Braemar Shipping Regulatory News (BMS)

 THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU NO. 596/2014) WHICH IS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN

30 August 2022

BRAEMAR SHIPPING SERVICES PLC

("Braemar", the "Company" or the "Group")

Preliminary Results for the year ended 28 February 2022

Strong trading performance, balance sheet built for growth, and achievement of key strategic objectives.

Braemar Shipping Services Plc (LSE: BMS), a leading international shipbroker and provider of expert advice in shipping investment, chartering, and risk management, today announces its preliminary results for the year ended 28 February 2022.

The board is delighted with the performance of the business for the financial year and looks to the future with confidence.

STRONG TRADING RESULTS AND SUCCESSFUL EXECUTION OF STRATEGIC CHANGE

· 21% increase in revenue from continuing operations to £101.3m (2021: £83.7m**)

· 31% increase in underlying operating profit* to £10.1m (2021: £7.7m**)

· 15% increase in the forward order book to US$50.0m (2021: US$43.4m)

· Cashflow from operating activities in the year increased by 61% to £20.5m (2021: £12.7m)

· Reported profit after tax for the year up 209% to £13.9m (2021: £4.5m)

· Balance sheet strengthened. EBITDA to net bank debt ratio reduced by 27% to 0.96x (2021: 1.32x), well below the board's target net debt to EBITDA ratio of 1.5x.

· Net bank debt reduction of £17.2m from 29 February 2020 to 2 March 2022 following receipt of funds from Cory Brothers disposal

· Successful refocus on core Shipbroking and Corporate Finance business

· Investment in people, offices, and technology is reaping rewards

· Disposal of non-core investments in AqualisBraemar LOC ("AqualisBraemar"), Cory Brothers, and Wavespec completed

· Underlying earnings per share increased by 100%

· Final dividend of 7.0p per share recommended to reflect the strong cashflow and confidence in the business. Total dividend for the year of 9.0p per share (2021: 5.0p)

· Braemar has also announced separately today that trading during the first five months of the current financial year has been very strong and also benefitted significantly from the strength of the US Dollar. As a result, the outturn for the current financial year is expected to be well ahead of the board's previous expectations with underlying operating profit expected to be not less than £20.0m.

FINANCIAL HIGHLIGHTS

* Underlying results measures above are before non-recurring specific items, including acquisition and disposal-related charges and profit/loss from discontinued operations.

** Reported results are from continuing operations only, comparatives have been adjusted to remove discontinued operations.

SUCCESSFUL EXECUTION OF STRATEGIC CHANGE

In the year ended 28 February 2022 the board has executed several transactions that have simplified the Group's operations and launched a new growth strategy centred on Shipbroking and Corporate Finance.

One of our core ambitions is to double the size of the business through strategic hires and acquisitions in our refocused areas of business. We remain confident that this can be achieved within a sensible timeline. We believe that scale has become increasingly important within our industry to service the needs of our clients; to provide the Group with enhanced geographical and product diversification; to reduce the impact of cyclical markets; and to create further cost efficiencies. Our substantial market share at a time of buoyant shipping markets, combined with our large forward order book, and a strong balance sheet leave us well-positioned to grow at an accelerated pace.

OUTLOOK

We have seen strong trading at the start of this financial year, and activity has been particularly high in the derivatives, sale and purchase, and corporate finance markets. The simplification of our business and our ambitious strategy to double our annual underlying operating profit is yielding strong trading results.

Our team has seen elevated numbers of newbuilding orders, principally in the container and gas carrier sectors. As a result, capacity at many shipyards is now unavailable well into 2025. For shipowners in other sectors this is making it challenging for them to renew their fleets and they're turning instead to the second-hand market. These dual factors have created significant opportunities for our Sale and Purchase desk, and they have capitalised on them. Over the next couple of years, these factors are likely to prove positive for our chartering desks too, as reduced ability to replace retiring ships is expected to constrict vessel supply and consequently create a higher floor on future charter rates.

We believe our ability to seize the opportunities available over the last year and maintain our high levels of activity are due to our investments in people, technology, and new offices. I look forward to another strong year of trading as these benefits continue to compound.

James Gundy, Group Chief Executive Officer of Braemar, commenting on the Group's results for the year, said:

"I am extremely proud of the performance of the Group in my first full year as Group Chief Executive Officer. The strong trading results are testament to the hard work and dedication of our team and to our clear and focused strategy, delivered by a united new board and management team. Our achievements this year have been a huge collaborative effort, and our team spirit positions us well for future growth."

Results briefing

A presentation for analysts will be held at 10.30am today via conference call. Please contact the team at Buchanan for details on braemar@buchanan.uk.com.

A copy of the presentation and call recording will be made available on the Investor Relations section of Braemar's website after noon today: https://braemar.com/investors/.

For further information, contact:

Notes to Editors:

About Braemar Shipping Services Plc

Braemar provides expert advice in shipping investment, chartering, and risk management to enable its clients to secure sustainable returns and mitigate risk in the volatile world of shipping. Our experienced brokers work in tandem with specialist professionals to form teams tailored to our customers' needs, and provide an integrated service supported by a collaborative culture.

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 and follow Braemar on LinkedIn

Reconciliation of underlying profit before tax to reported profit after tax for the period

*Discontinued operations include Cory Brothers, Wavespec and the non-core investment in AqualisBraemar - all of which have been disposed of in the period

Alternative Performance Measures ("APM"s)

Braemar uses APMs as key financial indicators to assess the underlying performance of the Group. Management considers the APMs used by the Group to better reflect business performance and provide more useful information to investors and other interested parties. Our APMs include underlying operating profit, underlying profit before tax, underlying earnings per share and net debt. Explanations of these terms and their calculation are shown in the summary above and in detail in our Financial Review.

This document contains forward-looking statements, including statements regarding the intentions, beliefs or current expectations of our Directors, officers and employees concerning, among other things, the Group's results of operations, financial condition, liquidity, prospects, growth, strategies and the business. These statements are based on current expectations and assumptions and only relate to the date on which they are made. They should be treated with caution due to the inherent risks, uncertainties and assumptions underlying any such forward-looking information. The Group cautions investors that a number of factors, including matters referred to in this document, could cause actual results to differ materially from those expressed or implied in any forward-looking statement, including general business and economic conditions globally, industry trends, competition, changes in government and other regulation and policy, interest rates and currency fluctuations, and political and economic uncertainty (including as a result of global pandemics). Neither the Group, nor any of the Directors, officers or employees, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this document will actually occur. Undue reliance should not be placed on these forward-looking statements. Other than in accordance with our legal and regulatory obligations, the Group undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise

Chairman's Statement

I am delighted to have been appointed as Chairman of the board in May 2021 with a remit to help the Group's new management team simplify its operations and develop an ambitious growth strategy centred around Shipbroking.

I am pleased to report that during the year, in addition to successfully navigating the challenges of the global pandemic, the Group has completed all the key strategic steps required to simplify its operations and provided the framework to further expand the business.

In addition to maintaining a first class service to its clients, during the year the board has put in place a clear and focused strategy; increased the scale of the business; disposed of non-core assets and businesses; delivered a strong trading performance exceeding the board's expectations; reduced net debt (including £6.5m of Cory Brothers disposal proceeds received on 2 March 2022) to £2.8m (2021: £8.9m) and restored the payment of and interim and final dividends to shareholders.

Strong trading results

The Group traded well throughout the financial year, because of increasing the scale of its Shipbroking operations as well as generally favourable market conditions. Revenue from continuing operations increased by 21% to £101.3m (2021: £83.7m) and operating profit from continuing operations increased by 31% to £10.1m (2021: £7.7m), ahead of the board's previously upgraded expectations. Reported profit after tax increased by 209% to £13.9m (2021: £4.5m), reflecting the strong underlying trading, combined with a profit of £4.1m on the disposal of Cory Brothers and a profit of £3.4m on the disposal of the Group's investment in AqualisBraemar.

Underlying earnings per share increased by 100% to 27.95p (2021: 13.96p). Reported earnings per share, which amongst other things includes the benefit of the sale of the non-core investment in AqualisBraemar and the disposal of Cory Brothers, increased by 215% to 45.56p, (2021: 14.45p).

Well-covered dividend

Mindful of the importance of dividends to shareholders and reflecting the strong cash generation of the Group's Shipbroking business, the board has decided to supplement its growth strategy with a progressive dividend policy, subject to financial performance. 

The board will recommend a well-covered final dividend for the current financial year of 7.0p per share for approval by shareholders at its reconvened AGM which will be held on 6 October 2022. This is in addition to the interim dividend of 2.0p per share in respect of the 6 months to 31 August 2021 which was paid on 16 December 2021, yielding a total dividend for the year of 9.0p per share (2021: 5.0p).

The final dividend will be paid on 14 October 2022 to shareholders who are on the register at the close of business on 9 September 2022, with a corresponding ex-dividend date of 8 September 2022. The last date for Dividend Reinvestment Plan (DRIP) elections will be 23 September 2022.

Delay in publishing results

Over the past year and a half, the new board has made substantial progress in laying the foundations for growth, clarifying Braemar's strategic direction and substantially increasing its profitability. Loss-making business have been closed, ongoing central costs have been reduced, the core Shipbroking business has been expanded, the board has been strengthened, net debt reduced to near zero and dividend payments restored.

However, while we can celebrate the progress that has been made in the business, we must also acknowledge that this year's accounts are being published later than would normally be the case. In summary, this delay has been caused by the auditors and the board reviewing the accuracy of certain foreign exchange and other balance sheet reserve accounts of the business. The foundations of an accelerated growth agenda mandate a solid bedrock of accounting integrity and I regard it as essential that a full check on the integrity of these areas over the past three years has been carried out.

A very significant workstream was initiated, therefore, re-examining these balance sheet areas over the past three years. In doing so, some errors, largely historic, in accounting for the Naves acquisition, the foreign exchange gain on the AqualisBraemar share disposal and the balance sheet classification of certain other reserves have been identified and corrected. None of these prior year errors impact the underlying profitability of the business that has been previously reported.

The board has now completed this exercise and these areas have been subject to audit to the extent required. I trust that shareholders will fully understand that it was essential that this exercise was done in order that we can move forward with confidence. I would like to take this opportunity to thank the auditors and Braemar's finance team for carrying out this significant piece of work over the past few weeks with unstinting diligence, clarity of focus and sheer effort.

Climate-smart shipping

The Group recognises the importance of climate change generally and specifically the importance of environmental, social and governance factors in our business and in the shipping industry. During the year the Group launched its environmental, people, social and governance framework ("EPSG Framework"). The board has chosen four of the seventeen United Nations Sustainable Development Goals ("SDGs") to underpin its mission to facilitate climate-smart shipping.

The drive for both those owning and chartering ships to operate in a climate-friendly environment continues to develop, and the Group has made good progress in developing responsible climate-smart shipping policies that are fit-for-purpose in this sought-after greener environment.

Board changes

With effect from 1 August 2021, Tristram ("Tris") Simmonds and Elizabeth Gooch MBE were appointed to the board of the Company as Chief Operating Officer (Executive) and Non-Executive Director respectively.

Tris was previously the Managing Director of Braemar Atlantic Securities, the Group's derivative brokerage business. Elizabeth has over 16 years' experience of governance, compliance, and financial reporting of publicly listed companies. Elizabeth has joined the Group's Audit and Nomination Committees and has chaired the Group's Remuneration Committee since Jürgen Breuer stood down from the board on 26 August 2021.

With effect from 1 March 2022, Joanne Lake was appointed to the board of the Company as a Non-Executive Director. Joanne has over 25 years' experience of business development, strategy, and corporate finance in several financial and professional services organisations. Joanne was appointed Audit Committee Chair with effect from 1 April 2022. Joanne joined the Remuneration and Nomination Committees from 1 March 2022. Lesley Watkins resigned from the board with effect from 31 March 2022, and Elizabeth Gooch succeeded Lesley in the role of senior independent director from 1 April 2022.

