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Braemar Shipping Services PLC Interim Results

11/11/2020 7:00am

UK Regulatory (RNS & others)


Braemar Shipping Services (LSE:BMS)
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RNS Number : 9072E

Braemar Shipping Services PLC

11 November 2020

11 November 2020

BRAEMAR SHIPPING SERVICES PLC

("Braemar", the "Company" or the "Group")

Unaudited interim results for the six months ended 31 August 2020

Shipbroking drives stronger performance

Braemar Shipping Services plc (LSE: BMS), a leading international provider of shipbroking, financial advisory, and logistics services principally to the shipping and energy industries, today announces its unaudited half-year results for the six months ended 31 August 2020.

 
                                  Underlying results*            Reported results** 
                                                              ------------------------ 
                            H1 2020/21   H1 2019/20   Change   H1 2020/21   H1 2019/20 
                               GBPm         GBPm        %         GBPm         GBPm 
                           -----------  -----------  -------  -----------  ----------- 
 Revenue                       56.3         57.6       (2%)       56.3         57.6 
 Operating profit/(loss)       5.6          4.2        33%        3.6         (0.6) 
 Profit/(loss) before 
  tax                          5.7          3.5        63%        3.7         (0.8) 
 Earnings/(loss) 
  per share                   16.3p        11.2p       47%        3.5p        (6.8)p 
 Dividend per share             -           5.0p      (100%)       -           5.0p 
                           -----------  -----------  -------  -----------  ----------- 
 

* Underlying profit measures above are before non-recurring specific items, including acquisition-related charges and loss from discontinued operations.

** Reported results are from continuing operations only, comparatives have been re-presented in relation to discontinued operations.

OPERATIONAL KEY POINTS

-- Strong first half trading performance ahead of expectations - growth in underlying operating profit of 33%

   --    Another strong performance by Shipbroking especially from Tankers 
   --    Steady trading in Logistics with operating profit unchanged 
   --    Increased success fees in the Financial Division, although offset by bad debt provisions 
   --    Completion of Strategic Review and decision to divest the Engineering Division, Wavespec 
   --    Share of AqualisBraemar underlying profits increased to GBP0.6 million (2019: GBP0.0m) 

-- Employee safety prioritised and transition to home working completed again in response to recent English lock down

FINANCIAL KEY POINTS

   --    Revenue 2% lower in the first half at GBP56.3 million (2019: GBP57.6m) 

-- Underlying operating profit from continuing operations increased substantially by 33% to GBP5.6 million (2019: GBP4.2m)

   --    Reported continuing profit before tax of GBP3.7 million (2019: GBP(0.8)m) 
   --    Wavespec now engaged in sale process and presented as discontinued operations 
   --    Net debt of GBP19.3 million (2019: GBP18.8 million) 

Trading update and Outlook

-- Appointment of James Gundy, Braemar's Head of Shipbroking, to the position of Group Chief Executive with effect from 1 January 2021

   --    Future strategic direction to be shaped around continuing to grow the Shipbroking business 

-- As recently announced, new strategic investment in the Shipbroking and trading technology space via Zuma Labs

   --    Shipping markets seasonally weak and future trading uncertainties persist 
   --    Trading for the full financial year remains in line with current expectations 

Ronald Series, Executive Chairman of Braemar, commenting on the performance and outlook said:

"Whilst markets remain volatile, we remain optimistic that trading for the year will be in line with expectations. Shipbroking remains central to everything that we do, and we are pleased with the progress that we've made so far this year in focussing on and developing our global shipbroking business and we look forward to further growth initiatives next year and in the years to come."

Results briefing

A presentation for analysts will be held at 10.00am today via conference call and audiocast, please contact the team at Buchanan for details on braemar@buchanan.uk.com .

A copy of the audiocast will be made available on the Investor Relations website after noon today: https://braemar.com/investors/

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

For further information, contact:

 
 Braemar Shipping Services 
  Ronald Series, Executive Chairman             Tel +44 (0) 20 3142 
                                                               4100 
  Nicholas Stone, Chief Operating Officer       Tel +44 (0) 20 3142 
   and Finance Director                                        4100 
 
 finnCap 
  Matt Goode/ James Thompson/ Kate Washington   Tel +44 (0) 20 7220 
                                                               0500 
 
 Buchanan 
  Charles Ryland / Stephanie Watson / Matilda   Tel +44 (0) 20 7466 
   Abraham                                                     5000 
 

About Braemar Shipping Services plc

Braemar Shipping Services plc is a leading international provider of shipbroking, financial advisory, and logistics services to the shipping and energy industries. Founded in 1972, Braemar employs approximately 530 people in 28 offices worldwide across its Shipbroking, Financial, Logistics and Engineering Divisions. Braemar joined the Official List of the London Stock Exchange in November 1997 and trades under the symbol BMS. For more information, including our investor presentation, visit www.braemar.com

Reconciliation of underlying profit before tax to reported profit/(loss) after tax for the period

 
                                          H1 2020/21   H1 2019/20 
 Underlying profit before tax              GBP5.7m      GBP3.5m 
 Acquisition & disposal related charges   GBP(2.0)m    GBP(3.4)m 
 Restructuring costs                          -        GBP(1.4)m 
 Specific finance costs                   GBP(0.2)m    GBP(0.3)m 
 Specific share of associate profit        GBP0.2m      GBP0.8m 
                                         -----------  ----------- 
 Reported profit from continuing           GBP3.7m     GBP(0.8)m 
  operations before tax 
 Taxation                                 GBP(0.6)m    GBP(0.1)m 
 Loss from discontinued operations        GBP(2.0)m    GBP(1.2)m 
                                         -----------  ----------- 
 Reported profit/(loss) after tax          GBP1.1m     GBP(2.1)m 
                                         -----------  ----------- 
 

Acquisition related charges includes costs directly associated with the purchase of NAVES and Atlantic as well as the run off of the equity-based retention programme established in connection with the merger with ACM Shipping Group plc. Specific costs in the prior period relate to restructuring costs in the Logistics Division and Board changes during the period.

Alternative Profit Measures ("APMs")

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 useful information to investors and other interested parties. Our APMs include underlying operating profit, underlying profit before tax and underlying earnings per share. Explanations of these terms and their calculation are shown in the summary above and in detail in our Financial Review.

CHAIRMAN'S STATEMENT

Results

A strong performance in the Shipbroking Division led to improved profits in the first half of the current financial year despite a small decrease in revenues. Operating profits increased significantly in Shipbroking due in part to lower costs but were unchanged from last year in the Logistics Division and slightly lower in the Financial Division.

Revenue for the period decreased only by 2% to GBP56.3 million (2019: GBP57.6 million) but underlying operating profit from continuing operations was up strongly by 33% at GBP5.6 million compared with GBP4.2 million in the previous year. Included within reported underlying earnings is the Group's underlying share of associate profits for AqualisBraemar of GBP0.6 million (2019/20 GBP0.0 million) which shows good progress in the integration of the two businesses since the merger completed on 21 June 2019.

The reported profit after tax from continuing operations was GBP3.1 million compared with a loss of GBP(0.9) million in 2019/20. This reflects lower levels of deferred accounting charges in relation to the Group's acquisitions of Braemar NAVES and Braemar Atlantic than in the previous year as well as the improved underlying trading performance.

Underlying earnings per share were 16.3p compared with 11.2p in the first half of 2019/20 and the reported earnings per share were 3.5p compared with a loss of (6.8)p per share in the first half of 2019/20. Comparatives for 2019/20 have been represented in relation to discontinued operations.

Trading

In what was a very challenging period, the Shipbroking Division achieved revenue growth of 2% and underlying operating profit growth of 24%, mainly due to cost savings. This was driven by Tankers but it was pleasing to see improved performances from both Dry Cargo and Sale and Purchase as we progressed through the period. The Logistics Division traded steadily and the Financial Division remained very busy, earning retainer income and a number of additional success fees during the period.

As stated in our announcement of 2 November 2020, AqualisBraemar is performing strongly, referenced in the recent Q3-2020 trading update: https://aqualisbraemar.com/all-media/news/investor-news/2020/q3-2020-financial-results/

Following the Strategic Review which was completed during the first half of the financial year, the Board made the decision in August 2020 that the Engineering Division, Wavespec, is now sub-scale, and that it would be in both the Group's and Wavespec's best interest to divest this business. The disposal process is now well underway and discussions are ongoing with a number of interested parties. The Strategic Review determined that the disposal would enable greater focus of both capital and management resources in more profitable areas of the Group. Therefore, the results of this Division have been accounted for as discontinued operations and the assets shown as held for sale on the balance sheet.

Appointment of Group Chief Executive

As separately announced, we have today appointed James Gundy, our Head of Shipbroking, to the position of Group Chief Executive. James has done a superb job in integrating the Braemar and ACM shipbroking businesses since the merger in 2014, and we all look forward to working closely with him as we continue to grow the Braemar business. James will take up his new post on 1 January 2021, at which time I will revert to being non-executive Chairman.

Future Strategy

With the decision to sell the Engineering Division and the appointment of James as the Group CEO, the future direction and strategy for the Group will be increasingly centred around Shipbroking and associated activities. I believe we are in a strong position to build on the success of the Shipbroking division in recent years as a trusted advisor for Shipping investment, chartering and risk management. I am looking forward to James leading the development and implementation of this strategy in the coming years.

Our people

The calibre of our people is central to the high level of service that we provide to our clients, and it is their hard work and creativity that enables Braemar to continue to build our brand and reputation as we develop our business. The first half of the current financial year was extremely challenging from a personal perspective for all of our employees who had to adapt quickly to working in a very different environment. The results for the first half of the year are a tribute to the dedication and expertise they have shown in delivering them. I would like to thank all of our people for their continuing efforts on behalf of the Group.

Dividend

The Board has decided not to declare an interim dividend for the period. This reflects the continuing uncertainties in future trading arising from the impacts of the ongoing COVID-19 pandemic but also allows continued investment in the Shipbroking business. An interim dividend of 5.0p per share was declared following the first half's trading last year. The Board will further review the Group's ability to recommend a dividend at the year end and will return to dividend payments as soon as it is appropriate to do so.

