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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Braemar Plc | AQSE:BMS.GB | Aquis Stock Exchange | Ordinary Share | GB0000600931 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 240.00 | 230.00 | 250.00 | 240.00 | 238.12 | 240.00 | 9,104 | 16:29:45 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Jan 2023 to Jan 2025
TIDMBMS
RNS Number : 6189T
Braemar PLC
16 November 2023
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.
16 November 2023
BRAEMAR PLC
("Braemar", the "Company" and together with its subsidiaries the "Group")
Audited Final Results for the year ended 28 February 2023
Strong trading performance doubling profitability, achievement of key strategic objectives and a balance sheet built for growth
Braemar Plc (LSE: BMS), a leading provider of expert investment, chartering and risk management advice, today announces its audited final results for the year ended 28 February 2023 ("FY23").
The board is delighted to report an outstanding year of revenue generation and profitability and, with the independent investigation now completed, looks to the future with confidence. The 2023 Annual Report and Accounts will be available on the Company's website ( www.braemar.com ).
RESULTS HIGHLIGHTS
Financial performance
Hot Features
Premium
Underlying results* Statutory results
FY23 FY22 % change FY23 FY22 % change
---------- ---------- --------- ---------- ---------- ---------
Revenue GBP152.9m GBP101.3m +51% GBP152.9m GBP101.3m +51%
---------- ---------- --------- ---------- ---------- ---------
Operating profit GBP20.1m GBP10.1m +100% GBP11.7m GBP9.5m +22%
---------- ---------- --------- ---------- ---------- ---------
Profit after tax from continuing
operations GBP13.4m GBP7.0m +90% GBP4.6m GBP6.7m -31%
---------- ---------- --------- ---------- ---------- ---------
Underlying earnings per
share (basic) 46.22p 27.95p +65% 15.85p 45.56p -65%
---------- ---------- --------- ---------- ---------- ---------
Total dividend per share 12.0p 9.0p +33% 12.0p 9.0p +33%
---------- ---------- --------- ---------- ---------- ---------
Net cash/(debt) GBP6.9m (GBP9.3m) - GBP6.9m (GBP9.3m) -
---------- ---------- --------- ---------- ---------- ---------
* Underlying results measures above are before specific items, including acquisition and disposal-related charges and profit/loss from discontinued operations.
Financial highlights
-- FY23 a year of outstanding revenue generation and underlying operating profitability.
-- 51% increase in revenue from continuing operations, driven by strong performances in all segments to GBP152.9m (FY22: GBP101.3m).
-- Increased revenue driving a 100% increase in underlying operating profit to GBP20.1m (FY22: GBP10.1m).
-- Reported profit after tax for the year down 67% to GBP4.6m (FY22: GBP13.9m), after goodwill impairment in FY23 of GBP9.1m (FY22: GBPnil) and expensed acquisition costs of GBP2m (FY22: GBPnil).
-- Significant strengthening of the balance sheet with net cash up to GBP6.9m as at 28 February 2023 (FY22: net debt of GBP9.3m), enhancing the Group's ability to execute a growth-oriented strategy.
-- Underlying earnings per share increased by 65% to 46.22 pence (FY22: 27.95 pence).
-- Recommended final dividend for FY23 of 8.0 pence per share, reflecting the Group's strong trading performance and confidence in the prospects of the business, representing total dividends for the year of 12.0 pence per share (FY22: 9.0 pence).
Operational highlights
-- Simplified strategy, focusing on core expertise of shipbroking, delivering tangible results.
-- Acquisition of Southport Maritime Inc. in the USA and Madrid tanker desk in Spain, as well as launch of Natural Gas and Oil derivatives desks significantly enhancing the diversification and resilience of the Group.
-- Transaction volumes expanded strongly, with fixture numbers up 32% from prior year. -- Average revenue per head for FY23 was GBP398,000, a 42% increase on the prior year.
Current trading and outlook
-- With the independent internal investigation completed, the board continues to pursue its stated growth strategy, to capitalise on the Group's strong platform and act as a consolidator in the fragmented shipbroking market.
-- The Group expects to build on FY23's exceptional performance and continues to trade well in FY24, remaining on track to deliver underlying operating profit of not less than GBP18m from FY25 onwards.
-- Sentiment in the short and medium-term, as measured by time charter rates, is broadly positive, and the vessel supply and freight demand pictures in the Group's two biggest markets, Tankers and Dry Cargo, look promising for the foreseeable future.
-- The Group's forward order book continues to strengthen, standing at $65.6m as at 31 October 2023, 17% higher than $56.2m as at 28 February 2023.
-- With the Group's growth-focused strategy delivering strong results, the board looks to the future with confidence .
James Gundy, Group Chief Executive Officer, commenting on the Group's FY23 results, said:
"I am proud to announce this outstanding performance from Braemar. We achieved what we promised in our key performance metrics, as well as investing to enhance the long-term resilience of the Group. Our strategy of focusing on our core expertise, shipbroking, is undoubtedly at the centre of our success. We have simplified the business, returned it to growth, and transformed the balance sheet. Braemar is now firmly on a long-term growth trajectory.
"The delivery schedule of ships in almost all sectors remains manageable; many inefficiencies in global supply chains remain post-Covid-19; large parts of the tanker and dry cargo fleets are travelling much longer distances due to sanctions; and vessel scrapping is likely to pick up ahead of a stricter regulatory environment and an increased focus on ESG-criteria for investments. All of which are positive factors for the Group.
"We are confident in our ability to continue to seize the opportunities available to us and maintain strong levels of activity, as a result of our strategic investments in our people, offices, and technology. We look forward to another good year of trading, as the benefits of our clear focus, our growth strategy, prudent cost control and operational gearing compound for the benefit of all stakeholders".
Results Roadshow and Online Presentations
Given the proximity of this announcement to the H1 FY24 results, which are scheduled to be released on 29 November 2023, the Company is hosting a combined results roadshow, which will commence with an analyst briefing on Wednesday, 29 November 2023 at 10.30am at Buchanan's offices at 107 Cheapside, London, EC2V 6DN. Please contact the team at Buchanan via braemar@buchanan.uk.com for further details.
The Company is also hosting an online investor presentation with Q&A on Friday, 1 December 2023, commencing at 1pm. To participate, please register with PI World at https://bit.ly/BMS_FY23_webinar .
For further information, contact:
Braemar Plc James Gundy, Group Chief Executive Officer Tel +44 (0) 20 3142 4100 Grant Foley, Group Chief Financial Officer Rebecca-Joy Wekwete, Company Secretary Buchanan Charles Ryland / Stephanie Whitmore / Tel +44 (0) 20 7466 5000 Jamie Hooper Investec Bank plc Gary Clarence / Harry Hargreaves / Alice Tel +44 (0) 20 7597 5970 King Cavendish Securities PLC Ben Jeynes / Matt Lewis (Corporate Finance) Tel +44 (0) 20 7220 0500 Leif Powis /Dale Bellis/ Charlie Combe (Sales & ECM)
CHAIRMAN'S STATEMENT
I am delighted to report an outstanding year of revenue generation and underlying operating profitability for Braemar. The Group achieved substantial revenue growth, significantly expanded transaction volumes, and generated impressive earnings, whilst building a strong balance sheet and ample financial liquidity. With a streamlined and simplified business model now in place, the Group is making excellent progress towards its strategic, operational, and Environmental, People, Social & Governance ("EPSG") goals.
The markets in which the Group operates were generally favourable during this financial year. While the Group is cautiously optimistic about market conditions in its key sectors in the years ahead and has taken numerous steps to make the business more resilient, as shipping is an inherently volatile and cyclical business. Factors such as a weaker global economy, increased environmental regulation, or commodity export bans could dampen demand for seaborne trade, whereas geopolitical tensions and conflict can increase market prices leading to higher revenue.
I was appointed in May 2021 with a mandate to help Braemar's new management team in two areas: to streamline and simplify the Group's operations and to develop and execute an ambitious, shipbroking-focused, growth strategy.
I am pleased to report that we have made strong progress on both objectives. The simplification of the Group is now complete: we have disposed of all non-core businesses and assets, and have transformed the Group's balance sheet from net debt of GBP9.3m on 28 February 2022 to a net cash position of GBP6.9m as at 28 February 2023.
Staff numbers and transaction volumes increased in line with our expectations, augmented by several bolt-on acquisitions, and the development and execution of our growth strategy is also progressing well. During this past financial year, the Group acquired a leading US shipbroker in Southport Maritime Inc. in Florida, USA; a 10-strong tanker desk in Madrid, Spain and a Natural Gas desk; and an Oil Derivatives desk in London. I am pleased to report that the Group's clients have responded positively to the services we have added to our operations and all of the additional services are performing well.
Our targeted hiring strategy also proved successful in the year. The total number of people working at Braemar increased by 6% to 384 (28 February 2022: 362), with an increase in fixtures of 18%. It is important to note that this growth in fixtures was proportionately much greater than the increase in the Group's broker headcount, and demonstrates the Group's ability to achieve non-linear growth, with average revenue per head increasing by 42% to GBP398,000 .
Strong trading performance
It is well reported that the period corresponding to FY23 was one of strong trading in the global shipping and energy industries. Trading in both sectors is predominantly in US dollars, but the Group's major costs are in sterling. This meant that the Group reaped the rewards of a well-structured FX hedging strategy as well as benefiting from favourable foreign exchange rates.
Revenue from continuing operations rose by 51% to GBP152.9m (2022: GBP101.3m), generating a 100% increase in underlying operating profit from continuing operations of GBP20.1m (2022: GBP10.1m). Primarily as a result of specific items, including GBP9.1m of goodwill impairment, reported profit after tax decreased by 67% to GBP4.6m (2022: GBP13.9m). Underlying earnings per share increased by 65% to 46.22 pence (2022: 27.95 pence), and the Group's reported earnings per share decreased by 65% to 15.85 pence (2022: 45.56 pence).
Progressive dividend policy
In my statement last year, I was pleased to announce the introduction of a progressive dividend policy to supplement the Group's growth strategy. The introduction of this policy demonstrated the board's confidence in the growing financial strength and prospects of the Group, its belief in the importance of dividends for shareholders, and its intention to include the payment of progressive dividends in the Group's growth agenda.
As a result of the exceptional cash-generation by the Group's activities in the year, I am pleased to announce that the board is recommending a final dividend for FY23 of 8.0 pence per share for approval by shareholders at the Group's reconvened AGM on 18 December 2023, to be paid on 9 February 2024. This final dividend together with the interim dividend already paid of 4.0 pence per share, represents a total dividend for the year of 12.0 pence, an increase of 33% over last year (2022: 9.0 pence per share).
I am also pleased to report that the Capital Reduction process was completed as planned on 5 June 2023, addressing the historic payment of unlawful dividends and increasing the Group's capacity to pay future dividends.
The final dividend will be paid on 9 February 2024 to shareholders who are on the register at the close of business on 5 January 2024, with a corresponding ex-dividend date of 4 January 2024. The last date for Dividend Reinvestment Plan ("DRIP") elections will be 19 January 2024.
Enabling climate-smart shipping
I am proud to be the Chairman of a business which believes that taking care of the environment, treating colleagues and clients fairly, and maintaining ethical business practices is not only the right thing to do, but is also good for business.
Our corporate operations have been globally carbon neutral for six years. This has, to date, been achieved by investing in offset programmes. I am pleased to report that the Group made continued progress in the year by further reducing its carbon footprint and adopting more environmentally friendly practices across its operations. In April 2023, the Group's ESG efforts and future commitments were recognised by the Financial Times and Statista, who named Braemar one of ' Europe's Climate Leaders' . This title reflects the progress Braemar has already achieved to reduce its Scope 1 and 2 emissions. There is more to be done to enhance the Group's measurement and reduction of Scope 3 emissions, and I look forward to reporting on progress in this area in the coming years.
Braemar is incorporating climate-smart expertise throughout its client service offering, and, as a business, we are committed to exploring new ways to enable our clients to achieve their sustainability ambitions. Over the last year, we have developed our sustainability offering further. As well as being able to service the voluntary carbon market via Braemar Offset, the Group is now providing clients with the access to the mandatory carbon credits they need to fulfil their obligations under the EU's Emissions Trading System (ETS).
The Braemar board
The Braemar board is functioning well. We have a well-balanced team of executives and non-executives, with wide ranging experience, skills and expertise from diverse sectors, who are united in their approach to the business.
On 31 January 2023, Stephen Kunzer, non-executive Director, stood down from the board to take up the position of Chief Executive Officer of Lila Global. Stephen played a supportive role in developing the Group's new growth strategy and we wish him well in his new executive role in the industry.
Cat Valentine joined the board, as an independent non-executive Director, with effect from 16 May 2023. She is a member of both the Remuneration Committee and Audit & Risk Committee. Cat is a communications professional with extensive knowledge of the small-cap growth companies' market and considerable M&A transaction experience. As the Group continues to develop and implement its expansion and growth agenda, her expertise will add considerable value to the board and will help the Group to further deliver on its strategic ambitions.
Grant Foley joined the board as Group Chief Financial Officer on 1 August 2023. Grant has more than 25 years' experience in leading public and private financial services and technology businesses, and joined the Company from ClearScore, the UK's leading credit marketplace, where he served as Chief Financial Officer. At ClearScore, Grant drove significant improvements across the finance function, implementing new systems, processes and reporting as the business scaled. Grant also brings additional transaction experience to the board, and his other roles have included CMC Markets Plc where, as Group Chief Financial Officer and Chief Operating Officer, he was instrumental in the company's successful IPO. The board thanks Nick Stone, who stepped down as Group Chief Financial Officer on 31 July 2023, for his contributions during his four years at Braemar.
Internal independent investigation
As announced on 26 June 2023, the board commenced an internal independent investigation into an historical transaction dating back to 2013. As a result, the publication of these financial results was delayed, and the Group was not able to publish its FY23 results by 30 June 2023 as required under the Financial Conduct Authority's Disclosure Guidance and Transparency Rules. Consequently, the Company requested that trading in its ordinary shares be suspended, this request was granted and suspension in the trading of the Company's ordinary shares took effect on 3 July 2023. The investigation was overseen by an Investigation Committee, chaired by myself and solely comprising the independent non-executive Directors. The investigation was conducted by FRP Advisory Trading Limited, an independent specialist forensic accounting firm, and independent external counsel. The investigation was complex, it was comprehensive and ultimately focused on a review of several transactions between 2006 and 2013.
The investigation has now been completed. The board and the Group have acted promptly to address the process and control areas that were identified as requiring improvement, including taking key remedial actions and the necessary steps to comply with the Group's legal and regulatory obligations. The board is committed to maintaining a high standard of corporate governance and will ensure the remedial actions are tracked through to completion. The Group has recognised a provision in relation to these transactions, which is primarily historical unsettled commissions payable and is treated as a balance sheet reclassification as detailed in the Financial Review, which the board considers appropriate at this time.
Our most valuable assets
On behalf of the board, I would like to thank every one of the Group's employees for their hard work and dedication; our clients for their trust and support; and our shareholders for their continued confidence in our Company.
Over the past year, the Group continued to invest in its people. We expanded our teams across the globe, implemented new programmes to attract and retain top talent, and our strong performance is due to their hard work and creativity. As a result of their successes, the Braemar brand continues to rise. This is now beginning to create a virtuous circle, in which, as our reputation grows, we are better able to attract high performers, who further enhance Braemar's performance, working environment, brand and overall client offering to the benefit of all stakeholders.
There is a renewed energy within Braemar, and the business is in a good place, led by our excellent Group CEO, James Gundy, and his experienced executive management team. The energy, drive and focus within the business is there to be seen.
Outlook
The market conditions in the Group's core sectors, shipping and energy, generally remain healthy, and the long-term outlook for the Group remains favourable.
Trading in FY24 to date has been good (and in line with the board's expectations), as the benefits of Braemar's increased breadth, depth, and scale continue to compound. As expected, the investments made in the last year have increased the cost base for the new financial year, but also provide a platform for further growth in future years. The Group remains on-track to double FY21's operating profit by FY25, delivering strong returns and creating long-term value for our stakeholders.
With this growth-focused strategy delivering strong results, the board looks to the future with confidence.
Nigel Payne
Chairman
15 November 2023
GROUP CHIEF EXECUTIVE OFFICER'S STATEMENT
I am delighted to present our Annual Report for FY23. This is my second year as Group CEO, and I am extremely proud to announce such a strong set of results. My key focus upon becoming CEO was to return to our core expertise, shipbroking, as this has always been at the centre of our success. We have simplified the business and returned it to growth, which in turn has placed Braemar firmly back on a growth trajectory. We have achieved this by capitalising on strong markets, selling non-core businesses, reducing our debts and subsequently investing in the long-term resilience of the Group.
The successful implementation of this strategy has achieved excellent results for the Group in FY23. Underlying operating profit rose by 100% to GBP20.1m (FY22: GBP10.1m), and revenue increased b y 51% from GBP101.3m to GBP152.9m, as revenue and fixture volumes increased on almost every Shipbroking desk. It is worth emphasising that the growth the Group has achieved in terms of revenue and profit are from a business that has a much lower headcount (compared with the headcount prior to the Cory Brothers sale in March 2022) and has been hugely simplified since I became CEO in 2021. Average revenue per head for FY23 was GBP398,000, an increase of 42% on the prior year.
We have a deeply experienced leadership team that knows this industry inside and out, and a strong balance sheet that is built for growth. Together they are enabling us to be a platform for consolidation in the fragmented shipbroking market, and we expect to continue diversification within shipbroking, in addition to growing organically and through M&A.
As part of the execution of our shipbroking-focused growth strategy we achieved significant milestones in FY23 including the acquisitions of Southport Maritime in the US, and a new tanker desk in Madrid. We also continued to enhance our Securities offering with the launch of new Oil derivatives and Natural Gas derivatives desks, which strongly complement our existing Tanker and Dry Cargo FFA desks. Our clients are responding favourably to our enhanced and diversified offering and the synergies which they provide.
Internal independent investigation
As detailed in the Chairman's Statement, the internal independent investigation commenced in late June 2023 has now been completed. It was time consuming and complex and I would like to thank the independent Investigation Committee for overseeing the process. I would also like to thank our clients and shareholders for their patience and understanding during this period. Braemar and its people have shown considerable resilience throughout this period, and I want to thank all our employees for their hard work and focus.
Braemar's growth and achievements this year would not have been possible without the relentless hard work and dedication of our global team, whose commitment to excellence continues to drive our performance and inspires me every day.
Building on strong foundations
Throughout a year of many challenges for the global economy, we remained firmly focused on delivering value to all our stakeholders. Our commitment to innovation and operational excellence has enabled us to remain agile and responsive in the constantly evolving shipping and energy landscapes.
As I outlined last year, our main ambition over the medium-term is to achieve a sustainable annual underlying operating profit, that regardless of market factors, is double the GBP8.9m underlying operating profit in FY21.
In FY23, we achieved 51% revenue growth and increased our underlying operating margin from 10% to 13% over FY22. In the year under review, we delivered further gains in revenue and profitability. Net bank cash at 28 February 2023 was GBP6.9m, helped by the initial proceeds of the sale of Cory Brothers (GBP6.5m) in March 2022 but after cash outflows for acquisitions totalling GBP7.3m (Southport for GBP6.3m, and a new tanker desk in Madrid for GBP1.3m upfront) - a substantial improvement on the net bank debt of GBP9.3m at 28 February 2022. Profit after tax was GBP4.6m (FY22: GBP13.9m), largely lower due to the impairment of goodwill relating to the Corporate Finance business.
Over this financial year, trading has been good across our Chartering and Sale & Purchase desks, as well as on our Investment and Risk Advisory desks. Chartering fixture volumes were up 18% across all desks, Risk Advisory revenues increased 42%, and Sale & Purchase transactions volume grew 23%.
Buoyant shipping and energy markets
In our industry, earnings are determined by the relationship between the supply of ships and the demand for ships. At its simplest, shipping is Economics 101. While there are variations from sector to sector, the key positive supply factors were shared across the industry: longer voyage distances, minimal fleet growth, and supply-chain inefficiencies. All these factors will remain in FY24 although they are likely to moderate and the demand picture in most sectors supports a positive rate floor.
Oil demand growth is back to where it was pre-Covid, and the IEA predicted in May 2023 that global oil demand in 2023 would be two million barrels per day higher than in 2022. Despite oil companies wanting newer ships to reduce the risks of accidents, the average age of the global fleet is becoming much older than it has been historically. Low scrapping and an unusually low orderbook is expected to further shrink the availability of modern ships over the next few years. This puts a high floor under tanker rates during a period when energy security concerns have increased voyage distances and tanker demand growth has accelerated relative to oil export volume.
The average age of the bulk carrier fleet is also increasing, while the orderbook for new ships is very small by historical standards - and it is a similar story in sectors such as Offshore. With demand for green energy and dry cargo commodities growing globally, combined with increased consumer demand now that China's Zero Covid policy has been revoked, we can expect to see positive returns over the medium term.
It is worth noting that not all markets are strong at the same time, and events impact shipping sectors in different ways. For example, in broad terms, Covid was good for dry cargo, and bad for tankers. This is why we are prioritising diversification in our shipbroking operations: and this is a key strength of the Group. Resilience through diversification is what will enable Braemar to be successful throughout the business and shipping cycles.
Investing in our EPSG
As I said in my report last year and have emphasised since, we remain committed to delivering sustainable growth and value to our shareholders and contributing to the communities and environments in which we operate. We are proud of the positive impact that our business has, and it will always be a Group priority to operate ethically.
Our sustainability strategy focuses on minimising our environmental impact, encouraging diversity and inclusion, and supporting local initiatives that drive positive change. We believe that shipping has a critical role to play in shaping a more sustainable world, and we are committed to doing our part.
Outlook: A stronger, more resilient business
Our resilience and adaptability have been tested over the last year, but our commitment to our strategic vision and values enabled us to emerge stronger than ever. A year on since my first CEO statement, I am delighted to be able to say that we have achieved the results we promised across every metric, and now we are a much more diversified and resilient shipbroking business.
We have invested in our people, expanded our product portfolio, and entered new markets and locations to diversify our revenue streams and mitigate risk. The investments that we have made, as we implemented our growth strategy, have enabled us to stay ahead of the curve in a rapidly changing industry, and will provide the foundations for an even stronger business in the years to come.
It is an exciting time to be at Braemar. Shipping is undergoing huge changes: in fuels, in trade patterns, and in the global regulations that govern how we operate. Thanks to these types of developments, the markets in which we operate are facing major volatility, and to achieve success in them requires the highest levels of expertise and practical experience. The investments that we have made since I became CEO have all been in the service of ensuring that we are able to continue to be able to deliver best-in-class advice, and to maximise the value we create for our clients.
The Group has traded well in FY24 to date and we are on track to achieve the sustainable doubling of FY21's underlying operating profit by FY25. Given our investments, costs will be higher in FY24 and we have incurred non-recurring costs of cGBP2.5m in relation to the investigation. However, we have built strong foundations in my first two years as CEO and there is much more work to be done to achieve the Group's full potential. I look forward with confidence to the remainder of the year, as we relentlessly continue to execute our clear, growth-focused strategy.
I would like to express my gratitude to our shareholders, employees, clients, and partners for their continued support. Our successes would not have been possible without the hard work and dedication of our talented teams, or the trust and loyalty of our clients and partners. I look forward to another successful year ahead and remain committed to delivering exceptional results for all our stakeholders.
James Gundy
Group Chief Executive Officer
15 November 2023
FINANCIAL REVIEW
A strong trading performance and the successful execution of our strategic objectives
"Another excellent trading year, together with the first steps on the growth plan . "
Grant Foley , Group Chief Financial Off icer
Summary Income Statement FY23
Th e strong trading and higher revenues have delivered significant increases across all continuing profit measures.
-- Statutor y operating profit increased by 22% to GBP11.7m (FY22: GBP9.5m ).
-- Unde rlying operating profit incre ased by 100% to GBP20.1m (FY22: GBP10.1m).
-- Statutory profit before tax increased by 11% to GBP9.5m (FY22: GBP8.5m ).
-- Underlying profit before tax increased by 103% to GBP18.0m (FY22: GBP8.9m).
Statutory profit in FY23 was impacted by the impairment of the goodwill on acquisition of Naves (now Braemar Corporate Finance), which was completed by the previous management team in 2017.
Underlying Statutory
FY23 FY22 FY23 FY22
GBP'000 GBP'000 % Inc/(Dec) GBP'000 GBP'000 % Inc/(Dec)
Revenue 152,911 101,310 51% 152,911 101,310 51%
-------------------- --------- --------- ------------ --------- --------- ------------
Operating profit 20,075 10,060 100% 11,669 9,546 22%
-------------------- --------- --------- ------------ --------- --------- ------------
Profit before tax 18,040 8,885 103% 9,451 8,543 11%
-------------------- --------- --------- ------------ --------- --------- ------------
Profit 13,399 8,539 57% 4,59 6 13,919 (67)%
-------------------- --------- --------- ------------ --------- --------- ------------
Earnings per share 46.22p 27.95p 65% 15.85p 45.56p (65)%
-------------------- --------- --------- ------------ --------- --------- ------------
Continuing operations
Re venu e
Revenu e from continuing operations grew by 51% from GBP101.3m to GBP152.9m, as revenue and fixture volumes across almost every Shipbroking desk increased , with the exception of Corporate Finance.
Th e US dollar exchange rate moved from US$1.34/GBP1 at the start of the year to US$1.21/GBP1 at 28 February 2023 with an average of US$1.21. A significant proportion of the Group's revenue is earned in US dollars. Revenue growth was positively impacted by the strong US dollar, which contributed around 24% of the overall increase. US dollar revenue increased by 48% in the period.
T o protect the future sterling value of those revenues, at 28 February 2023, the Group held forward currency contracts to sell US$123m at an average rate of US$1.22/GBP 1.
Operat ing costs
Du e to the substantial increase in revenue and the considerable hard work, which was put into its generation, there was a corresponding increase in profit -related bonuses paid to the brokers. This was the main contributor to the increase in operating costs, compared to the prior year. As planned, salary costs also increased, due to the investment in new brokers and desks, the new office in Madrid and the acquisition of Southport in the US. Travelling and entertaining expenditure increased to GBP6.4m from GBP2.1m, as a result of a full year largely free from Covid restrictions. As a result of all these factors, underlying operating costs increased by 46% from GBP90.5m to GBP132.6m.
Centra l costs
Centra l costs increased in total by 49% from GBP4.2m to GBP6.2m. This was the result of increased share-based payment charges, linked in part to the improved performance in the year and higher levels of expected vesting of awards, higher staff costs and non-recurring costs related to the delayed year-end audit process.
Ne t finance costs
Ne t finance costs for the year increased by 123% to GBP2.2m (2022: GBP1.0m). The cost has three elements: the revolving credit facility provided by HSBC, which provides the working capital needed by the business as well as the core indebtedness; the convertible loan notes associated with the acquisition of Braemar Naves; and the interest charge on the liability associated with right-of-use assets accounted for under IFRS 16. Average net debt improved versus FY22 and average borrowing is largely in line with FY22, but costs have increased in the year as a result of the increases in interest rates with average SONIA increasing from 0.1% in FY22 to 1.9% in FY23. In addition, there has been an adverse movement in foreign exchange rates, causing an increase of GBP0.5m to finance costs largely in relation to the euro denominated Naves liabilities.
Included within the net finance costs in FY22 is a credit of GBP0.2m, which did not recur in FY23. This was in respect of the accounting for the r estructuring of deferred consideration owed in relation to the acquisition of Braemar Naves.
Finance income includes a credit of GBP0.1m, relating to the revaluation of amounts due for the sale of Cory Brothers that took place in the previous year.
Specific items and discontinued operations
Discontinued operations
In FY22, the board successfully executed several transactions with the aim of simplifying the Group's operations to concentrate on a new growth strategy centred around Shipbroking. As a result, the financial results of W avespec, AqualisBraemar and Cory Brothers, which were disposed of during the year, have been presented as discontinued operations, together with the profits and losses on their disposal. In aggregate, all these items total a profit of GBP7.2m.
Spec ific it ems
A lternative profit m easures ("AP M s")
Braema r uses APMs as key financial indicators to assess the performance of the Group. Management considers that the APMs used by the Group help to provide an alternate assessment of business performance, by excluding items which management does not believe relate to business performance in the period, and provide useful information to investors and other interested parties. We have separated the impact of individually material capital transactions, such as acquisitions and disposals, from ongoing trading activity to allow a focus on ongoing operational performance. Our APMs include underlying operating profit and underlying earnings per share.
Items that are not considered to be part of the ongoing trade of the Group have been presented as specific. These items are material in both size and/or nature and we believe may distort understanding of the underlying performance o f the business if not identified separately. Details of these items can be found in Note 10 to these Financial Statements.
FY23 FY22
GBP'000 GBP'000
Underlying operating profit before specific
items 20,075 10,060
--------------------------------------------------- --------- ----------
Specific items - Acquisition and disposal-related
expenditure (1,999) (122)
--------------------------------------------------- --------- ----------
Specific items - Other operating costs (10,253) (392)
--------------------------------------------------- --------- ----------
Specific items - Other income 3,846 0
--------------------------------------------------- --------- ----------
Operating profit 11 ,669 9,546
--------------------------------------------------- --------- ----------
The most significant of these items is an impairment of goodwill. As a result of a weaker performance in FY23, a more negative outlook for the business and challenging market conditions, the Group has recognised an impairment of GBP9.1m to the Goodwill which arose on the acquisition of Naves. Further details can be found in Note 15.
As a result of accounting requirements, a gain on bargain purchase on the acquisition of Southport of GBP3.6m was recognised in the Group's Income Statement. This gain arises due to the recognition of acquired net assets, while for accounting purposes the consideration is treated as a post-acquisition employee expense.
