REG - Braemar PLC - FY24 Final Results
23/05/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240523:nRSW5512Pa&default-theme=true
RNS Number : 5512P Braemar PLC 23 May 2024
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.
23 May 2024
BRAEMAR PLC
("Braemar", the "Company" and together with its subsidiaries the "Group")
Audited Final Results for the year ended 29 February 2024
Strong trading performance building resilience and sustainable returns for
shareholders,
with a platform for future growth
Braemar Plc (LSE: BMS), a leading provider of expert investment, chartering
and risk management advice to the shipping and energy markets, announces its
audited results for the year ended 29 February 2024 ("FY24"), which are in
line with market expectations 1 (#_ftn1) .
The board is delighted to report another strong performance for the Group,
which demonstrates the Group's strategy to grow the business, build
resilience, and generate sustainable shareholder returns across the shipping
cycle. Following the 51% increase in revenues in the prior year, FY24 revenues
were sustained at £152.8 million (FY23: £152.9 million).
The strong performance from the acquisitions completed in FY23 and the Group's
growing securities business contributed to a more balanced revenue mix,
offsetting weaker shipping rates in some sectors. Overall fixture volumes grew
by 8% and the increased breadth and depth of the Group's operations helped
deliver both a strong financial result for the year, and build a platform for
sustainable profitability in the years going forward.
The Group generated underlying operating profit of £16.5 million (FY23:
£20.1 million), after a negative £2.6 million foreign exchange swing over
the previous year and expensing £1.5 million of acquisition-related costs
(£18.1 million before acquisition-related expenditure).
FY25 has started well, the Group has entered the year with a total forward
order book at 29 February 2024 of $82.6 million (FY23: $56.2 million) and
looks forward to continuing the successful execution of its growth strategy,
through hiring talented individuals, geographic expansion and making selective
acquisitions, while at all times maintaining a strong focus on cost
efficiencies and improving operating margins, as the business continues to
scale.
As a result, and reflecting the board's confidence in the future of the
business, the board has recommended a final dividend for FY24 of 9.0 pence per
share. Total dividends for the year if approved will be 13.0 pence per share
(FY23: 12.0 pence), an increase of 8%.
RESULTS HIGHLIGHTS
Financial performance
Underlying results* Statutory results
FY24 FY23 % change FY24 FY23 % change
Revenue £152.8m £152.9m - £152.8m £152.9m -
Operating profit (before acquisition-related expenditure) £18.1m £20.1m -10% £15.0m £13.7m +9%
Operating profit £16.5m £20.1m -18% £9.0m £11.7m -22%
Profit before tax £14.6m £18.0m -19% £7.5m £9.5m -20%
Profit after tax £10.8m £13.4m -19% £4.6m £4.6m -
Underlying earnings per share (basic) 36.62p 46.22p -21% 15.65p 15.85p -1%
Total dividend per share 13.0p 12.0p +8% 13.0p 12.0p +8%
Net cash/(debt) £1.0m £6.9m -86% £1.0m £6.9m -86%
* Underlying results measures above are before specific items, including some
acquisition-related charges and internal independent investigation costs.
Financial highlights
· Revenue at £152.8 million was unchanged on the prior year,
demonstrating improved resilience across the Group (FY23: £152.9 million),
with strong performances from acquisitions and Risk Advisory offsetting
cyclically weaker performances in other parts of the business.
· Underlying operating profit before acquisition-related items of
£18.1m in line with market expectations(1) (FY23: £20.1m).
· Impact on operating profit of acquisition-related costs and
foreign exchange swing totalling £4.1m.
· Reported profit after tax for the year unchanged from prior year
at £4.6m.
· Balance sheet remains strong with positive cash position
maintained.
· Continuation of the Group's progressive dividend policy, with a
recommended final dividend for FY24 of 9.0 pence per share, reflecting the
board's confidence in the future of the business. Total dividends for the year
if approved will be 13.0 pence per share (FY23: 12.0 pence) an increase of 8%.
Operational highlights
· Continued growth with total fixture numbers up 8% from the prior
year.
· Acquisitions of Southport Maritime Inc. in the USA and the Madrid
tanker desk in Spain performed well in their first full year as part of the
Group, realising the opportunities of being part of Braemar's global
business.
· Natural gas desk grew strongly throughout the year.
· Headcount up 7% to 409 as the business continues to invest,
average revenue per head continues to be strong at £373,000, 6% lower than
the prior year.
· The internal independent investigation commenced in June 2023 was
completed in October 2023.
Current trading and outlook
· FY25 has started well with market conditions remaining positive
- greater demand resulting from geo-political and natural events on a broadly
unchanged global fleet size.
· Continued execution of the growth strategy, hiring talented
individuals and teams, and through selective acquisitions in the fragmented
shipbroking market. This will be supported by the Group's platform, driving
ongoing efficiencies, and improving margins.
· The Group's forward order book strengthened throughout the
year, standing at $82.6m as at 29 February 2024, 47% higher than the $56.2m as
at 28 February 2023.
· With the Group's strategy delivering and a clear focus on
future growth, the board looks to the future with confidence.
James Gundy, Group Chief Executive Officer, commenting on the Group's FY24
results, said:
"This was another year of strong performance. I am delighted that it clearly
shows how much more resilient and balanced Braemar has become. In FY23, we
enjoyed high rates and activity across all sectors delivering a 51% increase
in revenue. I am delighted that this performance was sustained this year. We
maintained FY23's strong revenue levels through our growing securities
business and strong performances from our acquisitions, with overall fixture
volumes growing by 8%. We have built a platform that can support a growing
business and as we hire more brokers and make further acquisitions, whilst
maintaining a keen focus on cost management and efficiencies, we will build
greater resilience and further improve operating margins.
The overall market outlook remains positive. Geo-political and natural events,
as well as environmental considerations are leading to longer voyage times,
and global seaborne trade continues to grow, while the total fleet size
remains at similar levels.
We started FY25 with a strong forward order book at $82.6m, and will continue
to invest in our people, offices, and technology, whilst taking advantage of a
fragmented shipbroking market to hire and make acquisitions. I look forward to
another strong performance by the Group."
Results Roadshow and Online Presentations
The Company is hosting a results presentation for analysts on Thursday, 23 May
2024 at 10.30 a.m. at Buchanan's offices at 107 Cheapside, London, EC2V 6DN.
Please contact the team at Buchanan via braemar@buchanan.uk.com
(mailto:braemar@buchanan.uk.com) for further details.
In addition, the Company is also hosting an online investor presentation with
Q&A on Tuesday, 28 May 2024, commencing at 1 p.m. To participate, please
register with PI World at https://bit.ly/BMS_FY24_webinar
(https://url.uk.m.mimecastprotect.com/s/7nseCNxpzs10p6Ehmu7k7?domain=bit.ly) .
The 2024 Annual Report and Accounts will be available on the Company's website
(www.braemar.com (http://www.braemar.com) ) shortly.
For further information, contact:
Braemar Plc
James Gundy, Group Chief Executive Officer Tel +44 (0) 20 3142 4100
Grant Foley, Group Chief Financial Officer
Rebecca-Joy Wekwete, Company Secretary
Buchanan
Charles Ryland / Stephanie Whitmore Tel +44 (0) 20 7466 5000
Jack Devoy / Abby Gilchrist
Investec Bank plc
Gary Clarence / Alice King Tel +44 (0) 20 7597 5970
Cavendish Securities PLC
Ben Jeynes / Matt Lewis (Corporate Finance) Tel +44 (0) 20 7220 0500
Leif Powis / Dale Bellis / Charlie Combe (Sales & ECM)
Consolidated Income Statement
For the year ended 29 February 2024
29 Feb 2024 28 Feb 2023
Notes Underlying £'000 Specific items Total Underlying Specific Total
£'000
£'000
£'000
items
£'000
£'000
Revenue 2.1 152,751 - 152,751 152,911 - 152,911
Other operating income 2.2 - 83 83 - 3,846 3,846
Operating expense:
Operating costs 2.3, 2.2 (134,004) (3,182) (137,186) (132,598) (355) (132,953)
Acquisition-related expenditure 2.2 (1,502) (4,405) (5,907) - (1,999) (1,999)
Impairment of financial assets 2.3, 2.2 (697) - (697) (238) (848) (1,086)
Impairment of goodwill 2.2 - - - - (9,050) (9,050)
Total operating expense (136,203) (7,587) (143,790) (132,836) (12,252) (145,088)
Operating profit 16,548 (7,504) 9,044 20,075 (8,406) 11,669
Share of associate profit/(loss) for the year 3.4 12 - 12 (23) - (23)
Finance income 2.5, 2.2 871 419 1,290 119 83 202
Finance costs 2.5, 2.2 (2,823) - (2,823) (2,131) (266) (2,397)
Profit before tax from continuing operations 14,608 (7,085) 7,523 18,040 (8,589) 9,451
Taxation 2.7 (3,788) 889 (2,899) (4,641) (214) (4,855)
Profit from continuing operations 10,820 (6,196) 4,624 13,399 (8,803) 4,596
Profit attributable to equity shareholders of the Company 10,820 (6,196) 4,624 13,399 (8,803) 4,596
Underlying Total Underlying Total
Earnings per ordinary share
Basic 2.8 36.62p 15.65p 46.22p 15.85p
Diluted 2.8 29.96p 12.80p 38.52p 13.25p
The accompanying notes form an integral part of these Financial Statements.
Consolidated Statement of Comprehensive Income
For the year ended 29 February 2024
Note 29 Feb 2024 28 Feb 2023
£'000
£'000
Profit for the year 4,624 4,596
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss:
- Actuarial gain on employee benefit schemes - net of tax 5.1 173 2,361
Items that may be reclassified to profit or loss:
- Foreign exchange differences on retranslation of foreign operations 6.4 (1,783) 2,522
- Net investment hedge 6.4 249 (124)
- Cash flow hedges - net of tax 6.4 1,231 291
Other comprehensive (expense)/income (130) 5,050
Total comprehensive income attributable to owners of the parent 4,494 9,646
The accompanying notes form an integral part of these Financial Statements.
Consolidated Balance Sheet
As at 29 February 2024
Note As at As at
29 Feb 2024
28 Feb 2023
£'000
£'000
Assets
Non-current assets
Goodwill 3.1 71,337 71,407
Other intangible assets 3.2 3,185 3,980
Property, plant and equipment 3.5 5,582 5,320
Other investments 3.3 1,633 1,780
Investment in associate 3.4 713 701
Derivative financial instruments 4.4 249 30
Deferred tax assets 2.7 2,979 4,794
Pension surplus 5.1 1,414 1,120
Other long-term receivables 4.1 4,589 8,554
91,681 97,686
Current assets
Trade and other receivables 4.2 37,730 43,323
Derivative financial instruments 4.4 1,287 1,224
Current tax receivable 2.7 2,925 973
Cash and cash equivalents 4.5 27,951 34,735
69,893 80,255
Total assets 161,574 177,941
Liabilities
Current liabilities
Derivative financial instruments 4.4 175 1,122
Trade and other payables 4.3 43,611 57,310
Current tax payable 2.7 1,625 4,141
Provisions 7.1 3,080 2,575
Convertible loan notes 4.7 632 699
49,123 65,847
Non-current liabilities
Long-term borrowings 4.6 29,819 29,919
Deferred tax liabilities 2.7 8 344
Derivative financial instruments 4.4 183 1,022
Trade and other payables 416 542
Provisions 7.1 58 734
Convertible loan notes 4.7 2,346 2,852
32,830 35,413
Total liabilities 81,953 101,260
Total assets less total liabilities 79,621 76,681
Equity
Share capital 6.1 3,292 3,292
Share premium 6.1 - 53,796
ESOP reserve 6.3 (7,140) (10,607)
Other reserves 6.4 8,365 28,819
Retained earnings 75,104 1,381
Total equity 79,621 76,681
Registered number: 02286034
Consolidated Cash Flow Statement
For the year ended 29 February 2024
Notes 29 Feb 2024 28 Feb 2023
£'000
£'000
Profit before tax 7,523 9,451
Adjustment for:
Depreciation and amortisation charges 3.2, 3.5 3,805 3,364
Loss on disposal of intangible assets - 87
Net loss on disposal of property, plant and equipment - 20
Share scheme charges 6,442 4,520
Net foreign exchange loss/(gain) with no cash impact 497 (1,157)
Gain on acquisition of Southport 2.2 - (3,643)
Gain relating to disposal of Cory Brothers 2.2 (83) (203)
Fair value loss on unlisted investments 2.2 147 -
Impairment of Naves goodwill 3.1 - 9,050
Impairment of property, plant and equipment 3.5 - 150
Impairment of intangible assets 3.2 - 60
Impairment of financial asset 2.2 - 848
Reversal of dilapidations provision 7.1 - (124)
Adjustment for non-operating transactions included in profit before tax:
Net finance cost 2.5 1,533 2,195
Share of (profit)/loss in associate from continuing and discontinued 3.4 (12) 23
operations
Adjustment for cash items in other comprehensive income/expense:
Fair value movement on financial instruments charged to profit or loss 89 -
Cash settlement of share-based payment (52) -
Contribution to defined benefit scheme 5.1 (37) (450)
Operating cash flow before changes in working capital 19,852 24,191
Decrease/(increase) in receivables 6,252 (14,857)
(Decrease)/increase in payables (12,142) 16,836
(Decrease)/increase in provisions (138) 2,081
Cash flows from operating activities 13,824 28,251
Interest received 508 119
Interest paid (2,677) (1,925)
Tax paid, net of refunds (6,473) (4,381)
Net cash generated from operating activities 5,182 22,064
Cash flows from investing activities
Purchase of property, plant and equipment 3.5 (503) (695)
Purchase of other intangible assets 3.2 (32) (90)
Acquisition of business (cash acquired) 2.2 - 349
Proceeds related to disposal of Cory Brothers 4.9 1,397 6,500
Principal received on finance lease receivables 3.6 626 607
Net cash generated from investing activities 1,488 6,671
-
Cash flows from financing activities -
Proceeds from RCF loan facility 4,500 7,694
Repayment of RCF loan facility (5,098) (3,000)
Repayment of principal under lease liabilities 3.6 (3,143) (3,865)
Cash proceeds on issue of new shares 6.1 - 694
Cash proceeds on exercise of share awards settled by release of shares from 826 477
ESOP
Dividends paid 6.2 (2,440) (3,190)
Purchase of own shares 6.3 (6,125) (7,963)
Settlement of convertible loan notes 4.7 (598) (1,448)
Net cash used in financing activities (12,078) (10,601)
(Decrease)/increase in cash and cash equivalents (5,408) 18,134
Cash and cash equivalents at beginning of the year 4.5 34,735 13,964
Foreign exchange differences (1,376) 2,637
Cash and cash equivalents at end of the year 4.5 27,951 34,735
The accompanying notes form an integral part of these Financial Statements.
Consolidated Statement of Changes in Total Equity
For the year ended 29 February 2024
Notes Share Share ESOP reserve Other Retained (deficit)/ earnings Total
capital
premium
£'000
reserves
£'000
equity
£'000
£'000
£'000
£'000
At 1 March 2022 3,221 53,030 (6,771) 26,130 (4,119) 71,491
Profit for the year - - - - 4,596 4,596
Actuarial gain on employee benefits schemes - net of tax - - - - 2,361 2,361
Foreign exchange differences - - - 2,522 - 2,522
Cash flow hedges - net of tax - - - 291 - 291
Net investment hedge - - - (124) - (124)
Other comprehensive income - - - 2,689 2,361 5,050
Total comprehensive income - - - 2,689 6,957 9,646
Transactions with owners in their capacity as owners:
Deferred tax income on share awards - - - - 863 863
Dividends 6.2 - - - - (3,190) (3,190)
Shares issued 6.1 71 766 - - - 837
Acquisition of own shares - - (7,963) - - (7,963)
ESOP shares allocated 6.3 - - 4,127 - (3,650) 477
Share-based payments 5.2 - - - - 4,520 4,520
71 766 (3,836) - (1,457) (4,456)
At 28 February 2023 3,292 53,796 (10,607) 28,819 1,381 76,681
Profit for the year - - - - 4,624 4,624
Actuarial gain on employee benefits schemes - net of tax - - - - 173 173
Foreign exchange differences - - - (1,783) - (1,783)
Net investment hedge - - - 249 - 249
Cash flow hedges - net of tax - - - 1,231 - 1,231
Other comprehensive income - - - (303) 173 (130)
Total comprehensive income - - - (303) 4,797 4,494
Transactions with owners in their capacity as owners:
Tax on share awards 2.7 - - - - (205) (205)
Dividends 6.2 - - - - (2,440) (2,440)
Capital reduction 6.4 - (53,796) - (20,151) 73,947 -
Acquisition of own shares 6.3 - - (6,125) - - (6,125)
ESOP shares allocated 6.3 - - 9,592 - (8,766) 826
Cash paid for share-based payments 5.2 - - - - (52) (52)
Share-based payments 5.2 - - - - 6,442 6,442
- (53,796) 3,467 (20,151) 68,926 (1,554)
At 29 February 2024 3,292 - (7,140) 8,365 75,104 79,621
The accompanying notes form an integral part of these Financial Statements.
Notes to the Financial Statements
General information
Braemar plc (the "Company") is a public company limited by shares incorporated
in the United Kingdom under the Companies Act. The Company is registered in
England and Wales and its registered address is 1 Strand, Trafalgar Square,
London, United Kingdom, WC2N 5HR. The consolidated Financial Statements of the
Company as at and for the year ended 29 February 2024 comprise the Company and
its subsidiaries (together referred to as the "Group")
1 Basis of preparation
1.1 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 2023 or 28 February 2022
but is derived from those accounts. Statutory accounts for 2023 have been
delivered to the registrar of companies, and those for 2024 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.
The consolidated Financial Statements incorporate the Financial Statements of
Braemar Plc and all its subsidiaries made up to 28 February each year or 29
February in a leap year.
Subsidiaries are entities that are controlled by the Group. Control exists
when the Group has the rights to variable returns from its involvement with an
entity and has the ability to affect those returns through its power over the
entity. The results of subsidiaries sold or acquired during the year are
included in the accounts up to, or from, the date that control exists. All
intercompany balances and transactions have been eliminated in full.
Certain statements in this Annual Report are forward-looking. Although the
Group believes that the expectations reflected in these forward-looking
statements are reasonable, it gives 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.
The Group Financial Statements are presented in sterling and all values are
rounded to the nearest thousand sterling (£'000) except where otherwise
indicated.