Outlook

Despite the shipping market being subject to a great deal of volatility due to the impact of COVID-19 on global trading, especially during the first quarter of our Financial Year, our broking services have been in demand from our clients and we have achieved a good performance overall. In the last few months the markets have settled down, the Dry Cargo market has improved as Chinese imports have picked up and there has been an increase in demand in the gas markets. However, reductions in crude oil supply has led to decreased demand and weaker shipping markets and we have not yet seen the usual seasonal pick-up in demand at this time of year so the outlook for the Shipbroking Division remains mixed. The Logistics Division is on track to achieve its budget, and the Financial Division has reasonable expectations that a number of success fees will be earned in the second half of the year. Overall, trading for the year is in line with current market expectations.

Ronald Series

Executive Chairman

11 November 2020

OPERATING AND FINANCIAL REVIEW

The trading performance in our major business units for the six months ended 31 August 2020 is detailed below.

SHIPBROKING

 
                      H1 2020/21        H1 2019/20        FY 2019/20 
-----------------  ----------------  ----------------  ---------------- 
 Revenue            GBP39.3 million   GBP38.7 million   GBP82.4 million 
 Operating profit   GBP6.1 million     GBP4.9 million   GBP11.7 million 
 

The Shipbroking Division has again performed well during the first half of the year and achieved an underlying operating profit growth of 24% with revenue growth of 2%. The total forward order book was US$42.4 million as at 31 August 2020 in line with the $42.6m at 31 August 2019. Approximately US$23.0 million of this is deliverable in the second half of this financial year.

Central to this result was revenue from Tankers, Sale and Purchase and Securities which have all increased compared to the same period last year. Dry Cargo initially saw some falls in revenue attributable to COVID-19 and the resultant reduction of Chinese imports. Offshore saw a fall in revenue due to a low oil price and fall in oil industry demand. Profitability benefitted from a significant cost saving from reductions in travel and entertainment during the current pandemic.

The Tanker market was very busy during the first quarter of our new financial year mainly due to volatility in the oil market. Contango markets for oil and oil products led to high demand for both time and spot charters predominantly for storage and a strong market for several months. Since June 2020, reduction in crude oil supply has led to less demand and weaker shipping markets and we have not yet seen the usual seasonal pick-up in demand. However, Tanker revenues still remain well ahead of our forecasts for the year to date. Gas has also seen an increase in activity over the last quarter as a result of US gas exports competing for demand in Europe.

At the end of August, we were successful in hiring a team of product tanker brokers and opening a new office in Geneva. This has given us a stronger geographical presence and will help us to increase our market share as well as add to the Dry Cargo presence being established in Geneva. The first month of trading from this new team has shown encouraging results.

Sale and Purchase has performed ahead of last year despite activity levels being curtailed by COVID-19 lockdowns. Some transactions were delayed due to the closure of ports in the early stages of the pandemic but trading overall for the period is in line with our expectations. Several new build contracts were also added to the forward order book in the period when market activity levels were relatively low due to the uncertain economic environment.

As noted above the Dry Cargo market was initially challenging at the beginning of the period due to the lockdown in China and subsequent reduced demand. However, imports into China have improved during the second quarter of the period and our trading has increased to expected levels as a result.

Revenue from our Securities operations has been strong in both the Dry and Wet markets with both trading ahead of our forecasts. The investment in a team of new Dry FFA brokers and new technology initiatives has enabled us to increase our market share. We have formed a strategic joint venture with a technology provider, Zuma Labs, for the Group and we are pleased with the response so far from our brokers and their customers.

FINANCIAL

 
 
                        H1 2020/21       H1 2019/20       FY 2019/20 
------------------  ---------------  ---------------  --------------- 
 Revenue:            GBP3.5 million   GBP3.3 million   GBP5.9 million 
 Operating profit:   GBP0.7 million   GBP0.9 million   GBP1.1 million 
 

The Financial Division provides maritime related corporate finance advice to international clients covering finance raising advisory, restructuring, M&A, asset brokerage, and financial management including loan servicing. It earns fees through retainer arrangements with clients but mainly through success related transaction fees. As a result, the level of revenue in any one period can be hard to forecast and subject to project success and timing.

 
 
                      H1 2020/21        H1 2019/20 
----------------  ----------------  ---------------- 
 Retainer income   GBP1.6 million    GBP1.9 million 
 Success fees      GBP1.9 million    GBP1.4 million 
  Total revenue     GBP3.5 million    GBP3.3 million 
 

Revenue for the period has increased due to an increased level of success fees but by contrast the level of retainer fees has declined. Success fees have been driven by the successful conclusion of restructuring mandates combined with refinancing in the context of which the Financial Division supported ship owners to buy back their own debt at discounts from the loan amount outstanding. Profitability has been hit by a provision for certain retainer fees invoiced on a project that has been put on hold by the COVID-19 pandemic and remain uncollected.

The effects of the COVID-19 pandemic have restricted marketing activities and created a challenging environment for classical finance raising mandates. However, the Financial Division's international restructuring services benefit from these conditions. The division also diversified into the business of providing fairness opinions on the value of shipping companies and other consulting work.

LOGISTICS

 
                       H1 2019/20         H1 2019/20        FY 2019/20 
------------------  ----------------  -----------------  ---------------- 
 Revenue:            GBP13.5 million    GBP15.6 million   GBP29.3 million 
 Operating profit:   GBP0.6 million     GBP0.6 million    GBP1.0 million 
 

Trading in the Logistics Division has held up well in the face of the COVID-19 pandemic with profits overall in line with our expectations. This is a result of the costs being managed carefully, despite revenues being down, and the benefits of last year's restructuring can be clearly seen. The majority of the revenue variance came in the Freight Forwarding sub-division which is a lower margin business than the Agency side and therefore has less of an impact overall.

Port Agency

Trading in our UK Port Agency and Hub operations business was in line with expectations although slightly behind last year in terms of revenue. However, profits were higher than expected due to the cost savings programmes implemented during the previous financial year and holding back on discretionary costs. In particular, the Hub business held up strongly during the initial phase of the COVID-19 pandemic and made up for some shortfalls seen elsewhere. Overseas agency operations also benefited from some costs savings and closures in the previous year, but the remaining operations have traded well and profitably. The outlook for the remainder of the year is for stable Hub volumes and a potential improvement in the UK Port Agency volumes from both current and new customers.

Freight Forwarding

Business volumes were initially hit by a slowdown in activity during the period due to the COVID-19 pandemic and profits were therefore lower than expectations and the levels seen last year. Decisions were taken early on to retain all staff working from home during the furlough period which ensured that clients received the level of service they were used to but also allowed a focus on new business. Since the initial lockdown was relaxed, several new business wins have been successfully converted. There is also an increasing demand for Brexit related services which should see improved performance in the second half of the year.

OTHER OPERATING COSTS

 
 Central costs       H1 2020/21         H1 2019/20         FY 2019/20 
---------------  -----------------  -----------------  ----------------- 
 Central costs:   GBP(1.7) million   (GBP2.1) million   (GBP2.9) million 
 

Central costs were 24% lower than the previous year largely due to an unrealised foreign exchange loss of GBP0.5 million incurred in the prior period. This arose on Euro denominated liabilities connected to the acquisition of Naves in 2017, convertible loan notes and bank facility drawings. The Euro bank facility drawings have been switched into Sterling during the current period in order to reduce the foreign exchange risk they represented.

AqualisBraemar

The Group recognised an underlying share of profits in AqualisBraemar of GBP0.6 million (2019: GBP0.0 million) and received a dividend of GBP0.3 million (2019: GBPnil). At 31 August 2020 the carrying value of the Group's investment in AqualisBraemar was GBP7.1 million ( 31 August 2019: GBP8.1 million, 29 February 2020: GBP7.3 million). At the close of business on 10 November 2020, the market value of the shareholding was GBP11.1 million based on the share price quoted on the Oslo Børs (Aqua:NO).

The Group holds warrants, which if they vest, will allow the Group to subscribe for further shares in AqualisBraemar. At 31 August 2020 the fair value of the warrants was GBP0.2 million ( 31 August 2019: GBP0.8 million, 29 February 2020: GBP1.2 million). The fair value of the warrants is determined by a number of factors including the future performance of the combined business and the former Adjusting and Marine product lines. The reduction in the fair value of the warrants is in line with forecasts prepared by AqualisBraemar as at 30 June 2020.

 
 Specific items                        H1 2020/21         H1 2019/20          FY 2019/20 
---------------------------------  -----------------  -----------------  ------------------- 
 Acquisition & disposal-related 
  charges                          (GBP2.0) million    (GBP3.4) million     (GBP2.0) million 
 Restructuring costs                      -            (GBP1.4) million    (GBP0.9) million 
 
 

The Group has separately identified certain items that are not part of the underlying trade of the Group. These specific items are material in both size and/or nature and we believe may distort understanding of the underlying performance of the business. The majority of these costs relate to acquisitions completed in previous financial years. They are primarily non-cash and driven by the accounting requirements of IFRS 3, Business Combinations.

Acquisition related expenditure included less than GBP0.1 million (2019: less than GBP0.1 million) incurred in relation to the restricted share plan implemented to retain key staff following the merger between Braemar Shipping Services plc and ACM Shipping Group plc.

The Group incurred GBP0.7 million (2019: GBP2.7 million) of costs which are directly linked to the acquisition of NAVES. They comprise post-acquisition consideration payable to certain sellers under the terms of the acquisition agreement. The NAVES acquisition agreement included substantial payments to the working vendors which are conditional on their continuing employment. This includes a credit of GBP0.1m relating to expenses reimbursed in the period by the Vendors of Naves under the terms of the sale and purchase agreement.

The Group also incurred GBP0.2 million (2019: GBP0.6 million) of costs directly linked to the acquisition of Atlantic. This relates to consideration paid on the completion date which is charged to the income statement over a three-year claw-back period for the sellers still working in the business.

The Group incurred a further GBP1.0 million (2019: GBP0.1 million) loss in respect of fair value movements on warrants held over AqualisBraemar shares.

Foreign exchange

The US dollar exchange rate relative to sterling weakened from US$1.28:GBP1 at 1 March 2020 to US$1.32:GBP1 at 31 August 2020. A significant proportion of the Group's revenue is earned in US dollars. At 31 August 2020, the Group held forward currency contracts to sell US$43.0 million at an average rate of US$1.28:GBP1.

