinued operations 6 1,176 3,456 4,632 1,069 (2,800) (1,731)
---------------------------- ------ ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) attributable
to equity shareholders
of the parent 4 5,610 5,770 11,380 5,075 (3,970) 1,105
---------------------------- ------ ----------- ----------- --------- ----------- ----------- ---------
Total
Earnings per ordinary
share 8
Basic 18.00p 36.52p 16.22p 3.53p
Diluted 14.78p 29.99p 13.53p 2.95p
Continuing operations
Earnings per ordinary
share 8
Basic 14.23p 21.66p 12.81p 9.07p
Diluted 11.68p 17.78p 10.68p 7.56p
---------------------------- ------ ----------- ----------- --------- ----------- ----------- ---------
* The six months ended 31 August 2020 has been restated for the
presentation of Cory Brothers and AqualisBraemar as discontinued
operations.
Braemar Shipping Services Plc
Condensed Consolidated Statement of Comprehensive Income
Six months Six months
ended 31 Aug ended 31 Aug
2021 2020
Unaudited Unaudited
GBP'000 GBP'000
Profit for the period 11,380 1,105
------------------------------------------------------------- -------------- --------------
Other comprehensive income/(expense)
Items that will not be reclassified
to profit or loss:
* Actuarial loss on employee benefit schemes - net of
tax (978) -
Items that are or may be reclassified
to profit or loss:
* Foreign exchange differences on retranslation of
foreign operations (436) (2,516)
* Cash flow hedges - net of tax (532) 2,356
------------------------------------------------------------- -------------- --------------
Other comprehensive expense (1,946) (160)
------------------------------------------------------------- -------------- --------------
Total comprehensive income from continuing
operations 9,434 945
------------------------------------------------------------- -------------- --------------
Recycling of foreign exchange reserve (638) -
Share of other comprehensive income
/ (loss) of associate 52 (238)
------------------------------------------------------------- -------------- --------------
Total comprehensive loss from discontinued
operations (586) (238)
------------------------------------------------------------- -------------- --------------
Total comprehensive income attributable
to the equity shareholders of the
parent 8,848 707
------------------------------------------------------------- -------------- --------------
* The six months ended 31 August 2020 has been restated for the
presentation of Cory Brothers and AqualisBraemar as discontinued
operations.
Braemar Shipping Services Plc
Condensed Consolidated Balance Sheet
31 August 2021 31 August 2020 28 February 2021
Unaudited Unaudited Audited
--------------------------------------------------------- ------ --------------- --------------- -----------------
Assets Notes GBP'000 GBP'000 GBP'000
Non-current assets
Goodwill 80,169 83,812 83,955
Other intangible assets 1,072 2,037 2,129
Property, plant and equipment 8,093 10,763 9,841
Other investments 1,927 1,962 1,962
Investment in associate 10 606 7,126 3,763
Financial assets 13 - 188 -
Derivative financial instruments 13 - - 200
Deferred tax assets 3,335 3,973 2,900
Other receivables 1,316 2,123 1,888
--------------------------------------------------------- ------ --------------- --------------- -----------------
96,518 111,984 106,638
Current assets
Trade and other receivables 11 29,444 34,885 34,800
Financial assets - - 746
Derivative financial instruments 13 658 1,288 1,573
Cash and cash equivalents 9,111 12,687 14,111
Assets held for sale 6 27,878 283 436
--------------------------------------------------------- ------ --------------- --------------- -----------------
67,091 49,143 51,666
Total assets 163,609 161,127 158,304
--------------------------------------------------------- ------ --------------- --------------- -----------------
Liabilities
Current liabilities
Derivative financial instruments 13 178 63 60
Trade and other payables 26,254 44,034 46,237
Short-term borrowings 25,000 31,999 23,000
Current tax payable 480 924 1,318
Provisions 574 250 307
Convertible loan notes 12 1,934 4,529 5,130
Deferred consideration 12 - 626 608
Liabilities directly associated with assets classified
as held for sale 6 23,744 282 125
--------------------------------------------------------- ------ --------------- --------------- -----------------
78,164 82,707 76,785
Non-current liabilities
Derivative financial instruments 13 67 - -
Long-term borrowings 6,444 8,403 8,634
Deferred tax liabilities 166 889 174
Provisions 752 753 690
Convertible loan notes 12 1,360 2,502 1,217
Deferred consideration 12 3,417 3,289 3,358
Pension deficit 4,935 3,448 3,819
--------------------------------------------------------- ------ --------------- --------------- -----------------
17,141 19,284 17,892
Total liabilities 95,305 101,991 94,677
--------------------------------------------------------- ------ --------------- --------------- -----------------
Total assets less total liabilities 68,304 59,136 63,627
--------------------------------------------------------- ------ --------------- --------------- -----------------
Equity
Share capital 14 3,199 3,172 3,174
Share premium 14 55,805 55,805 55,805
Shares to be issued (3,880) (526) (1,362)
Other reserves 15 21,183 22,119 22,790
Retained earnings (8,003) (21,434) (16,780)
--------------------------------------------------------- ------ --------------- --------------- -----------------
Total equity 68,304 59,136 63,627
--------------------------------------------------------- ------ --------------- --------------- -----------------
Braemar Shipping Services Plc
Condensed Consolidated Statement of Cash Flows
Six months ended Six months ended
31 August 2021 31 August 2020
Unaudited Unaudited & restated *
Notes GBP'000 GBP'000
------------------------------------------------------- ------ ----------------- -----------------------
Profit before tax 7,231 3,276
Profit/(loss) before tax from discontinued operations 6 4,859 (1,613)
Depreciation and amortisation charges 1,825 1,801
Share of net profit in associates 10 (47) (837)
Share scheme charges 1,562 943
Net finance cost 643 784
Fair value loss on warrants - 991
Credit on modification of deferred consideration 12 (2,386) -
Gain on disposal of shares in AqualisBraemar 10 (3,759) -
Gain on disposal of Wavespec 10 (1,600) -
Loss on impairment of Wavespec receivable 6 2,374 -
Impairment of assets held for sale - 1,490
Contribution to defined benefit scheme (198) (225)
------------------------------------------------------- ------ ----------------- -----------------------
Operating cash flow before changes in working capital 10,504 6,610
(Increase)/decrease in receivables (7,639) 4,670
Increase/(decrease) in payables 687 (3,223)
Increase in provisions and employee benefits 328 36
------------------------------------------------------- ------ ----------------- -----------------------
Cash flows from operating activities 3,880 8,093
Interest received 40 90
Interest paid (665) (697)
Tax paid (980) (872)
------------------------------------------------------- ------ ----------------- -----------------------
Net cash generated from operating activities 2,275 6,614
------------------------------------------------------- ------ ----------------- -----------------------
* The six months ended 31 August 2020 has been restated for the
presentation of Cory Brothers and AqualisBraemar as discontinued
operations.
