Final Results

Braemar Seascope Group PLC 05 May 2004 For immediate release 5 May 2004 Results - Year ended 28 February 2004 Braemar Seascope Group plc (the 'Group'), a leading provider of shipping services, today announced full year results for the year ended 28 February 2004. HIGHLIGHTS •Turnover up to £30.8m (2003: £26.9m) •Pre-tax profit before goodwill and exceptionals £5.2m (2003: £4.0m) •Pre-tax profit £4.1m (2003: £3.5m) •Adjusted EPS before goodwill and exceptionals 20.16p (2003: 14.43p) •Basic EPS 13.96p (2003: 10.36p) •Net cash inflow from operations before financing £1.2m (2003: £Nil) •Final dividend 8.00p per share, full year 13.00p (2003: 12.00p) •Further expansion in China - new office in Beijing opened in April 2004 Commenting on the results and outlook, Sir Graham Hearne, Chairman, said: 'Shipping has been enjoying a period of high demand largely driven by increased shipments of raw materials and oil particularly to China. As a result, adjusted profits before goodwill and tax increased by 29% in spite of the weakening of the US dollar over the year. The Board is recommending an increase in the final dividend to 8p per share.' 'We view the outlook positively across all our major broking areas, but particularly from Dry Cargo and Newbuilding. In addition the first half of 2004/ 5 will benefit from the significant volume of second hand sale and purchase business concluded in the final quarter of 2003/4 but booked for delivery in the current year. ' For further information, contact: Braemar Seascope Group plc Alan Marsh Tel 020 7535 2650 James Kidwell Tel 020 7535 2881 Aquila Financial Patrick d'Ancona Tel 020 7849 3326 Peter Reilly Tel 020 7849 3319 Charles Stanley & Company Limited Rupert Dearden Tel 020 7953 2000 Philip Davies Tel 020 7953 2000 Notes to editors: Through its subsidiaries Braemar Seascope Group plc's services provided comprise: Braemar Seascope Specialised shipbroking and consultancy services to Limited international ship owners and charterers in the sale & purchase, tanker, offshore, container and dry bulk markets. www.braemarseascope.com Cory Brothers Liner and port ship agency services within the UK. Shipping Agency Limited www.cory.co.uk Wavespec Marine engineering and naval architecture consultants to the Limited shipping and offshore markets. www.wavespec.com PRELIMINARY ANNOUNCEMENT - YEAR ENDED 28 FEBRUARY 2004 CHAIRMAN'S STATEMENT Shipping began to enjoy a period of exceptional strength during the latter part of 2003 and this has continued into 2004. Both the dry and wet freight markets reached historic peaks and have since sustained levels above their long-term averages. The rise in the earnings capability of shipping has also boosted ship values, and stimulated newbuilding and ship sales activity. The increase in demand for major raw materials caused a steady rise in the dry bulk market in the first half, which accelerated in the second half, with shortages of shipping capacity throughout the autumn and winter of 2003 driven largely by the Chinese economy. The Deep Sea tanker market experienced volatility in freight rates over the year. In the early part of 2003 tanker freight rates rose significantly as a result of the disruption of oil supply from Venezuela and the anticipation of war in Iraq. Subsequently, freight rates weakened as expected but the final quarter saw a substantial improvement in rates, assisted by increased crude oil imports into the US. During the year the Dry Cargo department was strengthened and new broking offices have been established in Shanghai and most recently in Beijing, along with a joint venture in Delhi on tanker chartering. All of these build on our existing position in the shipping markets and while none has made any significant contribution in the current year, we expect each to add positively in the coming year. The acquisition of the ship agency, Cory Brothers Shipping Agency Limited ('Cory') in July 2003, forms a new arm for the group and is an initial step in extending the range of shipping services we provide. Revenue for the year was £30.8m (2003: £26.9m) and profit before tax (before goodwill amortisation and exceptional income) was £5.2m compared with £4.0m in the prior year. Profit before tax was £4.1m (2003: £3.5m). Cory contributed £2.7m of sales in seven months and an operating profit of £26,000, which is in line with expectations. Adjusted earnings per share (before exceptionals and amortisation) were 