Braemar H2 2025 Earnings Call Transcript

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May 29, 2025

Key Takeaways

  • Braemar PLC delivered FY25 revenue of £141.9m, a 7% decline, and underlying PBT of £16.7m down £1.4m, while maintaining a 12% operating margin and briefly holding net debt of £2.5m before returning to cash positive.
  • The board reduced the final dividend to 2.5p (from 9p) and launched a £2m share buyback to balance returning capital with funding growth opportunities.
  • A weaker tanker market in H2 was partially offset by an 18% increase in its investment advisory division, highlighting the resilience of its diversified revenue mix and underpinning an $82.2m forward order book.
  • Braemar unveiled a 5-year strategic framework aiming for £200m revenue and a 15% operating margin by FY30, targeting 10 new brokers, M&A opportunities and enhanced operational excellence.
  • Its risk advisory business has grown from £7.5m in FY21 to £22.3m in FY25, secured UK Organized Trading Facility approval and is pursuing an EU OTF license to expand hedging services.
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Earnings Conference Call
Braemar H2 2025
00:00 / 00:00

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Operator

Good afternoon, and welcome to the Broma plc Final Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself.

Operator

However, the company can review your questions submitted today and publish responses, which is appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, James Gundy. Good afternoon to you.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

Good afternoon. Thank you. Welcome to Braemar's FY twenty twenty five results presentation. My name is James Gunn, the CEO. I'm with Grant Foley, our CFO and CEO.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

So congratulations, Grant. Just an introduction about myself. I'm sure some of you don't know who I am. I just mentioned the fact that I've been in the shipbroking space for some forty years, starting my thirty years, first ten years at Clarksons and moving to a company called ACM. We successfully IPO ed that company in 02/2006 where I've been to become the CEO of that business.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

We merged in '20 with Braemar. I became the CEO of Shipbroken, dropped off the board, put what you could say difficult most together. Then in '21, I became the CEO of Braemar PLC. And we will go through the slides and sort of explain a little bit about what we've done in that period and where we are today and where we're going forward. So thank you.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

So just to start on the first slide, I think the most important factor for me was that coming into Braemar as the CEO was to make sure we built a business that was robust and financial performance. So as far as robust and obviously creating resilience, we have implemented all that strategy in the last four years. We believe that we can deliver now further growth as the business moves forward. The financials, a strong framework balance sheet is in a good position, tight control costs. Grant's doing a superb job there.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

The strategies we relaunched a five year strategy, which we're going to framework, which we're going to explain to later down within the presentation. And, there's been some opportunities with short term headwinds within the business, but the long term opportunities still look very favorable from where we are. Now this is just to show you a little bit from where when I came in in January 21. I think you can see from the bottom there, it says the revenues were up some 70%. The underlying operating profit is up 88%.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

This is mainly created by a diversification story and moving away from noncore businesses, which we were involved in before. So it allows us a bit less distraction and focus on the diversification story within the ship broking space, anything necessarily complements the business. Just on the right hand side, you can see we've got some 411 people within the business, some 18 offices across the globe in certain different countries. And I'll pass you across to Grant to give a of the financial performance.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

Thank you, James. So just starting with the financial highlights. The group has delivered a solid financial performance for FY 2025 with revenue of £141,900,000 Whilst the first half performance showed an improvement on the previous year, the second half was significantly weaker, and we that was really driven by lower tanker performance, and we'll talk a bit more about that shortly. But this was partially offset by a stronger performance from our investment advisory division, which really reflects the increasing resilience that we've built into the business over recent years. Underlying profit before tax and excluding acquisition related items was £16,700,000 which was £1,400,000 lower than the prior year, really reflecting the weaker revenue performance and subsequently lower bonus costs.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

However, as a result of the continued tight control on costs, we are pleased to be able to maintain our margin at 12%. At year end, the group had a net debt position of £2,500,000 and that was due to some adverse temporary working capital movements, which are primarily lower than expected cash receipts in January and February. That subsequently called itself up in March and we swiftly returned to a cash positive position in the first couple of weeks of March, which is typical of our working capital capital cycle. We have a strong forward order book. So our forward order book is where we hedge vessels either for sale in future periods or newbuilds and time charters.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