New standards, amendments and interpretations effective for the financial year
beginning 1 March 2023
The following amendments to IFRS Accounting Standards have been applied for
the first time by the Group:
• IFRS 17 "Insurance Contracts" (including the June 2020 and December 2021
Amendments to IFRS 17);
• Amendments to IAS 12 "Income Taxes" - Deferred Tax related to Assets and
Liabilities arising from a Single Transaction;
• Amendments to IAS 1 "Presentation of Financial Statements" and IFRS
Practice Statement 2 "Making Materiality Judgements - Disclosure of Accounting
Policies";
• Amendments to IAS 12 "Income Taxes - International Tax Reform - Pillar Two
Model Rules";
• Amendments to IAS 8 "Accounting Polices, Changes in Accounting Estimates
and Errors - Definition of Accounting Estimates".
The Group has adopted the amendments to IAS 1 in the current year. The
amendments change the requirements in IAS 1 with regard to disclosure of
accounting policies. The amendments replace all instances of the term
'significant accounting policies' with 'material accounting policy
information'. Accounting policy information is material if, when considered
together with other information included in an entity's financial statements,
it can reasonably be expected to influence decisions that the primary users of
general purpose financial statements make on the basis of those financial
statements. The Group has reviewed the impact of the changes to IAS 1, which
has resulted in some immaterial accounting policies being removed and updates
to the presentation of the financial statements to aid users in their
understanding and navigation.
The adoption of the above has not had any material impact on the amounts
reported or the disclosures in these financial statements.
New standards, amendments and interpretations issued but not yet effective for
the financial year beginning 1 March 2023 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 in future periods and have not been
early adopted by the Group:
- Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture (Amendments to IFRS 10 and IAS 28);
- Classification of Liabilities as Current or Non-current
(Amendments to IAS 1);
- Non-current Liabilities with Covenants (Amendments to IAS 1);
- Supplier Finance Arrangement (Amendments to IAS 7 and IFRS 7);
- Lease Liability in a Sale and Leaseback (Amendments to IFRS 16).
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. Following concerns raised by stakeholders,
the IASB issued further amendments in October 2022 to specify that only those
covenants which an entity must comply with on or before the reporting period
should affect classification of the corresponding liability as current or
non-current. The October 2022 amendments defer the effective date of the
January 2020 amendments by one year in order that both sets of amendments are
effective for annual reporting periods beginning on or after 1 January 2024
with earlier application permitted.
Under the Group's current accounting policy, a financial liability with an
equity conversion feature is classified as current or non-current disregarding
the impact of the conversion option. The amendments to IAS 1 will result in
the equity conversion feature relating to certain of the Group's financial
liabilities, impacting the classification of those liabilities. While the
Group's assessment of the impact is ongoing, the Group expects that amounts
included as non-current in relation to "Convertible Loan Notes" will be
reclassified to current liabilities.
1.2 Going concern
The Group 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 2025 which is more than 12 months
from the date of issue of these Financial Statements.
A set of cash flow forecasts ("the base case") have been prepared by
management to cover the going concern period and reviewed 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. In
putting together these forecasts, particular attention was paid to the
following factors:
· Expected market demand, the impact on market rates and the
Group's forward order book.
· The Group's compliance with sanctions put in place as a result of
the conflict in the Ukraine has meant additional work reviewing compliance
obligations on a regular basis as the laws have been amended but did not have
a material effect on trading in FY24, nor is it expected to have an impact in
FY25.
· The level of likely cost inflation, particularly around salaries.
· Geopolitical tensions can cause volatility in shipping markets,
but, if anything, that uncertainty can give rise to additional opportunities
for the business to support the industry and clients further. There is
therefore no expectation that the current global political tensions will have
an adverse impact on trading in FY25.
· 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 considered trading performance during the current year and
have concluded that none of these factors are currently likely to have a
significantly adverse impact on the Group's future cash flows.
The Group continues to have a strong balance sheet, as at 29 February 2024
the Group held net bank cash of £1.0 million (2023: £6.9 million). As at 30
April 2024 the Group had net bank cash of £8.9 million.
Notes 30 April 2024 29 Feb 2024 28 Feb 2023
£m
£m
£m
Secured revolving credit facilities 4.6 (23.0) (27.0) (27.8)
Cash 4.5 31.9 28.0 34.7
Net cash 8.9 1.0 6.9
The Group continued to maintain a revolving credit facility ("RCF") with its
main bankers, HSBC throughout the year. The RCF is for £30.0 million plus an
accordion limit of £10.0 million and has an initial termination date of
November 2025 with an option, subject to lender approval, to extend the term
of the facility by 24 months. Drawdown of the accordion facility is subject to
additional credit approval. It has an EBITDA leverage covenant of 2.5x and a
minimum interest cover of 4x. At 31 May 2023, 31 August 2023, 30 November 2023
and 29 February 2024 the Group met all financial covenant tests. In addition,
there is a further requirement to provide HSBC with the Group's audited
financial statements within six months of the year-end. Due to the delay in
completing the FY23 audited financial statements, the Group obtained waivers
for this in advance so there was no breach of this requirement.
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, including
a number of downside sensitivities on budgeted revenue, including a reverse
stress test scenario. The directors consider revenue as the key assumption in
the Group's budget. The cost base is largely fixed or made up of discretionary
bonuses, 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, only very minor 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 budgeted
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 38% in budgeted revenue
from the base case assumptions from March 2024 through to May 2025. In light
of current trading, forecasts and the Group's performance over FY24, the
directors assessed this downturn in revenue and concluded the likelihood of
such a reduction remote, especially in the light of the forward order book of
$83m at the end of February 2024 ($38m of which is for the financial year
ending February 2025), such that it does not impact the basis of preparation
of the Financial Statements and there is no material uncertainty in this
regard.
1.3 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. Key estimates are those that the Group has made in
the process of applying the Group's accounting policies and that have a
significant risk of resulting in material adjustments to the carrying amounts
of assets and liabilities within the next financial year. Critical judgements
are those that the Group makes, apart from those involving estimations, that
the directors have made in the process of applying the Group's accounting
policies and that have the most significant effect on the amounts recognised
in the Financial Statements.
The following table provides a summary of the Group's key estimates and
critical judgements, along with the location of more detailed information
relating to those judgements.
Judgement applied to Judgements excluding estimates Estimates Location of further information
Acquisition accounting for business combinations Yes Yes Note 1.4a - Business Combinations
Revenue recognition Yes Note 2a - Revenue Recognition
Classification and recognition of specific items Yes Note 2.2 - Specific items
Impairment of goodwill Yes Note 3.1 - Goodwill
Provision for impairment of trade receivables and contract assets Yes Note 4.2 - Trade and other receivables
Measurement of deferred and contingent consideration receivable Yes Note 4.8 - Deferred and contingent consideration receivable
Recoverability and valuation of defined benefit pension scheme Yes Yes Note 5.1 - Long-term employee benefits
Share option vesting Yes Note 5.2 - Share-based payments
Uncertain commission obligations Yes Note 7.1 - Provisions
Climate‐related risks and opportunities
Management has 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 does not consider that
climate‐related risks have a material impact on any key judgements,
estimates or assumptions in the consolidated Financial Statements.
In the prior year, 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 the Environment and Climate Change risk resulted in its inclusion as
a Group Principal Risk.
1.4 Material accounting policies
The accounting policies applied by the Group in relation to specific
transactions and balances are disclosed in the note to which they relate. The
following section includes those accounting policies which apply pervasively
across the Financial Statements and to avoid repetition are disclosed in this
note.
a) Business combinations
Key estimate
Acquisition accounting
Business combinations are accounted for under the acquisition method, based on
the fair values of the consideration paid. Assets and liabilities, with
limited exceptions, are measured at their fair value at the acquisition date.
The Group estimates the provisional fair values and useful lives of acquired
assets and liabilities at the date of acquisition. The valuation of acquired
intangibles is subject to estimation of future cash flows and the discount
rate applied to them. The valuation of the customer-related intangible assets
is determined based on an excess earnings methodology while the valuation of
the marketing-related intangible asset is based on a royalty savings method.
Key judgement
Assessment of business combinations
During the prior year, the Group acquired the entity Madrid Shipping Advisors
S.L. For a business combination to exist, the Group must obtain control of a
business. To be considered a business, an acquired set of activities and
assets must include, at a minimum, an input and a substantive process that
together significantly contribute to the ability to create outputs. As part of
the transaction, no assets were acquired (such as brand, order book, property,
plant and equipment), nor were any liabilities assumed. The entity holds the
service contracts for key employees and was a newly incorporated company, set
up specifically for the acquisition. The Group has made the judgement that the
acquisition did not meet the definition of a business combination as the
acquired entity did not meet the definition of a business. The transaction was
treated as the recruitment of a broker team, which is consistent with the
substance of the arrangement.
The acquisition method of accounting is used to account for all business
combinations, regardless of whether equity instruments or other assets are
acquired. The consideration transferred for the acquisition of a subsidiary
comprises the:
- fair values of the assets acquired;
- liabilities incurred to the former owners of the acquired
business;
- equity interests issued by the Group;
- fair value of any asset or liability resulting from a contingent
consideration arrangement; and
- fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are, with limited exceptions, measured
initially at their fair values at the acquisition date. The Group recognises
any non-controlling interest in the acquired entity on an
acquisition-by-acquisition basis either at fair value or at the
non-controlling interest's proportionate share of the acquired entity's net
identifiable assets.
Acquisition-related costs are expensed as incurred.
The excess of the consideration transferred; amount of any non-controlling
interest in the acquired entity; and acquisition-date fair value of any
previous equity interest in the acquired entity over the fair value of the net
identifiable assets acquired is recorded as goodwill. If those amounts are
less than the fair value of the net identifiable assets of the business
acquired, the difference is recognised directly in profit or loss as a gain on
purchase.
Where settlement of any part of cash consideration is deferred, the amounts
payable in the future are discounted to their present value as at the date of
exchange. The discount rate used is the entity's incremental borrowing rate,
being the rate at which a similar borrowing could be obtained from an
independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial
liability. Amounts classified as a financial liability are subsequently
remeasured to fair value, with changes in fair value recognised in profit or
loss.
If the business combination is achieved in stages, the acquisition date
carrying value of the acquirer's previously held equity interest in the
acquiree is remeasured to fair value at the acquisition date. Any gains or
losses arising from such remeasurement are recognised in profit or loss.
Due to the nature of the Group's business, amounts paid or shares issued to
sellers are often linked to their continued employment. An assessment is
performed to determine whether the amounts are part of the exchange for the
acquiree, or should be treated as a transaction separate from the business
combination. Transactions that are separate from the business combination are
accounted for in accordance the relevant IFRSs which generally results in the
amounts being treated as a post-combination remuneration expense.
b) Foreign currencies
Transactions and balances
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 instrument contracts, mainly forward foreign
currency exchange contracts which are designated as cash flow hedges (see Note
4.4). For a qualifying hedge relationship, the fair value gain or loss on the
hedging instrument is recognised as part of revenue when the underlying
transaction is recognised in accordance with the Group's revenue recognition
policy.
Translation to presentation currency
The presentational currency of the Group is sterling. 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 recognised through other comprehensive income in the
foreign currency translation reserve (see Note 6.4).
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. The Group finances overseas investments partly through the use of
foreign currency borrowings in order to provide a net investment hedge over
the foreign currency risk that arises on translation of its foreign currency
subsidiaries. For effective hedge relationships, the gain or loss on the
hedging instrument is recognised in equity through other comprehensive income.
c) 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 for impairment as
described below. If any indication of impairment exists, 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.
Goodwill is reviewed for impairment at least annually. Impairments are
recognised immediately in the Income Statement. Goodwill is allocated to
cash-generating units for the purposes of impairment testing.
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. The carrying values of other
intangible assets are reviewed for impairment at least annually or when there
is an indication that they may be impaired.
Right-of-use assets are reviewed for impairment to account for any loss when
events or changes in circumstances indicate the carrying value may not be
fully recoverable.
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.
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.
d) Contingent assets
Contingent assets are not recognised but are disclosed where an inflow of
economic benefits is probable.
2 Performance-related information
Revenue recognition
Key judgement
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 Chartering, in relation to single voyages, the Group has defined the
performance obligation to be satisfied at the point in time where the
negotiated contract between counterparties has been successfully completed,
being the discharge of cargoes, 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 over a time
period, or at a different point in time. For time charters, the performance
obligation is to provide operational support and act on behalf of the
principal over the course of hire. As a result, the Group believes the
performance obligation is satisfied over the period of hire and revenue is
recognised accordingly.
Revenue is recognised in accordance with satisfaction of performance
obligations. Revenue of the Group consists of:
i) Chartering desks - 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; and
- 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.
ii) Risk Advisory desks
Securities:
- for income derived from commodity broking, the commission is
recognised when a binding contractual arrangement is entered into between the
two parties, at which point, the Group has fulfilled its performance
obligation.
iii) Investment Advisory
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
allow customers to benefit from services when required, and as such, are
generally recognised in the month of invoice. Success fees are recognised at
the point when the performance obligations of the particular engagement are
fulfilled.
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; and
- 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.
Dividend income from investments is recognised when the right to receive
payment is established.
2.1 Business segments
Based on the way in which information is presented to the Group's Chief
Operating Decision Maker, the Group's operating segments are Chartering,
Investment Advisory and Risk Advisory. The Chief Operating Decision Maker is
considered to be the Group's board of directors. These three segments are
managed separately on the basis of the nature of the services offered to
clients and differences in the regulatory environment applicable to each
segment.
The table below shows the make-up of the Groups segments by underlying
component.
Segment Chartering
Component Deep Sea Tankers
Specialised Tankers
Offshore
Dry Cargo
Segment Investment Advisory
Component Corporate Finance
Sale and Purchase
Segment Risk Advisory
Component Securities
Each of Chartering, Investment Advisory and Risk Advisory are managed
separately, and the nature of the services offered to clients is distinct
between the segments. The Chartering segment includes the Group's shipbroking
business, Risk Advisory includes the Group's regulated securities business and
Investment Advisory focuses on transactional services.
The segmental analysis is consistent with the way the Group manages itself and
with the format of the Group's internal financial reporting. The board
considers the business from both service line and geographic perspectives. A
description of each of the lines of service is provided in the Operating and
Financial Review. The Group's main geographic markets comprise the UK,
Singapore, the US, Australia, Switzerland, Germany and the Rest of the World.
The Group's geographical markets are determined by the location of the Group's
assets and operations.
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 specific items, including restructuring costs, gain/loss on
disposal of investments and acquisition and disposal-related items.
The segmental information provided to the board for reportable segments for
the year ended 29 February 2024 is as follows:
Revenue Operating profit
2024 2023 2024 2023
£'000
£'000
£'000
£'000
Chartering 103,945 99,164 13,630 15,577
Investment Advisory 25,696 36,760 3,872 7,740
Risk Advisory 23,110 16,987 4,086 2,971
Trading segments revenue/results 152,751 152,911 21,588 26,288
Central costs (5,040) (6,213)
Underlying operating profit 16,548 20,075
Specific items included in operating profit (7,504) (8,406)
Operating profit 9,044 11,669
Share of associate's profit/(loss) for the year 12 (23)
Net finance expense (1,533) (2,195)
Profit before taxation 7,523 9,451
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:
Revenue
2024 2023
£'000
£'000
United Kingdom 81,088 80,353
Singapore 19,885 26,674
Australia 9,556 16,599
Switzerland 5,863 11,112
United States 20,479 6,255
Germany 1,287 2,951
Rest of the World 14,593 8,967
Total 152,751 152,911
Revenue analysis
The Group disaggregates revenue in line with the segmental information
presented above and also by desk. Revenue analysed by desk is provided below.
2024 2023
£'000
£'000
Tankers 54,656 41,602
Specialised Tankers 19,239 16,240
Dry Cargo 22,139 35,821
Offshore 7,911 5,501
Chartering total 103,945 99,164
Sales and purchase 23,543 32,060
Corporate finance 2,153 4,700
Investment Advisory total 25,696 36,760
Securities 23,110 16,987
Risk Advisory total 23,110 16,987
Total continuing operations 152,751 152,911
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 which are for a duration longer than
twelve months and where the Group has outstanding performance obligations on
which revenue has not yet been recognised at the Balance Sheet date. The
amount of revenue that will be recognised in future periods on these contracts
when those remaining performance obligations are satisfied is set out below:
Forward order book
2024 Within 1-2 years £'000 More than Total
12 months
2 years
£'000
£'000
£'000
Chartering 18,686 4,904 8,925 32,515
Sale and purchase 11,562 9,567 11,683 32,812
Total 30,248 14,471 20,608 65,327
2023 Within 1-2 years More than Total
12 months
£'000
2 years
£'000
£'000
£'000
Chartering 19,209 3,040 9,860 32,109
Sale and purchase 3,332 4,988 6,168 14,488
Total 22,541 8,028 16,028 46,597
2.2 Specific items
Specific items are significant items considered material in size or nature
(including acquisition and disposal-related gains and losses) as well as items
which are not considered to be part of the trading performance of the business
in the current year. These are disclosed separately to enable a full
understanding of the Group's ongoing financial performance, but may not be
comparable with disclosures provided by other companies. The Group's adjusted
performance measures are reviewed by the Group's Chief Operating Decision
Maker and are used as the basis to determine the discretionary bonus pools and
measure earnings per share performance related to targets for awards under the
Group's Long Term Incentive Plan.
Key judgement
Classification and recognition of specific items
In reporting financial information, the Group presents Alternative Performance
Measures ("APMs") which are not defined or specified under the requirements of
International Financial Reporting Standards ("IFRS"). The Group believes that
these APMs, which are not considered to be a substitute for or superior to
IFRS measures, provide stakeholders with additional helpful information and
enable an alternative comparison of performance over time.
The Group excludes specific items from its underlying earnings measures.
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. Further details
of the Group's specific items are included in the note below.
2024 2023
£'000
£'000
Other operating income:
- Gain on purchase of Southport - 3,643
- Gain on revaluation of Cory contingent consideration receivable 83 203
83 3,846
Operating costs:
- Commission obligation - (257)
- Investigation costs (2,616) -
- Board change costs (190) -
- Unlawful dividend rectification (229) -
- Impairment of financial assets - (848)
- Impairment of goodwill - (9,050)
- Other operating costs (147) (98)
(3,182) (10,253)
Acquisition-related items:
- Consideration treated as an employment expense (3,580) (1,325)
- Madrid post-contractual obligation (376) (264)
- Acquisition of Naves Corporate Finance GmbH - (60)
- Amortisation of acquired intangible assets (449) (350)
(4,405) (1,999)
Other items:
- Finance income - Cory Brothers earnout deferred consideration receivable 86 83
- Finance income/(expense) - foreign exchange and derivative gain/(loss) on 333 (266)
Naves liability
419 (183)
Total (7,085) (8,589)
Other operating income
A gain on purchase in relation to the acquisition of Southport was recognised
in the prior year. The Group does not consider this gain to reflect the
performance of the business in the year, and so is treated as a specific
item.