The Group also has material liabilities in Euros and the Euro rate strengthened against Sterling from EUR1.16:GBP1 at 1 March 2020 to EUR1.12:GBP1 at 31 August 2020.

Balance sheet

Net assets at 31 August 2020 were GBP59.1 million (31 August 2019: GBP54.4 million; 28 February 2019: GBP57.5 million). A review aimed at identifying evidence of impairment of intangible assets was carried out in the light of the COVID-19 pandemic and no such impairment was identified. No dividend was paid in the period (GBP3.0 million in the period to 31 August 2019) and no shares were purchased for the Employee Share Ownership Plan.

Trade and other receivables reduced by GBP4.6 million to GBP34.9 million compared with GBP39.5 million at 29 February 2020. Trade and other payables have decreased by GBP4.0 million to GBP44.0 million compared to GBP48.0 million at 29 February 2020. Both of these reductions are due to the Group's volume of business being slightly lower in the first half of FY20/21 compared to the second half of FY19/20.

Borrowings and cash

At the balance sheet date, the Group had bank facilities totalling GBP40.0 million, made up of a revolving credit facility ('RCF') of GBP35.0 million and an accordion facility of GBP5.0 million (subject to credit approval) provided by HSBC. The RFC has a number of covenants, in particular the ratio of debt to rolling 12 month EBITDA. As a result of a recent relaxation agreed by HSBC, this covenant has a limit of 4x until May 2021 after which it will revert to 3.5x. The Group also has access to global cash management arrangements, notably in our regional hubs of UK, Germany and Singapore. The facility is due to expire in September 2022 and therefore the Group will begin a refinancing process of within the next six months.

Net bank debt (excluding convertible loan notes and lease liabilities set up on the balance sheet under IFRS 16) was GBP19.3 million at 31 August 2020 compared with net bank debt of GBP18.8 million at 31 August 2019 and net bank debt of GBP20.0 million at 29 February 2020.

At 31 August 2020 the Group held cash of GBP12.7 million (31 August 2019: GBP23.9 million, 29 February 2020: GBP28.7 million). The decrease in cash is largely attributable to repayments made to overdrafts and the RCF during the period.

The operating cash flows of the Group exhibit seasonality in that bonus payments occur in the first half of the financial year and it is therefore normal for the second half of the year to generate more cash.

Assets held for sale

During August 2020 the Board took a decision to divest the Group's Engineering Division, Wavespec, following a strategic review of its future place within the Group. The Board has appointed a corporate finance advisor to identify bidders and conduct a sale process. As a result, the assets of that Division have been accounted for as assets held for sale under IFRS 5 'Non-Current Assets Held for Sale and Discontinued Operations'.

This Division was loss-making and has been accounted for under discontinued operations for the period, along with certain costs related to the strategic review and disposal process. A loss of GBP2.0 million in respect of discontinued operations was recognised in the period, GBP0.5 million relates to the trading loss for the period and GBP1.5 million relates to the impairment of assets. Discussions are ongoing with a number of interested partied and a sale transaction is expected to complete during the current financial year.

Taxation

The tax charge of GBP0.6 million (2019: less than GBP0.1 million) comprises a current tax charge of GBP0.5 million and a deferred tax charge of GBP0.1 million. Current tax is charged at 15.6% (2019: 19.0%) representing the best estimate of the annual effective tax rate, applied to the taxable profits of the interim period. The rate is lower than the standard rate of UK corporation tax due to utilisation of losses. Deferred tax is charged at 19.0% (2019: 17.0%) based on the UK Government's Spring Budget which was substantively enacted on 17 March 2020.

Principal risks

The Directors consider that the principal risks and uncertainties which could have a material effect on the Group's performance identified on pages 28 to 30 of the Annual Report 2020 are also applicable for a period of 12 months from 31 August 2020. These include risks associated with geopolitical and macroeconomic changes, currency fluctuations, financial capacity, financial liquidity, failure to attract and retain skilled individuals, disruptive technology, cultural behaviours and corporate governance and change management.

The Directors continue to assess the potential impacts of Brexit and COVID-19 on the principal risks and uncertainties. The experience of the last six months has shown the business can continue to operate successfully under the lock down conditions experienced. However, the volatility in shipping markets has reduced since the first quarter of the financial year, levels of demand in certain markets we operate in is low and forecasting levels of transactions and income remains difficult.

Going concern

Following a detailed review, no material uncertainty has been identified and the interim condensed consolidated financial statements have been prepared on a going concern basis. See Note 1.

Shareholder Engagement on Directors' Remuneration Report

As previously reported, whilst the resolution at the Company's Annual General Meeting in August to receive the Company's Directors' Remuneration Report passed with the requisite majority, it did receive a vote of 34% against the Board's recommendation. The Company has identified and contacted shareholders comprising over 90% of the votes against the resolution in order to discuss the matter further and understands the reasons behind the result. This process is ongoing and the Company will provide a further summary of its actions and consequent decisions in next year's annual report.

B raemar Shipping Services plc

Condensed Consolidated Statement of Profit or Loss

 
 
                                                                                                             29 Feb 
                                       Period ended 31 Aug                  Period ended 31 Aug               2020 
                                               2020                                 2019                   Unaudited 
                                             Unaudited                     Unaudited and restated         and restated 
                                                                                                         ------------- 
 
                                               Specific                             Specific 
                                Underlying        items      Total   Underlying        items      Total          Total 
 Continuing                                                GBP'000                              GBP'000 
 operations             Notes      GBP'000      GBP'000                 GBP'000      GBP'000                   GBP'000 
---------------------  ------  -----------  -----------  ---------  -----------  -----------  ---------  ------------- 
 Revenue                  4         56,308            -     56,308       57,557            -     57,557        117,655 
 Cost of sales                    (10,048)            -   (10,048)     (10,940)            -   (10,940)       (20,093) 
---------------------  ------  -----------  -----------  ---------  -----------  -----------  ---------  ------------- 
 Gross profit                       46,260            -     46,260       46,617            -     46,617         97,562 
 
 Operating expense 
---------------------  ------  -----------  -----------  ---------  -----------  -----------  ---------  ------------- 
 Other operating 
  costs                           (40,614)            -   (40,614)     (42,376)        (460)   (42,836)       (86,978) 
 Restructuring costs                     -            -          -            -        (976)      (976)          (890) 
 Acquisition-related 
  expenditure             5              -      (2,007)    (2,007)            -      (3,416)    (3,416)        (2,008) 
                                  (40,614)      (2,007)   (42,621)     (42,376)      (4,852)   (47,228)       (89,876) 
 
 Operating 
  profit/(loss)           4          5,646      (2,007)      3,639        4,241      (4,852)      (611)          7,686 
 Share of associate 
  profit for the 
  period                5,10           617          220        837            7          818        825            436 
 Finance income                        128            -        128          210            -        210            458 
 Finance costs            5          (730)        (182)      (912)        (901)        (334)    (1,235)        (2,311) 
 
 Profit/(loss) before 
  taxation                           5,661      (1,969)      3,692        3,557      (4,368)      (811)          6,269 
 
 Taxation                5,7         (586)           28      (558)        (135)           87       (48)             46 
---------------------  ------  -----------  -----------  ---------  -----------  -----------  ---------  ------------- 
 Profit/(loss) for 
  the period/year 
  from continuing 
  operations                         5,075      (1,941)      3,134        3,422      (4,281)      (859)          6,315 
---------------------  ------  -----------  -----------  ---------  -----------  -----------  ---------  ------------- 
 
 Loss for the 
  period/year 
  from discontinued 
  operations              6              -      (2,029)    (2,029)            -      (1,235)    (1,235)        (2,299) 
---------------------  ------  -----------  -----------  ---------  -----------  -----------  ---------  ------------- 
 
 Profit/(loss) for 
  the period/year 
  attributable to 
  equity shareholders 
  of the parent                      5,075      (3,970)      1,105        3,422      (5,516)    (2,094)          4,016 
---------------------  ------  -----------  -----------  ---------  -----------  -----------  ---------  ------------- 
 
 Total 
 Earnings per 
  ordinary 
  share                   8 
 Basic - underlying 
  operations                        16.25p                   3.54p       11.15p                 (6.82)p         12.88p 
 Diluted - underlying 
  operations                        13.53p                   2.95p       10.01p                 (6.82)p         11.64p 
 
 Continuing 
 operations 
 Basic - total                      16.25p                  10.03p       11.15p                 (2.80)p         20.26p 
 Diluted - total                    13.53p                   8.36p       10.01p                 (2.80)p         18.31p 
---------------------  ------  -----------  -----------  ---------  -----------  -----------  ---------  ------------- 
 

Braemar Shipping Services plc

Condensed Consolidated Statement of Comprehensive Income

 
 
                                                  Six months   Six months   Year ended 
                                                       to 31    to 31 Aug       29 Feb 
                                                    Aug 2020         2019         2020 
                                                   Unaudited    Unaudited      Audited 
                                                     GBP'000      GBP'000      GBP'000 
 
 Profit/(loss) for the period/year                     1,105      (2,094)        4,016 
-----------------------------------------------  -----------  -----------  ----------- 
 Other comprehensive income/(expense) 
 Items that will not be reclassified 
  to profit or loss: 
 Share of other comprehensive 
  expense of associate                                 (238)            -            - 
 Actuarial loss on employee 
  benefit schemes - net of tax                             -            -      (1,638) 
 Items that are or may be reclassified 
  to profit or loss: 
 Foreign exchange differences 
  on retranslation of foreign 
  operations                                         (2,516)          674        (503) 
 Cash flow hedges                                      2,683      (1,056)        (828) 
 Deferred tax on cash flow hedges                      (327)            -            - 
-----------------------------------------  ----  -----------  -----------  ----------- 
 Other comprehensive expense                           (398)        (382)      (2,969) 
-----------------------------------------  ----  -----------  -----------  ----------- 
 Total comprehensive income/(expense) 
  for the period/year from continuing 
  operations                                             707      (2,476)        1,047 
-----------------------------------------  ----  -----------  -----------  ----------- 
 Recycling of foreign exchange 
  reserve                                                  -            -          670 
-----------------------------------------  ----  -----------  -----------  ----------- 
 Total comprehensive income/(expense) 
  for the period/year from discontinued 
  operations                                               -          670          670 
-----------------------------------------  ----  -----------  -----------  ----------- 
 
