Interim Results

Braemar Seascope Group PLC 25 October 2005 BRAEMAR SEASCOPE GROUP plc PRESS RELEASE For immediate release 25 October 2005 Interim Results - 6 months ended 31 August 2005 Braemar Seascope Group plc (the 'Group'), a leading provider of shipping services, today announced half-year results for the six months ended 31 August 2005. HIGHLIGHTS • Turnover £30.6m, up 75% (2004/5: £17.4m) • Pre-tax profit £5.3m, up 62% (2004/5: £3.3m) • Basic EPS 18.29p, up 54% (2004/5: 11.89p) • Interim dividend 6.50p per share (2004: 6.00p) • Net cash £9.2m (28 February 2005 - £6.5m) Commenting on the results and outlook, Sir Graham Hearne, Chairman, said: 'The Group has performed well in markets which showed exceptional strength in the second half of last year and which continued through to the early months of this financial year.' 'While it seems unlikely that the second half results will reach the levels of the first half, the outlook for the rest of the financial year nevertheless remains positive with freight rates in recent weeks having recovered quite significantly, particularly in the wet markets. We expect the winter months in the wet market to remain firm though the dry market continues to be difficult to predict and likely to experience volatility.' For further information, contact: Braemar Seascope Group plc Alan Marsh Tel 020 7535 2650 James Kidwell Tel 020 7535 2881 Aquila Financial Peter Reilly Tel 020 7849 3319 Charles Stanley & Company Limited Philip Davies Tel 020 7953 2000 Notes to editors: Through its subsidiaries Braemar Seascope Group plc's services provided comprise: Braemar Seascope Limited Specialised shipbroking and consultancy services to international ship owners and charterers in the tanker, gas, offshore, container and dry bulk markets. www.braemarseascope.com Braemar Seascope Pty Ltd (formerly Specialised shipbroking and consultancy services for the dry bulk Seawise) market in Australia. www.seawise.com.au Cory Brothers Shipping Agency Limited Liner and port ship agency services within the UK. www.cory.co.uk Wavespec Limited Marine engineering and naval architecture consultants to the shipping and offshore markets. www.wavespec.com INTERIM ANNOUNCEMENT - SIX MONTHS ENDED 31 AUGUST 2005 CHAIRMAN'S STATEMENT I am delighted to announce a strong set of results for the first half of the year. Revenue was £30.6m up 75 per cent from £17.4m in the equivalent half of last year and pre-tax profits increased by 62% to £5.3m. The good performance was also reflected in the cash generated from operating activities which was £4.4m (Interim 2004/5: £0.7m) resulting in the Group's net cash position increasing by £2.7m since the beginning of the financial year to £9.2m at 31 August 2005. Earnings per share increased by 54 per cent to 18.29 pence per share compared with 11.89 pence in 2004/5. The Group has performed well in markets which showed exceptional strength in the second half of last year and which continued through to the early months of this financial year. Profits have also benefited from the initial contribution from Braemar Seascope Pty Ltd (formerly Seawise), acquired in February 2005, and by a much-improved performance from Cory. It is the Directors' intention to pay an interim dividend of 6.50 pence per share an increase of 8 per cent over last year (Interim 2004/5: 6.00 pence). The proposed interim dividend will be paid on 13 December 2005 to shareholders on the register at the close of business on 18 November 2005, with an ex-dividend date of 16 November 2005. During the summer there has been a general softening in the shipping market since the exceptional highs experienced at the beginning of the year. However, the Group is continuing to perform strongly - transaction volumes remain at least as good as last year and we have seen a greater proportion of higher value transactions in the overall mix. While it seems unlikely that the second half results will reach the levels of the first half, the outlook for the rest of the financial year nevertheless remains positive with freight rates in recent weeks having recovered quite significantly, particularly in the wet market. We expect the winter months in the wet market to remain firm though the dry market continues to be difficult to predict and likely to experience volatility. The continuing demand for the long-range transportation of raw materials, oil and consumer products underpins shipping. While seaborne trade continues to grow and the