Revaluation of the contingent receivable due in respect of the Cory Brothers
disposal resulted in a gain of £0.1 million (2023: £0.2 million). See Note
4.9 for further details.
The tax charge on specific items included within other operating income was
£nil (2023: £nil).
Operating costs
Investigation costs
During the preparation of the 2023 Annual Report, the board instigated an
investigation into a transaction which originated in 2013 and involved
payments being made through to 2017. The investigation engaged multiple
external specialist firms and resulted in a significant cost to the business
of £2.6 million in the year to 29 February 2024 which the Group does not
consider reflects the trading of the business in the year and as a result is
treated as a specific item. No significant further costs are expected in FY25.
Board change costs
The Group appointed a new Chief Financial Officer with effect from 1 August
2023 to replace Nick Stone who left on 31 July 2023. The recruitment costs
incurred of £0.2 million are not considered part of the trading performance
of the business and so are treated as specific items.
Unlawful dividend rectification
Following the identification of the payment of historic unlawful dividends,
the Group incurred costs of £0.2 million in relation to their rectification,
which are not expected to recur, are not considered part of the trading
performance of the business and so are treated as specific items.
Commission obligation
In the prior year, as set out in Note 7.1 Provisions, the Group recognised a
provision in relation to an uncertain commission obligation. During the prior
year, an amount of £0.3 million was recognised to increase the provision. Due
to the nature of the provision being an historical transaction and not related
to current trading, the Group treated the cost as a specific item.
Impairment of financial asset
In the prior year, an impairment charge of £0.8 million was recognised in
relation to a disputed staff loan with an ex-employee of our Indian
operations. Since no significant progress had been made with the ongoing legal
case it is now the opinion of the directors that recovery of this debt is
unlikely. Due to the size of the impairment and the fact that the original
debt arose several years previously and is not related to trading, this
impairment charge is not deemed to relate to the performance of the business
and as such was treated as a specific item.
Impairment of goodwill
In the prior year, an impairment of goodwill of £9.1 million was recognised
in relation to the goodwill allocated to the Corporate Finance business. The
Group does not believe that this impairment reflected the performance of the
business during the year, and as such, was treated as a specific item.
Other operating costs
In the current year, operating costs includes the fair value loss on the
revaluation of the Group's investment in London Tanker Brokers Panel.
Consistent with the previous revaluation gain being included as a specific
item, the Group has treated the current year loss as a specific item as it
does not relate to the trading performance of the business in the year. In the
prior year, the final transaction costs of £0.1 million related to disposals
in the preceding year were received.
The tax income on specific items included within operating costs was £0.7
million (2023: £0.1million)
Acquisition-related items
Consideration treated as an employment expense
Following the acquisition of Southport Maritime Inc. in December 2022, due to
the requirement for ongoing employee service, the upfront cash payment of
£6.0 million and IFRS 2 charge related to share awards made to the sellers
and existing employees of Southport are treated as a post-combination
remuneration expense. The total expense for the year related to amounts linked
to ongoing employee service in connection with the acquisition of Southport
was £3.6 million (2022: £1.3 million). The period of required employee
service is three years from the acquisition date.
Madrid post-contractual obligation
As a result of the recruitment of a team of brokers based in Madrid, service
agreements were entered into with employees. The recruitment of the broker
team in Madrid included the following key elements:
- The Group assumed a liability of £0.3 million for a
post-contractual payment to the employees, which was fully vested on signing
the contracts.
- An upfront cash payment of £1.3 million with a further payment
of £1.3 million made in December 2023.
- Share awards to a total value of £1.1 million which vest evenly
in one, two and three years from December 2022
The upfront payments and share awards have a clawback mechanism which is
linked to the continued employment of the brokers over a three-year period
from December 2022. The costs associated with the upfront payments and share
awards are not considered by the Group to be specific items as they relate to
the recruitment of brokers and not a business combination, but are disclosed
as acquisition-related expenditure given their size and will be amortised over
three years to December 2025. In addition, certain brokers are entitled to a
payment on termination in return for a non-compete obligation. The cost
related to the post-contractual payment obligation is treated as a specific
item because it is akin to a transaction cost with no requirement to provide
service. The Group recognised a cost of £0.4 million during the year in
relation to this obligation (2023: £0.3 million).
Acquisition of Naves Corporate Finance GmbH
In the prior year, the Group incurred total costs of £0.1 million in relation
to employment costs due to the management sellers conditional on their ongoing
service to the Group. As the service condition was satisfied in the prior year
there is no further employment cost to be recognised.
Amortisation of acquired intangible assets
An amount of £0.4 million (2022: £0.4 million) relates to the amortisation
of acquired intangible assets, primarily in relation to intangible assets
recognised as a result of the acquisition of Southport Inc.
The tax income on acquisition-related items was £0.1 million (2023: £0.1
million). The tax effect of expenses not deductible for tax was £1 million.
Other specific items
Cory brothers earnout deferred consideration receivable
The unwinding of the discounting of the deferred receivable due in respect of
the Cory Brothers disposal contributed interest income of £0.1 million (2023:
£0.1m). See Note 4.9 for further information. This income is not related to
the trading of the business in the period but is related to the disposal of
the logistics business in a prior year. As a result, it is treated as specific
item.
Foreign exchange and derivative movement on Naves liability
The foreign exchange gain and fair value gain on the Naves-related liabilities
and derivative of £0.3 million (2023: £0.3 million loss) is included as a
specific item as it relates to the acquisition of Naves and is not related to
trading.
The tax charge on specific items included within other items was £nil (2023:
£0.2 million). The tax effect of income not taxable was £0.2 million.
2.3 Operating profit from continuing operations
Operating profit represents the results from operations before finance income
and costs, share of profit/(loss) in associate and taxation.
This is stated after charging/(crediting):
Notes 2024 2023
£'000
£'000
Staff costs 2.4 109,557 110,166
Other staff costs - acquisition related 2.4 3,239 1,470
Depreciation of property, plant and equipment 3.5 3,127 2,823
Amortisation of computer software intangible assets 3.2 229 192
Bad debt charge 4.2 697 238
Auditor's remuneration 2.6 1,794 1,354
Other professional costs 5,627 3,410
Office costs 2,145 1,595
IT and communication costs 4,175 3,264
Insurance 1,083 1,069
Net foreign exchange losses/(gains) 1,118 (1,465)
2.4 Staff costs
a) Staff costs for the Group during the year (including directors)
Note 2024 2023
£'000
£'000
Salaries, wages and short-term employee benefits 97,441 100,039
Other staff costs - acquisition related(1) 2.2 3,239 1,470
Other pension costs 5.1 2,247 1,811
Social security costs 3,427 3,796
Share-based payments 6.3 6,442 4,520
Total 112,796 111,636
(1) The acquisition related staff costs relate to upfront cash payments made
in connection with the acquisition of Southport Maritime Inc. and the upfront
payments made on the acquisition of Madrid Shipping Advisors SL, which are
both treated as a remuneration expense. For further details on the upfront
payments, see Note 2.2.The numbers above include remuneration and pension
entitlements for each director.
b) Average number of employees
2024 2023
number
number
Chartering 266 253
Risk Advisory 31 32
Investment Advisory 49 63
Central 63 36
Total 409 384
c) Key management compensation
The remuneration of key management, which the Group considers to be the
directors, is set out below.
2024 2023
£'000
£'000
Salaries, short-term employee benefits and fees 4,954 5,879
Other pension costs 85 52
Termination benefits 131 -
Share-based payments 548 1,226
Total 5,718 7,157
Pension costs relate to contributions made to a defined contribution pension
scheme on behalf of four (2023: three) members of key management.
2.5 Finance income and costs
The tables below provide a breakdown of the key components of finance income
and finance costs.
Note 2024 2023
£'000
£'000
Finance income:
- Interest on bank deposits 4.5 464 84
- Interest on lease receivables 3.6 16 35
- Interest income on the net defined benefit asset 5.1 85 -
- Gain on derivative instruments not eligible for hedge accounting 4.4 273 -
- Foreign exchange gain on non-GBP denominated credit facilities 4.6 33 -
- Gain on Naves related derivative instruments and liability 4.7 333 -
- Interest on of Cory earnout deferred consideration receivable 4.4 86 83
Total finance income 1,290 202
Finance costs:
- Interest payable on revolving credit and overdraft facilities 4.6 (2,407) (1,151)
- Interest payable on defined benefit liability 5.1 - (54)
- Loss on derivative instruments not eligible for hedge accounting 4.4 - (292)
- Foreign exchange loss on non-GBP denominated credit facilities 4.6 - (49)
- Loss on Naves related derivative instruments and foreign exchange loss on 4.7 - (250)
liability
- Interest payable on convertible loan notes 4.7 (227) (426)
Subtotal finance costs before interest on lease liabilities (2,634) (2,222)
- Interest on lease liabilities 3.6 (189) (175)
Total finance costs (2,823) (2,397)
Finance costs - net (1,533) (2,195)
2.6 Auditor's remuneration
A more detailed analysis of the auditor's services is provided below:
2024 2023
£'000
£'000
Audit services:
- Fees payable to the Company's auditor for the audit of the Company's 625 740
Financial Statements
Fees payable to the Group's auditor and its associates for other services:
- The audit of the Group's subsidiaries pursuant to legislation 1,029 457
- Other services - interim review and reporting accountant services 140 157
1,794 1,354
All fees paid to the auditor were charged to operating profit in both years.
Included in the FY24 audit fees disclosed above is an amount of £0.4 million
in relation to incremental audit cost related to the investigation work
undertaken. See Note 2.2 for further detail.
2.7 Taxation
The taxation expense represents the sum of the current and deferred tax.
Tax currently payable is based on taxable profit for the year. Taxable profit
differs from 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.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated Financial Statements. However,
deferred tax liabilities are not recognised if they arise from the initial
recognition of goodwill. Deferred income tax is also not accounted for if it
arises from the initial recognition of an asset or liability in a transaction
other than a business combination that, at the time of the transaction,
affects neither accounting nor taxable profit or loss and does not give rise
to equal taxable and deductible temporary differences. Deferred income tax is
determined using tax rates (and laws) that have been enacted or substantively
enacted by the end of the reporting period and are expected to apply when the
related deferred income tax asset is realised, or the deferred income tax
liability is settled. Deferred tax assets and liabilities are offset where
there is a legally enforceable right to offset current tax assets and
liabilities and where the deferred tax balances relate to the same taxation
authority. Current tax assets and tax liabilities are offset where the entity
has a legally enforceable right to offset and intends either to settle on a
net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax are recognised in the Income Statement, except to the
extent that it relates to items recognised in other comprehensive income or
directly in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity, respectively.
a) Analysis of charge in year
2024 2023
£'000
£'000
Current tax
UK corporation tax charged to the Income Statement 1,015 1,194
UK adjustment in respect of previous years (340) -
Overseas tax on profits in the year 2,668 4,559
Overseas adjustment in respect of previous years (425) 394
Total current tax 2,918 6,147
Deferred tax
UK current year origination and reversal of temporary differences (97) (190)
Due to change in rate of tax (2) -
UK adjustment in respect of previous years (28) (242)
Overseas current year origination and reversal of temporary differences 110 (712)
Overseas adjustment in respect of previous years (2) (148)
Total deferred tax (19) (1,292)
Taxation 2,899 4,855
Reconciliation between expected and actual tax charge 2024 2023
£'000
£'000
Profit before tax from continuing operations 7,523 9,451
Profit before tax at standard rate of UK corporation tax of 24.49% (2023: 19%) 1,842 1,796
Utilisation of deferred tax asset at lower effective tax rate (2) 22
Net expenses not deductible for tax purposes 1,827 1,580
Utilisation of previously unrecognised losses (36) (104)
Tax on overseas branch 115 672
Tax calculated at domestic rates applicable to profits in overseas (565) 758
subsidiaries
Other differences leading to a decrease in tax - (365)
Share scheme movements 446 316
Unrecognised deferred tax on losses(2) 67 176
Prior year adjustments(1) (795) 4
Total tax charge for the year 2,899 4,855
(1)Included within the prior year adjustment, a £0.5 million credit arose in
the UK as a result of a foreign tax credit claim. In addition, in the prior
year, as part of the Group's estimate in relation to uncertain tax positions,
the Group had applied a tax rate of 17% in Singapore, but after meeting the
qualifying criteria a rate of 10.5% is applicable which has resulted in a
credit of £0.4 million in the current year.
(2) The Group has £0.2 million of unrecognised deferred tax asset relating to
£0.8 million of losses. The expiry date of operating losses carried forward
is dependent upon the law of the various territories in which losses arise. As
at 29 February 2024 the losses have no expiry. The prior year amount was
incorrectly reported as a decrease of £0.2m but has been updated in the
current year with the offsetting movement included in other differences
leading to a decrease in tax.
Included within the total tax charge is £0.8 million credit (2023: £0.2
million) in respect of specific items disclosed separately on the face of the
Income Statement. See Note 2.2.
The Group's future tax charge will be sensitive to the geographic mix of
profits earned, the tax rates in force and changes to the tax rules in
jurisdictions that the Group operates in. The UK main rate increased to 25%
from 1 April 2023. The impact of UK rate changes on deferred tax were taken
into account in the prior year.
b) Amounts recognised in OCI
2024 2023
£'000
£'000
Items that will not be reclassified to profit or loss
Actuarial gain in respect of defined benefit pension scheme 173 2,775
Deferred tax charge on defined benefit pension scheme - (414)
Sub-total 173 2,361
Items that will be reclassified to profit or loss
Cash flow hedge 1,641 388
Deferred tax charge on cash flow hedge (410) (97)
Sub-total 1,231 291
Total tax recognised in OCI (410) (511)
Total amounts recognised in OCI 1,404 2,652
Within the UK current year origination and reversal of temporary differences
there is no amount (2023: £414,000 debit) in respect of deferred tax on the
actuarial gain on the Group's defined benefit pension scheme.
c) Deferred tax asset
Deferred Tax Asset
Accelerated capital allowances Trading losses Other provisions Employee benefits
Bonuses Total
At 1 March 2022 (48) 248 713 913 1,887 3,713
(Charge)/credit to Income Statement 48 (248) 710 219 - 729
Charge to Other Comprehensive Income - - - (511) - (511)
Credit to equity - - - - 863 863
At 28 February 2023 - - 1,423 621 2,750 4,794
(Charge)/credit to Income Statement 86 215 (502) (116) - (317)
Charge to Other Comprehensive Income - - - (410) - (410)
Charge to equity - - - - (1,047) (1,047)
Exchange translation differences - - (66) 25 - (41)
At 29 February 2024 86 215 855 120 1,703 2,979
The movement in the net deferred tax asset 2024 2023
£'000
£'000
Balance at beginning of year 4,450 3,713
Movement to Income Statement:
Adjustments in respect of prior years 30 390
Arising on pension costs - 99
Arising on bonuses (502) 632
Arising on other 491 170
Total movement to Income Statement 19 1,291
Balance arising on business combinations - (906)
Movement to other comprehensive income:
Related deferred tax asset (410) (511)
Exchange translation differences (41) -
Movement to equity (1,047) 863
Total movement to equity and other comprehensive income (1,498) 352
Balance at end of year 2,971 4,450
A deferred tax asset of £2.9 million (2023: £4.8 million) has been
recognised as the directors believe that it is probable that there will be
sufficient taxable profits in the future to recover the asset in full.
d) Deferred tax liability
Analysis of the deferred tax liabilities As at As at
29 Feb 2024 28 Feb 2023
£'000 £'000
Temporary differences (8) (344)
Balance at end of year (8) (344)
The movement in the deferred tax liability As at As at
29 Feb 2024 28 Feb 2023
£'000 £'000
Balance at beginning of year (344) -
Balance arising on business combinations - (906)
Current year origination and reversal of temporary differences 336 562
Balance at end of year (8) (344)
No deferred tax has been provided in respect of temporary differences
associated with investments in subsidiaries and interests in joint ventures
where the Group is in a position to control the timing of the reversal of the
temporary differences and it is probable that such differences will not
reverse in the foreseeable future. The aggregate amount of temporary
differences associated with investments in subsidiaries, for which a deferred
tax liability has not been recognised, is approximately £nil (2023: £nil).
2.8 Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of ordinary shares
outstanding during the year, excluding ordinary shares held by the Employee
Share Ownership Plan and ordinary shares held by the ACM Employee Benefit
Trust which are not treated as outstanding.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential ordinary
shares. The Group has dilutive ordinary shares, being those options granted to
employees where the expected consideration is less than the average market
price of the Company's ordinary shares during the period that they are
outstanding, and convertible loan notes issued in respect of the acquisition
of Naves.
Total operations 2024 2023
£'000 £'000
Profit for the year attributable to shareholders 4,624 4,596
Pence pence
Basic earnings per share 15.65 15.85
Effect of dilutive share options (2.85) (2.60)
Diluted earnings per share 12.80 13.25
Underlying operations 2024 2023
£'000 £'000
Underlying profit for the year attributable to shareholders 10,820 13,399
pence pence
Basic earnings per share 36.62 46.22
Effect of dilutive share options (6.66) (7.70)
Diluted earnings per share 29.96 38.52
A reconciliation by class of instrument in relation to potential dilutive
ordinary shares and their impact on earnings is set out below:
2024 2023
Weighted average number of shares Underlying earnings Statutory earnings Weighted average number of shares Underlying earnings Statutory earnings
£'000 £'000 £'000 £'000
Used in basic earnings per share 29,547,810 10,820 4,624 28,990,885 13,399 4,596
RSP, DBP and LTIP 6,565,016 - - 5,428,815 - -
Options (SAYE) - - - 216,764 - -
Convertible loan notes - - - 201,118 20 20
Used in diluted earnings per share 36,112,826 10,820 4,624 34,837,582 13,419 4,616
3 Balance sheet non-current assets
3.1 Goodwill
Business combinations are accounted for using the acquisition method. The
goodwill recognised as an asset by the Group is stated at cost less any
accumulated impairment losses.
On the acquisition of a business, fair values are attributed to the net assets
(including any identifiable intangible assets) acquired. The excess of the
consideration transferred, any non-controlling interest recognised and the
fair value of any previous equity interest in the acquired entity over the
fair value of net identifiable assets acquired is recorded as goodwill.
Acquisition-related costs are recognised in the Income Statement as incurred
in accordance with IFRS 3.
