Braemar Shipping Services : Interim Results

BRAEMAR SHIPPING SERVICES PLC

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

24 October 2019

Unaudited interim results for the six months ended 31 August 2019

Shipbroking leads stronger performance

Braemar Shipping Services plc (LSE: BMS), a leading international provider of shipbroking, financial advisory, logistics and engineering services principally to the shipping and energy industries, today announces its unaudited half-year results for the six months ended 31 August 2019.

	Underlying results*			Reported results**
	H1 2019/20	H1 2018/19	Change	H1 2019/20	H1 2018/19
	£m	£m	%	£m	£m
Revenue	59.5	57.4	4%	59.5	57.4
Operating profit/(loss)	3.7	3.7	0%	(1.1)	(2.3)
Profit/(loss) before tax	3.0	3.5	(14)%	(1.3)	(2.8)
Earnings/(loss) per share	9.4p	9.8p	(4)%	(4.4)p	(9.0)p
Dividend per share	5.0p	5.0p	-	5.0p	5.0p

OPERATIONAL KEY POINTS

· Strong performance from shipbroking, especially in second quarter, achieving 9%revenue growth and underlying operating profit growth of 16% in the first half

· Benefits of investment across shipbroking division now evident, improving the balance in broking strengths

· Divestment of the Offshore, Marine and Adjusting businesses completed in June 2019

· Steady trading in Logistics with performance unchanged

· Financial division busy with a growing pipeline of mandated business and retainer income but saw low transaction completions in the period

· Appointment of new Chairman and Finance Director in the period creating a refreshed Board to focus on strategic growth

FINANCIAL KEY POINTS

· Revenue in the first half was £59.5 million, showing growth of 4%

· Underlying operating profit from continuing operations maintained at £3.7 million (Reported operating loss reduced from £2.3 million to £1.1 million)

· Interim dividend maintained at 5.0p

· Net debt of £18.8 million (2018: £9.3 million) from increased utilisation of revolving credit facility

· Trading for the full financial year remains in line with current expectations

* Underlying profit measures above are before non-recurring specific items, including acquisition-related charges

** Reported results from continuing operations only

Reconciliation of underlying profit before tax to reported (loss)/profit before tax for the period from continuing operations:

	H1 2019/20	H1 2018/19
Underlying profit before tax	£3.0m	£3.5m
Acquisition related charges	£(3.4)m	£(6.1)m
Acquisition related finance costs Exceptional operating costs	£(0.3)m £(1.4)m	£(0.2)m -
Share of associate profit	£0.8m	-
Reported loss before tax for the period	£(1.3)m	£(2.8)m

Acquisition related charges includes costs directly associated with the purchase of NAVES and Atlantic as well as the run off of the equity-based retention programme established in connection with the merger with ACM Shipping Group plc. Exceptional costs relate to restructuring costs in the Logistics division and Board changes during the period.

Ronald Series, Executive Chairman of Braemar, commenting on the results and the outlook said: 'I am pleased to report strong performance in our core Shipbroking division. Our investment in the division has positioned it well to capitalise on the improving conditions across the shipping markets. This investment coupled with our longstanding track record and reputation as a leading global shipbroker underpins our revenue growth. The Financial division remains very busy although its profitability continues to depend on the incidence and timing of completed transactions. The management team continues to work hard in focussing the business in each of our core areas. The Board has been significantly refreshed in recent months and is focused on returning Braemar to growth. We look forward to the second half with confidence and our trading for the full financial year remains in line with our expectations.'

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

For further information, contact:

Braemar Shipping Services
Ronald Series, Executive Chairman	Tel [phone]
Nicholas Stone, Finance Director	Tel [phone]
finnCap
Matt Goode/ James Thompson/ Kate Washington	Tel [phone]
Buchanan
Charles Ryland / Stephanie Watson / Matilda Abraham	Tel [phone]

Alternative Profit Measures ('APMs')

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

About Braemar Shipping Services plc

Braemar Shipping Services plc is a leading international provider of shipbroking, financial advisory, logistics and engineering services principally to the shipping and energy industries. Founded in 1972, Braemar employs approximately 530 people in 30 locations worldwide across its Shipbroking, Financial, Logistics and Engineering divisions.

Braemar joined the Official List of the London Stock Exchange in November 1997 and trades under the symbol BMS.

For more information, including our investor presentation, visitwww.braemar.com

INTERIM ANNOUNCEMENT - SIX MONTHS ENDED 31 AUGUST 2019

CHAIRMAN'S STATEMENT

Results

A strong performance in our Shipbroking division led revenue growth in the first half of the current financial year and demonstrated the benefits of having a diversified range of desks in that division. Operating profit was unchanged from last year as the Shipbroking division performance was offset by the results in the Financial and Engineering divisions.

Revenue for the period increased 4% to £59.5 million compared with £57.4 million in the first half of 2018/19. Underlying operating profit from continuing operations was unchanged at £3.7 million. The reported loss after tax was significantly reduced at £1.4 million compared with a loss of £3.0 million in the first half of 2018/19, which reflects lower levels of deferred accounting charges in relation to the Group's acquisitions of Braemar NAVES and Braemar Atlantic than in the previous year.

Underlying earnings per share was 9.4 p compared with 9.8 p in the first half of 2018/19 and the reported loss per share from continuing operations was 4.4 p compared with 9.0 p per share in the first half of 2018/19.

Trading

Braemar's Shipbroking division has been very active in the period and achieved revenue growth of 9% and underlying operating profit growth of 16% as a result. Our diversified range of products and services has protected us from weaker Dry Cargo and Sale and Purchase markets in the period. In particular, the Tanker and New Build projects businesses have had a strong period of revenue growth. Tankers remains a key revenue generator for our business and rates continue to improve, as do the rates in the Dry Cargo market.

The Logistics division traded steadily and the Financial division was very busy on a number of projects despite the fact that there was a low level of completed transactions in the period. The nature of success fees earnedin the Financial division means expectations are for lumpy revenues and profits.

The combination of Braemar Technical Services (excluding Braemar Engineering) and Aqualis ASA was completed in June 2019 to form AqualisBraemar. The Technical Services division has therefore, been owned and managed by AqualisBraemar from that time on. The Engineering division, re-branded as Braemar Wavespec, had a relatively quiet period as it managed through the considerable disruption that the internal and legal reorganisation involved as the divestment was completed.

Dividend

The Board has declared an interim dividend of 5.0p per share (full year 2018/19: 15.0p, half year 2018/19: 5.0p). This is a reflection of the current positive shipbroking market and the Board will continue to keep the future dividend policy under review. This interim dividend will be paid on 13 December 2019 to shareholders on the register at the close of business on 1 November 2019. The last date for Dividend Reinvestment Plan (DRIP) elections will be 22 November 2019.

Board of Directors

There have been a number of Board changes in the period with the previous Chairman, David Moorhouse, retiring from the Board on 14 April 2019. I was appointed to succeed him on 15 April 2019. Nick Stone was appointed as Group Finance Director on 1 April 2019. Finally, James Kidwell, the Group's Chief Executive Officer, retired and stepped down from the Board on 27 July 2019 at which time I became Executive Chairman on an interim basis.

On behalf of the Board I would like to thank David and James for their contributions to the business and for their many years of service on the Board.

Our people

The calibre of our people is at the centre of what we do and it is their hard work and creativity that enables Braemar to build our brand and reputation to develop our business. On behalf of the Board I would like to thank our staff for their efforts on behalf of the Group.

Outlook

The shipping market is currently subject to a great deal of volatility due to the current geo-political climate, compounded by the impending fuel regulation changes and changing trading patterns. This leads to our broking services being in greater demand from our clients. Our Financial division is working on an increased number of mandates, although the returns from that business remain subject to the incidence and timing of completed deals.

