Braemar Stock

Good afternoon, and welcome to the Braemar Plc investor presentation. [Operator Instructions]

Before we begin, I'd like to submit the following poll, which I kindly ask you submit your responses. I'd now like to hand over to CEO, James Gundy. James, good afternoon.

Good afternoon, and thank you, and welcome, everyone, and welcome to Braemar's '25-'26 Full Year Results. My name is James Gundy and Grant Foley, CFO. But as you know from the presentation, Grant will be taking over my place as I step down.

So to start the presentation, it's a little bit about -- I'll give a little short intro on where we were and where we are today from when I took over 5 years ago. Just quickly, I came into the business, I had a very clear vision of simplifying the business, reducing the debt of the business and buying more and building out the security business, which we built into in 2017, which to complement our presence in the broking space.

So you can see from this chart, which is in front of you, you can see we were in 2021 at GBP 83.7 million revenue then. Now we're at 135.6 million. And you can see from below that, you can see the chartering percentage there of 27% investment advisory, which is sale and purchase and finance, 44%. And you can see risk advisory, which is a security business has risen by 785% we're proud of that.

The underlying operating profit from '21 to '26 has gone from GBP 7.7 million, which is GBP 13.2 million. And the net debt, as you can see, has been hugely reduced. And in fact, Grant will tell you a bit later on that the net debt going into the beginning of March fell into cash positive position.

Okay.

So, I can say the business has totally transformed, and it's a business now that we can say that we fully understand and we brought it back, as I said, to very much the basic model. And you can see the margin is very much improved. The revenue per head has increased from '21 at GBP 233,000 to GBP 350,000. We've increased our global footprint across the world. We've gone from 14 offices now to 19 offices. We've expanded some really crucial parts of the world, especially in the U.S. we opened up recently an office in Cape Town, South Africa.

The forward order book, which is an important part of our business, it helps us to budget when we come to the start of the year. That's moved from $43.4 million to $72.5 million. I think Grant will mention a bit later on where it is at the present day. So you can see the diversification on the next slide, you can see how diversified. The most important thing about this slide, which I'm most proud about is the fact it's more equilibrium as opposed to in one sector.

The previous in '21, it's majority chartering. Securities is like 4%, S&P and finance 26%. But if you move towards the right-hand side, you can see how we're now more equal, where we've grown the security business to 21% of our business, S&P is 24% and the chartering is 55%.

Thanks, James. So I'll talk through the financial performance. So FY '26 saw a resilient financial performance in line with expectations. Revenue of GBP 135.6 million was 4% lower than the prior year, and that decrease was really driven by weaker chartering rates, particularly in the first half.

We did see an improvement in rates and activity as we went into the second half. And you can see here the split of first half, second half revenues with a 12% increase from the first half to the second half, reflecting those improvements. Underlying operating profit at GBP 13.2 million was 21% lower than the prior year, and that was really driven by the lower revenues that we saw coming through. Underlying operating profit margin was down to 10%, which reflects the operational leverage in the business as we grow the revenue, we saw that operational leverage coming through.

And as the revenue did improve in the second half, you can see quite clearly there that the first half margin was 9%, but as revenues improved, that grew quite quickly to 11% in the second half. And as James mentioned, the forward order book remains strong at $72.5 million. And although it's lower than the prior year, which reflects a decrease in our chartering forward order book, pleasingly, that has grown since the year-end and is now just under $78 million at the end of April.

The Board is recommending a final dividend of GBP 0.045 per share, which takes our full year dividend to GBP 0.07 per share. That's unchanged from the previous year and in line with our capital allocation framework that we launched last year. Net debt at the year-end was GBP 2.9 million, which is as expected and in line with our usual working capital cycle, and we returned to a net cash position shortly after the year-end in March.

So if we move on now to the income statement. As I said, revenue down 4%, really driven by that weaker chartering revenue, which was rate driven, and we'll come on to that. Operating expenses remain well controlled, a decrease of 2% in the year, mainly due to lower bonus costs on the back of those lower revenues. And I said underlying operating profit margin of 10%.

Underlying earnings per share, GBP 0.2423, which is 23% lower than the prior year and a full year dividend of GBP 0.07 per share. If we look at revenue now in a little bit more detail, Total revenues, GBP 135.6 million, which were GBP 6.3 million or 4% lower than the prior year. Chartering revenue was 16% lower than the prior year, reflecting weaker chartering rates in the first half, particularly in tankers.

