Interim Results

Braemar Seascope Group PLC 26 October 2006 BRAEMAR SEASCOPE GROUP plc PRESS RELEASE Interim Results - 6 months ended 31 August 2006 Braemar Seascope Group plc (the 'Group'), an international provider of shipping services, today announced half-year results for the six months ended 31 August 2006. HIGHLIGHTS • Turnover £50.5m (2005/6: £30.6m) • Pre-tax profit before impairment charge £5.0m (2005/6: £5.3m) • Reported pre-tax profit £4.1m (2005/6: £5.3m) • Basic EPS before impairment charge 16.88p (2005/6: 18.29p) • Reported EPS 12.03p (2005/6: 18.29p) • Increased interim dividend declared 6.75p per share (2005/6: 6.50p) • Net cash £8.1m (31 August 2005: £9.3m, February 2006: £13.6m) Commenting on the results and outlook, Sir Graham Hearne, Chairman, said: 'The overall performance in shipbroking has been good and our forward order book is at a record level reflecting a shift towards longer-term business.' 'The outlook for the remainder of the year is positive. The diversity of our shipbroking activities tends to moderate the influence of any one aspect of shipping on our earnings. Overall conditions are expected to remain favourable and, taking into account the level of business already concluded this year, we expect second half earnings to show an improvement over the first half.' For further information, contact: Braemar Seascope Group plc Alan Marsh Tel 020 7535 2650 James Kidwell Tel 020 7535 2881 Aquila Financial Peter Reilly Tel 020 7202 2601 Charles Stanley Securities Philip Davies Tel 020 7149 6457 Notes to editors: Through its subsidiaries Braemar Seascope Group plc's services comprise: Braemar Seascope Limited Specialised shipbroking and consultancy services to international ship owners and charterers in the tanker, gas, offshore, container and dry bulk markets. www.braemarseascope.com DV Howells Limited Environmental services provided principally to the oil, marine, rail industries www.dvhowells.co.uk Cory Brothers Shipping Agency Limited Freight forwarding and logistics and port agency services within the UK. www.cory.co.uk Wavespec Limited Marine engineering and naval architecture consultants to the shipping and offshore markets. www.wavespec.com INTERIM ANNOUNCEMENT - SIX MONTHS ENDED 31 AUGUST 2006 CHAIRMAN'S STATEMENT I am pleased to announce another strong set of results for the first half of the year. The markets in which the Group operates have for the most part remained buoyant, though perhaps at somewhat lower levels than experienced in 2004 and 2005. The overall performance in shipbroking has been good and our forward order book is at a record level reflecting a shift towards longer-term business. In August 2006 we were able to complete the acquisition of the 50 per cent interest in Braemar Container Shipping and Chartering Limited which the Group did not already own for £1.3m, thereby consolidating our interest in the important chartering and sale and purchase broking for container vessels. Our non-broking businesses - Cory Brothers and Wavespec - also achieved good results and contributed 20 per cent of our underlying operating profits. This is a useful start towards our objective of broadening the range of shipping services we can provide outside of the pure shipbroking field. A further step in this direction was achieved with the establishment of an environmental services business through the acquisition of DV Howells in March 2006 and Hi-bar in September for a maximum combined consideration of £1.0m. Services provided include pollution incident response, training and consultancy mainly for the oil majors and other transportation companies. We also increased our presence in the UK agency market, particularly in Liverpool, through the purchase of Gorman Cory which will take place over two years. Pre-tax profits in the first half were £4.1m compared to £5.3m in the first half of last year and earnings per share were 12.03 pence per share compared to 18.29 pence per share in 2005/6. The difference was mainly attributable to an impairment charge of £0.95m against goodwill on the acquisition of our Australian dry cargo business due to a lower trading performance and a restructuring of its business operations. Excluding this impairment charge, pre-tax profits were £5.0m (2005/6: £5.3m) and earnings per share were 16.88 pence per share (2005/6:18.29 pence per share). The outlook for the remainder of the year is positive. The diversity of our shipbroking activities tends to moderate the influence of any one aspect of shipping on our earnings. Overall, conditions are expected to remain favourable and, taking into account the level of business already concluded this year, we expect second half earnings to show an improvement