Balance Sheet
Ne t assets at 28 February 2023 were GBP76.7m (FY22 restated: GBP71.5m). The year saw an increase in gross trade receivables of 28% to GBP32.0m from GBP25.0m, due to the 51% revenue growth in shipbroking during the period. Despite this rise in gross trade receivables, the provision for impairment of trade receivables only increased by 18%, reflecting strong working capital management and control over receivables ageing. A receivable of GBP5.0m (FY22: GBP4.8m) is included in other long-term receivables in respect of the VertomCory deferred and contingent consideration.
Cap ital expendit ure
Tota l capital expenditure was GBP1.7m (FY22: GBP2.3m). The most significant item of capital expenditure relates to the treatment of office leases under IFRS 16 whereby the lease is treated as an a sset addition. These lease additions were GBP0.9m in the year (FY22: GBP1.0m) and do not relate to cash payments in the year. The balance relates to capitalised expenditure on computer equipment/software of GBP0.5m (FY22: GBP0.8m) and other expenditure on fixtures and fittings of GBP0.3m (FY22: GBP0.3m).
Provisions (internal independent investigation)
In June 2023, the board commissioned an internal independent investigation into an historical transaction originating in 2013. The investigation was overseen by an Investigation Committee chaired by the Group's non-executive Chairman and was conducted by an independent specialist forensic accounting firm and independent external counsel. The investigation was comprehensive and complex and ultimately encompassed several transactions between 2006 and 2013, which required further investigation.
As a result of the investigation, the Group has recognised a provision of GBP2.0m in relation to the uncertain obligations connected to a number of the transactions and commission obligations identified as part of the investigation. Of the GBP2.0m, GBP1.7m relates to historical unsettled commission payable, which was recorded in 2017 upon completion of the relevant contracts, which originated in 2013. This balance has been reclassified from trade payables to provisions during the year. While the board cannot forecast with certainty final outcomes in respect of these obligations, based on the Group's current information, the amount recognised is the current best estimate of the amount required to settle the obligations at the balance sheet date, taking into account the risks and uncertainties surrounding the obligations, including interpretation of specific laws and likelihood of settlement. Non-recurring costs of cGBP2.5m will be reported in FY24 regarding the investigation.
As the ultimate potential obligations and outcomes in relation to the transactions subject to the internal independent investigation are uncertain, there remains a risk that the final outcomes could materially impact the recognised balance. It is impracticable to provide sensitivity estimates of potential downside variances at this time.
Borrow ings and cash
A t the Balance Sheet date, the Group had a revolving credit facility with HSBC of GBP30.0m. The facility also provides access to a global cash pooling facility in the UK, Germany and Singapore, which enables efficient management of liquidity between its main regional hubs. The Group operates a pooling arrangement for cash management purposes and at the end of the year the Group had net cash of GBP6.9m (2022: net debt GBP9.3m).
Ret irement benefits
Th e Group has a defined benefit pension scheme, which was closed to new members during FY16. The scheme has a surplus of GBP1.1m (FY22: deficit GBP2.1m), which is recorded on the Balance Sheet as at 28 February 2023. The agreed annual scheme-specific funding, since the triennial valuation as at March 2020, was a cash contribution of GBP0.5 m per annum. As a result of the net asset position, these contributions were stopped from March 2023.
Taxat ion
Th e Group's underlying effective tax rate in relation to continuing operations in FY23 was a charge of 26% (FY22: 21 %), which is broadly in line with the UK tax rate in the current year. The increase was l argely driven by a benefit in the prior year relating to a change in applicable tax rate to an overseas entity, and additional non-deductible costs in the current year.
Cap ital m anage m ent
Th e Group manages its capital structure and adjusts it in response to changes in economic conditions and its capital needs. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares and debt instruments. The Group has a policy of maintaining positive cash balances, whenever possible, which can be supported by shor t -term use of its re volving credit facility. This is drawn down as required, to provide cover against the peaks and troughs in our working capital require ments.
ESO P Trust
Du ring FY23, the Company requested that SG Kleinwort Hambros Trust Company (CI) Ltd, as Trustee of the Company's ESOP Trust, purchase shares in Braemar Shipping Services Plc. During the year a total of 2,795,000 shares in the Company were purchased by the Trustee and 1,877,473 shares were released; as a result, at 28 February 2023, the ESOP held 3,579,630 shares (FY22: 2,669,603 shares). The total cash outflow as a result of these share purchases was GBP8.0m (FY22: GBP7.0m). At FY23 year end, the ESOP contained sufficient shares as are expected to be needed to cover all current share awards described in Note 31 of the Financial Statements.
D ividend
Th e directors are recommending for approval at the reconvened AGM on 18 December 2023, a f inal dividend of 8.0 pence per share, to be paid on 9 February 2024. Th e interim dividend of 4.0 pence per share in respect of the six months to 31 August 2022 was paid 4 January 2023. The total dividend of 12.0 pence for the year is covered 3.6 times by the underlying earnings per share from continuing operations of 43.19 pence . The total cash outflow in respect of dividends paid during the year ended 28 February 2023 was GBP3.2m (2022: GBP2.1m).
Following a project started during the year to improve the level of distributable profits of the Company, it was discovered that certain dividends paid between 2016 and 2023 were paid by the Company without having sufficient distributable reserves from which to lawfully pay them. Having identified these issues, to rectify the gap in retained earnings and the unlawful payment of dividends, after the balance sheet date the Company completed a Capital Reduction and entered releases from liability for the benefit of shareholders and directors. For further details see Note 12.
Go ing concern
Th e strong trading cash flows generated during the year, combined with the cash consideration received for the sale of Cory Brothers on 2 March 2022 have placed the Group in a strong cash position, with a net cash position at the year end. The Group will maintain its prudent approach to working capital forecasting and credit controls. The Group's revolving credit facility was renewed in November 2022 on largely similar terms to the previous one it replaced and provides the seasonal working capital that is required. Accordingly, the accounts have been prepared on a going concern basis.
Grant Foley
Group Ch ief Financial Officer
15 November 2023
Operating Review
Market Review
During FY23, shipping markets performed well. Earnings across the Container, Gas, and Tanker markets were some of the highest recorded in the last 20 years, and Dry Cargo revenues were close behind.
As we look ahead, we are cautiously optimistic. Sentiment in the short and medium term, as measured by time charter rates, is broadly positive, and the vessel supply and freight demand pictures for the shipping markets look promising in our two biggest markets - Tankers and Dry Cargo - over the foreseeable future.
The delivery schedule of ships in almost all sectors remains manageable; many inefficiencies in global supply chains remain post-Covid; large parts of the tanker and dry cargo fleets are travelling much longer voyage distances due to sanctions; and vessel scrapping is likely to pick up ahead of a stricter regulatory environment and an increased focus on ESG-criteria for investments.
We now present a FY23 summary of our three business segments: Investment Advisory, Chartering, and Risk Advisory
INVESTMENT ADVISORY
Investment Advisory's revenue increased by 40% from GBP26.3m in FY22 to GBP36.8m in FY23 and represented 24% of Braemar's total revenue.
Corporate Finance
Strong earnings in 2022 and the start of 2023 across most sectors have meant that many shipowners have achieved significant profits and accumulated large cash reserves. Many owners decided to use their profits to opt for more conservative financing structures. As a result, the diversity of Corporate Finance's mandates has varied considerably. These diverse projects have included the disposal process for the Cruise Ship Global Class One out of the insolvency of the German yard MV Werften, restructuring in the Offshore space, disposals in the Container market, and inland waterway M&A advisory. Despite these successes, revenue and profits were down compared to the previous year. Corporate Finance successfully launched a new office in Athens, Greece, and expanded its Singapore office.
Sale & Purchase / Newbuildings
Sale and Purchase activity has remained strong with a record number of second-hand sales across all sectors and desks. The strong spot tanker market has contributed hugely to a significant rise in tanker asset prices, and the tail-end of the strongest container market in decades has created many high asset value transactions. The desk has continued to grow its forward orderbook in many sectors, including LNG, Bulkers and Tankers. Newbuilding berths have been at a premium, and the desk's strong relationships with leading shipyards have reaped benefits for its clients. However, with strong freight markets across the board, ship recycling volumes have remained light. The desk is optimistic about the outlook for the wet and dry freight markets in FY24 and expects this to continue to translate into a good volume of transactions.
CHARTERING
Chartering's revenue increased by 57% from GBP63.0m in FY22 to GBP99.2m in FY23 and represented 65% of Braemar's total revenue. Fixture volumes increased by 18% compared with the previous year.
Tankers
Vessel earnings increased across all classes of Deep Sea Tankers. The increase in long-haul voyages because of changes to crude trade flows was the major driver for Aframaxes and Suezmaxes, and VLCC earnings were driven by increased activity in the US Gulf. However, VLCC demand was limited by the economic restrictions in China which were removed only recently. The acquisitions of Southport and the new desk in Madrid have already created several productive cross-office collaborations, and further enhanced and complemented the quality of Braemar's global coverage, particularly for the Spanish clean markets and US Gulf's crudes and oil products.
Supply chain challenges prompted by the pandemic and a resurgence of interest in nearshoring and reinvigorating American manufacturing put the Jones Act in the spotlight this year. Demand is likely to remain strong, and further use of its waterways to transport freight looks increasingly likely. The US Flag desk has seen strong rates in FY23 which look likely to continue, and recently launched an Inland desk to capitalise on opportunities in that market. The desk worked with three oil majors for the first time last year, and the desk is currently on track for 30% revenue growth.
Dry Cargo
Coal was the major theme of the year as natural gas prices soared and countries sought less expensive energy sources. The orderbook remains historically low, and new environmental regulation arriving in 2023-24 - with more on the horizon - is likely to set the tone for a favourable vessel supply/demand balance in the coming years. Dry Cargo has continued to strengthen its presence in strategic bases such as Athens, Greece, and Sao Paulo, Brazil. The desk has already seen positive results from its ability to leverage those enhanced local relationships. In Australia, major gains have been seen in the grains market, and solid Contract of Affreightment ("COA") cover - an agreement to transport a given quantity over a fixed period - for 2023 has strengthened relationships with key charterers. The Dry Cargo desk has also been instrumental in helping the United Kingdom's Ministry of Defence department fulfil its multipurpose vessel ("MPP") requirements, and it worked closely with the UN's World Food Programme to help ship fertiliser to Malawi to help it reduce the costs of crop production.
Offshore Energy Services
The Renewables and Oil & Gas markets delivered growth throughout the year. Vessel supply was insufficient to meet demand, and charter rates increased substantially. A lack of newbuilding orders in recent years increases the likelihood that these rate levels are going to remain elevated for a prolonged period. This shortage of vessels has led to substantially increased S&P activity for the desk, particularly in the Platform Supply Vessels ("PSV") and Subsea sectors. The desk's forward order book growth to March 2023 was double that of March 2022, and the outlook for the year ahead is positive with the volume of term fixtures increasing, and spot and term rates likely to continue to improve.
Specialised Tankers
*LNG and LPG & Petrochemicals are subsets of Specialised Tankers
FY23 saw the strongest chemical and European coastal products tanker market for many years. This was primarily caused by reduced ship supply - increasing ton-miles, swing tonnage exiting chemicals, and a reduced order book -, and these tailwinds are unlikely to completely disappear in FY24. The desk continued to grow, and it is capitalising on its investment in research, and geographical expansion to Dubai, Houston, and Melbourne which strongly complement the main desk in London. This growth has enabled Specialised Tankers to expand its reach and market share, and to realise further intra-desk synergies.
LNG
The elimination of Russian pipeline gas supply to Europe, in large part because of the war in Ukraine had profound effects on the LNG market. Long established trade routes switched from West to East as US gas volumes were directed to Europe to replace Russian volumes. Gas prices soared and with it demand for medium and long-term LNG shipping, with rates for certain vessels peaking at approximately USD 500k per day. In line with Braemar's growth strategy, the LNG desk has grown to six people, split between London and Geneva. Revenue continues to be well diversified across the desk's activities, and there is further growth planned into FY24.
LPG & Petrochemicals
Prospects for the freight market look positive as Very Large Gas Carrier ("VLGC") shipowners expect increased vessel demand, despite the current forward order book of approximately 20% of the existing fleet. Similarly, in the Medium Gas Carrier ("MGC") market the outlook remains good; mostly due to the projected expansion in liquid ammonia shipments in the near future. From a shipping perspective the Petrochemical segment had a reasonably strong year, and the Pressurised segment had a solid year with improved results from both spot and time charter coverage. Braemar's LPG & Petrochemicals desk has enhanced its MGC and VLGC presence with the recruitment of an ex-bunker broker, and concluded two new long-term petrochemical COAs as well as renewing another. The desk has realised increased time charter coverage and grown its customer base this year, with several promising long-term projects on the horizon for FY24.
RISK ADVISORY (SECURITIES)
Risk Advisory's revenue increased by 42% from GBP12.0 in FY22 to GBP17.0m in FY23 and represented 11% of Braemar's total revenue.
Braemar's Securities business consists of four derivatives markets: Dry Cargo, Natural Gas, Oil, and Tanker.
Dry Cargo Derivatives
The FFA market reflected the volatility of the Dry Cargo market over the last 12 months, but the outlook for the next year and beyond is looking likely to be fertile. Volumes across the market have grown dramatically, and continue to increase, with more non-traditional financial capital increasingly finding its way into the FFA market. The Dry Cargo FFA desk has also started to reap the benefits of Braemar's investment in its Securities businesses, including through the launch of Dry Cargo FFA operations for Asia in Singapore, as well as hiring several brokers. The addition of the Natural Gas and Oil Derivatives desks has led to cross-desk synergies as the business is able to service customers across asset classes, and Braemar Screen continues to provide the market's leading technology platform.
Natural Gas Derivatives
The Natural Gas market is returning to price normality after the major shock it endured when Russia invaded Ukraine in 2022. Substantial pressure on Nat Gas availability led to record high spot prices, and gas import markets remain sensitive to further supply restrictions. Braemar's Natural Gas desk started operations in January 2023, and is already profitable. It has successfully launched a new product - Trade At Heren ("TAH") - that the market hasn't previously traded, and the desk is receiving significant interest in its ability to broker European Union Allowances ("EUA") for compliance with the EU's Emissions Trading System ("ETS").
Oil Derivatives
In the oil markets the last 12 months have been marked by high volatility and low trading volumes in swap markets. Although these trends have been softened by war in Ukraine and the post-Covid recovery of global demand. 2023 has brought renewed activity, and traded volumes are steadily increasing. The desk's initial focus on fuel oil and middle distillates is progressing steadily, and Braemar's new ability to help its clients hedge their bunker fuel exposure through swap and option markets has been warmly received.
Tanker Derivatives
The Tanker FFA market was extremely volatile throughout 2022, primarily because of the Russia-Ukraine conflict. That volatility led to a historical dealing high across the Dirty, Clean and LPG FFA sectors. This year has continued in a similar fashion with growing requirements to hedge and opportunities to speculate on prices. As a result, the Tanker FFA market is expected to continue to thrive in FY24. The acquisition of Southport has enabled the desk to create a stronghold on US Gulf FFA routes, and the desk remains the leading global facilitator of Clean, Dirty and LPG FFAs.
Consolidated Income Statement
For the year ended 28 February 2023
28 Feb 2023 28 Feb 2022
------------------------------- ------------------------------
Specific Specific
Underlying items Total Underlying items Total
Continuing operations Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ----- ---------- -------- --------- ---------- -------- --------
Revenue 4 152,911 - 152,911 101,310 - 101,310
Other operating income 10 - 3,846 3,846 - - -
Operating expense:
5 ,
Operating costs 10 (132,598) (355) (132,953) (90,503) (392) (90,895)
Acquisition-related expenditure 10 - (1,999) (1,999) - (122) (122)
Impairment of financial assets 5 ,
(1) 10 (238) (848) (1,086) (747) - (747)
Impairment of goodwill 10 - (9,050) (9,050) - - -
------------------------------------ ----- ---------- -------- --------- ---------- -------- --------
(12,252 (145,088
Total operating expense (132,836) ) ) (91,250) (514) (91,764)
------------------------------------ ----- ---------- -------- --------- ---------- -------- --------
(8,406
Operating profit 20,075 ) 11,669 10,060 (514) 9,546
Share of associate loss for
the year 20 (23) - (23) (19) - (19)
Finance income 8, 10 119 83 202 81 172 253
8 ,
Finance costs 10 (2,131) (266) (2,397) (1,237) - (1,237)
------------------------------------ ----- ---------- -------- --------- ---------- -------- -------- Profit before tax from continuing operations 18,040 (8,589) 9,451 8,885 (342) 8,543 Taxation 9 (4,641) (214) (4,855) (1,839) - (1,839) ------------------------------------ ----- ---------- -------- --------- ---------- -------- -------- Profit from continuing operations 13,399 (8,803) 4,596 7,046 (342) 6,704 Profit net of tax from discontinued 10 , operations 11 - - - 1,493 5,722 7,215 Profit attributable to equity shareholders of the Company 13,399 (8,803) 4,596 8,539 5,380 13,919 ------------------------------------ ----- ---------- -------- --------- ---------- -------- -------- Total Underlying Total Underlying Total ------------------------------------ ----- ---------- -------- --------- ---------- -------- -------- Earnings per ordinary share Basic 13 46.22p 15.85p 27.95p 45.56p Diluted 13 38.52p 13.25p 22.78p 37.13p ------------------------------------ ----- ---------- -------- --------- ---------- -------- -------- Continuing operations ------------------------------------ ----- ---------- -------- --------- ---------- -------- -------- Earnings per ordinary share Basic 46.22p 15.85p 23.06p 21.94p Diluted 38.52p 13.25p 18.79p 17.88p ------------------------------------ ----- ---------- -------- --------- ---------- -------- --------
(1) The 2022 operating costs have been restated to show impairment of financial assets separately on the income statement. Impairment of financial assets was previously within operating costs.
Consolidated Statement of Comprehensive Income
For the year ended 28 February 2023
28 Feb 2023 28 Feb 2022
Notes GBP'000 GBP'000
------------------------------------------------------------ ----- ----------- -----------
Profit for the year 4,596 13,919
------------------------------------------------------------ ----- ----------- -----------
Other comprehensive income/(expense)
Items that will not be reclassified to profit
or loss:
* Actuarial gain on employee benefit schemes - net of
tax 29 2,361 1,318
Items that may be reclassified to profit or loss:
* Foreign exchange differences on retranslation of
foreign operations 2,522 538
* Investment hedge (124) -
* Cash flow hedges - net of tax 32 291 (1,968)
------------------------------------------------------------ ----- ----------- -----------
Other comprehensive income/(expense) from continuing
operations 5,050 (112)
------------------------------------------------------------ ----- ----------- -----------
Discontinued operations:
* Share of other comprehensive income/(expense) of
associates - 52
11 ,
* Recycling of foreign exchange reserve 20 - 408
------------------------------------------------------------ ----- ----------- -----------
Other comprehensive income from discontinued operations - 460
------------------------------------------------------------ ----- ----------- -----------
Total comprehensive income attributable to equity
shareholders of the Company 9,646 14,267
------------------------------------------------------------ ----- ----------- -----------
Consolidated Balance Sheet
As at 28 February 2023
Restated Restated
As at As at As at
28 Feb 28 Feb 1 March
2023 2022 2021
Note GBP'000 GBP'000 GBP'000
------------------------------------------------------- ---- -------- -------- --------
Assets
Non-current assets
Goodwill 15 71,407 79,891 83,955
Other intangible assets 16 3,980 997 2,129
Property, plant and equipment 17 5,320 7,078 9,841
Other investments 19 1,780 1,780 1,962
Investment in associate 20 701 724 3,763
Derivative financial instruments 24 30 8 200
Deferred tax assets 9 4,794 3,713 2,900
Pension surplus 29 1,120 - -
Other long-term receivables 21 8,554 5,636 1,888
------------------------------------------------------- ---- -------- -------- --------
97,686 99,827 106,638
------------------------------------------------------- ---- -------- -------- --------
Current assets
Trade and other receivables 22 43,323 35,792 33,416
Financial assets 24 - - 746
Derivative financial instruments 24 1,224 54 1,573
Current tax receivable 973 - -
Cash and cash equivalents 25 34,735 13,964 14,111
Assets held for sale - - 436
80,255 49,810 50,282
------------------------------------------------------- ---- -------- -------- --------
Total assets 177,941 149,637 156,920
------------------------------------------------------- ---- -------- -------- --------
Liabilities
Current liabilities
Derivative financial instruments 24 1,122 688 -
Trade and other payables 26 57,310 39,183 47,833
Current tax payable 4,141 1,608 1,318
Provisions 28 2,575 486 307
Convertible loan notes 27 699 1,416 4,461
Liabilities directly associated with assets classified
as held for sale - - 125
65,847 43,381 54,044
------------------------------------------------------- ---- -------- -------- --------
Non-current liabilities
Long-term borrowings 27 29,919 28,331 31,634
Deferred tax liabilities 9 344 - 174
Derivative financial instruments 24 1,022 335 56
Trade and other payables 24 542 - -
Provisions 28 734 797 690
Convertible loan notes 27 2,852 2,755 2,681
Deferred consideration 27 - 495 882
Pension deficit 29 - 2,052 3,819
------------------------------------------------------- ---- -------- -------- --------
35,413 34,765 39,936
------------------------------------------------------- ---- -------- -------- --------
Total liabilities 101,260 78,146 93,980
------------------------------------------------------- ---- -------- -------- --------
Total assets less total liabilities 76,681 71,491 62,940
------------------------------------------------------- ---- -------- -------- --------
Equity
Share capital 30 3,292 3,221 3,174
Share premium 30 53,796 53,030 52,510
ESOP reserve 31 (10,607) (6,771) (1,362)
Other reserves 32 28,819 26,130 27,100
Retained earnings/(deficit) 1,381 (4,119) (18,482)
------------------------------------------------------- ---- -------- -------- -------- Total equity 76,681 71,491 62,940 ------------------------------------------------------- ---- -------- -------- --------
The Balance Sheets as at 1 March 2021 and 28 February 2022 have been restated for a prior period adjustment, see Note 35 for more detail.
Consolidated Cash Flow Statement
For the year ended 28 February 2023
Restated
28 Feb 2023 28 Feb 2022
Notes GBP'000 GBP'000
------------------------------------------------------ ------- ----------- ------------
Profit before tax from continuing operations 9,451 8,543
Profit before tax from discontinued operations 11 - 8,081
Adjustment for:
Depreciation and amortisation charges 16 , 17 3,364 3,483
Loss on disposal of intangible assets 87 -
Net loss on disposal of PPE 20 10
Share scheme charges 4,520 2,894
Net foreign exchange gains with no cash impact (1,157) -
Gain on acquisition of Southport 14 (3,643) -
Gain on disposal of shares in AqualisBraemar 10 , 11 - (3,375)
Gain relating to disposal of Cory Brothers 10 , 11 (203) (4,134)
Gain on disposal of Wavespec 10 , 11 - (594)
Loss on impairment of Wavespec receivable 10 , 11 - 2,381
Impairment of Naves goodwill 9,050 -
Impairment of property, plant and equipment 10 150 392
Impairment of intangible assets 60 -
Impairment of financial asset 10 848 -
Reversal of dilapidations provision (124) -
Adjustment for non-operating transactions included
in profit before tax:
Net finance cost 8 2,195 984
Share of loss/(profit) in associate from continuing
and discontinued operations 20 23 (56)
Adjustment for cash items in other comprehensive
income/expense:
Contribution to defined benefit scheme 29 (450) (450)
------------------------------------------------------ ------- ----------- ------------
Operating cash flow before changes in working
capital 24,191 18,159
------------------------------------------------------ ------- ----------- ------------
Increase in receivables (14,857) (7,577)
Increase in payables 16,836 12,571
Increase in provisions 2,081 285
------------------------------------------------------ ------- ----------- ------------
Cash flows from operating activities 28,251 23,438
------------------------------------------------------ ------- ----------- ------------
Interest received 119 112
Interest paid (1,925) (921)
Tax paid, net of refunds (4,381) (2,161)
------------------------------------------------------ ------- ----------- ------------
Net cash generated from operating activities 22,064 20,468
------------------------------------------------------ ------- ----------- ------------
Cash flows from investing activities
Purchase of property, plant and equipment 17 (695) (652)
Purchase of other intangible assets 16 (90) (515)
Investment in associate 20 - (326)
Acquisition of business (cash acquired) 14 349 -
Disposal of Cory Brothers, net of cash disposed 11 6,500 (12,353)
Disposal of Wavespec, net of cash disposed 11 - (53)
Proceeds from disposal of investment in associate 20 - 7,232
Principal received on finance lease receivables 18 607 799
------------------------------------------------------- -------- --------
Net cash generated from/(used in) investing activities 6,671 (5,868)
------------------------------------------------------- -------- --------
Cash flows from financing activities
Proceeds from RCF loan facility(1) 7,694 8,292
Repayment of RCF loan facility(1) (3,000) (8,000)
Repayment of principal under lease liabilities 18 (3,865) (3,621)
Cash proceeds on issue of new shares 30 694 _
Cash proceeds on exercise of share awards settled
by release of shares from ESOP 477 -
Dividends paid 12 (3,190) (2,109)
Purchase of own shares 31 (7,963) (7,043)
Settlement of convertible loan notes 27 (1,448) (2,596)
------------------------------------------------------- -------- --------
Net cash used in financing activities (10,601) (15,077)
------------------------------------------------------- -------- --------
Increase/(decrease) in cash and cash equivalents 18,134 (477)
Cash and cash equivalents at beginning of the
year 25 13,964 14,164
Foreign exchange differences 2,637 277
------------------------------------------------------- -------- --------
Cash and cash equivalents at end of the year 25 34,735 13,964
------------------------------------------------------- -------- --------
(1) The 2022 cash proceeds and repayment from the RCF facility have been restated as they were previously reported as GBP292,000 on a net basis.
Consolidated Statement of Changes in Total Equity
For the year ended 28 February 2023
Note Retained
Share Share ESOP Other (deficit)/ Total
capital premium reserve reserves earnings equity
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 March 2021 3,174 52,510 (1,362) 28,094 (15,906) 66,510
Prior period adjustment 35 - - - (994) (2,576) (3,570)
-------------------------------------- ---- -------- -------- -------- --------- ----------- --------
At 1 March 2021 (restated) 3,174 52,510 (1,362) 27,100 (18,482) 62,940
Profit for the year - - - - 13,919 13,919
-------------------------------------- ---- -------- -------- -------- --------- ----------- --------
Actuarial gain on employee benefits
schemes - net of tax - - - - 1,318 1,318
Foreign exchange differences - - - 538 - 538
Cash flow hedges - net of tax - - - (1,968) - (1,968)
Other comprehensive income from
discontinued operations - - - 460 - 460
-------------------------------------- ---- -------- -------- -------- --------- ----------- --------
Other comprehensive income - - - (970) 1,318 348
-------------------------------------- ---- -------- -------- -------- --------- ----------- --------
Total comprehensive income - - - (970) 15,237 14,267
-------------------------------------- ---- -------- -------- -------- --------- ----------- --------
Transactions with owners in
their capacity as owners:
Dividends 12 - - - - (2,109) (2,109)
27,
30,
Shares issued 31 47 520 (25) - - 542
Acquisition of own shares - - (7,043) - - (7,043)
ESOP shares allocated - - 1,659 - (1,659) -
Share-based payments 30 - - - - 2,894 2,894
-------------------------------------- ---- -------- -------- -------- --------- ----------- --------
47 520 (5,409) - (874) (5,716)
-------------------------------------- ---- -------- -------- -------- --------- ----------- --------
At 28 February 2022 (restated) 3,221 53,030 (6,771) 26,130 (4,119) 71,491
Profit for the year - - - - 4,596 4,596
-------------------------------------- ---- -------- -------- -------- --------- ----------- --------
Actuarial gain on employee benefits
schemes - net of tax - - - - 2,361 2,361
Foreign exchange differences - - - 2,522 - 2,522
Cash flow hedges - net of tax - - - 291 - 291
Net investment hedge - - - (124) - (124)
Other comprehensive income - - - 2,689 2,361 5,050
-------------------------------------- ---- -------- -------- -------- --------- ----------- --------
Total comprehensive income - - - 2,689 6,957 9,646
-------------------------------------- ---- -------- -------- -------- --------- ----------- --------
Transactions with owners in
their capacity as owners:
Deferred tax income on share
awards - - - - 863 863
Dividends 12 - - - - (3,190) (3,190)
27 ,
Shares issued 30 71 766 - - - 837
Acquisition of own shares - - (7,963) - - (7,963)
ESOP shares allocated - - 4,127 - (3,650) 477
Share-based payments 30 - - - - 4,520 4,520
-------------------------------------- ---- -------- -------- -------- --------- ----------- --------
71 766 (3,836) - (1,475) (4,456)
-------------------------------------- ---- -------- -------- -------- --------- ----------- --------
At 28 February 2023 3,292 53,796 (10,607) 28,819 1,381 76,681
-------------------------------------- ---- -------- -------- -------- --------- ----------- --------
Notes to the Financial Statements
General information
Braemar plc (the "Company", previously Braemar Shipping Services plc) is a public company limited by shares incorporated in the United Kingdom under the Companies Act. The Company is registered in England and Wales and its registered address is 1 Strand, Trafalgar Square, London, United Kingdom, WC2N 5HR. The consolidated Financial Statements of the Company as at and for the year ended 28 February 2023 comprise the Company and its subsidiaries (together referred to as the "Group")
The Group Financial Statements of Braemar Plc for the year ended 28 February 2023 were authorised for issue in accordance with a resolution of the directors on 15 November 2023.
1 Basis of preparation
Basis of preparation and forward-looking statements
The financial information set out above does not constitute the Group's statutory accounts for the years ended 28 February 202 3 or 28 February 202 2 but is derived from those accounts. Statutory accounts for 202 2 have been delivered to the registrar of companies, and those for 202 3 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified; (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report; and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The financial information included in this preliminary announcement has been prepared in accordance with UK-adopted international accounting standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The Group expects to distribute full accounts that comply with UK-adopted international accounting standards and with the requirements of the Companies Act 2006.The Financial Statements have been prepared under the historic cost convention except for items measured at fair value as set out in the accounting policies below.