Tankers was GBP 9.6 million lower than the previous year. Investment advisory increased by GBP 2 million. And as James said, that's mainly our sale and purchase and Corporate Finance divisions, which is 6%. Asset values remained strong throughout much of the year, which helped that activity. Risk Advisory or our Securities business performed very strongly, increasing by 29% to GBP 28.8 million.

And this was really driven by increased levels of volatility in the period and the launch of our U.K. Organized Trading Facility, which is building out our infrastructure for our securities business so we can continue to grow that. In dollar terms, revenues were just 1% lower, but we saw a movement in the FX, the sterling because our revenues are dollar-denominated. So in dollar terms, it was just 1% lower.

Overall, I think this revenue performance clearly illustrates the benefits of our diversified revenue streams and how that is increasing resilience and delivering more sustainable revenues. So as I said, operating costs remain well controlled, reducing by GBP 2.7 million. Staff costs were GBP 2.7 million lower, really reflecting lower bonus costs.

We continue to invest in key hires, which is important for our future growth, and that was GBP 0.5 million. T&E, travel and entertainment was GBP 0.7 million lower, and that was really a reduced spend across the business, and there's a shipping event that happened prior year, which was inflated to costs.

Office costs were GBP 1.2 million higher. We had some surplus space in our London head office, which was previously sublet. That's now vacant, and we're actively looking to sublet that, and that will then -- that will reduce that cost hopefully in the coming period. So just looking at liquidity. The group continues to generate strong cash flow, GBP 12.1 million operating cash flows of GBP 12.1 million for the year.

During the year, we paid dividends of GBP 1.6 million, GBP 2 million of share were purchased through our share buyback program that we announced last year and GBP 4.1 million of shares were purchased for the employee share ownership plan. GBP 2.6 million was paid to settle the outstanding convertible loan notes that we have on our balance sheet, and that was the final payment in respect of the Naves transaction that we completed some time ago.

In addition, the provision that was held on our balance sheet relating to the independent investigation of GBP 1.9 million was settled and paid in the period. As I said, net debt position at the end of the year, GBP 2.9 million, GBP 0.4 million higher than the year earlier, and we've shortly returned to a cash positive position. So to summarize our financial performance, as I said, a resilient revenue performance with significant improvement in the second half as we saw rates and activity improve.

Improvement in revenue per head to GBP 350,000, reduction in operating profit margin for the year, it is important to look at first half, second half, where you see that move from 9% to 11%. The forward order book continues to be strong and continues to improve. Net debt broadly unchanged and a full year dividend of GBP 0.07, unchanged on the prior year and in line with our capital allocation framework.

James and I will now just talk about what we're seeing in the market. So moving on. Obviously, a lot is happening with regards to the war in the Middle East and its impact on the business. So if we look at this slide and we look at the impact that we're seeing on tankers.

If you look here, you can see this darker line here is the traffic that goes through the Strait of Hormuz. And you can see that once the hostilities commence, those passengers, the traffic through the Strait drops to almost from about 45 -- 50, a day on tankers to almost 0. Now what we saw in that period as well is that the rates for that route have increased dramatically.

However, that's really irrelevant because the rate isn't a true measure because you can't fix a ship. So whilst rates have increased, you can't actually fix a ship.

Now offsetting that, what we've seen as the conflict has continued is this green, this lighter green line, which is the transit to the U.S. Gulf. So what we're seeing is more ships move towards the U.S. Gulf and they are then -- they're taking on cargoes and then they're servicing other parts of the world. And so what we're seeing is new routes being established that were historically being serviced through the Middle East. A lot of that's coming out of the U.S. now.

So we're now seeing routes going as far as the U.S. to Australia or West and East Africa, which would have typically been serviced out of the Middle East. So we're seeing that type of activity. We've seen rates increase globally, given what's going on. So broadly for us, at the moment, because we are well diversified and we have a strong U.S. business, we're seeing a net neutral from a revenue perspective.

So what we're losing on the fixtures that we would have been seeing in the Middle East, we're gaining on what we're servicing and fixing in the U.S. So we're broadly seeing a revenue-neutral picture for the first 2 months of the year.

And if we look a little bit further on, there's clearly some short-term uncertainty. But once the strait reopens, we do believe that it will present opportunities. We're now almost 3 months into the conflict. And as I've said, we're seeing lower -- reduced Middle East fixtures offset by increased fixtures elsewhere at higher rates.