20.16 pence (2003: 14.43p) and basic earnings per share were 13.96 pence (10.36 pence). Net cash inflow from operations before financing increased to £1.2m (2003: Nil) contributing to the improvement in net funds which ended the year at £2.0m (2003: £2.5m net debt). The Board is recommending a final dividend of 8.0 pence per ordinary share, which together with the 5 pence interim dividend takes the total dividend for the year to 13.0 pence (2003: 12.0 pence). I recognise these results would not have been achieved without the hard work of the staff throughout the Group and the Board would like to express its gratitude for the commitment they have shown during the year. Outlook The strength in the shipping markets is underpinned by the increased demand for raw materials and oil. We view the outlook positively across all our major broking areas. If these conditions persist, and provided there is no adverse exchange rate impact, broking should continue to prosper, particularly Dry Cargo and Newbuilding. In addition the first half of 2004/5 will benefit from the significant volume of second hand sale and purchase business concluded in the final quarter of 2003/4 but for delivery in the current year. Increasingly there are opportunities to broaden our business within shipping and we therefore expect to continue expanding geographically and through the enhancement of our existing teams. We remain committed to the development of other shipping services where we can add value. CHIEF EXECUTIVE'S OPERATIONAL AND FINANCIAL REVIEW All areas of our business performed well during the year in markets, which for the most part, were very favourable. It is pleasing also that a significant part of the activity in the year will benefit the earnings in 2004/5. In particular our forward book has increased substantially through newbuilding orders placed and dry cargo time charter business contracted and also continued period and contract business for tankers. The final quarter of the financial year also saw some significant sale and purchase business concluded for delivery in the first half of the current year. Chartering The Deep Sea tanker chartering market in 2003/4, apart from a brief dip in the summer months immediately following the Iraq war, was strong and provided owners of large vessels with average earnings approximately double those achieved in the previous year. Demand for crude oil remained high, while inventories in the USA were low, as the effects of the strike in Venezuela continued to be felt well into the year, and replacement supplies involved considerably greater tonne /miles. From the autumn onwards the tanker market rebounded and held its ground through the winter months. Our Deep Sea desk was able to benefit from the increased volume of activity and high freight rates. The surge in the Chinese economy and consequent thirst for energy were significant drivers in the tanker freight market as China, whose imports were up 36% on 2002, established a position as the world's second largest importer of oil. Forecasts of global oil demand continue to rise and, while prices remain high, OPEC has produced well in excess of its official output ceiling, regardless of threats to cut back. As with the Deep Sea market the Short Sea market experienced volatility during the year with freight rates currently remaining strong. The Chemical and Gas departments both showed a significant increase in fixtures and contracted volumes relative to the prior year. The gas market in general is seeing improved freight levels throughout most areas and confidence is high for the continued strengthening of this sector over the next year. The dry cargo markets continued to grow strongly during the year across all size ranges from Handymax to Capesize. Average Capesize earnings in 2003/4 were $51,200 per day (2002/3 $14,400 per day) reaching a peak of $88,800 per day in January 2004, substantially due to a 33% increase in imports of iron ore into China in 2003. While the Dry Cargo department has not made any significant contribution in the past, we expanded our personnel by adding four experienced brokers in the latter part of 2003 and this, coupled with the exceptional freight rates, served to improve substantially the profit performance of the department. We expect Dry Cargo's performance for the year 2004/5 will be considerably improved over last year. Subsequent to the end of the year we set up a new office in Beijing