sector produces attractive returns the prospects for the Group are good. CHIEF EXECUTIVE'S REVIEW OF ACTIVITIES Shipbroking During the first half of our financial year the tanker freight market was much less volatile than during the second half of last year, and oil prices have continued to rise throughout the period. This has affected owners' net earnings, as the cost of bunker fuel has risen by more than 50 per cent. Daily earnings on the benchmark Very Large Crude Carriers ('VLCC') drifted below $30,000 per day during the middle of the summer, but have since recovered to more than double this level. More recently the 'Katrina effect' has stimulated activity. As the fragility of the American refining sector was so starkly exposed, and the demand surged for product carriers to take gasoline to the USA, there was a consequent sharp rise in freight rates. A significant proportion of the offshore crude oil production facilities in the Gulf of Mexico were damaged by the hurricanes and will remain shut down during the period when refiners normally build stocks ahead of winter demand. This is expected to create more demand for long haul crude oil and product shipments to replace the shortfall in local supplies; a trend from which we expect to achieve further benefits. The Gas and Chemicals markets have generally enjoyed more favorable market conditions which are expected to persist for the remainder of the year. The Dry market over the last six months has shown significant volatility. The Baltic Dry Index ('BDI') on 1 March 2005 was 4,663, falling to a low of 1,747 on 3 August 2005 before recovering to 2,592 at 31 August 2005 and 3,361 on 18 October 2005. The average of the BDI for the first half-year was 3,328 (average BDI for last financial first half and full year - 4,021 and 4,375 respectively). At the start of our financial year markets were still firm and raw material demand, particularly for iron ore, peaked in March 2005. Subsequently ore demand fell due to high stockpiles. Congestion at ports diminished adding to the supply of available tonnage and causing a decline in freight rates lasting through the summer. Our activity in the dry market has more than doubled with the addition of our Australian offices and we are working hard to utilize the worldwide connections that dry offices in London, Beijing, Melbourne, Perth and Sydney now offer. Australia contributed revenue of £1.8m and operating profit of £416,000 in the first half. Vessel values have fallen but to a lesser extent than freight rates and sale and purchase activity in the market place has also slowed. However, our own performance has been particularly strong both in terms of the number of successfully concluded negotiations and the mix of transactions which has generally favoured higher value deals. In particular, we have had significant involvement in ship purchases connected to the public markets where recently substantial new capital has been raised. Our newbuilding activity, for which the income earned is mostly for future years, has also continued to flourish despite the high level of the shipyards' order books. The Offshore market has enjoyed an increased level of activity particularly in the North Sea, supported by the higher oil price. Strong charter rates have benefited income as has our involvement in some substantial vessel sales. The Container shipping market continued its growth phase in the early part of the fiscal year before a downturn in the early summer which has continued into autumn. Our team, which is held through a joint venture company, is active in chartering, second hand and newbuilding and has successfully concluded business in all areas during this half. Our shipbroking representative offices in Shanghai and Beijing have contributed well during the half and we are steadily growing the activities of our joint ventures based in Delhi, Mumbai, Singapore and Shanghai. Technical shipping support - Wavespec Wavespec's results show some improvement but were affected by the delay in the start of its involvement in the Qatargas II project - a project which is expected to yield a significant income for the company for at least a further 3 years. The overall activity level has now picked up and the company's engineers are currently fully employed across a variety of projects, which presages well for profits in the second half of the year. Ship agency, forwarding and logistics - Cory Brothers Cory Brothers' results are significantly