 
 Total comprehensive income/(expense) 
  for the period/year attributable 
  to the equity shareholders of 
  the parent                                             707      (1,806)        1,717 
------------------------------------------  ---  -----------  -----------  ----------- 
 
 
 

Braemar Shipping Services plc

Condensed Consolidated Balance Sheet

 
 
                                              31 August 2020         31 August 2019 Unaudited and     29 February 2020 
                                                   Unaudited                             restated              Audited 
-----------------------------------  ------  ---------------  -----------------------------------  ------------------- 
 Assets                               Notes          GBP'000                              GBP'000              GBP'000 
 Non-current assets 
 Goodwill                                             83,812                               83,812               83,812 
 Other intangible assets                               2,037                                2,418                2,411 
 Property, plant and equipment                        10,763                               11,810               11,928 
 Other Investments                                     1,963                                1,850                1,962 
 Investment in associate                 10            7,126                                8,107                7,315 
 Financial assets                        12              188                                  766                1,184 
 Deferred tax assets                                   3,973                                2,402                3,620 
 Other receivables                                     2,122                                2,303                2,467 
-----------------------------------  ------  ---------------  -----------------------------------  ------------------- 
                                                     111,984                              113,468              114,699 
 Current assets 
 Trade and other receivables             11           34,885                               44,291               39,541 
 Derivative financial instruments        12            1,288                                    -                    - 
 Assets held for sale                     6              283                                    -                    - 
 Cash and cash equivalents                            12,687                               23,609               28,749 
-----------------------------------  ------  ---------------  -----------------------------------  ------------------- 
                                                      49,143                               67,900               68,290 
 
 Total assets                                        161,127                              181,368              182,989 
-----------------------------------  ------  ---------------  -----------------------------------  ------------------- 
 
 Liabilities 
 Current liabilities 
 Derivative financial instruments        12               63                                1,355                  527 
 Trade and other payables                             44,034                               44,310               48,031 
 Short term borrowings                                31,999                               45,804               48,758 
 Current tax payable                                     924                                1,399                1,334 
 Provisions                                              250                                    -                  201 
 Convertible loan notes                                4,529                                6,700                4,340 
 Deferred consideration                                  626                                  634                  600 
 Liabilities directly associated 
  with assets classified as held 
  for sale                                6              282                                    -                    - 
-----------------------------------  ------  ---------------  -----------------------------------  ------------------- 
                                                      82,707                              100,202              103,791 
 Non-current liabilities 
 Long term borrowings                                  8,403                               11,278               10,943 
 Deferred tax liabilities                                889                                  936                  903 
 Provisions                                              753                                  390                  765 
 Convertible loan notes                                2,502                                5,369                2,398 
 Deferred consideration                                3,289                                6,993                3,031 
 Pension deficit                                       3,448                                1,773                3,672 
-----------------------------------  ------  ---------------  -----------------------------------  ------------------- 
                                                      19,284                               26,739               21,712 
 
 Total liabilities                                   101,991                              126,941              125,503 
-----------------------------------  ------  ---------------  -----------------------------------  ------------------- 
 
 Total assets less total 
  liabilities                                         59,136                               54,427               57,486 
-----------------------------------  ------  ---------------  -----------------------------------  ------------------- 
 
 Equity 
 Share capital                           13            3,172                                3,154                3,167 
 Share premium                           13           55,805                               55,805               55,805 
 Shares to be issued                                   (526)                              (2,511)              (2,498) 
 Other reserves                          14           22,119                               23,145               22,279 
 Retained earnings                                  (21,434)                             (25,166)             (21,267) 
-----------------------------------  ------  ---------------  -----------------------------------  ------------------- 
 Total equity                                         59,136                               54,427               57,486 
-----------------------------------  ------  ---------------  -----------------------------------  ------------------- 
 

Braemar Shipping Services plc

Condensed Consolidated Statement of Cash Flows

 
 
                                           31 August 2020      31 August 2019 Unaudited and           29 February 2020 
                                                Unaudited                          restated     Unaudited and restated 
                                   Notes          GBP'000                           GBP'000                    GBP'000 
--------------------------------  ------  ---------------  --------------------------------  ------------------------- 
 Profit/(loss) before tax                           3,692                             (811)                      6,269 
 Loss from discontinued 
  operations                           6          (2,029)                           (1,235)                    (2,299) 
 Depreciation and amortisation 
  charges                                           1,801                             1,834                      3,390 
 Loss on disposal of fixed 
  assets                                                -                                 -                        801 
 Impairment of assets                                   -                                 1                          - 
 Gain on sub-lease arrangements                         -                             (111)                      (101) 
 Gain on bargain purchase                               -                             (818)                      (818) 
 Share of profit in associate         10            (837)                                 -                        382 
 Share scheme charges                                 943                               694                      1,582 
 Net foreign exchange 
  (gains)/losses of financial 
  instruments                                           -                                 -                       (70) 
 Net finance cost                                     784                             1,022                      1,853 
 Specific items                        6            2,007                             4,864                      3,344 
 Specific items - discontinued         6            2,029                                 -                        888 
 Contribution to defined benefit 
  scheme                                            (225)                                 -                      (450) 
--------------------------------  ------  ---------------  --------------------------------  ------------------------- 
 Operating cash flow before 
  changes in working capital                        8,165                             5,440                     14,771 
 
 Decrease/(increase) in 
  receivables                                       4,173                           (9,762)                    (1,629) 
 (Decrease)/increase in payables                  (3,942)                             5,094                      (604) 
 Increase/(decrease) in 
  provisions                                           36                             (249)                        552 
--------------------------------  ------  ---------------  --------------------------------  ------------------------- 
 Cash flows from operating 
  activities                                        8,432                               523                     13,090 
--------------------------------  ------  ---------------  --------------------------------  ------------------------- 
 
 Interest received                                     90                               222                        385 
 Interest paid                                      (697)                           (1,052)                    (1,895) 
 Specific items                        5            (339)                             (405)                    (2,523) 
 Tax received/(paid)                                (872)                             (824)                      1,193 
--------------------------------  ------  ---------------  --------------------------------  ------------------------- 
 Net cash generated from 
  operating activities                              6,614                           (1,536)                     10,250 
--------------------------------  ------  ---------------  --------------------------------  ------------------------- 
 
 Cash flows from investing 
 activities 
 Purchase of property, plant and 
  equipment and computer 
  software                                          (446)                           (1,416)                    (1,743) 
 Investment in associate                                -                           (1,605)                    (1,605) 
 Dividend received from 
  associate                           10              322                                 -                          - 
 Acquisition of other investment                        -                                 -                      (150) 
 Cash in subsidiaries disposed                          -                           (1,286)                    (3,910) 
 Proceeds from sale of property, 
 plant and equipment                                    6                                 -                          - 
 Principal received on finance 
  lease receivables                                   396                                 -                        661 
--------------------------------  ------  ---------------  --------------------------------  ------------------------- 
 Net cash generated from 
  investing activities                                278                           (4,307)                    (6,747) 
--------------------------------  ------  ---------------  --------------------------------  ------------------------- 
 
 Cash flows from financing 
 activities 
 Proceeds from borrowings                           7,300                             8,500                      8,500 
 Repayment of principal under 
  lease liabilities                               (1,986)                           (1,723)                    (3,473) 
 Repayment of borrowings                         (29,325)                           (1,719)                    (6,339) 
 Net proceeds from pooling 
  arrangements                                          -                                 -                      4,595 
 Dividends paid                        9                -                           (3,064)                    (4,630) 
 Deferred consideration                                 -                                 -                      (600) 
--------------------------------  ------  ---------------  --------------------------------  ------------------------- 
 Net cash (used in)/generated 
  from financing activities                      (24,011)                             1,994                    (1,947) 
--------------------------------  ------  ---------------  --------------------------------  ------------------------- 
 
 (Decrease)/increase in cash and 
  cash equivalents                               (17,119)                           (3,849)                      1,556 
 Cash and cash equivalents at 
  beginning of the period                          28,749                            28,021                     28,021 
 Foreign exchange differences                       1,057                             (563)                      (828) 
--------------------------------  ------  ---------------  --------------------------------  ------------------------- 
 Cash and cash equivalents at 
  end of the period                                12,687                            23,609                     28,749 
--------------------------------  ------  ---------------  --------------------------------  ------------------------- 
 

Braemar Shipping Services plc

Condensed Consolidated Statement of Changes in Equity

 
                                                            Shares 
                                        Share      Share     to be       Other    Retained     Total 
                                      capital    premium    issued    reserves    earnings    equity 
                             Notes    GBP'000    GBP'000   GBP'000     GBP'000     GBP'000   GBP'000 
--------------------------  ------  ---------  ---------  --------  ----------  ----------  -------- 
 
 At 1 March 2020                        3,167     55,805   (2,498)      22,279    (21,267)    57,486 
--------------------------  ------  ---------  ---------  --------  ----------  ----------  -------- 
 Profit for the 
  period                                    -          -         -           -       1,105     1,105 
 Foreign exchange 
  differences                               -          -         -     (2,516)           -   (2,516) 
 Share of associate's 
  other comprehensive 
  expense                                   -          -         -           -       (238)     (238) 
 Cash flow hedges                           -          -         -       2,683           -     2,683 
 Deferred tax on 
  cashflow hedges                                                        (327)           -     (327) 
--------------------------  ------  ---------  ---------  --------  ----------  ----------  -------- 
 Total comprehensive 
  income                                    -          -         -       (160)         867       707 
--------------------------  ------  ---------  ---------  --------  ----------  ----------  -------- 
 Dividends paid                9            -          -         -           -           -         - 
 Issue of shares                            5          -         -           -         (5)         - 
 Purchase of shares                         -          -         -           -           -         - 
 ESOP shares allocated                      -          -     1,972           -     (1,972)         - 
 Share based payments                       -          -         -           -         943       943 
--------------------------  ------  ---------  ---------  --------  ----------  ----------  -------- 
 Balance at 31 
  August 2020                           3,172     55,805     (526)      22,119    (21,434)    59,136 
--------------------------  ------  ---------  ---------  --------  ----------  ----------  -------- 
 