We're also seeing those new trade routes established, which I mentioned, and that's really trying to meet that demand that was being serviced from the Middle East. So you're seeing that demand being serviced from different places.

Now once the strait reopens, we believe there will be significant global demand that will need to be met. And we expect that strategic and commercial oil reserves will need to be replenished. They definitely will need to be replenished.

And much of that tonnage, the ships to do that are likely to be in the wrong location geographically. So if we look further ahead, we do believe that this situation will take some time to resolve itself. The strategic inventories will probably be replaced gradually and possibly countries will actually look to increase their reserves to build increased energy security.

There's also the potential depending on what a reopening of the strait looks like and the terms of that, the owners may remain cautious and they may not want to use the strait. So that could lead to a change in trading patterns -- and that's likely to increase freight costs through longer voyage times and more tonne miles. But overall, once it reopens, we believe it will be positive. So looking at rates during the year.

Yes. No, just quickly just adding on to what Grant said, and we obviously -- I'm sure you have a few questions at the end of this presentation regarding the Hormuz, et cetera, what's been going on there, so we can answer those questions more in depth then.

But on this slide here on Slide 16, you can see our Braemar Index. The Braemar Index is something we do every presentation, and that shows you where the global shipping fleet, that's everything as I sponsor again from containers to tankers to dry cargo. And you can see where the average is at [indiscernible]. So the market is still looking strong, just reemphasizing the fact that we are in every market.

We're not a singular broker certain markets, we are in all shipping and chartering markets. The Braemar Index for tankers, although I think you're seeing, as Grant said in the results, the first half of our year was more difficult as the rates were lower, especially in tankers. But the back end of the year of our financial year, the market, you can see, especially going into the conflict, you see the market rates moving back up again.

And the Braemar Dry Index, speaking to the analysts only yesterday, the outlook is looking very strong for dry. We're seeing some strong numbers on the Capes and throughout the business. The dry cargo market isn't so affected with the conflict in the Middle East. It's only really fertilizer on the ships that are really is the big impact there, but everything else can be sourced elsewhere.

So that's positive as well. We have a big business in Australia and dry cargo as well as London. Right. Going on to Slide 17. The demand side still looks very positive. I mean the global GDP, you know about that, that saw an upward trajectory. The China industrial growth still looks positive. We show that as far as iron ore imports there and oil demand is still very strong.

Yes, they're maintaining their oil exports as far as products are concerned using their refinery products within the country. And the oil index is still showing a positive graph there. So we have to emphasize once again, and I think it's important to see the fact that shipping as far as global goods is 80%, 85%. So you can see it's really a big indicator on some of these graphs -- right. This is one that just shows you a little bit about the global fleet. You can see the global fleet is growing.

Once again, that helps us having multiple desks covering all markets, but the situation with when back in 2006, it was probably more unique as far as what ships are being built, more driven towards tankers and dry cargo. As we move on in the last couple of years, it's more driven by containers and LNG and above those sectors.

The fleet is aging. That's undoubtedly -- ships are having -- the uses would indicate max 15 years of age, but ships go on longer, moving towards more 20 years of age, but the fleet is aging compared to what's coming in. newbuilding book order book on the right-hand side, you can see still down from the highs of 200 for the financial crisis. But the fact is it has to be replaced. We have a big new build department as big S&P department. So need to be obviously involved in those transactions. I [indiscernible] Grant.

Thanks. I'll give a strategy update. So we made good progress on our strategic framework that we launched last year during the course of FY '26. We said that we were going to hire 10 new brokers, senior brokers. We actually hired 16. And that's across all parts of the business, all of our ship broking businesses as well as our risk advisory businesses. We said we'd expand into new jurisdictions, and we opened our first office in Africa, and that really does expand our geographic and strategic reach.

We focused on efficiencies. We employed a global Head of Tanker Operations. And during the course of the year, we reduced headcount, we centralized the claims areas, and we implemented 24/7 coverage to really improve service and response times. We said that we'd aim to complete a transaction during the course of the year, and we evaluated a select number of complementary transactions. Now we focus on opportunities that will really create sustainable value for our shareholders.

And whilst those a select number did go through to due diligence, no transaction was completed in the year. And that's really because we give a very strong discipline and rigor to the transactions that we evaluate. We are very firm. We've got lots of good opportunities growing inorganically in the business.