And that we maintain that strong forward order book position at $82,200,000 And we announced today our new capital allocation framework, which I'll give more detail on later. So we've taken the decision to reduce our final dividend to 2.5p, but we've announced a share buyback program of up to £2,000,000 So ultimately, we've ensured that total shareholder returns has been maintained. So if we just move on to the income statement, revenues decreased by 7%. And as I've mentioned, that was really a chartering business segment where it was impacted by significantly weaker tanker and dry cargo rates in the second half, although offset by investment advisory slightly, which was 18% up. That was really a strong performance for our sales and purchase team.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

Risk advisory was down slightly 3%, but underlying operating profit before expense related expenditure was down 7% with margins maintained at 12%. Our statutory profit at £9,200,000 was 23 percent higher than the previous year, and that was reflecting lower specific costs that we had in the FY 2024 numbers. So we've focused over recent years on diversifying within ship broking and securities and building resilience into the business to give that resilience across the shipping cycle. Charter and revenues, I've said, were down 14% with GBP 14,500,000.0 due to tanker revenues. And specialized and dry were also down, but we had a very, very strong performance from our offshore desk that was up £1,000,000 to £9,000,000 We've said these lower charging revenues were partially offset by a strong performance in investment advisory, which in total was up 18%.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

And within that, our Sale and Purchase Desk was up 19%, and that performed very strongly in both new builds and secondhand. Risk Advisory, as I said, broadly unchanged. But this month, we received permission from the FCA to operate a UK organized trading facility, which is a venue which allows our securities business to trade additional products, and we believe that we're going to see that division return to growth this year on the back of that. Moving on to operating costs. We continue to maintain a tight control of costs, but we are balancing this with a focus on efficiency and investment.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

Ultimately, lower revenues led to lower bonus costs during the year, with staff costs reducing by £10,900,000 Professional fees increased, and this was partially due to the proactive investment that we've made in establishing The UK Organized Trading Facility to drive further growth in risk, our risk advisory division. And finally, other costs of $1,100,000 reflect an increase in bad debts and the investments made in our IT uplift program to improve our data capabilities and drive further efficiencies across the business. So our liquidity position remains good. We had a net debt position at the year end. Although as I said, we returned to cash positive shortly after, in line with our working capital cycle.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

If you look at the waterfall on the left, you can see where the cash went during the year. From our starting position of £28,000,000 we generated £21,000,000 from underlying operations. Working capital movements were a reduction of £10,000,000 Financing and tax was £3,000,000 outflow and we paid £5,000,000 in dividends. We continue to purchase shares for our employee share ownership plan and we reduced our total debt by £8,000,000 as we focused on the efficient use of our cash. So finally, if we look at the group KPIs, unfortunately, given the strong first half performance, we did not see the step forward we would have liked to in on the prior year, given the more challenging markets that we saw in the second half of the year.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

But I do think it's encouraging to see the significant growth and resilience that we've built into the business if we look back to FY 2021. And in FY 2021, that's the last time that we set ourselves some medium term targets, which was to double our underlying profit by FY 2025. So whilst revenue was down 7% in the year to £142,000,000 it was 70% higher than FY 2021. Revenue per head, 8% lower due to lower revenues, although it continues to be very strong by industry standards at three and forty five thousand pounds 40 six percent higher than FY 2021. And it's worth remembering this metric is actually based on all starts, not just revenue earners.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

Operating profit margin maintained at 12%, which is a 3% improvement from FY 2021. And our focus on efficiencies and increased productivity will improve this going forward. Our forward order book continues to be strong, as I've mentioned, at $82,200,000 I talked about net cash and funding dividends, 2.5p final dividend of 7p for the full year with a share buyback program launched today of up to £2,000,000 maintaining shareholder returns. And just coming back to our target, we set our FY 2021 target of doubling underlying profit. It's worth remembering that, that was achieved in FY '20 '20 '3 and FY 2024.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