over the first half. In light of the positive outlook the Directors have declared an interim dividend of 6.75 pence per share. The interim dividend will be paid on 13 December 2006 to shareholders on the register at the close of business on 17 November 2006, with an ex-dividend date of 15 November 2006. Sir Graham Hearne Chairman 25 October 2006 CHIEF EXECUTIVE'S REVIEW OF ACTIVITIES Shipbroking The tanker chartering market remained healthy for the first half of our financial year, after a slow start in the first calendar quarter. Over the summer, demand for sweet crudes produced in Atlantic regions for Far East destinations served to increase voyage lengths for many of the larger crude tankers and by the end of the second quarter freight rates improved to the levels seen in 2005. However, the recent reduction in oil prices has now had some effect on the crude tanker chartering, although since refining margins remain good the volume of product shipments is being sustained. There is concern that oil production may be constrained and that this could have some effect on the freight markets, although this may be offset by rising global demand especially from China and India and seasonal increases in crude shipments. The chemical sector is currently enjoying sustained growth both on volume and rates and this should only be strengthened with the change in regulations for the transport of biofuels which will mean those cargoes falling more under the 'chemical shipping' banner in the future. During the first half the gas sector remained reasonably strong but started weakening in the third calendar quarter, associated with a high crude price. However, as crude prices have fallen certain sectors of the gas market have shown marked increases in volumes moved. The average of the Baltic Dry Index for the first half was 2,837 (first half of 2005: 2,959) having declined quite sharply in the early part of the year before undergoing a steady recovery since August. Our volume of fixtures has increased, particularly for smaller Handymax vessels, but a larger proportion of business written so far this year is period charter business where commissions will be earned evenly over the duration of the charters. Forecasts for the dry cargo market are positive and the outlook for the remainder of the year is promising. We opened new offices in Singapore in March and in Brazil in September, to service the growing importance of both places for ship owners and charterers. There are significant fiscal incentives for ship operators who base their operations in Singapore and our new office has been staffed from our Australian company, in recognition of the attraction to clients. Sale and purchase activity has seen a shift in the activity mix from second hand to newbuilding. There have been fewer high value second hand transactions this half, especially when compared with the first half of 2005/6 which benefited from a number of deals financed by new capital raised in the public markets. Offsetting this is a substantial increase in newbuilding orders placed at shipyards in China, Japan, Korea, Vietnam and Poland. This is despite the extensiveness of shipyards' order books, which is an indication of the confidence in the long-term returns that can be made from shipping assets. The newbuilding forward order book is now at its highest level (both in terms of the number of ships and commission value) with ship deliveries stretching out to 2010/11. There is a steady rise in demolition business, which we expect will increase as the phase-out of single hull tankers accelerates. Our Offshore team had their most successful ever six months in a market that has seen greater exploration activity in the North Sea and around the World. The stimulus for this activity has been provided by a higher oil price. Day rates and spot activity have both been high and the addition of good period charter and project business has increased an already extensive forward book. The Container chartering market was relatively stable during the first half and our business has grown through involvement in both chartering and sale and purchase transactions. The first half results are reflected as a 50 per cent joint venture and, following our buyout of the other shareholders, the second half will include 100 per cent of the results. The market is expected to soften in the coming months providing new opportunities for our young team, which will be well placed to take advantage of greater liquidity in the charter market as more tonnage becomes available for employment. Technical shipping support - Wavespec Both revenue and profits have increased significantly as the company is now benefiting from the plan approval and