Braemar Shipping Services Plc
Condensed Consolidated Statement of Cash Flows (continued)
Six months ended Six months ended
31 August 2021 31 August 2020
Unaudited Unaudited & restated *
Notes GBP'000 GBP'000
----------------------------------------------------------------- ------ ----------------- -----------------------
Cash flows from investing activities
Purchase of property, plant and equipment and computer software (346) (446)
Purchase of other intangible assets (528) -
Investment in associate 10 (217) -
Dividend received from associate 10 - 322
Cash in subsidiaries disposed (53) -
Proceeds from sale of property, plant and equipment - 6
Proceeds from sale of investments 10 7,232 -
Principal received on finance lease receivables 450 396
----------------------------------------------------------------- ------ ----------------- -----------------------
Net cash generated from investing activities 6,538 278
----------------------------------------------------------------- ------ ----------------- -----------------------
Cash flows from financing activities
Proceeds from borrowings 2,000 7,300
Repayment of principal under lease liabilities (1,971) (1,986)
Repayment of revolving credit facility - (29,325)
Gift to ESOP for purchase of shares (4,183) -
Deferred consideration paid (1,198) -
----------------------------------------------------------------- ------ ----------------- -----------------------
Net cash used in from financing activities (5,352) (24,011)
----------------------------------------------------------------- ------ ----------------- -----------------------
Increase/(decrease) in cash and cash equivalents 3,461 (17,119)
Cash and cash equivalents at beginning of the period 14,164 28,749
Foreign exchange differences (579) 1,057
----------------------------------------------------------------- ------ ----------------- -----------------------
Cash and cash equivalents at end of the period 17,046 12,687
----------------------------------------------------------------- ------ ----------------- -----------------------
Six months Six months
ended ended
31 August 31 August
2021 2020
Unaudited Unaudited
& restated
*
GBP'000 GBP'000
--------------------------------------- ----------- ------------
Cash and cash equivalents (continuing
operations) 9,111 12,687
Cash and cash equivalents (included 7,935 -
in assets held for sale)
--------------------------------------- ----------- ------------
Total cash and cash equivalents
at end of the period 17,046 12,687
---------------------------------------- ----------- ------------
* The six months ended 31 August 2020 has been restated for the
presentation of Cory Brothers and AqualisBraemar as discontinued
operations.
Braemar Shipping Services Plc
Condensed Consolidated Statement of Changes in Equity
Shares
Share Share to be Other Retained Total
capital premium issued reserves earnings equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ------ --------- --------- -------- ---------- ---------- --------
Balance at 1 March
2021 3,174 55,805 (1,362) 22,790 (16,780) 63,627
----------------------- ------ --------- --------- -------- ---------- ---------- --------
Profit for the
period - - - - 11,380 11,380
Foreign exchange
differences - - - (1,075) - (1,075)
Actuarial loss
on employee benefit
schemes - net
of tax - - - - (978) (978)
Share of associate's
other comprehensive
expense - - - - 53 53
Cash flow hedges - - - (1,360) - (1,360)
Deferred tax on
cashflow hedges - - - 828 - 828
----------------------- ------ --------- --------- -------- ---------- ---------- --------
Total comprehensive
income - - - (1,607) 10,455 8,848
----------------------- ------ --------- --------- -------- ---------- ---------- --------
Dividends 9 - - - - (1,482) (1,482)
Issue of shares 25 - (25) - - -
Purchase of shares - - (4,183) - - (4,183)
ESOP shares allocated - - 1,690 - (1,690) -
Share based payments - - - - 1,494 1,494
----------------------- ------ --------- --------- -------- ---------- ---------- --------
Balance at 31
August 2021 3,199 55,805 (3,880) 21,183 (8,003) 68,304
----------------------- ------ --------- --------- -------- ---------- ---------- --------
Balance at 1 March
2020 3,167 55,805 (2,498) 22,279 (21,267) 57,486
----------------------- ------ --------- --------- -------- ---------- ---------- --------
Profit for the
period - - - - 1,105 1,105
Foreign exchange
differences - - - (2,516) - (2,516)
Share of associate's
other comprehensive
expense - - - - (238) (238)
Cash flow hedges - - - 2,683 - 2,683
Deferred tax on
cashflow hedges (327) - (327)
----------------------- ------ --------- --------- -------- ---------- ---------- --------
Total comprehensive
income - - - (160) 867 707
----------------------- ------ --------- --------- -------- ---------- ---------- --------
Dividends 9 - - - - - -
Issue of shares 5 - - - (5) -
Purchase of shares - - - - - -
ESOP shares allocated - - 1,972 - (1,972) -
Share based payments - - - - 943 943
----------------------- ------ --------- --------- -------- ---------- ---------- --------
Balance at 31
August 2020 3,172 55,805 (526) 22,119 (21,434) 59,136
----------------------- ------ --------- --------- -------- ---------- ---------- --------
Braemar Shipping Services Plc
Unaudited Notes to The Financial Statements
For the six months ended 31 August 2021
1. General information
Braemar Shipping Services Plc (the "Company") is a public
limited company incorporated and domiciled in England and Wales.
The interim condensed consolidated financial information for the
six months ended 31 August 2021 comprise the Company, its
subsidiaries and the employee share ownership trust (together
referred to as the "Group"). The address of the Company's
registered office is One Strand, Trafalgar Square, London, WC2N
5HR, United Kingdom. The interim condensed consolidated financial
statements of the Group were authorised for issue in accordance
with a resolution of the Directors on 2 November 2021.
The interim condensed consolidated financial statements do not
comprise statutory financial statements within the meaning of
Section 434 of the Companies Act 2006, but have been reviewed by
BDO LLP, the Company's auditor. The audited statutory financial
statements for the year ended 28 February 2021 have been delivered
to the Registrar of Companies. The auditor's report on those
financial statements was unqualified, did not draw attention to any
matters by way of emphasis, and did not contain a statement under
498(2) or 498(3) of the Companies Act 2006. The comparative
information for the year ended 28 February 2021 in this interim
report does not constitute statutory financial statements for that
year.
2. Basis of preparation and statement of compliance
The condensed consolidated interim financial statements for the
six months ended 31 August 2021 have been prepared in accordance
with the Disclosure Guidance and Transparency Rules of the
Financial Conduct Authority and with IAS 34, "Interim Financial
Reporting", and also in accordance with the measurement and
recognition principles of UK adopted international accounting
standards.
The condensed consolidated interim financial statements do not
include all the information and disclosures required in the annual
financial statements and should be read in conjunction with the
Group's Annual Report for the year ended 28 February 2021, which
were prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006 and
in accordance with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union.
Following the classification of the Logistics Division (Cory
Brothers) as held for sale and the disposal of AqualisBraemar, the
Group has restated the condensed consolidated Income Statement,
Statement of Comprehensive Income and Cash Flow Statement in
relation to discontinued operations for the period ended 31 August
2020. See Note 6.
The interim condensed consolidated financial statements have
been prepared on a going concern basis with a reasonable
expectation that the Group has adequate resources to continue in
operational existence for at least 12 months from the date of
signing of the interim condensed consolidated financial statements.
In reaching this conclusion the Directors considered cash flow
forecasts that have been prepared in the light of current trading
and the continued impact of COVID. The Directors have considered
the trading and cash flows over the first six months of the year
which has been good across the Group's Divisions. The Directors
consider that the breadth of the Group's business model and the
diversity of the broking operation and the markets in which the
Group now operates, have insulated the business well from any
ongoing pandemic weakness. The Directors have also considered
forward-looking market data in respect of the shipping market. This
includes the forward order book within the Shipbroking Division,
and the potential within the Financial Division (Braemar
Naves).
The revolving credit facility ("RCF") is currently GBP30.0
million plus an accordion limit of GBP10.0 million. Drawdown of the
accordion facility is subject to additional credit approval. The
EBITDA covenant is set at 3.0x until January 2022, and 2.5x until
the facility expires in September 2023. At 28 February 2021, 31 May
2021 and 31 August 2021 the Group met all financial covenant tests.
As at 31 August 2021 the Group's net bank debt* was GBP8.0 million
with available headroom in the GBP30.0 million RCF of GBP5.0
million. (*Net bank debt is calculated as secured RCF less net
cash.)