The Board is continually reviewing Braemar's structure and ways of working, to improve and optimise the opportunities for our divisions to work more closely together throughout the Group to grow value for the benefit of all stakeholders. We will give more guidance on the longer term strategy following the end of the current financial year. In the meantime, it is expected that the outturn for the full financial year will be in line with current expectations.

Ronald Series

Executive Chairman

24 October 2019

OPERATING AND FINANCIAL REVIEW

The trading performance in our major business units for the six months ended 31 August 2019 is detailed below.

SHIPBROKING

	H1 2019/20	H1 2018/19	FY 2018/19
Revenue	£38.7 million	£35.4 million	£75.7 million
Underlying operating profit	£4.9 million	£4.2 million	£9.3 million

The Shipbroking division performed very well during the first half and achieved revenue growth of 9% and underlying operating profit growth of 16%. The total forward order book was maintained at US$43 million since the start of the year, although was slightly lower than the US$46 million at 31 August 2018. Approximately US$20 million of this is deliverable in the second half of this financial year.

By contrast to the same period last year, we have seen a strong tanker market in the last six months but lower volumes in the dry cargo market due to cargo shortages for larger vessels. Sale and purchase business levels were similar to the previous year. We are benefiting therefore from the diversification in the broking business to a more balanced portfolio between these three areas. Dry cargo markets have staged a considerable recovery since the end of this reporting period.

Tankers

A volatile oil market has driven price and liquidity in tanker freight rates. We have seen an increase in ton miles as the routes taken have evolved in the current market. The upcoming IMO 2020 low sulphur fuel regulations means that we have continued to witness shifts in the refining and storage of oil products and more vessel tonnage having scrubbers fitted. As a result of the current conditions we are also seeing charterers willing to commit to longer term charter periods in order to protect themselves against future volatility.

Within the last month, tanker rates have increased significantly. The catalyst has been a combination of the impending IMO 2020 fuel changes, the approaching winter season and a number of geopolitical factors including tension in the Middle East and the increase of US sanctions hampering trade with Iran and Venezuela.

Demand for LPG transportation capacity and supply of vessels have both increased significantly in this growing market. Tanker rates have also increased as the market has grown, partly because Iranian LPG supply restrictions under US sanctions has led to increased longer haul export volumes from the US.

Offshore

The market has seen improved demand as oil company cost initiatives and a higher oil price has led to increased exploration and construction activity. We expect this trend to continue with likely increased vessel demand subject to oil prices remaining stable at current levels.

Dry Cargo

During the period, the dry cargo market recovered from the supply disruption in Australia and in Brazil following the Brumadinho mining disaster and unusually wet weather. As a result of this, and temporary removal of capacity from the fleet caused by the ongoing scrubber refits, the Baltic Dry Index had risen to the highest levels seen for five years by the end of the period. Thus, whilst revenues for the period were down on the year before, expectations are now for a much stronger second half.

Sale and Purchase

New Build activity, particularly in the tanker market has remained strong and the forward order book has been maintained at similar levels to the end of last year. Revenue from sale and purchase activity has been at similar levels to the first half of 2018. The second half of last year had benefitted from higher activity levels and one large fleet transaction covering thirteen vessels.

Second hand transactions have decreased due to economic uncertainty and volatile market conditions and the fact that charter rates are currently strong. The increased number of vessels having scrubbers fitted and the uncertainty over the impact of the availability of the cleaner fuel has also meant that there have been lower volumes of ship recycling transactions.

Securities

Braemar Atlantic Securities' traditional business was coal derivatives in which we have maintained a steady market share in a relatively challenging marketplace. The Dry FFA desk has made some strategic hires and is optimistic that when these brokers are in a position to trade our market share will increase. The overall growth of the team is in line with our objectives and we are actively marketing new product lines that we hope will come to fruition soon.

FINANCIAL

	H1 2019/20	H1 2018/19	FY 2018/19
Revenue:	£3.3 million	£4.4 million	£7.0 million
Underlying operating profit:	£0.9 million	£1.7 million	£2.1 million

The Financial division provides maritime related corporate finance advice to international clients covering finance advisory, M&A, asset brokerage, interim/pre-insolvency management and financial management including loan servicing. It earns fees through retainer arrangements with clients but mainly through success related transaction fees. As a result, the level of revenue in any one period can be hard to forecast and subject to project success and timing.

The division performed below the levels of the previous year as a result of significantly lower levels of success fees in the period. Although the number of transactions worked on and the number of retained clients have increased, the number and value of transactions completing in the period has reduced, giving rise to the reduction in revenue. Retainer income has been stable as can be seen below:

	H1 2019/20	H1 2018/19
Retainer income	£1.9 million	£1.8 million
Success fees Total revenue	£1.4 million £3.3 million	£2.6 million £4.4 million

The mix of business in the division has continued to shift towards refinancing and financial advisory work, with less emphasis on its traditional restructuring business, reflecting the state of the market. The integration into the wider Braemar Group is going well with opportunities presenting themselves to work with sale and purchase brokers and the Engineering division. As part of this the financial division has now established a presence in both our London and Singapore offices to supplement the main office in Hamburg.

LOGISTICS

	H1 2019/20	H1 2018/19	FY 2018/19
Revenue:	£15.6 million	£15.9 million	£32.1million
Underlying operating profit:	£0.6 million	£0.5 million	£0.8 million

Port Agency

Trading in our UK Port Agency business was in line with expectations and the prior year. However, our hub operations fell short due to a slowdown in volumes of port calls for key clients, and an adverse mix of calls versus the prior year. This was offset by a cost saving program, resulting in operating profit being 20% higher than the comparable period last year. The outlook for the remainder of the year will depend to an extent on wider political and economic activity affecting the oil and gas markets, but we are continuing to develop our client base, and expand further into dry cargo where we are currently under-represented.

Freight Forwarding

Trading was in line with expectations and the prior year. A significant cost saving program has been undertaken in our UK freight forwarding operation, including relocating the main office and entering a sub-let of the previous base. Excluding the restructuring cost of this program, underlying operating profit is double that of the same period last year. We are pushing to develop our business in our traditional strengths - in particular project cargo - and are investing in talent and systems to deliver sustained growth over the medium and long term.

ENGINEERING

	H1 2019/20	H1 2018/19	FY 2018/19
Revenue:	£1.9 million	£1.8 million	£3.1 million
Underlying operating loss:	(£0.5) million	(£0.0) million	(£0.3) million

The Engineering division has reported a loss in the period due to higher direct costs than originally expected resulting from the need to sub-contract resources on certain projects that were ongoing. This is against the backdrop of considerable disruption from the reorganization required to affect the AqualisBraemar transaction and Engineering's separation from the rest of the Technical Services division. Now that the transaction is complete, work is underway to rebalance costs with the anticipated future workload.

The decision to retain this business and its expertise in LNG transportation and storage has been justified by the number projects that they are working on in conjunction with other divisions in the group, although this is yet to be reflected in the overall financial performance.

OTHER OPERATING COSTS

Central costs	H1 2019/20	H1 2018/19	FY 2018/19
Central costs:	(£2.1) million	(£2.6) million	(£2.9) million

Central costs included an unrealised foreign exchange loss of £0.5 million incurred on Euro denominated liabilities connected to the acquisition of Naves in 2017, convertible loan notes and bank facility drawings. This loss was partially offset by savings made elsewhere and in the prior year H1, there was a total of £0.8 million relating to Board changes which was charged to underlying profit.