And in FY 2025, we did have that strong first half performance, but then we did see an impact from the rates in the second half. I'll now hand back to James to go through the strategic update on that.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

Thank you, Graham.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

So I think what we're trying to sort of show here in the first slide is basically we haven't seen a fall in the second half rates or market or numbers since '21. That's obviously being in the COVID situation. So normally, in the business with the second half of the year, a higher performance in revenue. Now obviously, change this year, which is unsurprising to ourselves and to many there's obviously a lot of factors and reason for that. Lots to do with what's going on potentially in The US at the moment, but pre Trump coming to administration.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

The tanker rate index on the right hand side is showing you the fact that the market has been exceptionally strong in some parts of 'twenty two, 'twenty three. We see we saw a drip dip down, but then since then, we started to see the markets move back up again. So we're feeling that the markets going forward for this year are increasing. So it's a benefit business there. Now most of our business is based in U.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

S. Dollars revenue. There may be some 5% is in other currencies like euros or sterling. But you can see that that has impacted the numbers in the second half as well because we saw we've seen dollar sterling move to 1.35 as opposed to where it was in the year earlier. The Braemar Index gives you an all ship index of where we are in the cycle.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

Compared to where you were some ten years ago, this cycle is still far higher. And the outlook, we're still very confident in the outlook for many reasons. I think you'll see in the slides coming forward. I can spend it from there. So on the first slide, it's a global fleet, and that's basically everything that you'll see from gas carriers to LNG to containers, dry tankers and other various sectors as well.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

So you see the world the global fleet has grown in in all in essence. That's obviously a positive for us as well because that means more transactions. Braemar is in every sector there is out there on that on that on that global fleet. On the second slide, it's showing you the fact that the fleet is aging, which needs to be replenished. Normally, would say what max 15 of age, when will be the cycle life of a ship.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

So that's sort of moving towards twenty year cycle, but the fact is the fleet needs to be rebuilt. And you can see from there on the new building program, that's starting to increase. Very nice increase, and that was obviously bigger than new building sectors and part large part of our new building value by revenue stream in our forward order book. Looking further ahead, we're taking some we've taken some graphs from data. The old demand is still increasing.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

You can see that drive going through there. We can't necessarily dictate how that flow will go because of so many implications in the world today, but the fact is it's still the demand is increasing. Now as far as China, we had a little bit of surprise there during COVID. We thought that we would see a bit more of a a bit of after COVID, see a bit more of a return to China. That's been a bit slower, but we can see that the output growth is going forward.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

We're starting to double. China is obviously a huge part of the shipping business for demand. And the global GDP is obviously you can see the curve there going forward as well. So it's obviously good for shipping. Shipping is a huge indicator of the global GDP.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

Now today, we sort of came out with a new strategic framework, and we want to build this momentum. When I came in in '21, I I mentioned earlier that, you know, building a diversified business that was able to to to protect itself. We're starting to become very new, meaning one sector coming through. From my previous CEO was at ACM, that was a little bit one dimensional. So it's important to get to a business that's more diversified and stick to ship working.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

So that's one thing we have done within the last four years. I'm very I'm a great believer in consolidation. Like I explained that the fact that as the business moves more towards a a compliant world, that's giving us opportunities to pick up the smaller businesses to having to sort of look at the the the idea of having to make more compliant or moving to a bigger shop. So so that's obviously happening. At the same time, we've probably moved away from some of these installations recently in businesses because the time frame wasn't ready, but now we feel that building strategic framework is the right time for us.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

Operational excellence, Grant's put that lots of places, really built a proper framework for us to build in our business. That's all in that's all in place, so it'd be easier to drop those businesses into the company. Now we've obviously got sort of a target here of $200,000,000 as far as sterling as far as by FY 'thirty, as far as our revenue. Risk advisory business revenue up by '21 now to 30,000,000 The underlying operating profit margin for FY 30% by 15% obviously, you see a $1,500,000,000 So now obviously, on top of those targets, we're sort of putting ourselves at 10 new brokers, high as then we're talking quality brokers, proper brokers, and one new area of jurisdiction, globalized tanker operations. We can spend a bit more on that afterwards, and a clip and one complete complementary transaction within the moment.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