focussing specifically on the Chinese dry bulk market. Sale and Purchase The sale and purchase department had a very successful year not all of which has directly flowed through in the reported figures this year. After a slow start the second hand business enjoyed a rapid acceleration of deal activity particularly in the final quarter with a significant proportion of transactions for delivery in 2004/5. Activity levels picked up on the back of the sustained improvement in the freight markets with the increase in ship values cascading down through all sizes of ship. Newbuilding income remained broadly level year-on-year. However the forward order book doubled in size during the course of the year with the benefit to earnings coming mainly over the next three years as the ships are constructed and delivered. The rise in the price of steel has driven up newbuilding prices across the board. Shipyards now have very extended order books and ship building capacity could become a limiting factor in future. Demolition income improved and was helped significantly by the increase in the demand for and price of steel causing scrap prices to move ahead sharply. It is interesting to note that 30 year old ULCC vessels (300,000-400,000 dwt) which cost of around $50-$55m have recently been sold for demolition at prices close to 50% of their original cost. Containers (50% owned) The container market has seen unprecedented growth in charter rates, sale and purchase prices and volume of container vessel ordering. The Braemar Container index, measuring container ship earnings, has risen some 113% over the last 12 months and at present is showing no signs of slowing down. Second hand prices have in some sectors risen by as much as 150%. During the year the container team secured a number of vessels on time charter, contracted newbuildings (with further options to be declared), as well as handling several resale contracts and completed a number of second hand sales. Much of this business will be delivered in the 2004/5 financial year. Offshore The Offshore department was able to post commendable results by increasing its market share and delivering significant project business, even though the offshore market was weak for most of the year despite a high oil price. The North Sea has seen an oversupply of vessels and poor rig utilisation keeping hire rates low. The market continues to be dull but market share remains high and we expect the first half to benefit from new project business. Cory The performance of Cory to date has been in line with our expectations. Cory operates wholly in the UK with 98 employees located at 14 ports most notably at Tilbury, Felixstowe and Southampton. Its activities span tramp and liner agency together with some freight forwarding and logistics. Most of its income is fee-based and derived from customers with whom it has had a long-standing relationship, making its earnings less exposed to the volatility of the freight markets and to an extent more predictable. Its success is, in part, dependent on the activity levels of its customers but also the efficiency with which it provides the services. This has been greatly improved by the roll-out of its own web-based 'Shiptrak' system. Cory has been actively seeking to build both its ship agency client list and other logistics revenue streams, and has recently succeeded in winning a number of new pieces of business in both areas. Wavespec In addition to its traditional work in conventional shipping, Wavespec has established a reputation at the forefront of LNG ship technology and they act as consultants to the leading participants in the market. Both profits and margins have improved over the year as the company's business has shifted in favour of discrete project work and inspections, and away from placing engineers on a contract basis. The majority of expected work for the forthcoming year is already contracted and there is a significant potential pipeline of work that the company could be appointed to do which would improve its reported result next year. Financial Adjusted pre-tax profit has increased by 29% to £5.2m and reported pre-tax profit rose by 19% to £4.1m. Set out in the table below is a reconciliation of adjusted pre-tax profit to reported pre-tax profit: £'000 Year to Year to 28 Feb 2004 28 Feb 2003 Reported pre-tax profit 4,122 3,475 Add: Goodwill amortisation 1,065 1,034 Less: Exceptional income - (479) --------- ---------- Adjusted