I am delighted to welcome Tris, Elizabeth, and Joanne to the board. The addition of Tris creates a stronger executive team with the bandwidth and experience needed to deliver the board's growth aspirations to the benefit of all stakeholders of the Group. Both Elizabeth's and Joanne's prior governance, public company, and technology experience in growth-oriented, people-based businesses is highly complementary to the Group's strategy and existing non-executive skill base. I would also like to thank Jürgen and Lesley for their significant contributions to the Group, and I wish them the very best for the future.

Our people

The results for the year are a tribute to the dedication and expertise of our staff. The calibre of our people is central to the high quality of service that we provide to our clients. It is their hard work and creativity that enables Braemar to continue to build its brand and reputation as we develop our business. I would like to thank all our staff for their continuing efforts on behalf of the Group.

Outlook

The present global marketplace is generally characterised today by geopolitical uncertainty, trading sanctions, exchange rate volatility, logistical challenges remaining from the global pandemic, together with inflationary and interest rate pressures.

Notwithstanding these challenges, market conditions in the Shipbroking industry remain favourable, driven both from strong demand and restricted supply. For Braemar, trading during the first five months of the new financial year has been very strong and the Group continues to benefit from the increased scale and breadth of its broking operations in these generally favourable market conditions. As a result expectations for the current financial year are expected to be well ahead of the board's previous expectations.

Compliance with existing sanctions, put in place because of the Russian/Ukraine conflict, is not expected to have any material effect on trading or cashflows in the current financial year nor does the Group have any existing material exposure. The board continues to look to the future with confidence as it sets about delivering on its growth strategy centred on Shipbroking. 

Nigel Payne

Chairman

28 August 2022

Group Chief Executive Officer's Statement

I am extremely proud of our performance in my first full year leading the Group. Before I became CEO, I led Shipbroking at Braemar, and I was previously the CEO of ACM, which merged with Braemar in 2014. That division was always Braemar's driving force, and my vision for the company has long been to take the business back to its basics.

As you'll see below in more detail, we've started to see the results of our focus on Shipbroking and Corporate Finance. We've become a more effective and more dynamic company by trimming the fat, investing in our people and technology, and focusing on what we know works through our wealth of experience.

The strong trading results are testament to the hard work and dedication of our people, and to our clear and focused strategy which has been delivered by a united new board and management team. Under unusual conditions and working from home for much of 2021, our achievements have been a huge team effort and prove we are well positioned for future growth.

Our future success: We have rebuilt the foundations, now we grow

Trading in our Shipbroking business was very strong throughout the year, with revenue and profits significantly ahead of our initial expectations from the previous year. Our performance reflects the core steps we have taken to increase the scale of our Shipbroking activities as well as favourable market conditions.

Examples of where our expanded and diversified business and market conditions combined to increase the Group's profitability include: A volatile and busy Dry Cargo market which helped increase revenue on our expanded physical and securities desks; our global Sale and Purchase team concluding a significantly higher number of transactions within their market; a strong container market volume which augmented the synergies gained from working closely with our Corporate Finance business.

Although Tanker market rates remained supressed throughout the year due to continued pandemic-related weakness for oil demand, the number of transactions we performed increased by more than 21% compared to the previous year. Chartering fixture volumes were up 8% across all desks, securities' revenue increased 60%, and Sale & Purchase volumes grew 59%.

Strengthening the balance sheet

The board has focused this year on reducing the net bank debt of the Group, and I am delighted that we have achieved our objective; a total reduction of £17.2m from 29 February 2020 to 2 March 2022.

Enhancing our cashflow

Cashflow from operating activities in the year increased by 61% to £20.5m (2021: £12.7m). Excluding the initial proceeds of the sale of Cory Brothers, as of 28 February 2022, the Group held cash of £14.0m (2021: £14.1m). The initial consideration of £6.5m from the disposal was received on 2 March and is accounted for as a receivable on the balance sheet date.

Reducing the debt burden

The board previously stated that that it had set a target of achieving a net bank debt to EBITDA ratio sustainably below 1.5 times on average over the seasonal working capital cycle. I am pleased to report that excellent progress has been made towards this goal. Net bank debt at 28 February 2022 was £9.3m (2021: £8.9m) with the ratio falling to 0.96 times for the 12 months to 28 February 2022, down from 1.32 times for the prior year. Including the £6.5m proceeds from Cory Brothers which were received on 2 March 2022, net bank debt reduces to £2.8m and the ratio falls further to 0.60 times.

Moreover, the future earnout consideration that will be received for Cory will almost totally offset the outstanding debt relating to the Naves acquisition, and it means that we enter the new financial year very close to debt-free. When you compare this situation to where we were four years ago, it's like colour versus black and white. A similarly concrete change has been achieved in our reduced exposure to deferred share promises relating to the employee bonus scheme now, and in the future.

The Group's revolving credit facility with our main bankers, HSBC, is due to expire in September 2023. We have already received acceptable indicative terms for an extension and we expect to conclude these discussions well in advance of the current facility end.

Successful execution of strategic changes

While we've achieved plenty during my first complete year in charge, there will be no resting on our laurels. There is too much left to do if we're to achieve our objectives.

I have a strong, experienced team around me led by my CFO, Nick Stone, and COO, Tris Simmonds, and we are executing on our plan that was agreed by the board. We've reduced net debt, invested in our people and technology, and implemented a focused programme of change. This has strengthened the Group compared to where we were recently, and will allow us to continue to grow organically, or through acquisitions.

Disposal of Cory Brothers

The disposal of Cory Brothers was completed on 28 February 2022, the last key step on the execution of Braemar's strategy of focusing on our core Shipbroking business. The all-cash consideration consists of a £6.5m upfront payment with deferred and contingent payments of up to £9.0m over a three-year earnout period. The Group expects to receive £4.8m of the deferred and contingent consideration. The buyers of Cory are a long-term strategic partner of the Group, and we look forward to seeing the new combined VertomCory business thrive. The business combination will provide a strong platform from which to accelerate growth and Braemar will share in the success of the new business via an earnout mechanism.

Braemar Naves consideration restructuring

On 3 June 2021, the Group amicably restructured the deferred consideration owed in relation to its 2017 acquisition of Braemar Naves. The restructuring saw over £2.5m, which was previously due for repayment before the end of December 2022, deferred to be paid no earlier than September 2025. Total liability for the Naves acquisition is now reduced to £4.7m, which is conveniently offset with receipts from the VertomCory transaction.

The development of this division as the Corporate Finance offering of the Group's Shipbroking business has progressed well with many transactions concluded together. The expected synergies with our sale and purchase department are strong and growing, especially in the container market.

Disposal of investment in AqualisBraemar

The Group further strengthened its balance sheet by selling its non-core investment in AqualisBraemar. On 19 May 2021 9,640,621 shares were sold for cash proceeds of £7.2m and on 20 August 2021 1,000,000 warrants vested and the resulting shares were sold for cash proceeds of £0.7m. The investment in AqualisBraemar was the result of the June 2019 disposal of the loss-making Offshore, Adjusting and Marine businesses. Including 9,600,000 shares sold in the year ending 28 February 2021, the Group has realised total cash proceeds of £13.9m in respect of this disposal.

Disposal of Wavespec

The Group completed the disposal of its loss-making Engineering Division, Wavespec on 31 March 2021. Although no proceeds are expected to be received, the disposal of this engineering business was the final step in disposing of the Group's Technical Division.

Reinvigorating the Braemar brand

The board's strategic development work has included a rebranding initiative. An important part of this was the launch of our new corporate website in June 2022, which clearly positions and communicates the Group's new focus, objectives, and purpose. This was also an ideal time to set out the Group's work regarding compliance, and EPSG. We see many new growth opportunities created by the rapidly developing area of environmental sustainability, and we are positioning the company to capture an outsize share of them.

Our new strategic ambition and direction

Our primary medium-term ambition is, through strategic hires and acquisitions, to double the size of the business, such that our sustainable annual underlying operating profit, regardless of market factors, is twice the £7.7m underlying operating profit restated in 2020-21. It is pleasing to note that we have already achieved a 30% increase over the last year, we've grown our operating margin from 9% to 10%, and we continue to believe that this can be achieved within the four-year timeline we outlined in 2021.

We believe that scale has become increasingly important within our industry to service the needs of our clients. It is also needed to provide us with sufficient geographical and product diversification, reduce the impact of cyclical markets, and create further cost efficiencies. Buoyant shipping markets, a strong market share and a robust forward order book, position us well to grow at an accelerated pace.

The board believes that the delivery of our core strategic ambition requires investment in our business support infrastructure and technology. Together, they will provide essential foundations for growth, as well as ensuring that we can continue to meet the growing demands of our clients. We continue to develop technology solutions that enhance our offering as a broker through, for example, by investing and working in partnership with Zuma Labs, and most recently by partnering with CHOOOSE, a supplier of digital toolkits that enable climate-based solutions for many industries. Through these partnerships we are delivering market-leading digital solutions to the shipping industry and future-proofing our business.

We have an active program for organic expansion, and recent highlights include the establishment of Geneva and Houston offices as we expand into new markets, as well as moving to a larger Dubai office and growing our market leading specialisms. Our Australian Dry Cargo Business in Melbourne and Perth continues to grow, and it remains the dominant broker in its field. Our Singapore office continues to expand and is a key partner with the Singapore Maritime Academy (SMA), providing an approved trainee scheme for young Singaporeans wanting to join the maritime industry.

Our expansion strategy is already paying dividends and there are good indications within the year's trading performance that the investments we are making to increase the breadth, focus, and depth of the Group's Shipbroking activities are starting to deliver growth unrelated to movements in market rates themselves. Notably, amid the volatile Dry Cargo market the Group increased both revenue and market share on the physical and securities desks. The Sale and Purchase desk has concluded a significantly higher number of transactions partially due to the strong container market, as well as through the synergies gained from working closer with the Corporate Finance desk. Tanker market rates remained low, impacted by pandemic related weakness in oil demand. However, Tanker transaction volumes have increased by more than 25% compared to the previous year, aided by strategic hires and growth of the Geneva office within the oil product sector.

To better align shareholder and employee interests and support the growth agenda, the board concluded that it should reduce the overall amount of deferred equity issued annually as part of employee remuneration arrangements. Under the previous scheme, deferred shares were awarded and issued to employed recipients over a three-year vesting period and generally settled by shares purchased in the market. Whilst this scheme will remain unchanged, the amount paid in such deferred shares will be halved with an increase in cash bonuses paid of the same amount for the current and future years. Future years will involve claw back arrangements on the additional cash payments to encourage employees to remain in Braemar's employment. During the year the ESOP acquired 2.7m shares. This reduced the company's exposure, and it ensures that all historic liabilities are now covered.

Outlook

Trading at the start of the new financial year has been strong and I look forward to the remainder of the year with confidence as we continue to reap the benefits of our increased scale and focused strategy.

Over the last year, the advisory and facilitation that Braemar provides to shipowners and charterers have increased our forward order book by 15% to US$50.0m (£37.3m) at the year end compared with US$43.4m (£31.1m) at the beginning of the period. Since the year end, the order book has grown by a further 14% to US$57.1m (£42.6m) at the end of July 2022.

We have seen strong ordering, particularly in the gas carrier and container markets, where there's very high demand for newbuildings, and capacity at many shipyards is now unavailable until 2025 at the earliest. Shipowners in other sectors are therefore finding it hard to renew their fleets and relying upon the second-hand market instead. All these factors have strongly benefitted our Sale and Purchase desk.

In the coming years, these factors are likely to benefit several of our chartering desks as well, because if older ships are retired and there's no ability to replace them it will restrict vessel supply in those sectors and put a higher floor on charter rates. I firmly believe that it is through our investments in our people as well as offices and technology that we have achieved these high levels of activity. I look forward to another strong year of trading as their benefits continue to compound.