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 as a gain on purchase.
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.
Key estimate
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
units. 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.
As part of determining the value in use of each CGU group, Management has
considered the potential impact of climate change on the business performance
over the next five years, and the terminal growth rates. While there is
considerable uncertainty relating to the longer term and quantifying the
impact on a range of outcomes, management considers that environmental-related
incremental costs are expected to have a relatively low impact. Recognising
that there are extreme but unlikely scenarios, the Group considers that while
exposed to physical risks associated with climate change (such as flooding,
heatwaves, sea level rises and increased precipitation) the estimated impact
of these on the Group is not deemed material. In addition, the Group is
exposed to transitional risks which might arise, for example, from government
policy, customer expectations, material costs and increased stakeholder
concern. The transitional risks could result in financial impacts such as
higher environmentally focused levies (e.g. carbon pricing). While the Group
is exposed to the potential financial impacts associated with transitional
risks, based on information currently available, these are not deemed to have
a significant impact.
The key assumptions and the sensitivity of them to the carrying values are
provided in the note below.
£'000
Cost
At 28 February 2022 87,550
Exchange adjustments 566
At 28 February 2023 88,116
Exchange adjustments (300)
At 29 February 2024 87,816
Accumulated impairment
At 28 February 2022 7,659
Impairment charge recognised in the year 9,050
At 28 February 2023 16,709
Exchange adjustments (230)
At 29 February 2024 16,479
Net book value at 29 February 2024 71,337
Net book value at 28 February 2023 71,407
All goodwill is allocated to cash-generating units. The allocation of goodwill
to groups of cash-generating units is as follows:
2024 2023
£'000 £'000
Chartering 68,696 68,696
Corporate Finance (part of Investment Advisory segment) 2,641 2,711
71,337 71,407
These groups of cash-generating units represent the lowest level within the
Group at which goodwill is monitored for internal management purposes.
All goodwill is denominated in the Group's reporting currency, with the
exception of the Corporate Finance Division which is denominated in euros.
Goodwill denominated in foreign currencies is revalued at the Balance Sheet
date. The exchange adjustment at 29 February 2024 was a loss of £0.1 million
(2023: gain of £0.6 million).
The Group is required to test, on an annual basis, whether goodwill has
suffered any impairment. The recoverable amount is determined based on
value-in-use calculations. The use of this method requires the estimation of
future cash flows and the determination of a discount rate in order to
calculate the present value of the cash flows.
The key assumptions on which the value-in-use calculations are based relate to
(i) business performance over the next five years, (ii) long-term growth rates
beyond 2029 and (iii) discount rates applied.
i) Business performance over the next five years -
The estimated cash flows were based on the approved annual budget for the next
financial year and projections for the following four years which are based on
management's estimates of revenue growth and cost inflation which reflect past
experience and management's expectation of future events given the specific
risks and economic and market conditions of each cash-generating unit. The
assumptions behind these projections are consistent with the viability
statement. Cash flows have been used over a period of five years as management
believes this reflects a reasonable time horizon for management to monitor the
trends in the business.
ii) Long-term growth rates - This is the average
growth rate used to extrapolate cash flows beyond the budget period.
iii) Discount rates - The post-tax discount rate was
determined based on a weighted average cost of capital ("WACC") and adjusted
for CGU-specific risk factors specific to the CGU group.
The results of the impairment tests are as follows:
a) Chartering
The key assumptions and resulting net present values are as follows:
Chartering 2024 2023
Post-tax discount rate 11.86% 13.04%
Equivalent pre-tax discount rate 12.40% 16.47%
Average revenue growth rate years 2-5(1) 3.0% 3.5%
Operating profit margin years 1-5 13.8% - 14.4% 15.0 - 15.4%
Long-term growth rate 1.7% 1.7%
(1) No year-on-year revenue growth is assumed in year 1
At 29 February 2024, the net present value of the Chartering segment is
significantly higher than the carrying value of the goodwill in respect of
this cash-generating unit. At the Balance Sheet date, management concluded
that there were no reasonably possible changes in the key assumptions used in
the impairment review that would reduce headroom to £nil or result in an
impairment.
b) Corporate Finance
Revenues for the Corporate Finance Division are challenging to forecast
because of the highly variable nature of success fees. Management forecasts
over the five year forecast period consider recent performance and reflect
management's best estimate of success fee taken into account of volatility of
the success fee. Growth rates used in the value-in-use test reflect this
variability and were based on the best estimate of the Management.
Corporate Finance 2024 2023
Post-tax discount rate 13.84% 14.82%
Equivalent pre-tax discount rate 14.45% 20.66%
Average revenue growth rate years 2-5(1) 5.0% 5.0%
Operating profit margin years 1-5 12.3% - 15.9% 11.6% - 14.4%
Long-term growth rate 1.7% 1.7%
(1) Year-on-year growth in year 1 is 29%, which reflects recovery of revenue
after lower than historically achieved performance in FY24
Sensitivity to impairment for Corporate Finance
To test the sensitivity of the results of the impairment review, the
calculations have been re-performed, flexing the three key assumptions:
- revenue growth rate from year two to five;
- post-tax discount rate; and
- revenue outperforms or underperforms forecast in year 1 with
subsequent revenue growth in line with the above assumptions in years two to
five.
The recoverable amount of the Group's goodwill relating to Corporate Finance
exceeds its carrying value by £0.6 million. The below table presents the net
variance in the calculated value in use of Corporate Finance under each
scenario:
Change in revenue growth Change in post-tax discount rate Year 1 revenue outperforms or underperforms forecast
+1% -1% +2% -2% +15% -15%
£'000 £'000 £'000 £'000 £'000 £'000
Corporate Finance 318 (310) (456) 637 1,438 (1,438)
Further, the break-even points of the impairment review which would result in
an impairment when flexing these three key assumptions are as below:
Change in assumption Increase/(decrease)
Revenue growth rate from year 2 to 5 (1.8%)
Post-tax discount rate 2.5%
Revenue underperforms forecast in year 1 (5.8%)
The effect on cash flows of climate change was considered but assessed to have
no material impact at this time. Management does not believe that
climate-related risks nor the potential impact of climate change on the
Group's operations would materially affect the recoverability of goodwill in
either of the cash-generating units (see Note 3.1).
3.2 Other 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.
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 provision 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, which is between four months to twelve years. The amortisation in
respect of capitalised brand assets is expensed to the Income Statement over
an estimated useful life, which is between three and twelve years.
Computer Other Total
software
intangible
£'000
assets £'000
£'000
Cost
At 28 February 2022 (restated) 2 (#_ftn2) 5,586 1,040 6,626
Additions 90 - 90
Business combination - 3,545 3,545
Disposals (87) - (87)
Exchange rate adjustments 5 33 38
At 28 February 2023 5,594 4,618 10,212
Additions 32 - 32
Disposals - (245) (245)
Exchange rate adjustments (3) (171) (174)
At 29 February 2024 5,623 4,202 9,825
Amortisation
At 28 February 2022 (restated) 1 4,845 784 5,629
Charge for the year 192 349 541
Impairment 60 - 60
Exchange adjustments 1 1 2
At 28 February 2023 5,098 1,134 6,232
Charge for the year 229 449 678
Impairment - - -
Disposal - (245) (245)
Exchange adjustments (1) (24) (25)
At 29 February 2024 5,326 1,314 6,640
Net book value at 29 February 2024 297 2,888 3,185
Net book value at 28 February 2023 496 3,484 3,980
1 The gross cost and gross accumulated amortisation of other intangible assets
at 28 February 2022 included fully amortised acquired order books relating to
historical business combinations. The Group believes that once all orders in
the order book have been satisfied and revenue recognised,, there is no
further asset to benefit from. For order books satisfied at 28 February 2022
the Group has restated the opening gross cost and gross accumulated
amortisation to correct the opening gross positions in relation to other
intangible assets. The impact of the restatement is a reduction of £8.5
million to the gross cost and gross accumulated amortisation at 28 February
2022, with no impact to net book values or amortisation expense in the current
or prior year.
Other intangible assets brought forward from the prior year relate to forward
books of income acquired in acquisitions which are amortised over the period
that the income is recognised; customer relationships which are amortised over
a period of up to twelve years; and brand which is amortised over a period of
up to ten years.
The addition of £3.5 million in the prior year related to the acquisition of
Southport, which gave rise to customer-related intangible assets of £3.1
million (including customer relationships of £2.8 million and order backlog
of £0.3 million) and an asset of £0.4 million in relation to the trade name.
The amortisation period for customer relationships is twelve years, order
backlog is four months, and trade name is five years.
The customer relationships and order backlog were valued using an excess
earnings method. Under the excess earnings method, a stream of revenue and
expenses are identified as those associated with a particular group of assets.
This group of assets includes the subject intangible asset as well as other
assets (contributory assets) that are necessary to support the earnings
associated with the subject intangible asset. By identifying and subtracting
contributory assets, the residual earnings are estimated to be attributable to
the subject intangible asset and are discounted to present value at an
appropriate discount rate (estimated at 19%). The trade name was valued using
a royalty savings method. The royalty savings method is a derivation of the
income approach often used to value intangible property that may be licensed
to third parties. Under this method, it is assumed that a company, without a
similar asset, would license the right to use this intangible asset and pay a
royalty related to turnover achieved. The value of the asset is established by
calculating the present value of the royalty stream (estimated at 4%) that the
business is saving by owning the asset.
At 29 February 2024, the Group had no contractual commitments for the
acquisition of computer software or other intangible assets (2023: £nil).
3.3 Investments
In accordance with IFRS 9, the Group's investments in unlisted equity
investments are measured at fair value through profit or loss as the Group has
not elected to recognise fair value gains and losses through other
comprehensive income.
2024 2023
£'000 £'000
Unlisted investments 1,633 1,780
Movement in unlisted investments £'000 £'000
Opening balance 1,780 1,780
Fair value loss (147) -
Closing balance 1,633 1,780
A list of subsidiary undertakings is included in Note 7.3.
The Financial Statements of the principal subsidiary undertakings are prepared
to 29 February 2024.
The Group's unlisted investments include 1,000 (2023: 1,000) ordinary £1
shares in London Tanker's Broker Panel Limited. The investment is carried at
fair value of £1.6 million, see Note 4.4 for further details.
3.4 Investment in associate
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 purchase is recognised in the Income
Statement and the carrying value of the investment in the Consolidated Balance
Sheet is increased.
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 29 February with
adjustments made for any significant transactions or events.
Investments where the Group has no significant influence are held at fair
value, with movements in fair value recorded in profit and loss.
Zuma Labs Limited
Zuma Labs Limited is a private company incorporated in England and Wales and
its registered address is Kemp House, 128 City Road, London, United Kingdom,
EC1V 2NX. Zuma Labs Limited has one share class and each share carries one
vote.
At 29 February 2024, the Group's shareholding was 2,500 shares, which equates
to 20.0% of Zuma Labs Limited's share capital and 20.0% of voting rights
(2023: 2,500 shares, 20% of share capital and 20% of voting rights). The Group
has representation on the board of Zuma Labs Limited, and, as a result, the
Group considers that it has the power to exercise significant influence in
Zuma Labs Limited and the investment in it has been accounted for using the
equity method.
A purchase price allocation exercise was undertaken to measure the fair value
of the net assets on the date at which Zuma Labs Limited became an associate,
and also at each date at which further shares were subscribed for. Based on
the purchase price allocation exercise, the difference between the cost of the
investment and the Group's share of the net fair value of Zuma Labs Limited's
identifiable assets and liabilities is accounted for as goodwill. Amortisation
of that goodwill is not permitted.
IAS 28 requires the most recent financial statements of an associate are used
for accounting purposes, and that coterminous information should be used
unless it is impractical to do so. Zuma Labs Limited has a year-end of 31
March and accounts up to 31 December 2023 have been made available, so for
practical reasons Zuma Labs Limited's management accounts for the nine months
ended 31 December 2023 will be used for the purposes of the Group's full-year
reporting at 29 February with adjustments made for any significant
transactions and events. Zuma Labs Limited will prepare its next set of
Financial Statements for the year ended 31 March 2024. At 29 February 2024
Zuma Labs Limited had no contingent liabilities.
Management has reviewed the carrying value of the investment in Zuma Labs
Limited at 29 February 2024 and does not consider this to be impaired.
The movements in the investment in associates are provided below.
Zuma
£'000
At 28 February 2022 724
Share of loss in associate (23)
At 28 February 2023 701
Share of profit in associate 12
At 29 February 2024 713
3.5 Property, plant and equipment
Property, plant and equipment are shown at historical cost less accumulated
depreciation and any provision for impairment.
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):
Computer equipment - four years
Fixtures and equipment - four years
Land and buildings Computers Fixtures and Total
£'000
£'000
equipment
£'000
£'000
Cost
At 28 February 2022 14,407 1,599 1,878 17,884
Additions at cost 757 374 334 1,465
Business combination 86 - 80 166
Disposals (2,445) (4) (369) (2,818)
Exchange differences 427 41 88 556
At 28 February 2023 13,232 2,010 2,011 17,253
Additions at cost 3,052 240 281 3,573
Disposals (3) (101) (45) (149)
Exchange differences (279) (28) (55) (362)
At 29 February 2024 16,002 2,121 2,192 20,315
Accumulated depreciation
At 28 February 2022 8,199 1,061 1,546 10,806
Charge for the year 2,477 171 175 2,823
Disposals (1,852) (1) (313) (2,166)
Impairment - 150 - 150
Exchange differences 234 25 61 320
At 28 February 2023 9,058 1,406 1,469 11,933
Charge for the year 2,662 246 219 3,127
Reclassification (6) - 6 -
Disposals (3) (91) (45) (139)
Exchange differences (126) (21) (41) (188)
At 29 February 2024 11,585 1,540 1,608 14,733
Net book value at 29 February 2024 4,417 581 584 5,582
Net book value at 28 February 2023 4,174 604 542 5,320
At 29 February 2024, the Group had no contractual commitments for the
acquisition of property, plant and equipment (2023: £nil).
3.6 Leases
The Group as a lessee
The Group has various lease arrangements for properties, and other
equipment. At inception of a lease contract, the Group 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 Group
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 twelve months or less, costs for which are
recognised as an operating expense within the Income Statement on a
straight-line basis.
A right-of-use asset is capitalised on the Balance Sheet at cost, comprising
the amount of the initial measurement of the lease liability and 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.
The lease liability is initially measured at the present value of future lease
payments. Interest expense is charged to the Consolidated Income Statement
over the lease period so as to produce a constant periodic rate of interest on
the remaining balance of the liability. The lease payments are discounted
using the interest rate implicit in the lease. If that rate cannot be
determined, the lessee's incremental borrowing rate is used, being the rate
that the lessee would have to pay to borrow the funds necessary to obtain an
asset of similar value in a similar economic environment with similar terms
and conditions. Generally, the interest rate implicit in the lease is not
readily determinable, as such the incremental borrowing rate is used to
discount future lease payments.
For the Group, lease payments generally comprise the following:
− Fixed payments, less any lease incentives receivable;
− Variable payments that are based on an index or rate; and
− Payments to be made under extension options which are reasonably certain
to be exercised.
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. When an adjustment to lease payments based on an index takes
effect, the liability is remeasured with a corresponding adjustment to the
right-of-use asset.
Contracts entered into by the Group have a wide range of terms and conditions
but generally do not impose any additional covenants. Several of the Group's
contracts include indexation adjustments to lease payments in future periods
which are not reflected in the measurement of the lease liabilities at 29
February 2024. Many of the contracts entered into by the Group include
extension or termination options which provide the Group with additional
operational flexibility. If the Group considers it reasonably certain that an
extension option will be exercised or a termination option not exercised, the
additional period is included in the lease term.
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.
The Group as a lessor
The Group classifies leases as either operating or finance leases based on the
substance of the arrangement. At commencement of a finance lease, a receivable
is recognised at an amount equal to the Group's net investment in the lease.
Finance income is recognised reflecting a constant periodic rate of return on
the net investment in the lease. Lease payments from operating leases are
recognised as income on a straight-line basis.
Right-of-use assets
The Group leases a number of properties in the jurisdictions from which it
operates. In some jurisdictions it is customary for lease contracts to provide
for payments to increase each year by inflation and in other property leases
the periodic rent is fixed over the lease term. The Group also leases certain
items of plant and equipment which are typically motor vehicles. These
contracts normally comprise only fixed payments over the lease term.
Land and buildings Fixtures and Total
£'000
equipment
£'000
£'000
At 28 February 2022 5,182 12 5,194
Additions 711 59 770
Business combination 86 - 86
Depreciation (2,079) (8) (2,087)
Disposals (481) (10) (491)
Exchange differences 166 1 167
At 28 February 2023 3,585 54 3,639
Additions 2,898 172 3,070
Reclassification 6 (6) -
Depreciation (2,249) (71) (2,320)
Exchange differences (145) (1) (146)
At 29 February 2024 4,095 148 4,243
Lease liabilities
Total
£'000
At 28 February 2022 8,506
Additions 770
Business combination 86
Disposal (632)
Interest expense 175
Lease payments (4,039)
Exchange differences 161
At 28 February 2023 5,027
Additions 3,021
Interest expense 189
Lease payments (3,332)
Exchange differences (127)
At 29 February 2024 4,778
In the prior year, right-of-use assets and lease liabilities arising on
business combinations represents leases on property of £86,000. The total
cash outflow for leases is £3,332,000 (2023: £4,039,000), of which £189,000
(2023: £175,000) represents payment of interest.
Lease receivables
Gross Provision Net
£'000
£'000
£'000
At 28 February 2022 1,512 (18) 1,494
Disposal (39) - (39)
Interest income 35 - 35
Lease payments (642) - (642)
Movement in provision - 6 6
At 28 February 2023 866 (12) 854
Interest income 16 - 16
Lease payments (642) - (642)
Movement in provision - 12 12
At 29 February 2024 240 - 240
2024 2023
£'000 £'000
Short-term lease expense (222) (217)
Short-term lease income 102 91
Lease liabilities
Contractual payments by maturity are provided in Note 4.4 (f).
Lease receivables
Contractual receipts by maturity are provided in the table below:
Within 1 to 2 2 to 5 More than Total Unearned Provision Net
1 year
Years
5 years
£'000
interest
£'000
receivable
£'000
£'000 years
£'000
£'000
£'000
£'000
At 29 February 2024 241 - - - 241 (1) - 240
At 28 February 2023 642 241 - - 883 (17) (12) 854
During the year, the financial effect of revising lease terms arising from the
effect of exercising extension and termination options was an increase of
£375,000 million (2023: increase of £98,000) in the recognised lease
liabilities. As at 29 February 2024, undiscounted potential future cash
outflows of £2.9 million (2023: £3.9 million) have not been included in the
lease liability because it is not reasonably certain that the leases will be
extended (or not terminated).