The Group has updated its expected revenue, cost and cash
forecasts in the light of trading over the first half of the
current financial year and assessed the ability of the Group to
operate both within the revised covenants and the facility
headroom. The base case assessment was performed to consider the
scenario of Cory Brothers being divested. A number of downside
sensitivities were tested including reverse stress scenarios for
the planned scenario of Cory Brothers being divested which
considered reductions in expected revenue from November 2021
onwards of 27%. The same process was undertaken for the scenario of
Cory Brothers being retained which showed results with higher
levels of headroom and a reverse stress revenue reduction of 32%.
The assessment also included the assumption of reasonable cost
mitigations and other cash management measures within the control
of the Group.
The Directors have considered these revenue downside
sensitivities and concluded that it would be remote that revenues
would be impacted to this extent over the assessed going concern
period, whether Cory Brothers is divested as planned or not. In
making this assessment, significant judgement has been applied.
The Directors consider revenue as the key assumption in the
Group's forecasts as there is a low level of cost of sales in the
continuing operations. The remaining costs are largely fixed or
made up of discretionary bonuses, predominately within the
Shipbroking Division and which are directly linked to
profitability.
To date the COVID pandemic has not had a significant impact on
the business but there remains uncertainty over the current
outlook. However, the Directors are comfortable that under the
scenarios run, the Group could withstand a decline in revenue as
described and continue to operate within the available banking
facilities. Accordingly, the Group continues to adopt the going
concern basis in preparing the financial statements.
Forward-looking statements
Certain statements in this interim report are forward-looking.
Although the Group believes that the expectations reflected in
these forward-looking statements are reasonable, we can give no
assurance that these expectations will prove to be correct. Because
these statements involve risks and uncertainties, actual results
may differ materially from those expressed or implied by these
forward-looking statements. We undertake no obligation to update
any forward-looking statements whether as a result of new
information, future events or otherwise.
3. Accounting policies
The Group has applied the same accounting policies and methods
of computation in its interim condensed consolidated financial
statements as in its consolidated financial statements as at and
for the year ended 28 February 2021, except as described below, and
should be read in conjunction with the 2021 Annual Report.
On 31 December 2020, IFRS as adopted by the European Union at
that date was brought into UK law and became UK-adopted
international accounting standards, with future changes being
subject to endorsement by the UK Endorsement Board. The Group
transitioned to UK-adopted international accounting standards in
its consolidated financial statements on 1 January 2021. There was
no impact or changes in accounting policies from the
transition.
No new standards or amendments effective for reporting periods
beginning on or after 1 January 2021 had an impact on the interim
condensed consolidated financial statements for the period ended 31
August 2021.
Policy on assessment of modification of terms of financial
liability
When the terms of an existing financial liability are modified,
management will consider both quantitative and qualitative factors
to assess whether the modification is substantive. In the case that
the modification of the terms of existing financial liability is
considered to be substantial, the modification shall be accounted
for as an extinguishment of that financial liability and the
recognition of a new financial liability. If the modification is
not considered substantive, then the existing financial liability
is remeasured in accordance with its original classification.
Taxation
Taxation is recognised in the interim period based on the best
estimate of the weighted average annual income tax rate expected
for the full financial year. Amounts accrued for income tax expense
in one interim period may have to be adjusted in the subsequent
interim period of that financial year if the estimate of the annual
income tax rate changes.
Accounting estimates and critical judgements
The preparation of interim financial statements in conformity
with IFRSs requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and
expenses. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were consistent with those that applied to
the consolidated financial statements as at and for the year ended
28 February 2021, except as described below:
In preparing the condensed consolidated interim financial
statements for the period ended 31 August 2021 the classification
of assets held for sale is a critical accounting judgement.
Cory Brothers
The classification of Cory Brothers as held for sale and the
carrying value of net assets held for sale are critical accounting
judgements. As a result of the board's intention to dispose of Cory
Brothers for a share of a joint venture entity with Vertom
Agencies, the Group will lose control of Cory Brothers. Management
believe it is highly probable that the transaction will complete
and therefore the results of Cory Brothers should be presented as
discontinued operations and the net assets of Cory Brothers
classified as held for sale.
The net assets classified as held for sale must be held at the
lower of carrying value and fair value less costs to sell.
Management calculated the value in use of the planned joint venture
using forecast cashflows, and approximated the fair value of the
consideration to sell as the Group's future share of the calculated
value in use of the joint venture. This exceeded the carrying value
of net assets held for sale, and consequently management have
concluded that the net assets should be held at cost and that there
is no impairment. See Note 6.
Wavespec
Fair value of consideration
In the year ended 28 February 2021, the sale of Wavespec, the
Group's Engineering Division, completed for a maximum consideration
of GBP2.6m. The fair value of the consideration is a critical
accounting judgement.
The consideration was satisfied by the issuance of a promissory
note with a maturity date of 31 March 2026. The fair value of the
consideration was based on the net present value of the promissory
note (GBP2.4 million). A discount rate of 2.11% was used to
calculate the net present value. The discount rate was made up of
two elements, the first being a 5 year BBB+ bond yield of 1.51%,
the second being a premium for lack of marketability at 0.60%. A 5
year BBB+ bond yield was used because it matches the maturity of
the promissory note and reflects the credit rating of the bank that
was expected to provide the letter of credit.
Credit impairment
As at 31 August 2021, the buyer had not delivered on its
obligations to secure the promissory note and therefore management
have judged that the promissory note is unlikely to be honoured and
consequently the fair value of the consideration is credit impaired
and a credit loss of GBP2.4 million has been booked.
NAVES Corporate Finance GmbH ("NAVES") acquisition -
rescheduling of deferred consideration
During the period, management agreed a restructuring of the
deferred consideration for the acquisition of NAVES (see Note 12).
Judgement has been used in assessing whether this restructuring
constituted a substantive modification of the terms of the deferred
consideration. Management considered both quantitative and
qualitative factors before judging that the modification was
substantive. Accordingly, the original deferred consideration has
been extinguished and a new financial liability has been
recognised.
The majority of this modification gain relates to a number of
management estimates and judgements primarily on the amount of
interest that would be payable under the terms of the original
deal. The GBP2.4 million difference between the carrying amount of
the financial liability extinguished and the new liability assumed
has been credited to the condensed consolidated income statement
and classified as a specific item within finance income (see Note
5).
Significant revenue transaction
Management recognised significant one-off success fees from one
of the clients in the period (see Note 4) whereby judgement has
been applied in determination of an appropriate discount rate to
deal with the significant financing component as per the agreement.
Management believes that the client's approximate weighted average
cost of capital is an appropriate discount rate.
Pension deficit
The defined benefit pension deficit is based on an actuarial
assessment. The material movement in the pension deficit is a
consequence of changes in estimates of future bond yields and
inflation rates.
Climate-related risks
Management do not consider climate-related risks to have an
impact on any key judgements, estimates or assumptions in these
condensed consolidated interim financial statements. The potential
impact of climate change is reviewed regularly by the board and
climate related risk is not currently considered to be a principal
risk of the business.
Seasonality
The Group's operating cash flows exhibit seasonality in that the
majority of bonus payments occur in the first half of the financial
year. The Group's revenues are not subject to significant seasonal
variation, with the historical exception of the Deep-sea Tankers
desk which has generated stronger revenues during the Northern
hemisphere winter months.
4. Segmental information
The Group's reportable segments are trading divisions that are
managed separately due to a combination of factors including the
variety of services provided and method of service delivery.
The reportable segments reflect the way financial information is
reviewed by the Group's Chief Operating Decision Maker ("CODM").