The only other point I wanted to raise is that I'm enjoying working with Nigel and the other non-executives. The synergies and their benefit to Braemar are already apparent as we now focus on looking forward, with confidence about what the future holds.

James Gundy

Group Chief Executive Officer

28 August 2022

Operating Review

Introduction

Seaborne trade continues to recover from the global pandemic. Growth in ton-miles and logistical disruption have combined to strengthen freight rates in many markets, which, in turn, has benefitted Braemar.

The Dry Cargo, Gas, and Container sectors have performed particularly strongly. Specialised Tankers has made a slower recovery, and Deep Sea Tankers has recently returned to better rates. The resurgent interest in the shipping industry from both a lending and equity investment point of view has meant the Corporate Finance desk has also performed well. As a result, we have grown our revenue and volume of fixtures in almost every sector.

The macroeconomic outlook for shipping is broadly favourable to Braemar. Seaborne volumes are expected to continue increasing, and between a combination of high ship recycling prices and shipyard capacity, only Containers and Gas are likely to see major fleet growth in the coming years. Through office expansion, new hires, and the positive momentum in the markets we are well positioned for strong performance in the Dry Cargo and Specialised Tanker markets; to continue to increase our Securities' market share; and well positioned for a full recovery in Deep Sea Tankers.

In April 2022, we created a Digital Transformation Desk and appointed our first Head of Digital Transformation. The desk is working to further integrate digital tools into all areas of the Group to enhance our ability to serve our clients' growing requirements, as well as to make workflows more engaging and efficient for our people.

Shipbroking

Sale and Purchase

Sale and Purchase activity has been exceptionally strong throughout the financial year ending 28 February 2022, which has driven a major increase in our revenues, and the desk has made several strategic new hires who are already making good contributions. Strong spot and time charter markets in the Dry and Container sectors since 2020 have lifted asset values to long-term highs. Consequently, asset value and transaction growth continued in the Containership sector for the second consecutive year, as charter rates and asset values grew to exceptional highs and fed into enhanced revenue for the desk.

Containerships and LNG carriers are dominating the newbuild orderbook, but in other sectors newbuilding ordering activity has been suppressed by a lack of space in shipyards, rising labour and material costs, and a lack of clarity regarding what fuels and technologies to adopt to ensure regulatory compliance. Owners have therefore focused their investment on second-hand units, which has resulted in one of the busiest periods of asset play in recent memory, which Braemar has profited from through our superior ability to connect buyers and sellers. We expect second-hand activity and prices to remain elevated for the dry cargo and container sectors. Due to the lack of newbuilding capacity, even in a weak tanker market we are still seeing an increase in second-hand values in this sector. On top of that we are seeing one of the strongest ship recycling markets, which has been to the advantage of our Demolition team. 

With interest rates close to historic lows and a consensus that the worst of the COVID pandemic is behind us, there was a lot of liquidity in the capital markets this year. Improving markets also enabled restructurings in Multipurpose/Heavylift and Offshore, for example, to be completed after years of preparation, all of which also benefited Braemar's Corporate Finance desk.

Sale and Purchase's revenue increased by 31% from £15.0m in FY20/21 to £19.6m in FY21/22 and represented 19% of Braemar's total revenue. Fixture volumes increased by 59% compared to the previous year.

Deep Sea Tankers

Tanker markets have weakened throughout the financial year as successive waves of COVID related restrictions have reduced global oil demand, particularly for diesel and jet fuel. A large 'shadow' fleet of tankers moving sanctioned Iranian and Venezuelan crude oil has provided employment for vessels that would otherwise have been sold to ship recyclers for their steel, and reduced employment for other vessels. Despite these hindrances, the desk has achieved fixture growth that's a fifth better the preceding financial year. Russia's actions in Ukraine threaten to withdraw crude supply from the already undersupplied market. A global stock build, once oil prices have eased, is likely to support tanker trades, and the desk is well positioned for when this occurs.

Deep Sea Tankers' revenue decreased by 32% from £26.3m in FY20/21 to £17.8m in FY21/22 and represented 18% of Braemar's total revenue. Although revenue decreased due to weak markets, fixture volumes were up 21% compared to the previous year.

Specialised Tankers and Gas

The Specialised Tankers and Gas market is diverse, and it includes very different types of vessels servicing the unique needs of the oil products, LPG, petrochemicals, and LNG markets - to take only four examples that Braemar services.

The return of activity from oil products' end users as COVID vaccinations were rolled out as well as a sizeable percentage of ships reaching their maximum trading age caused the global fleet's availability to tighten towards the end of 2021. This has continued into 2022 to Braemar's advantage as charter rates have remained robust. The Chemical market struggled at the start of the financial year with a combination of lower volumes, higher bunker prices, and increased competition from swing tonnage. It took until Q4 2021 for a significant increase in tanker earnings to occur, and Braemar has realised good gains as this upturn continued into 2022. There is cautious optimism about the sector's potential over the next 12 months, and that is expected to create further growth for the desk. Braemar's decision to invest in our Geneva office is already showing dividends, with substantial new business growth already from its recent hires, and the expectations that the compound benefits of this expansion will reap larger dividends in the new financial year.

Total demand is growing across the gas markets, and production is expected to continue to grow in tandem, which has combined to improve the desk's margins. A substantial number of larger capacity ships are set to be delivered in the next few years and it is hoped that the cumulative demand growth of these products will be able to absorb these newbuilds. However, there is a continued lack of newbuilding orders in smaller sectors as well as further owner consolidation. Braemar's Gas desk has substantially increased its spot and period business over the last year for petrochemicals and larger LPG, and it continues to diversify its client base. The desk has also increased its forward physical freight agreements, which has provided Braemar with increased liquidity for future spot business.

In previous years, relatively stable LNG delivered prices averaged at around $7-12 per MMBtu with seasonal fluctuations of between $5-6, has given way to highs of almost $70 this year and rapid fluctuations of $20-30 almost over 24hr periods. Consequently, Braemar is seeing huge interest in LNG shipping, as charterers are being forced to take longer term charters to mitigate these commodity price swings which has soaked up almost all available tonnage. Braemar has benefited from the high price for LNG as it has led to an increase of newbuild orders. On the chartering side, Braemar has recently achieved two 7-10-year charters, and several multi-month charters as customers work to secure their long-term security of supply. The long-term revenue for Braemar's LNG desk has almost doubled over the last 12 months, and it is optimistic about the prospects for the sector over the next year.

Specialised Tankers' and Gas revenue increased by 6% from £10.9m in FY20/21 to £11.6m in FY21/22 and represented 11% of Braemar's total revenue. Fixture volumes increased by 12% compared to the previous year.

Dry Cargo

Dry freight markets rose strongly during the first half of the financial year, reaching highs not seen since before the financial crisis in 2008, and we have realised substantial gains from its advisory and facilitation. COVID-related port congestion coupled with resurgent demand for raw materials, particularly in China, resulted in a significant tightening in the supply and demand balance, and consequently higher rates from which Braemar has profited. While Russia's invasion of Ukraine is likely to dent economic growth, we expect dry cargo demand to be supported by Chinese growth when COVID restrictions are fully eased. Thanks to sanctions and the loss of Ukraine's port facilities, the loss of Russian coal and grain exports to Europe will need to be replaced from further afield. The resulting reshuffling of global trades is likely to increase the average length of haul, supporting dry cargo freight rates in the short-term and the profitability of this desk.

Dry Cargo's revenue increased by 95% from £15.3m in FY20/21 to £29.8 in FY21/22 and represented 29% of Braemar's total revenue. Fixture volumes were marginally lower than the previous year.

Offshore and Renewables

A combination of high oil and gas prices, political pressure for low carbon energies, and an increase in total demand has created some of the brightest prospects for the offshore energy markets and the Offshore desk in many years. Activity in traditional and new energy sectors will prove beneficial for almost all vessel classes, as well as providing a welcome relief from the low demand and massive overcapacity that has inhibited the sector over much of the last decade. Braemar's Offshore Energy Services desk achieved 30% more business in 2021-22 compared to the previous 12 months, and in collaboration with other desks beat off stiff competition to be awarded a seven-year framework agreement with the UK's Ministry of Defence. Driven by end user pressure, progressive environmental regulation, and cost declines there is significant worldwide demand for offshore wind projects and clean energy more broadly that is likely to remain elevated for several years. To capitalise on this trend, Offshore has doubled its number of Renewables brokers, and recently became the first major shipbroker to hire a dedicated Renewables broker on the east coast of the USA.

Offshore and Renewables' revenue increased by 41% from £2.7m in FY20/21 to £3.8m in FY21/22 and represented 4% of Braemar's total revenue. Fixture volumes increased by 43% compared to the previous year.

Securities

High volatility over the course of the last 12 months has helped to drive overall market volumes higher. Braemar has been able to capture an increasingly large proportion of trading volumes, growing our market share considerably. Major concerns about European energy security led to exponential moves in dry FFAs. After several years of depressed values on dry cargo, 2021 finally achieved levels not seen for over a decade, with the Capesize index peaking in early October at $86,593. Over the following six months, supply disruptions and seasonality saw the same index approach $5,000, but positive 2H22 expectations have kept the forward curve in a steep contango, with deferred contracts trading at large premiums. (Coal FFA)

Braemar's dry FFA desk has grown substantially during this period, catering to the needs of investors who wish to speculate on price moves as well as those who need high performance tools to manage their risk exposure. Braemar's partnership with Zuma and the popularity of Braemar Screen is bringing clear, sustainable benefits to the business despite only being developed less than three years ago. The Braemar FFA desk is one of the few desks in the market that has an active trading platform, which has helped us to substantially increase our market share. The prospects for further growth are good, and the desk will continue to focus on developing digital, data-led solutions for its client base. Revenue growth for 2021 versus 2022 was nearly 4.5x, and market share more than doubled over the same period. (Dry FFA)

The lack of global oil demand caused by COVID has dragged rates on the largest ships to the floor and kept them there since Q3 2020. The decline was only stopped by Russia's invasion of Ukraine, which caused major volatility. Ultimately, that is what all forward curves have been missing for some time, and so liquidity wasn't far behind. Our desk was well positioned as this disruption occurred. Market volumes in March 2022 were only surpassed by November 2021 in the last 12 months. This was largely due to an exciting aspect of FFAs in the last year: traders covering their positions much further into the future. The desk has seen good volume out to 2025, and this has enabled it to provide our clients with the opportunity to capably manage their shipping exposure for up to almost four years. This is the first time that the market has seen open interest extending that far, and it puts the desk and the whole market in a very strong position moving forward. This desk is a joint venture between Braemar and GFI. (Wet FFA)

Securities' revenue increased by 60% from £7.5m in FY20/21 to £12.0m in FY21/22 and represented 12% of Braemar's total revenue.

Financial

Braemar's Corporate Finance desk (formerly 'Braemar Naves') is continuing to benefit from its extensive restructuring experience and relationships in two ways. Firstly, several large international restructuring mandates were completed after years of preparation in the financial year ending February 2022 as well as in Q1/2022. Such restructuring mandates involved accompanying capital raising activities in the Offshore, Multipurpose and Heavylift segments. Secondly, the strong recovery in the Container and Multipurpose market enabled us to support our clients to refinance loans - many of which Braemar's Corporate Finance desk had helped to restructure in preceding years. The desk diversified its market presence, and it worked with several large Container lines for the first time. The successful cooperation and combination of expertise with Braemar's Sale and Purchase desk was a key driver of this success. In expectation that the worst is behind in the passenger shipping markets, cruise companies, lenders and investors have started to request Braemar's support to find solutions to financial problems that were caused by the COVID pandemic. Investor appetite is returning in this segment, and expectations are to complete a number of similar assignments in the coming year. Corporate Finance's revenue increased by 12% from £6.0m in FY20/21 to £6.7m in FY21/22 and represented 7% of Braemar's total revenue.