Thank you. So just picking up on those three pillars. We've already made good progress in a number of areas within this framework given the strategy that we've had in place over recent years. And just picking up our risk advisory, which is a great example of the success that we've had in diversifying our revenue streams. This segment has been steadily building.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

In FY 2021, we had 7,500,000 of revenue. That's increased to £22,300,000 in FY 2025. These operations comprise of tanker and dry cargo for freight agreements, which allow our clients to hedge their freight positions. Coal, natural gas and oil, so highly complementary to the shipping industry. Importantly, we do not take risk in this business.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

We provide agency broking services. So there is no balance sheet risk that we take within this division. In FY 2026, I did start this year. I'm pleased to announce, as I said, that we've secured our organized trading facility approval, and that's live. And we're already seeing some of that clients trade on that venue.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

It will allow us to trade additional products as we bring more brokers and opportunities on board. And we're also, some way through the application to establish a European OTF, which you will base based in Spain under CNMV, who's the regulator out there, to trade with more European clients. So we're quite excited about the opportunities here. And if we look at consolidation, whilst we haven't completed a transaction this year, we looked at a number of deals during the course of the year, but we have maintained our discipline and we're focused on shareholder value and deals that would complement our existing business, the Braemar business, as well as the business that we would be acquiring, which is what we've done in the deals that we've done historically. Now what you can see here, we've used this slide before, but the white space shows how many opportunities there are out there.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

So whilst we have some short term headwinds that Jane talked about in terms of FX and rates, we believe that this market does present us with significant opportunities at the moment as the valuations for those businesses are coming down. There was probably, as I a disconnect between public and private valuations when we looked at transactions in the past. We see that that be getting becoming closer, and we're well positioned to take advantage of that. So as you can see that there are lots of opportunities not only by by desk type, but also by geography, that we can take advantage of. And finally, operational excellence is really the focus on building efficiencies in the business and adding value to the business.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

So as we continue to invest in our platform, and what we mean by that is our platform to support a growing business. So we have built the finance, the compliance, the IT infrastructure that can support a growing business. That will support our growth. And if we look at it from an IT perspective, during FY 2025, we improved our infrastructure, we modernized it, we went cloud first and we unified our global technology stack. We've had a focus on productivity with real time data feeds and tools that will enhance the broker productivity.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

And we've also had a big focus on performance improvement. So we've invested in business intelligence tools to give us a much deeper and faster insight into business performance. Why are we looking at processes? And we've automated We're aligning global processes to in to really drive the efficiencies in the business.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

So when we look at our FY thirty target of 15% operating margin, you know, that's about ensuring that we've got the support functions ready to support the business. And as we bring those additional revenues in through organic and inorganic growth, we can drive that margin forward on that. And then to finish for me on the capital allocation policy. So we've amended our capital allocation policy today in support of our strategic framework that James outlined. And we feel that this reflects a balance between growth investment and returning cash to shareholders.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

So first of all, we will maintain a robust balance sheet with net debt of less than 1.5x EBITDA. Secondly, we will continue to invest in talent to grow the business, but we will maintain our discipline to ensure that those generate shareholder value and focus on driving efficiencies and improved margins. We will not participate in paying lots and lots of money for hires if they are not going to generate returns and shareholder value. Thirdly, we will continue to have acquisitions that allow the group to accelerate its growth, but they have to meet a strict value enhancing criteria. And finally, we will return excess capital to shareholders through dividends and share buybacks as we continue to grow the business.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

Thank you, Paul.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

So summary and outlook. I think we could say it's a robust financial performance, clearly illustrating the importance of diversification, something I very much was clear when I came in four years ago, which enables to build resilience in the business. The underlying operating profit margin maintained at 12%, returned to net cash position shortly after year end, in line with the usual working capital cycle. Total dividend 7p, pounds 2 million share buyback announced, total shareholder returns maintained. Outlook.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

Yes, some short term headwinds driven by ongoing uncertainty and weak U. S. Dollars, reflecting this respect to FY twenty twenty six underlying operating profit to be now 13,000,000 to 14,000,000 Strong forward order book maintained $82,200,000 Strategic framework launch with short term and medium term targets. Market fundamentals remain strong. We continue to be well placed to take advantage of opportunities ahead. Thank you.