The CODM for the Group is the Board of Directors.
The results of discontinued operations for the six months ended
31 August 2021 include:
-- The results of Wavespec which was disposed of during the period.
-- The gains and losses related to the Group's investment in
AqualisBraemar which was disposed of during the period.
-- The results of Cory Brothers which is classified as held for sale.
All amounts are represented as discontinued operations in both
the current and comparative periods (See Note 6 and Note 10).
Revenue Results
H1 2021/22 H1 2021/22
-----------
H1 2020/21
restated
H1 2020/21
restated
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ----------- ----------- ----------- -----------
Shipbroking 42,215 39,291 5,921 6,076
Braemar Naves 5,195 3,497 1,736 723
Trading segments revenue/results 47,410 42,788 7,657 6,799
---------------------------------- ----------- ----------- ----------- -----------
Central costs (2,068) (1,723)
---------------------------------- ----------- ----------- ----------- -----------
Underlying operating profit 5,589 5,076
---------------------------------- ----------- ----------- ----------- -----------
Exceptional operating costs - -
Acquisition related expenditure (72) (1,016)
Operating profit 5,517 4,060
Share of associate profit (29) -
Finance income - remeasurement
of deferred consideration
(see Note 12 ) 2,386 -
Net finance expense from
underlying operations (643) (784)
---------------------------------- ----------- ----------- ----------- -----------
Profit before taxation 7,231 3,276
Taxation (483) (440)
Profit from continuing
operations 6,748 2,836
---------------------------------- ----------- ----------- ----------- -----------
Profit/(loss) from discontinued
operations 4,632 (1,731)
---------------------------------- ----------- ----------- ----------- -----------
Profit for the period 11,380 1,105
---------------------------------- ----------- ----------- ----------- -----------
The Group's revenue disaggregated by country of origin is as
follows:
Revenue
H1 2021/22 H1 2020/21
restated
GBP'000 GBP'000
-------------------------- ----------- -----------
United Kingdom 27,630 27,123
Singapore 9,386 5,517
United States 276 392
Australia 5,001 3,526
Germany 1,124 1,661
Rest of the World 3,993 4,569
-------------------------- ----------- -----------
Continuing operations 47,410 42,788
-------------------------- ----------- -----------
Discontinued operations 21,281 14,774
-------------------------- ----------- -----------
The Group does not allocate income tax expense or interest to
reportable segments. Treasury management is managed centrally.
Assets and liabilities information is reported internally in
total and not by reportable segment and, accordingly, no
information is provided in this note on assets and liabilities
split by reportable segment.
Significant transaction
In August 2021, the Group's Financial segment invoiced a
customer for a one-off amount of GBP2.3 million (EUR2.7 million).
Although all the services had been supplied at the point of
invoicing, management reached agreement with the customer that
payment for the invoice would be spread over 18 months at a rate of
EUR150,000 per month, starting in September 2021. After allowing
for discounting to present value, the fair value of revenue and the
receivable recognised on the balance sheet as at 31 August 2021 is
GBP2.2 million. This amount is split less than one year: GBP1.5
million; greater than one year: GBP0.7 million.
Major customers
Revenues from two customers of the Group's Financial segment
represented GBP2.4 million and GBP1.2 million (2020: GBP0.1 million
and GBPnil) of the Group's total revenues in the six months ended
31 August 2021.
In the six months ended 31 August 2020, revenues from one
customer of the Group's Financial segment represented GBP0.6
million of the Group's total revenues.
There is no single client that makes up more than 10% of the
Group's revenues.
5. Specific items
During the period, the Group incurred the following specific
items:
Six months Six months
ended 31 ended 31 Aug
Aug 2021 2020
restated
------------------------------------------------------------- ----------- --------------
GBP'000 GBP'000
------------------------------------------------------------- ----------- --------------
Acquisition related items
* Acquisition of NAVES (72) (719)
* Acquisition of Atlantic Brokers Holdings Limited - (228)
* Acquisition of ACM Shipping Group Plc - (69)
(72) (1,016)
* Gain / (loss) from discontinued operations (Note 6 ) 3,456 (2,800)
* Finance income - credit on modification of deferred
consideration 2,386 -
* Finance costs - (182)
* Taxation - 28
Total 5,770 (3,970)
--------------------------------------------------------------- ----------- --------------
Acquisition related items
The Group incurred net expenditure of GBP0.1 million (2020: net
expenditure of GBP1.0 million) relating to acquisition related
items.
Net expenditure of GBP0.1 million is directly linked to the
acquisition of NAVES (2020: expenditure of GBP0.7 million). In the
six months ended 31 August 2021 the expenditure included GBP0.1
million of post-acquisition remuneration payable to certain vendors
under the terms of the acquisition agreement and charges of GBP0.1
million of interest which were offset by a gain of GBP0.1 million
related to foreign exchange translation of Euro liabilities.
The net expenditure relating to the acquisition in the half year
ended 31 August 2020 included GBP0.2 million of post-acquisition
remuneration payable to certain vendors under the terms of the
acquisition agreement, charges of GBP0.1 million of interest and a
charge of GBP0.5 million related to foreign exchange translation of
Euro liabilities, offset by a credit of GBP0.1 million in respect
of reimbursement from the sellers of certain expenses incurred by
Braemar Naves prior to acquisition.
Expenditure of GBPnil (2020: GBP0.2 million) is directly linked
to the acquisition of Atlantic Brokers Holdings Limited in respect
of incentive payments to working sellers. The cash payment was made
in the year ended 28 February 2018 and was subject to clawback
provisions, and the clawback period over which costs were charged
to the Income Statement expired on 28 February 2021.
Expenditure of GBPnil (2020: less than GBP0.1 million) was
incurred in relation to the restricted share plan implemented to
retain key staff following the merger between Braemar Shipping
Services Plc and ACM Shipping Plc.
Other specific items
The Group recognised a net gain of GBP3.5million (2020: loss of
GBP2.8 million) in relation to discontinued operations. Gains on
the disposal of Wavespec and AqualisBraemar of GBP1.6 million and
GBP4.4 million respectively, were offset by an impairment charge of
GBP2.4 million on the consideration due in respect of Wavespec, and
Wavespec trading losses of GBP0.1 million. See Note 6.
On 3 June 2021, the Group completed a restructuring of the
deferred consideration amounts in relation to the acquisition of
NAVES. This modification resulted in a credit of GBP2.4 million.
The majority of this modification gain relates to a number of
management estimates and judgements primarily on the amount of
interest that would be payable under the terms of the original
deal, see Note 12. This credit is classified as specific finance
income.
In the prior period the Group recognised GBP0.2 million of
interest charges related to the Group's RCF as specific finance
costs. These charges related to interest payable on tranches of the
RCF that were used to fund the acquisition of NAVES.
6. Discontinued operations
Six months Six months
ended ended
31 Aug 31 Aug
2021 2020
GBP'000 GBP'000
------------------------------------------------ ----------- -----------
Underlying
Cory Brothers 1,100 452
AqualisBraemar 76 617
------------------------------------------------- ----------- -----------
Underlying profit from discontinued operations 1,176 1,069
Specific items
Wavespec (920) (2,029)
Cory Brothers 8 -
AqualisBraemar 4,368 (771)
------------------------------------------------- ----------- -----------
Profit / (loss) from specific items related
to discontinued operations 3,456 (2,800)
------------------------------------------------- ----------- -----------
Total profit / (loss) from discontinued
operations 4,632 (1,731)
------------------------------------------------- ----------- -----------
Wavespec
On 31 March 2021, the Group completed the sale of Wavespec,
which was classified as held for sale at 31 August 2020 and 28
February 2021. A gain of GBP1.6 million was recognised on
disposal.