Logistics

Cory Brothers, the Group's Logistics business was sold to Vertom on 28 February 2022 and consequently the results for the current and prior year are presented as discontinued operations. Cory Brothers had an extremely strong year, particularly from its Freight Forwarding activities. The pressure on container space and Brexit-related import/export complexities led to a greater demand for services. Challenges were faced in the UK Agency business, particularly due to the loss of a key contract which will impact revenue in FY22/23.

Revenue increased by 61% from £28.1m in FY20/21 to £45.2m in FY21/22 as this revenue is presented within discontinued operations it does not form part of Braemar's total revenue.

The board took the decision to sell Cory Brothers to Vertom, a long-term strategic partner of the business because they believe scale and management expertise are key to the long-term success of the business. This will be better achieved under the new ownership, whilst Braemar has tightened its balance sheet because of the transaction and is better placed to grow its core Shipbroking business. The board look forward to seeing Cory Brothers thrive under its new ownership, and Braemar has retained upside potential in the future performance of the business from the three-year earnout mechanism.

Conclusion

Over the last 12 months there has been stimulus from almost every government, and huge vaccination progress has released pent-up consumer demand in ways that are likely to benefit shipping for at least the next year. Outside of the tanker market, almost every sector has achieved profitability levels that have not been seen in many years. Moreover, the logistical bottlenecks which continue to exist around the world have balanced the fleet expansion. Consequently, we are predicting another year of strong rates across almost every sector. Thanks to our strong investments in our people, technology, and growing our geographical footprint we are well positioned to secure an outsize share of opportunities available in those markets.

We have realised total revenue growth of 21% across all our Shipbroking and Corporate Finance desks over the last year, and in the growing and evolving markets in 2022-23, we are optimistic about seeing further return on our investments and continuing to grow both revenues and fixtures.

Financial review

A strong trading performance and the successful execution of our strategic objectives

"This excellent performance reflects the investments we have made to increase the breadth, focus, and depth of the Group's core Shipbroking activities." Nick Stone, Chief Financial Officer

Summary income statement 2022

The strong trading and higher revenues have meant that all our profit measures have increased significantly

· Statutory operating profit over the last year increased by 44% to £9.5m (2021 restated*:£6.6m);

· Underlying operating profit increased by 31% to £10.1m (2021 restated*:£7.7m);

· Statutory reported profits for the year were up 209% to £13.9m (2021 restated*: £4.5m).

The final measure benefitted from the Group's strong underlying trading, as well as the profits on disposal of non-core assets and businesses.

* The year ended 28 February 2021 has been restated for the presentation of Cory Brothers and AqualisBraemar as discontinued operations and a prior period adjustment as disclosed in Note 34 of the Financial Statements.

Continuing operations

Revenue

Revenue from continuing operations grew by 21% from £83.7m to £101.3m. As seaborne trade recovered from the COVID pandemic and logistical disruption strengthened freight rates, revenue and fixture volumes across almost every Shipbroking desk increased. Total revenue also increased on the Corporate Finance Desk and due to the completion of several large mandates and there was a consequent increase in success fees compared to retainer income.

Operating costs

Due to the substantial increase in revenue there was a corresponding increase in profit-related bonuses paid to the brokers responsible for generating them which was the main contributor to the increase in operating costs. The increase in the percentage of cash bonuses paid on last year's profits, as noted in the CEO report, also contributed to this increase. Cash bonuses are charged in the year in which they are earnt whereas deferred share bonuses, which were reduced at the same time, are charged over multiple years. Future years will see a consequent reduction in deferred share charges as a result.

As COVID restrictions were eased during 2021, travelling and entertaining expenditure increased as the Group's brokers re-engaged with charterers and ship owners. In the prior year, £0.9m of Singaporean and Australian Government grants were netted off against staff costs, these grants were received by the Group for retaining employees during the COVID pandemic. No such grants were received in the current year. As a result of all these factors, operating costs increased by 20% from £72.6m to £87.1m.

Central costs

Central costs increased in total by 23% from £3.4m to £4.2m. This was the result of various changes to the Group's board as well as additional one-off professional fees associated with the delayed year end audit process and a one-off impact of £0.5m of costs related to an office building that was vacated by a sub-tenant during the year. The office lease was assigned to a new tenant in March 2022 and that cost will not re-occur in FY22/23. Therefore on an ongoing basis central costs were reduced during the year.

Net finance costs

Net finance costs for the year decreased by 34% to £1.0m (2021: £1.5m). The cost has three elements: the revolving credit facility provided by HSBC which provides the seasonal working capital needed by the business as well the core indebtedness; the convertible loan notes associated with the acquisition of Braemar Naves; and the interest charge associated with right-of-use assets under IFRS 16. The reduction in cost follows the reduction seen in net debt in the business, as well as the ongoing repayment of the convertible loan notes.

Included within the net finance costs is a credit of £0.2m. This is in respect of the accounting for the restructuring of deferred consideration owed in relation to the acquisition of Braemar Naves. In the prior year £0.4m was charged to finance costs in respect of interest payable on tranches of the revolving credit facility that was used to fund the acquisition of Braemar Naves. This is no longer considered specific, and in the current year all interest payable is included in underlying finance costs.

Prior period adjustments

As mentioned in the Chairman's Statement, a thorough review of the historic accounting for several corporate transactions and the classification of various reserve balances was carried out as part of the year end audit process. The process was prompted by the errors identified in the accounting for the 2017 Naves acquisition and was extended to incorporate a detailed review of other transactions and consolidation adjustments. The results of the process are described in detail in Note 34 to the financial statements. 

Specific Items and Discontinued Operations

During the year the board has successfully executed several transactions with the aim of simplifying the Group's operations to concentrate on a new growth strategy centred around Shipbroking.

Items that are not considered to be part of the ongoing trade of the Group have been presented as specific. These items are material in both size and/or nature and we believe may distort understanding of the underlying performance of the business if not identified separately.

The financial results of Wavespec, AqualisBraemar and Cory Brothers which were disposed of during the year have been presented as discontinued operations.

Specific items

Acquisition-related expenditure - Braemar Naves

There were £0.1m (2021 restated: £0.6m) of acquisition-related charges during the year for the acquisition of NAVES Corporate Finance GmbH in 2017. This charge includes £0.2m elements of post-acquisition consideration payable to the sellers; £0.1m of interest charges; and an FX gain of £0.2m on conversion of Euro denominated acquisition liabilities to GBP.

Other Operating Costs - Lease Assignment

On 28 March 2022 the assignment of the office referred to above was completed. The lease was impaired to reflect the commercial terms of the assignment at 28 February 2022. A charge of £0.4m was recognised as a specific item in other operating costs. This compares to a prior year charge of £0.3m in respect of the sublet of the same office.

Braemar Naves consideration restructuring

On 3 June 2021, a restructuring of the deferred consideration owed in relation to its 2017 acquisition of Braemar Naves was agreed. This restructuring will see the deferral of more than £2.5m (€2.9m) that was previously due for repayment before the end of December 2022 paid no earlier than September 2025. In addition, a further amount of approximately £0.7m (€0.75m) is to be satisfied by the issue of new ordinary shares in the capital of the Company in three tranches. The first two tranches were completed during the year, and the third is due in December 2022. At 28 February 2022 the total principal amount outstanding was £5.0m (€6.0m).

At 28 February 2022 the net present value of the outstanding liabilities was £4.9m (2021 restated: £8.1m).

As a result of the rescheduling, the model that had been used to generate the accounting entries for the acquisition since it was made in 2017 was reviewed to determine the amendments needed. That review identified certain computational errors. In particular the calculation of amounts in relation to the outstanding deferred consideration arising from the acquisition and the consequent entity accounting eliminations on consolidation were incorrect. The error resulted in an overstatement of liabilities at February 2021 and February 2020, and an overstatement of charges in other comprehensive income in 2021. There is no impact on profit and loss or earnings per share in either period. Further details of the restatement can be found in Note 34 of the Financial Statements.

Discontinued operations

A total of £7.2m has been recognised from discontinued operations, as can be seen in the table below. £1.5m relates to the underlying trading results of Cory Brothers and Wavespec prior to the disposal, as well as the Group's share of AqualisBraemar's results to 19 May 2021. £5.7m relates to the specific profits and losses on the disposal transactions.

Disposal of Cory Brothers

On 28 February 2022, the planned disposal of Cory Brothers, its Logistics Division, to Vertom was completed, total consideration will range between £10.25m and £15.5m. The consideration comprises initial cash proceeds of £6.5m, together with three further deferred and contingent payments based on the percentage of the gross profit of the newly formed VertomCory business for a three-year earnout period ending on 31 December 2024. The three earnout payments combined will be a minimum of £3.75m and a maximum of £9.0m. The fair value of the expected earnout consideration at 28 February 2022 is estimated to be £4.8m. The consideration from the disposal will be used to reduce net debt and strengthen the balance sheet in furtherance of the Group's growth strategy. The trading result for Cory Brothers up to the point of disposal was a profit of £2.4m, although this is drawn before amortisation and depreciation charges of £0.3m which were reversed upon the assets being held for sale. After costs of disposal and recycling of foreign exchange, the Group realised a profit on disposal of £4.1m.

Disposal of Investment in AqualisBraemar

On 19 May 2021, the Group sold 9,640,621 shares of its non-core investment in AqualisBraemar for cash proceeds of £7.2m. On 20 August 2021, 1,000,000 warrants vested and were exercised, and the remaining warrants lapsed. The resulting shares were sold for additional cash proceeds of £0.7m on 31 August 2021. After legal costs and recycling of foreign exchange, the Group realised a total profit of £3.4m on these disposal transactions.

As part of the exercise to re-examine and balance sheet reserves balances, it was identified that the amount recycled from other comprehensive income from the foreign exchange translation reserve in the previous year and reported as gain of £0.5m was misstated and should have been a loss of £0.5m. The gain on disposal that arose from the partial sale in the year to 28 February 2021 is therefore restated as described in Note 34 to the accounts.

On 19 May 2021 the Group's interest in AqualisBraemar was limited to its holding of 6,523,977 performance-based warrants. Consequently, the Group ceased to equity account for its interest in AqualisBraemar. The Group's share of profits in AqualisBraemar up to 19 May 2021 was £0.1m.

Disposal of Wavespec

On 31 March 2021, the Group completed the disposal of its loss-making Engineering Division, Wavespec, for a maximum consideration of £2.6m. The consideration was intended to be satisfied by the issuance of a promissory note with a maturity date of 31 March 2026. The recognised fair value of the consideration of £2.4m was based on the net present value of the promissory note and this resulted in a profit on disposal of £0.6m. However, as at 28 February 2022, the buyer had not delivered on its obligations to secure the promissory note and the board took a view that the promissory note was unlikely to be honoured, and that consequently the consideration has been credit impaired. The total loss for the year from Wavespec was £1.9m. This consisted of a trading loss of £0.1m, a gain on disposal of £0.6m and a credit impairment of charge of £2.4m.

Balance sheet

Net assets at 28 February 2022 were £75.1m (2021 restated: £66.5m). The year saw a decrease in gross trade receivables to £25.0m from £27.3m at the previous year-end due to the disposal of Cory Brothers, partially offset by the growth in debtors in Shipbroking and Financial due to the strong revenue growth in the period. The proportion of trade receivables provided against was broadly in line with the previous year. A receivable of £6.5m is included in other receivables in respect of the VertomCory completion proceeds received on 2 March 2022. A receivable of £4.8m is included in other long-term receivables in respect of the VertomCory deferred and contingent consideration.

Capital expenditure

Total capital expenditure was £2.3m (2021: £2.3m). The most significant item of capital expenditure relates to the treatment of office leases under IFRS 16 whereby the lease is treated as an asset addition. These lease additions totalled £1.0m in the year (2021: £1.2m) and do not relate to cash payments in the year. The balance relates to capitalised expenditure on computer software of £0.6m (2021: £0.6m) and other expenditure on fixtures and fittings and leasehold improvements of £0.7m (2021: £0.5m). 

