Last checked at 3 Aug 2021 17:05
BRAEMAR SHIPPING SERVICES PLC
("Braemar", the "Company" or the "Group")
3 August 2021
Annual Report and Notice of General Meeting
Braemar Shipping Services Plc (LSE: BMS), a leading international Shipbroker and provider of expert advice in shipping investment, chartering, risk management and logistics services, today announces that it has published its Annual Report and Accounts for the year ended 28 February 2021 ("Annual Report"), together with the Notice of Annual General Meeting ("AGM").
The AGM will be held at the offices of finnCap, One Bartholomew Close, London, EC1A 7BL at 2:00 p.m. on Thursday 26 August 2021. Whilst the Company is now able to welcome shareholders to the AGM in person, it also recognises that the COVID-19 pandemic continues to evolve and notes that it may need to limit attendance at the AGM, or otherwise make changes to its AGM format, as required, in order to comply with social distancing or other safety requirements, including any additional Government guidance or restrictions. The Company is also asking all shareholders who plan to attend the AGM in person to pre-register their attendance.
The Company will provide an update on arrangements closer to the time, if required. Shareholders are responsible for understanding and complying with the restrictions applicable to their own journey and should bear in mind that rules may differ between different parts of the UK.
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
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 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 and internal control framework is continually monitored and reviewed by the Board and the Audit Committee. 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.
Reporting to the Chair of the Audit Committee and the Group COO and Finance Director, the Group Head of Internal Audit and Group Risk & Compliance Manager leads the Risk Management, Internal Controls and Compliance functions.
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 our framework:
- Divisional management teams have initial responsibility for identifying, monitoring and updating business risks; while
- Key specialist personnel at Group level review areas such as IT, HR, Legal and Finance, and consider risks not addressed at Divisional level.
The Group's Risk Management framework is managed via an online system/solution which is accessible to Group and Divisional management teams globally. The system allows for:
- Group-wide real-time updating;
- Ongoing monitoring of risks and mitigation activities at both Group and Division levels; and
- Risk Management reporting at company location, Division, and Group levels.
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. Key (or 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 risk management process also evaluates the timescale over which emerging risks may occur. For example, climate change has been identified as an emerging risk for the shipping and energy sectors within which the Group operates, but its potential impact on the Group's operations is not expected to be felt sufficiently soon for it to be identified as its own principal risk at this time.
The risk management process ranks identified 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.
Risk Management is led at Group level by the Group COO and Finance Director, General Counsel, and the Group Head of Internal Audit and Group Risk and Compliance Manager. Group risk management and Divisional management teams monitor risks regularly, taking into consideration the appetite, tolerance, and potential impact for specific risks on the Group.
Risk mitigation
The Group takes various measures to mitigate risk. Key steps in our risk management process throughout the year included:
- Maintenance of appropriate insurance cover.
- Establishment of Group budgets prepared annually 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 Quality: ISO 9001 certification held in the Logistics Division.
- Operation of the Group's whistleblowing procedure.
- Treasury management activity regularly reported to the Board by the Group COO and Finance Director. (Note that the Group does not enter speculative treasury transactions.)
- Using common Group systems covering accounting, HR and operations supported by a global IT team.
- Monitoring contractual risk by the Group legal team.
- Succession planning and strategic recruitment supported by the Group HR team.
- Enhancing/strengthening Group Governance Framework, including review and updating of Group policies.
- Monitoring employee compliance with Group Governance Framework by Group Head of Internal Audit & Group Risk and Compliance Manager.
Principal risks
The Directors have carried out an assessment of the principal and emerging risks facing the Company. The most significant risks to which the Board considers the Group is exposed, based on the evaluation process described in the Group's Risk Management Framework are set out below.