And when we look at transactions, it really does need to ensure it's complementary and create shareholder value. So whilst we didn't complete the transaction, we remain well positioned to capitalize on the right opportunity. But to come back to that point, we maintain discipline and a rigorous approach to what we look at. So in line with our strategic framework, we've now set new targets for this new financial year. We have maintained our hiring target of 10 new brokers in the year.

We will continue to build resilience and diversification across the group, and we will establish a new securities desk, and we have plans for that, and that's really building on the infrastructure that we've put in place over the last few years and how we could bring these desks on board. Our focus on efficiency continues, and we're embedding AI across the business. We're initially focusing on areas where it can bring real productivity and efficiency gains in some of the corporate support functions and in some of the ship broking areas where there's more manual tasks that we can initially automate using AI.

And finally, as I said, we remain focused on completing a complementary transaction during the year. Now we've said that we want to have GBP 200 million worth of revenues by FY '30, and we continue to have confidence in that target, and we have a clear path to get there. In FY '21, as you heard from James, the business generated GBP 81 million of revenues. In FY '26, it generated GBP 136 million.

If you look at how we got there, part of that growth was organic through hiring individuals and teams of people and desks to join the business. And the remainder was from inorganic growth, and it was the acquisitions of Southport and Madrid Shipping Advisors that generated GBP 16 million. Now how we see the next stage of growth to get from where we are today to that GBP 200 million.

It broadly splits 50-50 in that we will continue to make the hires. So we hired 16 people in the last financial year. We've got a target and we'll do that for the following years. That quite quickly compounds and you start to see that revenue come through. So that's part of the growth and the remainder is through transactions. Now the market remains very fragmented. There are opportunities there. But again, we remain focused on doing the right transaction that adds shareholder value.

And it may be that other organic opportunities come along, and so we actually hire more than our target in one particular year if there's desks, et cetera, available. So we're flexible on that, but we have confidence that we can get to that GBP 200 million revenue target. So just to summarize, we've delivered a robust financial performance in line with expectations.

And that's been against a fairly challenging market backdrop in the first half. We've continued to generate strong operational cash flow, net debt broadly unchanged, but cash positive in March. We've made significant strategic progress opening in a new geography, expanding our capability and hiring new brokers. We completed our GBP 2 million share buyback and maintained our dividend at GBP 0.07 per share in line with our capital allocation framework.

As we look further ahead into the new financial year, we've seen strong momentum in the latter half of FY '26, which is carried into this year with a strong trading performance for the first 2 months of the year. The forward order book has strengthened to $78 million. We've received approval to open our office in the Dubai International Financial Center, which again is part of the infrastructure to grow our risk advisory or securities business, and we expect our European OTF to be approved in the first half of this financial year.

We continue to look at complementary acquisitions. As you've heard from James, the market fundamentals remain robust, and we're confident in our FY '30 targets. So we've built a very strong platform here to support the growth of the business going forward. So I'd also like to take the opportunity on the call to thank James for all of his work as Group CFO. I think you can see from the first few slides that we went through that the business has been transformed under James' tenure, and it's been great to work with James.

I'm delighted James is staying with the business, just focusing on the ship broking and I'm very excited to be taking over in the CEO role, but looking forward to continue to work with James.

Thank you, Grant. I'll just like to say to add to that, that I have utmost faith in Grant doing a stellar job coming into the role. For me, it's stepping back into full-time broking, but I've always never stopped broking. I've always been on the desk. So for me, it's not such a difficult transition. And I wish them all the very best, and that's all to say as well.

Thank you. So we'll now go to the Q&A, and thank you for those that have submitted their questions. And if you want to submit a question, please do. So I'll just work through these if that's okay. First question is, how are you actively working to become a more sustainable business?

So I think from what we've talked about from a -- I'll take it 2 ways. If we look at revenue sustainability, first of all, I think you've heard that what we've done over the last few years to make the business more diversified gives us that level of sustainability.

So you have clearly seen here weaker chartering, partially offset by strong performances from risk advisory and investment advisory. If you look back a couple of years, you'd probably see we would definitely see the converse of that.

So it's really important that we continue -- we're not going to start doing anything outside of ship broking and securities, but that we continue to expand our offering in those spaces and become a more diversified and resilient business, which will deliver those sustainable revenues.

I think if we're looking at sustainability from an environmental standpoint, we obviously work very closely with our clients when they're looking at purchasing ships to ensure that they're doing the right thing for the environment.

