Annual Report and Notice of General Meeting

RNS Number : 5896B

Braemar Shipping Services PLC

07 June 2019

 

BRAEMAR SHIPPING SERVICES PLC

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

7 June 2019

Annual Report and Notice of General Meeting

Braemar Shipping Services plc (LSE: BMS), a leading international provider of broking, financial, consultancy, technical and logistics services to the shipping, marine, energy, offshore and insurance industries, today announces that it has published its Annual Report and Accounts for the year ended 28 February 2019 ("Annual Report"), together with the Notice of Annual General Meeting ("AGM").

The AGM will be held at the offices of Buchanan Communications, 107 Cheapside, London EC2V 6DN at 2 pm on Wednesday 3 July 2019.

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: www.morningstar.co.uk/uk/nsm.  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 2019 Annual Report.

Legal Entity Identifier: 213800EV6IKTTHJ83C19

Principal risks and uncertainties

COMPREHENSIVE APPROACH TO RISK MANAGEMENT

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 Directors have carried out a thorough assessment of the risks that the Group faces. The management and reporting of these risks enable the Audit Committee to review their nature and extent. The risk monitoring process has been in place throughout the year and up to the date of approval of the Annual Report.

Risk management process

During the year the Group implemented a digital risk management framework solution. The principles of this system were fundamentally the same as the Group's existing risk management framework, but with the added advantage of acting as a central storage facility that allows for real- time updates and continuous monitoring of risks.

Our approach to risk management incorporates both bottom-up and topdown review of the identification, evaluation and management of risks. Within the risk management framework, initial responsibility for identifying, monitoring and updating risks is delegated to individuals in the divisional management teams. At Group level, key specialist personnel covering areas such as IT, HR, legal and finance consider risks to our strategic objectives which are not addressed in the divisions. The results of this risk framework form the basis of the risks identified on pages 35-37.

The Group takes various measures to mitigate risk; the key steps in the risk management process undertaken during the year include:

·    Maintaining appropriate insurance cover.

·    The Group budget which is prepared annually and approved by the Board.

·    Regular financial reforecasts prepared 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 significant variances.

·    An internal system of checks and authorisations and independent audits which are conducted in relation to the ISO 9001:2000 certification held in the Logistics and Technical divisions.

·    Operation of the Group's whistleblowing procedure.

·    Treasury management activity which is regularly reported to the Board by the Finance Director. Note that the Group does not enter into speculative treasury transactions.

·    Using common Group systems covering accounting, HR and operations supported by a global IT team.

·    Monitoring contractual risk by Group General Counsel.

·    Succession planning and strategic recruitment supported by the Group HR team.

The Group's risk management framework uses a matrix approach to determine 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 and reviewed to assess their impact on the Group's strategic objectives and the resources required to manage them effectively. Principal risks are aggregated together with associated issues or areas of uncertainty. 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 management actions reduce the risk level.

The divisional management teams as well as Group management (which includes the Chief Executive, Finance Director and General Counsel) monitor risks regularly and considers the appetite and tolerance for them in the light of their potential impact on the Group.