The sale was for maximum consideration of GBP2.6 million which
was expected to be satisfied by the issuance of a promissory note
with a maturity date of 31 March 2026. The disposal agreement
contained an obligation for the buyer to secure the note by
providing a standby letter of credit issued by an international
bank with an acceptable credit rating. Should they fail to deliver
such a letter of credit, the Group could elect to receive a sum of
cash of GBP0.5 million from the buyer with the balance of the note
of GBP2.1 million remaining unsecured. The fair value of the
consideration was GBP2.4 million (see Note 3 for details of
assessment of discount rate).
At 31 August 2021, the buyer had not delivered a secured letter
of credit nor had the cash sum of GBP0.5 million been received.
Management believes the consideration (fair value of GBP2.4
million) is unlikely to be received and consequently has been
provided in full (charge of GBP2.4 million).
Cory Brothers
Following the Group's decision to dispose of Cory Brothers, the
results of the current and comparative periods have been restated
to include the results of Cory Brothers as discontinued operations.
The disposal of Cory Brothers is expected to complete during the
current financial year. The net assets of Cory Brothers have been
classified as held for sale.
The net assets classified as held for sale must be held at the
lower of carrying value and fair value less costs to sell.
Management undertook a number of estimates to determine the fair
value of net assets held for sale (see Note 2), and consequently
management have determined that the net assets should be held at
carrying value and that there is no impairment.
AqualisBraemar
The Group recognised its minority shareholding in AqualisBraemar
as an investment in associate until its disposal on 19 May 2021.
The Group's share of profit of associate and the profit on disposal
including foreign exchange recycling totalled GBP4.4 million (see
Note 10). In the prior year the Group recognised a loss of GBP1.0
million on the fair value movement of warrants to acquire further
shares in AqualisBraemar. There was a matching gain recognised in
the financial statements of Aqualis Braemar, and the Group's share
of this gain was GBP0.2 million and is presented within specific
items.
The results of the discontinued operations which have been
included in the condensed consolidated Income Statement were as
follows:
Six months Six months
Wavespec ended ended
31 Aug 31 Aug
2021 2020
GBP'000 GBP'000
------------------------------------ ----------- -----------
Revenue 15 1,254
Costs (161) (1,708)
------------------------------------- ----------- -----------
Trading loss (146) (454)
Impairment to fair value and other
disposal costs - (1,575)
Gain on disposal 1,600 -
Credit impairment charge (2,374) -
Loss before taxation (920) (2,029)
Taxation - -
------------------------------------ ----------- -----------
Total loss for the period from
Wavespec (920) (2,029)
Six months Six months
Cory Brothers ended ended
31 Aug
2021 31 Aug 2020
GBP'000 GBP'000
---------------------------------- ----------- ------------
Revenue 21,281 13,520
Costs (19,954) (12,950)
----------------------------------- ----------- ------------
Trading profit 1,327 570
Specific items 8 -
---------------------------------- ----------- ------------
Profit before taxation 1,335 570
Taxation (227) (118)
----------------------------------- ----------- ------------
Total profit for the period from
Cory Brothers 1,108 452
Six months Six months
AqualisBraemar ended ended
31 Aug
31 Aug 2021 2020
GBP'000 GBP'000
------------------------------------------------- ------------ -------------
Share of associate profit for the period
- trading 76 617
Specific items
Movement in fair value in warrants - (991)
Share of associate profit for the period
- fair value movement in warrants - 220
Profit on disposal 4,368 -
------------------------------------------------- ------------ -------------
Total profit for the period from AqualisBraemar 4,444 (154)
A reconciliation of the derecognition of the Wavespec assets
held for sale to gain on disposal is as follows:
GBP'000
------------------------------- --------
Net assets disposed of
Intangibles 90
Property, plant and equipment 1
Cash 53
Trade and other receivables 293
Trade and other payables (272)
------------------------------- --------
165
------------------------------- --------
GBP'000
--------------------------------------------------------- --------
Disposal proceeds 2,374
Net assets disposed of (165)
Disposal-related costs (609)
Gain on disposal of Wavespec (before credit impairment) 1,600
--------------------------------------------------------- --------
The major classes of assets and liabilities comprising the
operations held for sale are as follows:
Wavespec
31 Aug 2021 31 Aug 2020 28 Feb 2021
GBP'000 GBP'000 GBP'000
------------------------------- ------------- ------------ ------------
Intangibles - 146 90
Property, plant and equipment - 12 1
Cash - - 53
Trade and other receivables - 125 292
Assets held for sale - 283 436
Trade and other payables - (270) (125)
Short-term borrowings - (12) -
------------------------------- ------------- ------------ ------------
Liabilities held for sale - (282) (125)
Net assets of discontinued
operations - 1 311
--------------------------------- ----------- ------------ ------------
At 31 August 2020 an impairment to fair value less costs to sell
of GBP782,000 was pro-rated across intangibles, property, plant and
equipment and trade and other receivables.
Cory Brothers
31 Aug 2021 31 Aug 2020 28 Feb 2021
GBP'000 GBP'000 GBP'000
-------------------------------------- ------------ ------------ ------------
Intangibles 5,013 - -
Property, plant and
equipment 733 - -
Deferred tax assets 230 - -
Cash 7,935 - -
Trade and other receivables 13,967 - -
Assets held for sale 27,878 - -
Trade and other payables (22,758) - -
Current tax payable (431) - -
Long-term borrowings (555) - -
-------------------------------------- ------------ ------------ ------------
Liabilities held for
sale (23,744) - -
Net assets of discontinued operations 4,134 - -
---------------------------------------- ------------ ------------ ------------
The net assets held for sale of Cory Brothers must be held at
lower of carrying value or fair value less costs to sell. At 31
August 2021 these net assets are held at carrying value as
management believe that the fair value less costs to sell exceeds
carrying value (see Note 3 for further detail on assessment).
The total basic and diluted earnings per share in respect of
discontinued operations is 14.86p and 12.21p respectively (August
2020 restated: both loss of 5.53p per share).
During the period the discontinued operations had net operating
cash outflows of GBP0.6 million. Investing activities included
proceeds of GBP7.2 million, which were received in respect of the
AqualisBraemar disposal and the disposal of GBP0.1 million cash
held for sale within Wavespec, and there were no cashflows relating
to financing activities.
7. Taxation
The total tax charge of GBP0.5 million consists of a current tax
charge of GBP0.8 million and a deferred tax credit of GBP0.3
million. Current tax is charged at 16.8% for the six months ended
31 August 2021 (2020 restated: 14.1%) representing the best
estimate of the average annual effective tax rate expected to apply
for the full year, applied to the pre-tax income of the six month
period. The rate in the current period is higher than the
comparative period due to the utilisation of losses in the prior
period and the effects of restating the prior period tax charge for
the presentation of Cory Brothers as discontinued operations.
Deferred tax is based on 25.0% for the six months ended 31
August 2021 (2020: 19.0%). This is the UK tax rate based on the
Finance Bill 2021 which was substantively enacted in May 2021. The
effect on the Group's deferred tax charge was not material. The
amount of deferred tax is based on the expected manner of
realisation of the carrying amount of assets and liabilities. The
Directors believe it is probable that there will be sufficient
taxable profits in the future to recover the deferred tax assets in
full.
