Overcapacity kept freight rates low last year, slicing margins at Braemar Shipping's core broking business. Acquisitions and one-off salvage work aided profits elsewhere, but an eight-year run of rising dividend payouts has ended here and we see no need to rethink our sell advice.
Indeed, ship broking revenue fell 19 per cent and, despite a 5-10 per cent increase in chartering transactions, weak rates hit commissions, halving adjusted divisional operating profit to £7.1m. Moreover, the forward order book fell almost a quarter to £19m and Braemar admits tonnage surplus will continue to affect the industry "for a few years to come".
Still, other work now accounts for nearly two-thirds of revenue. Acquisitions added £10.5m to the top line at Braemar's technical division, too, and logistics was more profitable than expected - clearing up after the cargo ship Rena ran aground off New Zealand in October proved lucrative for the environmental unit. Revenue there doubled to £14.5m and profits jumped from almost nothing to £1.86m. Work is expected to wind down through the second half, but could go on "a lot longer" if the authorities choose to recover the now sunken stern.
Prior to these results, Westhouse Securities had forecast adjusted EPS of 39.1p for 2013 (2012: 39.05p).
BRAEMAR SHIPPING SERVICES (BMS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 341p | MARKET VALUE: | £ 73.7m | |
| TOUCH: | 341-355p | 12-MONTH HIGH: | 490p | LOW: 276p |
| DIVIDEND YIELD: | 7.6% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 308p* | NET CASH: | £17.5m | |
| Year to 29 Feb | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 101 | 14.7 | 49.0 | 23.0 |
| 2009 | 127 | 16.2 | 56.7 | 24.0 |
| 2010 | 119 | 13.5 | 47.9 | 25.0 |
| 2011 | 126 | 13.2 | 48.4 | 26.0 |
| 2012 | 133 | 9.79 | 33.8 | 26.0 |
| % change | +6 | -26 | -30 | - |
Ex-div: 20 Jun Payment: 25 Jul *Includes intangible assets of £33m, or 153p per share | ||||