 At 1 March 2019                        3,144     55,805   (3,446)      22,857    (20,007)    58,353 
 Prior period application 
  of IFRS 16                                -          -         -           -       (205)     (205) 
 Prior period error: 
 Change in accounting 
  policy - IFRS 
  16                             3          -          -         -           -         586       586 
--------------------------  ------  ---------  ---------  --------  ----------  ----------  -------- 
 Restated 1 March 
  2019                                  3,144     55,805   (3,446)      22,857    (19,626)    58,734 
--------------------------  ------  ---------  ---------  --------  ----------  ----------  -------- 
 Loss for the period                        -          -         -           -     (2,094)   (2,094) 
 Foreign exchange 
  differences                               -          -         -       1,344           -     1,344 
 Cash flow hedges 
  - net of tax                              -          -         -     (1,056)           -   (1,056) 
--------------------------  ------  ---------  ---------  --------  ----------  ----------  -------- 
 Total comprehensive 
  income                                    -          -         -         288     (2,094)   (1,806) 
--------------------------  ------  ---------  ---------  --------  ----------  ----------  -------- 
 Dividends paid                9            -          -         -           -     (3,064)   (3,064) 
 Issue of shares                           10          -         -           -        (10)         - 
 Purchase of shares                         -          -         -           -           -         - 
 ESOP shares allocated                      -          -       935           -       (935)         - 
 Share based payments                       -          -         -           -         563       563 
--------------------------  ------  ---------  ---------  --------  ----------  ----------  -------- 
 Balance at 31 
  August 2019                           3,154     55,805   (2,511)      23,145    (25,166)    54,427 
--------------------------  ------  ---------  ---------  --------  ----------  ----------  -------- 
 

Braemar Shipping Services plc

Unaudited Notes to The Financial Statements

For the Six Months Ended 31 August 2020

1. General information

Braemar Shipping Services plc (the "Company") is a public limited company incorporated and domiciled in England and Wales. The interim condensed consolidated financial information for the six months ended 31 August 2020 comprise the Company, its subsidiaries and the employee share ownership trust (together referred to as the "Group"). The address of the Company's registered office is One Strand, Trafalgar Square, London, WC2N 5HR, United Kingdom. The interim condensed consolidated financial statements of the Group were authorised for issue in accordance with a resolution of the directors on 10 November 2020.

These interim condensed consolidated financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006, but have been reviewed by BDO LLP, the Group's auditor. The audited statutory accounts for the year ended 29 February 2020 have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. The comparative information for the year ended 29 February 2020 in this interim report does not constitute statutory accounts for that year.

The interim condensed consolidated financial statements have been prepared on a going concern basis in a reasonable expectation that the Group has adequate resources to continue in operational existence for at least 12 months from this reporting date. In reaching this conclusion the Directors considered cash flow forecasts that have been prepared in the light of the impact of COVID-19. The Directors have considered the trading and cash flows over the first six months of the year which has been resilient and also forward-looking market data in respect of the shipping market. This includes the forward order book within the Shipbroking Division, the resilience within the Logistics Division owing to the flexible cost model and the nature of the clients supplying essential goods and the potential within the Financial Division, should a global recession become apparent.

As at 31 August 2020 the Group's net debt* was GBP19.3 million with available headroom in the GBP35.0 million revolving credit facility ("RCF") of GBP3.0 million. The RCF has a number of financial covenant tests that must be adhered to and in particular a financial covenant relating to debt to 12 months rolling EBITDA. As a result of a recent relaxation agreed by HSBC, this covenant has a limit of 4x until May 2021, reducing to 3.5x until May 2022 and returning to 3x until the facility expires in September 2022.

The Group has updated its expected revenue, cost and cash forecasts in the light of trading over the first half of the current financial year in and assessed the ability of the Group to operate both within the revised covenants and the facility headroom. This assessment included a number of downside sensitivities, including reductions in expected revenue of 7.5% and 15% from January 2021 onwards. The assessment also included the assumption of reasonable cost mitigations and other cash management measures within the control of the Group. Having considered the 15% revenue downside sensitivity, and in particular the assumptions in respect of COVID-19, the Directors consider it remote that over the assessed going concern period that revenues would be impacted to this extent. In making this assessment, significant judgement has been applied.

The Directors consider revenue as the key assumption in the Group's forecasts as there is a low level of cost of sales, other than in the Freight Forwarding business within its Logistics Division, which generates a low gross margin. The remaining costs are largely fixed or made up of discretionary bonuses, predominately within the Shipbroking Division and which are directly linked to profitability.

Similar to other businesses, it is unclear how the COVID-19 pandemic's impact on the business will continue and despite expectations that global trade and GDP will recover next year, uncertainty remains over the outlook. We are however, comfortable that under the scenarios we have run, the Group could withstand a decline in revenue as described and continue to operate within the available banking facilities. Accordingly, the Group continues to adopt the going concern basis in preparing the financial statements.

*Net debt is calculated as secured revolving credit facilities less net cash.

Forward-looking statements

Certain statements in this interim report are forward-looking. Although the Group

believes that the expectations reflected in these forward-looking statements are reasonable,

we can give no assurance that these expectations will prove to be correct. Because

these statements involve risks and uncertainties, actual results may differ materially from

those expressed or implied by these forward-looking statements. We undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

2. Basis of preparation and statement of compliance

The condensed consolidated interim financial statements for the six months ended 31 August 2020 have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union.

The condensed consolidated interim financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's Annual Report for the year ended 29 February 2020, which was prepared in accordance with IFRSs as adopted by the European Union.

Following the Group's decision to dispose of certain operations, the Group has re-presented the condensed consolidated statement of profit and loss in relation to discontinued operations for the periods ended 29 February 2020 and 31 August 2019. See Note 6.

Prior period restatement - cash and short-term borrowings

The Group has re-presented the condensed consolidated balance sheet for the period ended 31 August 2019 in respect of a presentational error. The Group had previously disclosed net cash and overdraft balances that did not meet the criteria of IAS 32 for offset. The adjustment to gross up cash and short-term borrowings at 31 August 2019 is as follows.

31 August 2019

GBP'000

Increase in cash 18,802

   Increase in short-term borrowings                                                   18,802 

The adjustment at 31 August 2019 has no impact on the reported profits or net assets in any of the periods.

Prior period restatement - impact of IFRS 16

As disclosed in the annual report for the year ended 29 February 2020, in the condensed consolidated interim financial statements for the year ended 31 August 2019 the Group disclosed a decrease in retained earnings at 1 March 2019 of GBP0.2 million on adoption of IFRS 16. The impact of IFRS 16 at 1 March 2019 is represented below to correct an error and show an increase in retained earnings at 1 March 2019 of GBP0.4 million, as disclosed the consolidated financial statements for the year ended 29 February 2020. The nature of the change is in respect of the Group's reassessment of certain transitional balances such as rent-free accruals, capitalised direct costs and dilapidations provisions.

Impact of IFRS 16 as previously presented in the condensed consolidated interim financial statements for the year ended 31 August 2019:

 
                                    Year ended                 As at 1 Mar 
                                   28 Feb 2019                        2019 
                                       GBP'000     Impact of       GBP'000 
                                                     IFRS 16 
-------------------------------  -------------  ------------  ------------ 
 Non-current assets 
 Property, plant and equipment           1,978        13,031        15,009 
 Other receivables                         264         2,029         2,293 
 Current assets 
 Trade and other receivables            37,128           500        37,628 
-------------------------------  -------------  ------------  ------------ 
 Total impact on assets                               15,560 
-------------------------------  -------------  ------------  ------------ 
 Current liabilities 
 Short term borrowings                (15,323)       (3,317)      (18,640) 
 Non-current liabilities 
 Long term borrowings                        -      (12,448)      (12,448) 
 Total impact on liabilities                        (15,765) 
-------------------------------  -------------  ------------  ------------ 
 Non-current assets 
-------------------------------  -------------  ------------  ------------ 
 
 Retained Earnings                    (20,007)         (205)      (20,212) 
-------------------------------  -------------  ------------  ------------ 
 

Impact of IFRS 16 as presented now:

 
                                    Year ended                 As at 1 Mar 
                                   28 Feb 2019                        2019 
                                       GBP'000     Impact of       GBP'000 
                                                     IFRS 16 
-------------------------------  -------------  ------------  ------------ 
 Non-current assets 
 Property, plant and equipment           1,978        11,166        13,144 
 Other receivables                         264         2,037         2,301 
 Current assets 
 Trade and other receivables            37,128           517        37,645 
-------------------------------  -------------  ------------  ------------ 
 Total impact on assets                               13,720 
-------------------------------  -------------  ------------  ------------ 
 Current liabilities 
 Trade and other payables             (44,887)         2,260      (42,627) 
 Short term borrowings                (15,323)       (3,270)      (18.593) 
 Non-current liabilities 
 Long term borrowings                        -      (12,329)      (12,329) 
-------------------------------  -------------  ------------  ------------ 
 Total impact on liabilities                        (13,339) 
-------------------------------  -------------  ------------  ------------ 
 
 Retained Earnings                    (20,007)           381      (19,626) 
-------------------------------  -------------  ------------  ------------ 
 

Accounting estimates and critical judgements

The preparation of interim financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were consistent with those that applied to the consolidated financial statements as at and for the year ended 29 February 2020, except as described below:

In preparing the condensed consolidated interim financial statements for the period ended 31 August 2020 the classification of assets held for sale is a critical accounting judgement. This judgements was made by management with the advice of independent experts. It was concluded that a sale was highly probable within 12 months of classification as held for sale. The fair value less costs to sell is subject to estimation uncertainty. Management undertook a number of estimates to determine the fair value of net assets held for sale, including the fair value of the consideration and the costs to sell. See Note 6.

Management have assessed the impact of COVID-19 on the estimates relating to expected credit loss provisions and goodwill impairment testing. The assumptions on the impact of COVID-19 were consistent with those that applied to the consolidated financial statements as at and for the year ended 29 February 2020.

3. Accounting policies

Changes in accounting policies

The accounting policies adopted in the preparation of these interim condensed consolidated financial statements were consistent with those that applied to the consolidated financial statements as at and for the year ended 29 February 2020.