8. Earnings per share
Six months Six months
ended ended
31 Aug 2021 31 Aug 2020
Total operations GBP'000 GBP'000
---------------------------------- ---- ------------- -------------
Profit attributable to equity
holders of the parent 11,380 1,105
----------------------------------------- ------------- -------------
pence pence
---------------------------------- ---- ------------- -------------
Basic earnings/(loss) per share 36.52 3.53
Effect of dilutive share options (6.53) (0.58)
----------------------------------------- ------------- -------------
Diluted loss per share 29.99 2.95
----------------------------------------- ------------- -------------
Continuing operations GBP'000 GBP'000
---------------------------------- -------- --------
Profit attributable to equity
shareholders of the parent 6,748 2,836
------------------------------------ -------- --------
pence pence
---------------------------------- -------- --------
Basic earnings per share 21.66 9.07
Effect of dilutive share options (3.88) (1.51)
------------------------------------ -------- --------
Diluted earnings per share 17.78 7.56
------------------------------------ -------- --------
Underlying operations GBP'000 GBP'000
---------------------------------- -------- --------
Profit attributable to equity
shareholders of the parent 5,610 5,075
------------------------------------ -------- --------
pence pence
---------------------------------- -------- --------
Basic earnings per share 18.00 16.22
Effect of dilutive share options (3.22) (2.69)
------------------------------------ -------- --------
Diluted earnings per share 14.78 13.53
------------------------------------ -------- --------
Underlying continuing operations GBP'000 GBP'000
---------------------------------- -------- --------
Profit attributable to equity
shareholders of the parent 4,434 4,006
------------------------------------ -------- --------
pence pence
---------------------------------- -------- --------
Basic earnings per share 14.23 12.81
Effect of dilutive share options (2.55) (2.13)
------------------------------------ -------- --------
Diluted earnings per share 11.68 10.68
------------------------------------ -------- --------
Earnings per share from continuing operations and underlying
operations for the comparative periods have been restated following
the restatement of Cory Brothers and AqualisBraemar as discontinued
operations.
The weighted average number of shares used in basic earnings per
share is 31,161,213 (2020: 31,283,334).
The weighted average number of shares used in the diluted
earnings per share is 37,951,467 (2020: 37,509,762) after adjusting
for the effect of 6,790,254 (2020: 6,226,428) dilutive share
options.
Where any potential ordinary shares would have the effect of
increasing earnings per share, they have not been treated as
dilutive.
9. Dividends
On 3 June 2021 the Directors recommended a dividend of 5p per
share for approval at the AGM for the financial year ended 28
February 2021. On 26 August 2021 the dividend of 5p per share was
approved and was paid on 1 September 2021.
No dividends were declared or paid in the six months ended 31
August 2020.
The board has declared an interim dividend of 2.0p per share, as
a result of the trading in the first half of this year, to be paid
on 16 December 2021 (H1 2020: nil).
10. Investment in associate
Zuma Labs
On 29 October 2020 the Group subscribed for 1,000 ordinary
shares in Zuma Labs Limited. Zuma Labs Limited is a private company
incorporated in England and Wales and its registered address is
Kemp House, 160 City Road, London, United Kingdom, EC1V 2NX. Zuma
Labs Limited has one share class and each share carries one
vote.
During the period, in accordance with the shareholders'
agreement, two further subscriptions for shares were made totalling
of $0.3 million (GBP0.2 million), increasing Braemar's shareholding
increased by 750 shares. Fractal's shareholding has remained at
10,000 shares.
At 31 August 2021 the Group's shareholding was 2,125 shares,
which equates to 17.5% of Zuma Lab Limited's share capital and
17.5% of voting rights. The Group has representation on the board
of Zuma Labs Limited and, since the period end, has subscribed for
a further 375 shares for $0.15 million resulting in the Group
owning 20% of Zuma Labs Limited's share capital. As a result, the
Group considers that it has the power to exercise significant
influence in Zuma Labs Limited and the investment in it has been
accounted for using the equity method.
AqualisBraemar
AqualisBraemar is listed on the Oslo Børs, its principal place
of business is Oslo and its registered address is Olav Vs gate 6,
0161, Oslo Norway. AqualisBraemar has one share class and each
share carries one vote.
On 21 June 2019 the Group recognised an investment in associate
as a result of the divestment of the Offshore, Marine and Adjusting
product lines in return for a significant minority shareholding in
AqualisBraemar.
On 19 May 2021 the Group sold 9,640,621 shares in AqualisBraemar
for a profit of GBP4.4 million. At that point significant influence
was lost, the Group ceased to equity account for AqualisBraemar and
the Group's interest in AqualisBraemar was limited to its holding
of 6,523,977 performance-based warrants which were accounted for as
a financial asset at fair value.
On 20 August 2021, 1,000,000 of the 6,523,977 warrants vested
with the remainder lapsing. A loss on vesting of GBP2,000 was
recognised in specific items. The shares received were subsequently
sold on 31 August 2021 crystallising a further loss of
GBP4,000.
At 31 August 2021 the Group's shareholding was nil which equates
to 0% of AqualisBraemar's share capital and 0% of voting rights
(2020: 27.3% of share capital and 27.3% of voting rights).
Zuma Labs AqualisBraemar Total
GBP'000 GBP'000 GBP'000
------------------------------------------------- ---------- --------------- ---------
At 1 March 2020
Cost of investment - 7,315 7,315
Share of profit in associate - underlying - 837 837
Share of associate's other comprehensive expense - (238) (238)
Dividends received - (322) (322)
Foreign exchange movements - (466) (466)
At 31 August 2020 - 7,126 7,126
------------------------------------------------- ---------- --------------- ---------
Cost of investment 418 - 418
Share of loss in associate - underlying - (491) (491)
Share of associate's other comprehensive income - 550 550
Dividends received - (319) (319)
Gain on dilution - 826 826
Book value of 9,600,000 shares disposed - (3,753) (3,753)
Foreign exchange movements - (594) (594)
------------------------------------------------- ---------- --------------- ---------
At 28 February 2021 418 3,345 3,763
------------------------------------------------- ---------- --------------- ---------
Book value of 1,125 shares acquired 217 - 217
Share of profit/(loss) in associate - underlying (29) 76 47
Share of associate's other comprehensive income - 52 52
Book value of 9,640,621 shares disposed - (3,473) (3,473)
------------------------------------------------- ---------- --------------- ---------
At 31 August 2021 606 - 606
------------------------------------------------- ---------- --------------- ---------
A reconciliation of the book value of the AqualisBraemar shares
disposed of to the profit on disposal in Note 6 is as follows:
Number of shares sold 9,640,621
Share price NOK 9.00
NOK'000
Gross disposal proceeds 86,776
Brokers commission at 1.5% (1,301)
----------------------------------------------- ---------
Net disposal proceeds 85,475
----------------------------------------------- ---------
GBP'000
Net disposal proceeds 7,232
Book value of shares sold (3,473)
----------------------------------------------- ---------
Profit on disposal before selling costs and FX 3,759
Legal costs (31)
Recycle of amounts in OCI 640
Profit on disposal 4,368
----------------------------------------------- ---------
Management have reviewed the carrying value of the investment in
Zuma Labs Limited at 31 August 2021 and do not consider this to be
impaired.
IAS 28 requires the most recent financial statements of an
associate are used for accounting purposes, and that coterminous
information should be used unless it is impractical to do so.