better than last year partly because of improved volumes in ship agency but predominantly due to new income streams in forwarding and logistics. Agency has seen an improvement across the majority of its UK offices during the first half. Forwarding and Logistics is building its customer base primarily on its forwarding business which has contributed significantly to the overall Cory result. In July 2005, Cory acquired Geo M Morrison & Company (Leith) Ltd, which trades as Morrison Shipping & Morrison Tours, for a cash consideration of £525,000, part of which is deferred and profit dependent. Morrison is based in Scotland and acts as a ship's agent, a project forwarder and provider of shore excursions for cruise ships. It has built up long term business relationships with many cruise operators and Cory hope to build on these relationships to develop cruise business elsewhere in the UK. Financial The first half results and relevant comparatives have been prepared in accordance with International Financial Reporting Standards ('IFRS'). The IFRS adjusted results for the first half and full year 2004/5 were set out in a statement issued on 19 October 2005 which details the changes from UK GAAP to IFRS. These new accounting standards have no material effect on the underlying performance of the Group or the cash generated from operations. As can be seen from the segment note 2 in the accounts, all business segments improved both their turnover and operating profits over last year. Group operating profit in the first half was £5.2m (2004/5: interim £3.1m, Full year £7.8m) and the operating margin remained broadly unchanged at 18 per cent. The majority of the Group's income is US$ denominated and the average rate of exchange for conversion of US$ income in the six months to August 2005 was $1.80 /£ (Interim 2004/5: $1.70/£, Full Year 2004/5: $1.82/£). The estimated full year tax rate on profits has been applied at the half year. This rate was 33% (Interim 2004/5: 32%, Full year 2004/5: 33%). Net cash was £9.2m at 31 August 2005 compared with net cash of £6.5m as at 28 February 2005. This excludes £1.1m of restricted cash, which the company was holding as escrow agent for certain clients pending completion of transactions in which the company acted as broker. The increase in net cash reflects strong operational cash generation offset by the payment of the final dividend and annual bonus relating to the prior year. Braemar Seascope Group PLC Consolidated income statement For the half year ended 31 August 2005 Unaudited Unaudited Unaudited Six months to Six months to Year to 31-Aug-05 31-Aug-04 28-Feb-05 Notes £000 £000 £000 Revenue 2 30,592 17,439 45,203 Operating costs (25,381) (14,297) (37,535) Other gains - - 123 (25,381) (14,297) (37,412) Operating profit 2 5,211 3,142 7,791 Finance income 47 5 28 Finance costs (15) (50) (53) Share of profits from joint ventures 54 171 365 Profit before tax 5,297 3,268 8,131 Taxation 3 (1,769) (1,063) (2,699) Profit for the period attributable to shareholders 3,528 2,205 5,432 Earnings per share 5 Basic (pence) 18.29 11.89 29.50 Diluted (pence) 17.79 11.78 28.59 Comparatives have been restated for International Financial Reporting Standards. Braemar Seascope Group PLC Consolidated Balance Sheet As at 31 August 2005 Unaudited Unaudited Unaudited Notes 31-Aug-05 31-Aug-04 28-Feb-05 ASSETS £000 £000 £000 Non-current assets Property, plant and equipment 4,954 4,911 4,960 Goodwill 21,953 18,537 21,587 Other intangible assets 245 - 215 Investments 1,410 1,625 1,555 Deferred tax assets 269 250 262 Other receivables 71 107 95 28,902 25,430 28,674 Current assets Trade and other receivables 15,591 9,729 11,688 Financial instruments 194 - - Restricted cash 1,090 8,329 4,434 Cash and cash equivalents 11,464 4,894 9,606 28,339 22,952 25,728 Total assets 57,241 48,382 54,402 LIABILITIES Current liabilities Trade and other payables 18,929 11,633 17,170 Current tax payable 4,148 1,161 1,556 Short term borrowings 2,198 3,830 3,067 Finance leases 31 - 39 Client monies held as escrow agent 1,090 8,329 4,434 26,396 24,953 26,266 Deferred tax 58 - - Provisions 341 121 151 Total liabilities 26,795 25,074 26,417 Total assets less total liabilities 30,446 23,308 27,985 EQUITY Share capital 1,975 1,862 1,945 Capital redemption reserve 396 396 396 Share premium 7,880 7,506 7,505 Shares to be issued (637) (65) (637) Merger reserve 21,346 18,302 21,346 Hedging reserve 241 - - Other reserves 148 61 100 Translation