4 Balance sheet - Operating assets and liabilities
4.1 Other long-term receivables
For the accounting policy and further details on deferred and contingent
consideration receivable, see Note 4.9. The accounting policy for finance
lease receivables is set out in Note 3.6.
2024 2023
£'000 £'000
Deferred consideration 1,304 2,540
Contingent consideration 532 1,004
Security deposits 304 16
Finance lease receivables - 228
Prepayments 2,449 4,766
4,589 8,554
Deferred consideration of £1.3 million and contingent consideration of £0.5
million relates to the earnout payments receivable in respect of the disposal
of Cory Brothers, further detail is provided in Note 4.9. Prepayments
includes an asset of £2.4 million (2023: £4.8 million) which is the
non-current element of the clawback provision on joining incentives paid to
certain employees. The receivable is amortised over the clawback period.
See Note 3.6 for a maturity analysis which reconciles the long-term finance
lease receivables to the undiscounted lease receipts and unearned finance
income.
4.2 Trade and other receivables
Trade receivables and contract assets
Trade receivables and contract assets are initially recognised at fair value
(less transaction costs) and subsequently measured at amortised cost.
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 contract assets.
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 contract assets 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 are 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.
Other items
For the accounting policy and further details on deferred and contingent
consideration receivable, see Note 4.9. The accounting policy for finance
lease receivables is set out in Note 3.6.
Key estimate
Provision for impairment of trade receivables and contract assets
Trade receivables and contract assets are amounts due from customers in the
ordinary course of business. Trade receivables and contract assets 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 contract assets
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.
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. The expected loss rates applied to receivables are provided in
this note.
2024 2023
£'000 £'000
Trade receivables 26,964 31,989
Provision for impairment of trade receivables (2,837) (3,725)
Net trade receivables 24,127 28,264
Deferred consideration 1,316 1,097
Contingent consideration 550 403
Other receivables 3,949 4,148
Finance lease receivables 240 626
Contract assets 1,517 3,388
Prepayments 6,031 5,397
Total 37,730 43,323
Deferred consideration of £1.3 million and contingent consideration of £0.6
million relate to the earnout payments receivable in respect of the disposal
of Cory Brothers; further detail is provided in Note 4.9.
Included in other receivables in both years are VAT and other sales tax
receivables and employee loans. In the prior year, security deposits are also
included.
Prepayments includes an asset of £3.5 million (2023: £4.0 million) in
respect of the current portion of the clawback provision on joining incentives
paid to certain employees which are being charged to the Income Statement in
accordance with the clawback provisions of the underlying contracts. The
receivable is amortised over the clawback period.
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.
The total receivables balance is denominated in the following currencies:
2024 2023
£'000 £'000
US dollars 28,690 35,888
Sterling 6,675 6,114
Other 2,365 1,321
Total 37,730 43,323
The directors consider that the carrying amounts of trade receivables
approximate to their fair value.
Trade receivables are non-interest bearing and are generally on terms payable
within 30-90 days; terms associated with the settlement of the Group's trade
receivables vary across the Group. Specific debts are provided for where
recovery is deemed uncertain, which will be assessed on a case-by-case basis
whenever debts are older than the due date, but always when debts are older
than usual for the industry in which each business in the Group operates.
As at 29 February 2024, trade receivables of £2,339,000 (2023: £3,003,000)
which were over 12 months old were treated as credit impaired and have been
provided for. No provision (2023: £nil) has been made for specific trade
receivables which are less than 12 months overdue.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss provision for trade receivables
and contract assets. To measure expected credit losses on a collective basis,
trade receivables and contract assets are grouped based on similar credit risk
and ageing. The contract assets have similar risk characteristics to the trade
receivables for similar types of contracts.
The expected loss rates are based on the Group's historical credit losses and
rates are then adjusted for current and forward-looking information on
macroeconomic factors affecting the Group's customers. Trade receivables and
contract assets are written off where there is no reasonable expectation of
recovery. Indicators that there is no reasonable expectation of recovery
include, amongst others, the failure of a debtor to engage in a repayment plan
with the group, and a failure to make contractual payments for a period of
greater than 365 days past due.
The ageing profile of trade receivables and the lifetime expected credit loss
for provisions and contract assets is as follows:
2024 Trade Expected loss rate Group Total provision for impairment
receivables
% provision ECL of trade receivables
£'000
£'000 provision £'000
£'000
Up to 3 months 18,685 0.015 - 282 282
3 to 6 months 3,922 0.024 - 96 96
6 to 12 months 1,905 0.052 - 98 98
Over 12 months 2,452 0.954 2,286 53 2,339
Trade receivables 26,964 0.104 2,286 529 2,815
Contract assets 1,517 0.014 - 22 22
Total 28,481 0.100 2,286 551 2,837
2023 Trade Expected loss rate Group Total provision for impairment
receivables
% provision ECL of trade receivables
£'000
£'000 provision £'000
£'000
Up to 3 months 23,556 0.015 - 333 333
3 to 6 months 3,185 0.020 - 71 71
6 to 12 months 2,078 0.051 - 149 149
Over 12 months 3,170 0.591 3,033 99 3,132
Trade receivables 31,989 0.096 3,033 652 3,685
Contract assets 3,388 0.012 - 40 40
Total 35,377 0.020 3,033 692 3,725
Movements on the provision for impairment of trade receivables and contract
assets were as follows:
2024 2023
£'000 £'000
At 1 March 3,725 3,159
Bad debt charge 697 238
Receivables written off during the year as uncollectible (1,585) -
Reclassification of other provisions - 328
At 29/28 February 2,837 3,725
Amounts receivable written off in the year relate to previously fully provided
for amounts.
Contract assets
The Group's contract assets related to accrued income which has not yet been
invoiced at the Balance Sheet date. Significant changes in contract assets
during the period are analysed as follows:
£'000
At 1 March 2023 3,388
Contract assets converted to receivables on completion (3,292)
Contract assets arising on new contracts in-year 1,421
At 29 February 2024 1,517
4.3 Trade and other payables
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. The accounting policy for lease liabilities is set out in Note 3.6.
Current liabilities 2024 2023
£'000 £'000
Trade payables 2,214 1,809
Lease liabilities 1,925 2,923
Other taxation and social security 560 1,869
Other payables 1,974 767
Contract liabilities 334 329
Accruals 36,604 49,613
Total 43,611 57,310
Accruals primarily includes accrued bonuses and other general accruals.
The directors consider that the carrying amounts of trade payables approximate
to their fair value.
4.4 Financial instruments and risk management
The Group is exposed through its operations to the following financial risks:
- Currency risk;
- Interest rate risk;
- Credit risk; and
- Liquidity risk.
In common with all other businesses, the Group is exposed to risks that arise
from its use of financial instruments. This note describes the Group's
objectives, policies and processes for managing those risks and the methods
used to measure them. Further quantitative information in respect of these
risks is presented throughout the Financial Statements.
There have been no substantive changes in the Group's exposure to financial
instrument risks, its objectives, policies, and other processes for managing
those risks or the methods used to measure them from previous periods.
a) Financial instruments
i) Principal financial instruments
The principal financial instruments used by the Group, from which financial
risks arise, are as follows:
- Trade and other receivables;
- Cash and cash equivalents;
- Deferred consideration receivable;
- Contingent consideration receivable;
- Unlisted investments;
- Trade and other payables;
- Revolving credit facility;
- Lease liabilities; and
- Derivative financial instruments.
ii) Financial instruments by category
Financial instruments measured at fair value
The Group's financial assets and liabilities measured at fair value through
profit and loss, including their fair value hierarchy, are as follows. Fair
value is the amount at which a financial instrument could be exchanged in an
arm's length transaction, other than in a forced or liquidated sale.
Level 1 Level 2 Level 3 As at
£'000 £'000 £'000 29 Feb 2024
£'000
Financial assets:
Unlisted investment - - 1,633 1,633
Contingent consideration receivable - - 1,082 1,082
Derivative contracts(1) - 1,536 - 1,536
Total - 1,536 2,715 4,251
Financial liabilities:
Derivative contracts(1) - 218 - 218
Embedded derivative - - 140 140
Total - 218 140 358
Level 1 Level 2 Level 3 As at
£'000 £'000 £'000 28 Feb 2023
£'000
Financial assets:
Unlisted investment - 1,780 - 1,780
Contingent consideration receivable - - 1,407 1,407
Derivative contracts(1) - 1,254 - 1,254
Total - 3,034 1,407 4,441
Financial liabilities:
Derivative contracts(1) - 1,760 - 1,760
Embedded derivative - - 384 384
Total - 1,760 384 2,144
(1)Currency forwards with a fair value of £1.3 million (2023: £1.2 million)
maturing within twelve months have been shown as current assets. Currency
forwards with a fair value of £0.2 million (2023: £0.0 million) maturing
within 12 to 24 months of the Balance Sheet date have been shown as
non-current assets. Liabilities include currency forwards with a fair value of
£0.2 million (2023: £1.1 million) maturing within twelve months shown as
current liabilities and currency forwards with a fair value of £0.0 million
(2023: £0.7 million) maturing within 12 to 24 months of the Balance Sheet
date shown as non-current liabilities.
Fair value hierarchy
The level in the fair value hierarchy within which the financial asset or
liability is categorised is determined on the basis of the lowest level input
that is significant to the fair value measurement.
Financial assets and liabilities are classified in their entirety into one of
three levels:
- Level 1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities.
- Level 2: Inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either directly or
indirectly.
- Level 3: Inputs for the asset or liability that are not
based on observable market data.
Valuation processes
The Group's finance team and Group Chief Financial Officer are responsible for
fair value measurement of financial instruments and makes the decision as to
the valuation technique to be applied, along with the level of external
support required. The Group uses external specialists to value some of the
financial instruments included within Level 3 of the fair value hierarchy. The
results of those valuations are reviewed at each reporting date within the
finance team.
The following table provides a reconciliation of movements in Level 3
financial assets during the year:
Contingent consideration receivable Unlisted investments
£'000 £'000
Opening fair value 1,407 -
Transfer into level 3 - 1,780
Unrealised fair value gain/(loss) recognised in operating costs 83 (147)
Cash settlement (408) -
Total 1,082 1,633
Unlisted investments
The unlisted investment primarily relates to the Group's investment in the
London Tanker's Broker Panel, see Note 3.3. In the prior year the investment
was carried at fair value, based on the value of the most recent comparable
transaction and was therefore classified as Level 2 in the fair value
hierarchy. Due to the time which has passed since the most recent comparable
market transaction, the Group has valued the investment in the current year
based on an income approach which has resulted in the fair value being deemed
to be in Level 3 of the fair value hierarchy. The Group's policy is that the
beginning of the financial year is considered the date of transfer between
levels in the fair value hierarchy. The significant unobservable inputs into
the valuation are:
- a discount rate of 16.4%; and
- expected income from the investment.
An increase in the discount rate of 2% would result in an increased fair value
loss of £0.1 million recognised in the Income Statement, while a decrease in
the discount rate of 2% would result in a gain of £0.2 million recognised in
the Income Statement. A 10% increase/decrease in expected income would result
in a £0.1 million gain/loss.
Contingent consideration receivable
The fair value of the contingent consideration receivable includes
unobservable inputs and are therefore classified as Level 3. The contingent
consideration receivable relates to the disposal of the Logistics Division
whereby the Group is entitled to three future cash payments. The SPA provides
for a minimum guaranteed amount in each of the three years; this amount has
been classified as deferred consideration. The balance of the earnout
consideration is contingent on the future performance of the combined business
up to a maximum specified in the SPA; this has been classified as contingent
consideration. The fair value of the contingent consideration has been
calculated by reference to management's expectation of the future
profitability of the combined business and discounted to present value using a
discount rate of 5.29%. The discount rate is based on the credit risk of
Vertom Agencies BV assessed by a third-party credit agency. See Note 4.9 for
further details and a sensitivity analysis on the contingent element.
Derivative contracts
Contracts with derivative counterparties are based on ISDA Master Agreements.
Under the terms of these arrangements, only in certain situations will the net
amounts owing/receivable to a single counterparty be considered outstanding.
The Group does not have the present legal ability to set-off these amounts and
so they are not offset in the Balance Sheet. Of the derivative assets and
derivative liabilities recognised in the Balance Sheet, an amount of £0.2
million (2023: £0.1 million) would be set off under enforceable master
netting agreements.
Forward currency contracts
The fair value of the forward currency contracts are based on prices quoted by
the counterparty within these contracts versus the market rate at the Balance
Sheet date and have therefore been classified as Level 2 in the fair value
hierarchy. See the currency risk section for further details.
Currency options
The fair value of the currency options are based on prices quoted by the
counterparty within these contracts versus the market rate at the Balance
Sheet date and have therefore been classified as Level 2 in the fair value
hierarchy.
Embedded derivative
The convertible loan note instruments issued on the acquisition of Naves
contain an embedded derivative, being a euro liability of principal and
interest. The equity value of the underlying derivative is not considered
closely related to the debt host, therefore the loan note is considered to be
a financial liability host with an embedded derivative convertible feature
which is required to be separated from the host. The fair value of the
embedded derivative includes unobservable inputs and is therefore classified
as Level 3. The key assumptions underpinning the fair value of the embedded
derivative relate to the expected future share price of the Group and the
GBP:EUR exchange rate. The fair value has been determined using a
Black-Scholes valuation model.
A gain of £244,000 (2023: loss of £18,000) has been recognised in the Income
Statement in respect of the fair value movement of the embedded derivative
from 1 March 2023 to 29 February 2024.
Financial instruments not measured at fair value
The Group's financial assets and liabilities that are not measured at fair
value are measured at amortised cost. Due to their short-term nature or
frequent repricing, the carrying value of these financial instruments
approximates their fair value. Their carrying values are as follows:
Financial assets 2024 2023
£'000 £'000
Cash and cash equivalents 27,951 34,735
Deferred consideration receivable 2,620 3,637
Trade and other receivables 30,159 41,448
Total 60,730 79,820
Financial liabilities 2024 2023
£'000 £'000
Trade and other payables 4,851 6,446
Convertible loan notes 2,978 3,551
Long term borrowings 26,966 27,815
Total 34,795 37,812
Deferred consideration receivable
The initial fair value of the deferred consideration receivable was determined
by discounting the guaranteed minimum amounts as per the SPA to present value
using a discount rate of 2.39% and it is subsequently measured at amortised
cost.
b) Currency risk
Currency risk arises when Group entities enter into transactions denominated
in a currency other than their functional currency. The Group's policy is,
where possible, to allow Group entities to settle liabilities denominated in
their functional currency with the cash generated from operations in that
currency. The Group's currency risk exposure arises mainly as a result of the
majority of its earnings being denominated in US dollars while the majority of
its costs are denominated in sterling. There is also some currency exposure
related to convertible loan notes and deferred consideration denominated in
euros and from the carrying values of its overseas subsidiaries being
denominated in foreign currencies.
The Group manages its transactional exposures to foreign currency risks using
forward exchange contracts and currency options. The Group is primarily
exposed to fluctuations in US dollar to sterling exchange rates on foreign
currency sales and hedges a proportion of those expected cash flows out to 17
months. The principal source of hedge ineffectiveness is the risk of changes
in timing of the forecast transaction or that they do not occur, which is
addressed by only hedging a proportion of future foreign currency sales. There
were no hedged transactions forecast in the current year which did not occur
(2023: £nil).
The Group's results, which are reported in sterling, are exposed to changes in
foreign currency exchange rates across a number of different currencies with
the most significant exposures relating to the US dollar. The Group is exposed
to the underlying translational movements which remain outside the control of
the Group. The Group's translational exposures to foreign currency risks
relate to both the translation of income and expenses and net assets of
overseas subsidiaries which are converted into sterling on consolidation. The
Group finances overseas investments partly through the use of foreign currency
borrowings in order to provide a net investment hedge over the foreign
currency risk that arises on translation of its foreign currency
subsidiaries.
The Group continues to apply hedge accounting to hedging instruments that meet
the criteria set out in IFRS 9.
c) Hedge accounting
Derivatives are initially recognised at fair value and are subsequently
remeasured at their fair value at each Balance Sheet date with gains and
losses recognised immediately in the Income Statement unless hedge accounting
is applied. 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 within finance costs or income.
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 fair value of derivative contracts is based either directly or indirectly
on market prices at the Balance Sheet date.
Financial assets and liabilities are classified in accordance with the fair
value hierarchy specified by IFRS 13. See Note 4.4.
Cash flow hedge accounting
Cash flow hedges are used to hedge the variability in cash flows of highly
probable forecast transactions caused by changes in foreign currency exchange
rates and interest rates. Where a derivative financial instrument is
designated in a cash flow hedge relationship with a highly probable forecast
transaction, the effective part of any change in fair value arising is
deferred in the cash flow hedging reserve within equity, via the Statement of
Comprehensive Income. The Group designates a portion, being the first US
dollar amounts in a particular period, of forecast revenue transactions in
cash flow hedges and reports any gain or loss as part of revenue when the
revenue is recognised. The gain or loss relating to the ineffective part is
recognised in the Income Statement within net finance expense. Amounts
deferred in the cash flow hedging reserve are reclassified to the Income
Statement in the periods when the hedged item is recognised in the Income
Statement.
If a hedging instrument expires or is sold 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. If the hedged transaction is no longer expected to take
place, the cumulative unrealised gain or loss recognised in equity is
recognised immediately in the Income Statement.
The critical terms of the hedging instruments match the hedged transactions in
relation to currency, timing and amounts, meaning there is a clear economic
relationship between the hedging instrument and hedged item as required under
IFRS 9. Thereby, management qualitatively demonstrates that the hedging
instrument and the hedged items will move equally in the opposite direction.
A gain of £2,231,000 (2023: £4,826,000 loss) in relation to effective hedges
has been recognised in the Income Statement in respect of derivative contracts
which have matured in the period. No ineffectiveness in relation to hedge
accounting has been recognised in the period.
In the prior year the Group entered into currency options featuring a "cap and
floor" feature. The intrinsic value of the options is designated in cashflow
hedge relationships. The time value of the options is deferred in equity as a
cost of hedging and reclassified to the Income Statement in the period that
the hedged cash flow affects the Income Statement.
In a prior year the Group also entered into a currency option which was not
designated in a cash flow hedge relationship and expired during the year
(2023: £0.2 million liability). The £0.2 million movement in fair value in
the period was charged to the Income Statement (2023: £0.2 million) and is
included within Finance costs.