Risk |
| 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, 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 2020 No Change |
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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 (US$) contracts are entered into to mitigate the risk of adverse currency movements. | ||
Change from 2020 No Change |
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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 and the extension of banking facilities.
| ||
Change from 2020 No Change |
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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. Strategic activities have improved financial liquidity, including: · reduction of ownership in AqualisBraemar an associated company; · restructuring/deferral of Braemar NAVES acquisition payments; and · deferral of dividend payments while strengthening the Group's balance sheet. Ongoing 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 2020 Down |
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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. There has been very little employee attrition during the COVID pandemic which could lead to an increased risk of losing employees once pandemic restrictions end. |
| Ongoing development of a culture of engagement and professional development, including career path and succession planning. Maintenance of competitive remuneration packages, including use of deferred equity awards. When it is possible for all employees to return to working in the office, consideration will be given to roles where more flexible working arrangements would be possible for those employees who value flexibility. This would also allow the attraction of employees who live away from existing Braemar offices. | ||
Change from 2020 Up |
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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. |
| We have invested in technology, including in our Logistics business with ShipTrak+ and through Zuma Labs with the Venetian platform being used in the Shipbroking Division. We are modernising our infrastructure to allow us to get the basics right and then focus on innovation and strategic direction. | ||
Change from 2020 No Change |
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Cultural behaviours Inadequate policies and reward structures could incentivise negative behaviours, create internal conflict, and could lead to reputational damage. |
| Negative behaviours or actions that result in employee relations claims/litigation/tribunals, giving rise to negative publicity in the public domain which leads to reputational damage. |
| Regular review of policies including Conflict of Interest Policy and Employee Handbook, which set out behavioural expectations and employment practices for managers and employees. Annual review, with external benchmarking, helps to ensure remuneration packages continue to be appropriate and competitive. Managers are aware of their people management obligations and protection of employee well-being, including ensuring employees take adequate holiday and maintain appropriate working hours. | ||
Change from 2020 Down |
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| ||||
Corporate governance & change management Corporate governance framework or management structure ineffective in introducing and embedding change, managing our business, and achieving the Group's strategic objectives. |
| The business may not operate efficiently and effectively, leading to the risk that strategic objectives are not achieved, and 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 Division levels, for (1) continuous improvement and (2) alignment with best practice. New training has been introduced in the last year to ensure all employees are kept updated with the governance framework and related policies. Ongoing monitoring to ensure employee completion of annual Group governance training plans, compliance with all relevant Group policies and completion of Group attestation requirements. Oversight role enhances the effectiveness of Internal Audit and Compliance processes, and management infrastructure change enhances career path transparency. | ||
Change from 2020 No Change |
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| ||||
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 Data Protection legislation.
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| 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 program to help ensure employee awareness of all relevant legal and regulatory obligations: · Braemar Corporate Governance Framework; · Braemar Risk Management methodology; and · compliance with our policies, relevant laws & regulations. Ongoing monitoring to ensure insurance cover is maintained at adequate levels. | ||
Change from 2020 No Change |
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| ||||
Cybercrime/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. |
| In 2021 H1 we will have rolled out Security Operations Centre ("SOC") as a service using Darktrace technology. In 2021 H2 we will further improve our cyber security position through improved infrastructure, two-factor authentication, mobile device management and utilising the Microsoft Advance Threat Protection Suite. We will also be improving the visibility and routing of our traffic through implementation of an SD-WAN. As we continue to roll out the Microsoft 365 suite of applications, we will be utilising SharePoint, which will give us improved Data Loss Prevention. We are also performing regular penetration testing on our network and key systems. | ||
Change from 2020 Down |
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| ||||
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. |
| During 2021, we are performing significant upgrades to our network and telecoms estate in order to provide a more robust, scalable and resilient platform to deliver applications and services globally. Network and telecoms upgrades will include decommissioning on-premise equipment in Australia and Singapore and moving to the cloud, re-architecting our network with an SD-WAN and utilising the Microsoft 365 suite more efficiently. Improved monitoring of our systems in order to deliver better service. | ||
Change from 2020 Down |
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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 international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union 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 this Annual Report, 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:
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| 2020/2021 |
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| 2019/2020 |
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| Rechargesto/(from) £'000 | Dividends £'000 | Balancedue (to)/ from £'000 | Rechargesto/(from) £'000 | Dividends £'000 | Balancedue from £'000 |
AqualisBraemar LOC ASA |
610 |
641 |
240 | 669 | - | 175 |
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London Tanker Broker Panel |
310 |
- |
- | 310 | - | - |
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Risorto GmbH | (865) | - | (33) | (856) | - | - |
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Worldscale | 60 | - | - | 70 | - | - |
AqualisBraemar LOC ASA
Recharges to AqualisBraemar LOC ASA consist primarily of rent, IT services and HR services in accordance with a transitional services agreement. Included in the net recharge to AqualisBraemar LOC ASA is a fee payable to the Group's former Chairman, Ronald Series of £15,000 (2020: £15,000).