Specific items		H1 2019/20	H1 2018/19	FY 2018/19
Acquisition & disposal-related charges	(£3.4) million		£(6.1) million	£(10.7) million
Restructuring costs	(£1.4) million		-	£(0.8) million

We have separately identified certain items that are not part of the ongoing trade of the Group. These specific items are material in both size and/or nature and we believe may distort understanding of the underlying performance of the business. The majority of these costs relate to acquisitions completed in previous financial years. They are primarily non-cash and driven by the accounting requirements of IFRS 3, Business Combinations.

Acquisition related expenditure included £0.1 million (2019: £0.1 million) incurred in relation to the restricted share plan implemented to retain key staff following the merger between Braemar Shipping Services plc and ACM Shipping Group plc.

The Group incurred £2.7 million of costs which are directly linked to the acquisition of NAVES. They comprise non-cash post-acquisition consideration payable to certain sellers under the terms of the acquisition agreement. The NAVES acquisition agreement included substantial payments to the working vendors which are conditional on their continuing employment.

The Group also incurred £0.6 million of costs directly linked to the acquisition of Atlantic. This relates to consideration paid on the completion date which is charged to the income statement over a three-year claw-back period for the sellers still working in the business.

The exceptional relate to restructuring costs incurred in the Logisitcs division and Board changes during the period as detailed in Note 5.

Foreign exchange

The US dollar exchange rate relative to sterling strengthened from US$1.33:£1 at 1 March 2019 to US$1.22:£1 at 31 August 2019. A significant proportion of the Group's revenue is earned in US dollars. The Group also has material liabilities in Euros and the Euro rate also strengthened against Sterling from €1.17:£1 at 1 March 2019 to €1.10:£1 at 31 August 2019.

At 31 August 2019, the Group held forward currency contracts to sell US$32.4 million at an average rate of US$1.29:£1 and options over a further US$3.5 million at an average rate of US$1.37:£1.

Balance sheet

Net assets at 31 August 2019 were £53.8 million (31 August 2018: £83.3 million; 28 February 2019: £58.4 million). The Group paid dividends totalling £3.0 million in the period and no shares were purchased for the Employee Share Ownership Plan.

Trade and other receivables increased by £7.2 million to £44.3 million compared with £37.1 million at 28 February 2019. Trade and other payables have increased by £1.7 million to £46.6 million compared to £44.9 million at 28 February 2019.

The Group has applied IFRS 16 for the first time. This creates a significant movement in assets and liabilities due to the creation of the right-of-use assets and corresponding lease liabilities. A breakdown is shown in Note 3. As the date of initial application is 1 March 2019 and the Group has adopted the modified retrospective approach, there is no restatement of prior period comparatives with opening balance sheet adjustments being recorded directly into equity.

Borrowings and cash

At the balance sheet date, the Group had bank facilities totalling £40.0 million, made up of a revolving credit facility of £35.0 million and an accordion facility of £5.0 million provided by HSBC. The Group also has access to global cash management arrangements, notably in our regional hubs of UK, Germany and Singapore.

Net debt (excluding convertible loan notes and lease liabilities set up on balance sheet under IFRS 16) was £18.8 million at 31 August 2019 compared with net debt of £9.3 million at 31 August 2018 and net debt of £12.0 million at 28 February 2019.

The operating cash flows of the Group exhibit seasonality in that the bonus payments and final dividend payments occur in the first half of the financial year and it is therefore normal for the second half of the year to generate more cash.

Disposal of discontinued operations

On 21 June 2019, the Group successfully concluded the sale of the Offshore, Marine and Adjusting product lines to Aqualis ASA, a company listed on the Oslo Stock Exchange. The consideration for the sale comprised AqualisBraemar shares and warrants valued at £6.1 million, based on the market value at the time the transaction completed.

These product lines were loss-making and have been accounted for under discontinued operations for the period, along with certain costs related to the disposal. The loss on disposal of the businesses was estimated and provided for at the last year end when the assets were impaired to their fair value less costs to sell. A loss of £0.7 million was recognised in the period.

Taxation

The effective underlying rate of corporation tax on profits was 19.0% (half year 2018/19: 20.0%). This is based on the forecast for an annual effective income tax rate for the year ending 28 February 2020 applied to the pre-tax income of the interim period.

Braemar Shipping Services plc

Consolidated Statement of Profit or Loss

		Period ended 31 August 2019 unaudited			Period ended 31 August 2018 unaudited & restated			Year ended
		Underlying	Specific items	Total	Underlying	Specific items	Total	28 Feb 2019 audited Total
Continuing operations	Notes	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	4	59,470	-	59,470	57,433	-	57,433	117,853
Cost of sales		(12,641)	-	(12,641)	(10,317)	-	(10,317)	(24,892)
Gross profit		46,829	-	46,829	47,116	-	47,116	92,961
Operating expense
Other operating costs		(43,123)	-	(43,123)	(43,395)	-	(43,395)	(84,654)
Restructuring costs	5	-	(1,436)	(1,436)	-	-	-	-
Acquisition-related expenditure	5	-	(3,366)	(3,366)	-	(6,070)	(6,070)	(10,960)
		(43,123)	(4.802)	(47,925)	(43,395)	(6,070)	(49,465)	(95,614)
Operating profit/(loss)	4	3,706	(4,802)	(1,096)	3,721	(6,070)	(2,349)	(2,653)
Share of associate profit for the period	10	7	818	825	-	-	-	-
Gain on revaluation of investment		-	-	-	-	-	-	500
Finance income		210	-	210	111	-	111	297
Finance costs		(901)	(384)	(1,285)	(321)	(229)	(550)	(1,284)
Profit/(loss) before taxation		3,022	(4,368)	(1,346)	3,511	(6,299)	(2,788)	(3,140)
Taxation	7	(147)	87	(60)	(488)	241	(247)	(1,525)
Profit/(loss) for the period/year from continuing operations		2,875	(4,281)	(1,406)	3,023	(6,058)	(3,035)	(4,665)
Loss for the period/year from discontinued operations	6	-	(688)	(688)	-	(2,493)	(2,493)	(22,700)
Profit/(loss) for the period/year attributable to equity shareholders of the parent		2,875	(4,969)	(2,094)	3,023	(8,551)	(5,528)	(27,365)
Total
Earnings per ordinary share	8
Basic - underlying operations		9.37p		(6.82)p	9.78p		(17.88)p	(88.63)p
Diluted - underlying operations		8.41p		(6.82)p	9.00p		(17.88)p	(88.63)p
Continuing operations
Basic - total		9.37p		(4.38)p	9.78p		(9.02)p	(15.11)p
Diluted - total		8.41p		(4.38)p	9.00p		(9.02)p	(15.11)p

Braemar Shipping Services plc

Condensed Consolidated Statement of Comprehensive Income

				Unaudited		Unaudited & restated		Audited
				Six months to		Six months to		Year ended
				31 Aug 2019		31 Aug 2018		28 Feb 2019
				£'000		£'000		£'000
(Loss)/profit for the period/year				(2,094)		(5,528)		(27,365)
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss:
Actuarial gain on employee benefit schemes - net of tax				-		-		999
Items that are or may be reclassified to profit or loss:
Foreign exchange differences on retranslation of foreign operations				674		552		(2,999)
Recycling of foreign exchange reserve				670		-		-
Cash flow hedges - net of tax				(1,056)		(542)		(229)
Total comprehensive expense for the period/year attributable to the equity shareholders of the parent				(1,806)		(5,518)		(29,594)