Operator

Fantastic. James Grant, thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the top right corner of your screen. While the company take a few moments to read those questions submitted today, I would like to remind you that the recording of this presentation, along with a copy of the slides and the published Q and A can be accessed via investor dashboard. James Grant, as you can see, we have received a number of questions throughout today's presentation.

Operator

If I may now hand back to you and kindly ask you to read out the questions where appropriate to do so, and I'll pick up from you both at the end. Thank you.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

Thank you very much. I'll read the questions. Thank you. First question is, will we be looking at further acquisitions or other M and A?

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

Well, I think we want to sit here, first of all, and say that we sort of touch base on the fact that we've been patient. There's been quite a few M and A deals come past over our desks and bowels, I'd say. But the fact is it's important to make sure we do the right thing that's enhancing for the business. And the sum has been in the business for some forty years and seen many markets move up and down. It's important to make sure we get that at the right valuation and this integrates the business and enhances the business as well.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

So yes, there is opportunities out there and yes, there is a good chance that we will do that. We've also outlined the fact that we'll do singular hires, potential test purchases or potential bigger M and A deals.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

Yeah. We certainly believe that given that we're seeing a slightly softer market, that there's going be lots of opportunities for us in this space.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

And I think I want to just emphasize on that question as well. I think we did touch base as well that, you know, we've built that platform. The business is becoming closer and closer to, you know, to a regulated business. Although it's not necessarily there yet, the compliance, this is all of the cost factor for for smaller businesses. And I think that to them, as the clients demand more of this, that it gives us the opportunity to pick up as they start to think this is the right time to move out of that business.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

Okay. Thank you. Next question. Please could you explain what is your future dividend policy given that you've now cut the final dividend to 27.7% of last year's final dividend of 9p to 2.5p? Would it be a fair assumption that you intend to cut the interim dividend by a similar amount reflecting it to 1.25p from 4.5p, given that you normally pay onethree of the interim dividend and twothree as a final dividend?

Grant Foley
Grant Foley
Group CFO & COO at Braemar

So I think just I'll take that initially. So just to think about our capital allocation framework, which I just outlined, we do feel that we are faced with a number of opportunities, which will generate long term shareholder value. And that's why we've laid out a clear capital allocation policy. But of course, we do want to continue to pay an attractive dividend, but we have reduced it, although we have maintained total shareholder returns. I think it's fair to say that the dividend will remain dividend paying business.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

7p for the full year this year, reasonable to think that that will hold at that level. Now how that cuts between interim and final is up for debate. We haven't thought about that. So it could be one third, two thirds, but we haven't fully decided on that yet. New build next question.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

New building had a good FY 2025, but you comment uncertainties around tariffs and U. S. Port calls caused many clients to pause investment projects. Would reduced tariffs and fees on U. S.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

Port calls be enough for newbuilding orders to recover? Or does it need their removal uncertainty that they will not be reinstated? I think from my perspective,

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

I think, look, it's a tool to start to sort of move into a situation where you're going to labor a huge tariffs on Chinese built ship I potentially see the fact that it could be potentially hit targeting certain companies. You know, there's even conversations about Chinese financing as well-being in tax tariffs as well. So I just we're just seeing that. But from from my talking to the various client base, it doesn't feel yet that it hasn't slowed down necessarily always in China as they see that. We're seeing we're seeing we're seeing orders still be in place within China, obviously, Korea and Japan as well.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

But at the same time, we're moving into other parts of the business where we're seeing that the alternative fuels, whether that be dual fuel as an LNG or methanol or ammonia. So there's that pressure as well to build ships. And China has been the large area of building ships. So it's difficult to see how which way that will go. But the fact is, look, we're well placed in that position of those markets.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