pre-tax profit 5,187 4,030 --------- ---------- Operating profits before exceptional income and goodwill rose from £4.4m in 2003 to £5.5m, with an operating margin of 18.0% in 2004 compared with 16.2% in 2003, reflecting the growth in shipbroking turnover. Operating profits were £4.5m (2003: £3.8m) including an initial operating profit from Cory of £26,000. The majority of the Company's broking and technical services income is US dollar denominated and the average rate of exchange for conversion of US dollar income in the year was $1.64/£ (2003: $1.45/£) and at the year ended 28 February 2004 the rate was $1.86/£. The exposure to the US dollar has been mitigated by the use of forward foreign exchange contracts which have partially reduced the effect of the weaker US dollar. The year-on-year impact of the weaker US dollar relative to £ sterling is responsible for a turnover reduction of approximately £2.0m on a comparable basis. If the US dollar remains at current levels the year-on-year impact of currency is expected to be lower in the coming year. Cory's income is predominantly in £ sterling and will therefore serve to reduce the impact of foreign exchange movements. The tax rate on profits before exceptional income and non-deductible goodwill amortisation was 33% (2003: 39%). The tax rate is lower than the prior year because the proportion of non-deductible trading expenses is lower in relation to overall profits. After exceptional income and goodwill the tax rate was 42% (2003: 49%). As at 28 February 2004 net cash had improved by £4.5m to £2.0m (2003: net debt £2.5m). The improvement in the net cash position includes the effect of the full conversion of the £3.0m loan notes to 1.25 million new ordinary shares on 24 February 2004. Underlying operating cash flow was £5.9m (2003: £5.1m), calculated before movements in client commissions, tax and dividend payments. Net cash flow from operating activities was £5.9m (2003: £4.3m). As a result of the improvement in net cash, and in particular following the conversion of the £3m 6% loan stock, the net interest cost next year is expected to be much lower. The effect of the acquisition of Cory on the Group's net cash position was broadly neutral because the cash consideration (including costs) of £1.7m was broadly offset by an equivalent sum of cash in the business. The nature of Cory's activities is that for the majority of ship port calls it handles it receives cash on a pre-funded basis to meet the costs its client will incur while in port. The Group also exercised its option to acquire a 40% interest in SBQ satisfied by the issue of 175,000 new shares. SBQ is a Singapore based broking house focusing on the shipment of gas and chemicals in the Far East, an area where we anticipate accelerated growth. The proposed final dividend of 8.0 pence per ordinary share, at a cost of £1,491k, will be paid on 30 July 2004 to shareholders on the register at the close of business on 2 July 2004. Together with the 5p interim dividend the Company's dividend for the year is 13 pence (2003: 12 pence) at a cost of £2.35m. The dividend is covered 1.6 times by earnings before goodwill amortisation. The Group will adopt the International Accounting Standards with effect from the 2005/6 financial year with restated comparative figures. The principal accounting changes following adoption are likely to relate to accounting for derivative contracts and accounting for share options. BRAEMAR SEASCOPE GROUP plc CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 28 FEBRUARY 2004 Year ended Year ended 28-02-2004 28-02-2003 £000 £000 Turnover including share of joint ventures and associated undertakings 30,794 26,919 Less: share of joint ventures and associated undertakings (452) (157) ----------- ------------ Group turnover (note 1) 30,342 26,762 Administrative expenses before exceptional income and goodwill amortisation (24,812) (22,402) Goodwill amortisation (1,065) (1,034) Exceptional income (note 2) - 479 Total administrative expenses (25,877) (22,957) ------------ ------------ Group operating profit 4,465 3,805 Share of joint ventures' and associated undertaking's operating profit 13 18 ------------ ------------ Operating profit including joint ventures and associated undertakings (note 1) 4,478 3,823 Net interest payable and similar charges (356) (348) ------------ ------------ Profit on ordinary activities before taxation 4,122 3,475 Taxation on