Principal risks

Description of risk	Summary of impact	Mitigating control and management actions	Assessed risk level and change
Macroeconomic changes All of our businesses are subject to the impact of macroeconomic changes, such as changes in the crude oil price, restrictions in global trade or changes in supply and demand. Divisions: S F L E	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 strategy of diversification on a sector and geographic basis. Ongoing management of costs based on current and reasonably foreseeable market conditions. Continued monitoring to ensure that appropriately structured teams are located across all divisions and geographies.	Increased
Financial liquidity The Group requires a significant amount of working capital. Certain revenue streams can have a long lead time to convert to cash. Such delays could cause liquidity problems for the Group. Divisions: S F L E	All divisions have seen changes in business and working capital requirements. Debt collection is critical across the Group. All borrowing facilities are with one UK financial institution, whilst significant amounts of funds are held outside the UK in other institutions. Ongoing repatriation of funds to the UK to enable the Group to operate within its banking covenants.	Continued working capital management and monitoring across the Group. Senior management intervention to assist in recovery of problematic debtors. Maintenance of Group treasury management controls to monitor cash positions worldwide and coordination of cash repatriations to the Group. Continuing the consolidation of banking relationships and the implementation of global pooling capabilities.	No change
Management Capability Insufficient senior management bandwidth (quality and quantity) could lead to poor execution of the Group's strategic objectives or lost business opportunities. Divisions: S F L E	Business value and earnings could be reduced if key executives are not available to manage business opportunities.	Continue development of career path and succession planning for all senior management positions. Continuation of career path and succession planning to ensure suitable management structures are maintained across the Group. Maintain competitive remuneration packages, including use of deferred equity awards.	Decreased
Corporate skillsets Failure to attract and retain skilled people could result in loss of key client relationships or failure to cultivate new client relationships. Divisions: S F L E	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.	Continue development of career path and succession planning for all staff. Maintain competitive remuneration packages, including use of deferred equity awards.	No change
Financial capacity Inadequate financial capacity to execute the Group's strategic objectives. Divisions: S F L E	Without sufficient financial resources the Group cannot execute all of the growth opportunities that may be available.	Ensure that all divisional growth opportunities and strategies are regularly communicated to senior management. Complete strategic resource analysis of all identified growth opportunities to ensure that resources are allocated to opportunities with the best return.	Increased
Technological changes The threat of technological change could render aspects of our current services obsolete. Divisions: S E	Relationships could be devalued and replaced by disruptive technology platforms, resulting in increased competition and consequent price reductions.	Continue to develop and promote the Braemar corporate brand and values. Continue to recruit and retain talented and experienced staff. Developing our own technological expertise and strategy. Seeking appropriate acquisition opportunities. Engaging with external consultants to assess market developments.	Increased
Currency fluctuations A large proportion of the Group's revenue is generated in US dollars while the cost base is in multiple currencies. Divisions: S E	The Group is exposed to fluctuations in the value of US dollars.	Monitor foreign exchange movements. Implement the Group's hedging strategy over a rolling twelve-month period.	No change
Remuneration Implementation of inappropriate incentive and reward structures could incentivise negative behaviours, such as short-termism, or create internal conflict. Divisions: S	Business value and earnings could be reduced.	Continue to maintain appropriate and competitive remuneration packages.	No change
Communication Poor communication within the Group could impede the execution of the Group's strategic objectives. Divisions: S F L E	Internal and external relationships could be damaged. Contract management and business development opportunities could be damaged.	Continue to develop and prioritise cross-divisional communication and business development opportunities.	No change
Legal and regulatory impact Legal or regulatory breaches could result in fines and sanctions or, in the worst case, loss of ability to operate. Examples could include noncompliance with the Bribery Act or Modern Slavery Act on inadvertently dealing with sanctioned individuals or entities. Divisions: S F L E	Reputational damage to the Braemar brand at Group or divisional level.	Monitor and report on legal and regulatory compliance across the Group. Train all staff to be aware of legal and regulatory obligations. Maintain adequate levels of insurance cover.	No change
Cyber crime Cyber crime could result in disruption to the Group's IT systems. Divisions: S F L E	Loss of service and associated loss of revenue. Reputational damage. Potential for loss of cash due to fraud or phishing.	Implement robust security measures to prevent cyber crime. Maintain archiving solutions so data lost in the event of a breach can be recovered quickly and efficiently. Key information retained in multiple systems and locations.	Increased

S = Shipbroking, F = Financial, L = Logistics, E = Engineering

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

We confirm that to the best of our knowledge:

·    the financial statements, prepared in accordance with the applicable set of accounting standards, 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 issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the group's position and performance, business model and strategy.

Related party transactions

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

	2019			2018
Group	Recharges to/(from) £'000	Dividends £'000	Balance due from £'000	Recharges to/(from) £'000	Dividends £'000	Balance due from £'000
London Tanker Broker Panel	330	-	-	325	-	-

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

Key management compensation is disclosed in Note 4.

Following the acquisition of NAVES Corporate Finance GmbH in the year, the Group has an additional related party, Risorto GmbH, which is controlled by its management. The amount charged by Risorto GmbH in the year to the Group was €0.6 million (2018: €0.8 million) and the amount charged to Risorto GmbH in the year was less than €0.1 million (2018: less than €0.1 million). The balance owing to Risorto GmbH as at 28 February 2019 was €nil (2018: €0.7 million).

The Company has applied the disclosure exemption of FRS 101 in respect of transactions with wholly owned subsidiaries. The Company did not enter into any related party transactions aside from those with wholly owned subsidiaries.

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 52 to 56. Key management represents the Group Board of Directors of the Company.

	2019	2018
	£'000	£'000
Salaries, short-term employee benefits and fees	672	862
Other pension costs	64	86
Share-based payments	33	-
One-off costs related to board changes	759	-
	1,528	948
Number of key employees	5	7

Retirement benefits are accruing to one (2018: one) member of key management in respect of a defined contribution pension scheme.

For further information contact:

Braemar Shipping Services plc

James Kidwell, Chief Executive                                                                  Tel [phone]

Nick Stone, Finance Director

Peter Mason, Company Secretary

Shore Capital

Robert Finlay / Antonio Bossi / Henry Willcocks                                  Tel [phone]

Buchanan

Charles Ryland / Stephanie Watson / Matilda Abraham                  Tel [phone]

About Braemar Shipping Services plc

Braemar Shipping Services plc is a leading international provider of knowledge and skill-based services to the shipping, marine, energy, offshore and insurance industries.  Founded in 1972, Braemar employs approximately 750 people in more than 60 locations (although this will fall by approximately 250 people and 30 locations following the disposal of the Technical business units) 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, visit www.braemar.com

 

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