The effects of the foreign currency-related hedging instruments on the Group's
financial position and performance are as follows:
Currency options 2024 2023
Carrying amount of (liability)/asset N/A £(28,000)
Total notional amount N/A US $1,500,000
Maturity dates N/A March 2023 to April 2023
Hedge ratio N/A 1:1
Change in fair value of outstanding hedging instruments since inception of the N/A £(23,000)
hedge
Change in value of hedged item used to determine hedge ineffectiveness N/A £23,000
Weighted average strike rate for outstanding hedging instruments N/A 1.23 to 1.29
Forward currency contracts 2024 2023
Carrying amount of asset £1,535,990 £1,254,000
Carrying amount of liability £(217,622) £(1,547,000)
Total notional amount US $118,950,000 US $123,048,000
Maturity dates March 2024 to July 2025 March 2023 to November 2024
Hedge ratio 1:1 1:1
Change in fair value of outstanding hedging instruments since inception of the £1,318,368 £(218,000)
hedge
Change in value of hedged item used to determine hedge ineffectiveness £(1,318,368) £218,000
Weighted average strike rate for outstanding hedging instruments 1.25 1.22
Net investment hedge accounting
The Group uses its US dollar denominated borrowings as a hedge against the
translation exposure on the Group's net investment in overseas companies. The
Group designates the spot rate of the loans as the hedging instrument. There
was no ineffectiveness to be recognised on hedges of net investments in
foreign operations. Where the hedge is fully effective at hedging the
variability in the net assets of such companies caused by changes in exchange
rates, the changes in value of the borrowings are recognised in the
translation reserve within equity, via the Statement of Comprehensive Income.
The ineffective part of any change in value caused by changes in exchange
rates is recognised in the Income Statement within finance income or costs.
The effective portion will be recycled into the Income Statement on the sale
of the foreign operation.
The table below provides further information on the Group's net investment
hedging relationships:
2024 2023
£'000 £'000
Hedge ratio 1:1 1:1
Change in value of hedging instruments due to foreign currency movements since (249) 124
1 March
Change in value of the hedged item used to determine hedge effectiveness 249 (124)
The balances and movements into and out of the foreign currency translation
reserve are shown in the Consolidated Statement of Comprehensive Income and
the Consolidated Statement of Changes in Equity respectively. The amount in
the foreign currency translation reserve in relation to hedge accounting is a
gain of £0.1 million (2023: £0.1 million loss) and is split as follows:
- continuing net investment hedges gain of £0.1 million (2023:
£0.1 million loss); and
- hedging relationships for which hedge accounting is no longer
applied, £nil (2023: £nil).
The effect on equity and profit before tax if the US dollar or the euro
strengthened/(weakened) by 10% against sterling, with all other variables
being equal, is as follows:
Profit or loss Equity, net of tax
+10% strengthening £'000 -10% +10% strengthening £'000 -10%
weakening weakening
£'000 £'000
29 February 2024
US dollars 1,621 (1,621) (9,474) 7,100
Euros 40 (40) 40 (40)
Total 1,661 (1,661) (9,434) 7,060
28 February 2023
US dollars 874 (1,220) (4,529) 3,656
Euros (36) 36 (36) 36
Total 838 (1,184) (4,565) 3,692
d) Interest rate risk
The Group is exposed to interest rate risk from borrowings at floating rates.
The Group minimises its short-term exposure to interest rate risk on its cash
and cash equivalents by pooling cash balances across the Group's entities.
The Group has not entered into any financial instruments to fix or hedge the
interest rates applied to its bank borrowings and overdrafts.
The following table sets out the carrying amount, by maturity, of the Group's
financial instruments which are exposed to interest rate risk:
Note 2024 2023
£'000 £'000
Floating rate:
Within one year
Cash and cash equivalents 4.5 27,941 34,735
Long-term borrowings 4.6 (27,237) (27,815)
704 6,920
Cash balances are generally held on overnight deposits at floating rates
depending on cash requirements and the prevailing market rates for the amount
of funds deposited. The other financial instruments of the Group are
non-interest bearing.
The effect on equity and profit before tax of a 1% increase/(decrease) in the
interest rate, all other variables being equal, is as follows:
Profit or loss Equity, net of tax
+1% increase £'000 -1% decrease £'000 +1% increase £'000 -1% decrease £'000
29 February 2024
Cash and cash equivalents 308 (308) 308 (308)
Long-term borrowings (266) 266 (266) 266
Total 42 (42) 42 (42)
28 February 2023
Cash and cash equivalents 187 (187) 187 (187)
Long-term borrowings (195) 195 (195) 195
Total (8) 8 (8) 8
e) Credit risk
The maximum exposure to credit risk at the end of the reporting period is the
carrying amount of each class of financial assets. Concentrations of credit
risk with respect to trade receivables are limited due to the diversity of the
Group's customer base. The directors believe there is no further credit risk
provision required in excess of normal provisions for doubtful receivables,
estimated by Management based on prior experience and their assessment of the
current economic environment. The Group seeks to trade only with creditworthy
parties and carries out credit checks where appropriate. The maximum exposure
is the carrying amount as disclosed in Note 4.4.
f) Liquidity risk
Liquidity risk arises from the Group's management of working capital and the
finance charges and principal repayments on its debt instruments. It is the
risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due.
The Group's policy is to ensure that it will always have sufficient cash to
allow it to meet its liabilities when they become due. Management receives
rolling 13-week cash flow projections on a weekly basis to ensure the Group
has sufficient liquidity.
The board receives rolling twelve month cash flow projections on a monthly
basis as well as information regarding cash balances. At the end of the
financial year, these projections indicated that the Group expected to have
sufficient liquid resources to meet its obligations under all reasonably
expected circumstances.
The following table sets out the undiscounted contractual amounts due, in
relation to the Group's financial liabilities which exposes the Group to
liquidity risk:
At 29 February 2024 Up to Between Between Between Over Total Total
3 months
3 and
1 and
2 and
5 years
contractual
carrying
12 months
2 years
5 years
amount
amount
£'000
£'000
£'000 £'000 £'000 £'000 £'000
Trade and other payables 4,245 606 - - - 4,851 4,851
Loans and borrowings 487 1,460 28,586 - - 30,533 26,966
Lease liabilities 846 1,253 1,013 2,062 44 5,218 4,778
Convertible loan notes 46 47 3,190 - - 3,283 2,978
Total 5,624 3,366 32,789 2,062 44 43,885 39,573
Forward currency contracts 218
Gross outflows 1,779 7,946 1,818 - - 11,543
Gross inflows (1,769) (7,784) (1,775) - - (11,328)
Currency options -
Gross outflows - - - - - -
Gross inflows - - - - - -
Net outflow from derivative contracts 10 162 43 - - 215
At 28 February 2023 Up to Between Between Between Over Total Total
3 months
3 and
1 and
2 and
5 years
contractual
carrying
12 months
2 years
5 years
amount
amount
£'000
£'000
£'000 £'000 £'000 £'000 £'000
Trade and other payables 4,971 1,388 87 - - 6,446 6,446
Loans and borrowings 422 1,266 1,688 29,242 - 32,618 27,815
Lease liabilities 757 2,271 1,375 799 23 5,225 5,027
Convertible loan notes 66 764 109 3,726 - 4,665 3,551
Total 6,216 5,689 3,259 33,767 23 48,954 42,839
Forward currency contracts 1,547
Gross outflows 14,749 48,925 29,414 - - 93,088
Gross inflows (14,553) (48,866) (28,521) - - (91,940)
Currency options 213
Gross outflows 3,107 5,593 1,864 - - 10,564
Gross inflows (3,084) (5,593) (1,864) - - (10,541)
Net outflow from derivative contracts 219 59 893 - - 1,171
Loans and borrowings have been represented to show the expected interest
payments payable on the revolving credit facility in addition to the repayment
of the loan.
g) Capital management
The Group manages its capital structure so as to maintain investor and market
confidence and to provide returns to shareholders that will support the future
development of the business. The Group makes adjustments to the capital
structure if required in response to changes in economic conditions. The Group
considers its capital as consisting of ordinary shares and retained earnings.
To maintain or adjust the capital structure, the Group may adjust the dividend
payment to shareholders, return capital to shareholders or issue new shares.
The Group has a policy of maintaining positive cash balances and also has a
revolving credit facility which it draws down as required to provide cover
against the cyclical nature of the shipping industry.
The board monitors underlying business performance to determine the ongoing
use of capital, namely executive and staff incentive schemes (and whether to
fund this through cash or share incentives); acquisition appraisals ahead of
potential business combinations; investment in property, plant and equipment;
and the level of dividends.
No changes were made in the objectives, policies or processes during the years
ended 29 February 2024 and 28 February 2023.
4.5 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.
2024 2023
£'000 £'000
Cash at bank and cash in hand 27,951 34,735
Total 27,951 34,735
Cash and cash equivalents largely comprise bank balances denominated in
sterling, US dollars, euros and other currencies for the purpose of settling
current liabilities.
Cash includes an amount of £4.6 million (2023: £4.0 million) held in the
bank accounts of regulated entities where there is a requirement to hold a
certain amount of cash at any one time in order to cover future obligations.
No charge or other restriction of use is held over this cash.
The Directors consider that the carrying amounts of these assets approximate
to their fair value.
4.6 Long-term borrowings
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.
Modification of terms of financial liabilities
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.
2024 2023
£'000 £'000
Long-term borrowings
Secured revolving credit facilities 26,966 27,815
Lease liabilities 2,853 2,104
Total 29,819 29,919
The Group's revolving credit facility ("RCF") is for £30.0 million plus an
accordion limit of £10.0 million and has an initial termination date of
November 2025 with an option, subject to lender approval, to extend the term
of the facility by 24 months. Drawdown of the accordion facility is subject to
additional credit approval. The RCF agreement has an EBITDA leverage
covenant of 2.5x and a minimum interest cover of 4x. At 31 May 2023, 31
August 2023, 31 November 2023 and 29 February 2024 the Group met all
financial covenant tests. Amounts can be rolled on a monthly basis until the
facility expires subject to certain conditions, and on that basis the
borrowings have been classified as non-current. The amounts drawn under the
RCF bear interest based on SONIA, SOFR and EURIBOR from amounts drawn in
sterling, US dollars and euros respectively, plus a credit margin dependent on
the Group's leverage ratio.
All revolving credit facilities are drawn by Braemar Plc and appear in the
accounts of the Company. See Note 4.5 for details of the Group's cash
pooling arrangements and the net overdraft available to the Group.
The directors consider that the fair value of the revolving credit facility
liability is equivalent to its carrying amount.
4.7 Convertible loan notes
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 is
recognised as a euro liability initially recognised at fair value and
prospectively accounted for applying the effective interest rate method. As
the loan notes are denominated in euros, the conversion feature does not meet
the definition of an equity instrument. As a result, it is treated as a
separated embedded derivative and is 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.
In September 2017, the Group acquired the entire share capital of Naves
Corporate Finance GmbH ("Naves"). Naves is an established and successful
business, headquartered in Hamburg, Germany, which advises national and
international clients on corporate finance related to the maritime industry,
including restructuring advisory, corporate finance advisory, M&A, asset
brokerage, interim/pre-insolvency management and financial asset management
including loan servicing.
The acquisition agreement provided for consideration of £16.0 million
(€18.4 million) payable as follows:
i) at completion in cash of £7.3 million (€8.3 million), in
shares of £1.3 million (€1.5 million) and in convertible loan notes of
£6.4 million (€7.4 million); and
ii) deferred consideration in cash of £0.5 million (€0.6 million)
and convertible loan notes of £0.5 million (€0.6 million), payable in
instalments over the three years after the acquisition.
The acquisition agreement also provided deferred amounts that would be payable
to management sellers, conditional on their ongoing service in the business.
IFRS 3 states that amounts paid to former owners which are conditional on
ongoing service are for the benefit of the acquirer and not for the benefit of
former owners. Consideration linked to the ongoing service of former owners is
treated as remuneration for post-combination services and classified as
acquisition-related expenditure under specific items in the Income Statement.
The deferred amounts payable to management sellers comprised:
i) deferred cash of £1.3 million (€1.5 million) and deferred
convertible loan notes of £4.3 million (€4.9 million) conditional only on
the individual management seller's continued service payable in instalments
over the five years after the acquisition; and
ii) deferred convertible loan notes of up to £9.4 million (€11.0
million) conditional on the individual management seller's continued service
and the post-acquisition Naves' EBIT in the three years post-acquisition. By
February 2021, there was no contingency remaining and the total amount paid
was £4.6 million (€5.3 million).
Following the issuance of new convertible loan notes in the prior year, at
February 2024 no amounts are subject to future service conditions.
No post-acquisition remuneration associated with the acquisition was incurred
during the year ended 29 February 2024 (2023: £0.1 million).
Convertible instruments
The Group issued convertible loan notes in connection with its acquisition of
Naves in September 2017.
These convertible loan note instruments are unsecured, unlisted and
non-transferable. The notes are euro denominated and carry a 3% per annum
coupon. Each tranche is redeemable on or after two years from the date of
issue by the Group or by the individual holder. The conversion prices were
fixed at 390.3 pence for management sellers and 450.3 pence for non-management
sellers.
The convertible loan note instruments carry certain accelerated conversion
rights in the event of default on financial commitments associated with the
instruments or business distress within the Group. The loan notes shall
automatically convert or be redeemed in the event that any person or persons
acting in concert hold more than 50% of the issued share capital of the Group
or an impairment charge in excess of £43.9 million (€50.0 million) is
reflected in the audited Financial Statements of the Group.
The embedded derivatives within the convertible loan notes are valued using
level 3 hierarchy techniques under IFRS 13. See Note 4.4.
The total value of convertible loan note liabilities, including linked
derivatives, is £3.1 million (2023: £3.9 million). The following table
shows amounts in the Group balance sheet relating to the convertible loan
notes issued on the acquisition of Naves.
2024 2023
Represented in the Group Balance Sheet £'000 £'000
Current liabilities:
Convertible loan notes 632 699
Non-current liabilities:
Convertible loan notes 2,346 2,852
Derivatives 140 384
2,486 3,236
3,118 3,935
The movement in the Naves-related balances in the Group Balance Sheet during
the year is explained by the items below:
2024 2023
£'000 £'000
Total Naves-related balances at start of year 3,935 4,917
Finance expense 227 408
Derivative (gain)/loss (244) 18
Post-acquisition remuneration - 59
Foreign exchange movements (89) 250
Cash paid (711) (1,606)
Equity issued - (111)
Total movements (817) (982)
Total Naves-related balances at year-end 3,118 3,935
The current year cash paid includes interest of £0.1 million (2023: £0.2
million).
The loan notes have the following maturities:
Accounting value Nominal value
2024 2023 2024 2023
£'000 £'000 €'000 €'000
Due at the reporting date
30-Sep-23 - 606 - 699
30-Sep-24 568 550 699 699
30-Sep-25 2,410 2,395 2,929 2,929
2,978 3,551 3,628 4,327
Derivatives thereon 140 384
Total liabilities on loan notes 3,118 3,935
Note that current liabilities in respect of the loan notes differs from the
amounts shown above maturing within one year due to interest payable within
one year on non-current loans and the outstanding current liability to deliver
cash and shares in respect of matured loan notes.
4.8 Reconciliation of liabilities from financing activities
RCF Convertible loan notes Deferred Lease Total
borrowings
consideration
liabilities
£'000 £'000
£'000 £'000
At 1 March 2023 27,815 3,551 - 5,027 36,393
Cash flows (598) (598) - (3,143) (4,339)
Non-cash flows:
- Interest accruing in the period 153 114 - - 267
- Fees paid reported as operating cash flows (122) - - - (122)
- New leases - - - 3,021 3,021
- Effects of foreign exchange (282) (89) - (127) (498)
At 29 February 2024 26,966 2,978 - 4,778 34,722
Current portion - 632 - 1,925 2,557
RCF(1) Convertible(1) loan notes Deferred Lease Total
borrowings
consideration
liabilities
£'000
£'000 £'000
£'000 £'000
At 1 March 2022 23,254 4,171 495 8,506 36,426
Cash flows(2) 4,694 (1,448) - (3,864) (618)
Non-cash flows:
- Shares issued - (111) - - (111)
- Derivatives issued - (71) - - (71)
- Accrual of service cost - 59 - 59
- Interest accruing in the period(2) 32 250 - - 282
- Fees paid reported as operating cash flows (336) - - - (336)
- New leases - - - 770 770
- Business combinations - - - 86 86
- Lease terminations - - - (632) (632)
- Amounts reclassified from deferred consideration to loans - 615 (615) - -
- Effects of foreign exchange 171 145 61 161 538
At 28 February 2023 27,815 3,551 - 5,027 36,393
Current portion - 699 - 2,923 3,622
(1) In the prior year, RCF borrowings and the convertible loan notes were
disclosed in the aggregate. The movement in balances during the year ended 28
February 2023 has been updated to reflect the current year presentation which
provides the reconciliation separately for the RCF and the convertible loan
notes.
(2) In the prior year, 'Interest accruing in the period' included cash settled
interest charges in relation to lease liabilities and the combined total for
the RFC and convertible loan notes. These charges were offset by interest
'Cash flows' as reported in the reconciliation. The prior year numbers have
been updated to remove these interest cash flows from both 'Interest accruing
in the period' and 'Cash flows'. The effect is to reduce 'Cash flows' by £0.5
million and reduce 'Interest accruing in the period' by £0.2 million and
include an additional item relating to fees paid of £0.3 million. There is no
overall impact on total reported cash flows, opening or closing balances.
4.9 Deferred and contingent consideration receivable
Contingent consideration receivable is initially recognised at fair value and
is subsequently remeasured at its fair value at each Balance Sheet date. The
resulting gain or loss is recognised immediately in the Income Statement.
Contingent consideration receivable is classified as Level 3 in accordance
with the fair value hierarchy specified by IFRS 13. Deferred consideration is
initially measured at its fair value and subsequently measured at amortised
cost less provision for impairment.
Key estimate
On 28 February 2022, the Group sold Cory Brothers to Vertom Agencies BV for
maximum consideration of £15.5 million. Initial cash proceeds of £6.5
million 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 twelve
month earn out periods. The remaining "earnout" payments are subject to a
combined minimum of £2.7 million and a combined maximum of £6.4 million.
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. 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 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. Contingent consideration receivable is initially recognised at fair
value and subsequently measures at fair value through profit and loss.
The fair value of the contingent consideration is calculated using the
forecast gross profit for the combined VertomCory business for each earnout
period, applying the agreed percentage, deducting the minimum payment and
discounting the forecast contingent cashflows. The valuation of the
contingent consideration 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. A discount rate of
5.45% (2023: 5.29%) 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.