Borrowings and cash

At the balance sheet date, the Group had a revolving credit facility with HSBC of £30.0m. The facility also provides access to a global cash pooling facility in the UK, Germany and Singapore which enables efficient management of liquidity between its main regional hubs. The Group operates a pooling arrangement for cash management purposes and at the end of the year the Group had net debt across those pools of £9.3m (2021: £8.9m). Including the £6.5m proceeds from Cory Brothers which were received on 2 March 2022, net bank debt reduces to £2.8m. The Group's revolving credit facility ("RCF") liability was previously reported as a short-term liability. However, a review of the facility agreement has confirmed that the lender is obliged to continue the facility for a period greater than 12 months from the respective reporting date. The liability has therefore been restated as a non-current liability at 29 February 2020 and 28 February 2021.

Retirement benefits

The Group has a defined benefit pension scheme which was closed to new members during the 2015/16 financial year. The scheme has a net liability of £2.1m (2021: £3.8m), which is recorded on the balance sheet at 28 February 2022. The agreed annual scheme-specific funding since the triennial valuation as at March 2014 was a cash contribution of £0.5m. The latest triennial funding valuation as at March 2020 was carried out during the year and the result was an unchanged annual employer cash contribution of £0.5m, which was agreed with the trustees and is being paid in monthly instalments.

Foreign exchange

The US dollar exchange rate has moved from US$1.39/£1 at the start of the year to US$1.34/£1 at the end of the year. A significant proportion of the Group's revenue is earned in US dollars. To protect the future sterling value of those revenues, at 28 February 2022, the Group held forward currency contracts to sell US$53.8m at an average rate of US$1.37/£1.

An error in allocating amounts between the translation reserve and hedging reserve has been identified. These reserves are both presented within other reserves in the primary statements as detailed in Note 30. The hedging reserve was understated and the translation reserve overstated by £0.5m at 29 February 2020. At 28 February 2021, the hedging reserve was understated and the translation reserve overstated by £0.6m. These errors have been corrected in the restated balance sheets at 28 February 2020 and 28 February 2021.

Taxation

The Group's underlying effective tax rate in relation to continuing operations in FY21/22 was a charge of 21.2% (2021: charge of 31.4%) which is broadly in line with the UK tax rate in the current year. The tax charge on discontinued operations was £0.8m (2021: £0.2m).

Alternative profit measures ("APMs")

Braemar uses APMs as key financial indicators to assess the underlying performance of the Group. Management considers the APMs used by the Group to better reflect business performance and provide useful information to investors and other interested parties. We have separated the impact of individually material capital transactions, such as acquisitions and disposals, from ongoing trading activity to allow a focus on ongoing operational performance. Our APMs include underlying operating profit and underlying earnings per share. Our prior year APMs have been restated to reflect the reclassification of discontinued operations noted above.

Capital management

The Group manages its capital structure and adjusts it in response to changes in economic conditions and its capital needs. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares and debt instruments. The Group has a policy of maintaining positive cash balances whenever possible, which can be supported by short-term use of its revolving credit facility. This is drawn down as required to provide cover against the peaks and troughs in our working capital requirements.

ESOP Trust

During the previous year the Company requested that SG Kleinwort Hambros Trust Company (CI) Ltd, as Trustee of the Company's ESOP Trust, purchase shares in Braemar Shipping Services Plc. During the year a total of 2,740,164 shares in the Company were purchased by the Trustee and 596,398 shares were released; as a result, at 28 February 2022, the ESOP held 2,669,603 shares (2021: 525,837 shares). The total cash outflow as a result of these share purchases was £6.3m (2021: £0.9m). Subsequent to the year end the ESOP purchased a further 1,670,000 shares. As at 10 August 2022 the ESOP held 4,339,603 shares and now contains sufficient shares as are expected to be needed to cover all current share awards as described in Notes 28 and 29 of the financial statements.

Dividend

The Directors are recommending for approval at the reconvened AGM on 6 October 2022 a final dividend of 7.0p per share. The interim dividend of 2.0p per share in respect of the 6 months to 31 August 2021 was paid on 16 December 2021. The total dividend of 9.0p for the year is covered 3.1 times by the underlying earnings per share from continuing operations of 27.95p. The total cash outflow in respect of dividends paid during the year ended 28 February 2022 was £2.1m (2021: £nil).

Going concern

Particular care has been taken in preparing these accounts to the going concern review and viability statement due to the ongoing geopolitical impacts on global trade. The Group's compliance with sanctions put in place because of the Russian/Ukraine conflict is not expected to have any material effect on trading in the current financial year nor does the Group have any existing material exposure. The strong cash flows exhibited during the year and the Cory Brothers cash consideration received on 2 March 2022 have meant that the Group is in a much stronger position than at the previous year-end. Nevertheless, careful and frequent monitoring of cash forecasts and client payments will be maintained to ensure this situation continues. The Group's revolving credit facility is due to expire in September 2023, however the Group has already received acceptable indicative terms for an extension and expects discussions to be concluded well in advance of the expiration of the current facility.

Nick Stone

Chief Financial Officer

28 August 2022

Consolidated Income Statement

For the year ended 28 February 2022

The year ended 28 February 2021 has been restated for prior period adjustments (see Note 34) and the presentation of Cory Brothers and AqualisBraemar as discontinued operations (See Note 9). As all of the Group's costs of sales relate only to discontinued operations, neither cost of sales nor gross profit is presented on the face of the income statement in respect of continuing operations.

The accompanying notes form an integral part of these Financial Statements.

Consolidated Statement of Comprehensive Income

For the year ended 28 February 2022

The year ended 28 February 2021 has been restated for the presentation of Cory Brothers and AqualisBraemar as discontinued operations (See Note 9) and for a prior period adjustment (see Note 34).

* The recycling of foreign exchange reserve relates to the disposals of Cory Brothers and AqualisBraemar (2021: Dilution and partial disposal of AqualisBraemar). See Note 9 and Note 19.

The accompanying notes form an integral part of these Financial Statements.

Consolidated Balance Sheet

As at 28 February 2022

The balance sheets as at 28 February 2020 and 28 February 2021 have been restated for a prior period adjustment, see Note 34 for more detail.

The Financial Statements were approved by the board of directors on 28 August 2022 and were signed on its behalf by:

James Gundy Nicholas Stone

Group Chief Executive Officer Chief Financial Officer Registered number: 02286034

Consolidated Cash Flow Statement

For the year ended 28 February 2022

The year ended 28 February 2021 has been restated for the presentation of Cory Brothers and AqualisBraemar as discontinued operations and the impact of prior year adjustments described in Note 34.

The accompanying notes form an integral part of these Financial Statements.

Statements of Changes in Total Equity

For the year ended 28 February 2022

The accompanying notes form an integral part of these Financial Statements.

Notes to the Financial Statements

General information

The Group Financial Statements of Braemar Shipping Services Plc for the year ended 28 February 2022 were authorised for issue in accordance with a resolution of the directors on 28 August 2022. Braemar Shipping Services Plc is a public limited company incorporated in England and Wales.

The term "Company" refers to Braemar Shipping Services Plc and "Group" refers to the Company and all its subsidiary undertakings and the Employee Share Ownership Plan trust.

1 Accounting policies

a) Basis of preparation and forward-looking statements

The financial information set out above does not constitute the Group's statutory accounts for the years ended 28 February 2022 or 28 February 2021 but is derived from those accounts. Statutory accounts for 2021 have been delivered to the registrar of companies, and those for 2022 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified; (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report; and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The financial information included in this preliminary announcement has been prepared in accordance with UK-adopted international accounting standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The Group expects to distribute full accounts that comply with UK-adopted international accounting standards and with the requirements of the Companies Act 2006.The Financial Statements have been prepared under the historic cost convention except for items measured at fair value as set out in the accounting policies below.

Certain statements in this Annual Report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. These forward-looking statements involve risks and uncertainties, so actual results may differ materially from those expressed or implied by these forward-looking statements. We undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

The Group Financial Statements are presented in Sterling and all values are rounded to the nearest thousand Sterling (£'000) except where otherwise indicated.

On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted international accounting standards, with future changes being subject to endorsement by the UK Endorsement Board. The Group transitioned to UK-adopted international accounting standards in its Consolidated Financial Statements on 1 March 2021. There was no impact or changes in accounting policies from the transition.

New standards, amendments and interpretations effective for the financial year beginning 1 March 2021

There were no new standards or amendments (including the amendments to IFRS 9, IAS 39, IFRS 7 IFRS 4 and IFRS 16 in respect of Interest rate benchmark reform IBOR "phase2") that were adopted in the annual Financial Statements for the year ended 28 February 2022 which had a significant effect on the Group.

New standards, amendments and interpretations issued but not yet effective for the financial year beginning 1 March 2021 and not early adopted

There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early.

The following amendments are effective for the period beginning 1 March 2022:

- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);

- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);

- Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and

- References to Conceptual Framework (Amendments to IFRS 3).

The following amendments are effective for the period beginning 1 March 2023:

- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);

- Definition of Accounting Estimates (Amendments to IAS 8); and

- Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).

The adoption of these standards and amendments is not expected to have a material impact on the Financial Statements of the Group in future periods.

In January 2020, the IASB issued amendments to IAS 1, which clarify the criteria used to determine whether liabilities are classified as current or non-current. These amendments clarify that current or non-current classification is based on whether an entity has a right at the end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period. The amendments also clarify that "settlement" includes the transfer of cash, goods, services, or equity instruments unless the obligation to transfer equity instruments arises from a conversion feature classified as an equity instrument separately from the liability component of a compound financial instrument. The amendments were originally effective for Annual Reporting periods beginning on or after 1 January 2022. However, in May 2020, the effective date was deferred to Annual Reporting periods beginning on or after 1 January 2023.

The Group is currently assessing the impact of these new accounting standards and amendments. The Group does not believe that the amendments to IAS 1 will have a significant impact on the classification of liabilities.

b) Going concern

The Group and Company Financial Statements have been prepared on a going concern basis. In reaching this conclusion regarding the going concern assumption, the directors considered cash flow forecasts to 31 August 2023 which is 12 months from the date of signing of these Financial Statements and coincides with the expiry of the Group's current bank facilities with HSBC.

A set of cash flow forecasts ('the base case') have been prepared by the directors based on revenue and cost forecasts considered reasonable in the light of work done on budgets for the current year and the current shipping markets. Uncertainties related to the conflict in the Ukraine, around forecasting success fees in the Naves business, the need to continue purchasing shares for the employee trust, COVID and climate change and note the following:

• The Group's compliance with sanctions put in place as a result of the conflict in the Ukraine is not expected to have any material effect on trading FY22/23 nor does the Group have any existing material exposure.

• Forecasting success fee revenue involves uncertainties in terms of both timing and actual closure of transactions but current levels of transaction activity in the industry suggests that there won't be a significant decline in the going concern period and indeed one large transaction has already closed this year.

• The ESOP now contains sufficient shares as are expected to be needed to cover all current share awards that have not yet vested as described in Notes 28 and 29 to these accounts. This is on the assumption that the majority of recipients elect to sell sufficient shares back to the trust immediately in order to settle their tax liability as they have done in the past.

• The effects of COVID are nothing like those that were the case in the previous two years, despite some disruptions still prevalent, particularly in Asia. However, these are not expected to have a material impact on trading in the going concern period.

• The impact of climate change is not expected to have any material impact on the business in the short-term and indeed could lead to additional opportunities.

The directors have concluded therefore that none of these factors are likely to have a significantly adverse impact on the Group's future cash flows.