Certain statements in this report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it gives no assurance that these expectations will prove to have been correct. These forward-looking statements involve risks and uncertainties, so actual results may differ materially from those expressed or implied by these forward-looking statements.
The Group Financial Statements are presented in sterling and all values are rounded to the nearest thousand sterling (GBP'000) except where otherwise indicated.
New standards, amendments and interpretations effective for the financial year beginning 1 March 2022
There were no new standards or amendments (including the amendments to IFRS 3, IAS 1 and the Annual Improvements to IFRS Accounting Standards 2018-2020 Cycle) that were adopted in the annual Financial Statements for the year ended 28 February 2023 which had a significant effect on the Group.
New standards, amendments and interpretations issued but not yet effective for the financial year beginning 1 March 2022 and not early adopted
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early.
The following amendments are effective in future periods and have not been early adopted by the Group:
- Insurance Contracts (IFRS 17 Insurance Contracts and amendments to IFRS 17);
- Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28);
- Classification of Liabilities as Current or Non-current (Amendments to IAS 1); - Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2); - Definition of Accounting Estimates (Amendments to IAS 8);
- Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12); and
- International Tax Reform - Pillar Two Model Rules - Amendments to IAS 12
The adoption of these standards and amendments is not expected to have a material impact on the Financial Statements of the Group in future periods.
In January 2020, the IASB issued amendments to IAS 1, which clarify the criteria used to determine whether liabilities are classified as current or non-current. These amendments clarify that current or non-current classification is based on whether an entity has a right at the end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period. The amendments also clarify that "settlement" includes the transfer of cash, goods, services, or equity instruments unless the obligation to transfer equity instruments arises from a conversion feature classified as an equity instrument separately from the liability component of a compound financial instrument. Following concerns raised by stakeholders, the IASB issued further amendments in October 2022 to specify that only those covenants which an entity must comply with on or before the reporting period should affect classification of the corresponding liability as current or non-current. The October 2022 amendments defer the effective date of the January 2020 amendments by one year in order that both sets of amendments are effective for annual reporting periods beginning on or after 1 January 2024 with earlier application permitted.
Under the Group's current accounting policy, a financial liability with an equity conversion feature is classified as current or non-current disregarding the impact of the conversion option. The amendments to IAS 1 will result in the equity conversion feature relating to certain of the Group's financial liabilities, impacting the classification of those liabilities. While the Group's assessment of the impact is ongoing, the Group expects that amounts included as non-current in relation to "Convertible Loan Notes" will be reclassified to current liabilities.
The Company has elected to prepare its Parent Company Financial Statements in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework ("FRS 101").
Going concern
The Group and Company Financial Statements have been prepared on a going concern basis. In reaching this conclusion regarding the going concern assumption, the directors considered cash flow forecasts to 28 February 2025 which is more than 15 months from the date of signing of these Financial Statements.
A set of cash flow forecasts ("the base case") have been prepared by management and reviewed by the directors based on revenue and cost forecasts considered reasonable in the light of work done on budgets for the current year and the current shipping markets. In putting together these forecasts particular attention was paid to the following factors:
-- The Group's compliance with sanctions put in place as a result of the conflict in the Ukraine has meant additional work reviewing compliance obligations on a regular basis as the laws have been amended but did not have a material effect on trading in FY22/23, nor is it expect to have an impact in FY23/24.
-- The level of likely cost inflation, particularly around salaries and energy costs.
-- The Group's investment in a new office in Madrid, an acquisition in the US and new trading desks in the Securities business have started well and there is no indication that integration risks are going to be a threat to the forecasts for FY23/24.
-- Geopolitical tensions can cause volatility in shipping markets, but if anything, that uncertainty can give rise to additional opportunities for the business to support the industry and clients further. There is therefore no expectation that the current global political tensions will have an adverse impact on trading in FY 23/24.
-- The impact of climate change is not expected to have any material impact on the business in the short term and indeed could lead to additional opportunities.
-- The impact that the investigation and resulting delay in publishing the annual report and accounts could have on the performance and reputation of the business.
The Directors have considered trading performance during the current year and have concluded that none of these factors are currently likely to have a significantly adverse impact on the Group's future cash flows.
The Group's balance sheet has been strengthened significantly due to the strong trading and disposals of non-core assets during the prior year. As at 28 February 2023 the Group held net bank cash of GBP6.9 million (2022: net bank debt GBP9.3 million). As at 30 September 2023 the Group had net bank cash of GBP5.3 million, following the payment of year end broker bonuses.
Notes 30 Sept 28 Feb 2023 28 Feb 2022
2023 GBPm GBPm
GBPm
------------------------------------ ----- -------- ----------- -----------
Secured revolving credit facilities 27 ( 25.1 ) (27.8) (23.3)
Cash 25 30.4 34.7 14.0
Net cash/(debt) 5.3 6.9 (9.3)
------------------------------------ ----- -------- ----------- -----------
During the period, the Group has extended its revolving credit facility ("RCF") with its main bankers, HSBC. The RCF is for GBP30.0 million plus an accordion limit of GBP10.0 million and has an initial termination date of November 2025 with two options, subject to lender approval, to extend the term of the facility by 12 and 24 months respectively. Drawdown of the accordion facility is subject to additional credit approval. It has an EBITDA leverage covenant of 2.5x and a minimum interest cover of 4x. At 31 May 2022, 31 August 2022, 30 November 2022 and 28 February 2023 the Group met all financial covenant tests. In addition, there is a further requirement to provide HSBC with the Group's audited Financial Statements within 6 months of the year-end. Due to the delay in completing the audited Financial Statements the Group obtained waivers for this requirement.
The cash flow forecasts in the base case assessed the ability of the Group to operate both within the banking covenants and the facility headroom, and included a number of downside sensitivities on the budgeted revenue, including a reverse stress test scenario. The directors consider revenue as the key assumption in the Group's budget. The cost base is largely fixed or made up of discretionary bonuses, which are directly linked to profitability. Based on two flex scenarios; a revenue decrease of 7.5% and a revenue decrease of 15% from the base case, only very minor mitigations were necessary to meet banking covenants.
A reverse stress test was also performed to ascertain the point at which the covenants would be breached in respect of the key assumption of budgeted revenue decline. This test indicated that the business, alongside certain mitigating actions which are fully in control of the directors, would be capable of withstanding a reduction of approximately 35% in budgeted revenue from the base case assumptions from September 2023 through to November 2024. In light of current trading, forecasts and the Group's performance over FY22/23, the directors assessed this downturn in revenue and concluded the likelihood of such a reduction remote, especially in light of the forward order book of $65 million at the end of September 2023 (GBP38 million of which is for the financial year ending February 2024 and 2025), such that it does not impact the basis of preparation of the Financial Statements and there is no material uncertainty in this regard.
Basis of consolidation
The consolidated Financial Statements incorporate the Financial Statements of Braemar Plc (previously Braemar Shipping Services plc) and all its subsidiaries made up to 28 February each year or 29 February in a leap year.
Subsidiaries are entities that are controlled by the Group. Control exists when the Group has the rights to variable returns from its involvement with an entity and has the ability to affect those returns through its power over the entity. The results of subsidiaries sold or acquired during the year are included in the accounts up to, or from, the date that control exists. All intercompany balances and transactions have been eliminated in full.
2 Use of estimates and critical judgements
The preparation of the Group's Financial Statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.
Key sources of estimation uncertainty
The following are the key estimates and assumptions that the Directors have made in the process of applying the Group's accounting policies and that have a significant risk of resulting in material adjustments to the carrying amounts of assets and liabilities within the next financial year.
Impairment of goodwill
Goodwill is tested for impairment on an annual basis, and the Group will also test for impairment at other times if there is an indication that an impairment may exist. Determining whether goodwill is impaired requires an estimation of the value-in-use of the cash-generating units to which these assets have been allocated. The value-in-use calculation estimates the present value of future cash flows expected to arise for the cash-generating units. The key estimates are therefore the selection of suitable discount rates and the estimation of future growth rates which vary between cash-generating units depending on the specific risks and the anticipated economic and market conditions related to each cash-generating unit (see Note 15 for a description of the approach used by management to determine these key values).
As part of determining the value in use of each CGU group, Management has considered the potential impact of climate change on the business performance over the next five years, and the terminal growth rates. While there is considerable uncertainty relating to the longer term and quantifying the impact on a range of outcomes, management considers that environmental-related incremental costs are expected to have a relatively low impact. Recognising that there are extreme but unlikely scenarios, the Group considers that while exposed to physical risks associated with climate change (such as flooding, heatwaves, sea level rises and increased precipitation) the estimated impact of these on the Group is not deemed material.
In addition, the Group is exposed to transitional risks which might arise, for example, from government policy, customer expectations, material costs and increased stakeholder concern. The transitional risks could result in financial impacts such as higher environmentally focused levies (e.g. carbon pricing). While the Group is exposed to the potential financial impacts associated with transitional risks, based on information currently available, these are not deemed to have a significant impact.
Acquisition accounting
Business combinations are accounted for under the acquisition method, based on the fair values of the consideration paid. Assets and liabilities, with limited exceptions, are measured at their fair value at the acquisition date. The Group estimates the provisional fair values and useful lives of acquired assets and liabilities at the date of acquisition. The valuation of acquired intangibles is subject to estimation of future cash flows and the discount rate applied to them. The valuation of the customer-related intangible assets is determined based on an excess earnings methodology while the valuation of the marketing-related intangible asset is based on a royalty savings method. For further details on the acquisition in the year, see Note 14 Business combinations.
Fair value of Cory Brothers deferred and contingent consideration receivable
On 28 February 2022 the Group sold Cory Brothers to Vertom Agencies BV for maximum consideration of GBP15.5 million. Initial cash proceeds of GBP6.5 million were received on completion of the transaction, and three contractual "earn-out" payments will be made, being an agreed percentage of the future gross profits of the combined VertomCory business over three subsequent earn out periods. Each of the three earn-out payments are subject to minimum and maximum amounts which are specified in the share purchase agreement.
The minimum earnout consideration has been classified as deferred consideration receivable. The minimum amount is specified in the SPA and is therefore not an estimate, however an estimate of a discount rate is necessary to discount the deferred consideration receivable. A discount rate of 2.39% was used to calculate the net present value; this was based on the credit risk of Vertom Agencies BV following a credit check performed by management. Deferred consideration receivable is initially recognised at fair value and subsequently measured at amortised cost.
The balance of the earnout consideration, up to the maximum specified in the SPA has been classified as contingent consideration receivable because it is contingent on the future profitability of the combined business. The fair value of the contingent consideration receivable involves two critical estimates: the future profitability of the combined business and the discount rate used to calculate the net present value. The future profitability forecasts are based on a business plan prepared by the combined VertomCory business. Contingent consideration receivable is initially recognised at fair value and subsequently measures at fair value through profit and loss.
See Note 23 for further details, including a sensitivity analysis of the contingent consideration receivable to the discount rate and the assumptions of future profitability.
Recoverability of deferred tax assets
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. See Note 9.
Share option vesting
The fair value determined at the grant date of the equity-settled share-based payments is typically expensed on a straight-line basis over the vesting period, based on the Group's estimate of the number of equity instruments that will eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to reserves. See Note 30.
Provision for impairment of trade receivables and contract assets
Trade receivables and contract assets are amounts due from customers in the ordinary course of business. Trade receivables and contract assets are classified as current assets if collection is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current assets.
The provision for impairment of trade receivables and contract assets represents management's best estimate at the Balance Sheet date. A number of judgements are made in the calculation of the provision, primarily the age of the invoice, the existence of any disputes, recent historical payment patterns and the debtor's financial position.
When measuring expected credit losses, the Group uses reasonable and supportable forward-looking information, which is based on assumptions for the future movement of different economic drivers and how these drivers will affect each other. Probability of default constitutes a key input in measuring expected credit losses. Probability of default is an estimate of the likelihood of default over a given time horizon, the calculation of which includes historical data, assumptions and expectations of future market conditions. See Note 22.
Valuation of defined benefit pension scheme
The Group uses an independent actuary to provide annual valuations of the defined benefit pension scheme. The actuary uses a number of estimates in respect of the scheme membership, the valuation of assets and assumptions regarding discount rates, inflation rates and mortality rates.
The membership details are provided by an independent trustee while the valuation of assets is verified by an independent fund manager. The discount rates, inflation rates and mortality rates are reviewed by management at each reporting date. See Note 29.
Wavespec
Fair value of consideration
In the year ended 28 February 2022, the sale of Wavespec, the Group's Engineering Division, completed for a maximum consideration of GBP2.6 million. The fair value of the consideration is a critical accounting judgement.
The consideration was due to be 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.
Impairment
As at 28 February 2022 and 28 February 2023, the buyer had not delivered on its obligations to secure the promissory note and therefore management have made a judgement that the promissory note is unlikely to be honoured and consequently the fair value of the consideration is impaired and a credit loss of GBP2.4 million was recognised within discontinued operations in the year ended 28 February 2022.
Uncertain commission obligations
As described further and set out in Note 28 Provisions, the Directors have made significant judgements in relation to the estimation of the amount of provision to be recognised in relation to uncertain commission obligations.
Key judgements
The following are key judgements that the Group makes, apart from those involving estimations (which are dealt with above), that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the Financial Statements.
Revenue recognition
IFRS 15 "Revenue from Contracts with Customers" requires judgement to determine whether revenue is recognised at a "point in time" or "over time" as well as determining the transfer of control for when performance obligations are satisfied.
For Chartering, the Group has defined the performance obligation to be satisfied at the point in time where the negotiated contract between counterparties has been successfully completed, being the discharge of cargoes, and therefore revenue is recognised at this point in time. This is a critical judgement since revenue recognition would differ if the performance obligations were deemed to be satisfied over a time period, or at a different point in time.
Recoverability of defined benefit pension scheme net asset
As a result of actuarial movements during the period, including an increase in the discount rate from 2.65% at 28 February 2022 to 4.90% at 28 February 2023, the UK defined benefit scheme is in an actuarial surplus position at 28 February 2023 (measured on an IAS 19 "Employee Benefits" basis) of GBP1.1 million (28 February 2022: liability of GBP2.1 million). The surplus has been recognised on the basis that the Group has an unconditional right to a refund, assuming the gradual settlement of Scheme liabilities over time until all members have left the Scheme. The surplus will be subject to a tax charge on its recovery which the Group does not believe meets the definition of an income tax under IAS 12, and as a result, the surplus has been presented net of the expected taxes payable of GBP0.6m, at a rate of 35%.
Classification and recognition of specific items
In reporting financial information, the Group presents Alternative Performance Measures ("APMs") which are not defined or specified under the requirements of International Financial Reporting Standards ("IFRS"). The Group believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide stakeholders with additional helpful information and enable an alternative comparison of performance over time.
The Group excludes specific items from its underlying earnings measure. Management judgement is required as to what items qualify for this classification. There can also be judgement as to the point at which costs should be recognised and the amount to record to ensure that the understanding of the underlying performance is not distorted. Specific items include the results from discontinued operations. See Note 10.
Assessment of business combinations
During the year, the Group acquired the entity Madrid Shipping Advisors S.L. For a business combination to exist, the Group must obtain control of a business. To be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. As part of the transaction, no assets were acquired (such as brand, order book, property, plant and equipment), nor were any liabilities assumed. The entity holds the service contracts for key employees and was a newly incorporated company, set up specifically for the acquisition. The Group has made the judgement that the acquisition did not meet the definition of a business combination as the acquired entity did not meet the definition of a business. The transaction was treated as the recruitment of a broker team, which is consistent with the substance of the arrangement.
Climate -- related risks and opportunities
Management have considered the impact of climate-related risks in respect of impairment of goodwill, recoverability of receivables and the recoverability of deferred tax assets in particular and do not consider that climate--related risks have a material impact on any key judgements, estimates or assumptions in the consolidated Financial Statements.
In the prior year, climate change was assessed as part of ongoing discussions of key and emerging risks for the Group and the shipping and energy sectors within which it operates. Consideration of the potential short to medium-term impact of the Environment and Climate Change risk resulted in its inclusion as a Group Principal Risk.
3 Accounting policies a) Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:
- fair values of the assets acquired; - liabilities incurred to the former owners of the acquired business; - equity interests issued by the Group;
- fair value of any asset or liability resulting from a contingent consideration arrangement; and
- fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest's proportionate share of the acquired entity's net identifiable assets.
Acquisition-related costs are expensed as incurred.
The excess of the consideration transferred; amount of any non-controlling interest in the acquired entity; and acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a gain on purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value, with changes in fair value recognised in profit or loss.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss.
Due to the nature of the Group's business, amounts paid or shares issued to sellers are often linked to their continued employment. An assessment is performed to determine whether the amounts are part of the exchange for the acquiree, or should be treated as a transaction separate from the business combination. Transactions that are separate from the business combination are accounted for in accordance the relevant IFRSs which generally results in the amounts being treated as a post-combination remuneration expense.
b) Revenue recognition
Revenue is recognised in accordance with satisfaction of performance obligations. Revenue of the Group consists of:
i) Chartering desks - The Group acts as a broker for several types of shipping transactions, each of which gives rise to an entitlement to commission:
Deep sea tankers, specialised tankers and gas, dry cargo and offshore:
- for single voyage chartering, the contractual terms are governed by a standard charterparty contract in which the broker's performance obligation is satisfied when the cargo has been discharged according to the contractual terms;
- for time charters, the commission is specified in the hire agreement and the performance obligation is spread over the term of the charter at specified intervals in accordance with the charter party terms;
ii) Risk Advisory desks
Securities:
- for income derived from commodity broking, the commission is recognised when a binding contractual arrangement is entered into between the two parties, at which point, the Group has fulfilled its performance obligation.
iii) Investment Advisory
Financial:
- income comprises retainer fees and success fees generated by corporate finance-related activities. Revenue is recognised in accordance with the terms agreed in individual client terms of engagement. Recurring monthly retainers are recognised in the month of invoice and success fees are recognised at the point when the performance obligations of the particular engagement are fulfilled.
Sale and purchase:
- in the case of second-hand sale and purchase contracts, the broker's performance obligation is satisfied when the principals in the transaction complete on the sale/purchase and the title of the vessel passes from the seller to the buyer;
- with regard to newbuilding contracts, the commission is recognised when contractual stage payments are made by the purchaser of a vessel to a shipyard which in turn reflects the performance of services over the life of the contract;
- for income derived from providing ship and fleet valuations, the Group recognises income when a valuation certificate is provided to the client and the service is invoiced.
iv) Logistics (a discontinued operation):
- - the performance obligation for agency income is satisfied at the point in time when the vessel sails from the port. For forwarding and logistics income the performance obligation is satisfied when the goods depart from their load location. Where the Group acts as a principal rather than as agent, the revenue and costs are shown gross.
Dividend income from investments is recognised when the right to receive payment is established.
c) Government grants
Government grants are netted against the cost incurred by the Group. When retention of a government grant is dependent on the Group satisfying certain criteria, it is initially recognised as deferred income and released to the Income Statement once the criteria for retention have been satisfied. See Note 5.
d) Foreign currencies
Transactions and balances
Transactions in currencies other than sterling are recorded at the rates of exchange prevailing on the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currency are recognised in the Income Statement.
In order to hedge its exposure to certain foreign exchange risks, the Group enters into derivative financial instrument contracts, mainly forward foreign currency exchange contracts which are designated as cash flow hedges (see Note 3(m)). For a qualifying hedge relationship, the fair value gain or loss on the hedging instrument is recognised as part of Revenue when the underlying transaction is recognised in accordance with the Revenue recognition policy set out above.
Translation to presentation currency
The presentational currency of the Group is sterling. Assets and liabilities of overseas subsidiaries, branches and associates are translated from their functional currency into sterling at the exchange rates ruling at the Balance Sheet date. Trading results are translated at the average rates for the period. Exchange differences arising on the consolidation of the net assets of overseas subsidiaries are recognised through other comprehensive income in the foreign currency translation reserve (see Note 32).
On disposal of a business, the cumulative exchange differences previously recognised in the foreign currency translation reserve relating to that business are transferred to the Income Statement as part of the gain or loss on disposal. The Group finances overseas investments partly through the use of foreign currency borrowings in order to provide a net investment hedge over the foreign currency risk that arises on translation of its foreign currency subsidiaries. For effective hedge relationships, the gain or loss on the hedging instrument is recognised in equity through other comprehensive income.
e) Taxation
The taxation expense represents the sum of the current and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Income Statement because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group and Company's liability for current tax is calculated using rates that have been enacted or substantively enacted by the Balance Sheet date.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated Financial Statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss and does not give rise to equal taxable and deductible temporary differences. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where the deferred tax
balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
f) Goodwill
Business combinations are accounted for using the acquisition method. The goodwill recognised as an asset by the Group is stated at cost less any accumulated impairment losses.
On the acquisition of a business, fair values are attributed to the net assets (including any identifiable intangible assets) acquired. The excess of the consideration transferred, any non-controlling interest recognised and the fair value of any previous equity interest in the acquired entity over the fair value of net identifiable assets acquired is recorded as goodwill. Acquisition-related costs are recognised in the Income Statement as incurred in accordance with IFRS 3.
In relation to acquisitions where the fair value of assets acquired exceeds the fair value of the consideration, the excess fair value is recognised immediately in the Income Statement as a gain on purchase.
On the disposal of a business, goodwill relating to that business remaining on the Balance Sheet is included in the determination of the profit or loss on disposal. As permitted by IFRS 1, goodwill on acquisitions arising prior to 1 March 2004 has been retained at prior amounts and is tested annually for impairment.
g) Intangible assets
Computer software
The Group capitalises computer software at cost. It is amortised on a straight-line basis over its estimated useful life of up to four years.
Development costs
The Group capitalises internally generated development costs when it is able to demonstrate:
- the technical feasibility of completing the intangible asset so that it is subsequently available for use;
- that there is a clear intention that the intangible asset would be completed and then used; - that it is able to use the intangible asset; - that future economic benefits are probable;
- that there are adequate technical, financial and other resources to complete the development and to use the asset; and the expenditure attributable to the intangible asset during its development can be reliably measured.
The Group amortises development on a straight -- line basis over its estimated useful economic life of up to three years. See Note 16.
Research costs are expensed as incurred.
Other intangible assets
Intangible assets acquired as part of a business combination are stated in the Balance Sheet at their fair value at the date of acquisition less accumulated amortisation and any provision for impairment. The amortisation of the carrying value of the capitalised forward order book and customer relationships is charged to the Income Statement over an estimated useful life, which is between four months to twelve years. The amortisation in respect of capitalised brand assets is expensed to the Income Statement over an estimated useful life, which is between three and twelve years.
h) Property, plant and equipment
Property, plant and equipment are shown at historical cost less accumulated depreciation and any provision for impairment.
Depreciation is provided at rates calculated to write off the cost, less estimated residual value of each asset, on a straight-line basis over its expected useful life as follows (except for long and short leasehold interests which are written off against the remaining period of the lease):
Motor vehicles - three years Computer equipment - four years Fixtures and equipment - four years i) Leases
The Group as a lessee
The Group has various lease arrangements for properties, and other equipment. At inception of a lease contract, the Group assesses whether the contract conveys the right to control the use of an identified asset for a certain period of time and whether it obtains substantially all the economic benefits from the use of that asset, in exchange for consideration. The Group recognises a lease liability and a corresponding right-of-use asset with respect to all lease arrangements in which it is a lessee, except low-value leases and short-term leases of 12 months or less, costs for which are recognised as an operating expense within the income statement on a straight-line basis.
A right-of-use asset is capitalised on the Balance Sheet at cost, comprising the amount of the initial measurement of the lease liability and lease payments made at or before the commencement date, plus any initial direct costs incurred in addition to an estimate of costs to remove or restore the underlying asset. Where a lease incentive is receivable, the amount is offset against the right-of-use asset at inception. Right-of-use assets are depreciated using the straight-line method over the shorter of the estimated life of the asset or the lease term.
The lease liability is initially measured at the present value of future lease payments. Interest expense is charged to the Consolidated Income Statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee's incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. Generally, the interest rate implicit in the lease is not readily determinable, as such the incremental borrowing rate is used to discount future lease payments.
For the Group, lease payments generally comprise the following:
- Fixed payments, less any lease incentives receivable;
- Variable payments that are based on an index or rate; and
- Payments to be made under extension options which are reasonably certain to be exercised.
Lease payments made are apportioned between an interest charge and a capital repayment amount which are disclosed within the financing activities and the operating activities sections of the Consolidated Statement of Cash Flows respectively. When an adjustment to lease payments based on an index takes effect, the liability is remeasured with a corresponding adjustment to the right-of-use asset.
Contracts entered into by the Group have a wide range of terms and conditions but generally do not impose any additional covenants. Several of the Group's contracts include indexation adjustments to lease payments in future periods which are not reflected in the measurement of the lease liabilities at 28 February 2023. Many of the contracts entered into by the Group include extension or termination options which provide the Group with additional operational flexibility. If the Group considers it reasonably certain that an extension option will be exercised or a termination option not exercised, the additional period is included in the lease term.
A modification to a lease which changes the lease payment amount (e.g. due to a renegotiation or market rent review) or amends the term of the lease, results in a reassessment of the lease liability with a corresponding adjustment to the right-of-use asset.
The Group as a lessor
The Group classified leases as either operating or finance leases based on the substance of the arrangement. At commencement of a finance lease, a receivable is recognised at an amount equal to the Group's net investment in the lease. Finance income is recognised reflecting a constant periodic rate of return on the net investment in the lease. Lease payments from operating leases are recognised as income on a straight-line basis.
j) Investments
Investments in associates and joint ventures where the Group has joint control or significant influence are accounted for under the equity method. Investments in associates are initially recognised in the Consolidated Balance Sheet at cost. Subsequently associates are accounted for under the equity method, where the Group's share of post-acquisition profits and losses and other comprehensive income is recognised in the Income Statement and Statement of Comprehensive Income.
Profits and losses arising on transactions between the Group and its associates are recognised only to the extent of unrelated investors' interests in the associate. The investor's share in the associate's profits and losses arising from these transactions is eliminated against the carrying value of the associate.
Where the Group's share of the associate's identifiable net assets is greater than the cost of investment, a gain on purchase is recognised in the Income Statement and the carrying value of the investment in the Consolidated Balance Sheet is increased.
When the Group disposes of shares in associates or joint ventures the Group recognises a profit or loss on disposal based on the net proceeds less the weighted average cost of the shares disposed of. On disposal the Group reclassifies foreign exchange amounts previously recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be required to be reclassified to profit or loss on the disposal of the related assets or liabilities.
The most recent Financial Statements of an associate are used for accounting purposes unless it is impractical to do so. Where the Group and an associate have non-coterminous reporting dates the associate's full-year accounts will be used for the purposes of the Group's reporting at 28 February with adjustments made for any significant transactions or events.
Investments where the Group has no significant influence are held at fair value, with movements in fair value recorded in profit and loss.
k) Impairment
The carrying amount of the Group's assets, other than financial assets within the scope of IFRS 9 and deferred tax assets, are reviewed for impairment as described below. If any indication of impairment exists, the asset's recoverable amount is estimated. The recoverable amount is determined based on the higher of value-in-use calculations and fair value less costs to sell, which requires the use of estimates. An impairment loss is recognised in the Income Statement whenever the carrying amount of the assets exceeds its recoverable amount.
Goodwill is reviewed for impairment at least annually. Impairments are recognised immediately in the Income Statement. Goodwill is allocated to cash-generating units for the purposes of impairment testing.
The carrying value of intangible assets with a finite life is reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The carrying values of other intangible assets are reviewed for impairment at least annually or when there is an indication that they may be impaired.
Right-of-use assets are reviewed for impairment to account for any loss when events or changes in circumstances indicate the carrying value may not be fully recoverable.
Where there is objective evidence that the investment in an associate has been impaired, the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.
Where an impairment loss subsequently reverses, the carrying amount of the assets, with the exception of goodwill, is increased to the revised estimate of its recoverable amount. This cannot exceed the carrying amount prior to the impairment charge. An impairment recognised in the Income Statement in respect of goodwill is not subsequently reversed.
l) Deferred and contingent consideration receivables
Contingent consideration receivable is initially recognised at fair value and is subsequently remeasured at its fair value at each Balance Sheet date. The resulting gain or loss is recognised immediately in the Income Statement. Contingent consideration receivable is classified as level 3 in accordance with the fair value hierarchy specified by IFRS 13. Deferred consideration is initially measured at its fair value and subsequently measured at amortised cost less provision for impairment. See Notes 23 and 24.
m) Derivative financial instruments and hedging
Derivatives are initially recognised at fair value and are subsequently remeasured at their fair value at each Balance Sheet date with gains and losses recognised immediately in the Income Statement unless hedge accounting is applied. Recognition of the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if it is, the nature of the item being hedged. Changes in the fair value of derivatives that do not qualify for hedge accounting are recognised immediately in the Income Statement. The Group designates derivatives that qualify for hedge accounting as a cash flow hedge where there is a high probability of the forecast transactions arising. The effective portion of changes in the fair value of these derivatives is recognised in equity. The gain or loss on derivative instruments not designated in hedging relationships and relating to the ineffective portion of derivatives designated in hedging relationships is recognised immediately in the Income Statement within finance costs or income. Amounts accumulated in equity are recycled to the Income Statement at the same time as the gains or losses on the hedged items. When a forecast transaction is no longer expected to occur, the cumulative gains or losses that were reported in equity are immediately transferred to the Income Statement.
To qualify for hedge accounting, the terms of the hedge must be clearly documented at inception and there must be an expectation that the derivative will be highly effective in offsetting changes in the cash flow of the hedged risk. Hedge effectiveness is tested throughout the life of the hedge and if at any point it is concluded that the relationship can no longer be expected to remain highly effective in achieving its objective, the hedge relationship is terminated.