Set out below is a sensitivity analysis of the contingent consideration
receivable to the discount rate and the assumptions of future profitability.
Fair value of Cory Brothers deferred and contingent consideration receivable
The agreed minimum earnout payment is presented as deferred consideration and
measured at amortised cost, using a discount rate of 2.39% determined on
initial measurement. The uncertain element of each earnout payment is
measured at fair value through profit or loss and presented as contingent
consideration.
Deferred and contingent consideration are included in other long-term
receivables (see Note 4.1) and current other receivables (see Note 4.2). The
amortised cost of the deferred consideration is £2.6 million (2023: £3.6
million). The fair value of the contingent consideration is £1.1 million
(2023: £1.4 million).
During the year, the Group received £1.5 million (in the Group Cash Flow
Statement, £1.4 million is allocated to investing activities and £0.1
million to interest received) in relation to the first deferred and contingent
consideration payment. The receivable held on the Balance Sheet at 29 February
2024 in relation to the second earnout payment is £1.9 million (£1.3 million
deferred consideration and £0.6 million contingent consideration).
Sensitivity analysis
Management have considered the sensitivity of the contingent consideration
receivable arising from the second and third earnout payments to both changes
in the estimate of future profitability of the VertomCory agency business, and
the discount rate selected.
Sensitivity to the estimate of future gross profits of the VertomCory agency Sensitivity to change in the discount rate selected
business
Carrying value Undiscounted value as at 29 February 2024 Decrease by 10% Increase by 10% Decrease by Increase by
as at 29 February 2024
1% p.a.
1% p.a.
£'000s £'000s £'000s £'000s £'000s £'000s
Payment due on 31 May 2024 550 557 N/A N/A 1 (1)
Payment due on 31 May 2025 532 569 (177) 177 6 (6)
Total 1,082 1,126 (177) 177 7 (7)
The 10% increase/decrease in future gross profits of the VertomCory agency
business considered in the sensitivity analysis is selected to reflect a
reasonably likely variation in outcomes, which lie within a range covered by
the minimum and maximum earnout thresholds. The change in discount rate
considered reflects the observed range of three-year GBP corporate bond rates
with similar credit risk. No sensitivity is provided for the payment due on 31
May 2024 as the payment amount is based on actual reported performance.
5 Employee remuneration schemes
5.1 Long-term employee benefits
Key estimate
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 at each reporting date.
Critical judgement
Recoverability of defined benefit pension scheme net asset
As a result of actuarial movements during the year, including an increase in
the discount rate from 4.9% at 28 February 2023 to 5.0% at 29 February 2024,
the UK defined benefit scheme continues to be in an actuarial surplus position
at 29 February 2024 (measured on an IAS 19 "Employee Benefits" basis) of £1.4
million (28 February 2023: £1.1 million). The surplus has been recognised on
the basis that the Group has an unconditional right to a refund, assuming the
gradual settlement of Scheme liabilities over time until all members have left
the Scheme. The surplus will be subject to a tax charge on its recovery which
the Group does not believe meets the definition of an income tax under IAS 12,
and, as a result, the surplus has been presented net of the expected taxes
payable of £0.8 million, at a rate of 35%. The free-standing tax charge will
reduce from 35% to 25% from 6 April 2024, this measure was substantively
enacted on 11 March 2024. The impact of the change in rate is not expected to
have a material impact on the Group.
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 operates 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 asset or liability 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 net of tax, excluding
interest, are recognised in the period in which they arise within the
Statement of Comprehensive Income.
When the defined benefit plan is in a surplus, the asset is recognised at the
lower of the surplus and the asset ceiling, less any associated costs, such as
taxes payable.
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.
The Group operates a defined benefit scheme in the UK. A full actuarial
valuation was carried out as at 31 March 2023 and updated by the IAS 19
valuation as at 29 February 2024. All valuations have been carried out by a
qualified independent actuary.
The Group's obligations in respect of the funded defined benefit scheme at 29
February 2024 were as follows:
2024 2023
£'000 £'000
Present value of funded obligations 10,609 10,558
Fair value of scheme assets, net of tax (12,023) (11,678)
Total surplus of defined benefit pension scheme (1,414) (1,120)
Funded defined benefit scheme
The Group sponsors a funded defined benefit scheme (the ACM Staff Pension
Scheme) for qualifying UK employees. The Scheme is administered by a separate
board of Trustees which is legally separate from the Group. The Trustees are
composed of representatives of both the employer and employees. The Trustees
are required by law to act in the interest of all relevant beneficiaries and
are responsible for the investment policy with regard to the trust assets and
the day-to-day administration of benefits.
Under the Scheme, employees are entitled to annual pensions on retirement at
age 60 of 1/60th of final pensionable salary for each year of service.
Pensionable salary is defined as basic salary plus the average of the previous
three years' bonuses (capped at three times basic salary). Pensionable
salaries for members who joined after 1 June 1989 are also subject to an
earnings cap. Other benefits are payable, for example those provided on death.
The scheme was closed to future accrual and from 1 February 2016,
post-retirement benefits are provided to these employees through a separate
defined contribution arrangement.
Profile of the Scheme
The defined benefit obligation includes benefits for current employees, former
employees, and current pensioners. Broadly, around 50% of the liabilities are
attributable to deferred pensions for current and former employees, with the
remaining 50% to current pensioners.
The Scheme duration is an indicator of the weighted average time until benefit
payments are made. For the Scheme as a whole, the duration is around 14.8
years (2023: 15.3 years).
Funding implications
UK legislation requires that pension schemes are funded prudently. The most
recent funding valuation of the Scheme was carried out by a qualified actuary
as at 31 March 2023 and showed a surplus of £0.3 million.
Risks associated with the Scheme
The Scheme exposes the Group to a number of risks, the most significant of
which are:
Asset volatility
The liabilities are calculated using a discount rate set with reference to
corporate bond yields; if assets underperform this yield, this will create a
deficit. The Scheme holds a significant proportion of growth assets which,
though expected to outperform corporate bonds in the long term, create
volatility and risk in the short term. The allocation to growth assets is
monitored to ensure it remains appropriate given the Scheme's long-term
objectives.
Changes in bond yields
An increase in corporate bond yields will decrease the value placed on the
Scheme's liabilities for accounting purposes, although this will be partially
offset by a Decrease in the value of the Scheme's bond holdings.
Inflation risk
A proportion of the Scheme's benefit obligations are linked to inflation and
higher inflation will lead to higher liabilities (although, in most cases,
caps on the level of inflationary increases are in place to protect against
extreme inflation). The majority of the assets are either unaffected by or
only loosely correlated with inflation, meaning that an increase in inflation
will also increase the deficit.
Life expectancy
The majority of the Scheme's obligations are to provide benefits for the life
of the member, so increases in life expectancy will result in an increase in
scheme liabilities.
The Company and Trustees have agreed a long-term strategy for reducing
investment risk as and when appropriate. This includes moving assets to match
pensioner liabilities when members reach retirement.
The Trustees insure certain benefits payable on death before retirement.
The principal assumptions used for updating the latest valuation of the Scheme
were:
2024 2023
(% p.a.) (% p.a.)
Discount rate 5.0 4.9
CPI inflation 2.6 3.0
Pension increases:
CPI capped at 2.5% p.a. 2.1 2.0
CPI capped at 5.0% p.a. 3.0 3.0
Deferred pension increases:
CPI capped at 2.5% p.a. 2.1 2.0
CPI capped at 5.0% p.a. 3.0 3.0
2024 2023
Years Years
Life expectancy from age 60 for:
Current 60-year-old male 25.6 25.1
Current 60-year-old female 28.0 27.7
Pre-retirement mortality - -
Post-retirement mortality S2 PXA, CMI 2022/2021 (min 1.25%)
Early retirement No allowance for early retirement (2023: 33% of members retire at age 55, with
the remainder retiring at age 60)
Withdrawals from active service No allowance
Cash commutation 80% of members assumed to take maximum lump sum (2023: 100%)
All members are assumed to retire at age 60.
The Scheme's assets are split by type of asset in the following table.
Scheme assets 2024 2023
£'000 £'000
Scheme assets are comprised as follows:
UK equities 359 434
Overseas equities 4,387 4,374
Unquoted equities - 78
High yield debt 986 1,019
Cash 1,031 707
Inflation-linked bonds 1,142 1,022
Corporate bonds 2,793 1,883
Government bonds 1,726 1,303
Other 360 1,462
Total 12,784 12,282
The Pension Scheme assets do not include any ordinary shares issued by the
Company. All assets are held through pooled investment vehicles.
Expense recognised in the Income Statement (included in operating costs) 2024 2023
£'000 £'000
Current service cost - -
Interest (income)/expense on net asset/liability (85) 54
Expense recognised in Income Statement (85) 54
Remeasurements in other comprehensive expense:
(Gain)/loss on assets in excess of that recognised in net interest (201) 1,061
Actuarial gains due to changes in financial assumptions (179) (4,594)
Actuarial loss/(gain) due to changes in demographic assumptions 127 (220)
Actuarial (gain)/loss due to liability experience (77) 374
Deferred tax charge - 414
Expected tax charge on recovery of assets 157 604
Gain recognised in other comprehensive income (173) (2,361)
Total amount recognised in Income Statement and other comprehensive expense (258) (2,307)
Changes to the present value of the defined benefit obligation are analysed as
follows:
2024 2023
£'000 £'000
Opening defined benefit obligation 10,558 15,156
Interest expense 517 402
Actuarial gains due to changes in financial assumptions (179) (4,594)
Actuarial loss/(gain) due to changes in demographic assumptions 127 (220)
Actuarial (gain)/loss due to liability experience (76) 374
Net benefit payments from scheme (338) (560)
Closing value at 29 February (2023: 28 February) 10,609 10,558
Changes in the fair value of plan assets are analysed as follows:
2024 2023
£'000 £'000
Opening fair value at 1 March 11,678 13,104
Interest income 602 348
Fair value gain/(loss) on assets 201 (1,061)
Contributions by employers 37 450
Net benefit payments from scheme (338) (559)
Expected tax charge on recovery of assets (157) (604)
Closing value at 29 February (2023: 28 February) 12,023 11,678
The Group does not expect to make any contributions to the scheme in the next
twelve months (2023: £37,500).
Actual return on Scheme assets 2024 2023
£'000 £'000
Interest income on plan assets 602 348
Remeasurement gain/(loss) on assets 201 (1,061)
Actual return on assets 803 (713)
Sensitivity analysis
The table below illustrates the sensitivity of the Scheme liabilities at 29
February 2024 to changes in the principal assumptions. The sensitivities
assume that all other assumptions remain unchanged and the calculations are
approximate (full calculations could lead to a different result).
Change in assumption Approximate increase in liabilities Approximate increase in liabilities
%
£'000
Interest rate reduced by 0.5% p.a. 9.0 955
Inflation assumption increased by 0.5% p.a.(1) 5.9 626
Increase in life expectancy of one year for all members reaching 60 2.5 265
(1)The inflation assumption sensitivity applies to both the assumed rate of
increase in the CPI and the RPI, and includes the impact on the rate of
increases to pensions, both before and after retirement.
Defined contribution schemes
There are a number of defined contribution schemes in the Group, the principal
scheme being the Braemar Pension Scheme, which is open to all UK employees.
Cash contributions paid into the defined contribution schemes are accounted
for as an Income Statement expense as they are incurred. The total charge for
the year in respect of this and other defined contribution schemes amounted to
£2,247,000 (2023: £1,811,000) which was in respect of continuing operations.
Contributions of £180,000 were due to these schemes at 29 February 2024
(2023: £nil).
The assets of these schemes are held separately from those of the Group in
funds under the control of the Trustees.
5.2 Share-based payments
The Group operates a number of equity-settled share-based payment schemes.
No awards may be granted under the schemes set out below 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).
All of the Group's share schemes are accounted for as equity-settled
share-based payments because they only entitle the employee to receive equity
instrument issued by the Parent Company. 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. Occasionally the Group, at its discretion, might repurchase vested
equity instruments. In accordance with IFRS 2, such payments to employees are
accounted for as a deduction from equity, except to the extent the payment
exceeds the fair value of the equity instruments repurchased.
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 6.3 provides detail on the ESOP and the EBT and
movements in shares to be issued.
Key estimate
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 the Income Statement such that
the cumulative expense reflects the revised estimate, with a corresponding
adjustment to reserves.
A 1% increase in the forfeiture assumption for all awards which were not
vested at 29 February 2024 would result in an additional charge to the Income
Statement of £0.1 million in FY24, while a 5% increase in the forfeiture
assumption would result in an additional charge of £0.6 million to the Income
Statement in FY24. While the Group believes that a change in estimate of 5% or
greater for all awards in any one year is unlikely, due to the fact that the
value of awards are not uniform between employees, the Group believes that
there is a significant risk that a revision to the forfeiture estimate could
result in a material impact to the Income Statement in the next financial year
depending on the profile of leavers.
Share Option Scheme
During the prior year the Company operated the Braemar Plc Savings-Related
Share Option Scheme 2014 (the "SAYE Scheme") and the Braemar Plc International
Savings-Related Share Option Scheme 2019 (the "International SAYE Scheme").
Options are granted at up to a 20% discount to the prevailing market price
and entitle employees to purchase shares in the Company at a fixed price
subject to continued employment. The fair value of share options granted under
the SAYE schemes is determined using a binomial pricing model. The number of
awards which are expected to vest is estimated by management based on levels
of expected forfeitures.
Deferred Bonus Plan ("DBP")
The Company adopted a Deferred Bonus Plan in May 2020 (the "2020 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 "2020 CSOP"). Where an employee
receives a linked award under the 2020 DBP, if the Company's share price rises
over the vesting period, the 2020 CSOP award can be exercised with the value
of shares delivered on the vesting of the 2020 DBP award being reduced by the
exercise gain on the 2020 CSOP award. Awards under the 2020 DBP and the 2020
CSOP may be settled by the issue of new shares of by way of transfer of shares
from the ESOP. Historical 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.
The number of awards granted under the Deferred Bonus Plan each year is
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 three years after the date of award and is
subject to continued employment. Awards made to new joiners are expensed
over the period from date of joining to date of vesting. Their fair value is
estimated based on the share price at the time of grant less the expected
dividend to be paid during the vesting period. The number of awards which are
expected to vest is estimated by management based on levels of expected
forfeitures.
Restricted Share Plan ("RSP")
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. Their fair value is
estimated based on the share price at the time of grant less the expected
dividend to be paid during the vesting period. The number of awards which are
expected to vest is estimated by management based on levels of expected
forfeitures.
Long Term Incentive Plan ("LTIP)
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 typically subject to a performance condition such as earnings
per share ("EPS") or Total Shareholder Return ("TSR"), a market-based
condition.
The fair value of awards with the EPS condition are non-market conditions and
their fair value is estimated based on the share price at the time of grant
less the expected dividend to be paid during the vesting period. The fair
value of awards containing market conditions is determined using Monte Carlo
simulation models. The number of awards which are expected to vest is
estimated by management based on levels of expected forfeitures and the
expected outcome of the EPS condition. For awards subject to market
conditions, no adjustment is made to reflect the likelihood of the market
condition being met nor the actual number of awards which lapse as a result of
the condition not being met.
The Company operates a variety of share-based payment schemes which are listed
below.
a) Share options
Details of the share options in issue and the movements in the year are given
below:
Share scheme Year option granted Number at 1 March 2023 Granted Exercised Lapsed Number at Exercise price (pence) Exercisable between
29 February 2024
SAYE N/A - - - - - N/A N/A
During the prior year, 433,528 options were exercised. The weighted average
share price on exercise for awards exercised in the prior year was £2.82.
These options are valued using a binomial pricing model. The value of the
awards was expensed over the period from the date of grant to the vesting
date.
b) Deferred Bonus Plan
Details of the share awards in issue and the movements in the year are given
below:
Share scheme Number at Granted Exercised Forfeited Number at Exercise price (pence) Exercisable
1 March 29 February
2023 2024
Jul-20 2,833,067 - (2,763,777) (69,290) - nil July 2023
Nov-20 315,975 - (315,975) - - nil November 2023
Jun-21 1,172,051 - - (59,162) 1,112,889 nil June 2024
Nov-21 239,415 - - - 239,415 nil November 2024
Sep-22 934,694 - - (54,850) 879,844 nil June 2025
Jan-23 400,679 3,568 (51,013) (5,516) 347,718 nil June 2025
Feb-23 137,132 - - (15,188) 121,944 nil June 2025
Dec-23 - 1,647,204 - - 1,647,204 nil July 2026
Deferred Bonus Plan 6,033,013 1,650,772 (3,130,765) (204,006) 4,349,014
The weighted average share price on exercise for awards exercised during the
year was £2.82 (2023: £3.32). The weighted average share price at grant date
for awards granted during the year was £2.75 (2023: £2.98).
Under the DBP, sufficient shares to satisfy each award are bought over the
course of the vesting period and held in an employee trust ("ESOP") until
vesting. As at 29 February 2024, the ESOP held 2,303,211 ordinary shares
(2023: 3,587,130). The ESOP holding is in line with expectations of how many
shares will be needed to satisfy the current awards under this scheme. This
amount is net of expected lapses in the scheme and the fact that recipients
typically forego sufficient shares in order to satisfy the associated tax
liability that arises on their vesting.
c) Restricted Share Plan
Details of the RSP share awards in issue and the movements in the year are
given below:
Share scheme Number at Granted Exercised Lapsed Number at Exercisable
1 March 29 February between
2023 2024
July 2014 13,750 - (7,500) - 6,250 Jul 17 - Jul 24
August 2015 12,500 - - - 12,500 Aug 18 - Aug 25
Restricted Share Plan 26,250 - (7,500) - 18,750
The weighted average share price on exercise for awards exercised during the
year was £2.71 (2023: £3.32).
The fair value of the £nil cost options 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 the awards is expensed over the period from the date of grant to
the vesting date or if used as a recruitment incentive, from the date of
joining to the vesting date. The awards are satisfied by the issue of new
shares.
d) Long-Term Incentive Plan ("LTIP")
The Company also has LTIP awards, which allow for the form of a conditional
right to receive shares at £nil cost. The awards normally vest over three
years and are subject to various performance conditions based on earnings per
share ("EPS") or segmental operating profit.
