Last checked at 24 May 2018 17:15
24 May 2018
BRAEMAR SHIPPING SERVICES PLC
("Braemar", the "Company" or the "Group")
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 2018 ("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 Friday 22 June 2018.
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.
Principal risks and uncertainties
DEVELOPING OUR APPROACH TO RISK MANAGEMENT
Effective management of risk is essential for delivering our strategic objectives. As such, risk management is built into our day-to-day activities and forms an integral part of how we operate. The approach developed for the assessment, management and reporting of risks enables the Audit Committee to review the nature and extent of the identified risks that the Group faces. 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
Our approach to risk management incorporates both bottom-up and top-down review of the identification, evaluation and management of risks. Initial responsibility for the identification and management of risk (including monitoring and updating) is delegated to the divisional management teams within the Shipbroking, Technical, Logistics and Financial divisions. During the year, we engaged PwC to run a series of workshops with various management teams to review all aspects of risk identification, identify variances in risk perception, link risk to Group strategy and reconsider the Group risk register. The results of this exercise form the basis of the risks identified on pages 35-37.
In addition, key specialist personnel covering areas such as IT, HR, Legal and Finance consider risks to our strategic objectives which are not addressed within the business units and develop appropriate approaches to managing and mitigating these. The Group takes measures to mitigate risk, including maintaining appropriate insurance cover.
Key steps included in the risk management process undertaken during the year include
· The Group budget which is prepared annually and approved by the Board.
· Regular financial reforecasts are prepared and approved by the Board.
· Monitoring the performance of the Group and the individual operating units 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 Group Finance Director. Note that the Group does not enter into speculative treasury transactions.
· Using common group systems covering accounting, HR and operations supported by an international IT team.
· Monitoring contractual risk by Group General Counsel.
· Succession planning and strategic recruitment support by Group HR team.
By their nature, event-based risks will vary in likelihood and impact. "Heat maps" are used as a method 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) position of each individual risk.
All risks identified are then aggregated and reviewed to assess their impact on Group business model and strategy and the resources required to ensure they are managed effectively. The divisional management boards and the Corporate Risk Team, which includes the Chief Executive and Group Finance Director, monitor these risks regularly and considers its appetite and tolerance for them in the light of their potential impact on the Group.
Principal risks are aggregated, together with associated issues or areas of uncertainty, the extent of control/mitigation and potential for material effect on the market value of the Group, then assessed. By definition, unmitigated risks can be significant but the risk levels fall after taking account of our control processes and management actions.
Principal risks |
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Risk rank | Description of risk | Summary of impact | Mitigating Control and Management actions | Assessed Risk level & change |
1 | Macroeconomic changes (Divisions: S,T,F,L) All our businesses are subject to the Impact of macroeconomic changes, such as changes in the crude oil price, restrictions in global trade or access to capital for shipping activity. |
A downturn in the world economy could result in reduced activity and lower revenue. Changes in shipping rates and/or changes in the demand or pricing or commodities would affect supply activity.
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The Group's strategy of diversification on a sector and geographic basis Ongoing management of cost base based on current and reasonably foreseeable market conditions Continued monitoring to ensure that appropriately structured teams are located across all divisions and geographies Implement restructuring programmes as required |
Critical |
2 | Financial liquidity (Divisions: S,T,F) Significant amounts are utilised for Group working capital. Certain sections of working capital can have a long lead time to convert to cash. Such delays could cause liquidity problems for the Group.
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All divisions have seen changes in business and working capital requirements All borrowing facilities are with one UK financial institution whilst significant amount of funds held outside UK in other institutions On-going 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 a Group aide treasury management to monitor cash positions worldwide and co-ordination cash repatriations to the Group Continuing the consolidation of banking relationships and the Implementation of the global pooling capabilities. |
Moderate |
3 | Management bandwidth (Divisions: S,T,L,F) Insufficient senior management bandwidth (quality and quantity) which can lead to lost opportunities to pursue and/or execute business opportunities. |
Business value and earnings could be reduced if key executives are not available to manage business opportunities. |
Continuation of career path and succession planning to ensure suitable management structures are maintained across the Group. |
Moderate |
4 | Corporate skill sets (Divisions: S,T,F) Failure to attract and retain skilled people leading to loss of key client relationships or failure to cultivate new 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. |
Continue development of career path and succession planning for all key staff. Maintain competitive remuneration packages, including use of deferred equity awards. |
Moderate |
5 | Financial capacity (Divisions: S,T,F) Inadequate financial capacity to execute Group growth and development plans.
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Group may not have sufficient financial resources to execute all growth opportunities identified and available to it. |
Ensure that all divisional growth opportunities and strategies are regularly reported to the Board. The Board completes a strategic resource analysis of all growth opportunities to ensure that intended resources are allocated to growth opportunities with the best return. |
Moderate |
Principal risks |
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Risk rank | Description of risk | Summary of impact | Mitigating Control and Management actions | Assessed Risk level & Change |
6 | Technological changes (Divisions: S,T) The threat of technological change rendering aspects of our current service offering obsolete.