Braemar Shipping Services plc

Condensed Consolidated Balance Sheet

			Unaudited		Unaudited & restated		Audited
			As at		As at		As at
			31 Aug 2019		31 Aug 2018		28 Feb 2019
Assets	Notes		£'000		£'000		£'000
Non-current assets
Goodwill			83,812		89,441		83,812
Other intangible assets			2,418		2,927		2,226
Property, plant and equipment			13,675		3,067		1,978
Other Investments			1,850		1,356		1,773
Investment in associate	10		8,107		-		-
Financial assets	12		766		-		-
Deferred tax assets			2,402		3,457		1,640
Other receivables			2,303		307		264
			115,333		100,555		91,693
Current assets
Trade and other receivables	11		44,266		59,573		37,128
Derivative financial instruments	12		-		-		-
Assets held for sale	6		-		654		10,611
Cash and cash equivalents			4,807		5,027		3,590
			49,073		65,254		51,329
Total assets			164,406		165,809		143,022
Liabilities
Current liabilities
Derivative financial instruments	12		1,355		513		49
Trade and other payables			46,570		47,361		44,887
Short term borrowings			27,049		14,307		15,323
Current tax payable			1,399		903		1,408
Provisions			-		353		90
Convertible loan notes			6,700		998		6,339
Deferred consideration			634		-		600
Liabilities directly associated with assets classified as held for sale	6		-		-		2,797
			83,707		64,435		71,493
Non-current liabilities
Long term borrowings			11,397		-		-
Deferred tax liabilities			936		982		930
Provisions			390		521		324
Convertible loan notes			5,369		13,420		4,579
Deferred consideration			6,993				5,357
Pension deficit			1,773		3,185		1,986
			26,858		18,108		13,176
Total liabilities			110,565		82,543		84,669
Total assets less total liabilities			53,841		83,266		58,353
Equity
Share capital	13		3,154		3,144		3,144
Share premium	13		55,805		55,805		55,805
Shares to be issued			(2,511)		(2,470)		(3,446)
Other reserves	14		23,145		26,095		22,857
Retained earnings			(25,752)		692		(20,007)
Total equity			53,841		83,266		58,353

Braemar Shipping Services plc

Condensed Consolidated Statement of Cash Flows

			Unaudited					Unaudited & restated		Audited
			Six months to					Six months to		Year ended
			31 Aug 2019					31 Aug 2018		28 Feb 2019
	Notes		£'000					£'000		£'000
Cash flows from operating activities
Cash generated/(used in) from operations	19		473					(2,300)		8,871
Specific items			(355)					-		(759)
Tax paid			(824)					(190)		(1,078)
Net cash generated (used in)/from operating activities			(706)					(2,490)		7,034
Cash flows from investing activities
Purchase of property, plant and equipment and computer software					(1,416)			(945)		(2,807)
Acquisition of businesses, net of cash acquired			-					(112)		-
Investment in associate			(1,605)					-		-
Cash in subsidiaries disposed			(1,286)					-		-
Proceeds from disposal of investments			-					-		300
Interest received			222					112		297
Proceeds from sale of property, plant and equipment			-					-		77
Other long-term assets			-					(7)		35
Net cash used in investing activities			(4,085)					(952)		(2,098)
Cash flows from financing activities
Proceeds from borrowings			8,500					6,434		14,450
Repayment of principle under lease liabilities			(1,723)					-		-
Repayment of borrowings			-					-		(7,000)
Proceeds from issue of ordinary shares			-					-		-
Dividends paid	9		(3,064)					(3,076)		(4,616)
Interest paid			(1,052)					(577)		(1,187)
Gift to ESOP for purchase of own shares			-					(644)		(1,712)
Deferred consideration			-					-		(1,710)
Net cash from/(used in) financing activities			2,661					2,137		(1,775)
Decrease in cash and cash equivalents			(2,130)					(1,305)		3,161
Cash and cash equivalents at beginning of the period/year			7,500					5,424		5,424
Reclassified as held for sale			-					-		-
Foreign exchange differences			(563)					908		(1,085)
Cash and cash equivalents at end of the period/year			4,807					5,027		7,500

Braemar Shipping Services plc

Condensed Consolidated Statement of Changes in Equity

		Share capital	Share premium	Shares to be issued	Other reserves	Retained earnings	Total equity
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
At 1 March 2019		3,144	55,805	(3,446)	22,857	(20,007)	58,353
Change in accounting policy - IFRS 16	3	-	-	-	-	(205)	(205)
Loss for the period		-	-	-	-	(2,094)	(2,094)
Foreign exchange differences		-	-	-	1,344	-	1,344
Cash flow hedges - net of tax		-	-	-	(1,056)	-	(1,056)
Total comprehensive income		-	-	-	288	(2,094)	(1,806)
Dividends paid	9	-	-	-	-	(3,064)	(3,064)
Issue of shares		10	-	-	-	(10)	-
Purchase of shares		-	-	-	-	-	-
ESOP shares allocated		-	-	935	-	(935)	-
Credit in respect of share option schemes		-	-	-	-	563	563
Balance at 31 August 2019		3,154	55,805	(2,511)	23,145	(25,752)	53,841
At 1 March 2018		3,144	55,805	(2,701)	26,085	11,326	93,659
Prior period application of IFRS 9		-	-	-	-	(1,081)	(1,081)
Prior period error:
- Change in accounting policy IFRS 9		-	-	-	-	190	190
- Change in accounting policy IFRS 15		-	-	-	-	(989)	(989)
Revised 1 March 2018		3,144	55,805	(2,701)	26,085	9,446	91,779
Loss for the period		-	-	-	-	(5,528)	(5,528)
Foreign exchange differences		-	-	-	552	-	552
Cash flow hedges - net of tax		-	-	-	(542)	-	(542)
Total comprehensive income		-	-	-	10	(5,528)	(5,518)
Dividends paid	9	-	-	-	-	(3,076)	(3,076)
Purchase of shares		-	-	(644)	-	-	(644)
ESOP shares allocated		-	-	875	-	(875)	-
Credit in respect of share option schemes		-	-	-	-	725	725
Balance at 31 August 2018		3,144	55,805	(2,470)	26,095	692	83,266

Braemar Shipping Services plc

Unaudited Notes to The Financial Information

For the Six Months Ended 31 August 2019

1. General information

Braemar Shipping Services plc (the 'Company') is a public limited company incorporated and domiciled in England and Wales. The interim condensed consolidated financial information for the six months ended 31 August 2019 comprise the Company, its subsidiaries and the employee share ownership trust (together referred to as the 'Group'). The address of the Company's registered office is One Strand, Trafalgar Square, London, WC2N 5HR, United Kingdom. The interim condensed consolidated financial statements of the Group were authorised for issue in accordance with a resolution of the directors on 23 October 2019.

These interim condensed consolidated financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006, but have been reviewed by BDO LLP, the Group's auditor. The audited statutory accounts for the year ended 28 February 2019 have been delivered to the Registrar of Companies in England and Wales. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statements under Section 498 of the Companies Act 2006. The interim condensed consolidated financial statements have been prepared on a going concern basis.

Forward-looking statements

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

Accounting estimates and critical judgements

The preparation of interim financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were consistent with those that applied to the consolidated financial statements as at and for the year ended 28 February 2019 with exception of those relating to IFRS 16. IFRS 16 requires significant judgements in relation to the determination of the lease term and the incremental borrowing rate (see Note 3).

2. Basis of preparation and statement of compliance

The interim financial statements for the six months ended 31 August 2019 have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union.

The interim financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's Annual Report for the year ended 28 February 2019, which was prepared in accordance with IFRSs as adopted by the European Union.

The Group has re-presented results in relation to discontinued operations for the period ended 31 August 2018 following the Group's decision to dispose of certain operations (see Note 6).

3. Accounting policies

Changes in accounting policies

The accounting policies adopted in the preparation of these interim condensed consolidated financial statements are consistent with those of the Annual Report for the year ended 28 February 2019, except as described below:

IFRIC 23 'Uncertainty over Income Tax Treatments'

IFRIC 23 provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. The interpretation requires:

· the Group to contemplate whether uncertain tax treatments should be considered separately, or together as a group, based on which approach provides better predictions of the resolution;

· the Group to determine if it is probable that the tax authorities will accept the uncertain tax

treatment; and

· if it is not probable that the uncertain tax treatment will be accepted, measure the tax uncertainty based on the most likely amount or expected value, depending on whichever method better predicts the resolution of the uncertainty.