AqualisBraemar have a year end of 31 December and for practical
reasons AqualisBraemar full year accounts are used for the purposes
of the Group's full year reporting at 28 February with adjustments
made for any significant transactions and events. For the interim
period to 31 August 2021 the Group has included its share of the
AqualisBraemar results to 19 May 2021, at which point the Group
disposed of its investment and ceased to equity account. Zuma Labs
has a year end of 31 March and for practical reasons Zuma's results
for the 12 months ended 31 December will be included in the Group's
full year report at 28 February with adjustments made for any
significant transactions and events. For the interim period to 31
August 2021 the Group has included its share of Zuma's results from
1 November 2020 to 30 June 2021. There were no significant events
between 1 July 2021 and 31 August 2021 and Zuma Labs Limited has no
contingent liabilities.
11. Trade and other receivables
As at As at As at
31 Aug 31 Aug 28 Feb
2021 2020 2021
GBP'000 GBP'000 GBP'000
----------------------------------- -------- -------- --------
Trade receivables 20,737 26,971 27,266
Provision for impairment of trade
receivables (2,787) (2,778) (2,858)
----------------------------------- -------- -------- --------
17,950 24,193 24,408
Other receivables 8,219 6,975 5,567
Finance lease receivables 750 772 974
Accrued income 1,240 1,778 2,570
Prepayments 1,285 1,167 1,281
----------------------------------- -------- -------- --------
29,444 34,885 34,800
----------------------------------- -------- -------- --------
The Directors consider that the carrying amounts of trade
receivables approximate to their fair value.
At 31 August 2021 the lifetime expected loss provision for trade
receivables and contract assets is GBP0.5 million (28 February
2021: GBP0.8 million). The expected credit loss rates applied at 31
August 2021 are consistent with those applied at 28 February 2021.
At 31 August 2021 the expected credit loss rate for balances over
12 months was 0.154% (28 February 2021: 0.154%).
Other receivables includes GBP1.5 million restricted cash held
for the payment of future dividends (28 February 2021: GBPnil).
12. Deferred consideration
In September 2017, the Group acquired the entire share capital
of NAVES. The acquisition agreement provided for a minimum
consideration of GBP20.6 million (EUR24.0 million), excluding a
working capital adjustment, and a maximum consideration of GBP30.0
million (EUR35.0 million). Following the conclusion of the
assessment period, the total amount payable under the acquisition
agreement was fixed at GBP25.3 million (EUR29.3 million).
Management Sellers represent Mark Kuchenbecker and Axel Siepmann,
the managing partners of NAVES, and non-management Sellers
represent other investors.
On 3 June 2021 the Group reached an agreement with two of
Braemar Naves' Managing Directors, Axel Siepmann and Mark
Kuchenbecker, and their connected parties, to restructure certain
deferred consideration amounts owed by the Group in relation to the
acquisition.
A total of GBP2.5 million (EUR2.9 million) which was previously
due for repayment before the end of December 2022 has been deferred
to be paid no earlier than September 2025. In addition, a further
amount of GBP0.7 million (EUR0.75 million) will be satisfied by the
issue of Braemar shares in three tranches between September 2021
and December 2022. As part of the modification the Group has also
agreed to increase the interest rate on certain convertible loan
notes, to the extent that they are still outstanding, to five per
cent per annum from September 2025.
A credit of GBP2.4 million has been recognised in respect of the
accounting for the modification and classified in finance income
under specific items in the condensed consolidated Income
Statement. The majority of this modification gain relates to a
number of management estimates and judgements primarily on the
amount of interest that would be payable under the terms of the
original deal. See Note 5.
In total, the Group has committed to the issue of GBP20.6
million (EUR24.0 million) convertible loan note instruments in
respect of the acquisition of NAVES. Of the total convertible loan
notes and deferred consideration, GBP1.9 million is in relation to
payments that will be made within one year of the Balance Sheet
date.
As at As at As at
31 Aug 31 Aug 28 Feb
2021 2020 2021
GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- --------
Current
Issued convertible loan notes 1,934 4,529 5,130
Deferred cash - 626 608
------------------------------- -------- -------- --------
1,934 5,155 5,738
Non-current
Issued convertible loan notes 1,360 2,502 1,217
Accrued retention convertible
loan notes 3,417 3,289 3,358
------------------------------- -------- -------- --------
4,777 5,791 4,575
------------------------------- -------- -------- --------
Total 6,711 10,946 10,313
------------------------------- -------- -------- --------
13. Financial instruments
There have been no substantive changes in the Group's exposure
to financial instrument risks, its objectives, policies, and other
processes for managing those risks or the methods used to measure
them from previous periods unless otherwise stated in this
note.
a) Principal financial instruments
The principal financial instruments used by the Group are as
follows:
-- Trade and other receivables
-- Cash and cash equivalents
-- Unlisted investments
-- Warrants
-- Trade and other payables
-- Bank overdrafts
-- Revolving credit facility
-- Lease liabilities
-- Forward currency contracts
-- Deferred and contingent consideration
b) Financial instruments measured at fair value
The carrying values of the Group's financial assets and
liabilities measured at fair value through the income statement,
including their fair value hierarchy, are as follows. Fair value is
the amount at which a financial instrument could be exchanged in an
arm's length transaction, other than in a forced or liquidated
sale.
As at
Level Level Level
31 Aug 2021 1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
Financial Assets
Unlisted investments 1,500 - 1,500 -
Forward currency
contracts 658 - 658 -
------------------------ ------------ -------- -------- --------
Total 2,158 - 2,158 -
------------------------ ------------ -------- -------- --------
Financial Liabilities
Forward currency
contracts 245 245
------------------------ ------------ -------- -------- --------
Total 245 - 245 -
------------------------ ------------ -------- -------- --------
As at
Level Level Level
28 Feb 2021 1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
Financial Assets
Unlisted investments 1,500 - 1,500 -
Forward currency
contracts 1,773 - 1,773 -
Warrants 746 - - 746
------------------------ ------------ -------- -------- --------
Total 4,019 - 3,273 746
------------------------ ------------ -------- -------- --------
Financial Liabilities
Embedded derivative 60 - - 60
------------------------ ------------ -------- -------- --------
Total 60 - - 60
------------------------ ------------ -------- -------- --------
Fair value hierarchy
The level in the fair value hierarchy within which the financial
asset or liability is categorised is determined on the basis of the
lowest level input that is significant to the fair value
measurement.
Financial assets and liabilities are classified in their
entirety into one of three levels:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: Inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly or
indirectly.
Level 3: Inputs for the asset or liability that are not based on observable market data.
Unlisted investment
The unlisted investment of GBP1.5 million relates to the Group's
investment in the London Tanker Broker Panel. The investment is
carried at fair value, being the value of the most recent
comparable transaction and is therefore classified as Level 2 in
the fair value hierarchy. There was no movement in the fair value
of the unlisted investment.
Warrants
At 28 February 2021 the fair value of the warrants included
unobservable inputs and they were therefore classified as Level 3.
The key assumptions underpinning the fair value of the warrants
related to the future expected share price of AqualisBraemar, the
GBP:NOK and GBP:USD exchange rate and the future performance of
both AqualisBraemar as a whole, and of the former Braemar Marine
and Adjusting product lines.
On 20 August 2021 the Group successfully exercised 1,000,000
warrants. The Group received 1,000,000 ordinary shares in
AqualisBraemar which were held on the Balance Sheet as an equity
investment at market value. On vesting, a loss of GBP2,000 was
recognised in specific items. On 31 August 2021 the Group sold
1,000,000 ordinary shares and derecognised the investment from the
Balance Sheet. A further loss of GBP4,000 on disposal was
recognised in specific items. See Note 5.
There was no movement in the fair value of the warrants between
28 February 2021 and 20 August 2021.
Forward currency contracts
The fair value of the forward currency contracts are based on
prices quoted by the counterparty within these contracts versus the
market rate at the Balance Sheet date and have therefore been
classified as Level 2 in the fair value hierarchy.