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The value of "relationships" could be devalued and replaced by disruptive technology platforms resulting in increased competition and consequent price reductions. |
Continued development and promotion of the Braemar corporate brand and values Continuing to recruit and retain talented and experienced staff Developing own technological expertise and strategy Seeking appropriate acquisition opportunities Engagement of external consultants to assess market developments |
Moderate |
7 | Currency fluctuations (Divisions: S,T) The majority of Group revenues are generated in US$ whilst the cost base is in multiple currencies. |
The Group remains exposed to US$ fluctuation |
Foreign exchange movements are monitored and short and medium term hedging structures are put in place over a rolling twelve-month period. |
Moderate |
8 | Incentive and cost structures (Divisions: S) Implementation of inappropriate incentive and reward structures that could incentivise negative behaviour such as internal conflict or short termism |
Business value and earnings could be reduced. |
Continue to maintain appropriate and competitive remuneration packages |
Moderate |
9 | Internal and external communications (Divisions: S,T,F,L) Poor communication between divisions or business units could mean that overall Group return and earnings are not maximised. |
This could impact internal and external relationships, damage contract management, impair business development and result in lost business opportunities. |
Continue to develop and prioritise cross divisional communication and business development opportunities |
Moderate |
10 | Legal and regulatory impact (Divisions: S,T,F) Legal or regulatory breach by the Group resulting in fines and sanctions and ultimately loss of ability to operate. Examples could include non-compliance with the Bribery Act or Modern Slavery Act on inadvertently dealing with sanctioned individuals or entities. |
The Braemar brand could be damaged and business lost. This error/mistake could be at a local level but impact the whole Group |
Maintain current training programme to ensure all staff are fully aware of business obligations Continuing management and reporting Maintain adequate levels of insurance cover. |
Moderate |
11 | Cyber crime (Divisions: S,T,L,F) Cyber crime resulting in a denial of service or where unauthorised access to Braemar's systems leads to a potential loss of revenue |
Loss of service and associated loss of revenue Reputational damage Potential for loss due to fraud. |
Maintain current archiving solutions so lost data can be recovered quickly and efficiently Key information retained in multiple systems and locations
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Moderate |
S = Shipbroking; T = Technical; L = Logistics; F = Financial
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:
Group | 2018 | 2017 | ||||
Recharges to/(from) £'000 | Dividends £'000 | Balance due from £'000 | Recharges to/(from) £'000 | Dividends £'000 | Balance due from £'000 | |
London Tanker Brokers Panel | 325 | - | - | 395 | - | - |
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 have 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 €0.8 million and the amount charged to Risorto GmbH in the year was less than €0.1 million. The balance owing to Risorto GmbH as at 28 February 2018 was €0.7 million.
During the year the Company entered into the following transactions with subsidiaries and joint ventures:
Company | 2018 | 2017 | ||||
Loans/ recharges to/(from) £'000 | Dividends £'000 | Balance due from/(to) £'000 | Loans/ recharges to/(from) £'000 | Dividends £'000 | Balance due from/(to) £'000 | |
Braemar Shipbrokers Limited | - | - | (589) | - | - | (589) |
Braemar ACM Shipbroking Limited | (3,027) | - | (9,296) | - | - | (6,269) |
Braemar Technical Services (Engineering) Limited | (415) | - | 389 | 450 | - | 804 |
Braemar Technical Services Holdings Limited | (1,053) | 884 | (169) | (797) | 797 | - |
Braemar Technical Services (Adjusting) Limited | 315 | - | 69 | 315 | - | 468 |
Braemar Technical Services Limited | (399) | - | 2,965 | (367) | - | 2,896 |
Cory Brothers Shipping Agency Limited | (4,412) | - | (6,476) | (2,067) | - | (2,064) |
Braemar Response Limited | 533 | - | 995 | 462 | - | 462 |
Cagnoil Limited | - | - | 39 | - | - | 39 |
Braemar ACM Shipbroking Pte Limited | 3,272 | - | - | 431 | - | (3,272) |
Braemar Technical Services Offshore Pte Limited | 41 | - | 24 | 1,145 | 4,572 | 65 |
Braemar ACM Group Limited | (4,863) | 3,468 | 1,553 | (13,102) | 14,368 | 2,948 |
Braemar ACM Valuations Limited | (339) | - | - | 339 | - | 339 |
Braemar Holdings (USA) Inc | - | - | 1,298 | 1,298 | - | 1,298 |
Portabella Limited | - | - | (525) | - | - | (525) |
Braemar NAVES Corporate Finance GmbH | 208 | - | 208 | - | - | - |
Braemar NAVES Corporate Finance Limited | 23 | - | 23 | - | - | - |
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 47 and 56. Key management represents the Group Board of Directors of the Company.
| 2018 £'000 | 2017 £'000 |
Salaries, short-term employee benefits and fees | 862 | 844 |
Other pension costs | 86 | 86 |
Share-based payments | - | 8 |
| 948 | 938 |
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Number of key employees | 7 | 6 |
Retirement benefits are accruing to one member of key management (2017: one) in respect of a defined contribution pension scheme.
For further information, contact:
Braemar Shipping Services plc | |
James Kidwell, Chief Executive | Tel +44 (0) 20 3142 4100 |
Louise Evans, Finance Director | Tel +44 (0) 20 3142 4100 |
Peter Mason, Company Secretary | Tel +44 (0) 20 3142 4100 |
Stockdale Securities | |
Robert Finlay / Antonio Bossi / Henry Willcocks | Tel +44 (0) 20 7601 6100 |
Buchanan | |
Charles Ryland / Stephanie Watson / Tilly Abraham | Tel +44 (0) 20 7466 5000
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Notes to Editors:
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 800 people in more than 70 locations worldwide across its Shipbroking, Technical, Logistics and Financial 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 presentations, visit www.braemar.com.