supervisory work at three shipyards for the construction of up to 48 new LNG vessels in connection with the Qatargas II project. This project is expected to generate income for the company for several years. Wavespec and Braemar Seascope together are playing a leading role in the development of the seaborne transportation of Compressed Natural Gas, both in a technical and commercial capacity. Ship agency, forwarding and logistics - Cory Brothers Cory Brothers has shown an improved performance across all activities. Agency volumes at all offices have continued strongly following the increases seen in the latter part of 2005. The acquisition of the business and assets of Gorman Shipping, which handles over 750 vessels per annum concentrated on the Mersey and the Manchester Ship Canal, has strengthened our UK agency activities. The business has been combined with the existing Cory Liverpool office making it one of the foremost ships' agents in the area. The Liner, Logistics and Forwarding businesses continue to grow their income from most key logistics contracts and supplemented these with a number of one-off projects. The acquisitions made in 2005 have both performed in line with expectations. Morrison Tours has added to its customer base and improved the take-up of the shore excursions on offer, whilst in forwarding, Planetwide has seen significant growth of existing services and added new consolidation routes to the Middle East. Recently Cory has been successful in winning several new pieces of business such that activity levels should be at least maintained in the second half of the year. Environmental services - DV Howells DV Howells has had a promising first six months in the Group, maintaining activity with its core customers while focusing on growing its customer base. The success in winning the prestigious MOD contract is an indication of the potential the company has to build its business within the UK and beyond. The purchase of Hi-bar's business in September 2006 has completed the incident response coverage within the UK and enhanced the company's training and consultancy capability. Bunker trading Bunker sales have been lower than expected due to the high oil price which has to some extent limited demand in the Australasian region. The second half is expected to benefit from an upturn associated with the cruise season in the Pacific and also the recent drop in the crude oil price which has resulted in lower bunker prices. Financial The Group's profits and earnings are seen most clearly in the analysis below which shows the figures before the Braemar Seascope Pty goodwill impairment charge, which is not a cash cost. The impairment has arisen because the earnings derived from the Australian business have been less than expected at acquisition mainly as a result of a weaker handymax chartering market in the Pacific region. First half 2006/7 First half 2005/6 £000 £000 Profit before impairment charge and tax 5,023 5,297 Impairment of Braemar Seascope Pty goodwill (950) - Reported profit before tax 4,073 5,297 pence Pence EPS (pre impairment charge) 16.88 18.29 Impairment of goodwill (4.85) - Basic EPS 12.03 18.29 The majority of the Group's income is US$ denominated and the average rate of exchange for conversion of US$ income in the six months to August 2006 was $1.81/£ (Interim 2005/6: $1.80/£, Full Year 2005/6: $1.80/£). The rate of translation at 31 August 2006 was $1.90/£. The estimated full year tax rate on profits has been applied at the half year. This rate was 33.0% excluding the impact of the impairment charge which is non-deductible for tax (Interim 2005/6: 33.3%, Full year 2005/6: 30.3%). Net cash was £8.1m at 31 August 2006 compared with net cash of £13.6m as at 28 February 2006. This excludes £4.9m of restricted cash, which the company was holding as escrow agent for certain clients pending completion of transactions in which the company acted as broker. The Group normally generates most of its annual cash flow in the second half of the year and the reduction in cash principally reflects the payment of the annual broking bonus and full year dividend relating to the prior year. Net cash expended on acquiring businesses was £1.1m in respect of DV Howells, 50 per cent of Braemar Container Shipping and Chartering and 41 per cent of Gorman Cory. This is net of £0.7m of cash in the acquired balance sheets but does not include further potential cash consideration of, in aggregate, £0.9m dependent on profitability. Alan Marsh Chief Executive 25 October 2006 Income statement for the six months ended 31 August 2006 Unaudited Unaudited Unaudited Six months to Six months to Year ended 31 Aug 2006 31 Aug 2005 28 Feb 2006 Continuing operations Notes £'000 £'000 £'000 Revenue 2 50,512 30,592 68,497 Operating costs (46,725) (25,381) (58,607) Amortisation of other intangibles (62) (172) (287) Impairment of goodwill (950) - - Operating costs excluding amortisation of other intangibles and impairment of goodwill (45,713) (25,209) (58,320) Operating profit 2 3,787 5,211 9,890 Finance income 148 47 162 Finance costs (4) (15) (2) Share of post-tax profit from joint ventures 142 54 243 Profit before taxation 4,073 5,297 10,293 Taxation 3 (1,657) (1,769) (3,115) Profit for the period 2,416 3,528 7,178 Attributable to: Ordinary shareholders 2,357 3,528 7,178 Minority interest 59 - - Profit for the period 2,416 3,528 7,178 Earnings per ordinary share 5 Basic - pence 12.03 p 18.29 p 37.03 p Diluted - pence 11.84 p 17.79 p 36.18 p Consolidated Balance Sheet as at 31 August 2006 Unaudited Unaudited Unaudited As at As at As at 31 Aug 06 31 Aug 05 28 Feb 06 Assets Notes £'000 £'000 £'000 Non current assets Goodwill 21,909 21,953 22,480 Other intangible assets 1,812 245 462 Property, plant and equipment 5,349 4,954 5,034 Investments 1,481 1,410 1,611 Deferred tax assets 566 269 510 Other receivables 76 71 58 31,193 28,902 30,155 Current assets Trade and other receivables 18,732 15,591 17,717 Financial assets - Derivative financial instruments 473 194 12 Restricted cash 4,946 1,090 - Cash and cash equivalents 8,134 11,464 13,567 32,285 28,339 31,296 Total assets 63,478 57,241 61,451 Liabilities Current liabilities Financial liabilities - Short term borrowings - 2,198 - - Derivative financial instruments - - 99 Trade and other payables 21,831 18,929 25,490 Current tax payable 2,362 4,148 2,224 Finance leases - 31 11 Provisions 210 - 288 Client monies held as escrow agent 4,946 1,090 - 29,349 26,396 28,112 Non-current liabilities Deferred tax liabilities 239 58 139 Provisions 433 341 343 672 399 482 Total liabilities 30,021 26,795 28,594 Total assets less total liabilities 33,457 30,446 32,857 Equity Share capital 2,014 1,975 1,988 Capital redemption reserve 396 396 396 Share premium 8,434 7,880 8,046 Merger reserve 21,346 21,346 21,346 Shares to be issued (997) (637) (997) Other reserves 393 426 639 Retained earnings 1,541 (940) 1,439 33,127 30,446 32,857 Minority interest 330 - - Total equity 33,457 30,446 32,857 Consolidated Cash Flow Statement Unaudited Unaudited Unaudited Six months Six months Year ended 31 Aug 06 31 Aug 05 28 Feb 06 Notes £'000 £'000 £'000 Cash flows from operating activities Cash generated from operations 6 (771) 5,732 13,769 Interest received 148 43 156 Interest paid (4) (16) (1) Tax paid (1,670) (1,389) (3,210) Net cash generated from operating activities (2,297) 4,370 10,714 Cash flows from investing activities Dividends received from joint ventures 145 228 239 Acquisition of subsidiaries, net of cash acquired (1,132) (274) (521) Purchase of property, plant and equipment (246) (115) (387) Proceeds from sale of property, plant and equipment - - 29 Purchase of investments - (29) (36) Other long term receivables (18) 24 37 Net cash used in investing activities (1,251) (166) (639) Cash flows from financing activities Proceeds from issue of ordinary shares 414 405 535 Dividends paid (2,255) (1,923) (3,194) Purchase of own shares - - (360) Payment of principal under finance leases (11) (11) (28) Net cash used in financing activities (1,852) (1,529) (3,047) Foreign exchange differences (33) 52 - (Decrease)/increase in cash and cash equivalents (5,433) 2,727 7,028 Cash and cash equivalents at beginning of the period 13,567 6,539 6,539 Cash and cash equivalents at end of the period 8,134 9,266 13,567 Consolidated Statement of changes in shareholders' equity Unaudited 2006 2005 Share Share Other Retained Total Total equity capital premium reserves earnings equity £'000 £'000 £'000 £'000 £'000 £'000 At 28 February 1,988 8,046 21,384 1,439 32,857 29,062 Profit for the period - - - 2,357 2,357 3,528 Cash flow hedges - - 364 - 364 (740) Exchange differences - - (17) - (17) 45 Dividends paid - - - (2,255) (2,255) (1,902) Issue of shares 26 388 - - 414 405 Consideration to be paid - - (738) - (738) - Credit in respect of share option schemes - - 145 - 145 48 At 31 August 2,014 8,434 21,138 1,541 33,127 30,446 BRAEMAR SEASCOPE GROUP PLC NOTES TO THE FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 31 AUGUST 2006 1. Basis of preparation This financial information comprises the consolidated interim balance sheets as of 31 August 2006 and 31 August 2005 and related consolidated interim statements of income and cash flows and statement of changes in equity for the six months then ended of Braemar Seascope Group PLC (herein after referred to as 'financial information'). In preparing this financial information management has used the principal accounting policies as set out in the Group's financial statements for the year ended 28 February 2006 on pages 22 to 25. The comparative figures for the financial year ended 28 February 2006 are not the company's statutory accounts for that financial year, but have been extracted from those accounts. Those accounts have been reported on by the company's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. 