reserve 37 - (8) Retained earnings 7 (940) (4,754) (2,661) Total equity 30,446 23,308 27,985 Comparatives have been restated for International Financial Reporting Standards. Braemar Seascope Group PLC Consolidated Cash Flow Statement For the Half Year Ended 31 August 2005 Unaudited Unaudited Unaudited Six months to Six months to Year to 31-Aug-05 31-Aug-04 28-Feb-05 £000 £000 £000 Cash flows from operating activities Cash generated from operations 5,732 1,622 11,044 Interest received 43 3 26 Interest paid (16) (20) (52) Tax paid (1,389) (884) (2,448) Net cash generated from operating activities 4,370 721 8,570 Cash flows from investing activities Dividends from joint ventures 228 - - Purchase of business, net of cash acquired (274) - (1,026) Purchase of property, plant and equipment (115) (102) (175) Proceeds from sale of property, plant and equipment - - 11 Purchase of investments (29) (26) (21) Proceeds from sale of investment - - 386 Other long term assets 24 (4) 8 Net cash used in investing activities (166) (132) (817) Cash flows from financing activities Proceeds from issue of ordinary shares 405 1 1 Dividends paid (1,923) (1,484) (2,597) Purchase of own shares - - (572) Payment of principal under finance leases (11) - (2) Other - - (2) Net cash used in financing activities (1,529) (1,483) (3,172) Increase/(decrease) in cash and cash equivalents 2,675 (894) 4,581 Cash and cash equivalents at beginning of the period 6,539 1,958 1,958 Foreign exchange differences 52 - - Cash and cash equivalents at end of the period 9,266 1,064 6,539 Reconciliation of net funds Cash and cash equivalents at end of the period 9,266 1,064 6,539 Finance leases (31) - (39) Net funds at the end of the period 9,235 1,064 6,500 Comparatives have been restated for International Financial Reporting Standards. BRAEMAR SEASCOPE GROUP PLC NOTES TO THE ACCOUNTS FOR THE SIX MONTHS ENDED 31 AUGUST 2005 1. Accounting policies and basis of preparation The Group's interim result consolidates the results of the Company and its subsidiary companies made up to 31 August 2005. The interim financial information has been prepared according to recognition and measurement requirements of International Financial Reporting Standards ('IFRS') that are in issue and have been endorsed by the European Union or are expected to be endorsed and effective at 28 February 2006, the Group's first annual reporting date under IFRS. The directors have revised the Group's accounting policies based on these requirements. Details of these accounting policies together with a reconciliation of the adjustments made to the comparative information provided below were published in the investor relations section of the Braemar Seascope website, www.braemarseascope.com, as supporting information for the press release 'Braemar Seascope Group PLC Adoption of International Financial Reporting Standards' issued on 19 October 2005. The IFRS and IFRIC interpretations are still subject to change. As a result there may be further changes applicable to this half year and the comparative financial information when the Group prepares its first full year IFRS financial statements. The financial information contained in this interim statement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information for the preceding year is based on the statutory accounts for the year ended 28 February 2005, as restated to comply with IFRS. The statutory accounts prepared under UK GAAP for the year ended 28 February 2005, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. 2. Segmental Information Unaudited Unaudited Unaudited Six months to Six months to Year to 31-Aug-05 31-Aug-04 28-Feb-05 Revenue £000 £000 £000 Shipbroking 21,838 13,277 32,420 Ship agency, forwarding & logistics 6,433 2,100 8,461 Technical shipping support 2,321 2,062 4,322 30,592 17,439 45,203 Operating profit Shipbroking 4,929 3,295 8,864 Ship agency, forwarding & logistics 180 (226) (1,213) Technical shipping support 102 73 140 5,211 3,142 7,791 Net assets Shipbroking 27,678 20,526 25,838 Ship agency, forwarding & logistics 1,361 996 376 Technical shipping support 838 1,195 996 Share of joint ventures 569 590 775 30,446 23,307 27,985 BRAEMAR SEASCOPE GROUP PLC NOTES TO THE ACCOUNTS FOR THE SIX MONTHS ENDED 31 AUGUST 2005 3. Taxation The taxation charge for the half-year is calculated using the estimated effective tax rate for the full year applied to the pre-tax profits at the half year. 4. Dividends The following dividends were paid by the Group: Half year to Half year to Year ended 31-Aug-05 31-Aug-04 28-Feb-05 £000 £000 £000 Interim dividend 6.0 pence per share - - 1,134 Final dividend 10.0 pence (2004: 8 pence) per share 1,902 1,491 1,491 1,902 1,491 2,625 The Directors have declared a dividend of 6.50 pence per ordinary share, payable on 13 December 2005 to shareholders on the register on 18 November 2005. 