profit on ordinary activities (note 3) (1,723) (1,702) ------------ ------------ Profit on ordinary activities after taxation 2,399 1,773 Dividends (2,347) (2,054) ------------ ------------ Retained profit/(loss) for the period 52 (281) ======= ======= Earnings per ordinary share - Pence (note 4) -Basic 13.96p 10.36p -Adjusted EPS excluding goodwill amortisation and exceptional items 20.16p 14.43p - Diluted 13.63p 10.34p BRAEMAR SEASCOPE GROUP plc CONSOLIDATED BALANCE SHEET AS AT 28 FEBRUARY 2004 28 Feb 28 Feb 2004 2003 £000 £000 Fixed assets Intangible fixed assets: goodwill 18,534 18,634 Tangible assets 4,963 4,514 Investments: Investment in joint ventures: Share of gross assets 209 61 Share of gross liabilities (180) (48) ------------ ----------- 29 13 Investment in associated undertaking 373 - Other investments 1,093 1,071 ------------ ----------- Investments 1,495 1,084 ------------ ----------- 24,992 24,232 ------------ ----------- Current assets Debtors 9,775 4,707 Cash at bank and in hand 4,071 3,255 ------------- ------------ 13,846 7,962 Creditors: amounts falling due within one year (note 5) (17,279) (10,568) ------------ ------------ Net current liabilities (3,433) (2,606) ------------ ------------ Total assets less current liabilities 21,559 21,626 Creditors: amounts falling due after more than one year - (3,000) Provisions for liabilities and charges (330) (826) ------------- ------------ Net assets 21,229 17,800 ======== ======= Capital and reserves Called up share capital 1,862 1,719 Capital redemption reserve 396 396 Share premium 7,505 4,271 Other reserves 18,302 18,302 Profit and loss account (note 10) (6,836) (6,888) ------------ ------------ Total equity shareholders' funds (note 6) 21,229 17,800 ======= ======= BRAEMAR SEASCOPE GROUP plc CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2004 Year ended Year ended 28 Feb 2004 to 28 Feb 2003 £000 £000 Net cash inflow from operating activities (note 7) 5,872 4,339 Returns on investments and servicing of finance Interest received 21 67 Interest paid (464) (418) Interest element of finance lease rental payments (3) (8) --------- ----------- Net cash outflow from returns on investments and servicing of finance (446) (359) Taxation UK Corporation tax paid (1,511) (1,045) Capital expenditure and financial investment Payments to acquire tangible fixed assets (230) (93) Purchase of investments (110) (45) --------- ----------- Net cash outflow from investing activities (340) (138) Acquisitions and disposals Purchase of subsidiaries including expenses (1,658) - Cash acquired with subsidiaries 1,597 - Deferred consideration paid (225) (855) --------- ----------- Net cash outflow for acquisitions (286) (855) Equity dividends paid (2,062) (1,901) --------- ----------- Net cash inflow before financing 1,227 41 Financing New loan - 50 Loan repayment (2,500) - Payment of principal under finance leases (24) (77) --------- ----------- Net cash outflow from financing (2,524) (27) --------- ----------- (Decrease)/increase in cash and other liquid funds (note 8) (1,297) 14 ========= =========== Note 1 - Segmental results Turnover Year to 28 Feb Year to 28 Feb 2004 2003 £'000 £'000 Shipbroking 22,523 21,189 Technical shipping support 5,127 5,573 ________ _______ 27,650 26,762 Acquisition - ship agency 2,692 - ________ _______ 30,342 26,762 Share of joint ventures & associates 452 157 ________ _______ 30,794 26,919 ======= ======= Operating profit £'000 £'000 Shipbroking 5,210 4,079 Technical shipping support 294 281 ________ _______ 5,504 4,360 Acquisition - ship agency 26 - _______ _______ 5,530 4,360 Share of joint ventures & associates 13 18 ________ _______ 5,543 4,378 Goodwill amortisation (1,065) (1,034) Exceptional income - 479 ________ _______ 4,478 3,823 ======= ======= Note 2 - Exceptional items Exceptional income in 2003 relates to the successful outcome of litigation (£254k) and the partial release of a vacant space provision (£225k). Note 3 - Taxation The rate of taxation applicable to the company's profits before goodwill amortisation and exceptional items is 33.2% (2003: 38.7%). Note 4 - Earnings per share Reconciliation of basic earnings per share to adjusted earnings per share: 2004 2003 Earnings Year to Year to 28 Feb 28 Feb £'000 £'000 Profit after taxation 2,399 1,773 Goodwill amortisation 1,065 1,034 Exceptional (income) - (479) Related tax charge - 143 ----------- ---------- Adjusted profit after tax 3,464 2,471 ----------- ---------- Weighted average number of shares 17,181,600 17,120,436 Basic EPS (pence) 13.96 10.36 Adjusted EPS (pence) 20.16 14.43 Diluted EPS £'000 £'000 Profit after taxation 2,399 1,773 Interest on convertible £3m loan notes 124 126 ------------- ----------- Diluted earnings 2,523 1,899 ------------- ----------- Weighted average number of shares 17,181,600 17,120,436 Conversion of £3m loan notes 1,236,301 1,250,000 Share options 97,653 - ------------- --------------- Diluted average number of shares 18,515,554 18,370,436 ------------- --------------- Diluted EPS (pence) 13.63 10.34 Note 5 - Creditors falling due within one year 2004 2003 £000 £000 Bank overdrafts 2,113 - Bank loan - 2,500 Trade creditors 8,530 2,519 UK corporation tax 954 785 Dividends payable 1,484 1,199 Accruals and deferred income 3,570 2,891 Other creditors 628 425 Loan stock - 187 Deferred consideration - 38 Obligations under finance lease - 24 ---------- --------- 17,279 10,568 ====== ====== Note 6 - Reconciliation of movement in shareholders' funds 2004 2003 £000 £000 Profit on ordinary activities after tax 2,399 1,773 Dividends (2,347) (2,054) Issue of shares 3,377 - --------- --------- Net increase/(decrease) in shareholders' funds 3,429 (281) Opening shareholders' funds 17,800 18,081 ---------- --------- Closing shareholders' funds 21,229 17,800 ====== ====== Note 7 - Reconciliation of operating profit to net cash flow from operating activities 2004 2003 £000 £000 Operating profit 4,465 3,805 Depreciation charge 282 229 Goodwill amortisation 1,065 1,034 Loss on disposal of fixed assets 28 16 Write down of investments 77 60 (Increase) /decrease in debtors (3,836) 840 Increase/(decrease) in creditors 4,287 (1,071) Decrease in provisions (496) (574) ------- --------- Net cash flow from operating activities 5,872 4,339 ======= ====== The movement in creditors includes a net increase of £Nil in commissions due to clients (2003: a reduction of £0.7m). Net cash inflow from operating activities eliminating this movement is £5.9m (2003: £5.1m). Included within the net cash inflow from operations is a net inflow of £791k in respect of Cory Brothers during the seven months it formed part of the group. This mainly represented advance funding from its clients for which it will make disbursements on their behalf. Note 8 - Reconciliation of net cash flow to movement in net funds 2004 2003 £000 £000 (Decrease)/increase in cash and other liquid funds (1,297) 14 Decrease in finance leases 24 77 Decrease in bank loan 2,500 - ----------- ---------- Movement in net funds 1,227 91 Net debt at beginning of period (2,456) (3,060) Repayment of loan notes 187 563 New bank loan - (50) Conversion of loan stock to ordinary shares 3,000 - ------------ ---------- Net funds/(debt) at end of period 1,958 (2,456) ======= ====== Note 9 - Acquisition of Cory Brothers Shipping Agency On 30 July 2003 the Group acquired the business and trading assets of Cory Brothers Shipping Agency for a cash consideration of £1.5m. The net assets acquired and goodwill arising on the transaction were as follows: £'000 £'000 Cash consideration 1,500 Transaction costs 158 -------- 1,658 Fixed Assets acquired 529 Debtors 1,269 Creditors (2,698) Cash 1,597 --------- Net tangible assets acquired 697 -------- Goodwill 961 ===== Goodwill is being amortised over 20 years. Note 10 Profit and loss account The negative cumulative profit and loss account balance is the result of a goodwill write-off, in the amount of £5,599,794, which took place in the financial year to 31 December 1998 upon the Company's adoption of FRS10. The financial information set out above does not constitute the Company's statutory accounts for the year ended 28 February 2004 and the year ended February 2003. The financial information in respect of the year ended 28 February 2004 has been extracted from the un-audited accounts. The audited accounts will be posted to shareholders shortly. Statutory accounts for the year ended 28 February 2003 on which the auditors have given an unqualified report pursuant to section 235 of the Companies Act 1985, have been filed with the Registrar of Companies. The accounting policies are consistent with the year ended 28 February 2003 statutory accounts in all material respects. -------------------------- This information is provided by RNS The company news service from the London Stock Exchange SLESPLEFE

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