No new standards or amendments effective for reporting periods beginning on or after 1 January 2020 had an impact on the interim condensed consolidated financial statements for the period ended 31 August 2020.

4. Segmental information

The Group's reportable segments are trading divisions that are managed separately due to a combination of factors including the variety of services provided and method of service delivery.

The reportable segments reflect the way financial information is reviewed by the Group's Chief Operating Decision Maker ("CODM"). The CODM for the Group is the Board of Directors.

Following the Board's decision to dispose of the Engineering Division, the results of this Division have been represented as discontinued operations in both the current and comparative periods. The loss from discontinued operations for the year ending 29 February 2020 includes the results of the Offshore, Adjusting and Marine product lines which were divested to AqualisBraemar on 21 June 2019. See Note 6.

 
                                                Revenue                                     Results 
                                  H1 2020/21   H1 2019/20   FY 2019/20   H1 2020/21   H1 2019/20            FY 2019/20 
                                     GBP'000      GBP'000      GBP'000      GBP'000      GBP'000               GBP'000 
-------------------------------  -----------  -----------  -----------  -----------  -----------  -------------------- 
 Shipbroking                          39,291       38,677       82,377        6,076        4,922                11,763 
 Financial                             3,497        3,295        5,931          723          896                 1,101 
 Logistics                            13,520       15,585       29,347          570          550                 1,023 
 Trading segments 
  revenue/results                     56,308       57,557      117,655        7,369        6,368                13,887 
-------------------------------  -----------  -----------  -----------  -----------  -----------  -------------------- 
  Central costs                                                             (1,723)      (2,127)               (2,857) 
-------------------------------  -----------  -----------  -----------  -----------  -----------  -------------------- 
 Underlying operating profit                                                  5,646        4,241                11,030 
-------------------------------  -----------  -----------  -----------  -----------  -----------  -------------------- 
 Exceptional operating costs                                                      -      (1,436)               (1,336) 
 Acquisition related 
  expenditure                                                               (2,007)      (3,416)               (2,008) 
 Operating profit/(loss)                                                      3,639        (611)                 7,686 
 Share of associate profit 
  for the period                                                                837          825                   436 
 Finance expense - net                                                        (784)      (1,025)               (1,853) 
-------------------------------  -----------  -----------  -----------  -----------  -----------  -------------------- 
 Profit/(loss) before taxation                                                3,692        (811)                 6,269 
 Taxation                                                                     (558)         (48)                    46 
 Profit/(loss) for the 
  period/year 
  from continuing operations                                                  3,134        (859)                 6,315 
-------------------------------  -----------  -----------  -----------  -----------  -----------  -------------------- 
 Loss for the period/year 
  from discontinued operations                                              (2,029)      (1,235)               (2,299) 
-------------------------------  -----------  -----------  -----------  -----------  -----------  -------------------- 
 Profit/(loss) for the 
  period/year                                                                 1,105      (2,094)                 4,016 
-------------------------------  -----------  -----------  -----------  -----------  -----------  -------------------- 
 
 

The Group's revenue disaggregated by country of origin is as follows:

 
                                            Revenue 
                           -----------  ----------- 
                            H1 2020/21   H1 2019/20   FY 2019/20 
                               GBP'000      GBP'000      GBP'000 
-------------------------  -----------  -----------  ----------- 
           United Kingdom       39,642       40,146       79,904 
                Singapore        5,757        5,619       14,638 
            United States          919          984        2,173 
                Australia        3,526        4,531        7,672 
                  Germany        1,661        3,132        4,870 
        Rest of the World        4,803        3,145        8,398 
-------------------------  -----------  -----------  ----------- 
    Continuing operations       56,308       57,557      117,655 
-------------------------  -----------  -----------  ----------- 
  Discontinued operations        1,254        1,912        3,139 
-------------------------  -----------  -----------  ----------- 
 

The Group does not allocate income tax expense or interest to reportable segments. Treasury management is managed centrally.

Assets and liabilities information is reported internally in total and not by reportable segment and, accordingly, no information is provided in this note on assets and liabilities split by reportable segment.

5. Specific items

During the period, the Group incurred the following specific items:

 
                                                            Six months   Six months 
                                                                    to           to   Year ended 
                                                                31 Aug       31 Aug       29 Feb 
                                                                  2020         2019         2020 
                                                               GBP'000      GBP'000      GBP'000 
---------------------------------------------------------  -----------  -----------  ----------- 
 
 Other operating costs 
 - Board changes                                                     -        (460)        (468) 
 - Profit on sublet of office                                        -            -           22 
 - Other income                                                      -            -            - 
---------------------------------------------------------  -----------  -----------  ----------- 
                                                                     -        (460)        (446) 
 
 Acquisition related items 
 
   *    Acquisition of ACM Shipping Group plc                     (69)         (69)        (153) 
 
   *    Acquisition of NAVES Corporate Finance GmbH              (719)      (2,727)      (1,190) 
 
   *    Acquisition of Atlantic Brokers Holdings Limited         (228)        (570)      (1,083) 
 
   *    Warrants (Note 12)                                       (991)         (50)          418 
                                                               (2,007)      (3,416)      (2,008) 
 
 
   - Restructuring costs                                             -        (976)        (890) 
 - Share of profit in associate                                    220          818          698 
 - Finance costs                                                 (182)        (334)        (450) 
 - Taxation                                                         28           87          228 
 - Loss from discontinued operations 
  (Note 6)                                                     (2,029)      (1,235)      (2,299) 
---------------------------------------------------------  -----------  -----------  ----------- 
 Total                                                         (3,970)      (5,516)      (5,167) 
---------------------------------------------------------  -----------  -----------  ----------- 
 
 

Acquisition related items

The Group incurred total expenditure of GBP2.0 million (2019: GBP3.4 million) in respect of acquisition related items. Less than GBP0.1 million (2019: Less than GBP0.1 million) was incurred in relation to the restricted share plan implemented to retain key staff following the merger between Braemar Shipping Services Plc and ACM Shipping Plc. This restricted share plan expired in July 2020.

Expenditure of GBP0.7 million (2019: GBP2.7 million) is directly linked to the acquisition of NAVES Corporate Finance GmbH. This includes GBP0.2 million of post-acquisition remuneration payable to certain vendors under the terms of the acquisition agreement. This agreement has a three-year earn-out period over which the costs of the acquisition will be charged to the income statement depending on the earnings of the Financial Division during that period. Also included are charges of GBP0.1 million of interest and GBP0.5 million related to foreign exchange translation of euro liabilities. A credit of GBP0.1 million is included in respect of a reimbursement from the sellers of certain expenses incurred by the Financial division prior to acquisition.

Expenditure of GBP0.2 million (2019: GBP0.6 million) is directly linked to the acquisition of Atlantic Brokers Holdings Limited in respect of incentive payments to working sellers. The cash payment was made in the year to 28 February 2018 but is subject to clawback provisions if the working sellers were to leave employment of the group before 28 February 2021. As such, the costs are charged to the income statement over that clawback period.

The Group recognised a loss of GBP1.0 million (2019: GBP0.1 million) on the fair value movement of warrants to acquire further shares in AqualisBraemar. See Note 12.

Other specific items

The group recognised specific income of GBP0.2 million in relation to its investment in AqualisBraemar. This amount is the group's share of the fair value movement in contingent consideration due from AqualisBraemar. This related to the business combination and is therefore treated as a specific item.

GBP0.2 million (2019: GBP0.3 million) of interest charges related to the Group's revolving credit facility have been included as specific finance costs. These charges relate to interest payable on tranches of the revolving credit facility that were used to fund the acquisition of NAVES Corporate Finance GmbH.

A tax credit of less than GBP0.1 million (2019: GBP0.1 million) has been recognised in respect of discontinued operations. This represents the credit arising from specific items that are allowable deductions for UK corporation tax, at the standard corporation tax rate of 19%.

The Group recognised a further GBP2.0 million (2019: GBP1.2 million) in relation to discontinued operations. See Note 6.

6. Discontinued Operations

Following the Group's decision to dispose of the Engineering Division, the results of the current and comparative periods have been re-presented to include the results of the Engineering Division as discontinued operations. Previously losses from discontinued operations comprised the results of the Offshore, Adjusting and Marine product lines which were divested to AqualisBraemar on 21 June 2019.

The Board has appointed a corporate finance advisor to identify bidders and conduct a sale process. Discussions are ongoing with a number of interested parties and a sale transaction is expected to complete during the current financial year.

The results of the discontinued operations which have been included in the income statement were as follows:

 
                                                Six months   Six months 
 Engineering Division                                   to           to   Year ended 
                                                                 31 Aug       29 Feb 
                                               31 Aug 2020         2019         2020 
                                                   GBP'000      GBP'000      GBP'000 
--------------------------------------------  ------------  -----------  ----------- 
 
 Revenue                                             1,254        1,193        3,139 
 Costs                                             (1,708)      (1,728)      (4,550) 
--------------------------------------------  ------------  -----------  ----------- 
 Trading loss                                        (454)        (535)      (1,411) 
 Write offs of other receivables 
  and deferred tax assets                            (707)            -            - 
 Impairment to fair value less costs 
  to sell                                            (783)            -            - 
 Costs to sell                                        (85)            -            - 
 Loss before taxation                              (2,029)        (535)      (1,411) 
 Taxation                                                -         (12)            4 
--------------------------------------------  ------------  -----------  ----------- 
 Total loss for the period from Engineering        (2,029)        (547)      (1,407) 
 
 
 Offshore, Marine and Adjusting product          Six months   Six months 
  lines                                                  to           to   Year ended 
                                                                  31 Aug       29 Feb 
                                                31 Aug 2020         2019         2020 
                                                    GBP'000      GBP'000      GBP'000 
---------------------------------------------  ------------  -----------  ----------- 
 
 Revenue                                                  -       10,320       10,320 
 Costs                                                    -     (10,982)     (10,982) 
---------------------------------------------  ------------  -----------  ----------- 
 Trading loss                                                      (662)        (662) 
 Specific Items                                           -          (2)        (206) 
---------------------------------------------  ------------  -----------  ----------- 
 Loss before taxation                                     -        (664)        (868) 
 Taxation                                                 -         (24)         (24) 
---------------------------------------------  ------------  -----------  ----------- 
 Total loss for the period from Offshore, 
  Adjusting and Marine                                    -        (688)        (892) 
 