The critical terms of the hedging instruments match the hedged transactions r in relation to currency, timing and amounts, meaning there is a clear economic relationship between the hedging instrument and hedged item as required under IFRS 9. Thereby, management qualitatively demonstrates that the hedging instrument and the hedged items will move equally in the opposite direction.
When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs.
The fair value of derivative contracts is based either directly or indirectly on market prices at the Balance Sheet date.
Financial assets and liabilities are classified in accordance with the fair value hierarchy specified by IFRS 13. See Note 24.
n) Trade receivables and contract assets
Trade receivables and contract assets are initially recognised at fair value (less transaction costs) and subsequently measured at amortised cost.
At the Balance Sheet date, there may be amounts where invoices have not been raised but performance obligations have been satisfied, and these are recognised as contract assets.
Specific provision is made where there is evidence that the balances will not be recovered in full. A provision for expected credit losses is made for trade receivables and contract assets using the simplified approach. A provision matrix is used to calculate an expected credit loss as a percentage of carrying value by age. The percentages are determined based on historical credit loss experience as well as forward-looking information. Expected credit loss provisions are made for other receivables based on lifetime expected credit losses using a model that considers forward-looking information and significant increases in credit risk.
Trade and other receivables are non-interest bearing and generally on terms payable within 30 to 90 days.
o) Cash and cash equivalents
Cash and cash equivalents included in the Balance Sheet comprise cash in-hand, short-term deposits with an original maturity of three months or less and restricted cash.
Cash and cash equivalents included in the Cash Flow Statement include cash and short-term deposits. Bank overdrafts are included in the Balance Sheet within short-term borrowings.
p) Provisions
Provisions are recognised when the Group has a present obligation (legal or otherwise) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If material, the provisions are discounted using an appropriate current post-tax interest rate.
Short-term provisions for long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled.
The provision for long service leave not expected to be settled within 12 months of the reporting date is measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
q) Share-based payments
The Group operates a number of equity-settled share-based payment schemes.
No awards may be granted under the schemes set out below which would result in the total number of shares issued or remaining issuable under all of the schemes (or any other Group share schemes), in the ten-year period ending on the date of grant of the option, exceeding 10% of the Company's issued share capital (calculated at the date of grant of the relevant option).
The Group may provide a net settlement feature, whereby it withholds the number of equity instruments equal to the monetary value of the employee's tax obligation arising from the exercise (or vesting) of the award if the total number of shares that otherwise would have been issued to the employee. The Group has no contractual obligation to provide a net settlement option, and therefore the award is still accounted for as an equity settled award in full and the value of the shares foregone by the employee is accounted for as a deduction from equity.
The net cost of the shares acquired for the shares held by the ESOP and the EBT are a deduction from shareholders' funds and represent a reduction in distributable reserves. Note 31 provides detail on the ESOP and the EBT and movements in shares to be issued.
Share Option Scheme
During the year the Company operated the Braemar Shipping Services Plc Savings-Related Share Option Scheme 2014 (the "SAYE Scheme") and the Braemar Shipping Services Plc International Savings-Related Share Option Scheme 2019 (the "International SAYE Scheme"). Options are granted at up to a 20% discount to the prevailing market price and entitle employees to purchase shares in the Company at a fixed price subject to continued employment. The fair value of share options granted under the SAYE schemes is determined using a binomial pricing model. The number of awards which are expected to vest is estimated by management based on levels of expected forfeitures.
Deferred Bonus Plan ("DBP")
The Company adopted a Deferred Bonus Plan in May 2020 (the "2020 DBP"), pursuant to which future discretionary bonus awards will be granted to staff including executive directors. Awards under the New DBP may be linked to an option granted under the new Braemar Company Share Option Plan 2020, which was also adopted by the Company in May 2020 (the "2020 CSOP"). Where an employee receives a linked award under the 2020 DBP, if the Company's share price rises over the vesting period, the 2020 CSOP award can be exercised with the value of shares delivered on the vesting of the 2020 DBP award being reduced by the exercise gain on the 2020 CSOP award. Awards under the 2020 DBP and the 2020 CSOP may be settled by the issue of new shares of by way of transfer of shares from the ESOP. Historic practice has been to settle via the transfer of shares from the ESOP and it is the current intention to continue to operate in this manner.
The number of awards granted under the Deferred Bonus Plan each year is related to the profits generated in the previous year. The cost of the award is therefore expensed from the beginning of that profit period until the vesting date which is usually three years after the date of award and is subject to continued employment. Awards made to new joiners are expensed over the period from date of joining to date of vesting. Their fair value is estimated based on the share price at the time of grant less the expected dividend to be paid during the vesting period. The number of awards which are expected to vest is estimated by management based on levels of expected forfeitures.
Restricted Share Plan ("RSP")
During the year ended 28 February 2015, the Company established a Restricted Share Plan ("RSP"). This scheme was set up to grant awards to certain key staff to try to retain them following the merger between Braemar and ACM Shipping Group Plc, but it can also be used where the Remuneration Committee considers it necessary to secure the recruitment of a particular individual. Executive directors of the Company are not eligible to participate in the RSP. RSP awards are made in the form of a nil cost option and there are no performance criteria other than continued employment. Their fair value is estimated based on the share price at the time of grant less the expected dividend to be paid during the vesting period. The number of awards which are expected to vest is estimated by management based on levels of expected forfeitures.
Long Term Incentive Plan ("LTIP")
The Company also operates an LTIP, which was approved by shareholders and adopted in 2014. LTIP awards under this plan take the form of a conditional right to receive shares at nil cost. The awards normally vest over three years and are typically subject to a performance condition such as earnings per share ("EPS") or Total Shareholder Return ("TSR"), a market-based condition.
The fair value of awards with the EPS condition are non-market conditions and their fair value is estimated based on the share price at the time of grant less the expected dividend to be paid during the vesting period. The fair value of awards containing market conditions is determined using Monte Carlo simulation models. The number of awards which are expected to vest is estimated by management based on levels of expected forfeitures and the expected outcome of the EPS condition. For awards subject to market conditions, no adjustment is made to reflect the likelihood of the market condition being met nor the actual number of awards which lapse as a result of the condition not being met.
r) Commissions payable
Commissions payable to co-brokers are recognised in trade payables due within one year on the earlier of the date of invoicing or the date of receipt of cash.
s) Long-term employee benefits
The Group has the following long-term employee benefits:
i) Defined contribution schemes
The Group operates a number of defined contribution schemes. Pension costs charged against profits in respect of these schemes represent the amount of the contributions payable to the schemes in respect of the accounting period. The assets of the schemes are held separately from those of the Group within independently administered funds. The Group has no further payment obligations once the contributions have been paid.
ii) Defined benefit schemes
The Group operates a defined benefit scheme, the ACM Staff Pension Scheme, with assets held separately from the Group. The cost of providing benefits under the scheme is determined using the projected unit credit actuarial valuation method which measures the liability based on service completed and allowing for projected future salary increases and discounted at an appropriate rate.
The current service cost, which is the increase in the present value of the retirement benefit obligation resulting from employee service in the current year, and gains and losses on settlements and curtailments, are included within operating profit in the Income Statement. The unwinding of the discount rate on the scheme liabilities which is shown as a net finance cost and past service costs are presented and recognised immediately in the Income Statement.
The pension asset or liability recognised on the Balance Sheet in respect of this scheme represents the difference between the present value of the Group's obligations under the scheme and the fair value of the scheme's assets. Actuarial gains or losses and return on plan assets net of tax, excluding interest, are recognised in the period in which they arise within the Statement of Comprehensive Income.
When the defined benefit plan is in a surplus, the asset is recognised at the lower of the surplus and the asset ceiling, less any associated costs, such as taxes payable.
iii) Other long-term benefits
The current service cost of other long-term benefits resulting from employee services in the current year is included within the Income Statement. The unwinding of any discounting on the liabilities is shown in net finance costs.
t) Borrowings and loan notes
Arrangement costs for loan facilities are capitalised and amortised over the life of the debt at a constant rate.
Finance costs are charged to the Income Statement, based on the effective interest rate of the associated external borrowings and debt instruments.
The convertible loan notes are considered to be a financial liability host with an embedded derivative convertible feature which is required to be separated from the host. The Group has an accounting choice to record the instrument in its entirety at fair value through profit and loss but has not chosen to apply this treatment. Instead, the financial liability host is recognised as a euro liability initially recognised at fair value and prospectively accounted for applying the effective interest rate method. The derivative conversion feature is recognised at fair value through profit and loss. Where there are conversion options that can be exercised within one year the liability is recognised as current.
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 substantial. 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 substantial, then the existing financial liability is remeasured in accordance with its original classification and any gain or loss is recognised immediately in the Income Statement.
u) Specific items
Specific items are significant items considered material in size or nature, including acquisition and disposal-related gains and losses. These are disclosed separately to enable a full understanding of the Group's ongoing financial performance.
v) Non-current assets held for sale and discontinued operations
A non-current asset or a group of assets, such as a disposal group, is classified as held for sale if its carrying amount will be recovered principally through sale rather than through continuing use, it is available for immediate sale and sale is highly probable within one year.
On initial classification as held for sale, non-current assets and disposal groups are measured at the lower of previous carrying amount and fair value less costs to sell with any adjustments taken to profit or loss.
A discontinued operation is a component of the Group's business that represents a separate line of business or geographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative Income Statement is restated as if the operation has been discontinued from the start of the comparative period.
w) Contingent assets
Contingent assets are not recognised but are disclosed where an inflow of economic benefits is probable.
4 Segmental information and revenue a) Business segments
Following the simplification of the Group's activities and the way in which information is now presented to the Group's Chief Operating Decision Maker, the Group's operating segments are Chartering, Investment Advisory and Risk Advisory. Previously the Group's operating segments were based on a Divisional structure of Shipbroking, Financial, Logistics and Engineering Divisions. The Logistics and Engineering Divisions were sold in the prior year and are presented as discontinued operations in the comparative period.
The Chief Operating Decision Maker is considered to be the Group's board of Directors. Each of Chartering, Investment Advisory and Risk Advisory are managed separately, and the nature of the services offered to clients is distinct between the segments. The Chartering segment includes the Group's shipbroking business, Risk Advisory includes the Group's regulated securities business and Investment Advisory focuses on transactional services.
The segmental analysis is consistent with the way the Group manages itself and with the format of the Group's internal financial reporting. The board considers the business from both service line and geographic perspectives. A description of each of the lines of service is provided in the Operating and Financial Review. The Group's main geographic markets comprise the UK, Singapore, the US, Australia, Germany and the Rest of the World. The Group's geographical markets are determined by the location of the Group's assets and operations.
Central costs relate to board costs and other costs associated with the Group's listing on the London Stock Exchange. All segments meet the quantitative thresholds required by IFRS 8 as reportable segments.
Underlying operating profit is defined as operating profit for continuing activities before restructuring costs, gain on disposal of investment and acquisition and disposal-related items.
The segmental information provided to the board for reportable segments for the year ended 28 February 2023 is as follows:
Revenue Operating profit
------------------ ------------------
2023 2022 2023 2022
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------- -------- -------- -------- --------
Chartering 99,164 63,024 15,577 6,246
Investment Advisory 36,760 26,297 7,740 6,359
Risk Advisory 16,987 11,989 2,971 1,615
-------------------------------------------- -------- -------- -------- --------
Trading segments revenue/results 152,911 101,310 26,288 14,220
-------------------------------------------- -------- -------- -------- --------
Central costs (6,213) (4,160)
-------------------------------------------- -------- -------- -------- --------
Underlying operating profit 20,075 10,060
-------------------------------------------- -------- -------- -------- --------
Specific items included in operating profit (8,406) (514)
-------------------------------------------- -------- -------- -------- --------
Operating profit 11,669 9,546
-------------------------------------------- -------- -------- -------- --------
Share of associate's loss for the year (23) (19)
Net finance expense (2,195) (984)
-------------------------------------------- -------- -------- -------- --------
Profit before taxation 9,451 8,543
-------------------------------------------- -------- -------- -------- --------
Prior year figures have been restated in line with the current segment definitions.
Geographical segment - by origin
The Group manages its business segments on a global basis. The operation's main geographical area and also the home country of the Company is the United Kingdom.
Geographical information determined by location of customers is set out below:
Revenue
------------------
2023 2022
GBP'000 GBP'000
------------------------ -------- --------
United Kingdom 80,353 54,524
Singapore 26,674 19,423
Australia 16,599 12,565
Switzerland 11,112 5,435
United States 6,255 972
Germany 2,951 2,488
Rest of the World 8,967 5,903
------------------------ -------- --------
Continuing operations 152,911 101,310
Discontinued operations - 45,215
------------------------ -------- --------
Total 152,911 146,525
------------------------ -------- --------
b) Revenue analysis
The Group disaggregates revenue in line with the segmental information presented above and also by desk. Revenue analysed by desk is provided below.
2023 2022
GBP'000 GBP'000
---------------------------- -------- --------
Tankers 41,602 17,837
Specialised Tankers 16,240 11,622
Dry Cargo 35,821 29,789
Offshore 5,501 3,776
Chartering 99,164 63,024
Sales and purchase 32,060 19,646
Corporate finance 4,700 6,651
------------------------------ -------- --------
Investment Advisory 36,760 26,297
Securities 16,987 11,989
------------------------------ -------- --------
Risk Advisory 16,987 11,989
------------------------------ -------- --------
Total continuing operations 152,911 101,310
------------------------------ -------- --------
All revenue arises from the rendering of services. There is no single customer that contributes greater than 10% of the Group's revenue.
Remaining performance obligations
The Group enters into some contracts, primarily in Chartering, which are for a duration longer than 12 months and where the Group has outstanding performance obligations on which revenue has not yet been recognised. The amount of revenue that will be recognised in future periods on these contracts when those remaining performance obligations will be satisfied is set out below:
Forward order book
More
Within than
12 months 1-2 years 2 years Total
202 3 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ---------- --------- -------- --------
Chartering 19,209 3,040 9,860 32,109
Sale and purchase 3,332 4,988 6,168 14,488
------------------ ---------- --------- -------- --------
Total 22,541 8,028 16,028 46,597
------------------ ---------- --------- -------- --------
Within More than
12 months 1-2 years 2 years Total
2022 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ---------- --------- --------- --------
Chartering 15,724 3,211 9,057 27,992
Sale and purchase 6,584 1,832 924 9,340
------------------ ---------- --------- --------- --------
Total 22,308 5,043 9,981 37,332
------------------ ---------- --------- --------- --------
5 Operating profit from continuing operations
Operating profit represents the results from operations before finance income and costs, share of profit/(loss) in associate, taxation and discontinued operations.
This is stated after charging/(crediting):
2023 2022
Notes GBP'000 GBP'000
------------------------------------------------- ----- -------- --------
Staff costs 6 110,166 75,814
Depreciation of property, plant and equipment 17 2,823 2,834
Amortisation of intangibles 16 192 262
Bad debt charge 22 238 747
Auditor's remuneration 7 1,354 960
Other professional costs 3,410 2,782
Office costs 1,595 1,600
IT and communication costs 3,264 2,507
Insurance 1,069 875
Net foreign exchange gains (1,465) (432)
Specific items included in operating profit (see
Note 10 ) 8,406 (514)
------------------------------------------------- ----- -------- --------
Staff costs for the prior year are stated after netting off grants totalling GBP0.1 million against staff costs for continuing operations detailed in Note 6; no grants were received in the current year. The grants were received from both the Singaporean Government and the Australian Government as a result of the impact of COVID. All criteria for the retention of both grants have been satisfied and therefore the full amount has been recognised in the Income Statement.
6 Staff costs
a) Staff costs for the Group during the year (including directors)
2023 2022
Note GBP'000 GBP'000
------------------------------------------------- ---- -------- --------
Salaries, wages and short-term employee benefits 100,039 68,043
Other pension costs 29 1,811 1,613
Social security costs 3,796 3,347
Share-based payments 30 4,520 2,951 ------------------------------------------------- ---- -------- -------- Continuing operations 110,166 75,954 Discontinued operations - 8,344 ------------------------------------------------- ---- -------- -------- Total 110,166 84,298 ------------------------------------------------- ---- -------- --------
The numbers above include remuneration and pension entitlements for each director.
b) Average number of employees
2023 2022
number number
------------------------ ------- -------
Chartering 253 243
Risk Advisory 32 18
Investment Advisory 63 57
Central 36 44
------------------------ ------- -------
Continuing operations 384 362
Discontinued operations - 190
------------------------ ------- -------
Total 384 552
------------------------ ------- -------
The Directors' remuneration is borne by Braemar Plc.
c) Key management compensation
The remuneration of key management, which the Group considers to be the Directors, is set out below.
2023 2022
GBP'000 GBP'000
------------------------------------------------ -------- --------
Salaries, short-term employee benefits and fees 5,879 3,484
Other pension costs 52 41
Share-based payments 1,226 521
Total 7,157 4,046
------------------------------------------------ -------- --------
Pension costs relate to contributions made to a defined contribution pension scheme on behalf of three (2022: three) members of key management.
7 Auditor's remuneration
A more detailed analysis of the auditor's services is given below:
2023 2022
GBP'000 GBP'000
----------------------------------------------------------------------- -------- --------
Audit services:
- Fees payable to the Company's auditor for the audit of the Company's
Financial Statements 740 540
Fees payable to the Group's auditor and its associates for other
services:
- The audit of the Group's subsidiaries pursuant to legislation 457 334
- Other service - interim review 157 86
----------------------------------------------------------------------- -------- --------
1,354 960
----------------------------------------------------------------------- -------- --------
All fees paid to the auditor were charged to operating profit in both years.
8 Finance income and costs
Note 2023 2022
GBP'000 GBP'000
----------------------------------------------------- ---- -------- --------
Finance income:
- Gain on modification of deferred consideration 10 - 172
- Interest on bank deposits 84 9
- Interest on lease receivables 35 72
- Interest on of Cory earnout deferred consideration
receivable 83 -
----------------------------------------------------- ---- -------- --------
Total finance income 202 253
----------------------------------------------------- ---- -------- --------
Finance costs:
- Interest payable on revolving credit and overdraft
facilities (1,151) (930)
- Interest payable on defined benefit liability (54) (73)
- Foreign exchange loss on derivative instruments
not eligible for hedge accounting (292) -
- Foreign exchange loss on non-GBP denominated
credit facilities (49) -
- Foreign exchange and derivative (loss)/gain
on Naves liability (250) 225
- Interest payable on convertible loan notes (426) (130)
----------------------------------------------------- ---- -------- --------
Subtotal finance costs before interest on lease
liabilities (2,222) (908)
- Interest on lease liabilities (175) (329)
----------------------------------------------------- ---- -------- --------
Total finance costs (2,397) (1,237)
----------------------------------------------------- ---- -------- --------
Finance costs - net (continuing operations only) (2,195) (984)
----------------------------------------------------- ---- -------- --------
9 Taxation
a) Analysis of charge in year
2023 2022
GBP'000 GBP'000
------------------------------------------------------------------------ -------- --------
Current tax
UK corporation tax charged to the Income Statement 1,194 -
UK adjustment in respect of previous years - 335
Overseas tax on profits in the year 4,559 3,432
Overseas adjustment in respect of previous years 394 (517)
------------------------------------------------------------------------ -------- --------
Total current tax 6,147 3,250
------------------------------------------------------------------------ -------- --------
Deferred tax
UK current year origination and reversal of temporary differences (190) 377
Due to change in rate of tax - (473)
UK adjustment in respect of previous years (242) (41)
Overseas current year origination and reversal of temporary differences (712) (95)
Overseas adjustment in respect of previous years (148) (313)
------------------------------------------------------------------------ -------- --------
Total deferred tax (1,292) (545)
------------------------------------------------------------------------ -------- --------
Taxation 4,855 2,705
------------------------------------------------------------------------ -------- --------
Taxation on continuing operations 4,855 1,839
Taxation on discontinued operations - 866
------------------------------------------------------------------------ -------- --------
Taxation 4,855 2,705
------------------------------------------------------------------------ -------- --------
2023 2022
Reconciliation between expected and actual tax charge GBP'000 GBP'000
------------------------------------------------------------------- -------- --------
Profit before tax from continuing operations 9,451 8,543
------------------------------------------------------------------- -------- --------
Profit before tax at standard rate of UK corporation tax of 19%
(2022: 19%) 1,796 1,623
Utilisation of deferred tax asset at lower effective tax rate 22 69
Net expenses not deductible for tax purposes 1,580 843
Utilisation of previously unrecognised losses (104) (478)
Tax on overseas branch 672 234
Tax calculated at domestic rates applicable to profits in overseas
subsidiaries 758 392
Other differences leading to a (decrease)/increase in tax (13) 4
Share scheme movements* 316 228
Unrecognised deferred tax on losses* (176) (135)
Prior year adjustments** 4 (941)
------------------------------------------------------------------- -------- --------
Total tax charge for the year 4,855 1,839
------------------------------------------------------------------- -------- --------
*In the prior year, a single net amount of GBP93,000 was disclosed in respect of share scheme movements and unrecognised deferred tax on losses. To provide further information, the comparative information has been updated to split out the GBP228,000 in relation to share scheme movements and GBP(135,000) in relation to unrecognised deferred tax on losses.
** Included within prior year adjustments in 2022 is the release of overprovided corporation tax creditor of GBP0.8m in respect of Singapore following a tax rate change from 17.0% to 10.5%.
Included within the total tax charge is GBP0.2 million (2022: GBP0.5 million) in respect of specific items disclosed separately on the face of the Income Statement. See Note 10.
A tax charge of GBPnil (2022: GBP0.3 million) is included in the results for discontinued operations as a result of the trading loss contained therein (see Note 11). This tax charge arose mainly as a result of the trading profits of Cory Brothers.
The Group's future tax charge will be sensitive to the geographic mix of profits earned; the tax rates in force and changes to the tax rules in jurisdictions that the Group operates in. The UK Main rate is to increase to 25% from 1 April 2023. The impact of UK rate changes on deferred tax were taken into account in the prior year.
2023 2022
Reconciliation between expected and actual tax charge GBP'000 GBP'000
---------------------------------------------------------------- --------- --------
Profit before tax from discontinued operations - 8,081
---------------------------------------------------------------- --------- --------
Profit before tax at standard rate of UK corporation tax of 19%
(2022: 19%) - 1,535
Due to change in rate of tax - 6
Net gains not taxable for tax purposes - (1,098)
Utilisation of losses - (74)
Other differences leading to increase in tax - 3
Temporary differences - 88
Other prior year adjustments - 406
Total tax charge for the year - 866
---------------------------------------------------------------- --------- --------
b) Amounts recognised in OCI
2023 2022
GBP'000 GBP'000
---------------------------------------------------------------- -------- --------
Items that will not be reclassified to profit or loss
Actuarial gain in respect of defined benefit pension scheme 2,775 1,391
Deferred tax charge on defined benefit pension scheme (414) (348)
Movement in opening balance due to change in rate of tax - 275
---------------------------------------------------------------- -------- --------
Sub-total (414) (73)
Total 2,361 1,318
---------------------------------------------------------------- -------- --------
Items that will be reclassified to profit or loss
Cash flow hedge 388 (2,482)
Deferred tax charge on cash flow hedge (97) 620
Movement in opening balance of tax due to change in rate of tax - (106)
---------------------------------------------------------------- -------- --------
Sub-total (97) 514
Total 291 (1,968)
---------------------------------------------------------------- -------- --------
Total tax recognised in OCI (511) 441
---------------------------------------------------------------- -------- --------
Total amounts recognised in OCI 2,652 (650)
---------------------------------------------------------------- -------- --------
Included within the UK current year origination and reversal of temporary differences is a debit of GBP414,000 (2022: GBP348,000 credit) in respect of deferred tax on the actuarial gain on the Group's defined benefit pension scheme.
c) Deferred tax asset
Deferred Tax Asset Accelerated Trading losses Other provisions Employee benefits
capital allowances Bonuses Total
------------------- ------------------- --------------- ---------- ----------------- ------------------ --------
At 1 March 2021 80 746 - 756 1,318 2,900
(Charge)/credit to
Statement of
Total
Comprehensive
Income (128) (498) 713 (285) 569 371
Credit to equity - - 442 - 442
------------------- ------------------- --------------- ---------- ----------------- ------------------ --------
At 28 February
2022 (48) 248 713 913 1,887 3,713
(Charge)/credit to
Income Statement 48 (248) 710 219 - 729
Charge to Other
Comprehensive
Income - - - (511) - (511)
Credit to equity - - - - 863 863
------------------- ------------------- --------------- ---------- ----------------- ------------------ --------
Balance at end of
year - - 1,423 621 2,750 4,794
------------------- ------------------- --------------- ---------- ----------------- ------------------ --------
2023 2022
The movement in the net deferred tax asset GBP'000 GBP'000
--------------------------------------------------------------------- -------- --------
Balance at beginning of year 3,713 2,900
Movement to Income Statement:
Adjustments in respect of prior years 390 180
Movement in opening balance due to change in rate of tax 25%/19% - 472
Arising on pension costs 99 (94)
Arising on bonuses 632 -
Arising on other 170 (187)
--------------------------------------------------------------------- -------- --------
Total movement to Income Statement 1,291 371
Balance arising on business combinations (906) -
Movement to other comprehensive income:
Movement in opening balance due to change in rate of tax 25%/19% - 169
Related deferred tax asset (511) 273
Movement to equity 863 -
--------------------------------------------------------------------- -------- --------
Total movement to equity and other comprehensive income 352 442
Balance at end of year 4,450 3,713
--------------------------------------------------------------------- -------- --------
A deferred tax asset of GBP4.8 million (2022: GBP3.7 million) has been recognised as the directors believe that it is probable that there will be sufficient taxable profits in the future to recover the asset in full.
d) Deferred tax liability
As at As at
28 Feb 28 Feb
2023 2022
Analysis of the deferred tax liabilities GBP'000 GBP'000
---------------------------------------- -------- --------
Temporary differences (344) -
---------------------------------------- -------- --------
Balance at end of year (344) -
---------------------------------------- -------- --------
As at As at
28 Feb 28 Feb
2023 2022
The movement in the deferred tax liability GBP'000 GBP'000
--------------------------------------------------------------- -------- --------
Balance at beginning of year - (174)
Balance arising on business combinations (906) -
Adjustment in respect of previous years - 174
Current year origination and reversal of temporary differences 562 -
--------------------------------------------------------------- -------- --------
Balance at end of year (344) - --------------------------------------------------------------- -------- --------
No deferred tax has been provided in respect of temporary differences associated with investments in subsidiaries and interests in joint ventures where the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future. The aggregate amount of temporary differences associated with investments in subsidiaries, for which a deferred tax liability has not been recognised, is approximately GBPnil (2022: GBP0.1 m illion ).
10 Specific items
The following is a summary of specific items incurred. Each item meets the definition of specific items detailed in Note 3 (u) and has an impact on the reported results for the year that is considered material either by size or nature and is not expected to be incurred on an ongoing basis and, as such, will not form part of the underlying profit in future years.
2023 2022
GBP'000 GBP'000
-------------------------------------------------------------------- -------- --------
Other operating income:
- Gain on purchase of Southport 3,643 -
- Gain on revaluation of Cory contingent consideration receivable 203 -
-------------------------------------------------------------------- -------- --------
3,846 -
Operating costs:
- Commission obligation (257) -
- Impairment of financial assets (848) -
- Impairment of goodwill (9,050) -
- Other operating costs (98) (392)
(10,253) (392)
Acquisition-related items:
- Consideration for Southport treated as an employment expense (1,325) -
- Madrid transaction costs (264) -
- Acquisition of Naves Corporate Finance GmbH (60) (122)
- Amortisation of acquired intangible assets (350) -
(1,999) (122)
Discontinued operations:
- Wavespec - (1,787)
- Cory Brothers - 4,134
- AqualisBraemar - 3,375
-------------------------------------------------------------------- -------- --------
- 5,722
Other items:
- Finance income - credit on modification of deferred consideration - 172
- Finance income - Cory Brothers earnout deferred consideration
receivable 83 -
- Finance expense - foreign exchange and derivative loss on Naves
liability (266) -
Total (8,589) 5,380
-------------------------------------------------------------------- -------- --------
Other operating income
A gain on purchase in relation to the acquisition of Southport was recognised during the year, with further details provided in Note 14. The Group does not consider this gain to reflect the performance of the business in the year, and so is treated as a specific item.
Revaluation of the contingent receivable due in respect of the Cory Brothers disposal resulted in a gain of GBP0.2 million (see Note 23 ).
The tax charge on specific items included within other operating income was GBPnil (2022: GBPnil).
Operating costs
As set out in Note 28 Provisions, the Group has recognised a provision in relation to an uncertain commission obligation. During the period, and amount of GBP0.3 million was recognised to increase the provision. Due to the nature of the provision being an historical transaction and not related to current trading, the Group has treated the cost in the year as a specific item.
During the year, an impairment charge of GBP0.8 million was recognised in relation to a disputed staff loan with an ex-employee of our Indian operations. Since no significant progress had been made with the ongoing legal case it is now the opinion of the Directors that recovery of this debt is unlikely. Due to the size of the impairment and the fact that the original debt arose several years previously and is not related to trading, this impairment charge is not deemed to relates to the performance of the business in the year and as such is treated as a specific item.
In addition, the final transaction costs of GBP0.1 million related to disposals in the prior year were received. In the prior year, a loss of GBP0.4 million was recognised in other operating costs arising from the impairment to a right-of-use asset in respect of a London office which was vacated by AqualisBraemar LOC ASA (see Note 17 for more details).
During the year an impairment of goodwill of GBP9.1 million was recognised in relation to the goodwill allocated to the Corporate Finance business. Further details are provided in Note 15 . The Group does not believe that this impairment reflects the performance of the business during the year, and as such, is treated as a specific item.