2. Segmental information Revenue Six months to Six months to Year ended 31 Aug 2006 31 Aug 2005 28 Feb 2006 £'000 £'000 £'000 Shipbroking 17,348 21,838 39,745 Ship agency, forwarding & logistics 10,904 6,433 15,851 Technical shipping support 3,191 2,321 5,202 Environmental services 1,121 - - Bunker trading 17,948 - 7,699 50,512 30,592 68,497 Operating profit Shipbroking 3,828 4,929 9,003 Goodwill impairment charge - shipbroking (950) - - 2,878 4,929 9,003 Ship agency, forwarding & logistics 588 180 568 Technical shipping support 245 102 289 Environmental services 68 - - Bunker trading 8 - 30 3,787 5,211 9,890 Net Assets As at As at As at 31 Aug 2006 31 Aug 2005 28 Feb 2006 £'000 £'000 £'000 Shipbroking 26,261 23,885 19,355 Ship agency, forwarding & logistics (1,888) (1,363) (755) Technical shipping support 1,377 1,185 1,599 Environmental services 622 - - Bunker trading (495) - (667) Operating group 25,877 23,707 19,532 Cash and cash equivalents 8,134 11,464 13,567 Short term borrowings - (2,198) - Current and deferred taxation (2,035) (3,937) (1,853) Share of joint ventures 698 627 828 Other investments 783 783 783 Group 33,457 30,446 32,857 3. Taxation The taxation charge for the half-year is calculated using the estimated effective tax rate for the full year applied to the pre-tax profits at the half year. 4. Dividends The following dividends were paid by the Group: Six months to Six months to Year ended 31-Aug-06 31-Aug-05 28-Feb-06 £000 £000 £000 Interim dividend 6.5 pence per share - - 1,271 Final dividend 11.5 pence (2005: 10 pence) per share 2,255 1,902 1,902 2,255 1,902 3,173 The Directors have declared a dividend of 6.75 pence per ordinary share, payable on 13 December 2006 to shareholders on the register on 17 November 2006. 5. Earnings per share Six months to Six months to Year ended 31 Aug 2006 31 Aug 2005 28 Feb 2006 £'000 £'000 £'000 Earnings - continuing operations 2,357 3,528 7,178 Goodwill impairment charge 950 - - Earnings before impairment charge 3,307 3,528 7,178 Pence Pence Pence Earnings per share - pence 12.03 18.29 37.03 Goodwill impairment - pence 4.85 - - Earnings before impairment charge - pence 16.88 18.29 37.03 Shares Shares Shares Weighted average number of ordinary shares 19,586,694 19,293,750 19,385,615 Share options 326,503 536,150 452,339 Diluted weighted average number of ordinary shares 19,913,197 19,829,900 19,837,954 BRAEMAR SEASCOPE GROUP PLC NOTES TO THE FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 31 AUGUST 2006 6. Cash generated from operations £'000 £'000 £'000 Profit for the period 2,416 3,528 7,178 Adjustments for: -Tax 1,657 1,769 3,115 -Depreciation 232 143 339 -Amortisation 62 172 287 -Goodwill impairment charge 950 - - -Derivative financial instruments - 201 - -Profit on sale of property plant and - - (17) equipment -Interest income (148) (47) (162) -Interest expense 4 15 2 -Share of post-tax profits of joint ventures (142) (54) (243) -Stock option expense 145 48 244 Changes in working capital -Trade and other receivables (625) (1,335) (129) -Trade and other payables (5,336) 1,106 2,913 -Provisions 14 186 242 Cash generated from operations (771) 5,732 13,769 Independent review report to Braemar Seascope Group plc Introduction We have been instructed by the company to review the financial information for the six months ended 31 August 2006 which comprises the consolidated interim balance sheet as at 31 August 2006 and the related consolidated interim statements of income, cash flows and changes in shareholders' equity and related notes for the six months then ended. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The Listing Rules of the Financial Services Authority require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. This interim report has been prepared in accordance with the basis set out in Note 1. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the disclosed accounting policies have been applied. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Listing Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 August 2006. PricewaterhouseCoopers LLP Chartered Accountants West London 25 October 2006 This information is provided by RNS The company news service from the London Stock Exchange

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