                                                 Six months   Six months 
                                                         to           to   Year ended 
                                                                  31 Aug       29 Feb 
 Total discontinued operations                  31 Aug 2020         2019         2020 
                                                    GBP'000      GBP'000      GBP'000 
---------------------------------------------  ------------  -----------  ----------- 
 Total loss for the period from discontinued 
  operations                                        (2,029)      (1,235)      (2,299) 
---------------------------------------------  ------------  -----------  ----------- 
 

The major classes of assets and liabilities comprising the operations held for sale are as follows:

 
                                          Six months   Six months 
                                                  to           to   Year ended 
                                              31 Aug       31 Aug       28 Feb 
                                                2020         2019         2020 
                                             GBP'000      GBP'000      GBP'000 
---------------------------------------  -----------  -----------  ----------- 
 
 Intangibles                                     548            -            - 
 Property, plant and equipment                    47            -            - 
 Trade and other receivables                     470            -            - 
 Impairment of assets held for sale            (782) 
---------------------------------------  -----------  -----------  ----------- 
 Assets held for sale                            283 
 
 Trade and other payables                      (270)            -            - 
 Short-term borrowings                          (12)            -            - 
---------------------------------------  -----------  -----------  ----------- 
 Liabilities held for sale                     (282) 
                                                                -            - 
---------------------------------------  -----------  -----------  ----------- 
 Net assets of discontinued operations             1            -            - 
---------------------------------------  -----------  -----------  ----------- 
 

Prior to classification as held for sale, the net assets of the discontinued operations were written down to their recoverable amount. An impairment of GBP0.8 million was booked and allocated firstly to the non-current assets, with the residual impairment being recognised against the trade and other receivables, to reduce the recoverable amount to GBP1,000. The recoverable amount has been determined based on the advice from the sales agent. The Group expects to incur further costs to sell which are expected to exceed the carrying value of the disposal group disclosed above.

The total basic and diluted earnings per share in respect of discontinued operations is (6.50)p (August 2019: (4.02)p and February 2020: (7.37)p).

During the period the discontinued operations had net operating cash outflows of GBP0.4 million. There were no cashflows relating to financing or investing activities.

7. Taxation

The tax charge for the interim period to 31 August 2020 of GBP0.6 million comprises a current tax charge of GBP0.5 million and deferred tax charge of GBP0.1 million.

Current tax is charged at 15.6% for the six months ended 31 August 2020 (2019: 19%), representing the best estimate of the average annual effective tax rate expected to apply to the full year, applied to the pre-tax income of the interim period.

Current tax for current and prior periods is classified as a current liability to the extent that it is unpaid. Amounts paid in excess of amounts owed are classified as a current asset.

Deferred tax is charged at 19.0% for the six months ended 31 August 2020 (2019: 17.0%). This is based on the UK Government announcement to maintain the corporation tax rate at 19.0%, which was substantively enacted on 17 March 2020. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities. The Directors believe it is probable that there will be sufficient taxable profits in the future to recover the deferred tax assets in full.

8. Earnings per share

 
                                     Six months       Six months   Year ended 
                                      to 31 Aug        to 31 Aug       29 Feb 
                                           2020             2019         2020 
 Total operations                       GBP'000          GBP'000      GBP'000 
-------------------------------------  --------      -----------  ----------- 
 Profit/(loss) for the period/year 
 attributable to equity holders of 
 the parent                               1,105          (2,094)        4,016 
-------------------------------------  --------      -----------  ----------- 
 
                                          pence            pence        pence 
-------------------------------------  --------      -----------  ----------- 
 Basic earnings/(loss) per share           3.54           (6.82)        12.88 
 Effect of dilutive share options        (0.59)                -       (1.24) 
-------------------------------------  --------      -----------  ----------- 
 Diluted loss per share                    2.95           (6.82)        11.64 
-------------------------------------  --------      -----------  ----------- 
 
 
 
 Continuing operations 
-----------------------------------------  -------  -------  ------- 
 Profit for the period/year attributable 
  to equity shareholders of the parent       3,134    (859)    6,315 
-----------------------------------------  -------  -------  ------- 
 
                                             pence    pence    pence 
-----------------------------------------  -------  -------  ------- 
 Basic earnings per share                    10.03   (2.80)    20.26 
 Effect of dilutive share options           (1.68)        -   (1.95) 
-----------------------------------------  -------  -------  ------- 
 Diluted earnings per share                   8.36   (2.80)    18.31 
-----------------------------------------  -------  -------  ------- 
 
 
 
   Underlying operations 
-----------------------------------------  -------  -------  ------- 
 Profit for the period/year attributable 
  to equity shareholders of the parent       5,075    3,422    9,183 
-----------------------------------------  -------  -------  ------- 
 
                                             pence    pence    pence 
-----------------------------------------  -------  -------  ------- 
 Basic earnings per share                    16.25    11.15    29.45 
 Effect of dilutive share options           (2.72)   (1.14)   (2.83) 
-----------------------------------------  -------  -------  ------- 
 Diluted earnings per share                  13.53    10.01    26.62 
-----------------------------------------  -------  -------  ------- 
 

Earnings per share from underlying operations for the comparative periods has been restated following the re-presentation of Offshore, Marine and Adjusting as discontinued operations.

The weighted average number of shares used in basic earnings per share is 31,283,334 (2019: 30,688,161).

The weighted average number of shares used in the diluted earnings per share is 37,509,762 (2019: 34,191,992) after adjusting for the effect of 6,271,418 (2019: 3,492,832) dilutive share options.

Where any potential ordinary shares would have the effect of decreasing a loss per share, they have not been treated as dilutive.

9. Dividends

The following dividends were paid by the Group:

 
                                      Six months    Six months 
                                              to            to   Year ended 
                                          31 Aug        31 Aug       29 Feb 
                                            2020          2019         2020 
                                         GBP'000       GBP'000      GBP'000 
----------------------------------  ------------   -----------  ----------- 
 Ordinary shares of 10 p each 
 Final of 10.0 p per share (2019: 
  10.0 p per share)                             -        3,064        3,066 
 Interim of 5.0 p per share paid                -            -        1,564 
----------------------------------  -------------  -----------  ----------- 
             -                                           3,064        4,630 
 -------------  ---------------------------------  -----------  ----------- 
 

No dividends have been declared or paid in the six months to 31 August 2020.

10. Investment in associate

On 21 June 2019 the Group recognised an investment in associate as a result of the divestment of the Offshore, Marine and Adjusting product lines in return for a significant minority shareholding in AqualisBraemar.

AqualisBraemar ASA is listed on the Oslo Bors, its principal place of business is Oslo and it's registered address is Olav Vs gate 6, 0161, Oslo Norway. AqualisBraemar ASA has one share class and each share carries one vote. At 31 August 2020 the Group's shareholding was 19,240,621 ordinary shares which equates to 27.32% of AqualisBraemar's share capital and 27.32% of voting rights.

The investment in associate has been accounted for using the equity method.

 
 
 
                                                         GBP'000 
                                                           Total 
--------------------------------------------------      -------- 
 
 At 1 March 2020 
 Cost of investment                                        7,315 
 Share of profit in associate                                837 
 Share of associate's other comprehensive expense          (238) 
 Dividends received                                        (322) 
 Foreign exchange movements                                (466) 
------------------------------------------------------  -------- 
 At 31 August 2020                                         7,126 
------------------------------------------------------  -------- 
 
 
                                     GBP'000 
                                       Total 
------------------------------      -------- 
 
 At 1 March 2019                           - 
 Cost of investment                    5,395 
 Private placement                     1,605 
 Share of profit in associate            825 
 Foreign exchange movements              282 
----------------------------------  -------- 
 At 31 August 2019                     8,107 
 Share of loss in associate            (389) 
 Foreign exchange movements            (403) 
----------------------------------  -------- 
 At 29 February 2020                   7,315 
----------------------------------  -------- 
 

The share price of AqualisBraemar on 31 August 2020 was NOK5.70. The market value of the Group's shareholding at 31 August 2020 was GBP9.3 million (NOK109.7 million). Management have reviewed the carrying value of the investment at 31 August 2020 and do not consider this to be impaired.

IAS 28 requires the most recent financial statements of an associate are used for accounting purposes, and that co-terminous information should be used unless it is impractical to do so. AqualisBraemar have a year end of 31 December and for practical reasons AqualisBraemar full year accounts are used for the purposes of the Group's full year reporting at 29 February with adjustments made for any significant transactions and events. For the interim period to 31 August 2020 the Group has included its share of the AqualisBraemar results to 30 June 2020. There were no significant transactions or events between 30 June 2020 and 31 August 2020. At 31 August 2020 AqualisBraemar had no contingent liabilities.

The summarised financial information of AqualisBraemar for the period ended 30 June 2020 is as follows. These figures are taken from AqualisBraemar's Q2 Report 2020, adjusted for any fair value adjustments but before any intercompany eliminations.

 
                                            30 June 2020 
                                                 GBP'000 
                                                   Total 
------------------------------------       ------------- 
 
 Balance sheet 
 Current assets                                   35,224 
 Non-current assets                                1,998 
 Current liabilities                               8,041 
 Non-current liabilities                           1,922 
 
 Net assets (100%)                                27,259 
 
 Group share of net assets (27.32%)                7,448 
 Dividends received from associate                 (322) 
-----------------------------------------  ------------- 
 Carrying value of investment                      7,126 
 
 Income statement 
 Revenues                                         29,855 
 Post-tax profit                                   3,064 
 Total comprehensive income                        2,194 
 
 
 

The share of loss in associate recognised during the year has been adjusted for the elimination of gains and losses on transactions with AqualisBraemar.

11. Trade and other receivables

 
                                        As at     As at     As at 
                                       31 Aug    31 Aug    29 Feb 
                                         2020      2019      2020 
                                      GBP'000   GBP'000   GBP'000 
-----------------------------------  --------  --------  -------- 
 Trade receivables                     26,971    36,388    31,913 
 Provision for impairment of trade 
  receivables                         (2,778)   (4,150)   (3,405) 
-----------------------------------  --------  --------  -------- 
                                       24,193    32,238    28,508 
 Other receivables                      6,975     7,163     6,561 
 Finance lease receivables                772       638       784 
 Accrued income                         1,778     2,283     2,815 
 Prepayments                            1,167     1,969       873 
-----------------------------------  --------  --------  -------- 
                                       34,885    44,291    39,541 
-----------------------------------  --------  --------  -------- 
 

The Directors consider that the carrying amounts of trade receivables approximate to their fair value.

