As the previously outlined weakness in the[ds_preview] oil and gas sectors has worsened further than the Board originally anticipated, Braemar Shipping Services (BMS) expects an underlying operating profit before interest, acquisition related costs and tax for the year ended 28 February 2017 is now expected to be within the range of 3.0 mill. £ to 3.5 mill. £.
The Group‘s underlying operating profit before interest, acquisition related costs and tax for the year ended 28 February 2017 is now expected to be within the range of 3.0 mill. £ to 3.5 mill. £. This excludes a one off gain before tax from disposal of its interest in The Baltic Exchange of 1.7 mill. £ and one off costs associated with restructuring of approximately 2.7 mill. £. This lower forecast is largely attributable to the Technical division and, to a much lesser extent, the freight forwarding element of our Logistics business.
The Shipbroking division, which is the largest part of the Group generating over 40% of expected Group revenue, has traded well, met its objectives and is on track to meet expectations for the year.
However, the Technical division has continued to underperform. The previously outlined weakness in the oil and gas sectors has worsened further than the Board originally anticipated, impacting the division in several ways not least a marked deterioration in replacement work. Accordingly, we have significantly expanded the management actions originally announced in August 2016 to realign the business. This wide ranging restructuring programme to significantly change the management and operating structure of the division is now substantially complete and has resulted in significant reductions in its ongoing cost base. It is expected that the annualised cost savings will be in excess of £6 million for the next financial year.
Within the smaller Logistics division, the port agency business continued to perform strongly, although the freight forwarding business was affected by a reduction in market activity. Overall, the Logistics division‘s performance has fallen but this will only have a small impact on the overall Group results.
The Board‘s intention for the medium and longer term is to pay a dividend appropriately covered by earnings from underlying operations. It expects to recommend a final dividend for the current financial year of 5p which, together with the interim dividend of 9p paid in December 2016, will make a total for the year of 14p.
The Group says it has a strong balance sheet, including a net cash position at 31 December 2016 of £1.7 million (compared to net debt of 1.6 mill. £ at 31 December 2015) against an unused Group debt facility of 30 mill. £.
Braemar says it remains committed to the ongoing development of a diversified portfolio of broking and advisory businesses within its market sectors. The Group believes that despite an extremely challenging year the decisive actions taken during recent times, in particular in the Technical Division, will ensure that it is efficiently structured and well positioned for the future.