The tax income on specific items included within operating costs was GBP0.1 million (GBP0.1 million charge)
Acquisition-related items
As set out in Note 14 , as a result of the acquisition of Southport, due to the requirement for ongoing employee service, the upfront cash payment of GBP6.0 million and working capital adjustment of GBP0.6 million are treated as a post-combination remuneration expense in addition to the IFRS 2 charge related to share awards made to the sellers and existing employees of Southport. The total expense related to amounts linked to ongoing employee service in connection with the acquisition of Southport was GBP1.3 million in the year. The period of required employee service is three years from the acquisition date. As a result, this specific item will exist in future periods. In addition, as explained further in Note 14 , the Group recognised a gain on acquisition of Southport. Consistent with the Group's policy on specific items, this cost does not reflect the performance of the business and so is treated as a specific item.
As a result of the recruitment of a team of brokers based in Madrid, service agreements were entered into with employees. The recruitment of the broker team in Madrid included the following key elements:
- The Group assumed a liability of GBP0.3 million for a post-contractual payment to the employees, which was fully vested on signing the contracts.
- An upfront cash payment of GBP1.3 million with a further payment of GBP1.3m due in December 2023.
- Share awards to a total value of GBP0.8 million which vest evenly in one, two and three years from December 2022
The upfront payments and share awards have a clawback mechanism which is linked to the continued employment of the brokers over a three-year period from December 2022. The costs associated with the upfront payments and share awards are not considered by the Group to be specific items. But the cost related to the post-contractual payment obligation is treated as a specific item because it is akin to a transaction cost with no requirement to provide service.
Costs of GBP0.4 million (2022: GBP0.1 million) are directly linked to the acquisition of Naves Corporate Finance GmbH. In the current year GBP0.3 million relates to foreign currency translation losses on the euro liabilities linked to the acquisition of Naves Corporate Finance GmbH and GBP0.1 million in relation to an IAS 19 service cost. The prior year expenditure included GBP0.1 million related to foreign exchange translation of euro liabilities linked to the acquisition of Naves Corporate Finance GmbH.
An amount of GBP0.4 million relates to the amortisation of acquired intangible assets, primarily in relation to intangible assets recognised as a result of the acquisition of Southport.
The tax charge on acquisition-related items was GBP0.1 million (2022: GBPnil)
Discontinued operations
In the prior year, the Group recognised a net gain of GBP5.7 million on the disposal of discontinued operations. Gains arose on the disposal of Cory Brothers, AqualisBraemar and Wavespec of GBP4.1 million, GBP3.4 million and GBP0.6 million respectively, which were offset by an impairment charge of GBP2.4 million on the consideration due in respect of Wavespec. See Note 11 .
Other specific items
The unwinding of the discounting of the deferred receivable due in respect of the Cory Brothers disposal contributed interest income of GBP0.1 million (see Note 23 ). This income is not related to the trading of the business in the period but is related to the disposal of the logistics business in the prior year. As a result, it is treated as specific item.
The foreign exchange loss and fair value loss on the Naves-related liabilities and derivative of GBP0.3 million is included as a specific item as it relates to the acquisition of Naves and is not related to trading. In the prior year, on 3 June 2021 the Group completed a restructuring of the deferred consideration amounts in relation to the acquisition of Naves. This resulted in a gain on modification of GBP0.2 million. which is classified as specific finance income (see Note 27 ). The Naves-related gains and losses do not relate to the trading performance of the businesses during the year, and as a result are classified as specific items. The tax charge on specific items included within other items was GBP0.2 million (2022: GBPnil).
11 Discontinued operations
During the year ended 28 February 2022, the Group has sold its Engineering Division, Wavespec, its Logistics Division, Cory Brothers, and its entire shareholding in AqualisBraemar.
a) Post-tax profit / loss related to discontinued operations
2023 2022
------------------------------------ ---------------------------------
Underlying Specific Total Underlying Specific Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-----------------
Wavespec - - - (146) (1,787) (1,933)
Cory Brothers - - - 1,563 4,134 5,697
AqualisBraemar - - - 76 3,375 3,451
----------------- ------------ ---------- ---------- ----------- --------- ---------
Profit - - - 1,493 5,722 7,215
----------------- ------------ ---------- ---------- ----------- --------- ---------
Wavespec
On 31 March 2021, the Group completed the sale of Wavespec, which was classified as held for sale at 28 February 2021. A gain of GBP0.6 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. At 28 February 2022, the buyer had not delivered a secured letter of credit nor had the cash sum of GBP0.5 million been received. The letter of credit and cash dues continue to be outstanding at 28 February 2023. Management believe that the consideration (fair value of GBP2.4 million) is unlikely to be received and the amount was provided for in full (charge of GBP2.4 million) in the year ended 28 February 2022.
Year ended
28 Feb
2022
GBP'000
-------------------------------------------------- ----------
Underlying:
Revenue 15
Costs (161)
--------------------------------------------------- ----------
Trading loss before tax (146)
Taxation -
-------------------------------------------------- ----------
Underlying loss for the year from Wavespec (146)
Specific items:
Impairment to fair value and other disposal costs (7)
Gain on disposal 594
Credit impairment charge (2,374)
--------------------------------------------------- ----------
Loss from specific items (1,787)
Loss for the year from Wavespec (1,933)
--------------------------------------------------- ----------
No taxation arises in relation to this discontinued operation as Wavespec was loss making.
A reconciliation of the derecognition of the Wavespec assets held for sale to gain on disposal is as follows:
GBP'000
------------------------------------- -------
Intangibles 90
Property plant and equipment 1
Cash 53
Trade and other receivables 292
Trade and other payables (271)
-------------------------------------- -------
Net assets held for sale disposed of 165
-------------------------------------- -------
GBP'000
----------------------------- -------
Disposal proceeds 2,374
Net assets disposed of (165)
Loan waiver (1,006)
Disposal related costs (609)
------------------------------ -------
Gain on disposal of Wavespec 594
------------------------------ -------
Intercompany loans totalling GBP1.0 million were owed to the Group from Wavespec were waived on disposal.
There were no cash proceeds from disposal in the period.
Cory Brothers
On 28 February 2022 the Company sold Cory Brothers to Vertom Agencies BV for a maximum consideration of GBP15.5 million.
Initial cash proceeds were GBP6.5 million, in addition, three further cash payments are due based on a percentage of the gross profit of the combined VertomCory business. Each of the three earnout payments is subject to a minimum and a maximum. The minimum aggregate earnout payment is GBP3.75 million and the maximum aggregate earnout payment is GBP9.0 million. The initial estimate of the fair value of the deferred and contingent consideration was GBP4.8 million, presented within receivables (more detail on the calculation of the deferred consideration is included in Note 23 ).
The profit on disposal including foreign exchange recycling totalled GBP4.2m for the year ended 28 February 2022.
Year ended
28 Feb
2022
GBP'000
------------------------------------- ----------
Underlying:
Revenue 45,215
Costs (42,759)
-------------------------------------- ----------
Trading profit before tax 2,456
Finance income 9
Finance expense (36)
-------------------------------------- ----------
Profit before taxation 2,429
Taxation (866)
-------------------------------------- ----------
Underlying profit from Cory Brothers 1,563
Specific items:
Gain on disposal 4,134
Total profit from Cory Brothers 5,697
-------------------------------------- ----------
A reconciliation of the derecognition of the Cory Brothers assets held for sale to gain on disposal is as follows:
GBP'000
------------------------------------- --------
Goodwill 3,645
Intangibles 1,190
Property, plant and equipment 1,220
Investments 119
Cash 12,353
Trade and other receivables 15,110
Trade and other payables (27,042)
-------------------------------------- --------
Net assets held for sale disposed of 6,595
-------------------------------------- --------
GBP'000
----------------------------------------------------------------- -------
Disposal proceeds - completion payment 6,500
Disposal proceeds - earn-out payments (deferred) 4,758
Net assets disposed of (6,595)
Disposal-related costs (492)
FX recycling (37)
------------------------------------------------------------------ -------
Gain on disposal of Cory Brothers for the year ended 28 February
2022 4,134
------------------------------------------------------------------ -------
Note 23 describes the valuation of the deferred receivable arising from the earn-out payments.
A sensitivity analysis of the contingent consideration to changes in the gross profits and discount rate is provided in Note 23 .
AqualisBraemar
The Group recognised its minority shareholding in AqualisBraemar as an investment in associate until its disposal on 19 May 2021.
In the prior year, the Group's share of profit of associate and the profit on disposal including foreign exchange recycling totalled GBP3.5 million (see Note 20 ).
Year ended
28 Feb
2022
GBP'000
--------------------------------------------------- ----------
Underlying:
Share of associate profit for the period - trading 76
Specific items:
Profit on disposal 3,375
---------------------------------------------------- ----------
Profit from specific items 3,375
---------------------------------------------------- ----------
Total profit for the period from AqualisBraemar 3,451
---------------------------------------------------- ----------
b) Earnings per share in respect of discontinued operations
The basic and diluted earnings per share in respect of discontinued operations were as follows:
Year ended
28 Feb 2022
--------------------------- ------------
Basic earnings per share 23.62p
Diluted earnings per share 19.24p
---------------------------- ------------
c) Cash flows in respect of discontinued operations
During the year there were net cash inflows of GBP6.5 million relating to investing activities concerning discontinued operations, being the cash proceeds on completion of the Cory Brothers disposal. In the prior year, the cash flows relating to discontinued operations were net operating cash inflows of GBP7.3 million, net cash outflows relating to investing activities of GBP4.7 million, which includes the GBP7.2 million proceeds from the sale of AqualisBraemar shares less the combined cash of GBP12.4 million held within Wavespec and Cory Brothers at the time of their disposal.
12 Dividends
Amounts recognised as distributions to equity holders in the year:
2023 2022
GBP'000 GBP'000
--------------------------------------------------------------------- -------- --------
Ordinary shares of 10 pence each
Final dividend of 7.0 pence per share for the year ended 28 February
2022 (2022: 5.0 pence per share) 2,018 1,499
Interim dividend of 4.0 pence per share (2022: 2.0 pence per share) 1,172 610
--------------------------------------------------------------------- -------- --------
3,190 2,109
--------------------------------------------------------------------- -------- --------
The dividends paid by the Group during the year ended 28 February 2023 totalled GBP3.2 million (11.0 pence per share) which comprised a final dividend in respect of the year ended 28 February 2022 of GBP2.0 million (7.0 pence per share) paid on 14 October 2022 and an interim dividend for the year ended 28 February 2023 of GBP1.2 million (4.0 pence per share) paid on 4 January 2023.
The right to receive dividends on the shares held in the ESOP has been waived (see Note 31). The dividend saving through the waiver is GBP0.4 million (2022: GBP0.1 million).
During the year ended 28 February 2022, the Group paid dividends totalling GBP2.1 million (7.0 pence per share), being a final dividend in respect of the year ended 28 February 2022 of GBP1.5 million (5.0 pence per share) paid on 21 September 2021 and an interim dividend for the year ended 28 February 2022 of GBP0.6 million (2.0 pence per share) paid on 16 December 2021.
In December 2022 the Company commenced a project to research various options for increasing the distributable reserves available to the Company in order to support the stated progressive dividend policy. After the payment of an interim dividend in January 2023, the outcome of the research identified an accounting practice of the Company used since IFRS 2 was introduced in 2005, which carried realised gains which could only be used in very limited circumstances with the consequence that a significant balance within retained earnings (that was not previously identified as created by unrealised gains) was incorrectly used by the Company in the calculation of distributable reserves.
Dividends paid between 2016 and 2023 were therefore paid by the Company without having sufficient distributable reserves from which to lawfully pay them. Having identified these issues, to rectify the gap in retained earnings and the unlawful payment of dividends, after the Balance Sheet date, the Company reduced its share premium account and capital redemption reserve and capitalised and reduced GBP19.8 million of the merger reserve ("Capital Reduction") and entered into releases from liability for the benefit of shareholders and directors (to ensure that no person was disadvantaged as a consequence of the payment of unlawful dividends).
On 15 February 2023 the Company entered into deeds of release in favour of shareholders receiving the unlawful dividends and the directors of the Company at the time the unlawful dividends were paid. These releases were conditional on various conditions including, shareholder approval for the Capital Reduction, the Capital Reduction becoming effective, and the terms of the deeds of release for shareholders and directors. At a General Meeting of the Company on 14 April 2023, shareholders approved the Capital Reduction and the deeds of release for shareholders and directors which allowed the Company to proceed with the process for the Capital Reduction by seeking approval from the High Court of Justice. On 9 May 2023 the High Court approved and confirmed the Capital Reduction and on 5 June 2023 the Capital Reduction became effective providing the Company with GBP73.9 million of distributable reserves at that time.
For the year ended 28 February 2023, a final ordinary dividend of 8.0 pence per share has been proposed totalling GBP2.6 million.
13 Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year, excluding ordinary shares held by the Employee Share Ownership Plan and ordinary shares held by the ACM Employee Benefit Trust which are not treated as outstanding.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has dilutive ordinary shares, being those options granted to employees where the expected consideration is less than the average market price of the Company's ordinary shares during the period that they are outstanding, and convertible loan notes issued in respect of the acquisition of Naves.
2023 2022
Total operations GBP'000 GBP'000
------------------------------------------------------------ -------- --------
Profit for the year attributable to shareholders 4,596 13,919
------------------------------------------------------------ -------- --------
pence pence
------------------------------------------------------------ -------- --------
Basic earnings per share 15.85 45.56
Effect of dilutive share options (2.60 ) (8.43)
------------------------------------------------------------ -------- --------
Diluted earnings per share 13.25 37.13
------------------------------------------------------------ -------- --------
2023 2022
Underlying operations GBP'000 GBP'000
------------------------------------------------------------ -------- --------
Underlying profit for the year attributable to shareholders 13,399 8,539
------------------------------------------------------------ -------- --------
pence pence
------------------------------------------------------------ -------- --------
Basic earnings per share 46.22 27.95
Effect of dilutive share options (7.70 ) (5.17)
------------------------------------------------------------ -------- --------
Diluted earnings per share 38.52 22.78
------------------------------------------------------------ -------- --------
A reconciliation by class of instrument in relation to potential dilutive ordinary shares and their impact on earnings is set out below:
2023 2022
------------------------------------------------------------------------------------------
Weighted Underlying Statutory Weighted Underlying Statutory
average earnings earnings average earnings earnings
number GBP'000 GBP'000 number GBP'000 GBP'000
of shares of shares
Used in b
asic
earnings
per share 28,990,885 13,399 4,596 30,552,532 8,539 13,919 RSP, DBP and LTIP 5,428,815 - - 6,790,255 - - Options (SAYE) 216,764 - - 147,998 - - Convertible loan notes 201,118 20 20 - - - ------------- ----------- ----------- ---------- -------------------------------------- ----------- ------------------------------------- Used in diluted earnings per share 34,837,582 13,419 4,616 37,490,785 8,539 13,919 ------------- ----------- ----------- ---------- -------------------------------------- ----------- ------------------------------------- 14 Business combinations - acquisition of Southport Maritime Inc.
On 16 December 2022, Braemar Plc acquired 100% of the issued capital of Southport Maritime Inc ("Southport"). Southport is a tanker broker based in North America, and their addition is a key part of the Group's strategic global growth plan.
Southport strongly complements our existing Tanker desks in London, Singapore, Houston, and Geneva, and provides the ideal platform for the Group to penetrate new markets and add further scale and reach to our global shipbroking activities.
Consideration for the acquisition was made up of:
i) GBP6.0 million ($7.3 million) cash paid on completion; ii) GBP0.6 million ($0.7 million) estimated working capital adjustment; and iii) GBP2.5 million ($3.0 million) relating to 1,016,121 shares in Braemar Plc.
The cash amount of GBP6.0 million is subject to a clawback linked to continued service under the terms of the Sale and Purchase agreement with one third of the amount vesting to the sellers each year following completion. The working capital adjustment is also subject to an employment service condition up to the date that it is agreed. The cash payments are treated as prepayments for service with the cost recognised over the vesting period.
The Braemar Plc shares are subject to an employment condition and will be issued on the third anniversary of completion, provided the sellers are employees of the Group (or the seller is a Good Leaver). The share consideration which is linked to employment is accounted for as a share-based payment under IFRS 2 with the accounting charge recognised on a straight-line basis over the three years from acquisition date to the vesting date. In addition to the grant of share awards to the sellers, other awards were granted to key employees and are accounted for in the same way as the awards made to the sellers.
The acquisition date balance sheet of Southport, is summarised below:
GBP'000
------------------------------- --------
Intangible assets 3,545
Property, plant and equipment 166
Trade and other receivables 2,125
Cash 349
Lease liabilities (86)
Trade and other payables (1,347)
Corporation tax (203)
Deferred tax liability (906)
------------------------------- --------
Net asset acquired 3,643
Fair value of consideration -
------------------------------- --------
Gain on acquisition 3,643
------------------------------- --------
The gross contractual value and fair value of acquired receivables was GBP2.1 million. As at the acquisition date, the full amount of receivables was expected to be collected. Intangible assets include Customer-related (relationships and order backlog) of GBP3.0 million, along with an intangible asset in relation to the Southport trade name of GBP0.5 million.
The accounting gain on acquisition of GBP3.6 million arises due to the requirements of IFRS 3 which result in all consideration with an employment service condition being treated as a post-combination remuneration expense, rather than the economic reality that they also represent the commercial consideration for the acquired business. Because there is no consideration under IFRS 3, the cash in the acquired business is reflected as a cash inflow for the Group in the Cash Flow Statement.
The revenue and loss of Southport included in the Group's annual results are GBP3.7 million and (GBP0.2 million) respectively. Had the acquisition taken place at the beginning of the financial year, the Group's revenue would have been GBP10.3 million higher than reported, and its profit would have been lower by GBP2.0 million.
15 Goodwill
GBP'000
------------------------------------------- -------
Cost
At 28 February 2021 91,614
Disposal of Cory Brothers (3,645)
Exchange adjustments (419)
------------------------------------------- -------
At 28 February 2022 87,550
Exchange adjustments 566
------------------------------------------- -------
At 28 February 2023 88,116
------------------------------------------- -------
Accumulated impairment
At 28 February 2022 and 28 February 2021 7,659
Impairment charge recognised in the year 9,050
At 28 February 2023 16,709
------------------------------------------- -------
Net book value at 28 February 2023 71,407
------------------------------------------- -------
Net book value at 28 February 2022 79,891
------------------------------------------- -------
All goodwill is allocated to cash-generating units. The allocation of goodwill to groups of cash-generating units is as follows:
2023 2022
GBP'000 GBP'000
-------------------------------------------------------- -------- --------
Chartering 68,696 68,696
Corporate Finance (part of Investment Advisory segment) 2,711 11,195
71,407 79,891
-------------------------------------------------------- -------- --------
These groups of cash-generating units represent the lowest level within the Group at which goodwill is monitored for internal management purposes.
Following the simplification of the Group's activities and the way in which information is now presented to the Group's Chief Operating Decision Maker, the Group's operating segments are Chartering, Investment Advisory and Risk Advisory. The Chief Operating Decision Maker is considered to be the Group's board of directors. These three segments are managed separately on the basis of the nature of the services offered to clients and differences in the regulatory environment applicable to each segment. Previously the Group's operating segments were based on a Divisional structure of Shipbroking and Financial. The goodwill allocated to Shipbroking in 2022 is now allocated to Chartering on the basis that the goodwill arose and benefited the same CGUs which were included in the Shipbroking segment and now included in the Chartering segment. Goodwill allocated to Corporate Financial in 2022 continues to be allocated to Corporate Finance within the Investment Advisory segment in 2023.
The table below illustrates the change in segment structure.
2023 2022
----------- --------------------- ---------------------
Segment Chartering Shipbroking
Component Deep Sea Tankers Deep Sea Tankers
Specialised Tankers Specialised Tankers
Offshore Offshore
Dry Cargo Dry Cargo
Sale and Purchase
Securities
----------- --------------------- ---------------------
Segment Investment Advisory Financial
Component Corporate Finance Corporate Finance
Sale and Purchase
----------- --------------------- ---------------------
Segment Risk Advisory
Component Securities
----------- --------------------- ---------------------
All goodwill is denominated in the Group's reporting currency, with the exception of the Corporate Finance Division which is denominated in euros. Goodwill denominated in foreign currencies is revalued at the Balance Sheet date. The exchange adjustment at 28 February 2023 was a gain of GBP566,000 (2022: loss of GBP419,000).
The Logistics Division, Cory Brothers, was disposed of on 28 February 2022, the goodwill previously held in respect of this cash-generating unit was therefore disposed of. See Note 11.
The Group is required to test, on an annual basis, whether goodwill has suffered any impairment. The recoverable amount is determined based on value-in-use calculations. The use of this method requires the estimation of future cash flows and the determination of a discount rate in order to calculate the present value of the cash flows.
The key assumptions on which the value-in-use calculations are based relate to (i) business performance over the next five years, (ii) long-term growth rates beyond 2027 and (iii) discount rates applied.
i) Business performance over the next five years - The estimated cash flows were based on the approved annual budget for the next financial year and projections for the following four years which are based on management's estimates of revenue growth and cost inflation which reflect past experience and management's expectation of future events given the specific risks and economic and market conditions of each cash-generating unit. Cash flows have been used over a period of five years as management believes this reflects a reasonable time horizon for management to monitor the trends in the business.
ii) Long-term growth rates - this is the average growth rate used to extrapolate cash flows beyond the budget period. The rate is consistent with forecasts included in industry reports.
iii) Discount rates - The pre-tax discount rate was determined based on a weighted average cost of capital ("WACC") and adjusted for CGU-specific risk factors specific to the CGU group.
The results of the impairment tests are as follows:
a) Chartering
The key assumptions and resulting net present values are as follows:
Chartering 2023 2022 ----------------------------------- ------------- ------------- Post-tax discount rate 13.04% 10.87% Equivalent pre-tax discount rate 16.47% 13.19% Average revenue growth rate 3.5% 5.0% Operating profit margin years 2-5 15.0 - 15.4% 12.5 - 16.1% Long-term growth rate 1.7% 1.7% ----------------------------------- ------------- -------------
At 28 February 2023, the net present value of the Chartering segment is significantly higher than the carrying value of the goodwill in respect of this cash-generating unit. At the Balance Sheet date, management concluded that there were no reasonably possible changes in the key assumptions used in the impairment review that would reduce headroom to nil or result in an impairment.
b) Corporate Finance
Revenues for the Corporate Finance Division are challenging to forecast because of the highly variable nature of success fees. Management forecasts over the period of two to five years consider recent performance and reflect management's best estimate of success fee taken into account of volatility of the success fee. Growth rates used in the value-in-use test reflect this variability and were based on the best estimate of the Management.
Corporate Finance 2023 2022 ----------------------------------- -------------- -------------- Post-tax discount rate 14.82% 12.37% Equivalent pre-tax discount rate 20.66% 15.01% Average revenue growth rate 5.0% 8.0% Operating profit margin years 2-5 11.6% - 14.4% 34.5% - 45.6% Long-term growth rate 1.7% 1.7% ----------------------------------- -------------- --------------
The goodwill included in the Corporate Finance Division arose from the acquisition of Naves Corporate Finance GmbH in 2017. At 28 February 2023, the recoverable amount of the Corporate Finance Division is based on a value-in-use of GBP2,835,000, which is lower than the carrying value of its assets. This is as a result of market conditions and trading below expectations in the year to 28 February 2023 and an increase in discount rate from 15.01% in 2022 to 20.66% in 2023 as well as a reduction in forecast revenues compared to management view in the prior year. As a result, Management recognised an impairment of GBP9.1 million at 28 February 2023.
Sensitivity to impairment for Corporate Finance
To test the sensitivity of the results of the impairment review, the calculations have been re-performed, flexing the three key assumptions:
- revenue growth rate;
- post-tax discount rate; and
- revenue outperforms or underperforms forecast
Change in revenue Change in post-tax Revenue outperforms
growth discount rate or underperforms
forecast
-------------------- --------------------- ----------------------
+1% -1% +2% -2% +15% -15%
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- --------- --------- ---------- --------- ---------- ----------
Corporate Finance 372 (363) (383) 523 1,702 (1,702)
The effect on cash flows of climate change was considered but assessed to have no material impact at this time. Management does not believe that climate-related risks nor the potential impact of climate change on the Group's operations would materially affect the recoverability of goodwill in either of the cash-generating units (see Note 2).
16 Other intangible assets
Other
Computer intangible
software assets Total
Note GBP'000 GBP'000 GBP'000
----------------------------------- ---- --------- ----------- --------
Cost
At 28 February 2021 6,420 11,005 17,425
Additions 515 - 515
Disposal of Cory Brothers (1,344) (1,480) (2,824)
Exchange rate adjustments (5) - (5)
----------------------------------- ---- --------- ----------- --------
At 28 February 2022 5,586 9,525 15,111
Additions 90 - 90
Business combination 14 - 3,545 3,545
Disposals (87) - (87)
Exchange rate adjustments 5 33 38
----------------------------------- ---- --------- ----------- --------
At 28 February 2023 5,594 13,103 18,697
----------------------------------- ---- --------- ----------- --------
Amortisation
At 28 February 2021 4,775 10,521 15,296
Charge for the year 346 107 453
Reclassified as held for sale (275) (1,359) (1,634)
Exchange adjustments (1) - (1)
----------------------------------- ---- --------- ----------- --------
At 28 February 2022 4,845 9,269 14,114
Charge for the year 192 349 541
Impairment 60 - 60
Exchange adjustments 1 1 2
----------------------------------- ---- --------- ----------- --------
At 28 February 2023 5,098 9,619 14,717
----------------------------------- ---- --------- ----------- --------
Net book value at 28 February 2023 496 3,484 3,980
----------------------------------- ---- --------- ----------- --------
Net book value at 28 February 2022 741 256 997
----------------------------------- ---- --------- ----------- --------
Other intangible assets brought forward from the prior year relate to forward books of income acquired in acquisitions which are being amortised over the period that the income is being recognised; customer relationships which are amortised over a period of up to twelve years; and brand which is being amortised over a period of up to ten years.
The addition of GBP3.5 million relates to the acquisition of Southport, which gives rise to customer-related intangible assets of GBP3.1 million (including customer relationships of GBP2.8 million and order backlog of GBP0. 3million) and an asset of GBP0.4 million in relation to the tradename. The amortisation period for customer relationships is twelve years, order backlog is four months, and tradename is five years.
The customer relationships and order backlog have been valued using an excess earnings method. Under the excess earnings method, a stream of revenue and expenses are identified as those associated with a particular group of assets. This group of assets includes the subject intangible asset as well as other assets (contributory assets) that are necessary to support the earnings associated with the subject intangible asset. By identifying and subtracting contributory assets, the residual earnings are estimated to be attributable to the subject intangible asset and are discounted to present value at an appropriate discount rate (estimated at 19%). The tradename has been valued using a royalty savings method. The royalty savings method is a derivation of the income approach often used to value intangible property that may be licensed to third parties. Under this method, it is assumed that a company, without a similar asset, would license the right to use this intangible asset and pay a royalty related to turnover achieved. The value of the asset is established by calculating the present value of the royalty stream (estimated at 4%) that the business is saving by owning the asset.
At 28 February 2023, the Group had no contractual commitments for the acquisition of computer software or other intangible assets (2022: GBPnil).
17 Property, plant and equipment
Fixtures
Land and and
buildings Computers equipment Total
Note GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ---- ---------- --------- ---------- --------
Cost
At 28 February 2021 - as reported 14,308 859 2,384 17,551
Restatement(1) 475 835 224 1,534
---------------------------------- ---- ---------- --------- ---------- --------
At 28 February 2021 - restated 14,783 1,694 2,608 19,085
Additions at cost 1,087 315 337 1,739
Disposals (244) - (631) (875)
Disposal of Cory Brothers (1,294) (416) (478) (2,188)
Exchange differences 75 6 42 123
At 28 February 2022 14,407 1,599 1,878 17,884
Additions at cost 757 374 334 1,465
Business combination 14 86 - 80 166
Disposals (2,445) (4) (369) (2,818)
Exchange differences 427 41 88 556
---------------------------------- ---- ---------- --------- ---------- --------
At 28 February 2023 13,232 2,010 2,011 17,253
---------------------------------- ---- ---------- --------- ---------- --------
Accumulated depreciation
At 28 February 2021 - as reported 5,378 352 1,980 7,710
Restatement(1) 565 835 134 1,534
---------------------------------- ---- ---------- --------- ---------- --------
At 28 February 2021 - restated 5,943 1,187 2,114 9,244
Charge for the year 2,663 148 220 3,031
Disposals (244) - (620) (864)
Impairment 392 - - 392
Disposal of Cory Brothers (490) (300) (178) (968)
Exchange differences (65) 26 10 (29)
At 28 February 2022 (restated) 8,199 1,061 1,546 10,806
Charge for the year 2,477 171 175 2,823
Disposals (1,852) (1) (313) (2,166)
Impairment - 150 - 150
Exchange differences 234 25 61 320
---------------------------------- ---- ---------- --------- ---------- --------
At 28 February 2023 9,058 1,406 1,469 11,933
---------------------------------- ---- ---------- --------- ---------- --------
Net book value at 28 February
2023 4,174 604 542 5,320
---------------------------------- ---- ---------- --------- ---------- --------
Net book value at 28 February
2022 6,208 538 332 7,078
---------------------------------- ---- ---------- --------- ---------- --------
(1) At 28 February 2021, both cost and accumulated depreciation have been increased by GBP1.5 million (Computers: increase of GBP0.8 million; Fixtures and equipment: increase of GBP0.2 million; Land and buildings: decrease of GBP0.5 million). This primarily relates to a correction of grossed up disposals in prior years relating to business combinations where the addition of the asset was based on its fair value at the point of acquisition, but the eventual disposal being based on original cost.
On 28 March 2022, the Group assigned the lease for its Bevis Marks premises to Beat Capital. The impairment charge of GBP392,000 recognised in the year ended 28 February 2022 is equal to the subsequent loss on assignment of this lease, being the lease assignment premium paid plus the net book value of the ROU asset disposed of less the outstanding lease liability. At 28 February 2023, the Group had no contractual commitments for the acquisition of property, plant and equipment (2022: GBPnil).