There has been no material impact on the Group's financial statements from the application of IFRIC 23.

IFRS 16 'Leases'

In the current year, the Group, for the first time, has applied IFRS 16 Leases. The date of initial application of IFRS 16 for the Group is 1 March 2019.

IFRS 16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes to the lessee accounting by removing the distinction between operating and finance leases, requiring the recognition of a right‑of‑use asset and a lease liability at commencement for all leases, except for short‑term leases and leases of low value assets. In contrast to lessee accounting, the requirements for lessor accounting have remained largely unchanged.

The Group is a lessee of a large number of property and other equipment leases and also a lessor of certain property leases.

Details of the Group's accounting policies under IFRS 16 are set out below, followed by a description of the impact of adopting IFRS 16. Significant judgements applied in the adoption of IFRS 16 included determining the lease term for those leases with termination or extension options and determining an incremental borrowing rate where the rate implicit in a lease could not be readily determined.

Accounting policies under IFRS 16 Leases

The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right‑of‑use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short‑term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the Group recognises the lease payments as an operating expense on a straight‑line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily 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.

Lease payments included in the measurement of the lease liability comprise:

· fixed lease payments (including in substance fixed payments), less any lease incentives;

· variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;

· the amount expected to be payable by the lessee under residual value guarantees;

· the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and

· payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.

The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability and by reducing the carrying amount to reflect the lease payments made.

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right‑of‑use asset) whenever:

• the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate;

• the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used);

• a lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

The Group did not make any such adjustments during the periods presented.

The right‑of‑use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. The costs are included in the related right‑of‑use asset, unless those costs are incurred to produce inventories.

Right‑of‑use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right‑of‑use asset reflects that the Group expects to exercise a purchase option, the related right‑of‑use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease. The Group does not have any leases that include purchase options or transfer ownership of the underlying asset.

The right‑of‑use assets are presented within the same line item as that within which the corresponding underlying assets would be presented if they were owned - for the Group this is property, plant and equipment.

Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right‑of‑use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in the line 'Other operating expenses' in the income statement.

For short‑term leases (leases with a term of 12 months or less) and leases of low‑value assets the Group has opted to recognise a lease expense on a straight‑line basis as permitted by IFRS 16. This expense is presented within operating expenses in the consolidated income statement.

As a practical expedient, IFRS 16 permits a lessee not to separate non‑lease components, and instead account for any lease and associated non‑lease components as a single arrangement. The Group has not used this practical expedient.

Approach to transition

The Group has applied IFRS 16 using the modified retrospective approach, without restatement of the comparative information. In respect of those leases the Group previously treated as operating leases, the Group has elected to measure its right of use assets arising from property leases using the approach set out in IFRS 16.C8(b)(ii), whereby right of use assets are set equal to the lease liability, adjusted for prepaid or accrued lease payments, including un‑amortised lease incentives.

The Group's weighted average incremental borrowing rate applied to lease liabilities as at 1 March 2019 is 2.93%.

Practical expedients adopted on transition

The Group has made use of the practical expedient available on transition to IFRS 16 not to reassess whether a contract is or contains a lease. Accordingly, the definition of a lease in accordance with IAS 17 and IFRIC 4 will continue to be applied to those leases entered into or modified before 1 March 2019.

As part of the Group's adoption of IFRS 16 and application of the modified retrospective approach to transition, the Group also elected to use the following practical expedients:

• a single discount rate has been applied to portfolios of leases with reasonably similar characteristics;

• right‑of‑use assets have been adjusted by the carrying amount of onerous lease provisions at 28 February 2019 instead of performing impairment reviews under IAS 36. The Group had no onerous lease provisions at 28 February 2019;

• hindsight has been used in determining the lease term; and

• leases which are short-term or expiring before 1 March 2020 are recognised as an expense on a straight-line basis.

Impact on lessee accounting

All leases held by the Group at 28 February 2019 were classified as operating leases under IAS 17.

IFRS 16 changes how the Group accounts for leases previously classified as operating leases under IAS 17, which were off‑balance sheet.

Applying IFRS 16, for all leases (except as noted above), the Group now recognises right‑of‑use assets and lease liabilities in the consolidated balance sheet, initially measured at the present value of the future lease payments as described above.

Lease incentives (for example, rent-free periods) are recognised as part of the measurement of the right‑of‑use assets and lease liabilities whereas under IAS 17 they resulted in the recognition of a lease incentive liability, amortised as a reduction of rental expenses on a straight-line basis.

Under IFRS 16, right‑of‑use assets will be tested for impairment in accordance with IAS 36 Impairment of Assets. This replaces the previous requirement to recognise a provision for onerous lease contracts.

Under IFRS 16 the Group recognises depreciation of right‑of‑use assets and interest on lease liabilities in the consolidated income statement, whereas under IAS 17 operating leases previously gave rise to a straight‑line expense in other operating expenses.

Under IFRS 16 the Group separates the total amount of cash paid for leases that are on balance sheet into a principal portion (presented within financing activities) and interest (presented within operating activities) in the consolidated cash flow statement. Under IAS 17 operating lease payments were presented as operating cash outflows.

Impact on lessor accounting

The Group is a lessor with respect to certain subleases of land and buildings. Lessor accounting under IFRS 16 is broadly unchanged with the distinction between operating leases and finance leases retained. In accordance with IFRS 16, the transfer of risk and reward is judged against the right of use asset, not the underlying physical asset. Subleases are treated as finance leases where substantially all risk and reward is transferred to the lessee. For finance leases a receivable is recognised on the balance sheet with finance income taken to the income statement.

If a sublease does not transfer substantially all risk and reward it is accounted for as an operating lease with operating lease income taken to the income statement on a straight-line basis.

Financial impact

The application of IFRS 16 to leases previously classified as operating leases under IAS 17 resulted in the recognition of right‑of‑use assets and lease liabilities.

The Group has chosen to use the table below to set out the adjustments recognised at the date of initial application of IFRS 16.

Of the total right‑of‑use assets of £13.3 million recognised at 1 March 2019, £13.2 million related to leases of property and £0.1 million to leases of other assets. Where the Group is a sub-lessor, some right-of-use assets have been derecognised and finance lease assets have been recognised in other receivables.

	Year Ended		As at			As at
	28 Feb 2019	Impact of IFRS 16	01 Mar 2019	Impact of IFRS 16	Other	31 Aug 2019
	£'000	£'000	£'000	£'000	£'000	£'000
Non-current assets
Property, plant and equipment	1,978	13,031	15,009	(2,087)	1,007	13,929
Other receivables	264	2,029	2,293	234	(224)	2,303
Current assets
Trade and other receivables	37,128	500	37,628	138	6,500	44,266
Total impact on assets		15,560		(1,715)
Current liabilities
Short term borrowings	(15,323)	(3,317)	(18,640)	(87)	(8,324)	(27,051)
Non-current liabilities
Long term borrowings	-	(12,448)	(12,448)	1,051	-	(11,397)
Total impact on liabilities		(15,765)		964
Retained Earnings	(20,007)	(205)	(19,802)	936	(6,886)	(25,752)

On initial adoption of IFRS 16 there was no material tax or deferred tax effect. At 31 August 2019 a deferred tax asset of £0.7 million was recognised as a result of IFRS 16.

