Annual Report and Notice of AGM

RNS Number : 5457T

Braemar Shipping Services PLC

20 July 2020

 

BRAEMAR SHIPPING SERVICES PLC

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

20 July 2020

Annual Report and Notice of General Meeting

Braemar Shipping Services Plc (LSE: BMS), a leading international provider of shipbroking, financial advisory, logistics and engineering services to the shipping and energy industries, today announces that it has published its Annual Report and Accounts for the year ended 29 February 2020 ("Annual Report"), together with the Notice of Annual General Meeting ("AGM").

The AGM will be held at the offices of the Company at One Strand, Trafalgar Square, London, WC2N 5HR at 2:00 p.m. on Wednesday 19^th August 2020. Due to the ongoing COVID-19 pandemic and current government advice on non-essential travel and social distancing, the AGM will be a closed meeting and shareholders will not be permitted to attend.

Shareholders are encouraged to exercise their voting rights by appointing a proxy using the Form of Proxy provided with the AGM Notice and are strongly advised to appoint the chairman of the meeting as their proxy, as attendance by other proxies is unlikely to be possible.

The Annual Report and AGM Notice will be available on the Company's website ( www.braemar.com ) and, together with the Form of Proxy for the AGM, will be submitted to the National Storage Mechanism and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism .   Copies of these documents have also been posted today to those of the Company's shareholders that have elected to continue to receive hard copies.

Appendix

This appendix sets out the disclosures that the Company is required to make to comply with Disclosure and Transparency Rule (DTR) 6.3.5R, namely: the principal risks and uncertainties facing the Company; the directors' responsibility statement made in respect of certain sections of the Annual Report; and a statement regarding related party transactions.  This information has been extracted from the Annual Report in unedited text and is not a substitute for reading the full Annual Report.

Page references and note references below refer to page numbers and numbers of notes to the accounts in the Annual Report.

Legal Entity Identifier: 213800EV6IKTTHJ83C19

Principal risks and uncertainties

Effective risk management forms an integral part of how we operate. It is essential for delivering our strategic objectives as well as protecting our relationships and reputation.

The Group's risk management framework

The Board is responsible for managing the Group's risk, overseeing the internal control framework and determining the nature and extent of the principal risks the Company is willing to take in order to achieve its long-term objectives. The Group's risk management framework and internal controls are continually monitored and reviewed by the Board and the Audit Committee. During the year, the Group created a new role of Group Head of Internal Audit and Group Risk and Compliance Manager to lead the Group's risk management, internal controls and compliance functions. The Group also conducted an extensive review of its risk, compliance and internal control framework, which has led to a number of policies, processes and procedures being updated and rolled out across the Group - a process that will continue in the coming year.

The Board is committed to maintaining a reputation for the highest standards of conduct in all aspects of its business, but in considering the other matters set out in Section 172 of the Companies Act 2006, the Directors were mindful that the approach must be balanced with the interests of the Group's employees and the need to foster the Group's business relationships. As such, the Group's policies and procedures are designed to ensure that the level of risk to which the Group is exposed is consistent with the Group's risk appetite and aligned with the Group's long-term strategy, but also to avoid a disproportionate administrative burden on employees, clients or counterparties.

Risk management process

The Group's risk management approach or framework incorporates both bottom-up and top-down identification, evaluation and management of risks. Within the framework:

· divisional management teams have initial responsibility for identifying, monitoring and updating business risks; and

· key specialist personnel at Group level review areas such as IT, human resources, legal and finance in order to consider any risks that are not addressed at a divisional level.

The Group's risk management framework is managed via an online system that is accessible to Group and Division management teams globally. The system allows for:

· Company-wide real-time updating;

· ongoing monitoring of risks and mitigation activities at both Group and divisional levels; and

· risk management reporting at office location, Division and Group levels.

The Group's risk management framework uses a matrix approach to assess both the likelihood and the impact of identified risks. The matrix produces a score which is used to evaluate collectively the extent of all risks within a similar categorisation or certain profile, and to illustrate the effectiveness of our mitigation of a single risk by capturing the gross and current (net of mitigation controls) score of each individual risk.

All identified risks are aggregated with related events and circumstances and reviewed to assess their potential impact on the Group's strategic objectives and the resources required to manage them effectively. The process also evaluates the timescale over which emerging risks may occur and requires consideration of how such risks can be best managed and mitigated. The extent of controls and mitigation as well as the potential for a material effect on the market value of the Group are then assessed. By definition, unmitigated risks can be significant, but our control processes and monitoring actions reduce the risk level. The process helps rank the risks (factoring in their potential impact and likelihood, as well as the timescale in which they may occur), which are then further considered by the Risk Committee, the Audit Committee and the Board who also independently consider risks to produce the principal risks, which are set out on pages 28 to 30.