18 Leases
Right-of-use assets
The Group leases a number of properties in the jurisdictions from which it operates. In some jurisdictions it is customary for lease contracts to provide for payments to increase each year by inflation and in other property leases the periodic rent is fixed over the lease term. The Group also leases certain items of plant and equipment which are typically motor vehicles. These contracts normally comprise only fixed payments over the lease terms.
Fixtures
Land and and
buildings equipment Total
Note GBP'000 GBP'000 GBP'000
-------------------------- ---- ---------- ---------- --------
At 28 February 2021 7,307 138 7,445
Additions 1,036 11 1,047
Amortisation (2,079) (76) (2,155)
Impairment (392) - (392)
Disposals - (10) (10)
Disposal of Cory Brothers (856) (51) (907)
Exchange differences 166 - 166
-------------------------- ---- ---------- ---------- --------
At 28 February 2022 5,182 12 5,194
Additions 711 59 770
Business combination 14 86 - 86
Depreciation (2,079) (8) (2,087)
Disposals (481) (10) (491)
Exchange differences 166 1 167
-------------------------------- ---------- ---------- --------
At 28 February 2023 3,585 54 3,639
-------------------------------- ---------- ---------- --------
Lease liabilities
Note Total
GBP'000
-------------------------- ---- --------
At 28 February 2021 12,554
Additions 814
Interest expense 329
Lease payments (3,950)
Disposal of Cory Brothers (1,243)
Exchange differences 2
-------------------------- ---- --------
At 28 February 2022 8,506
Additions 770
Business combination 14 86
Disposal (632)
Interest expense 175
Lease payments (4,039)
Exchange differences 161
-------------------------- ---- --------
At 28 February 2023 5,027
-------------------------- ---- --------
Right-of-use assets and lease liabilities arising on business combinations represents lease on property of GBP86,000. For further details refer to Note 14 Business combinations.
Total cash outflow for leases is GBP4,039,000, of which GBP175,000 represents payment of interest.
Lease receivables
Gross Provision Net
GBP'000 GBP'000 GBP'000
-------------------------- -------- --------- --------
At 28 February 2021 2,827 - 2,827
Disposal (236) - (236)
Interest income 72 - 72
Lease payments (870) - (870)
Disposal of Cory Brothers (272) - (272)
Movement in provision - (18) (18)
Exchange differences (9) - (9)
-------------------------- -------- --------- --------
At 28 February 2022 1,512 (18) 1,494
Disposal (39) - (39)
Interest income 35 - 35
Lease payments (642) - (642)
Movement in provision - 6 6
Exchange differences - - -
-------------------------- -------- --------- --------
At 28 February 2023 866 (12) 854
-------------------------- -------- --------- --------
2023 2022
GBP'000 GBP'000
------------------------- -------- --------
Short-term lease expense (217) (234)
Short-term lease income 91 73
------------------------- -------- --------
Lease liabilities
Contractual payments by maturity are provided in Note 24 ( e) .
Lease receivables
Contractual receipts by maturity are provided in the table below:
1 to 2 to More
Within 2 5 than Unearned Net
1 year Years years 5 years Total interest Provision receivable
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- -------- -------- -------- -------- -------- --------- --------- -----------
At 28 February 2023 642 241 - - 883 (17) (12) 854
At 28 February 2022 642 642 284 - 1,568 (56) (18) 1,494
-------------------- -------- -------- -------- -------- -------- --------- --------- -----------
During the year, the financial effect of revising lease terms arising from the effect of exercising extension and termination options was an increase of GBP98,000 in the recognised lease liabilities. As at 28 February 2023, potential future cash outflows of GBP3.9 million (undiscounted) have not been included in the lease liability because it is not reasonably certain that the leases will be extended (or not terminated).
19 Investments
2023 2022
GBP'000 GBP'000
--------------------- -------- --------
Unlisted investments 1,780 1,780
--------------------- -------- --------
The Group recognises unlisted investments at fair value through profit or loss.
Total
Movement in unlisted investments GBP'000
----------------------------------------- --------
At 1 March 2021 1,962
Disposal (182)
------------------------------------------- --------
At 28 February 2022 and 28 February 2023 1,780
------------------------------------------- --------
A list of subsidiary undertakings is included in Note 34.
The Financial Statements of the principal subsidiary undertakings are prepared to 28 February 2023.
Unlisted investments
The Group's unlisted investments include 1,000 (2022: 1,000) ordinary GBP1 shares in London Tanker's Broker Panel Limited. The investment is carried at fair value of GBP1.5 million, being the value of the most recent comparable transaction, which occurred during the year ended 28 February 2019. There have been no transactions or events in the current or prior year which would result in a material adjustment to the fair value at 28 February 2023.
20 Investment in associate
Zuma Labs Limited
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, 128 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, four further subscriptions for shares were made totalling of $0.5 million (GBP0.3 million), increasing Braemar's shareholding by 1,500 shares.
At 28 February 2023 the Group's shareholding was 2,500 shares, which equates to 20.0% of Zuma Labs Limited's share capital and 20.0% of voting rights (2022: 2,500 shares, 20% of share capital and 20% of voting rights). The Group has representation on the board of Zuma Labs Limited, and 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.
A purchase price allocation exercise was undertaken to measure the fair value of the net assets on the date at which Zuma Labs Limited became an associate, and also at each date at which further shares were subscribed for. Based on the purchase price allocation exercise, the difference between the cost of the investment and Braemar's share of the net fair value of Zuma Labs Limited's identifiable assets and liabilities will be accounted for as goodwill. Amortisation of that goodwill is not permitted.
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. Zuma Labs Limited has a year end of 31 March and accounts up to 31 December 2022 have been made available, so for practical reasons Zuma Labs Limited's management accounts for the nine months ended 31 December 2022 will be used for the purposes of the Group's full-year reporting at 28 February with adjustments made for any significant transactions and events. Zuma Labs Limited will prepare its next set of Financial Statements for the year ended 31 March 2023. At 28 February 2023 Zuma Labs Limited had no contingent liabilities.
The summarised financial information of Zuma Labs Limited for the period ended 28 February 2023 is as follows. These figures are taken from the management accounts of Zuma Labs Limited, adjusted for any fair value adjustments but before any intercompany eliminations.
28 Feb 2023
GBP'000
-------------------------------- -----------
Balance Sheet
Current assets 177
Non-current assets 223
Current liabilities (68)
Net assets (100%) 332
Group share of net assets (20%) 66
-------------------------------- -----------
Income Statement
Revenues -
Post-tax loss (116)
The Group's share of the loss (23)
-------------------------------- -----------
Management have reviewed the carrying value of the investment in Zuma Labs Limited at 28 February 2023 and do not consider this to be impaired.
AqualisBraemar
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 shareholding in AqualisBraemar LOC ASA. AqualisBraemar LOC ASA 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 LOC ASA has one share class and each share carries one vote.
On 28 January 2021 the Group sold 9,600,000 shares and on 19 May 2021 the Group sold its entire remaining shareholding in AqualisBraemar LOC ASA, see Note 11. The Group was entitled to representation on the board of AqualisBraemar LOC ASA for as long as the Group's shareholding remains more than 10.0%. Based on this the Group considers that it had the power to exercise significant influence for the year ended 28 February 2022, and until it sold its shareholding on 19 May 2021. 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 28 February 2022 and 28 February 2023 the Group's shareholding was nil which equates to 0% of AqualisBraemar's share capital and 0% of voting rights.
The results of AqualisBraemar are presented within discontinued operations.
The movements in the investment in associates are provided below.
Zuma AqualisBraemar Total
GBP'000 GBP'000 GBP'000
------------------------------------------------ -------- -------------- --------
At 1 March 2021 418 3,345 3,763
Book value of 450 shares acquired 326 - 326
Share of profit in associate (20) 76 56
Share of associate's other comprehensive income - 52 52
Book value of 9,640,621 shares disposed - (3,473) (3,473)
At 28 February 2022 724 - 724
Share of loss in associate - underlying (23) - (23)
At 28 February 2023 701 - 701
------------------------------------------------ -------- --------
A reconciliation of the book value of the AqualisBraemar shares disposed of to the profit on disposal in Note 11 is as follows:
19 May 2021
------------------------------------------------- -----------
Number of shares sold 9,640,621
Share price NOK 9.00
NOK'000
Gross disposal proceeds 86,776
Broker's commission at 1.5% / 2% (1,301)
------------------------------------------------- -----------
Net disposal proceeds 85,475
------------------------------------------------- -----------
GBP'000
------------------------------------------------- -----------
Net disposal proceeds 7,232
Book value of shares sold (3,473)
Legal costs (13)
Recycle of amounts in other comprehensive income (371)
------------------------------------------------- -----------
Profit on disposal 3,375
------------------------------------------------- -----------
21 Other long-term receivables
2023 2022
GBP'000 GBP'000
---------------------------- -------- --------
Other long-term receivables
Deferred consideration 2,540 3,482
Contingent consideration 1,004 1,276
Security deposits 16 17
Finance lease receivables 228 861
Prepayments 4,766 -
8,554 5,636
---------------------------- -------- --------
Deferred consideration of GBP2.5 million and contingent consideration of GBP1.0 million relates to the earn-out payments receivable in respect of the disposal of Cory Brothers, further detail is provided in Note 23 . Prepayments includes an asset of GBP4.8 million (2022: GBPnil) which is the non-current element of the clawback provision on joining incentives paid to certain employees. This includes an amount of GBP3.6 million added in the year in relation to the acquisition of Southport and GBP0.2 million in relation to the broker team in Madrid. The receivable is amortised over the clawback period.
See Note 18 for a maturity analysis which reconciles the long-term finance lease receivables to the undiscounted lease receipts and unearned finance income.
22 Trade and other receivables
Restated
2023 2022
GBP'000 GBP'000
---------------------------------------------- -------- --------
Trade receivables 31,989 24,970
Provision for impairment of trade receivables (3,725) (3,159)
---------------------------------------------- -------- --------
Net trade receivables 28,264 21,811
Deferred consideration 1,097 -
Contingent consideration 403 -
Other receivables 4,148 7,822
Finance lease receivables 626 633
Contract assets 3,388 1,965
Prepayments 5,397 3,212
---------------------------------------------- -------- --------
Total 43,323 35,792
---------------------------------------------- -------- --------
Deferred consideration of GBP1.1 million and contingent consideration of GBP0.4 million relate to the earn-out payments receivable in respect of the disposal of Cory Brothers; further detail is provided in Note 23 .
Included in other receivables at 28 February 2022 is GBP6.5 million of completion proceeds relating to the disposal of Cory Brothers. The cash was received on 2 March 2022. Also included in other receivables in both years are security deposits, VAT and other sales tax receivables and employee loans.
Prepayments includes an asset of GBP4.0 million (2022: GBP2.1 million) in respect of the current portion of the clawback provision on joining incentives paid to certain employees which are being charged to the Income Statement in accordance with the clawback provisions of the underlying contracts. This includes an amount of GBP2.0 million added in the year in relation to the acquisition of Southport and GBP0.9 million in relation to the broker team in Madrid. The receivable is amortised over the clawback period.
The movement in the asset between years is due to the invoicing of all prior year assets and the accrual of amounts relating to the current year.
The total receivables balance is denominated in the following currencies:
2023 Restated
GBP'000 2022
GBP'000
----------- -------- --------
US dollars 35,888 20,083
Sterling 6,114 14,451
Other 1,321 1,258
----------- -------- --------
Total 43,323 35,792
----------- -------- --------
The Directors consider that the carrying amounts of trade receivables approximate to their fair value.
Trade receivables are non-interest bearing and are generally on terms payable within 30-90 days; terms associated with the settlement of the Group's trade receivables vary across the Group. Specific debts are provided for where recovery is deemed uncertain, which will be assessed on a case-by-case basis whenever debts are older than the due date, but always when debts are older than usual for the industry in which each business in the Group operates.
As at 28 February 2023, trade receivables of GBP3,003,000 (2022: GBP2,008,000) which were over 12 months old were treated as credit impaired and have been provided for. No provision (2022: GBP396,000) has been made for specific trade receivables which are less than 12 months overdue.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables and contract assets. To measure expected credit losses on a collective basis, trade receivables and contract assets are grouped based on similar credit risk and ageing. The contract assets have similar risk characteristics to the trade receivables for similar types of contracts.
The expected loss rates are based on the Group's historical credit losses and rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group's customers.
The ageing profile of trade receivables and the lifetime expected credit loss for provisions and contract assets is as follows:
Total provision
for impairment
Trade Expected Group ECL of trade
receivables loss rate provision provision receivables
2023 GBP'000 % GBP'000 GBP'000 GBP'000
------------------ ------------ ---------- ---------- ----------- ---------------
Up to 3 months 23,556 0.015 - 333 333
3 to 6 months 3,185 0.020 - 71 71
6 to 12 months 2,078 0.051 - 149 149
Over 12 months 3,170 0.591 3,033 99 3,132
------------------ ------------ ---------- ---------- ----------- ---------------
Trade receivables 31,989 0.096 3,033 652 3,685
------------------ ------------ ---------- ---------- ----------- ---------------
Contract assets 3,388 0.012 - 40 40
------------------ ------------ ---------- ---------- ----------- ---------------
Total 35,377 0.020 3,033 692 3,725
------------------ ------------ ---------- ---------- ----------- ---------------
Total provision
for impairment
Trade Expected Group ECL of trade
receivables loss rate provision provision receivables
2022 GBP'000 % GBP'000 GBP'000 GBP'000
------------------ ------------ ---------- ---------- ----------- ---------------
Up to 3 months 14,562 0.015 100 210 310
3 to 6 months 3,952 0.020 100 77 177
6 to 12 months 4,036 0.051 196 196 392
Over 12 months 2,420 0.591 2,008 243 2,251
------------------ ------------ ---------- ---------- ----------- ---------------
Trade receivables 24,970 0.096 2,404 726 3,130
------------------ ------------ ---------- ---------- ----------- ---------------
Contract assets 1,965 0.015 - 29 29
------------------ ------------ ---------- ---------- ----------- ---------------
Total 26,935 0.028 2,404 755 3,159
------------------ ------------ ---------- ---------- ----------- ---------------
Movements on the provision for impairment of trade receivables and contract assets were as follows:
2023 2022
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
At 1 March 3,159 2,858
Bad debt charge 238 747
Receivables written off during the year as uncollectible - (204)
Reclassification of other provisions 328 -
Transferred on disposal - (242)
At 28 February 3,725 3,159
--------------------------------------------------------- -------- --------
Contract assets
The Group's contract assets related to accrued income which has not yet been invoiced at the Balance Sheet date. Significant changes in contract assets during the period are analysed as follows:
GBP'000
------------------------------------------------------- -------
At 1 March 2022 1,965
Changes due to business combinations 647
Contract assets converted to receivables on completion (2,049)
Contract assets arising on new contracts in-year 2,825
-------------------------------------------------------- -------
At 28 February 2023 3,388
-------------------------------------------------------- -------
Contract assets increased by GBP0.6m due to the acquisition of Southport in December 2022; all other movements in contract assets arise from normal underlying operations.
23 Deferred and contingent consideration receivable
Fair value of Cory Brothers deferred and contingent consideration receivable
On 28 February 2022 the Company sold Cory Brothers to Vertom Agencies BV for maximum consideration of GBP15.5 million. Initial cash proceeds of GBP6.5 million were received on completion of the transaction and three further cash payments are due contingent on an agreed percentage of future gross profit of the combined VertomCory business. These "earnout" payments are subject to a combined minimum of GBP3.75 million and a combined maximum of GBP9.0 million.
Each agreed minimum earnout payment is presented as deferred consideration recognised at amortised cost, using a discount rate of 2.39% determined on initial measurement. The uncertain element of each earnout payments is recognised at fair value through profit or loss and presented as contingent consideration.
The fair value of the contingent consideration is calculated using the forecast gross profit for the combined VertomCory business for each earnout period, applying the agreed percentage, deducting the minimum payment and discounting the forecast contingent cashflow using the discount rate of 5.29% (2022: 2.39%).
Deferred and contingent consideration are included in other long-term receivables (see Note 21) and current other receivables (see Note 22 ). The amortised cost of the deferred consideration is GBP3.6 million (2022: GBP3.5 million). The fair value of the contingent consideration is GBP1.4 million (2022: GBP1.3 million).
The valuation of the contingent consideration involves two critical estimates: the future profitability of the combined business and the discount rate used to calculate the net present value. The future profitability forecasts are based on a business plan prepared by the combined VertomCory business and was reviewed by management as part of the financial due diligence process. A discount rate of 5.29% was used to calculate the net present value; this was based on the credit risk of Vertom Agencies BV following a credit check performed by management.
The contingent consideration relating to the first earnout payment is resolved as it is based on the performance of the VertomCory business to December 2022. The receivable held on the Balance Sheet at 28 February 2023 in relation to the first earnout payment is GBP1.5 million (GBP1.1 million deferred consideration and GBP0.4 million contingent consideration).
Sensitivity analysis
Management have considered the sensitivity of the contingent consideration receivable arising from the second and third earnout payments to both changes in the estimate of future profitability of the VertomCory agency business, and the discount rate selected.
Sensitivity to Sensitivity to
the estimate of change in the discount
future gross profits rate selected
of the VertomCory
agency business
Carrying Undiscounted Decrease Increase Decrease Increase
value value as by 10% by 10% by by
as at at 28 February 1% p.a. 1% p.a.
28 February 2023
2023
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
---------------- ------------- ---------------- ------------ ----------- ------------- ------------
Payment due on
31 May 2023 403 408 n/a n/a n/a n/a
Payment due on
31 May 2024 515 550 (176) 176 6 (6)
Payment due on
31 May 2025 489 550 (167) 167 11 (10)
---------------- ------------- ---------------- ------------ ----------- ------------- ------------
Total 1,407 1,508 (343) 343 17 (16)
---------------- ------------- ---------------- ------------ ----------- ------------- ------------
The 10% increase/decrease in future gross profits of the VertomCory agency business considered in the sensitivity analysis is selected to reflect a reasonably likely variation in outcomes, which lie within range covered by the minimum and maximum earnout thresholds. The change in discount rate considered reflects the observed range of three-year GBP corporate bond rates with similar credit risk.
24 Financial instruments and risk management
The Group is exposed through its operations to the following financial risks:
- Currency risk - Interest rate risk - Credit risk - Liquidity risk
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout the Financial Statements.
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.
a) Financial instruments i) Principal financial instruments
The principal financial instruments used by the Group, from which financial risks arise, are as follows:
- Trade and other receivables - Cash and cash equivalents - Deferred consideration receivable - Contingent consideration receivable - Unlisted investments - Trade and other payables - Revolving credit facility - Lease liabilities - Derivative financial instruments - Deferred consideration payable
ii) Financial instruments by category
Financial instruments measured at fair value
The Group's financial assets and liabilities measured at fair value through profit and loss, 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.
Level 1 Level 2 Level 3 As at
GBP'000 GBP'000 GBP'000 28 Feb 2023
GBP'000
------------------------------------ --------- -------- -------- ------------
Financial assets:
Unlisted investment - 1,780 - 1,780
Contingent consideration receivable - - 1,407 1,407
Derivative contracts* - 1,254 - 1,254
Total - 3,034 1,407 4,441
------------------------------------ --------- -------- ------------
Financial liabilities:
Derivative contracts* - 1,760 - 1,760
Embedded derivative - - 384 384
------------------------------------ --------- -------- -------- ------------
Total - 1,760 384 2,144
------------------------------------ --------- -------- -------- ------------
Level 1 Level 2 Level 3 As at
GBP'000 GBP'000 GBP'000 28 Feb 2022
GBP'000
------------------------------------ -------- -------- -------- ------------
Financial assets:
Unlisted investment - 1,780 - 1,780
Contingent consideration receivable - - 1,276 1,276
Derivative contracts* - 62 - 62
Total - 1,842 1,276 3,118
------------------------------------ -------- -------- ------------
Financial liabilities:
Derivative contracts* - 772 - 772
Embedded derivative - - 251 251
------------------------------------ -------- -------- -------- ------------
Total - 772 251 1,023
------------------------------------ -------- -------- -------- ------------
*Currency forwards with a fair value of GBP1,224,000 (2022: GBP54,000) maturing within 12 months have been shown as current assets. Currency forwards with a fair value of GBP30,000 (2022: GBP8,000) maturing within 12 to 24 months of the Balance Sheet date have been shown as non-current assets. Liabilities include currency forwards with a fair value of GBP1,108,000 (2022: GBP688,000) maturing within 12 months shown as current liabilities and currency forwards with a fair value of GBP652,000 (2022: GBP84,000) maturing within 12 to 24 months of the Balance Sheet date shown as non-current liabilities.
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 relates to the Group's investment in the London Tanker's Broker Panel, see Note 19. 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.
Contingent consideration receivable
The fair value of the contingent consideration receivable includes unobservable inputs and are therefore classified as Level 3. The contingent consideration receivable relates to the disposal of the Logistics Division whereby the Group is entitled to three future cash payments. The SPA provides for a minimum guaranteed amount in each of the three years; this amount has been classified as deferred consideration. The balance of the earnout consideration is contingent on the future performance of the combined business up to a maximum specified in the SPA; this has been classified as contingent consideration. The fair value of the contingent consideration has been calculated by reference to management's expectation of the future profitability of the combined business and discounted to present value using a discount rate of 5.29%. The discount rate is based on the credit risk of Vertom Agencies BV assessed by a third party credit agency. See Note 23 for further details and a sensitivity analysis on the contingent element.
Derivative contracts
Contracts with derivative counterparties are based on ISDA Master Agreements. Under the terms of these arrangements, only in certain situations will the net amounts owing/receivable to a single counterparty be considered outstanding. The Group does not have the present legal ability to set-off these amounts and so they are not offset in the Balance Sheet. Of the derivative assets and derivative liabilities recognised in the Balance Sheet, an amount of GBP0.1 million (2022: GBP0.1 million) would be set-off under enforceable master netting agreements.
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. See the currency risk section for further details.
Currency options
The fair value of the currency options 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.
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 is 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 a Black-Scholes valuation model.
A loss of GBP18,000 (2022: gain of GBP97,000) has been recognised in the Income Statement in respect of the fair value movement of the embedded derivative from 1 March 2022 to 28 February 2023.
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 cost. Due to their short-term nature, the carrying value of these financial instruments approximates their fair value. Their carrying values are as follows:
2023 2022
Financial assets GBP'000 GBP'000
---------------------------------- -------- --------
Cash and cash equivalents 34,735 13,964
Deferred consideration receivable 3,637 3,482
Trade and other receivables 41,448 38,601
---------------------------------- -------- --------
Total 79,820 56,047
---------------------------------- -------- --------
2023 2022
Financial liabilities GBP'000 GBP'000
------------------------- -------- --------
Trade and other payables 6,446 7,779
Convertible loan notes 3,551 4,666
Long term borrowings 27,815 23,254
------------------------- -------- --------
Total 37,812 35,699
------------------------- -------- --------
Deferred consideration receivable
The initial fair value of the deferred consideration receivable was determined by discounting the guaranteed minimum amounts as per the SPA to present value using a discount rate of 2.39% and it is subsequently measured at amortised cost
b) Currency risk
Currency risk arises when Group entities enter into transactions denominated in a currency other than their functional currency. The Group's policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency with the cash generated from operations in that currency. The Group's currency risk exposure arises mainly as a result of the majority of its Shipbroking earnings being denominated in US dollars while the majority of its costs are denominated in sterling. There is also some currency exposure related to convertible loan notes and deferred consideration denominated in euros and from the carrying values of its overseas subsidiaries being denominated in foreign currencies.
The Group manages its transactional exposures to foreign currency risks using forward exchange contracts and currency options. The Group is primarily exposed to fluctuations in US dollar to sterling exchange rates on foreign currency sales and hedges a proportion of those expected cash flows out to 21 months. The principal source of hedge ineffectiveness is the risk of changes in timing of the forecast transaction or that they do not occur, which is addressed by only hedging a proportion of future foreign currency sales. There were no hedged transactions forecast in the current year which did not occur (2022: nil).
The Group's results, which are reported in sterling, are exposed to changes in foreign currency exchange rates across a number of different currencies with the most significant exposures relating to the US dollar. The Group is exposed to the underlying translational movements which remain outside the control of the Group. The Group's translational exposures to foreign currency risks relate to both the translation of income and expenses and net assets of overseas subsidiaries which are converted into sterling on consolidation. The Group finances overseas investments partly through the use of foreign currency borrowings in order to provide a net investment hedge over the foreign currency risk that arises on translation of its foreign currency subsidiaries.
The Group continues to apply hedge accounting to hedging instruments that meet the criteria set out in IFRS 9.
Cash flow hedge accounting
Cash flow hedges are used to hedge the variability in cash flows of highly probable forecast transactions caused by changes in foreign currency exchange rates and interest rates. Where a derivative financial instrument is designated in a cash flow hedge relationship with a highly probable forecast transaction, the effective part of any change in fair value arising is deferred in the cash flow hedging reserve within equity, via the Statement of Comprehensive Income. The gain or loss relating to the ineffective part is recognised in the Income Statement within net finance expense. Amounts deferred in the cash flow hedging reserve are reclassified to the Income Statement in the periods when the hedged item is recognised in the Income Statement.
If a hedging instrument expires or is sold but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised immediately in the Income Statement. If a derivative financial instrument is not formally designated in a cash flow hedge relationship, any change in fair value is recognised in the Income Statement.
The critical terms of the hedging instruments match the hedged transactions in relation to currency, timing and amounts, meaning there is a clear economic relationship between the hedging instrument and hedged item as required under IFRS 9. Thereby, management qualitatively demonstrates that the hedging instrument and the hedged items will move equally in the opposite direction.
A loss of GBP4,826,000 (2022: GBP1,613,000 gain) has been recognised in the Income Statement in respect of derivative contracts which have matured in the period.
The Group entered into currency options featuring a "cap and floor" feature. The intrinsic value of the options is designated in cashflow hedge relationships. The time value of the options is deferred in equity as a cost of hedging and reclassified to the Income Statement in the period that the hedged cash flow affects the Income Statement.
The Group also entered into a currency option which is not designated in a cash flow hedge relationship with a fair value of a GBP0.2 million liability (28 February 2022: GBPnil liability). The GBP0.2 million movement in fair value in the period was charged to the Income Statement (2022: GBPnil) and is included within Finance costs.
The effects of the foreign currency-related hedging instruments on the Group's financial position and performance are as follows:
Currency options 2023 2022
------------------------------------------------------------------------ ------------- -------------
Carrying amount of (liability)/asset (GBP28,000) GBP14,000
Total notional amount US $1,500,000 US $5,000,000
March 2023 April 2021
to April to August
Maturity dates 2023 2022
Hedge ratio 1:1 1:1
Change in fair value of outstanding hedging instruments since inception
of the hedge (GBP23,000) GBP14,000
Change in value of hedged item used to determine hedge ineffectiveness GBP23,000 (GBP14,000)
1.23 to
Weighted average strike rate for outstanding hedging instruments 1.29 1.39
------------------------------------------------------------------------ ------------- -------------
Forward currency contracts 2023 2022
------------------------------------------------------------------------ --------------- --------------
Carrying amount of asset GBP1,254,000 GBP62,000
Carrying amount of liability (GBP1,547,000) (GBP771,000)
Total notional amount US $123,048,000 US $49,300,000
March 2023 March 2022
to November to August
Maturity dates 2024 2023
Hedge ratio 1:1 1:1
Change in fair value of outstanding hedging instruments since inception
of the hedge (GBP218,000) (GBP723,000)
Change in value of hedged item used to determine hedge ineffectiveness GBP218,000 GBP723,000
Weighted average strike rate for outstanding hedging instruments 1.22 1.37
------------------------------------------------------------------------ --------------- --------------
Net investment hedge accounting
The Group uses its US dollar denominated borrowings as a hedge against the translation exposure on the Group's net investment in overseas companies. The Group designates the spot rate of the loans as the hedging instrument. There was no ineffectiveness to be recognised on hedges of net investments in foreign operations. Where the hedge is fully effective at hedging the variability in the net assets of such companies caused by changes in exchange rates, the changes in value of the borrowings are recognised in the translation reserve within equity, via the Statement of Comprehensive Income. The ineffective part of any change in value caused by changes in exchange rates is recognised in the Income Statement. The effective portion will be recycled into the Income Statement on the sale of the foreign operation.
The table below provides further information on the Group's net investment hedging relationships:
2023 2022
GBP'000 GBP'000
------------------------------------------------------------------------ -------- --------
Hedge ratio 1:1 n/a
Change in value of hedging instruments due to foreign currency
movements since 1 March 124 n/a
Change in value of the hedged item used to determine hedge effectiveness (124) n/a
------------------------------------------------------------------------ -------- --------
The balances and movements into and out of the foreign currency translation reserve are shown in the Consolidated Statement of Comprehensive Income and the Consolidated Statement of Changes in Equity respectively. The amount in the foreign currency translation reserve in relation to hedge accounting is a loss of GBP0.1 million (2022: GBPnil) and is split as follows:
- continuing net investment hedges loss of GBP0.1 million (2022: GBPnil); and
- hedging relationships for which hedge accounting is no longer applied, GBPnil (2022: GBPnil).
The effect on equity and profit before tax if the US dollar or the euro strengthened/(weakened) by 10% against sterling, with all other variables being equal, is as follows:
Profit or loss Equity, net of tax
------------------------------ ------------------------------
-10% -10%
+10% strengthening weakening +10% strengthening weakening
GBP'000 GBP'000 GBP'000 GBP'000
----------------- ------------------ ---------- ------------------ ----------
28 February 2023
US dollars 874 (1,220) (4,529) 3,656
Euros (36) 36 (36) 36
----------------- ------------------ ---------- ------------------ ----------
Total 838 (1,184) (4,565) 3,692
----------------- ------------------ ---------- ------------------ ----------
28 February 2022
US dollars 2,697 (2,697) 2,185 (2,185)
Euros (111) 111 (90) 90
----------------- ------------------ ---------- ------------------ ----------
Total 2,586 (2,586) 2,095 (2,095)
----------------- ------------------ ---------- ------------------ ----------
c) Interest rate risk
The Group is exposed to interest rate risk from borrowings at floating rates. The Group minimises its short-term exposure to interest rate risk on its cash and cash equivalents by pooling cash balances across the Group's hubs.