The Group's balance sheet has been strengthened significantly due to the strong trading and disposals of non-core assets during the year. As at 28 February 2022 the Group's net bank debt was £9.3m with available headroom in the £30.0m revolving credit facility ("RCF") of £6.7m but following receipt of the initial consideration from the sale of Cory Brothers on 2 March 2022 that net bank debt had reduced to £2.8m. As at 31 July 2022 the Group had net bank debt of £7.1m with available headroom in the RCF of £5.7m and cash balances of £17.2m. Employee bonuses are paid in May each year and bank debt tends to be at a high point following those bonus payments and associated payroll taxes.

The RCF has a number of financial covenant tests that must be adhered to. At the start of the year the financial covenant relating to debt to 12 months rolling EBITDA was 3.5x after May 2022 the covenant was reduced to 3x until the facility expires in September 2023. At 31 May 2022 and for the year ended 28 February 2022 the Group met all financial covenant tests. During FY21/22 the directors have discussed the extension of the RCF with the Group's main bankers, HSBC, and have received acceptable indicative terms for such an extension. It is intended that these discussions will be concluded well in advance of the expiry of the current facility.

The cash flow forecasts in the base case assessed the ability of the Group to operate both within the banking covenants and the facility headroom, and included a number of downside sensitivities on the budgeted revenue, including a reverse stress test scenario. The directors consider revenue as the key assumption in the Group's forecasts. The remaining costs are largely fixed or made up of discretionary bonuses, predominately within the Shipbroking Division and which are directly linked to profitability. Based on two flex scenarios; a revenue decrease of 7.5% and a revenue decrease of 15% from the base case no mitigations were necessary to meet banking covenants.

A reverse stress test was also performed to ascertain the point at which the covenants would be breached in respect of the key assumption of forecast revenue decline. This test indicated that the business, alongside certain mitigating actions which are fully in control of the directors, would be capable of withstanding a reduction of approximately 41% in budgeted revenue from the base case assumptions from September 2022 through to August 2023. In light of current trading, forecasts and the Group's performance over FY21/22 the directors having assessed this downturn in revenue and concluded the likelihood of such a reduction to be remote, such that it does not impact the basis of preparation of the Financial Statements and there is no material uncertainty in this regard.

c) Basis of consolidation

The consolidated Financial Statements incorporate the Financial Statements of the Braemar Shipping Services Plc and all its subsidiaries made up to 28 February each year or 29 February in a leap year.

The results of subsidiaries are consolidated using the purchase method of accounting, from the date on which control of the net assets and operation of the acquired company are effectively transferred to the Group. Similarly, the results of subsidiaries divested cease to be consolidated from the date on which control of the net assets and operations are transferred out of the Group.

All intercompany balances and transactions have been eliminated in full.

d) Use of estimates and critical judgements

The preparation of the Group's Financial Statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.

The following are key areas where the Group typically makes judgements involving estimates:

Estimates

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Impairment of goodwill

Goodwill is tested for impairment on an annual basis, and the Group will also test for impairment at other times if there is an indication that an impairment may exist. Determining whether goodwill is impaired requires an estimation of the value-in-use of the cash-generating units to which these assets have been allocated. The value-in-use calculation estimates the present value of future cash flows expected to arise for the cash-generating unit. The key estimates are therefore the selection of suitable discount rates and the estimation of future growth rates which vary between cash-generating units depending on the specific risks and the anticipated economic and market conditions related to each cash generating unit (see Note 12 for a description of the approach used by management to determine these key values). Climate change risk has been taken into account in determining the underlying inputs used in calculations used for impairment reviews and is not considered to have a material impact on the value in use calculations.

Fair value of Cory Brothers deferred and contingent consideration receivable

On 28 February 2022 the Company sold Cory Brothers to Vertom Agencies BV for maximum consideration of £15.5m. Initial cash proceeds of £6.5m were received on completion of the transaction, and three contractual "earn-out" payments will be made, being an agreed percentage of the future gross profits of the combined VertomCory business over three subsequent earn out periods. Each of the three earn-out payments are subject to minimum and maximum amounts which are specified in the share purchase agreement. 

The minimum earnout consideration has been classified as deferred consideration receivable. The minimum amount is specified in the SPA and is therefore not an estimate, however an estimate of a discount rate is necessary to discount the deferred consideration receivable to fair value. A discount rate of 2.39% was used to calculate the net present value, this was based on the credit risk of Vertom Agencies BV following a credit check performed by management. Deferred consideration receivable is initially recognised at fair value and subsequently measured at amortised cost. The current estimate of the fair value of the deferred consideration receivable is £3.6m

The balance of the earnout consideration, up to the maximum specified in the SPA has been classified as contingent consideration receivable because it is contingent on the future profitability of the combined business. The fair value of the contingent consideration receivable involves two critical estimates; the future profitability of the combined business and the discount rate used to calculate the net present value. The future profitability forecasts are based on a business plan prepared by the combined VertomCory business and was reviewed by management as part of the financial due diligence process. The discount rate used to calculate the net present value was also 2.39%. Contingent consideration receivable is initially recognised at fair value and subsequently measures at fair value through profit and loss.

See Note 9 for further details, including a sensitivity analysis of the contingent consideration receivable to the discount rate and the assumptions of future profitability.

Recoverability of deferred tax assets

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. See Note 7.

Share option vesting

The fair value determined at the grant date of the equity-settled share-based payments is typically expensed on a straight-line basis over the vesting period, based on the Group's estimate of the number of equity instruments that will eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to reserves. See Note 28.

Provision for impairment of trade receivables and accrued income

Trade receivables and accrued income are amounts due from customers in the ordinary course of business. Trade receivables and accrued income are classified as current assets if collection is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current assets.

The provision for impairment of trade receivables and accrued income represents management's best estimate at the Balance Sheet date. A number of judgements are made in the calculation of the provision, primarily the age of the invoice, the existence of any disputes, recent historical payment patterns and the debtor's financial position.

The application of IFRS 9 "Financial Instruments" results in an additional provision for expected credit losses. When measuring expected credit losses, the Group uses reasonable and supportable forward-looking information, which is based on assumptions for the future movement of different economic drivers and how these drivers will affect each other. Probability of default constitutes a key input in measuring expected credit losses. Probability of default is an estimate of the likelihood of default over a given time horizon, the calculation of which includes historical data, assumptions and expectations of future market conditions. See Note 20.

The Group has considered the impact of both COVID and the conflict in the Ukraine on the Financial Statements at 28 February 2022. However, at 28 February 2022 there was no evidence to suggest that the Group's trade receivables may be at a higher risk of becoming credit impaired as a result of COVID or the conflict in the Ukraine. No impairment allowances were made in respect of either COVID or the conflict in the Ukraine.

Valuation of defined benefit pension scheme

The Group uses an independent actuary to provide annual valuations of the defined benefit pension scheme. The actuary uses a number of estimates in respect of the scheme membership, the valuation of assets and assumptions regarding discount rates, inflation rates and mortality rates. The membership details are provided by an independent trustee while the valuation of assets is verified by an independent fund manager. The discount rates, inflation rates and mortality rates are reviewed by management for reasonability. See Note 27.

Judgements

Naves prior year adjustment

For details of judgements made relating to the prior year adjustment, see Note 34.

Wavespec

Fair value of consideration

In the year ended 28 February 2022, the sale of Wavespec, the Group's Engineering Division, completed for a maximum consideration of £2.6m. The fair value of the consideration is a critical accounting judgement.

The consideration was due to be satisfied by the issuance of a promissory note with a maturity date of 31 March 2026. The fair value of the consideration was based on the net present value of the promissory note (£2.4m). A discount rate of 2.11% was used to calculate the net present value. The discount rate was made up of two elements, the first being a 5 year BBB+ bond yield of 1.51%, the second being a premium for lack of marketability at 0.60%. A 5 year BBB+ bond yield was used because it matches the maturity of the promissory note and reflects the credit rating of the bank that was expected to provide the letter of credit.

Impairment

As at 28 February 2022, the buyer had not delivered on its obligations to secure the promissory note and therefore management have made a judgement that the promissory note is unlikely to be honoured and consequently the fair value of the consideration is impaired and a credit loss of £2.4m has been recorded within discontinued operations.

Measurement of right-of-use assets and liabilities

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any period covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group has several lease contracts that include extension and termination options. Management applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for the Group to exercise either the renewal or termination option. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate the lease. See Note 17.

Revenue recognition

IFRS 15 "Revenue from Contracts with Customers" requires judgement to determine whether revenue is recognised at a "point in time" or "over time" as well as determining the transfer of control for when performance obligations are satisfied.

For Shipbroking, the Group has defined the performance obligation to be the point in time where the negotiated contract between counterparties has been successfully completed, and therefore revenue is recognised at this point in time. This is a critical judgement since revenue recognition would differ if the performance obligations were deemed to be satisfied at a different point in time.

Classification and recognition of specific items

The Group excludes specific items from its underlying earnings measure. The directors believe that such additional performance measures can provide the users of the Financial Statements with a better understanding of the Group's underlying financial performance, if properly used. Management judgement is required as to what items qualify for this classification. There can also be judgement as to the point at which costs should be recognised and the amount to record to ensure that the understanding of the underlying performance is not distorted. Specific items include the results from discontinued operations. See Note 8.

Climate‐related risks and opportunities

Management have considered the impact of climate related risks in respect of impairment of goodwill, recoverability of receivables and the recoverability of deferred tax assets in particular and do not consider that climate‐related risks have a material impact on any key judgements, estimates or assumptions in the consolidated financial statements.

During FY21/22 climate change was assessed as part of ongoing discussions of key and emerging risks for the Group and the shipping and energy sectors within which it operates. Consideration of the potential short to medium-term impact of Environment and Climate Change risk resulted in its inclusion as a Group Principal Risk this year.

e) Revenue recognition

Revenue is recognised in accordance with satisfaction of performance obligations. Revenue of the Group consists of:

i) Shipbroking desks - income comprises commission arising from tanker and dry cargo charter broking, sale and purchase broking, offshore broking and consultancy, valuation fees and fees relating to the facilitation of commodity and commodity derivatives. The Group acts as a broker for several types of shipping transactions, each of which gives rise to an entitlement to commission:

Deep sea tankers, specialised tankers and gas, dry cargo and offshore:

- for single voyage chartering, the contractual terms are governed by a standard charterparty contract in which the broker's performance obligation is satisfied when the cargo has been discharged according to the contractual terms;

- for time charters, the commission is specified in the hire agreement and the performance obligation is spread over the term of the charter at specified intervals in accordance with the charter party terms;

Sale and purchase:

- in the case of second-hand sale and purchase contracts, the broker's performance obligation is satisfied when the principals in the transaction complete on the sale/purchase and the title of the vessel passes from the seller to the buyer;

- with regard to newbuilding contracts, the commission is recognised when contractual stage payments are made by the purchaser of a vessel to a shipyard which in turn reflects the performance of services over the life of the contract;

- for income derived from providing ship and fleet valuations, the Group recognises income when a valuation certificate is provided to the client and the service is invoiced; and

Securities:

- for income derived from commodity broking, the commission is recognised when the services have been performed.

ii) Financial - income comprises retainer fees and success fees generated by corporate finance related activities. Revenue is recognised in accordance with the terms agreed in individual client terms of engagement. Recurring monthly retainers are recognised in the month of invoice and success fees are recognised at the point when the performance obligations of the particular engagement are fulfilled.

iii) Logistics - the performance obligation for agency income is satisfied at the point in time when the vessel sails from the port. For forwarding and logistics income the performance obligation is satisfied when the goods depart from their load location. Where the Group acts as a principal rather than as agent, the revenue and costs are shown gross.

At the Balance Sheet date, there may be amounts where invoices have not been raised but performance obligations have been satisfied, and these are recognised as accrued income. The movement in the asset between years is due to the invoicing of all prior year assets and the accrual of amounts relating to the current year.