The table below presents a reconciliation from operating lease commitments disclosed at 28 February 2019 to lease liabilities recognised at 1 March 2019:

					£'000
Operating lease commitments disclosed under IAS 17 at 28 February 2019					12,095
Short-term and low value lease commitments straight-line expensed under IFRS 16					(201)
Effect of discounting					(2,460)
Payments due in periods covered by extension options that are included in the lease term					6,331
					15,765

In terms of the income statement impact, the application of IFRS 16 resulted in an increase in depreciation and interest expense and a decrease in other operating expenses and compared to IAS 17. During the six months ended 31 August 2019, the application of IFRS 16 had the following impact on the Group consolidated income statement:

					£'000
Increase in:
- Depreciation					(1,328)
- Interest expense					(232)
- Interest income					40
					(1,520)
Decrease in:
- Lease income					(289)
- Lease expense					1,723
					1,434
Net loss on income statement					(86)

Changes to the cash flow presentation

The Group has opted to disclose cash flows in respect of interest received and interest paid as investing activities and financing activities respectively in the condensed consolidated statement of cash flows. The cash flows were previously disclosed under operating activities - the comparatives have been restated accordingly.

Prior period error

Adoption of IFRS 15, Revenue from contracts with customers

In preparing the financial statements for the year ended 28 February 2019, it was noted that earlier conclusions regarding the impact of IFRS 15 disclosed in the interim financial information for the period ended 31 August 2018 were not fully identified.

As disclosed in the financial statements for the year ended 28 February 2019, the adoption of IFRS 15 was assessed as having an impact on the timing of recognition relating to revenue earned in the Shipbroking division on spot charters.

Tax impact on adoption of IFRS 9, Financial instruments

The impact of the adoption of IFRS 9, Financial Instruments, was accounted for in the interim financial statements for the period ended 31 August 2018. It was noted however that the tax impact from the adoption of the accounted standard was not recognised.

Below is a summary of the impact of the prior period error on the interim financial statements of the Group at 1 March 2018 and 31 August 2018:

	At 1 March 2018 £'000	At 31 August 2018 £'000
Consolidated Statement of Profit or Loss
Revenue	-	890
Other operating costs excluding amortisation	-	(623)
Tax	-	(10)
Profit/(loss) for the period	-	(257)
Consolidated Statement of Financial Position
Deferred tax asset	362	(10)
Trade and other payables	(1,161)	1,711
Trade and other receivables	-	(1,444)
Retained earnings	799	-

4. Segmental information

The Group's reportable segments are trading divisions that are managed separately due to a combination of factors including the variety of services provided and method of service delivery.

The reportable segments reflect the way financial information is reviewed by the Group's Chief Operating Decision Maker ('CODM'). The CODM for the Group is the Board of Directors.

	Revenue			Results
	H1 2019/20	H1 2018/19	FY 2018/19	H1 2019/20	H1 2018/19	FY 2018/19
	£'000	£'000	£'000	£'000	£'000	£'000
Shipbroking	38,677	35,383	75,691	4,922	4,210	9,332
Financial	3,295	4,399	6,951	896	1,661	2,128
Logistics	15,585	15,869	32,065	550	461	841
Engineering	1,913	1,782	3,146	(535)	(4)	(311)
Trading segments revenue/results	59,470	57,433	117,853	5,833	6,328	11,990
Central costs				(2,127)	(2,607)	(2,924)
Underlying operating profit				3,706	3,721	9,066
Exceptional operating costs				(1,436)	-	-
Acquisition related expenditure				(3,366)	(6,070)	(11,719)
Operating loss				(1,096)	(2,349)	(2,653)
Share of associate profit for the period				825	-	-
Gain on revaluation of investment				-	-	500
Finance expense - net				(1,075)	(439)	(987)
Loss before taxation				(1,346)	(2,788)	(3,140)
Taxation				(60)	(247)	(1,525)
Loss for the period/year from continuing operations				(1,406)	(3,035)	(4,665)
Loss for the period/year from discontinued operations				(688)	(2,493)	(22,700)
Loss for the period/year				(2,094)	(5,528)	(27,365)

The Group does not allocate income tax expense or interest to reportable segments. Treasury management is managed centrally.

Assets and liabilities information is reported internally in total and not by reportable segment and, accordingly, no information is provided in this note on assets and liabilities split by reportable segment.

5. Specific items

During the period/year, the Group incurred the following acquisition-related items:

	Six months to		Six months to		Year ended
	31 Aug 2019		31 Aug 2018		28 Feb 2019
	£'000		£'000		£'000
Acquisition-related items
- Amortisation charge of intangible assets	-		(1,040)		(1,097)
	-		(1,040)		(1,097)
Acquisition related expenditure
- Group share retention plan directly attributable to the acquisition of ACM Shipping Group plc	(69)		(82)		(123)
- Acquisition of NAVES Corporate Finance GmbH	(2,727)		(3,533)		(8,045)
- Finance costs attributable to NAVES acquisition	(334)		-		-
- Acquisition of Atlantic Brokers Holdings Limited	(570)		(1,387)		(2,485)
- Finance costs attributable to Atlantic acquisition	(50)		-		-
- Other acquisition-related expenditure	-		(28)		-
	(3,750)		(5,030)		(10,653)
Board changes	(460)		-		(759)
Impact of tax	87		-		144
Restructuring costs	(976)		-		-
Share of associate profit for the period	818		-		-
Gain on revaluation of investment	-		-		500
Loss from discontinued operations (Note 6)	(688)		(2,493)		(22,700)
Total	(4,969)		(8,563)		(34,565)

Acquisition related expenditure included £0.1 million (2019: £0.1 million) incurred in relation to the restricted share plan implemented to retain key staff following the merger between Braemar Shipping Services plc and ACM Shipping Group plc.

The Group incurred total expenditure of £3.0 million (2019: £8.0 million) directly linked to the acquisition of NAVES. £1.9 million (2019: £7.2 million) relates to post acquisition remuneration payable to certain vendors under the terms of the acquisition agreement, £0.8 million (2019 less than £0.1 million) relates to FX due to the movement of the EUR:GBP exchange rate, and £0.3 million (2019: £0.8 million) relates to interest costs. The post-acquisition remuneration agreement has a three year earn out period over which the costs of the acquisition will be charged to the income statement depending on the earnings of the Finance Division during that period. The corresponding balance sheet movements are an increase of £0.4 million in current convertible loan notes and deferred consideration, and an increase of £2.5 million in non-current convertible loan notes and deferred consideration.

The Group incurred expenditure of £0.6 million (2019: £2.5 million) directly linked to the acquisition of Atlantic Brokers Holdings Limited in respect of incentive payments to working sellers. The cash payment was made in the year to 28 February 2018, but it is subject to clawback provisions if the working sellers were to leave employment of the Group and as such the costs are charged to the income statement over that clawback period.

The former Chief Executive Officer left the Board in July 2019 and £0.5 million of costs were incurred relating to his departure. This is not a cost that will be incurred on a regular basis and is therefore treated as a specific item. In the reported results to August 2018 costs £0.8 million were charged to underlying operating profit in respect of Board changes and not recorded in specific items.

The Group incurred restructuring costs of £1.0 million in the Logistics division as a result of a restructuring programme implemented by the new Managing Director. This involved the closure of the Manchester office, and relocation from Felixstowe to a smaller office in Ipswich which incurred £0.6 million of costs and a small number of redundancies resulted in £0.4 million of costs. These are not costs that will be incurred on a regular basis and are therefore treated as specific items.

The Group recognised £0.8 million in relation to negative goodwill on the acquisition of AqualisBraemar. This is expected to be a one-off event and is therefore treated as a specific item.

6. Discontinued Operations

On 21 June 2019 the Group entered into a strategic relationship with AqualisBraemar ASA ('AqualisBraemar'). The transaction involved the divestment of the Offshore, Marine and Adjusting product lines in return for a significant minority shareholding in AqualisBraemar ASA ('AqualisBraemar').