And but at the same time, the appetite hasn't totally dwindled on those as what we call the Chinese built ships.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

I'll add to that as well. So that we showed that chart earlier, which showed new building orders. Over 20% of capacity came out of the new building yards post the GFC. So the yards are pretty busy at the moment. There isn't a lot of available slots.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

And that chart, just to the left of that showed an aging fleet. So these vessels are going to have to be replaced. And so we're going to continue to see reasonable newbuilding activity. Next question. You referenced expanding teams.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

How are you finding recruitment in what is likely to be a competitive talent market?

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

Yeah. I think I can answer that question. Look. The the market is has been, as I say, last three or four years, it's exceptionally competitive. And we've obviously you know, the you know, Grant is very much looking at we both look to make sure that we see some a a return of our of those talents as how we, you know, how we structure that as far as what we would call sign ons and making sure that the we see a return on that investment, and we've been shy to gain to some form of bidding war that so because sadly, I've seen rates go down as well as go up, and we felt very choppy in the market.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

But at the same time, you know, it's important to sort of promote Braemar as a company that is is on multiple different markets and helps and it does help the broker to have that in base information to obviously supply to your clients.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

So Yeah. You talked about the cost of talent reaching uneconomic levels. Can you say what parts of the market this was and what sort of organization was paying these uneconomic levels?

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

I mean, yeah, think you can go

Grant Foley
Grant Foley
Group CFO & COO at Braemar

We saw saw competitors and heard of competitors paying quite significant amounts of money for individuals to join their business. And our view was that they were just uneconomic. This was at a time when, yes, rates were stronger, but as James already said, rates go down as as well as up. And when we looked at it, it was that you look at those numbers and it's you're looking at a significant period of time before you get a payback on on your investment. And that was at a time when rates were strong.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

As we've seen with weaker rates, you're going to have a significantly longer period. And so our focus during that period was not to participate in that bidding war as it was, but to focus on retention, which we've done during that period. We now think that there's being a more normalization in that space. And again, it comes back to the opportunity that we see just short term headwinds, but we thought it's an opportunity to acquire talented individuals as well.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

And it's very important that, you know, that when bringing new talent into the company, you're careful of not literally going too far the other way and overpaying. As as Grant mentioned, this doesn't become an unequal sense to do that. But the fact is, you know, you've got to also got a large team within the business, and that also can create a rock rocking way. It doesn't work out too well. So you have to be very careful what you do, pick up set internally as well.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

Thank you. Next question. What is your take on the China US trade patterns for shipping? Any best insight?

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

I mean, it's I think we'll obviously with the tariff, it's still totally not totally clear on what's gonna happen with the Trump administration because as you can see, I'm sure you're very aware, that is moving around a lot. It has created some uncertainty as we have mentioned a moment before. You know, obviously, The US is an exporter of oil as they're obviously huge as far as taking in from China as far as on the container market as well. So look, we just we just moment, we feel that it's gonna be interesting times. You know, they also add into the fact that what's economically making sense moving all around and what the trade patterns are gonna be.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

So at the moment, it's creating a bit of uncertainty, which potentially goes back to where we feel we could self assurance.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

Next question. What will you call what will cause your margin to increase to reach your 02/1930 target? Is it scale or a change in business mix? Does this require charter rates to increase from these levels to achieve this? So basically, what we're looking at here is really that focus on operational excellence, and I've talked about the platform.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

So the investments that we've made to support a growing business, yes, of course, there will be additional cost within that. But it wouldn't be at the rate that we can increase our revenue base. As the business grows, we have the technology, the infrastructure to support that growing business as we buy individual join us or teams or M and A comes on board. We can use that platform to support those businesses. Now what that will do is that will then drive as they come on board and our revenue goes up, then we can retain a good proportion of the profit there.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

And that will start to open up the jaws of the operational leverage in the business and improve our operating margins. Now what we're saying, we are we're focused on building a more diverse and resilient business. So we are not there is always going to be a shipping cycle. But as you've seen in these numbers and last year's numbers as well, yes, it doesn't all move the same way. So we saw weaker tankers this year.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

We saw stronger S and P. Last year, we saw stronger tankers. We saw slightly weaker S and P. The year before, stronger dry cargo. So you always get a mix of revenue, and that's why it's so important to be diversified across the shipping space.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

So you are not reliant on one single area of chartering or S and P or whatever it would be. The next question. In cutting the final dividend so substantially, what considerations given to small private shareholders who rely on the dividend income? Do want me to start with that?