Dividend income from investments is recognised when the shareholders' legal rights to receive payment have been established with certainty.

f) Government grants

Government grants are netted against the cost incurred by the Group. When retention of a government grant is dependent on the Group satisfying certain criteria, it is initially recognised as deferred income and released to the Income Statement once the criteria for retention have been satisfied. See Note 3.

g) Foreign currencies

The presentational currency of the Group is Sterling. Transactions in currencies other than Sterling are recorded at the rates of exchange prevailing on the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currency are recognised in the Income Statement.

In order to hedge its exposure to certain foreign exchange risks, the Group enters into derivative financial instruments contracts, mainly forward contracts and other derivative currency contracts (see Note 1(p)).

Assets and liabilities of overseas subsidiaries, branches and associates are translated from their functional currency into Sterling at the exchange rates ruling at the Balance Sheet date. Trading results are translated at the average rates for the period. Exchange differences arising on the consolidation of the net assets of overseas subsidiaries are dealt with through the foreign currency translation reserve (see Note 30), whilst those arising from trading transactions are dealt with in the Income Statement. On disposal of a business, the cumulative exchange differences previously recognised in the foreign currency translation reserve relating to that business are transferred to the Income Statement as part of the gain or loss on disposal.

h) Taxation

The taxation expense represents the sum of the current and deferred tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the Income Statement because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group and Company's liability for current tax is calculated using rates that have been enacted or substantively enacted by the Balance Sheet date.

Full provision is made for deferred taxation on all taxable temporary differences. Deferred tax assets and liabilities are recognised separately on the Balance Sheet. Deferred tax assets are recognised only to the extent that they are expected to be recoverable. Deferred taxation is recognised in the Income Statement unless it relates to taxable transactions taken directly to equity, in which case the deferred tax is also recognised in equity. The deferred tax is released to the Income Statement at the same time as the taxable transaction is recognised in the Income Statement. Deferred taxation on unremitted overseas earnings is provided for to the extent a tax charge is foreseeable.

i) Goodwill

Business combinations are accounted for using the purchase method.

On the acquisition of a business, fair values are attributed to the net assets (including any identifiable intangible assets) acquired. Goodwill arises where the fair value of the consideration given exceeds the fair value of the net assets acquired. Goodwill is recognised as an asset and is reviewed for impairment at least annually. Impairments are recognised immediately in operating costs in the Income Statement. Goodwill is allocated to cash-generating units for the purposes of impairment testing. On the disposal of a business, goodwill relating to that business remaining on the Balance Sheet is included in the determination of the profit or loss on disposal. As permitted by IFRS 1, goodwill on acquisitions arising prior to 1 March 2004 has been retained at prior amounts and is tested annually for impairment.

In relation to acquisitions where the fair value of assets acquired exceeds the fair value of the consideration, the excess fair value is recognised immediately in the Income Statement.

j) Intangible assets

Computer software

The Group capitalises computer software at cost. It is amortised on a straight-line basis over its estimated useful life of up to four years. The carrying value of intangible assets with a finite life is reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Development costs

The Group capitalises internally generated development costs when it is able to demonstrate:

- the technical feasibility of completing the intangible asset so that it is subsequently available for use;

- that there is a clear intention that the intangible asset would be completed and then used;

- that it is able to use the intangible asset;

- that future economic benefits are probable;

- that there are adequate technical, financial and other resources to complete the development and to use the asset; and the expenditure attributable to the intangible asset during its development can be reliably measured.

The Group amortises development on a straight‑line basis over its estimated useful economic life of up to 3 years. See Note 13.

Research costs are expensed as incurred.

Other intangible assets

Intangible assets acquired as part of a business combination are stated in the Balance Sheet at their fair value at the date of acquisition less accumulated amortisation and any provisions for impairment. The amortisation of the carrying value of the capitalised forward order book and customer relationships is charged to the Income Statement over an estimated useful life of the lesser of two to ten years or when based on historical attrition rates. The amortisation in respect of capitalised brand assets is expensed to the Income Statement over an estimated useful life of three years.

The carrying values of intangible assets are reviewed for impairment at least annually or when there is an indication that they may be impaired.

k) Property, plant and equipment

Property, plant and equipment are shown at historical cost less accumulated depreciation and any impairment value.

Depreciation is provided at rates calculated to write off the cost, less estimated residual value of each asset, on a straight-line basis over its expected useful life as follows (except for long and short leasehold interests which are written off against the remaining period of the lease):

Motor vehicles - three years

Computers - four years

Fixtures and equipment - four years

l) Leases

The Company has various lease arrangements for properties, and other equipment. At inception of a lease contract, the Company assesses whether the contract conveys the right to control the use of an identified asset for a certain period of time and whether it obtains substantially all the economic benefits from the use of that asset, in exchange for consideration. The Company recognises a lease liability and a corresponding right-of-use asset with respect to all lease arrangements in which it is a lessee, except low-value leases and short-term leases of 12 months or less, costs for which are recognised as an operating expense within the income statement as they are incurred.

A right-of-use asset is capitalised on the balance sheet at cost which comprises the present value of future lease payments determined at the inception of the lease adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred in addition to an estimate of costs to remove or restore the underlying asset. Where a lease incentive is receivable, the amount is offset against the right-of-use asset at inception. Right-of-use assets are depreciated using the straight-line method over the shorter of the estimated life of the asset or the lease term and are reviewed for impairment to account for any loss when events or changes in circumstances indicate the carrying value may not be fully recoverable.

The lease liability is initially measured at amortised cost using the effective interest rate method to calculate the present value of future lease payments and is subsequently increased by the associated interest cost and decreased by lease payments made. The effective interest rate is based on estimates of relevant incremental borrowing costs. Lease payments made are apportioned between an interest charge and a capital repayment amount which are disclosed within the financing activities and the operating activities sections of the consolidated statement of cash flows respectively. Lease payments comprise fixed lease rental payments only, with the exception of property leases for which the associated fixed service charge is also included. Lease liabilities are classified between current and non-current on the balance sheet.

The lease term comprises the non-cancellable period in addition to the determination of the enforceable period which is covered by an option to extend the lease, where it is reasonably certain that the option will be exercised.

A modification to a lease which changes the lease payment amount (e.g. due to a renegotiation or market rent review) or amends the term of the lease, results in a reassessment of the lease liability with a corresponding adjustment to the right-of-use asset.

m) Investments

Investments in associates and joint ventures where the Group has joint control or significant influence are accounted for under the equity method. Investments in associates are initially recognised in the Consolidated Balance Sheet at cost. Subsequently associates are accounted for under the equity method, where the Group's share of post-acquisition profits and losses and other comprehensive income is recognised in the Income Statement and Statement of Comprehensive Income.

Profits and losses arising on transactions between the Group and its associates are recognised only to the extent of unrelated investors' interests in the associate. The investor's share in the associate's profits and losses arising from these transactions is eliminated against the carrying value of the associate.

Where the Group's share of the associate's identifiable net assets is greater than the cost of investment, a gain on bargain purchase is recognised in the Income Statement and the carrying value of the investment in the Consolidated Balance Sheet is increased.

When the Group's investment in associates or joint ventures is diluted the Group recognises a profit or loss on the book value of the investment that is derecognised along with any recycling of foreign exchange previously recognised in other comprehensive income. On a rights issue the Group remeasures its share of net assets and recognises a corresponding gain.

When the Group disposes of shares in associates or joint ventures the Group recognises a profit or loss on disposal based on the net proceeds less the weighted average cost of the shares disposed of. On disposal the Group reclassifies foreign exchange amounts previously recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be required to be reclassified to profit or loss on the disposal of the related assets or liabilities.

The most recent Financial Statements of an associate are used for accounting purposes unless it is impractical to do so. Where the Group and an associate have non-coterminous reporting dates the associate's full-year accounts will be used for the purposes of the Group's reporting at 28 February with adjustments made for any significant transactions or events.

Where there is objective evidence that the investment in an associate has been impaired, the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.

Investments where the Group has no significant influence are held at fair value, with movements in fair value recorded in profit and loss.

n) Impairment

The carrying amount of the Group's assets, other than financial assets within the scope of IFRS 9 and deferred tax assets, are reviewed at each Balance Sheet date to determine whether there is an indication of impairment. If any such indication exists, or annually for goodwill, the asset's recoverable amount is estimated. The recoverable amount is determined based on the higher of value-in-use calculations and fair value less costs to sell, which requires the use of estimates. An impairment loss is recognised in the Income Statement whenever the carrying amount of the assets exceeds its recoverable amount.

Where an impairment loss subsequently reverses, the carrying amount of the assets, with the exception of goodwill, is increased to the revised estimate of its recoverable amount. This cannot exceed the carrying amount prior to the impairment charge. An impairment recognised in the Income Statement in respect of goodwill is not subsequently reversed.

o) Deferred and contingent consideration receivables

Contingent consideration receivables are initially recognised at fair value and are subsequently remeasured at their fair value at each Balance Sheet date. The resulting gain or loss is recognised immediately in the income statement. Contingent consideration receivables are classified as level 3 in accordance with the fair value hierarchy specified by IFRS 13. See Notes 14 and 22.

p) Derivative financial instruments and hedging

Derivatives are initially recognised at fair value and are subsequently remeasured at their fair value at each Balance Sheet date. Recognition of the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if it is, the nature of the item being hedged. Changes in the fair value of derivatives that do not qualify for hedge accounting are recognised immediately in the Income Statement. The Group designates derivatives that qualify for hedge accounting as a cash flow hedge where there is a high probability of the forecast transactions arising. The Group has applied the IFRS 9 hedge accounting model since 1 March 2020. The effective portion of changes in the fair value of these derivatives is recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the Income Statement. Amounts accumulated in equity are recycled to the Income Statement at the same time as the gains or losses on the hedged items. When a forecast transaction is no longer expected to occur, the cumulative gains or losses that were reported in equity are immediately transferred to the Income Statement.

To qualify for hedge accounting, the terms of the hedge must be clearly documented at inception and there must be an expectation that the derivative will be highly effective in offsetting changes in the cash flow of the hedged risk. Hedge effectiveness is tested throughout the life of the hedge and if at any point it is concluded that the relationship can no longer be expected to remain highly effective in achieving its objective, the hedge relationship is terminated.

The hedging instruments and the hedged transactions offset each other in currency terms and in amounts, meaning there is a clear economic relationship between the hedging instrument and hedged item as required under IFRS 9. Thereby, management qualitatively demonstrate that the hedging instrument and the hedged items will move equally in the opposite direction. Additionally, the credit rating of the counterparty to the derivatives is high, so the effect of credit risk is considered as neither material nor dominant in the economic relationship.

When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs.

The fair value of forward foreign exchange contracts is based either directly (i.e. as prices) or indirectly (i.e. derived from prices) at the Balance Sheet date.

Financial assets are initially recognised at fair value and are subsequently measured at fair value through profit or loss at each Balance Sheet date.

Financial assets and liabilities are classified in accordance with the fair value hierarchy specified by IFRS 13. See Note 21.

q) Trade receivables and accrued income

Trade receivables and accrued income are recognised and carried at the lower of their original value less impairment. Specific provision is made where there is evidence that the balances will not be recovered in full. A provision for expected credit losses is made for trade receivables and accrued income using the simplified approach. A provision matrix is used to calculate an expected credit loss as a percentage of carrying value by age. The percentages were determined based on historical credit loss experience as well as forward-looking information. Expected credit loss provisions are made for other receivables based on lifetime expected credit losses using a model that considers forward-looking information and significant increases in credit risk.

Trade and other receivables are non-interest bearing and generally on terms payable within 30 to 90 days.

r) Cash and cash equivalents

Cash and cash equivalents included in the Balance Sheet comprise cash in hand, short-term deposits with an original maturity of three months or less and restricted cash.