On completion, 14,865,621 ordinary shares in AqualisBraemar were issued to the Group resulting in a shareholding of 26% of the ordinary share capital. Warrants were also issued to the Group, which if successfully vested will take overall equity ownership up to 33%. On 16 July 2019 the Group acquired a further 4,375,000 shares through a private placement at a cost of £1.6 million which took the total shareholding to 27.3% of AqualisBraemar's ordinary share capital. As a consequence of this transaction, the results of these divested businesses are presented as a discontinued operation and prior year comparatives have been adjusted accordingly.

AqualisBraemar is a Norwegian quoted entity listed on the Oslo Bors and the Group have measured the value of the equity consideration using the share price on the disposal date.

The warrants are in two equal tranches subject to certain performance considerations over a two-year period following completion such that one half of the warrants will be measured against the AqualisBraemar group EBITDA and one half against the gross profit of the former Braemar Marine and Adjusting divisions. The estimate of the number of warrants that will vest was made using a forecast put together by the joint management team of the combined business and valued using a Black Scholes model. The resultant fair value of the warrants is £0.8 million (see Note 12).

At 28 February 2019, the assets and liabilities were transferred to held for sale and impaired to their fair value less costs to sell of £7.8 million.

The major classes of assets and liabilities comprising the operations held for sale are as follows:

	Six months to		Six months to		Year ended
	31 Aug 2019		31 Aug 2018		28 Feb 2019
	£'000		£'000		£'000
Property, plant and equipment	-		17		1,177
Deferred tax assets	-		-		-
Trade and other receivables	-		1,692		18,194
Current tax receivables (group relief surrendered)	-		38		375
Cash and cash equivalents	-		107		3,910
Provision against assets held for sale	-		(1,200)		(13,045)
Trade and other payables	-		-		(2,797)
Net assets of discontinued operations	-		654		7,814

At 31 August 2018 certain assets and liabilities belonging to the Braemar Response division were similarly classified as held for sale and were subsequently divested by the Group on 9 October 2018. The comparative figures at August 2018 relate to those Braemar Response assets and liabilities. The loss reported on that disposal is also included in the Income Statement as part of discontinued operations. At 31 August 2019 all assets and liabilities relating to discontinued operations has been derecognised.

A reconciliation of the derecognition of assets held for sale to the provisional profit on disposal is as follows:

					Six months to 31 Aug 2019 £'000
Net assets disposed of					(7,128)
Proceeds (including working capital adjustment)					8,509
Transaction costs					(1,658)
Disposal related costs					(282)
Recycling of foreign exchange					670
Profit on disposal					111
Trading loss					(799)
Total loss from discontinued operations					(688)

Included in the loss on disposal is the estimated cost of settling certain warranty claims arising of £0.5 million (see Note 15). Historic differences on retranslation of the disposed subsidiaries totalling £0.7 million, and previously recorded through other comprehensive income and held with the foreign exchange reserve, have been recycled to profit on disposal.

The results of the discontinued operations which have been included in the income statement were as follows:

	Six months to		Six months to		Year ended
	31 Aug 2019		31 Aug 2018		28 Feb 2019
	£'000		£'000		£'000
Revenue	10,320		17,704		32,276
Costs	(10,982)		(19,968)		(34,465)
Specific Items	(113)		-		(20,616)
Loss before taxation	(775)		(2,264)		(22,805)
Taxation	(24)		(229)		105
Loss for the year	(799)		(2,493)		(22,700)

The basic and diluted earnings per share in respect of discontinued operations is (2.24)p (August 2018: (8.06)p and February 2019: (73.52)p).

During the period the discontinued operations had net operating cash outflows of <£0.9 million. There were no cashflows relating to financing or investing activities.

7. Taxation

Current tax expense for the interim period to 31 August 2019 is the expected tax payable on the taxable net income for the period, calculated as the annual effective tax income tax rate for the year ended 28 February 2019 applied to the pre-tax income of the interim period.

Current tax for current and prior periods is classified as a current liability to the extent that it is unpaid. Amounts paid in excess of amounts owed are classified as a current asset.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates that are enacted or substantively enacted at the balance sheet date.

The Group's consolidated effective tax rate for the year ended 28 February 2019 was 19% (six months ended 31 August 2018: 20%).

8. Earnings per share

	Six months to 31 Aug 2019			Six months to 31 Aug 2018			Year ended 28 Feb 2019
Total operations		£'000			£'000		£'000
Loss for the period/year attributable to equity holders of the parent		(2,094)			(5,528)		(27,365)
		pence			pence		pence
Basic loss per share		(6.82)			(17.88)		(88.63)
Effect of dilutive share options		-			-		-
Diluted loss per share		(6.82)			(17.88)		(88.63)

Underlying operations
Profit for the period/year attributable to equity shareholders of the parent	2,875		3,023		7,200
	pence		pence		pence
Basic earnings per share	9.37		9.78		23.32
Effect of dilutive share options	(0.96)		(0.78)		(1.96)
Diluted earnings per share	8.41		9.00		21.36

Earnings per share from underlying operations for the comparative period ended 31 August 2018 has been restated following the re-presentation of Offshore, Marine and Adjusting as discontinued operations.

Where any potential ordinary shares would have the effect of decreasing a loss per share, they have not been treated as dilutive.

9. Dividends

The following dividends were paid by the Group:

	Six months to		Six months to		Year ended
	31 Aug 2018		31 Aug 2018		28 Feb 2019
	£'000		£'000		£'000
Ordinary shares of 10 p each
Final of 10.0 p per share (2018: 10.0 p per share)	3,064		3,076		3,079
Interim of 5.0 p per share paid	-		-		1,537
	3,064		3,076		4,616

The Board has declared an interim dividend of 5.0p per share. The interim dividend will be paid on Friday 13 December 2019 to shareholders on the register at the close of business on Friday 1 November 2019.

10. Investment in associate

On 21 June 2019 the Group recognised an investment in associate as a result of the divestment of the Offshore, Marine and Adjusting product lines in return for a significant minority shareholding in AqualisBraemar (See Note 6).

					£'000 Total
At 1 March 2019					-
Cost of investment					5,395
Private placement					1,605
Share of profit in associate					825
Foreign exchange movements					282
At 31 August 2019					8,107

A provisional purchase price allocation 'PPA' exercise was carried out to compare the fair value of the Group's share of identifiable net assets in AqualisBraemar to the fair value of the purchase price. The notional PPA exercise resulted in a bargain purchase of £0.8 million which increased the carrying value of the investment in associate to £6.2 million. The gain on bargain purchase arises as a result of the fair value of the identifiable net assets acquired through the notional PPA exercise being greater than the cost of acquisition of the investment in AqualisBraemar.

On 16 July 2019 the Group acquired a further 4,375,000 shares in AqualisBraemar through a private placement at a cost of £1.6 million.

Management have reviewed the carrying value of the investment at 31st August 2019 and do not consider this to be impaired.

IAS 28 requires the most recent financial statements of an associate are used for accounting purposes, and that co-terminous information should be used unless it is impractical to do so. AqualisBraemar have a year end of 31 December and for practical reasons AqualisBraemar full year accounts will be used for the purposes of the Group's full year reporting at 28 February with adjustments made for any significant transactions and events. For the interim period to 31 August 2019 the Group has included its share of the AqualisBraemar results to 30 June 2019. These results were adjusted for AqualisBraemar's transaction costs, there were no other significant transactions or events between 21 June 2019 and 31 August 2019.