At 31 August 2020 the lifetime expected loss provision for trade receivables and contract assets is GBP0.6 million (29 February 2020: GBP0.9 million). The expected credit loss rates applied at 31 August 2020 are consistent with those applied at 29 February 2020 with the exception of an increase to the loss rate applied to balances over 12 months old. At 31 August 2020 the expected credit loss rate for balances over 12 months was 0.506% (29 February 2020: 0.482%).

12. Financial instruments

   a)    Principal financial instruments 

The principal financial instruments used by the Group are as follows:

   --             Trade and other receivables 
   --             Cash and cash equivalents 
   --             Unlisted investments 
   --             Warrants 
   --             Trade and other payables 
   --             Bank overdrafts 
   --             Revolving credit facility 
   --             Lease liabilities 
   --             Forward currency contracts 
   --             Deferred and contingent consideration 
   b)    Financial instruments measured at fair value 

The 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.

The carrying values of the Group's financial assets and liabilities measured at fair value are:

 
                                  As at 
                                            Level     Level     Level 
                            31 Aug 2020         1         2         3 
                                GBP'000   GBP'000   GBP'000   GBP'000 
 Financial Assets 
 Unlisted investments             1,500         -     1,500         - 
 Warrants                           188         -         -       188 
 Forward currency 
  contracts                       1,288         -     1,288         - 
------------------------   ------------  --------  --------  -------- 
 Total                            2,976         -     2,788       188 
------------------------   ------------  --------  --------  -------- 
 Financial Liabilities 
 Embedded derivative                 63         -         -        63 
------------------------   ------------  --------  --------  -------- 
 Total                               63         -         -        63 
------------------------   ------------  --------  --------  -------- 
 
                                  As at 
                                            Level     Level     Level 
                            29 Feb 2020         1         2         3 
                                GBP'000   GBP'000   GBP'000   GBP'000 
 Financial Assets 
 Unlisted investments             1,500         -     1,500         - 
 Warrants                         1,184         -         -     1,184 
------------------------   ------------  --------  --------  -------- 
 Total                            2,684         -     1,500     1,184 
------------------------   ------------  --------  --------  -------- 
 Financial Liabilities 
 Forward currency 
  contracts                         437         -       437         - 
 Embedded derivative                 90         -         -        90 
------------------------   ------------  --------  --------  -------- 
 Total                              527         -       437        90 
------------------------   ------------  --------  --------  -------- 
 
 

Fair value hierarchy

The level in the fair value hierarchy within which the financial asset or liability is categorised is determined on the basis of the lowest level input that is significant to the fair value measurement.

Financial assets and liabilities are classified in their entirety into one of three levels:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Inputs for the asset or liability that are not based on observable market data.

Unlisted investment

The unlisted investment of GBP1.5 million relates to the Group's investment in the London Tanker Broker Panel. The investment is carried at fair value, being the value of the most recent comparable transaction.

There was no movement in the fair value of the unlisted investment.

Warrants

The fair value of the warrants includes unobservable inputs and are therefore are classified as Level 3. The key assumptions underpinning the fair value of the warrants relate to the future expected share price of AqualisBraemar ASA, the GBP:NOK and GBP:USD exchange rate and the future performance of both AqualisBraemar as a whole, and of the former Braemar Marine and Adjusting product lines. The fair value has been determined using the Black-Scholes valuation model. The inputs in the Black-Scholes valuation model are:

   --             The share price of AqualisBraemar           NOK 3.9 
   --             The exercise price of the option                NOK 0.01 
   --             The length of the exercise period              0.88 years 
   --             The compound risk-free interest rate 
   --             The annualised standard deviation 

The fair value of the warrants was decreased from GBP1.2 million on 29 February 2020 to GBP0.2 million on 31 August 2020 on the basis of forecasts prepared by the management of AqualisBraemar at 30 June 2020. The fair value of the warrants is determined by a number of factors including the future performance of the combined business and the former Adjusting and Marine product lines. A loss of GBP1.0 million has been recognised in specific items, see Note 5.

Forward currency contracts

The fair value of the forward currency contracts are based on prices quoted by the counterparty within these contracts versus the market rate at the Balance Sheet date and have therefore been classified as Level 2 in the fair value hierarchy.

The Group manages the exposure to US dollar currency variations by spot and forward currency sales and other derivative currency contracts.

At 31 August 2020 the Group held forward currency contracts to sell $43.0 million at an average rate of $1.2810/GBP1.

At 29 February 2020 the Group held forward currency contracts to sell US$43.7 million at an average rate of US$1.309/GBP1.

The net fair value of forward currency contracts that are designated and effective as cash flow hedges amount to a GBP1,288,000 Asset (29 February 2020: GBP437,000 liability).

Amounts of GBP958,000 have been charged ( 29 February 2020 : GBP638,000 charged) to the Income Statement in respect of forward contracts which have matured in the period.

Embedded derivative

The convertible loan note instruments issued on the acquisition of NAVES contain an embedded derivative, being a Euro liability of principal and interest. The equity value of the underlying derivative is not considered closely related to the debt host, therefore the loan note is considered to be a financial liability host with an embedded derivative convertible feature which is required to be separated from the host. The fair value of the embedded derivative includes unobservable inputs and are therefore classified as Level 3. They key assumptions underpinning the fair value of the embedded derivative relate to the expected future share price of the Group and the GBP:EUR exchange rate. The fair value has been determined using the Black-Scholes valuation model.

GBP27,000 has been charged to the Income Statement in respect of the fair value movement of the embedded derivative from 29 February 2020 to 31 August 2020.

   c)    Financial instruments not measured at fair value 

The Group's financial assets and liabilities that are not measured at fair value are held at amortised costs. Due to their short-term nature, the carrying value of these financial instruments approximates their fair value.

The carrying values of the Group's financial assets and liabilities measured at amortised cost are:

 
                                 As at     As at 
                                31 Aug    29 Feb 
                                  2020      2020 
Financial assets               GBP'000   GBP'000 
----------------------------  --------  -------- 
Cash and cash equivalents       12,687    28,749 
Trade and other receivables     35,840    39,541 
----------------------------  --------  -------- 
Total                           48,527    68,290 
----------------------------  --------  -------- 
 
 
                                           As at     As at 
                                          31 Aug    29 Feb 
                                            2020      2020 
Financial liabilities                    GBP'000   GBP'000 
--------------------------------------  --------  -------- 
Trade and other payables                  25,807    48,031 
Deferred and contingent consideration     10,946    10,369 
Loans and borrowings                      44,512    59,701 
--------------------------------------  --------  -------- 
Total                                     81,265   118,101 
--------------------------------------  --------  -------- 
 

13. Share capital

 
                         Number of   Ordinary     Share 
                            shares     Shares   Premium     Total 
                       (thousands)    GBP'000   GBP'000   GBP'000 
-------------------   ------------  ---------  --------  -------- 
 At 1 March 2020            31,673      3,167    55,805    58,972 
 Issue of shares                36          5         -         5 
 At 31 August 2020          31,709      3,172    55,805    58,977 
--------------------  ------------  ---------  --------  -------- 
 
 
 At 1 March 2019            31,436      3,144    55,805    58,949 
 Issue of shares               108         10         -        10 
 At 31 August 2019          31,544      3,154    55,805    58,959 
--------------------  ------------  ---------  --------  -------- 
 

On 31 August 2020 the total number of ordinary shares of 10 pence each in issue increased from 31,673,829 to 31,709,205. These shares were issued by the Company at nominal value and were used to settle shares that had vested in relation to the restricted share plan implemented to retain staff following the merger between Braemar Shipping Services plc and ACM Shipping Group plc.

14. Other reserves

 
                       Capital redemption                           Translation                            Total other 
                                  reserve   Merger reserve              reserve   Hedging reserve             reserves 
                                  GBP'000          GBP'000              GBP'000           GBP'000              GBP'000 
--------------------  -------------------  ---------------  -------------------  ----------------  ------------------- 
 At 1 March 2020                      396           21,346                1,385             (848)               22,279 
 Cash flow hedges                       -                -                    -                 -                    - 
 - Amounts recycled 
  to profit or loss                     -                -                    -               958                  958 
 - Fair value gains 
  in the period                         -                -                    -             1,725                1,725 
 - Deferred tax on 
  items taken to 
  equity                                -                -                    -             (327)                (327) 
 Foreign exchange 
  differences                           -                -              (2,516)                 -              (2,517) 
 At 31 August 2020                    396           21,346              (1,131)             1,508               22,119 
--------------------  -------------------  ---------------  -------------------  ----------------  ------------------- 
                       Capital redemption                           Translation                            Total other 
                                  reserve   Merger reserve              reserve   Hedging reserve             reserves 
                                  GBP'000          GBP'000              GBP'000           GBP'000              GBP'000 
 At 1 March 2019                      396           21,346                1,218             (103)               22,857 
 Cash flow hedges 
 - Fair value losses 
  in the period                         -                -                    -           (1,056)              (1,056) 
 Foreign exchange 
  differences                           -                -                1,344                 -                1,344 
 At 31 August 2019                    396           21,346                2,562           (1,159)               23,145 
--------------------  -------------------  ---------------  -------------------  ----------------  ------------------- 
 
 

All other reserves are attributable to the equity holders of the parent company.

15. Contingencies

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.

16. Related parties

The Group's related parties are unchanged from 29 February 2020 and there have been no significant related party transactions in the six months ended 31 August 2020. For further information about the Group's related parties, please refer to the Group's Annual Report 2020.

17. Events after the reporting date

There were no reportable events after 31 August 2020.

Statement of Directors' responsibilities

We confirm that to the best of our knowledge:

-- the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; and

   --     the interim management report includes a fair review of the information required by: 

(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board

 
 Ronald Series , Executive Chairman   Nicholas Stone, Chief Operating 
                                                              Officer 
                                                 and Finance Director 
 
 
 
 

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