Risk mitigation

The Group takes various measures to mitigate risk. Key mitigation steps taken in our risk management process throughout the year included:

· maintaining appropriate insurance cover;

· establishing Group budgets on an annual basis and approved by the Board;

· monitoring the performance of the Group and the individual businesses against budget and reforecasts throughout the year, including investigation of any significant variances;

· an internal system of checks and authorisations and independent audits which are conducted in relation to the ISO 9001:2000 certification held by the Logistics Division;

· operating a Group-wide whistleblowing procedure;

· regular reporting of treasury management activity to the Board by the Group Finance Director (noting that the Group does not enter speculative treasury transactions);

· using common Group systems for accounting, human resources and operations activities, supported by a global IT team;

· monitoring of contractual risks by the legal team;

· succession planning and strategic recruitment supported by the human resources team; and

· enhancing and strengthening our Group governance framework, including reviewing and updating Group policies, procedures and process, where appropriate, and delivering training so that all employees are familiar with the requirements.

Principal risks

The Directors confirm that they have carried out a robust assessment of the principal and emerging risks facing the Company. The most significant risks to which the Board considers the Company is exposed are set out below. The impact of COVID-19 has increased the risk in a number of these categories, which are marked with an asterisk (*).

		Summary of impact				Mitigating control and management actions
Geopolitical and macroeconomic Braemar's businesses may be negatively impacted by geopolitical and/or macroeconomic issues, such as climate change, changes in the crude oil price, restrictions in global trade due to pandemics such as COVID-19, sanctions and changes in supply and demand.		A downturn in the world economy could result in reduced transaction volumes and lower revenue. Changes in shipping rates and/or changes in the demand or pricing of commodities could affect supply activity.				The Group's diversification on a sector and geographic basis reduces dependency on individual business areas. Continued monitoring to ensure the Group is appropriately resourced across its activities and geographies. Ongoing management of costs based on current and reasonably foreseeable market conditions.
		Change from 2019 Increased	Impacted by COVID-19 *	Rationale Global pandemic has imposed some physical restrictions on trade and is likely to cause a reduction in global GDP.
Currency fluctuations The Group is exposed to foreign exchange risk as a result of a large proportion of its revenue being generated in US dollars while the cost base is in multiple currencies.		A change in exchange rates could result in a financial gain or loss.				The Board monitors macroeconomic issues to assess possible foreign exchange movements. Forward currency contracts are entered into to mitigate the risk of adverse currency movements.
		Change from 2019 Increased
Financial capacity Limited financial capacity could result in the Group being unable to execute all of its strategic objectives.		Without sufficient financial resources the Group cannot execute all of the growth opportunities that may be available.				All identified growth opportunities prioritised to ensure that resources are allocated to opportunities with the best potential return. Regular review of debt levels and dividend policy.
		Change from 2019 Increased	Impacted by COVID-19 *	Rationale Ability to raise funds may be reduced in the short term.
Financial liquidity The Group could experience liquidity problems as a result of the extended lead times certain revenue streams require to convert to cash.		The Group could be cash constrained, resulting in reduced investment, headcount, dividends, and not achieving its strategic objectives.				Continued working capital management and monitoring across the Group, with coordinated resolution of any liquidity deficits. Continue the consolidation of banking relationships and the implementation of global pooling capabilities. Ensure operation of, and compliance with, robust credit controls across the Group, including adherence to agreed payment terms.
		Change from 2019 Increased	Impacted by COVID-19 *	Rationale Revenue may be reduced, leading to lower cash balances. Client liquidity may also be constrained and lead to delays in converting invoices to cash and an increased bad debt charge.
Failure to attract and retain personnel Failure to identify, attract and retain skilled personnel could result in failure to deliver business objectives and to maintain client relationships.		If key staff leave the Group, they are likely to take "their" business with them, resulting in a loss to the Group. If new staff are not attracted to the Group, then rate of growth may be limited.				Develop a culture of engagement and professional development, including career path and succession planning. Maintenance of competitive remuneration packages, including use of deferred equity awards.
		Change from 2019 No change
Disruptive technology The risk of technological change, and increased customer demands for enhanced technological offerings, could render aspects of our current services obsolete, potentially resulting in loss of customers.		Relationships could be devalued and replaced by disruptive technology platforms, resulting in increased competition and consequent price reductions.				Increased investment in business applications within the Shipbroking and Logistics Divisions. Applications and reporting tools have been developed internally. Increased investment in data analytics. Staff with technological expertise retained/recruited. External consultants used where appropriate. Ongoing monitoring of external developments. Investigating cooperation with technology partners.
		Change from 2019 Increased
Cultural behaviours Inadequate policies and reward structures could incentivise negative behaviours, create internal conflict, and could lead to reputational damage.		Business value and earnings could be reduced.				Regular review of policies, including the Employee Handbook, which set out behavioural expectations. Annual review, with external benchmarking, helps to ensure remuneration packages continue to be appropriate and competitive. Ongoing monitoring to ensure completion of employee annual training plans, compliance with all relevant Group policies and completion of attestation requirements across the Group.
		Change from 2019 No change
Corporate governance and change management Corporate governance framework or management structure ineffective in introducing change, managing our business, and achieving the Group's strategic objectives.		The business may not operate as effectively, resulting in lower returns. Internal and external relationships could be damaged/missed. Business development opportunities could be damaged.				Regular review of corporate governance framework, management structure, succession planning and job mapping and responsibilities at Group and divisional levels for continuous improvement and alignment with best practice. Creation and appointment of new oversight roles to enhance the effectiveness of the internal audit and compliance processes and changes within management infrastructure to make career paths more transparent.
		Change from 2019 Increased
Compliance with laws and regulations The Group is exposed to the risk of breaches of requirements, such as those included in the UK Bribery Act, the Proceeds of Crime Act ("POCA") 2002 (UK Anti-Money Laundering regime), and the General Data Protection Regulation ("GDPR").		Breaches could result in fines, sanctions and loss of the ability to operate.				Ongoing monitoring of legal and regulatory compliance across the Group. Group-wide training programme to help ensure employee understanding of all relevant legal and regulatory obligations. Compliance with our policies, relevant laws and regulations (and seeking specialist advice on the requirements where appropriate). Ongoing monitoring to ensure insurance cover is maintained at adequate levels.
		Change from 2019 No change
Cybercrime and data security Cybercrime could result in loss of business assets or disruption to the Group's IT systems and its business. Lack of appropriate data security could result in loss of data.		Loss of service and associated loss of revenue. Reputational damage. Potential for loss of cash due to fraud or phishing.				Robust security measures are in place to detect and protect against cybercrime, including: - standardised best-in-class security solutions for firewalls, mail control, anti-virus, server protection and access management. - continuous improvement of security solutions and processes to maintain security accreditations.
		Change from 2019 No change	Impacted by COVID-19 *	Rationale Pandemic has closed office buildings. Employees required to work remotely. This new way of working could increase exposure to potential cyber threats, but has been mitigated by successful transition to home working.
Major business disruption The risk of disruption to our business due to a disaster or unplanned events occurring.		The business may be unable to operate as effectively as usual, resulting in financial loss.				Regular monitoring of systems and back-up arrangements including business continuity and disaster recovery testing. Multisite operations maintained including the facility for remote working, which reduces dependency on individual sites/personnel. Appropriate insurance maintained. Continued investment moving activity to the cloud.
		Change from 2019 No change	Impacted by COVID-19 *	Rationale Pandemic has closed office buildings with employees working remotely. Successful implementation of home working gives more confidence in the business resilience.