Cash and cash equivalents included in the Cash Flow Statement include cash and short-term deposits. Bank overdrafts are included in the Balance Sheet within short-term borrowings.

s) Provisions

Provisions are recognised when the Group has a present obligation (legal or otherwise) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If material, the provisions are discounted using an appropriate current post-tax interest rate.

Short-term provisions for long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled.

The provision for long service leave not expected to be settled within 12 months of the reporting date is measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

t) Share-based payments

The Group operates a number of equity-settled share-based payment schemes.

During the year the Company operated employee save-as-you-earn option schemes called the Braemar Shipping Services Plc Savings-Related Share Option Scheme 2014 (the "SAYE Scheme") and the Braemar Shipping Services Plc International Savings-Related Share Option Scheme 2019 (the "International SAYE Scheme"). No option may be granted under either scheme which would result in the total number of shares issued or remaining issuable under all of the schemes (or any other Group share schemes), in the ten-year period ending on the date of grant of the option, exceeding 10% of the Company's issued share capital (calculated at the date of grant of the relevant option). Options are granted at up to a 20% discount to the prevailing market price.

In 2005 the Company put in place a Deferred Bonus Plan (the "Plan") whereby part of the annual performance-related bonus is delivered in shares, on a discretionary basis, to staff including executive directors. Under the Plan the shares are bought and held in an employee trust ("ESOP") until vesting, which will normally occur after three years from the date of grant, subject to the employee beneficiary remaining in employment with the Group, at which time the award will be settled by the transfer of shares to the beneficiary. Shares are valued at fair value at the date of grant.

The Company adopted a new Deferred Bonus Plan in May 2020 (the "New DBP"), pursuant to which future discretionary bonus awards will be granted to staff including executive directors. Awards under the New DBP may be linked to an option granted under the new Braemar Company Share Option Plan 2020, which was also adopted by the Company in May 2020 (the "New CSOP"). Where an employee receives a linked award under the New DBP, where the Company's share price rises over the vesting period, the New CSOP award can be exercised with the value of shares delivered on the vesting of the New DBP award being reduced by the exercise gain on the New CSOP award. Awards under the New DBP and the New CSOP may be settled by the issue of new shares of by way of transfer of shares from the ESOP. Historic practice has been to settle via the transfer of shares from the ESOP and it is the current intention to continue to operate in this manner.

During the year ended 28 February 2015, the Company established a Restricted Share Plan ("RSP"). This scheme was set up to grant awards to certain key staff to try to retain them following the merger between Braemar and ACM Shipping Group Plc, but it can also be used where the Remuneration Committee considers it necessary to secure the recruitment of a particular individual. Executive directors of the Company are not eligible to participate in the RSP. RSP awards are made in the form of a nil cost option and there are no performance criteria other than continued employment.

The Company also operates an LTIP, which was approved by shareholders and adopted in 2014. LTIP awards under this plan take the form of a conditional right to receive shares at nil cost. The awards normally vest over three years and are subject to a performance condition such as earnings per share ("EPS").

Share options granted under the Save as you earn schemes are valued using a binomial pricing model. All other share awards are nil cost options and their fair value is approximated to the share price at the time of grant less the expected dividend to be paid during the vesting period.

The value of awards granted under the Deferred Bonus Plan each year are related to the profits generated in the previous year. The cost of the award is therefore expensed from the beginning of that profit period until the vesting date which is usually 3 years after the date of award. Awards made to new joiners are expensed over the period from date of joining to date of vesting. The quantum of the charge made for each set of awards is calculated on the value of the shares granted, reduced by the expected attrition rate.

The Group may provide a net settlement feature, whereby it withholds the number of equity instruments equal to the monetary value of the employee's tax obligation arising from the exercise (or vesting) of the award if the total number of shares that otherwise would have been issued to the employee. The Group has no contractual obligation to provide a net settlement option, and therefore the award is still accounted for as an equity settled award in full and the value of the shares foregone by the employee is accounted for as a deduction from equity.

An Employee Share Ownership Plan ("ESOP") was established on 23 January 1995. The ESOP has been set up to purchase shares in the Company. These shares, once purchased, are held in trust by the Trustee of the ESOP, SG Kleinwort Hambros Trust Company (CI) Limited, for the benefit of the employees. Additionally, an Employee Benefit Trust ("EBT") previously run by ACM Shipping Group plc also holds shares in the Company. The ESOP and EBT are accounted for within the Company accounts.

The net cost of the shares acquired for the shares held by the ESOP and the EBT are a deduction from shareholders' funds and represent a reduction in distributable reserves. Note 29 provides detail on the ESOP and the EBT and movements in shares to be issued.

u) Commissions payable

Commissions payable to co-brokers are recognised in trade payables due within one year on the earlier of the date of invoicing or the date of receipt of cash.

v) Long-term employee benefits

The Group has the following long-term employee benefits:

i) Defined contribution schemes

The Group operates a number of defined contribution schemes. Pension costs charged against profits in respect of these schemes represent the amount of the contributions payable to the schemes in respect of the accounting period. The assets of the schemes are held separately from those of the Group within independently administered funds. The Group has no further payment obligations once the contributions have been paid.

ii) Defined benefit schemes

The Group holds a defined benefit scheme, the ACM Staff Pension Scheme, with assets held separately from the Group. The cost of providing benefits under the scheme is determined using the projected unit credit actuarial valuation method which measures the liability based on service completed and allowing for projected future salary increases and discounted at an appropriate rate.

The current service cost, which is the increase in the present value of the retirement benefit obligation resulting from employee service in the current year, and gains and losses on settlements and curtailments, are included within operating profit in the Income Statement. The unwinding of the discount rate on the scheme liabilities which is shown as a net finance cost and past service costs are presented and recognised immediately in the Income Statement.

The pension liabilities recognised on the Balance Sheet in respect of this scheme represents the difference between the present value of the Group's obligations under the scheme and the fair value of the scheme's assets. Actuarial gains or losses and return on plan assets excluding interest are recognised in the period in which they arise within the Statement of Comprehensive Income.

iii) Other long-term benefits

The current service cost of other long-term benefits resulting from employee services in the current year is included within the Income Statement. The unwinding of any discounting on the liabilities is shown in net finance costs.

w) Borrowings and loan notes

Arrangement costs for loan facilities are capitalised and amortised over the life of the debt at a constant rate.

Finance costs are charged to the Income Statement, based on the effective interest rate of the associated external borrowings and debt instruments.

The convertible loan notes are considered to be a financial liability host with an embedded derivative convertible feature which is required to be separated from the host. The Group has an accounting choice to record the instrument in its entirety at fair value through profit and loss but has not chosen to apply this treatment. Instead, the financial liability host will be recognised as a Euro liability initially recognised at fair value and prospectively accounted for applying the effective interest rate method. The derivative conversion feature will be recognised at fair value through profit and loss. Where there are conversion options that can be exercised within one year the liability is recognised as current.

Modification of terms of financial liability

When the terms of an existing financial liability are modified, management will consider both quantitative and qualitative factors to assess whether the modification is substantial. In the case that the modification of the terms of existing financial liability is considered to be substantial, the modification shall be accounted for as an extinguishment of that financial liability and the recognition of a new financial liability. If the modification is not considered substantial, then the existing financial liability is remeasured in accordance with its original classification and any gain or loss is recognised immediately in the Income Statement.

x) Segmental analysis

The Group's segmental analysis previously recognised four segments, being the Shipbroking, Financial, Logistics and Engineering Divisions. Two business segments have been disposed of during the year, the Logistics Division (Cory Brothers) and the Engineering Division (Wavespec). The prior year comparatives have been restated for the presentation of Cory Brothers as discontinued operations together with Wavespec. The restated segmental analysis is based on its two continuing business segments: the Shipbroking and Financial Divisions. The segmental analysis is consistent with the way the Group manages itself and with the format of the Group's internal financial reporting.

The second analysis is presented according to the geographic markets, comprising the UK, Singapore, the US, Australia, Germany and the Rest of the World. The Group's geographical segments are determined by the location of the Group's assets and operations.

y) Specific items

Specific items are significant items considered material in size or nature, including acquisition and disposal-related gains and losses. These are disclosed separately to enable a full understanding of the Group's ongoing financial performance.

z) Non-current assets held for sale and discontinued operations

A non-current asset or a group of assets, such as a disposal group, is classified as held for sale if its carrying amount will be recovered principally through sale rather than through continuing use, it is available for immediate sale and sale is highly probable within one year.

On initial classification as held for sale, non-current assets and disposal groups are measured at the lower of previous carrying amount and fair value less costs to sell with any adjustments taken to profit or loss.

A discontinued operation is a component of the Group's business that represents a separate line of business or geographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative Income Statement is restated as if the operation has been discontinued from the start of the comparative period.

aa) Contingent assets

Contingent assets are not recognised but are disclosed where an inflow of economic benefits is probable.

2 Segmental information and revenue

a) Business segments

Following the disposal of the Engineering and Logistics Divisions during the period, there are now two operating segments within the Group, which each provide different services to the shipping industry, being Shipbroking and Financial. They are managed separately because each business requires different technology and resources to deliver its strategy. The reports reviewed by the Chief Operating Decision Maker to make strategic decisions are disaggregated by Division. The Chief Operating Decision Maker is the Group's board of directors. The Logistics and Engineering Divisions were disposed of during the year and have been presented as discontinued operations.

The board considers the business from both service line and geographic perspectives.

Central costs relate to board costs and other costs associated with the Group's listing on the London Stock Exchange. All segments meet the quantitative thresholds required by IFRS 8 as reportable segments.

Underlying operating profit is defined as operating profit for continuing activities before restructuring costs, gain on disposal of investment and acquisition and disposal-related items.

Sales between and within business segments are carried out on an arm's-length basis.

The segmental information provided to the board for reportable segments for the year ended 28 February 2022 is as follows:

* The year ended 28 February 2021 has been restated for the presentation of Cory Brothers and AqualisBraemar as discontinued operations and prior period errors. See Note 9 and Note 34.

Geographical segment - by origin

The Group manages its business segments on a global basis. The operation's main geographical area and also the home country of the Company is the United Kingdom.

Geographical information determined by location of customers is set out below:

b) Revenue analysis

The Group disaggregates revenue into Shipbroking and Financial in line with the segmental information presented above and also by desk. Revenue analysed by desk is provided below.

All revenue arises from the rendering of services. There is no single customer that contributes greater than 10% of the Group's revenue.

Remaining performance obligations

The Group enters into some contracts, primarily in Shipbroking which are for a duration longer than 12 months and where the Group has outstanding performance obligations on which revenue has not yet been recognised. The amount of revenue that will be recognised in future periods on these contracts when those remaining performance obligations will be satisfied is set out below:

Forward order book

3 Operating profit from continuing operations

Operating profit represents the results from operations before finance income and costs, share of profit/(loss) in associate, taxation and discontinued operations.

This is stated after charging/(crediting):

Staff costs are stated after netting off grants totalling £0.1m (2021: £0.8m) against staff costs for continuing operation detailed in Note 4. The grants were received from both the Singaporean Government and the Australian Government during COVID. All criteria for the retention of both grants have been satisfied and therefore the full amount has been recognised in the Income Statement.

4 Staff costs

a) Staff costs for the Group during the year (including directors)

The prior period numbers have been restated to present Cory Brothers and AqualisBraemar within discontinued operations. The numbers above include remuneration and pension entitlements for each director.

b) Average number of full-time employees

The directors' remuneration is borne by Braemar Shipping Services Plc.

c) Key management compensation

The remuneration of key management is set out below. Key management represents the board of the Company.

Retirement benefits are accruing to three (2021: three) members of key management in respect of a defined contribution pension scheme.

5 Auditor's remuneration

A more detailed analysis of the auditor's services is given below:

All fees paid to the auditor were charged to operating profit in both years.

6 Finance income and costs

The finance costs for the prior year have been restated (see Note 34), and the analysis of the finance income and expenses has been amended.

7 Taxation

a) Analysis of charge in year