The Group has not entered into any financial instruments to fix or hedge the interest rates applied to its bank borrowings and overdrafts.
The following table sets out the carrying amount, by maturity, of the Group's financial instruments which are exposed to interest rate risk:
2023 2022
Note GBP'000 GBP'000
-------------------------- ---- -------- --------
Floating rate:
Within one year
Cash and cash equivalents 25 34,735 13,964
Long-term borrowings 27 (27,815) (23,254)
-------------------------- ---- -------- --------
6,920 (9,290)
-------------------------- ---- -------- --------
Cash balances are generally held on overnight deposits at floating rates depending on cash requirements and the prevailing market rates for the amount of funds deposited. The other financial instruments of the Group are non-interest bearing.
The effect on equity and profit before tax of a 1% increase/(decrease) in the interest rate, all other variables being equal, is as follows:
Profit or loss Equity, net of tax
-------------------------- --------------------------
+1% increase -1% decrease +1% increase -1% decrease
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ------------ ------------ ------------ ------------
28 February 2023
Cash and cash equivalents 187 (187) 187 (187)
Long-term borrowings (195) 195 (195) 195
-------------------------- ------------ ------------ ------------ ------------
Total (8) 8 (8) 8
-------------------------- ------------ ------------ ------------ ------------
28 February 2022
Cash and cash equivalents 63 (63) 51 (51)
Long-term borrowings (104) 104 (84) 84
-------------------------- ------------ ------------ ------------ ------------
Total (41) 41 (33) 33
-------------------------- ------------ ------------ ------------ ------------
d) Credit risk
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets. Concentrations of credit risk with respect to trade receivables are limited due to the diversity of the Group's customer base. The Directors believe there is no further credit risk provision required in excess of normal provisions for doubtful receivables, estimated by Management based on prior experience and their assessment of the current economic environment. The Group seeks to trade only with creditworthy parties and carries out credit checks where appropriate. The maximum exposure is the carrying amount as disclosed in Note 24.
e) Liquidity risk
Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. Management receive rolling 13-week cash flow projections on a weekly basis to ensure the Group has sufficient liquidity.
The board receives rolling 12-month cash flow projections on a monthly basis as well as information regarding cash balances. At the end of the financial year, these projections indicated that the Group expected to have sufficient liquid resources to meet its obligations under all reasonably expected circumstances.
The following table sets out the undiscounted contractual amounts due, in relation to the Group's financial liabilities which exposes the Group to liquidity risk:
Between Between Between Total Total
Up to 3 and 1 and 2 and Over contractual carrying
3 months 12 months 2 years 5 years 5 years amount amount
At 28 February 2023 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- ---------- -------- -------- -------- ------------ ---------
Trade and other payables 4,971 1,388 87 - - 6,446 6,446
Loans and borrowings 422 1,266 1,688 29,242 - 32,618 27,815
Lease liabilities 757 2,271 1,375 799 23 5,225 5,027
Deferred consideration 66 764 109 3,726 - 4,665 3,551
---------------------------- --------- ---------- -------- -------- -------- ------------ ---------
Total 6,216 5,689 3,259 33,767 23 48,954 42,839
---------------------------- --------- ---------- -------- -------- -------- ------------ ---------
Forward currency contracts 1,547
Gross outflows 14,749 48,925 29,414 - - 93,088
(14,553 (48,866 (28,521 (91,940
Gross inflows ) ) ) - - )
Currency options 213
Gross outflows 3,107 5,593 1,864 - - 10,564
(3,084 (5,593 (1,864 (10,541
Gross inflows ) ) ) - - )
---------------------------- --------- ---------- -------- -------- -------- ------------ ---------
Net outflow from derivative
contracts 219 59 893 - - 1,171
---------------------------- --------- ---------- -------- -------- -------- ------------ ---------
Between Between Between Total Total
Up to 3 and 1 and 2 and Over contractual carrying
3 months 12 months 2 years 5 years 5 years amount amount
At 28 February 2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------- ---------- -------- -------- -------- ------------ ---------
Trade and other payables 5,649 2,130 - - - 7,779 7,779
Loans and borrowings - - 23,254 - - 23,254 23,254
Lease liabilities 864 2,567 3,197 2,131 16 8,775 8,506
Deferred consideration - 1,450 1,654 1,562 - 4,666 4,666
--------------------------- --------- ---------- -------- -------- -------- ------------ ---------
Total 6,513 6,147 28,105 3,693 16 44,474 44,205
--------------------------- --------- ---------- -------- -------- -------- ------------ ---------
Forward currency contracts 772
Gross outflows 11,204 18,748 6,498 - - 36,450
Gross inflows (11,034) (18,231) (6,414) - - (35,679)
--------------------------- --------- ---------- -------- -------- -------- ------------ ---------
Net outflow from forward
currency contract 170 517 84 - - 771
--------------------------- --------- ---------- -------- -------- -------- ------------ ---------
Loans and borrowings have been represented to show the expected interest payments payable on the revolving credit facility in addition to the repayment of the loan.
f) Capital management
The Group manages its capital structure so as to maintain investor and market confidence and to provide returns to shareholders that will support the future development of the business. The Group makes adjustments to the capital structure if required in response to changes in economic conditions. The Group considers its capital as consisting of ordinary shares and retained earnings. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.
The Group has a policy of maintaining positive cash balances and also has a revolving credit facility which it draws down as required to provide cover against the cyclical nature of the shipping industry.
The board monitors underlying business performance to determine the ongoing use of capital, namely executive and staff incentive schemes (and whether to fund this through cash or share incentives); acquisition appraisals ahead of potential business combinations; investment in property, plant and equipment; and the level of dividends.
No changes were made in the objectives, policies or processes during the years ended 28 February 2023 and 28 February 2022.
g) Reconciliation of liabilities from financing activities
Loans and Deferred Lease
borrowings consideration liabilities Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- ----------- -------------- ------------ --------
At 1 March 2022 27,425 495 8,506 36,426
Cash flows 2,752 - (4,039) (1,287)
Non-cash flows:
- Shares issued (111) - - (111)
- Derivatives issued (71) - - (71)
- Accrual of service cost - 59 - 59
- Interest accruing in the period 440 - 175 615
- New leases - - 770 770
- Business combinations - - 86 86
- Lease terminations - - (632) (632)
- Amounts reclassified from deferred consideration
to loans 615 (615) - -
- Effects of foreign exchange 317 61 161 539
--------------------------------------------------- ----------- -------------- ------------ --------
At 28 February 2023 31,367 - 5,027 36,394
--------------------------------------------------- ----------- -------------- ------------ --------
Current portion 699 - 2,923 3,622
--------------------------------------------------- ----------- -------------- ------------ --------
Loans and Deferred Lease
borrowings consideration liabilities Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- ----------- -------------- ------------ --------
At 1 March 2021 30,142 882 12,554 43,578
Cash flows (2,955) - (3,950) (6,905)
Non-cash flows:
- Shares issued (541) - - (541)
- Derivatives issued (293) - - (293)
- Interest accruing in the period 671 238 329 1,238
- New leases - - 814 814
- Amounts reclassified from deferred consideration
to loans 625 (625) - -
- Cory Brothers disposal - - (1,243) (1,243)
- Effects of foreign exchange (224) - 2 (222)
--------------------------------------------------- ----------- -------------- ------------ --------
At 28 February 2022 27,425 495 8,506 36,426
--------------------------------------------------- ----------- -------------- ------------ --------
Current portion 1,416 - 3,429 4,845
--------------------------------------------------- ----------- -------------- ------------ --------
25 Cash and cash equivalents
2023 2022
GBP'000 GBP'000
------------------------------ -------- --------
Cash at bank and cash on hand 34,735 13,964
Total 34,735 13,964
------------------------------ -------- --------
Cash and cash equivalents largely comprise bank balances denominated in Sterling, US dollars, euros and other currencies for the purpose of settling current liabilities.
Cash includes an amount of GBP4.0 million (2022: GBP2.9 million) held in the bank accounts of regulated entities where there is a requirement to hold a certain amount of cash at any one time in order to cover future obligations. No charge or other restriction of use is held over this cash.
The Directors consider that the carrying amounts of these assets approximate to their fair value.
26 Trade and other payables
Restated
2023 2022
Current liabilities GBP'000 GBP'000
----------------------------------- -------- --------
Trade payables 1,809 3,397
Lease liabilities 2,923 3,429
Other taxation and social security 1,869 721
Other payables 767 400
Contract liabilities 329 154
Accruals 49,613 31,082
----------------------------------- -------- --------
Total 57,310 39,183
----------------------------------- -------- --------
Accruals includes accrued bonuses and other general accruals.
The average credit period taken for trade payables is 33 days (2022: 102 days). The directors consider that the carrying amounts of trade payables approximate to their fair value.
27 Borrowings
2023 2022
GBP'000 GBP'000
------------------------------------ -------- --------
Long-term borrowings
Secured revolving credit facilities 27,815 23,254
Lease liabilities 2,104 5,077
------------------------------------ -------- --------
Total 29,919 28,331
------------------------------------ -------- --------
During the period, the Group extended its revolving credit facility ("RCF") with its main bankers, HSBC. The RCF is for GBP30.0 million plus an accordion limit of GBP10.0 million and has an initial termination date of November 2025 with two options, subject to lender approval, to extend the term of the facility by 12 and 24 months respectively. Drawdown of the accordion facility is subject to additional credit approval. The RCF agreement has an EBITDA leverage covenant of 2.5x and a minimum interest cover of 4x. At 31 May 2022, 31 August 2022, 31 November 2022 and 28 February 2023 the Group met all financial covenant tests. Amounts can be rolled on a monthly basis until the facility expires subject to certain conditions, and on that basis the borrowings have been classified as non-current. The amounts drawn under the RCF bear interest based on SONIA, SOFR and EURIBOR from amounts drawn in sterling, US dollars and euros respectively, plus a credit margin dependent on the Group's leverage ratio.
All revolving credit facilities are drawn by Braemar Plc and appear in the accounts of the Company. See Note 25 for details of the Group's cash pooling arrangements and the net overdraft available to the Group.
The Directors consider that the fair value of the revolving credit facility liability is equivalent to its carrying amount.
Acquisition of Naves Corporate Finance GmbH
In September 2017, the Group acquired the entire share capital of Naves Corporate Finance GmbH ("Naves"). Naves is an established and successful business, headquartered in Hamburg, Germany, which advises national and international clients on corporate finance related to the maritime industry including restructuring advisory, corporate finance advisory, M&A, asset brokerage, interim/pre-insolvency management and financial asset management including loan servicing.
The acquisition agreement provided for consideration of GBP16.0 million (EUR18.4 million) payable as follows:
i) at completion in cash of GBP7.3 million (EUR8.3 million), in shares of GBP1.3 million (EUR1.5 million) and in convertible loan notes of GBP6.4 million (EUR7.4 million); and
ii) deferred consideration in cash of GBP0.5 million (EUR0.6 million ) and convertible loan notes of GBP0.5 million (EUR0.6 million), payable in instalments over the three years after the acquisition.
No consideration was contingent consideration. As at 28 February 2023, there is GBPnil outstanding deferred consideration (2022: GBPnil) to non-management sellers.
The acquisition agreement also provided deferred amounts that would be payable to management sellers, conditional on their ongoing service in the business. IFRS 3 states that amounts paid to former owners which are conditional on ongoing service are for the benefit of the acquirer and not for the benefit of former owners. Consideration linked to the ongoing service of former owners is treated as remuneration for post-combination services and classified as acquisition-related expenditure under specific items in the Income Statement.
The deferred amounts payable to management sellers comprised:
i) deferred cash of GBP1.3 million (EUR1.5 million) and deferred convertible loan notes of GBP4.3 million (EUR4.9 million) conditional only on the individual management seller's continued service payable in instalments over the five years after the acquisition; and
ii) deferred convertible loan notes of up to GBP9.4 million (EUR11.0 million) conditional on the individual management seller's continued service and the post-acquisition Naves' EBIT in the three years post-acquisition. By February 2021, there was no contingency remaining and the total amount paid was GBP4.6 million (EUR5.3 million).
In 2022 the amount of service accrual of GBP0.5 million is presented within deferred consideration. Following the issuance of new convertible loan notes in relation to this amount during the year, at February 2023 GBPnil (2022: GBP0.5 million) due to management sellers was subject to future service conditions. Note 27 sets out the outstanding amounts in relation to the Naves acquisition.
Post-acquisition remuneration of GBP0.1 million associated with the acquisition were incurred during the year ended 28 February 2023 (2022: GBP0.2 million) and have been classified as acquisition-related expenditure under specific items in the Income Statement. See Note 10.
Convertible instruments
The Group issued convertible loan notes in connection with its acquisition of Naves in September 2017.
These convertible loan note instruments are unsecured, unlisted and non-transferable. The notes are euro denominated and carry a 3% per annum coupon. Each tranche is redeemable on or after two years from the date of issue by the Group or by the individual holder. The conversion prices were fixed at 390.3 pence for management sellers and 450.3 pence for non-management sellers.
The convertible loan note instruments carry certain accelerated conversion rights in the event of default on financial commitments associated with the instruments or business distress within the Group. The loan notes shall automatically convert or be redeemed in the event that any person or persons acting in concert hold more than 50% of the issued share capital of the Group or an impairment charge in excess of GBP43.9m (EUR50.0 million) is reflected in the audited Financial Statements of the Group.
The embedded derivatives within the convertible loan notes are valued using level 3 hierarchy techniques under IFRS 13. See Note 24 .
The total value of convertible loan note liabilities, including linked derivatives, is GBP3.9 million (2022: GBP4.9 million). The following table shows amounts in the Group balance sheet relating to the convertible loan notes issued on the acquisition of Naves.
2023 2022
Represented in the Group Balance Sheet GBP'000 GBP'000
---------------------------------------- -------- --------
Current liabilities:
Convertible loan notes 699 1,416
Non-current liabilities:
Convertible loan notes 2,852 2,755
Accrued employee costs - 495
Derivatives 384 251
---------------------------------------- -------- --------
3,236 3,501
---------------------------------------- -------- --------
3,935 4,917
---------------------------------------- -------- --------
The movement in the Naves-related balances in the Group Balance Sheet during the year is explained by the items below:
2023 2022
GBP'000 GBP'000
----------------------------------------------- -------- --------
Total Naves-related balances at start of year 4,917 8,080
Finance expense 426 130
Post-acquisition remuneration 59 238
Foreign exchange movements 250 (225)
Renegotiation gain - (172)
Cash paid (1,606) (2,593)
Equity issued (111) (541)
----------------------------------------------- -------- --------
Total movements (982) (3,163)
Total Naves-related balances at year end 3,935 4,917
----------------------------------------------- -------- --------
The current year cash paid includes interest of GBP158,000.
The loan notes have the following maturities:
Accounting value Nominal value
--------------------------------------------- ------------------- ------------------
2023 2022 2023 2022
GBP'000 GBP'000 EUR'000 EUR'000
--------------------------------------------- --------- -------- -------- --------
Due at the reporting date
30-Sep-22 - 1,184 - 1,399
31-Dec-22 - 215 - -
30-Sep-23 606 592 699 699
not yet
30-Sep-24 550 earned 699 699
30-Sep-25 2,395 2,180 2,929 2,929
--------------------------------------------- --------- -------- -------- --------
3,551 4,171 4,327 5,726
--------------------------------------------- --------- -------- -------- --------
Derivatives thereon 384 251
Accrual for notes subject to future service - 495
--------------------------------------------- --------- -------- -------- --------
Total liabilities on loan notes 3,935 4,917
--------------------------------------------- --------- -------- -------- --------
Note that current liabilities in respect of the loan notes differs from the amounts shown above maturing within one year due to interest payable within one year on non-current loans and the outstanding current liability to deliver cash and shares in respect of matured loan notes.
Where loan notes are subject to future service conditions, they are accrued as an employee expense over the relevant service period. At the end of the service period they are recognised as financial instruments. The nominal value of loan notes subject to future service is included in the maturity analysis above but is not included in the Group's financial liabilities. The accrual in respect of these items was GBPnil at 28 February 2023 (2022: GBP0.5 million).
Renegotiation of amounts payable to management sellers in the prior year
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 convertible loan notes owed by the Group. These loan notes arose on variable consideration for post-acquisition services arising from the 2017 Naves acquisition. At the time of the renegotiation there were no contingencies or further service obligations outstanding in respect of any of these amounts.
A total of GBP2.5 million (EUR2.9 million) which was previously due to mature before the end of December 2022 was deferred to mature no earlier than September 2025. In addition, a further amount of GBP0.7 million (EUR0.75 million) was agreed to be satisfied by the issue of Braemar shares in three tranches. The first two tranches, totalling GBP0.6 million (EUR0.6 million) were issued in September and December 2021 with the remaining tranche of GBP0.1m (EUR0.1 million) issued in December 2022. As part of the modification the Group also agreed to increase the interest rate on certain convertible loan notes, to the extent that they are still outstanding, to 5% per annum from September 2025 from the 3% payable until that date.
In the prior year a credit of GBP0.2m was recognised in respect of the accounting for the modification and classified in finance income under specific items in the Income Statement. See Note 10.
28 Provisions
Uncertain
commission
Dilapidations obligation Other Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ------------- ----------- -------- --------
At 28 February 2021 675 - 322 997
Provided in the year 7 - 279 286
At 28 February 2022 682 - 601 1,283
Reclassification 18 1,707 (346) 1,379
Provided in the year - 257 462 719
Utilised in the year - - (15) (15)
Reversal of provision in the year (124) - - (124)
Exchange differences 16 - 51 67
At 28 February 2023 592 1,964 753 3,309
---------------------------------- ------------- ----------- -------- --------
Current 122 1,964 489 2,575
Non-current 470 - 264 734
---------------------------------- ------------- ----------- -------- --------
At 28 February 2023 592 1,964 753 3,309
---------------------------------- ------------- ----------- -------- --------
Dilapidations relate to future obligations to make good certain office premises upon expiration of the lease term. The provision is calculated with reference to the location and square footage of the office.
Employee entitlements of GBP0.5m is included in other, which relate to statutory long service leave in Braemar ACM Shipbroking Pty Limited. This is based on the principle that each Australian employee is entitled to eight weeks of leave over and above any annual leave on completion of ten years' continuous service. The provision is calculated with reference to the number of employees who have at least seven years of continuous service.
In June 2023 the board commissioned an independent internal investigation into an historical transaction originating in 2013. The investigation was overseen by an Investigation Committee chaired by the Group's non-executive Chairman and was conducted by an independent specialist forensic accounting firm, and independent external counsel. The investigation was comprehensive and complex and ultimately encompassed several transactions between 2006 and 2013 which required further investigation.
As a result of the investigation, the Group has recognised a provision of GBP2.0 million in relation to the uncertain obligations connected to a number of the transactions and commission obligations identified as part of the investigation. Of the GBP2.0 million, GBP1.7 million relates to an historical unsettled commission payable which was recorded in 2017 upon completion of the relevant contracts which originated in 2013. This balance has been reclassified from trade payables to provisions during the year. While the board cannot forecast with certainty final outcomes in respect of these obligations, based on the Group's current information, the amount recognised is the current best estimate of the amount required to settle the obligations at the balance sheet date, taking into account the risks and uncertainties surrounding the obligations, including interpretation of specific laws and likelihood of settlement.
As the ultimate potential obligations and outcomes are uncertain in relation to the transactions subject to the internal investigation, there remains a risk that the final outcomes could materially impact the recognised balance within the next or in future financial years. It is impracticable to provide sensitivity estimates of potential downside variances at this time.
29 Retirement benefit schemes
The Group operates a defined benefit scheme in the UK. A full actuarial valuation was carried out as at 31 March 2020 and updated by the IAS 19 valuation as at 28 February 2023. All valuations have been carried out by a qualified independent actuary.
The Group's obligations in respect of the funded defined benefit scheme at 28 February 2023 were as follows:
2023 2022
GBP'000 GBP'000
---------------------------------------------------------- -------- --------
Present value of funded obligations 10,558 15,156
Fair value of scheme assets, net of tax (11,678) (13,104)
---------------------------------------------------------- -------- --------
Total (surplus)/deficit of defined benefit pension scheme (1,120) 2,052
---------------------------------------------------------- -------- --------
Funded defined benefit scheme
The Group sponsors a funded defined benefit scheme (the ACM Staff Pension Scheme) for qualifying UK employees. The Scheme is administered by a separate board of Trustees which is legally separate from the Group. The Trustees are composed of representatives of both the employer and employees. The Trustees are required by law to act in the interest of all relevant beneficiaries and are responsible for the investment policy with regard to the trust assets and the day-to-day administration of benefits.
Under the Scheme, employees are entitled to annual pensions on retirement at age 60 of 1/60th of final pensionable salary for each year of service. Pensionable salary is defined as basic salary plus the average of the previous three years' bonuses (capped at three times basic salary). Pensionable salaries for members who joined after 1 June 1989 are also subject to an earnings cap. Other benefits are payable, for example those provided on death.
The scheme is closed to future accrual and from 1 February 2016, post-retirement benefits are provided to these employees through a separate defined contribution arrangement.
Profile of the Scheme
The defined benefit obligation includes benefits for current employees, former employees, and current pensioners. Broadly, around 51% of the liabilities are attributable to deferred pensions for current and former employees, with the remaining 49% to current pensioners.
The Scheme duration is an indicator of the weighted average time until benefit payments are made. For the Scheme as a whole, the duration is around 15.3 years.
Funding implications
UK legislation requires that pension schemes are funded prudently. The most recent funding valuation of the Scheme was carried out by a qualified actuary as at 31 March 2020 and showed a deficit of GBP1.5 million. As a result, the Company has made contributions of GBP450,000 p.a. between April 2020 and March 2023. Contributions to the Scheme have ceased since March 2023.
Risks associated with the Scheme
The Scheme exposes the Group to a number of risks, the most significant of which are:
Asset volatility
The liabilities are calculated using a discount rate set with reference to corporate bond yields; if assets underperform this yield, this will create a deficit. The Scheme holds a significant proportion of growth assets which, though expected to outperform corporate bonds in the long term, create volatility and risk in the short term. The allocation to growth assets is monitored to ensure it remains appropriate given the Scheme's long-term objectives.
Changes in bond yields
An increase in corporate bond yields will decrease the value placed on the Scheme's liabilities for accounting purposes, although this will be partially offset by a Decrease in the value of the Scheme's bond holdings.
Inflation risk
A proportion of the Scheme's benefit obligations are linked to inflation and higher inflation will lead to higher liabilities (although, in most cases, caps on the level of inflationary increases are in place to protect against extreme inflation). The majority of the assets are either unaffected by or only loosely correlated with inflation, meaning that an increase in inflation will also increase the deficit.
Life expectancy
The majority of the Scheme's obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in scheme liabilities.
The Company and Trustees have agreed a long-term strategy for reducing investment risk as and when appropriate. This includes moving assets to match pensioner liabilities when members reach retirement.
The Trustees insure certain benefits payable on death before retirement.
The principal assumptions used for updating the latest valuation of the Scheme were:
2023 2022
(% p.a.) (% p.a.)
---------------------------- ---------- ---------
Discount rate 4.90 2.65
CPI inflation 3.0 3.1
Pension increases:
CPI capped at 2.5% p.a. 2.0 2.1
CPI capped at 5.0% p.a. 3.0 3.2
Deferred pension increases:
CPI capped at 2.5% p.a. 2.0 2.1
CPI capped at 5.0% p.a. 3.0 3.2
---------------------------- ---------- ---------
2023 2022
Years Years
-------------------------- -------------------------- -------------------------
Life expectancy from
age 60 for:
Current 60-year-old
male 25.1 27.5
Current 60-year-old
female 27.7 28.7
Pre-retirement mortality - -
Post-retirement mortality S2 PXA, CMI 2021 (min 1.25%)
33% of members retire at age 55, with the remainder
Early retirement retiring at age 60
Withdrawals from active
service No allowance
Cash commutation 25% of the member's pension is commuted
-------------------------- ------------------------------------------------------
Under early retirement it is assumed that 33% of members will retire at age 55, with the remainder retiring at age 60.
The Scheme's assets are split by type of asset in the following table.
2023 2022
Scheme assets GBP'000 GBP'000
---------------------------------------- -------- --------
Scheme assets are comprised as follows:
UK equities 434 366
Overseas equities 4,374 4,391
Unquoted equities 78 57
Absolute return - 315
High yield debt 1,019 325
Cash 707 322
Inflation-linked bonds 1,022 4,354
Corporate bonds 1,883 1,547
Government bonds 1,303 234
Other 1,462 1,193
---------------------------------------- -------- --------
Total 12,282 13,104
---------------------------------------- -------- --------
The Pension Scheme assets do not include any ordinary shares issued by the Company. All assets are held through pooled investment vehicles.
Expense recognised in the Income Statement (included in operating 2023 2022 costs) GBP'000 GBP'000 -------------------------------------------------------------------- -------- -------- Current service cost - - Curtailment credit - - Interest cost on net asset/liability 54 73 -------------------------------------------------------------------- -------- -------- Expense recognised in Income Statement 54 73 -------------------------------------------------------------------- -------- -------- Remeasurements in other comprehensive expense:
Loss/(gain) on assets in excess of that recognised in net interest 1,061 (316) Actuarial gains due to changes in financial assumptions (4,594) (2,174) Actuarial gains due to changes in demographic assumptions (220) (268) Actuarial losses due to liability experience 374 1,368 Deferred tax charge 414 72 -------------------------------------------------------------------- -------- -------- Expected tax charge on recovery of assets 604 - -------------------------------------------------------------------- -------- -------- (Gain)/loss recognised in other comprehensive income (2,361) (1,318) -------------------------------------------------------------------- -------- -------- Total amount recognised in Income Statement and other comprehensive expense (2,307) (1,245) -------------------------------------------------------------------- -------- --------
Changes to the present value of the defined benefit obligation are analysed as follows:
2023 2022
GBP'000 GBP'000
----------------------------------------------------------- -------- --------
Opening defined benefit obligation 15,156 16,174
Interest expense 402 307
Actuarial losses due to changes in financial assumptions (4,594) (2,174)
Actuarial losses due to changes in demographic assumptions (220) (268)
Actuarial gains due to liability experience 374 1,368
Net benefit payments from scheme (560) (251)
----------------------------------------------------------- -------- --------
Closing value at 28 February 10,558 15,156
----------------------------------------------------------- -------- --------
Changes in the fair value of plan assets are analysed as follows:
2023 2022
GBP'000 GBP'000
------------------------------------------ -------- --------
Opening fair value at 1 March 13,104 12,355
Interest income 348 235
Fair value (losses)/gains on assets (1,061) 316
Contributions by employers 450 450
Net benefit payments from scheme (559) (252)
Expected tax charge on recovery of assets (604) -
------------------------------------------ -------- --------
Closing value at 28 February 11,678 13,104
------------------------------------------ -------- --------
The Group does not expect to make any contributions to the scheme in the next 12 months (2022: GBP412,500).
2023 2022
Actual return on Scheme assets GBP'000 GBP'000
------------------------------------ -------- --------
Interest income on plan assets 348 235
Remeasurement (loss)/gain on assets (1,061) 316
------------------------------------ -------- --------
Actual return on assets (713) 551
------------------------------------ -------- --------
Sensitivity analysis
The table below illustrates the sensitivity of the Scheme liabilities at 28 February 2023 to changes in the principal assumptions. The sensitivities assume that all other assumptions remain unchanged and the calculations are approximate (full calculations could lead to a different result).
Approximate Approximate
increase increase
in liabilities in liabilities
Change in assumption % GBP'000
----------------------------------------------------------------- --------------- ---------------
Interest rate reduced by 0.5% p.a. 11.2 1,180
Inflation assumption increased by 0.5% p.a.* 7.2 760
Increase in life expectancy of one year for all members reaching
60 2.2 230
----------------------------------------------------------------- --------------- ---------------
* The inflation assumption sensitivity applies to both the assumed rate of increase in the CPI and the RPI, and includes the impact on the rate of increases to pensions, both before and after retirement.
Defined contribution schemes
There are a number of defined contribution schemes in the Group, the principal scheme being the Braemar Pension Scheme, which is open to all UK employees. Cash contributions paid into the defined contribution schemes are accounted for as an Income Statement expense as they are incurred. The total charge for the year in respect of this and other defined contribution schemes amounted to GBP1,811,000 (2022: GBP1,613,000) of which GBP1,811,000 (2022: GBP915,000) was in respect of continuing operations.
No contributions were due to these schemes at 28 February 2023 (2022: GBP99,000).
The assets of these schemes are held separately from those of the Group in funds under the control of the Trustees.
30 Share capital
Ordinary shares Ordinary shares
---------------------- ------------------
2023 2022 2023 2022
Number Number GBP'000 GBP'000
--------------------------------- ---------- ---------- -------- --------
a) Authorised
Ordinary shares of 10 pence each 34,903,000 34,903,000 3,490 3,490
--------------------------------- ---------- ---------- -------- --------
Ordinary shares Ordinary shares Share premium
---------------------- ------------------ ------------------
2023 2022 2023 2022 2023 2022
Number Number GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ---------- ---------- -------- -------- -------- --------
b) Issued
Fully paid ordinary shares
of 10 pence each
As at start of year 32,200,279 31,731,218 3,221 3,174 53,030 52,510
Shares issued and fully paid
(see below) 724,598 469,061 71 47 766 520
----------------------------- ---------- ---------- -------- -------- -------- --------
As at end of year 32,924,877 32,200,279 3,292 3,221 53,796 53,030
----------------------------- ---------- ---------- -------- -------- -------- --------
During the year. in connection with setting up a broker team in Madrid, 253,434 shares were issued to certain employees as a joining incentive; and 37,636 shares were issued to settle part of the deferred consideration payable in respect of the acquisition of Naves..