11. Trade and other receivables

	As at		As at		As at
	31 Aug 2019		31 Aug 2018		28 Feb 2019
	£'000		£'000		£'000
Trade receivables	36,379		44,237		31,461
Provision for impairment of trade receivables	(4,150)		(6,074)		(3,239)
	32,229		38,163		28,222
Other receivables	7,147		8,071		5,957
Finance lease receivables	638		-		-
Accrued income	2,283		9,281		1,803
Prepayments	1,969		4,058		1,146
	44,266		59,573		37,128

The Directors consider that the carrying amounts of trade receivables approximate to their fair value.

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 aging. 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 experienced over the five-year period prior to the period end. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group's customers.

At 31 August 2019 the lifetime expected loss provision for trade receivables and contract assets is £0.9 million (28 February 2019: £0.8 million).

12. Financial instruments

The Group held the following financial instruments at fair value at 31 August 2019. 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.

The Group considers that the carrying amount of the following financial assets and liabilities are a reasonable approximation of their fair value:

· Trade receivables;

· Trade payables; and

· Cash and cash equivalents

The carrying value of the Group's financial assets and liabilities are:

		As at
		31 Aug 2019		Level 1		Level 2		Level 3
		£'000		£'000		£'000		£'000
Financial Assets
Warrants		766		-		-		766
Total		766		-		-		766
Financial Liabilities
Forward currency contracts		1,355		-		1,355		-
Total		1,355		-		1,355		-
		As at
		28 Feb 2019		Level 1		Level 2		Level 3
		£'000		£'000		£'000		£'000
Financial Assets
Warrants		-		-		-		-
Total		-		-		-		-
Financial Liabilities
Forward currency contracts		49		-		49		-
Total		49		-		49		-

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.

In accordance with the IFRS 13 hierarchy, the warrants have been classified as Level 3 and the forward currency contracts as Level 2.

Warrants

The warrants are deferred contingent consideration and accounted for as a financial asset under IFRS 9 (see Note 6). The fair value of the warrants includes unobservable inputs and are therefore are classified as Level 3. They key assumptions underpinning the fair value relate to the expected future share price of AqualisBraemar, the GBP:NOK and GBP:USD exchange rate and the performance of both AqualisBraemar as a whole and the performance of the former Braemar Marine and Adjusting businesses. The fair value has been determined using the Black-Scholes valuation model.

There were no movements in the fair value of the warrants from 21 June 2019 to 31 August 2019 except for a gain on foreign exchange rate movement of £13,000.

Forward currency contracts

The fair value of Level 2 forward currency contracts has been determined based on estimates from observable market inputs.

13. Share capital

		Number of		Ordinary		Share
		shares		Shares		Premium		Total
		(thousands)		£'000		£'000		£'000
At 1 March 2019		31,436		3,144		55,805		58,949
At 31 August 2019		31,544		3,154		55,805		58,959
At 1 March 2018		31,436		3,144		55,805		58,949
At 31 August 2018		31,436		3,144		55,805		58,949

On 30 August 2019 the total number of ordinary shares of 10 pence each in issue increased from 31,436,351 to 31,544,329. These shares were issued by the Company at nominal value and were used to settle shares that had vested in relation to the restricted share plan implemented to retain staff following the merger between Braemar Shipping Services plc and ACM Shipping Group plc.

14. Other reserves

	Capital redemption reserve	Merger reserve	Translation reserve	Hedging reserve	Total other reserves
	£'000	£'000	£'000	£'000	£'000
At 1 March 2019	396	21,346	1,218	(103)	22,857
Cash flow hedges
- Fair value losses in the period	-	-	-	(1,056)	(1,056)
Foreign exchange differences	-	-	1,344	-	1,344
At 31 August 2019	396	21,346	2,562	(1,159)	23,145
	Capital redemption reserve	Merger reserve	Translation reserve	Hedging reserve	Total other reserves
	£'000	£'000	£'000	£'000	£'000
At 1 March 2018	396	21,346	4,217	126	26,085
Cash flow hedges
- Fair value losses in the period	-	-	-	(542)	(542)
Foreign exchange differences	-	-	552	-	552
At 31 August 2018	396	21,346	4,769	(416)	26,095

All other reserves are attributable to the equity holders of the parent company.

15. Contingencies

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.

There have been warranty claims in respect of the disposal of the Offshore, Marine and Adjusting product lines. Discussions with AqualisBraemar over the settlement of these claims are at an advanced stage and it is expected that the cost of these claims will be approximately £0.5 million.

16. Related parties

The Group's related parties are unchanged from 28 February 2019 and there have been no significant related party transactions in the six months ended 31 August 2019.

For further information about the Group's related parties, please refer to the Group's Annual Report 2019.

17. Events after the reporting date

There were no reportable events after 31 August 2019.

18. Principal risks

The Directors consider that the principal risks and uncertainties which could have a material effect on the Group's performance identified on pages 34 to 37 of the Annual Report 2019 are still applicable. These include risks associated with macroeconomic changes, financial liquidity, management bandwidth, the failure to attract and retain skilled individuals, inadequate financial capacity to execute growth plans, the threat of technological changes, currency fluctuations, implementation of inappropriate reward structures, poor communications, legal or regulatory breach and cyber crime.

The AqualisBraemar transaction has resulted in some changes to the Group's principal risks and uncertainties. The combined AqualisBraemar business is more diversified in terms of product lines and geography which mitigates certain macroeconomic risks in cyclical markets. However, the Group is now exposed to equity risk relating to its shareholding of AqualisBraemar. A reduction in the share price of AqualisBraemar could result in an impairment to the Group's investment in associate. Management's mitigating control is to monitor the carrying value of the investment and regularly test for impairment.

The Group holds professional indemnity insurance to an amount considered adequate for its size and potential exposure.

19. Reconciliation of operating profit to net cash flow from operating activities

					Unaudited					Unaudited		Audited
					Six months to					Six months to		Year ended
					31 Aug 2019					31 Aug 2018		28 Feb 2019
					£'000					£'000		£'000
(Loss)/profit before tax for the period/year								(1,346)		(2,786)		(3,140)
Loss before tax for the period/year from discontinued operations					(688)					(2,493)		(22,700)
Adjustments for:
- Depreciation of property, plant and equipment (continuing)					330					518		691
- Depreciation of property, plant and equipment (continuing) - ROU assets					1,328					-		-
- Depreciation of property, plant and equipment (discontinued)					-					11		145
- Amortisation of computer software					176					200		478
- Impairment of computer software					1					-		1,055
- Negative goodwill on acquisition of AQB					(818)					-		-
- Profit on disposal of Offshore, Marine and Adjusting product lines					(111)					-		-
Specific items: - Impairment of assets held for sale					-					-		13,045
- Gain on disposal of investment					-					-		(100)
- Amortisation of other intangible assets					-					1,040		1,073
- Other specific items					4,802					5,030		10,935
- Finance income					(262)					(112)		(297)
- Finance expense					1,284					577		1,555
- Share based payments (excluding restricted share plan)					694					726		1,282
- Net foreign exchange (gains)/losses & financial instruments					-					542		229
Changes in working capital:
- Trade and other receivables					(9,762)					(8,660)		(56)
- Trade and other payables					5,094					7,125		5,456
Contribution to defined benefit pension scheme					(225)					(225)		(450)
Provisions					(24)					120		(330)
Cash generated from operations before acquisition and disposal related activities					473					1,613		8,871
Movement in net assets held for sale					-					975
Acquisition fees paid					-					(203)		-
Amounts due to acquisition-related retention payments					-					(4,685)		-
Cash (used in)/generated from operations after acquisition-related activities					473					(2,300)		8,871

Statement of Directors' responsibilities

We confirm that to the best of our knowledge:

• the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; and

• the interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board

Ronald Series, Executive Chairman	Nicholas Stone, Finance Director