The Group received £641,000 of dividends from AqualisBraemar LOC ASA which have been credited to cost of investment. See Note 18.
A loss of £262,000 has been recognised in discontinued operations in respect of the Group subletting a portion of its Singapore office space to AqualisBraemar LOC ASA, and an impairment to a right-of-use asset in respect of a London office which will be vacated by AqualisBraemar LOC ASA. See Note 8.
The balance due from AqualisBraemar LOC ASA is unsecured, interest-free and immediately repayable.
London Tanker Broker Panel Limited
Recharges to London Tanker Broker Panel consist of a monthly fee payable to the Group for the provision of data.
Risorto GmbH
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 for management fees was €0.7m (2020: €1.1m) and the amount charged to Risorto GmbH in the year was €nil (2020: less than €0.1m). The balance owing to Risorto GmbH as at 28 February 2021 was less than €0.1m (2020: €nil).
Worldscale Association Limited
Recharges to Worldscale consist of a monthly fee payable to the Group for the provision of data.
All recharges to related parties are carried out on an arm's-length basis.
Key management compensation is disclosed in Note 4.
Transactions with wholly owned subsidiaries
The Company has applied the disclosure exemption of FRS 101 in respect of transactions with wholly owned subsidiaries. The amount charged to AqualisBraemar LOC ASA by the Company was £591,000 (2020: £275,000) and the balance due from AqualisBraemar LOC ASA to the Company at 28 February 2021 was £179,000 (2020: £146,000).
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 52-60. Key management represents the Board of the Company.
| 2021 £'000 | 2020 restated£'000 |
Salaries, short-term employee benefits and fees | 3,410 | 3,903 |
Other pension costs | 68 | 128 |
Share-based payments | 71 | 116 |
One-off costs related to Board changes | - | 468 |
| 3,549 | 4,615 |
Retirement benefits are accruing to three (2020 restated: three) members of key management in respect of a defined contribution pension scheme. The current year remuneration includes new key management personnel and to enable comparability, the prior year disclosure has been restated. This has increased the prior year total remuneration from £1.5m to £4.6m. The increases relate to a £2.9m increase in salaries, short-term employee benefits and fees, £0.1m increase in pension costs and £0.1m increase in share-based payments.
For further information, contact:
Braemar Shipping Services |
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James Gundy, Group Chief Executive Officer | Tel +44 (0) 20 3142 4100 |
Nick Stone, Chief Financial Officer |
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Peter Mason, Company Secretary
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finnCap |
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Matt Goode / James Thompson | Tel +44 (0) 20 7220 0500 |
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Buchanan |
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Charles Ryland / Victoria Hayns / Stephanie Watson / Matilda Abraham | Tel +44 (0) 20 7466 5000 |
Notes to Editors:
About Braemar Shipping Services Plc
Braemar is a leading international Shipbroker and provider of expert advice in shipping investment, chartering and risk management. Braemar employs approximately 520 people in 30 offices worldwide across its Shipbroking, Financial and Logistics 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