Braemar Shipping Services: Cyclical Challenges Continue
Edison | Jan 24, 2017 06:36AM ET
While the shipbroking activity continues to trade in line with expectations, weakness in the oil & gas market has continued to adversely impact the Technical division. Corrective actions have been accelerated, with £6m of benefit expected in FY18. FY17 EBIT guidance is cut to £3-3.5m and the reduced dividend should more closely reflect the underlying earnings potential, with an historic yield of 5.7% likely to build as earnings recover.
Oil & gas spending crunch persists
Shipbroking, which generates over 40% of revenues, continues to trade in line with expectations for FY17. However, weaker trading elsewhere in Braemar Shipping Services Plc's (LON:BRMS) diversified portfolio has led to a significant profit warning. The deterioration in trading conditions for the Technical division noted at the interims has worsened further, leading to an extension of the previously announced realignment programme. The weakness has been driven by the depressed spending levels in the oil & gas market, which have led to a “marked” reduction in replacement contracts. Corrective actions have included the installation of new management change and changes to a regional operating structure. In addition, the smaller Logistics division has seen weakness in its freight forwarding activity due to weak international trade flows, undermining the continued strength of the port agency business.
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