The Group manages the exposure to US dollar currency variations
by spot and forward currency sales and other derivative currency
contracts.
At 31 August 2021 the Group held forward currency contracts to
sell $50.3 million at an average rate of $1.375/GBP1.
At 28 February 2021 the Group held forward currency contracts to
sell $48.8 million at an average rate of $1.328/GBP1.
The net fair value of forward currency contracts that are
designated and effective as cash flow hedges amount to a GBP413,000
asset (28 February 2021: GBP1,773,000 asset).
Amounts of GBP570,000 have been charged (31 August 2020:
GBP958,000) to the condensed consolidated Income Statement in
respect of forward contracts which have matured in the period.
The maturity analysis of forward currency contracts Is provided
below:
As at As at
31 August 28 February
2021 2021
GBP'000 GBP'000
------------------------------------- ----------- -------------
Assets
Forward currency contracts maturing
within 12 to 18 months - 200
Forward currency contracts maturing
within 12 months 658 1,573
------------------------------------- ----------- -------------
Total 658 1,773
------------------------------------- ----------- -------------
Liabilities
Forward currency maturing within 12
to 18 months 67 -
Forward currency contracts maturing
within 12 months 178 -
------------------------------------- ----------- -------------
Total 245 -
------------------------------------- ----------- -------------
Embedded derivative
The convertible loan note instruments issued on the acquisition
of NAVES contain an embedded derivative, being a Euro liability of
principal and interest. The equity value of the underlying
derivative is not considered closely related to the debt host,
therefore the loan note is considered to be a financial liability
host with an embedded derivative convertible feature which is
required to be separated from the host. The fair value of the
embedded derivative includes unobservable inputs and are therefore
classified as Level 3. They key assumptions underpinning the fair
value of the embedded derivative relate to the expected future
share price of the Group and the GBP:EUR exchange rate. The fair
value has been determined using the Black-Scholes valuation
model.
GBPnil has been charged to the condensed consolidated Income
Statement in respect of the fair value movement of the embedded
derivative from 1 March 2021 to 31 August 2021. The embedded
derivative was derecognised as part of the modification to the
terms of the deferred consideration described in Note 12.
c) Financial instruments not measured at fair value
The Group's financial assets and liabilities that are not
measured at fair value are held at amortised costs. Due to their
short-term nature, the carrying value of these financial
instruments approximates their fair value. The carrying values of
the Group's financial assets and liabilities (excluding assets and
liabilities held for sale) measured at amortised cost are:
As at
31 Aug As at
2021 28 Feb 2021
Financial assets GBP'000 GBP'000
---------------------------- -------- ------------
Cash and cash equivalents 9,111 14,111
Trade and other receivables 29,475 35,408
---------------------------- -------- ------------
Total 38,586 49,519
---------------------------- -------- ------------
As at
31 Aug As at
2021 28 Feb 2021
Financial liabilities GBP'000 GBP'000
-------------------------------------- -------- ------------
Trade and other payables 10,722 30,335
Deferred and contingent consideration 6,711 10,313
Loans and borrowings 34,964 35,553
-------------------------------------- -------- ------------
Total 52,397 76,201
-------------------------------------- -------- ------------
14. Share capital
Number of Ordinary Share
shares shares premium Total
(thousands) GBP'000 GBP'000 GBP'000
------------------- ------------ --------- -------- --------
At 1 March 2021 31,731 3,174 55,805 58,979
-------------------- ------------ --------- -------- --------
Issue of shares 264 25 - 25
-------------------- ------------ --------- -------- --------
At 31 August 2021 31,995 3,199 55,805 59,004
-------------------- ------------ --------- -------- --------
At 1 March 2020 31,673 3,167 55,805 58,972
Issue of shares 36 5 - 5
At 31 August 2020 31,709 3,172 55,805 58,977
-------------------- ------------ --------- -------- --------
In the six months ended 31 August 2021 the total number of
ordinary shares of 10 pence each in issue increased from 31,731,218
at 1 March 2021 to 31,995,335. These shares were issued by the
Company at nominal value and were allotted to the Company's
Employee Share Ownership Plan to be used to satisfy share awards
under the Company's employee incentive schemes (including the
Braemar Shipping Services Plc Long-Term Incentive Plan; the Braemar
Shipping Services Plc Restricted Share Plan and the Braemar
Shipping Services Plc 2010 Company Share Option Plan).
15. Other reserves
Capital redemption Translation Total other
reserve Merger reserve reserve Hedging reserve reserves
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ------------------- --------------- ------------------- ---------------- -------------------
At 1 March 2021 396 21,346 182 866 22,790
Cash flow hedges
- Amounts recycled
to profit or loss - - - (1,084) (1,084)
- Fair value gains
in the period - - - (276) (276)
- Deferred tax
movements - - - 828 828
Foreign exchange
differences - - (1,075) - (1,075)
At 31 August 2021 396 21,346 (893) 334 21,183
-------------------- ------------------- --------------- ------------------- ---------------- -------------------
Capital redemption Translation Total other
reserve Merger reserve reserve Hedging reserve reserves
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ------------------- --------------- ------------------- ---------------- -------------------
At 1 March 2020 396 21,346 1,385 (848) 22,279
Cash flow hedges - - - - -
- Amounts recycled
to profit or loss - - - 958 958
- Fair value gains
in the period - - - 1,725 1,725
- Deferred tax
movements - - - (327) (327)
Foreign exchange
differences - - (2,516) - (2,516)
-------------------- ------------------- --------------- ------------------- ---------------- -------------------
At 31 August 2020 396 21,346 (1,131) 1,508 22,119
-------------------- ------------------- --------------- ------------------- ---------------- -------------------
All other reserves are attributable to the equity holders of the
parent company.
16. Contingent liabilities
From time to time the Group may be engaged in litigation in the
ordinary course of business. The Group carries professional
indemnity insurance. There are currently no contingent liabilities
expected to have a material adverse financial impact on the Group's
consolidated results or net assets.
17. Related parties
The Group's related parties are unchanged from 28 February 2021.
Other than the Braemar Naves Payment rescheduling described in Note
12, there have been no significant related party transactions in
the six months ended 31 August 2021. For further information about
the Group's related parties, please refer to the Group's Annual
Report 2021.
18. Events after the reporting date
Shares issued as part of the rescheduled consideration for
Naves
On 3 June 2021, the Group agreed a rescheduling of deferred
consideration amounts owed in relation to its acquisition of
Braemar Naves, in 2017. As part of this restructuring it was agreed
that an amount of approximately GBP0.7 million (EUR0.75 million)
would be satisfied by the issue of new ordinary shares in the
capital of the Company in three tranches between September 2021 and
December 2022. Since the period end, GBP0.4 million was satisfied
by the issue of the first tranche of 157,339 shares in
October2021.
Statement of directors' responsibilities
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with UK-adopted IAS 34 Interim Financial Reporting;
and
-- the interim management report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
By order of the board
James Gundy Nick Stone
Group Chief Executive Officer Chief Financial Officer
2 November 2021
INDEPENDENT REVIEW REPORT TO Braemar shipping services plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 August 2021 which comprises the Condensed
Consolidated Income Statement, Condensed Consolidated Statement of
Comprehensive Income, Condensed Consolidated Balance Sheet,
Condensed Consolidated Statement of Cash Flows, Condensed
Consolidated Statement of Changes in Equity and the Unaudited Notes
to The Financial Statements.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and
has been approved by the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
group will be prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this interim financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
August 2021 is not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34 and
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London
2 November 2021
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
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