5. Earnings per share Half year to Half year to Year to 31-Aug-05 31-Aug-04 28-Feb-05 Profit after tax £000 3,528 2,205 5,432 Earnings per share (pence per share) - Basic 18.29 11.89 29.50 - Diluted 17.79 11.78 28.59 Weighted average number of ordinary shares Basic 19,293,750 18,545,851 18,412,881 Share options 536,150 585,077 166,818 Diluted 19,829,900 18,712,669 18,997,958 BRAEMAR SEASCOPE GROUP PLC NOTES TO THE ACCOUNTS FOR THE SIX MONTHS ENDED 31 AUGUST 2005 6. Cash generated from operations Unaudited Unaudited Unaudited Six months to Six months to Year to 31-Aug-05 31-Aug-04 28-Feb-05 £000 £000 £000 Profit for the period 3,528 2,205 5,432 Adjustments for: -Tax 1,769 1,063 2,699 -Depreciation 143 153 297 -Amortisation of intangible assets 172 - - -Goodwill impairment charge - - 931 -Derivative financial instruments 201 - - -Profit on sale of investment - - (123) -Interest income (47) (5) (28) -Interest expense 15 50 53 -Share of profit of associates (54) (171) (365) -Stock option expense 48 39 78 Changes in working capital -Trade and other receivables (1,335) (380) (1,416) -Trade and other payables 1,106 (1,123) 3,715 -Provisions 186 (209) (229) Cash generated from operations 5,732 1,622 11,044 7. Consolidated statement of changes in equity Attributable to equity holders of the Company Share Share Shares Other Retained Total Capital Premium to be Reserves Earnings Equity issued £000 £000 £000 £000 £000 £000 Balance at 1 March 2005 1,945 7,505 (637) 21,834 (2,662) 27,985 Change in accounting policies regarding adoption of IAS39 - - - 981 96 1,077 Balance at 1 March 2005 1,945 7,505 (637) 22,815 (2,566) 29,062 (restated) Profit for the period - - - - 3,528 3,528 Cash flow hedges net of tax - - - (740) - (740) Currency translation differences - - - 45 - 45 Total recognised income and expense for the period - - - (695) 3,528 2,833 Employees share option scheme: -value of employee services - - - 48 - 48 Share issues in respect of share option schemes 30 375 - - - 405 Final dividend relating to 2004/5 - - - - (1,902) (1,902) 30 375 - 48 (1,902) (1,449) Balance at 31 August 2005 1,975 7,880 (637) 22,168 (940) 30,446 Independent review report to Braemar Seascope Group plc Introduction We have been instructed by the company to review the financial information for the six months ended 31 August 2005 which comprises the consolidated interim balance sheet as at 31 August 2005 and the related consolidated interim statements of income, cash flows and changes in shareholders' equity for the six months then ended. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. The IFRS restatement dated 19 October 2005, as referred to in Note 1, does not form part of these accounts. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority. As disclosed in note 1, the next annual financial statements of the group will be prepared in accordance with accounting standards adopted for use in the European Union. This interim report has been prepared in accordance with the basis set out in Note 1. The accounting policies are consistent with those that the directors intend to use in the next annual financial statements. As explained in note 1, there is, however, a possibility that the directors may determine that some changes are necessary when preparing the full annual financial statements for the first time in accordance with accounting standards adopted for use in the European Union. The IFRS standards and IFRIC interpretations that will be applicable and adopted for use in the European Union at 28 February 2006 are not known with certainty at the time of preparing this interim financial information. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the disclosed accounting policies have been applied. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Listing Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 August 2005. PricewaterhouseCoopers LLP Chartered Accountants West London 25 October 2005 This information is provided by RNS The company news service from the London Stock Exchange

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