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

Yes. Start with that.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

Yes. So look. I obviously, it's not a decision that was taken lightly. It was debated a lot at the board. We want to create shareholder value and that through an improving share price as well as paying dividends. We had a progressive dividend in place. We paid 5p in FY 2021. Now once it went up to 13p in FY 2024, share price hasn't really moved much to reflect that progressive dividend. I think the yield went from 3% to 6%.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

We believe that the yield now is an attractive yield, 3%. But given what we've outlined, we also and sorry. Would say we've maintained shareholder return. But given the opportunities that we've outlined, and I hope everyone's heard the opportunities that we've spoken about during this call, we believe that we can drive more medium to longer term shareholder value through investing that capital in the opportunities that we see, which will, of course, then drive longer term shareholder value.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

Yeah.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

I think, you know, just to add to that, obviously, the share price we feel has been undervalued to where the business is based or where the business was some four years ago and what we've done. Just want to emphasize the fact that I'm the largest shareholder within the business. And I too was thinking about obviously thinking about the cuts and dividends. But for me, it's about growing the business and the buyback seems to be the best alternative option for us and maintaining, as Grant mentioned, without the different policy and the percentage. So, yeah, so I think we've definitely looked at it very carefully before we make that decision.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

Thank you, James. Next question. You mentioned regulatory pressure could create exits from some parts of the business. Could you suggest which ones? Just so we're clear, that's not our business.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

So there is ship broking is unregulated. Of course, have a regulated securities business, so that's fully regulated in jurisdictions that we operate in. But what we're saying is the unregulated shipbroking business is becoming more towards a regulated business. And that's exactly why we've invested in compliance technology, etcetera, etcetera, to ensure that when we're working with owners and charterers, they have the confidence that KYC, AML, all of these checks have been done. Now if you look at smaller operators, that's an additional cost burden that they would have to bear.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

We have got that platform to support that. So we become attractive because they haven't got to invest in that business. They could come a team or another business could become part of the Braemar Group and benefit from that platform that we have in place. So just to be clear, that wouldn't be us exiting parts of the business. It would be some type of our competitors or smaller businesses who would say, you know, I wanna become part of a bigger group because they've got that infrastructure in place, and I've got to pay for it.

Operator

That's great. James Grant, thank you for addressing all those questions from investors today. And of course, the company can review your questions submitted today. I will publish those responses on the Investor Me company platform. But James, before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Could I please ask you for a few closing comments?

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

Yes. Thank you once again for joining us today. We really appreciate. And the most important thing for us to say is that we are pleased with the set of results this year. It proves the fact that business is resilient.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

And the fact that, I mean, you can see we've put framework in place to build the business even further to the next five years. We've sent some good strong targets. And we believe that from the last four years of what we've done to where we're going, we feel we're well placed for that. And so thank you very much for that. And obviously, we're always there for additional questions to myself or to Grant.

James Gundy
James Gundy
Group CEO & Executive Director at Braemar

Happy to have that. Always happy to meet more and discuss further information if you need some more. Thank you once again for attending today. Really appreciate it.

Grant Foley
Grant Foley
Group CFO & COO at Braemar

Thank you very much.

Operator

That's great, James Grant. Thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Braemar plc, we would like to thank you for attending today's presentation, and good afternoon to you all.

Executives
    • James Gundy
      James Gundy
      Group CEO & Executive Director
    • Grant Foley
      Grant Foley
      Group CFO & COO
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