During the year ended 28 February 2023, no shares were issued as part of the restricted share plan scheme, nor the long-term incentive programme (2022: no shares were issued at nil cost). 433,528 shares were issued in the year as part of the Save As You Earn ("SAYE") Scheme (2022: no shares were issued), for which cash totalling GBP694,000 was received on exercise.
No shares remained unpaid at 28 February 2023 or 28 February 2022.
The Company has one class of ordinary shares which carry no right to fixed income.
c) Share-based payments
The Company operates a variety of share-based payment schemes which are listed below.
i) Share options
Details of the share options in issue and the movements in the year are given below:
Number at
Year option Number at 28 February Exercise Exercisable
Share scheme granted 1 March 2022 Granted Exercised Lapsed 2023 price (pence) between
------------- ------------ ------------- ------- --------- ------- ------------ -------------- -----------
SAYE 2019 437,422 - (433,528) (3,894) - 160.0 2022-2023
------------- ------------ ------------- ------- --------- ------- ------------ -------------- -----------
The weighted average share price on exercise for awards exercised during the year was GBP2.82 (2022: n/a).
These options are valued using a binomial pricing model. The value of the awards was expensed over the period from the date of grant to the vesting date.
The number of outstanding share options as at 1 March 2022 has been updated from the previously reported figure at 28 February 2022 of 413,771. During the year, 433,528 options were exercised (2022: no options exercised).
ii) Deferred Bonus Plan
Details of the share awards in issue and the movements in the year are given below:
Number
Number at at
1 March 28 February Exercise
Share scheme 2022 Granted Exercised Forfeited 2023 price (pence) Exercisable
--------------- --------- --------- ----------- --------- ------------ -------------- -----------
Jun-19 1,512,351 - (1,422,155) (90,196) - nil Jun-22
Jul-20 3,030,763 - (18,160) (179,536) 2,833,067 nil Jul-23
Nov-20 341,905 - (15,000) (10,930) 315,975 nil Nov-23
Jun-21 1,212,193 - - (40,142) 1,172,051 nil Jun-24
Nov-21 239,415 - - - 239,415 nil Nov-24
Sep-22 - 967,737 - (33,043) 934,694 nil Jun-25
Jan-23 - 400,679 - - 400,679 nil Jun-25
Feb-23 - 137,132 - - 137,132 nil Jun-25
--------------- --------- --------- ----------- --------- ------------ -------------- -----------
Deferred Bonus
Plan 6,336,627 1,505,548 (1,455,315) (353,847) 6,033,013
--------------- --------- --------- ----------- --------- ------------ -------------- -----------
The weighted average share price on exercise for awards exercised during the year was GBP3.32 (2022: GBP2.77). The weighted average share price at grant date for awards granted during the year was GBP2.98 (2022: GBP3.03). The fair value of the award is estimated based on the share price at the time of grant less the expected dividend to be paid during the vesting period.
Under both the Plan and the New DBP, sufficient shares to satisfy each award are bought over the course of the vesting period, and held in an employee trust ("ESOP") until vesting. As at 28 February 2023, the ESOP held 3,587,130 ordinary shares (2022: 2,669,603). The ESOP holding is in line with expectations of how many shares will be needed to satisfy the current awards under this scheme. This amount is net of expected lapses in the scheme and the fact that recipients typically forego sufficient shares in order to satisfy the associated tax liability that arises on their vesting.
The number of outstanding share awards at 1 March 2022 has been updated from the previously reported figures at 28 February 2022 of 33,387 for Jun-18 (to nil), 1,606,422 for Jun-19, 3,167,855 for Jul-20, 315,975 for Nov-20, 1,328,536 for Jun-21 and nil for Nov-21.
iii) Restricted Share Plan
During the year ended 28 February 2015 the Company issued 1,409,000 RSP awards, of which 50% will vest after three years and 25% after each of the fourth and fifth years provided the individuals remain employed by the Group.
During the year ended 29 February 2016 a further 315,000 RSP awards were granted, of which 50% will vest after three years and 25% after each of the fourth and fifth years provided the individuals remain employed by the Group.
During the year ended 28 February 2019 a further 144,000 RSP awards were granted, of which 100% will vest after three years provided the individuals remain employed by the Group.
During the year ended 28 February 2022 a further 13,000 RSP awards were granted, of which 100% will vest after seven months provided the individuals remain employed by the Group.
Details of the RSP share awards in issue and the movements in the year are given below:
Number at Number at
1 March 28 February Exercisable
Share scheme 2022 Granted Exercised Lapsed 2023 between
---------------------- --------- ------- --------- ------ ------------ ------------
Jul 17 - Jul
July 2014 13,750 - - - 13,750 24
Aug 18 - Aug
August 2015 12,500 - - - 12,500 25
Feb 22 - Feb
November 2020 144,000 - (144,000) - - 29
Feb 22 - Feb
November 2021 13,000 - (13,000) - - 29
Restricted Share Plan 183,250 - (157,000) - 26,250
---------------------- --------- ------- --------- ------ ------------ ------------
The number of outstanding share awards at 1 March 2022 has been updated from the previously reported figures at 28 February 2022 of 36,320 for July 2018 (to nil) and nil for November 2021.
The weighted average share price on exercise for awards exercised during the year was GBP3.32 (2022: GBP2.81).
The fair value of the nil cost options is approximated to the share price at the time of grant less the expected dividend to be paid during the vesting period.
The value of the awards are expensed over the period from the date of grant to the vesting date or if used as a recruitment incentive, from the date of joining to the vesting date. The awards are satisfied by the issue of new shares.
iv) Long-Term Incentive Plan ("LTIP")
The Company also has LTIP awards, which allow for the form of a conditional right to receive shares at nil cost. The awards normally vest over three years and are subject to various performance conditions based on earnings per share ("EPS") or segmental operating profit.
In June 2018, awards of 527,464 shares were made to one executive director and three senior members of management.
In June 2019, awards of 394,735 shares were made to one executive director and three senior members of management.
In June 2020, awards of 506,250 shares were made to one executive director and three senior members of management.
In June 2021, awards of 437,116 shares were made to two executive directors and one senior member of management.
In February 2023, awards of 624,174 shares were made to two executive directors and four senior members of management.
Details of the LTIP share awards in issue and the movements in the year are given below:
Number Number
at at
1 March Forfeited 28 February Exercisable
Share scheme 2022 Granted Exercised Lapsed 2023 between
-------------------- --------- ------- --------- -------- ----------- ------------ ------------
May 23 - Oct
LTIP 2018 33,294 - - - - 33,294 28
Jul 24 - Jul
LTIP 2019 331,578 - - (86,620) (42,105) 202,853 29
Jul 25 - Jul
LTIP 2020 431,250 - - - (56,250) 375,000 30
Jun 26 - Jun
LTIP 2021 437,166 - - - (47,787) 389,379 31
Jul 27 - Jul
LTIP 2023 - 624,174 - - - 624,174 32
Long-Term Incentive
Plan 1,233,288 624,174 - (86,620) (146,142) 1,624,700
-------------------- --------- ------- --------- -------- ----------- ------------ ------------
The weighted average share price at grant date for awards granted during the year was GBP3.14.
The fair value of the LTIP 2021 award which has a TSR based vesting condition has been calculated using a Monte Carlo simulation. The fair value of the other LTIPs is determined based on the share price at the time of grant less the expected dividend to be paid during the vesting period calculated using the market consensus dividend yield.
The value of the awards is recognised as an expense over the period from the date of grant to the vesting date. The awards are satisfied by the issue of new shares.
v) Other share-based payments
On 5 December 2022, 253,434 shares were awarded as a joining incentive to certain employees of Madrid Shipping Advisors SL and on 16 December 2022, 1,016,121 shares were issued to the former owners of Southport. as part of the acquisition. In addition, on the acquisition of Southport, a further 872,821 shares were awarded to key employees of Southport. The fair value of the awards is determined based on the share price at the time of grant less the expected dividend to be paid during the three-year vesting period calculated using the market consensus dividend yield. For further details, see Note 14 Business combinations.
The value of the awards is recognised as an expense over the period from the date of grant to the vesting date. The awards will be satisfied by the issue of new shares.
Number Number
at at
1 March Forfeited 28 February
Share award 2022 Granted Exercised Lapsed 2023 Vesting
------------------- -------- --------- --------- ------ ----------- ------------ ------------
Southport Maritime
Inc. - 1,888,942 - - - 1,888,942 Dec 25
Madrid Shipping Dec 23 - Dec
Advisors SL - 253,434 - - - 253,434 25
------------------- -------- --------- --------- ------ ----------- ------------ ------------
31 ESOP reserve
An Employee Share Ownership Plan ("ESOP") was established on 23 January 1995. The ESOP has been set up to purchase shares in the Company. These shares, once purchased, are held in trust by the Trustee of the ESOP, SG Kleinwort Hambros Trust Company (CI) Limited, for the benefit of the employees. Additionally, an Employee Benefit Trust ("EBT") previously run by ACM Shipping Group plc also holds shares in the Company. The ESOP and EBT are accounted for within the Company accounts.
The ESOP reserve represents a deduction from shareholders' funds and a reduction in distributable reserves. The deduction equals the net purchase cost of the shares held in trust by the ESOP. Shares allocated by the ESOP to satisfy share awards issued by the Group are released at cost on a First in First Out basis.
Group and Company GBP'000 ------------------------------------------------ ------- At 29 February 2021 1,362 New shares fully paid up and issued to the ESOP 25 Shares acquired by the ESOP 7,043 ESOP shares allocated (1,659) ------------------------------------------------ ------- At 28 February 2022 6,771 Shares acquired by the ESOP 7,963 ESOP shares allocated (4,127) ------------------------------------------------ ------- At 28 February 2023 10,607 ------------------------------------------------ -------
As at 28 February 2023, the ESOP held 3,579,630 (2022: 2,669,837) ordinary shares of 10 pence each. The funding of the purchase has been provided by the Company in the form of a gift and the Trustees have contracted with the Company to waive the ESOP's right to receive dividends. The fees charged by the Trustees for the operation of the ESOP are paid by the Company and charged to the Income Statement as they fall due.
As part of the acquisition of ACM Shipping Group plc in July 2014, the Company issued 125,621 shares into an Employee Benefit Trust ("EBT") previously run by ACM Shipping Group plc. As at 28 February 2023, the EBT held 62,290 (2022: 62,290) ordinary shares of 10 pence each.
The total cost to the Company of shares and cash held in the ESOP and EBT at 28 February 2023 was GBP10,606,000 (2022: GBP6,771,000) including stamp duty associated with the purchase. The shares owned by the ESOP and EBT had a market value at 28 February 2023 of GBP10,948,000 (2022: GBP6,420,395). The distribution of these shares is determined by the Remuneration Committee.
1,877,473 shares (2022: 596,398) have been released to employees during the year. The shares acquired by the ESOP had an aggregate cost of GBP8.0 million.
32 Other reserves
Foreign
Capital currency
redemption Merger translation Hedging
reserve reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ----------- -------- ------------ -------- --------
At 1 March 2021 396 24,641 1,622 1,435 28,094
Prior period adjustment (994) (994)
-------------------------------- ----------- -------- ------------ -------- --------
396 24,641 628 1,435 27,100
Cash flow hedges:
- Transfer to income statement - - - (1,613) (1,613)
- Fair value losses in the
period - - - (869) (869)
Exchange differences - - 998 - 998
Deferred tax on items taken
to equity - - - 514 514
At 28 February 2022 396 24,641 1,626 (533) 26,130
Cash flow hedges:
- Transfer to income statement - - - 4,826 4,826
- Fair value gain/losses in
the period - - - (4,438) (4,438)
Investment hedge - - (124) - (124)
Exchange differences - - 2,522 - 2,522
Deferred tax on items taken
to equity - - - (97) (97)
-------------------------------- ----------- -------- ------------ -------- --------
At 28 February 2023 396 24,641 4,024 (242) 28,819
-------------------------------- ----------- -------- ------------ -------- --------
The capital redemption reserve arose on previous share buy-backs by the Company.
The merger reserve arises on transactions where the Company issues shares pursuant to an arrangement to acquire more than a 90% interest in another company and no share premium is recorded. The merger reserve arose principally in 2001 in relation to the acquisitions of Braemar Shipbrokers Limited and Braemar Tankers Limited. Further additions have arisen in respect of Naves and Atlantic Brokers. The amounts in the merger reserve are unrealised profits relating to the corresponding assets acquired by the Company on the issue of shares. These profits may become realised on the disposal or write down of these assets.
The hedging reserve comprises the effective portion of the cumulative net change in fair value of cash flow hedging instruments relating to hedged transactions that have not yet occurred of GBP321,000 liability (2022: GBP710,000 liability). A decrease of GBP97,000 in the deferred tax asset (2022: GBP514,000 increase) is attributable to these transactions.
The Group defers the time value of option contracts in the costs of hedging reserve.
33 Contingent liabilities
The Group has contingent liabilities in respect of guarantees entered into in the normal course of business given as follows:
2023 2022
GBP'000 GBP'000
---------------------------------------- -------- --------
Bank guarantees given to:
Third parties (non-cash collateralised) 324 837
---------------------------------------- -------- --------
Total 324 837
---------------------------------------- -------- --------
The Company and certain of its subsidiaries have provided cross guarantees and fixed and floating rate charges over their assets to secure their borrowing facilities and other financial instruments (see Note 24).
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 liabilities expected to have a material adverse financial impact on the Group's consolidated results or net assets.
34 Related party transactions
During the period the Group entered into the following transactions with joint ventures and investments:
2023 2022
------------------------------------ ---------------------------------
Balance Balance
Recharges due (to)/ Recharges due (to)/
to/(from) Dividends from to/(from) Dividends from
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ----------- ---------- ----------- ---------- --------- ----------
AqualisBraemar LOC ASA n/a n/a n/a 221 - 282
AqualisBraemar LOC ASA
AqualisBraemar LOC ASA was a related party until the Group sold its significant shareholding in the entity and lost its representation on the board, on 19 May 2022. All transactions with Aqualis Braemar LOC ASA in the prior year have been included as related party transactions. Recharges to AqualisBraemar LOC ASA consisted primarily of rent, IT services and HR services in accordance with a transitional services agreement. In the prior year, the net recharge to AqualisBraemar LOC ASA included a fee payable to the Group's former Chairman, Ronald Series of GBP3,750.
The balance due from AqualisBraemar LOC ASA is unsecured, interest-free and immediately repayable.
Key management compensation is disclosed in Note 6.
Transactions with wholly owned subsidiaries
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this Note.
Unless otherwise indicated, all shareholdings owned directly or indirectly by the Company represent 100% of the issued share capital of the subsidiary and the share capital comprises ordinary shares. All entities primarily operate in their country of incorporation.
Subsidiaries
Direct holdings of the Company as at 28 February 2023:
Incorporated in England & Wales One Strand, Trafalgar Square, London WC2N 5HR Principal activity Registration number -------------------------------------- ------------------- ------------------- Braemar Shipping Group Limited* Holding company 05990315 Braemar Securities Holdings Limited* Holding company 10010995 Braemar Financial Holdings Limited* Holding company 10917096 Braemar Shipbrokers Limited* Shipbroking 01674710 Seascope Capital Services Limited* Non-trading 03592796 Braemar Shipping Services Limited Dormant 02360525 Braemar Developments Limited* Dormant 02186790 Braemar Tankers Limited Dormant 02001027 -------------------------------------- ------------------- ------------------- Incorporated in the US 2800 North Loop West, Suite 900, Houston, Texas 77092, US Principal activity Registration number ------------------------------------------ ------------------ ------------------- Braemar Holdings (USA) Inc Holding company FEIN 81-1568938 ------------------------------------------ ------------------ ------------------- 2401 PGA Boulevard, Suite 236, Palm Beach Gardens, Florida 33410 US Principal activity Registration number ------------------------------------ ------------------- ------------------- Southport Maritime Inc Shipbroking 65-0342509 ------------------------------------ ------------------- ------------------- Incorporated in Spain Madrid, ctra. Humera 43, 6, Spain Principal activity Registration number ------------------------------------ ------------------- ------------------- Madrid Shipping Advisors S.L. Shipbroking B10866028 ------------------------------------ ------------------- -------------------
Indirect holdings of the Company as at 28 February 2023:
Incorporated in England & Wales
One Strand, Trafalgar Square, London
WC2N 5HR Principal activity Registration number
----------------------------------------- ------------------- -------------------
Braemar Shipbroking Group Limited* Holding company 01611096
Braemar Shipbroking Limited Shipbroking 01020997
Braemar Shipbroking (Dry Cargo) Limited* Shipbroking 07223509
A.C.M. Shipping USA Limited* Shipbroking 08391132
Braemar Valuations Limited* Valuations 03439765
Braemar Securities Limited Futures broker 07899358
Braemar Corporate Finance Limited* Corporate finance 02710842
ACM Shipping CIS Limited Dormant 06934055
Braemar Maritime Limited* Non-trading 03321899
Braemar Burness Maritime Limited* Non-trading 03674230
Burness Marine (Gas) Limited* Non-trading 01081837
Braemar Pension Trustees Limited Dormant 05502209
Incorporated in Germany
Domstrasse 17, 20095 Hamburg, Germany Principal activity Registration number
--------------------------------------- ------------------ -------------------
Braemar Corporate Finance GmbH Corporate finance HRB 114161
Braemar Financial Holdings Germany GmbH Holding company HRB 146089
--------------------------------------- ------------------ -------------------
Incorporated in United Arab Emirates
One JLT 06-55 One JLT, Plot No. Dmcc-Ez1-1ab,
Jumeirah Lakes Towers, Dubai, UAE Principal activity Registration number
---------------------------------------------- --------------------- -------------------
Braemar ACM Shipbroking DMCC Shipbroking DMCC-749556
---------------------------------------------- --------------------- -------------------
Incorporated in the US
2800 North Loop West, Suite 900, Houston,
Texas 77092, US Principal activity Registration number
---------------------------------------------- --------------------- -------------------
Braemar ACM Shipbroking (USA) Inc Shipbroking 46-2641490
Braemar Technical Services (USA) Inc Energy loss adjuster 76-0036958
---------------------------------------------- --------------------- -------------------
24 Grassy Plain Street - Ste 4, Bethel,
CT 06801-1700 US Principal activity Registration number
----------------------------------------------- ------------------- -------------------
Braemar ACM Shipbroking LLP Shipbroking 1099337
----------------------------------------------- ------------------- -------------------
Incorporated in Singapore
80 Robinson Rd, #24-01/02, Singapore
068898 Principal activity Registration number
----------------------------------------------- ------------------- -------------------
Braemar Shipbroking Pte Limited Shipbroking 200602547M
Braemar Corporate Finance Pte Limited Corporate finance 201834760K
----------------------------------------------- ------------------- -------------------
Incorporated in Australia
Level 3, 70 City Road, South Bank, Melbourne,
Victoria 3006, Australia Principal activity Registration number
----------------------------------------------- ------------------- -------------------
Braemar ACM Shipbroking Pty Limited Shipbroking ACN 000862 993
ABN 35 000 862 993
Incorporated in other overseas countries
Piazza 2 Giugno No 14, 54033 Carrara,
Italy Principal activity Registration number
----------------------------------------------- ------------------- -------------------
Braemar Seascope Italia SRL Shipbroking 01268770458
----------------------------------------------- ------------------- -------------------
Suite 2009, Building C Luneng International
Center,
No.211, GuoYoa Road, Pudong District,
Shanghai, 200126, China Principal activity Registration number
-------------------------------------------- ------------------- ---------------------
Braemar Seascope (Shanghai) Limited Shipbroking 913100005588064761
-------------------------------------------- ------------------- ---------------------
2nd Floor, Building No. 22, Pushp Vihar,
Commercial Complex,
Madangir, New Delhi - 110 062, India Principal activity Registration number
-------------------------------------------- ------------------- ---------------------
Braemar ACM Shipbroking India Private
Limited (49.9% owned) Shipbroking U63090DL2003PTC120247
-------------------------------------------- ------------------- ---------------------
Office No. 1004, 10th Floor, Dalamal
House, 206-Jamanalal Bajaj Road, Nariman
Point, Mumbai-400021, India Principal activity Registration number
-------------------------------------------- ------------------- ---------------------
ACM Shipping India Limited Dormant U93090MH2006FLC164019
-------------------------------------------- ------------------- ---------------------
Subsidiaries marked with an asterisk (*) are exempt from the requirements of the Companies Act 2006 relating to the audit of individual accounts by virtue of section 479A of the Companies Act 2006 for the financial year ended 28 February 2023. The Company has provided a guarantee of all outstanding liabilities to which these subsidiaries were subject as at 28 February 2023 in accordance with section 479C of the Companies Act 2006.
35 Prior period adjustment
During the preparation of the 2023 Financial Statements, errors in consolidation entries from prior years were identified. These errors date back to before 2021 and were not fully corrected as part of the prior year adjustments in the Financial Statements for the year-ended 28 February 2022. Therefore, the Group has provided a restated Balance Sheet as at 28 February 2022 and 1 March 2021 in accordance with IAS 8. Principally, there were two errors identified: i) A consolidation error in relation to the sale of the Group's Technical Division in 2019 resulted in the overstatement of other receivables, and retained earnings as at 1 March 2021 and 28 February 2022 of GBP1.1 million; ii) An error in the elimination of intercompany balances principally related to postings required in respect of the Naves transaction and associated liabilities resulted in the overstatement of other receivables and understatement of other payables. The effect of the restatement on the 2022 Balance Sheet is to decrease trade and other receivables by GBP1.9 million, increase trade and other payables by GBP0.5 million, decrease retained earnings by GBP1.4 million and foreign exchange reserve by GBP1.0 million. The effect of the restatement at 1 March 2021 is to decrease trade and other receivables by GBP0.2 million, increase trade and other payables by GBP2.2 million and decrease retained earnings by GBP1.4 million and foreign exchange reserve by GBP1.0 million.
The overall effect of the restatement on the 2022 Balance Sheet is to decrease trade and other receivables by GBP3.0 million and increase trade and payables by GBP0.6 million, with an overall reduction in retained earnings of GBP2.6 million and foreign exchange reserve of GBP1.0 million. The overall effect of the restatement at 1 March 2021 is to decrease trade and other receivables by GBP1.4 million and increase trade and other payables by GBP2.2 million, with an overall reduction in retained earnings of GBP2.6 million and foreign exchange reserve of GBP1.0 million. The impact on the Consolidated Cash Flow Statement for the year to February 2022 is to decrease the movement in receivables by GBP1.6 million with a corresponding decrease to the movement in payables balances and does not impact any actual cash movements.
36 Events after the reporting date
In June 2023 Braemar Plc completed a capital reduction in relation to its share premium and merger reserves. For further details see 'Note 12 Dividends'. There were no other adjusting or significant non-adjusting events between the reporting date and the date these Financial Statements were authorised.
Five-year financial summary (unaudited)
Consolidated Income Statement
12 months 12 months 12 months 12 months
to to to 12 months to
28 Feb 28 Feb 28 Feb to 28 Feb
2023 2022 2021 29 Feb2020 2019
Continuing operations GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------- --------- --------- --------- ----------- ---------
Group revenue 152,911 101,310 83,695 117,655 117,853
Other operating expenses (132,836) (91,250) (75,976) (106,925) (108,787)
Specific items (net) (8,406) (514) (1,097) (3,344) (11,719)
Total operating expenses (141,242) (91,764) (77,073) (109,969) (120,506)
---------------------------------------------- --------- --------- --------- ----------- ---------
Operating profit/(loss) 11,669 9,546 6,622 7,686 (2,653)
Gain on revaluation of investment - 172 - - 500
Net interest expense (2,195) (1,156) (1,485) (1,853) (987)
Share of associate profit for the period (23) (19) - 436 -
---------------------------------------------- --------- --------- --------- ----------- ---------
Profit before taxation 9,451 8,543 5,136 6,269 (3,140)
Taxation (4,855) (1,839) (1,574) 46 (1,525)
Gain/(loss) for the year from discontinued
operations - 7,215 970 (2,299) (22,700)
---------------------------------------------- --------- --------- --------- ----------- ---------
Profit/(loss) after taxation 4,596 13,919 4,532 4,016 (27,365)
---------------------------------------------- --------- --------- --------- ----------- ---------
Dividends
Interim 1,172 610 - 1,564 1,501
Final proposed 2,634 2,254 1,495 - 2,951
---------------------------------------------- --------- --------- --------- ----------- ---------
3,806 2,864 1,495 1,564 4,452
---------------------------------------------- --------- --------- --------- ----------- ---------
Earnings per ordinary share - pence
Basic - underlying from continuing operations 46.22p 23.06p 15.60p 29.45p 23.32p
---------------------------------------------- --------- --------- --------- ----------- ---------
Diluted - underlying from continuing
operations 38.52p 18.79p 12.91p 26.62p 21.36p
---------------------------------------------- --------- --------- --------- ----------- ---------
Five-year financial summary (unaudited)
Consolidated Balance Sheet
As at As at
28 Feb 28 Feb
As at 2022 2021 As at As at
28 Feb 29 Feb 28 Feb
2023 GBP'000 GBP'000 2020 2019
GBP'000 (restated) (restated) GBP'000 GBP'000
------------------------------------ --------- ----------- ----------- -------- --------
Assets
Non-current assets
Goodwill 71,407 79,891 83,955 83,812 83,812
Other intangible assets 3,980 997 2,129 2,411 2,226
Property, plant and equipment 5,320 7,078 9,841 11,928 1,978
Other investments 1,780 1,780 1,962 1,962 1,773
Investment in associate 701 724 3,763 7,315 -
Financial assets - - - 1,184 -
Derivative financial instruments 30 8 200 - -
Deferred tax assets 4,794 3,713 2,900 3,620 1,640
Pension surplus 1,120 - - - -
Other long-term receivables 8,554 5,636 1,888 2,467 264
------------------------------------ --------- ----------- ----------- -------- --------
97,686 99,827 106,638 114,699 91,693
------------------------------------ --------- ----------- ----------- -------- --------
Current assets
Trade and other receivables 43,323 35,792 33,416 39,541 37,128
Financial assets - - 746 - -
Derivative financial instruments 1,224 54 1,573 - -
Current tax receivable 973 - - - -
Assets held for sale - - 436 - 10,611
Cash and cash equivalents 34,735 13,964 14,111 28,749 24,111
------------------------------------ --------- ----------- ----------- -------- --------
80,255 49,810 50,282 68,290 71,850
------------------------------------ --------- ----------- ----------- -------- --------
Total assets 177,941 149,637 156,920 182,989 163,543
------------------------------------ --------- ----------- ----------- -------- --------
Liabilities
Current liabilities
Derivative financial instruments 1,122 688 - 437 49
Trade and other payables 57,852 39,183 47,833 47,209 44,887
- -
Short-term borrowings 2910 2910 - 25,116 35,844
Current tax payable 4,140 1,608 1,318 1,334 1,408
Provisions 2,575 486 307 201 90
Convertible loan notes 699 1,416 4,461 4,444 6,339
Deferred consideration - - - 177 600
Liabilities directly associated
with assets classified as held
for sale - - 125 - 2,797
------------------------------------ --------- ----------- ----------- -------- --------
66,388 43,381 54,044 78,918 92,014
------------------------------------ --------- ----------- ----------- -------- --------
Non-current liabilities
Long-term borrowings 29,919 28,331 31,634 34,585 -
Deferred tax liabilities 344 - 174 903 930
Derivative financial instruments 1,022 335 56 - -
Provisions 733 797 690 765 324
Convertible loan notes 2,852 2,755 2,681 2,603 4,579
Deferred consideration - 495 882 2,293 5,357
Pension deficit - 2,052 3,819 3,672 1,986
------------------------------------ --------- ----------- ----------- -------- --------
34,870 34,765 39,936 44,861 13,176
------------------------------------ --------- ----------- ----------- -------- --------
Total liabilities 101,258 78,146 93,980 123,779 105,190
------------------------------------ --------- ----------- ----------- -------- --------
Total assets less total liabilities 76,686 71,491 62,940 59,210 58,353
Equity
Share capital 3,292 3,221 3,174 3,167 3,144 Share premium 53,796 53,030 52,510 52,510 55,805 ESOP reserve (10,607) (6,771) (1,362) (2,498) (3,446) Other reserves 28,819 26,130 27,100 25,862 22,857 Retained earnings 1,381 (4,119) (18,482) (19,831) (20,007) ------------------------------------ --------- ----------- ----------- -------- -------- Total equity 76,686 71,491 62,940 59,210 58,353 ------------------------------------ --------- ----------- ----------- -------- --------
Notes to Editors
About Braemar Plc
Braemar provides expert advice in shipping investment, chartering, and risk management to enable its clients to secure sustainable returns and mitigate risk in the volatile world of shipping. Our experienced brokers work in tandem with specialist professionals to form teams tailored to our customers' needs, and provide an integrated service supported by a collaborative culture. 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 and follow Braemar on LinkedIn .
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 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.
This document contains forward-looking statements, including statements regarding the intentions, beliefs or current expectations of our directors, officers and employees concerning, among other things, the Group's results of operations, financial condition, liquidity, prospects, growth, strategies and the business. These statements are based on current expectations and assumptions and only relate to the date on which they are made. They should be treated with caution due to the inherent risks, uncertainties and assumptions underlying any such forward-looking information. The Group cautions investors that a number of factors, including matters referred to in this document, could cause actual results to differ materially from those expressed or implied in any forward-looking statement, including general business and economic conditions globally, industry trends, competition, changes in government and other regulation and policy, interest rates and currency fluctuations, and political and economic uncertainty (including as a result of global pandemics). Neither the Group, nor any of the Directors, officers or employees, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this document will actually occur. Undue reliance should not be placed on these forward-looking statements. Other than in accordance with our legal and regulatory obligations, the Group undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
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