Details of the LTIP share awards in issue and the movements in the year are
given below:
Share scheme Number at Granted Exercised Lapsed Number at Exercisable
1 March 29 February between
2023 Forfeited 2024
LTIP 2018 33,294 - - - - 33,294 May 23 - Oct 28
LTIP 2019 202,853 - - - (36,653) 166,200 Jul 24 - Jul 29
LTIP 2020 375,000 - - - - 375,000 Jul 25 - Jul 30
LTIP 2021 389,379 - - - (88,495) 300,884 Jun 26 - Jun 31
LTIP 2022 (granted FY23) 624,174 - - - (78,326) 545,848 Jul 27 - Jul 32
LTIP 2023 - 369,958 - - - 369,958
Long-Term Incentive Plan 1,624,700 369,958 - - (203,474) 1,791,184
The weighted average share price at grant date for awards granted during the
year was £2.75 (2023: £3.14).
The fair value of the LTIP 2021 award which has a TSR-based vesting condition
has been calculated using a Monte Carlo simulation. The fair value of the
other LTIPs is determined based on the share price at the time of grant less
the expected dividend to be paid during the vesting period calculated using
the market consensus dividend yield.
The value of the awards is recognised as an expense over the period from the
date of grant to the vesting date. The awards are satisfied by the issue of
new shares.
e) Other share-based payments
On 5 December 2022, 253,434 shares were awarded as a joining incentive to
certain employees of Madrid Shipping Advisors SL and on 16 December 2022,
1,016,121 shares were issued to the former owners of Southport as part of the
acquisition. In addition, on the acquisition of Southport, a further 872,821
shares were awarded to key employees of Southport. The fair value of the
awards is determined based on the share price at the time of grant less the
expected dividend to be paid during the three-year vesting period calculated
using the market consensus dividend yield.
The value of the awards is recognised as an expense over the period from the
date of grant to the vesting date. The Southport Maritime Inc. awards will be
satisfied by the issue of new shares.
Share award Number at Granted Exercised Lapsed Number at Vesting
1 March 29 February
2023 Forfeited 2024
Southport Maritime Inc. 1,888,942 - - - - 1,888,942 Dec 25
Madrid Shipping Advisors SL 253,434 - - - - 253,434 Dec 23 - Dec 25
6 Share capital and other reserves
6.1 Share capital
Ordinary shares Ordinary shares
2024 2023 2024 2023
Number Number £'000 £'000
c) Authorised
Ordinary shares of 10 pence each 34,903,000 34,903,000 3,490 3,490
Ordinary shares Ordinary shares Share premium
2024 2023 2024 2023 2024 2023
Number Number £'000 £'000 £'000 £'000
d) Issued
Fully paid ordinary shares of 10 pence each
As at start of year 32,924,877 32,200,279 3,292 3,221 53,796 53,030
Capital reduction - - - - (53,796) -
Shares issued and fully paid (see below) - 724,598 - 71 - 766
As at end of year 32,924,877 32,924,877 3,292 3,292 - 53,796
In the prior year, in connection with setting up a broker team in Madrid,
253,434 shares were issued to certain employees as a joining incentive; and
37,636 shares were issued to settle part of the deferred consideration payable
in respect of the acquisition of Naves.
No shares remained unpaid at 29 February 2024 or 28 February 2023.
The Company has one class of ordinary shares which carry no right to fixed
income.
6.2 Dividends
Amounts recognised as distributions to equity holders in the year:
2024 2023
£'000 £'000
Ordinary shares of 10 pence each
Final dividend of 8.0 pence per share for the year ended 28 February 2023 2,440 2,018
(2023: 7.0 pence per share)
Interim dividend (2023: 4.0 pence per share) - 1,172
2,440 3,190
The dividends paid by the Group during the year ended 29 February 2024
totalled £2.4 million (8.0 pence per share) relating to a final dividend in
respect of the year ended 28 February 2023 paid on 9 February 2024. An interim
dividend of £1.2 million (4.0 pence per share) was paid on 2 April 2024.
The right to receive dividends on the shares held in the ESOP has been waived
(see Note 6.3). The dividend saving through the waiver is £0.2 million
(2023: £0.4 million).
During the year ended 28 February 2023, the Group paid dividends totalling
£3.2 million (11.0 pence per share), being a final dividend in respect of
the year ended 28 February 2022 of £2.0 million (7.0 pence per share) paid
on 14 October 2022 and an interim dividend for the year ended 28 February
2023 of £1.2 million (4.0 pence per share) paid on 4 January 2023.
In December 2022, the Company commenced a project to research various options
for increasing the distributable reserves available to the Company in order to
support the stated progressive dividend policy. After the payment of an
interim dividend in January 2023, the outcome of the research identified an
accounting practice of the Company used since IFRS 2 was introduced in 2005,
which carried realised gains which could only be used in very limited
circumstances with the consequence that a significant balance within retained
earnings (that was not previously identified as created by unrealised gains)
was incorrectly used by the Company in the calculation of distributable
reserves.
Dividends paid between 2016 and 2023 were therefore paid by the Company
without having sufficient distributable reserves from which to lawfully pay
them. Having identified these issues, to rectify the gap in retained earnings
and the unlawful payment of dividends, after the Balance Sheet date, the
Company reduced its share premium account and capital redemption reserve and
capitalised and reduced £19.8 million of the merger reserve ("Capital
Reduction") and entered into releases from liability for the benefit of
shareholders and directors (to ensure that no person was disadvantaged as a
consequence of the payment of unlawful dividends).
On 15 February 2023 the Company entered into deeds of release in favour of
shareholders receiving the unlawful dividends and the directors of the Company
at the time the unlawful dividends were paid. These releases were conditional
on various conditions including, shareholder approval for the Capital
Reduction, the Capital Reduction becoming effective, and the terms of the
deeds of release for shareholders and directors. At a General Meeting of the
Company on 14 April 2023, shareholders approved the Capital Reduction and the
deeds of release for shareholders and directors which allowed the Company to
proceed with the process for the Capital Reduction by seeking approval from
the High Court of Justice. On 9 May 2023 the High Court approved and confirmed
the Capital Reduction and on 5 June 2023 the Capital Reduction became
effective providing the Company with £73.9 million of distributable reserves
at that time.
For the year ended 29 February 2024, a final ordinary dividend of 9.0 pence
per share has been proposed totalling £3.0 million.
6.3 ESOP reserve
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 ESOP reserve represents a deduction from shareholders' funds and a
reduction in distributable reserves. The deduction equals the net purchase
cost of the shares held in trust by the ESOP. Shares allocated by the ESOP
to satisfy share awards issued by the Group are released at cost on a First in
First Out basis.
£'000
At 28 February 2022 6,771
Shares acquired by the ESOP 7,963
ESOP shares allocated (4,127)
At 28 February 2023 10,607
Shares acquired by the ESOP 6,125
ESOP shares allocated (9,592)
At 29 February 2024 7,140
As at 29 February 2024, the ESOP held 2,303,211 (2023: 3,579,630) ordinary
shares of 10 pence each. The funding of the purchase has been provided by the
Company in the form of a gift and the Trustees have contracted with the
Company to waive the ESOP's right to receive dividends. The fees charged by
the Trustees for the operation of the ESOP are paid by the Company and charged
to the Income Statement as they fall due.
As part of the acquisition of ACM Shipping Group plc in July 2014, the Company
issued 125,621 shares into an Employee Benefit Trust ("EBT") previously run by
ACM Shipping Group plc. As at 29 February 2024, the EBT held 62,290 (2023:
62,290) ordinary shares of 10 pence each.
The total cost to the Company of shares and cash held in the ESOP and EBT at
29 February 2024 was £7.1 million (2023: £10.6 million) including stamp duty
associated with the purchase. The shares owned by the ESOP and EBT had a
market value at 29 February 2024 of £6.3 million (2023: £10.9 million). The
distribution of these shares is determined by the Remuneration Committee.
3,440,115 shares (2023: 1,877,473) have been released to employees during the
year. The shares acquired by the ESOP had an aggregate cost of £6.1 million
(2023: £8.0 million).
6.4 Other reserves
Capital Merger Foreign Hedging Total
redemption
reserve
currency
reserve
£'000
reserve
£'000
translation
£'000
£'000
reserve
£'000
At 28 February 2022 396 24,641 1,626 (533) 26,130
Cash flow hedges:
- Transfer to income statement - - - 4,826 4,826
- Fair value gain/losses in the period - - - (4,438) (4,438)
Investment hedge - - (124) - (124)
Exchange differences - - 2,522 - 2,522
Deferred tax on items taken to equity - - - (97) (97)
At 28 February 2023 396 24,641 4,024 (242) 28,819
Cash flow hedges:
- Transfer to income statement - - - (2,231) (2,231)
- Fair value gain/losses in the period - - - 3,872 3,872
Investment hedge - - 249 - 249
Exchange differences - - (1,783) - (1,783)
Capital reduction (396) (19,755) - - (20,151)
Deferred tax on items taken to equity - - - (410) (410)
At 29 February 2024 - 4,886 2,490 989 8,365
The capital redemption reserve arose on previous share buy-backs by the
Company. The merger reserve arose on transactions where the Company issued
shares pursuant to an arrangement to acquire more than a 90% interest in
another company and no share premium was recorded. The merger reserve arose
principally in 2001 in relation to the acquisitions of Braemar Shipbrokers
Limited and Braemar Tankers Limited. Further additions have arisen in
respect of Naves and Atlantic Brokers. The amounts in the merger reserve are
unrealised profits relating to the corresponding assets acquired by the
Company on the issue of shares. These profits may become realised on the
disposal or write-down of these assets. During the year, following the Capital
Reduction (see Note 6.2), the merger reserve was reduced by £19.8 million and
the capital redemption reserve was reduced to £nil.
The hedging reserve comprises the effective portion of the cumulative net
change in fair value of cash flow hedging instruments relating to hedged
transactions that have not yet occurred of £1.3 million asset (2023: £0.3
million liability). The deferred tax movement recognised in equity in the year
was a loss of £410,000 (2023: £97,000 loss).
7 Other supporting notes
7.1 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 twelve 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 twelve
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.
Key estimate
Uncertain commission obligations
In June 2023, the board commissioned an independent internal investigation
into an historical transaction originating in 2013. The investigation was
overseen by an Investigation Committee chaired by the Group's non-executive
Chairman and was conducted by an independent specialist forensic accounting
firm, and independent external counsel. The investigation was comprehensive
and complex and ultimately encompassed several transactions between 2006 and
2013 which required further investigation.
As a result of the investigation, the Group has recognised a provision of
£2.0 million in relation to the uncertain obligations connected to a number
of the transactions and commission obligations identified as part of the
investigation. Of the £2.0 million, £1.7 million relates to an historical
unsettled commission payable which was recorded in 2017 upon completion of the
relevant contracts which originated in 2013. This balance was reclassified
from trade payables to provisions in the prior year. During the year, £0.2
million was added to the provision following the return of previously paid
amounts connected to the uncertain commission obligation. While the board
cannot forecast with certainty final outcomes in respect of these obligations,
based on the Group's current information, the amount recognised is the current
best estimate of the amount required to settle the obligations at the balance
sheet date, taking into account the risks and uncertainties surrounding the
obligations, including interpretation of specific laws and likelihood of
settlement.
As the ultimate potential obligations and outcomes are uncertain in relation
to the transactions subject to the internal investigation, there remains a
risk that the final outcomes could materially impact the recognised balance
within the next or in future financial years. It is impracticable to provide
sensitivity estimates of potential downside variances at this time.
Dilapidations Uncertain commission obligation Other Total
£'000
£'000
£'000
£'000
At 28 February 2022 682 - 601 1,283
Reclassification 18 1,707 (346) 1,379
Provided in the year - 257 462 719
Utilised in the year - - (15) (15)
Reversal of provision in the year (124) - - (124)
Exchange differences 16 - 51 67
At 28 February 2023 592 1,964 753 3,309
Provided in the year 20 - - 20
Provision added in year - 209 - 209
Utilised in the year - - (134) (134)
Reversal of provision in the year - - (154) (154)
Exchange differences (7) (79) (26) (112)
At 29 February 2024 605 2,094 439 3,138
Current 547 2,094 439 3,080
Non-current 58 - - 58
At 29 February 2024 605 2,094 439 3,138
Dilapidations relate to future obligations to make good certain office
premises upon expiration of the lease term. The provision is calculated with
reference to the location and square footage of the office.
Employee entitlements of £0.4 million is included in other, which relate to
statutory long service leave in Braemar Shipbroking Pty Limited. This is based
on the principle that each Australian employee is entitled to eight weeks of
leave over and above any annual leave on completion of ten years' continuous
service. The provision is calculated with reference to the number of employees
who have at least seven years of continuous service.
7.2 Contingent liabilities
From time to time the Group may be engaged in litigation in the ordinary
course of business. The Group carries professional indemnity insurance. There
are currently no liabilities expected to have a material adverse financial
impact on the Group's consolidated results or net assets.
7.3 Events after the reporting date
The Company paid an interim dividend of £1.2 million (4p per share) on 2
April 2024. There were no other adjusting or significant non-adjusting events
between the reporting date and the date these Financial Statements were
authorised.
Five-year financial summary (unaudited)
Consolidated Income Statement
Continuing operations 12 months to 12 months to 12 months to 12 months to 12 months to
29 Feb 2024
28 Feb 2023
£'000
£'000 28 Feb 2022 28 Feb 2021 29 Feb2020
£'000
£'000
£'000
Group revenue 152,751 152,911 101,310 83,695 117,655
Other operating expenses (136,203) (132,836) (91,250) (75,976) (106,625)
Specific items (net) (7,504) (8,406) (514) (1,097) (3,344)
Total operating expenses (143,707) (141,242) (91,764) (77,073) (109,969)
Operating profit/(loss) 9,044 11,669 9,546 6,622 7,686
Gain on revaluation of investment - - 172 - -
Net interest expense (1,533) (2,195) (1,156) (1,486) (1,853)
Share of associate profit for the period 12 (23) (19) - 436
Profit before taxation 7,523 9,451 8,543 5,136 6,269
Taxation (2,899) (4,855) (1,839) (1,574) 46
Gain/(loss) for the year from discontinued operations - - 7,215 970 (2,299)
Profit/(loss) after taxation 4,624 4,596 13,919 4,532 4,016
Dividends
Interim 1,222 1,172 610 - 1,564
Final proposed 2,963 2,440 2,254 1,495 -
4,185 3,612 2,864 1,495 1,564
Earnings per ordinary share - pence
Basic - underlying from continuing operations 36.62p 46.22p 23.06p 15.60p 29.45p
Diluted - underlying from continuing operations 29.96p 38.52p 18.79p 12.91p 26.62p
Five-year financial summary (unaudited)
Consolidated Balance Sheet
As at As at As at As at As at
29 Feb 2024
28 Feb 2023
£'000
£'000 28 Feb 2022 28 Feb 2021 29 Feb 2020
£'000
£'000
£'000
(restated) (restated)
(restated)
Assets
Non-current assets
Goodwill 71,337 71,407 79,891 83,955 83,812
Other intangible assets 3,185 3,980 997 2,129 2,411
Property, plant and equipment 5,582 5,320 7,078 9,841 11,928
Other investments 1,633 1,780 1,780 1,962 1,962
Investment in associate 713 701 724 3,763 7,315
Financial assets - - - - 1,184
Derivative financial instruments 249 30 8 200 -
Deferred tax assets 2,979 4,794 3,713 2,900 3,620
Pension surplus 1,414 1,120 - - -
Other long-term receivables 4,589 8,554 5,636 1,888 2,467
91,681 97,686 99,827 106,638 114,699
Current assets
Trade and other receivables 37,730 43,323 35,792 33,416 39,541
Financial assets - - - 746 -
Derivative financial instruments 1,287 1,224 54 1,573 -
Current tax receivable 2,925 973 - - -
Assets held for sale - - - 436 -
Cash and cash equivalents 27,951 34,735 13,964 14,111 28,749
69,893 80,255 49,810 50,282 68,290
Total assets 161,574 177,941 149,637 156,920 182,989
Liabilities
Current liabilities
Derivative financial instruments 175 1,122 688 - 437
Trade and other payables 43,611 57,310 39,183 47,833 47,209
Short-term borrowings - - - - 25,116
Current tax payable 1,625 4,141 1,608 1,318 1,334
Provisions 3,080 2,575 486 307 201
Convertible loan notes 632 699 1,416 4,461 4,444
Deferred consideration - - - - 177
Liabilities directly associated with assets classified as held for sale - - - 125 -
49,123 65,847 43,381 54,044 78,918
Non-current liabilities
Long-term borrowings 29,819 29,919 28,331 31,634 34,585
Deferred tax liabilities 8 344 - 174 903
Derivative financial instruments 183 1,022 335 56 4
Trade and other payables 58 542 - - -
Provisions 416 734 797 690 765
Convertible loan notes 2,346 2,852 2,755 2,681 2,639
Deferred consideration - - 495 882 2,293
Pension deficit - - 2,052 3,819 3,672
32,830 35,413 34,765 39,936 44,861
Total liabilities 81,953 101,260 78,146 93,980 123,779
Total assets less total liabilities 79,621 76,681 71,491 62,940 59,210
Equity
Share capital 3,292 3,292 3,221 3,174 3,167
Share premium - 53,796 53,030 52,510 52,510
ESOP reserve (7,140) (10,607) (6,771) (1,362) (2,498)
Other reserves 8,365 28,819 26,130 27,100 25,862
Retained earnings 75,104 1,381 (4,119) (18,482) (19,831)
Total equity 79,621 76,681 71,491 62,940 59,210
Contact information
Registered office
Braemar Plc
One Strand
Trafalgar Square
London
WC2N 5HR
Company number: 02286034
Telephone: +44 (0)20 3142 4100
Web address:
www.braemar.com
Principal offices
Shipbroking
One Strand
Trafalgar Square
London
WC2N 5HR
80 Robinson Road
#24-01/02
Singapore
068898
Level 3, 70 City Road
South Bank
Melbourne
Victoria 3006
Australia
Corporate Finance
Domstraße 17
20095 Hamburg
Germany
One Strand
Trafalgar Square
London
WC2N 5HR
www.braemar.com
1 (#_ftnref1) Company compiled consensus as at the date of this
announcement: FY24 revenue of £150.4m and FY24 underlying operating
profit (before acquisition-related expenditure) of £18m.
2 (#_ftnref2)
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR EANSAADSLEFARecent news on Braemar
See all newsREG - Braemar PLC - Director/PDMR Shareholding
AnnouncementREG - Braemar PLC - Grant of Share Incentives to PDMRs
AnnouncementREG - Braemar PLC - Results of 2024 Annual General Meeting
AnnouncementREG - Braemar PLC - AGM Statement
AnnouncementREG - Braemar PLC - Total Voting Rights
Announcement