Responsibility statement of the directors in respect of the annual financial report

The directors hereby confirm that to the best of their knowledge:

· the financial statements, prepared in accordance with IFRSs and Article 4 of the IAS Regulation, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

· the Strategic Report and Directors' Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation, taken as a whole, together with a description of the principal risks and uncertainties that they face.

The directors confirm that they consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for the Company's shareholders to assess the Group's position, performance, business model and strategy.

Related party transactions

During the period the Group entered into the following transactions with joint ventures and investments:

		2020			2019
	Recharges to/(from) £'000	Dividends £'000	Balance due from £'000	Recharges to/(from) £'000	Dividends £'000	Balance due from £'000
London Tanker Broker Panel	310	-	-	330	-	-
AqualisBraemar	669	-	175	-	-	-

Recharges to AqualisBraemar consist primarily of rent, IT services and HR services in accordance with a transitional services agreement. Included in the net recharge to AqualisBraemar ASA is a fee payable to the Group's Executive Chairman of £15,000.

The balance due from AqualisBraemar is unsecured, interest free and immediately repayable.

All recharges to related parties are carried out on an arm's-length basis.

Key management compensation is disclosed in Note 4.

Risorto GmbH is controlled by the management of Braemar Naves Corporate Finance GmbH. The amount charged by Risorto GmbH in the year to the Group was €1.1 million (2019: €0.6 million) and the amount charged to Risorto GmbH in the year was less than €0.1 million (2019: less than €0.1 million). The balance owing to Risorto GmbH as at 29 February 2020 was €nil (2019: €nil).

The Company has applied the disclosure exemption of FRS 101 in respect of transactions with wholly owned subsidiaries. The amount charged to AqualisBraemar by the Company was £275,000 (2019: nil) and the balance due from AqualisBraemar to the Company at 29 February 2020 was £146,000 (2019: nil).

Key management compensation

The remuneration of key management is set out below. Further information about the remuneration of individual Directors is provided in the Directors' Remuneration Report on pages 44 to 58. Key management represents the Board of the Company.

	2020 £'000	2019 £'000
Salaries, short-term employee benefits and fees	1,011	672
Other pension costs	51	64
Share-based payments	-	33
One-off costs related to board changes	468	759
	1,530	1,528
Number of key employees	5	5

Retirement benefits are accruing to one (2019: one) member of key management in respect of a defined contribution pension scheme.

For further information, contact:

Braemar Shipping Services Plc
Ron Series, Executive Chairman	Tel [phone]
Nick Stone, Finance Director
Peter Mason, Company Secretary
finnCap
Matt Goode/ James Thompson/ Kate Washington	Tel [phone]
Buchanan
Charles Ryland / Victoria Hayns / Stephanie Watson / Matilda Abraham	Tel [phone]

Notes to Editors:

About Braemar Shipping Services Plc

Braemar Shipping Services Plc is a leading international provider of shipbroking, financial advisory, logistics and engineering services principally 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 .

 

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