So we have people internally who provide consultancy to help our clients make the right decision when they're investing in vessels.

Just next question. On the new CFO, can you give any further update on appointing a new Head of Finance?

Yes, we're making good progress on that. We're now down to a very, very short list, and I'm hoping that we'll have the line certainly well before the AGM when I officially step into the CEO role.

Next question. In offshore, with the elevated oil price and perhaps prospects of more exploration activity, would you expect to see more ordering of offshore support vessels?

Yes. I think we can answer that question. You have to remember there was a -- first of all, the offshore supply vessels have a lot longer longevity compared to the -- what we would say the tankers. We saw explosion as in like many ships being built in the -- before the financial crisis.

I mean we saw the layup scenario, we saw a lot of recycling in that market as well. So the good thing is the market is now rebounding. It's in a very strong market. So I think the players in that market are actually taking their time to rebound into the new building market.

But our desks alone are involved in those deals, and we are seeing it. So we would expect that to happen to grow that market further. And we have opened offices now. We have offices in offshore in Singapore, London and Houston. Thank you.

Next question. You've made good progress on hiring new brokers, but can you talk about departures and staff turnover generally?

That's typically higher or lower. I think I can start the question. The most important is, look, we're in a high-margin business. It's a broker environment. It's a people's business. And being a business that is very much in the limelight at the moment, it does -- what we do see is outsiders trying to break into new markets as we have seen that.

But at the same time, I can tell you now from my ACM shipping days when we were very much one-dimensional tanker market. The first thing I knew when we came into Braemar, the first thing I said when coming into the actual seat of the CEO was to build our breadth remove ourselves from noncore business, move into higher-margin business and protect the business from any one potential, what we would say, being attacked in one market.

So what we can sit here and say is, yes, we've lost some people, but be, we've rehired very quickly on the back of those losses. And the fact it's amazing how we see the market consolidating more and more that we feel we can attract.

And because we have such diverse business across all sectors and those desks across -- there's a lot of cross-fertilization of those desk, we're attracting people. And so -- and also on top of that, we have a lot of young talent running the business who are attracting other talent as well. So for us, I think we're net positive what we're trying to do here.

Yes. And I'd add that there was some staff turnover in the earlier part of the year and that seems to settle in the latter part of the year. And we are, as James said, attracting established talent as well as a strong pipeline of talent.

And you have to understand, it's not just chartering we do. You look at our business now. We were 4% in securities. We're now at 20% in securities. So when you might ask about chartering people, we're growing securities. So the revenue stream is growing across the business.

Thank you. Next question, how disciplined will you remain around leverage and return thresholds when evaluating M&A opportunities given the fragmented market, our valuation expectations becoming more reasonable as macro uncertainty increases.

I think that we will be -- and it always depends on the type of transaction, how you structure it, free cash flows that you're getting, the synergies, particularly on revenue perspective, I mean, if we look back at our U.S. transaction that we did a few years ago, there were clear revenue synergies by being part of a larger group. So there's a lot of things that we consider.

Would we consider increasing our leverage target slightly if we thought that it was the right deal to do and there was good strong free cash flow to reduce that quite quickly? Yes, if it delivered sustainable shareholder value and it was a complementary fit.

So we're quite flexible around that. And in terms of the valuations, we haven't seen that any sort of adjustment at the moment, but we're early days, and we may see that in the coming period.

With widespread interest in the shipping space as of late, including rumors of ICAP looking to acquire Galbraiths for a very high multiple. Are you seeing increased institutional interest in our shares, which are clearly undervalued?

I start there?

Yes.

Look, I think one thing I have been saying for a very long time is the fact that -- and I said it again today is that we will see consolidation. I think you can see from this presentation very clearly that, yes, we've very much got into that IDB world ourselves. So we've branched out and the breadth of the business into other sectors.

There's only so many brokers you can have on one particular desk. So the importance is to grow into new sectors. We only heard about the rumors of this. Are we seeing the fact that we know -- we do know our shares are undervalued, very much compared to what we think the value of the business is worth.

But at the same time, we know that the small cap market has been undervalued for some time. And obviously, our job is to build the business up to grow into moving into a slightly move above the GBP 100 million to show more interest to institutions. But we have big institutions involved in the business. We know one big institution. So...

Yes. And I'll add to that. We've obviously just announced our numbers today. We've got a good roadshow over the next week or so where we're meeting institutions. I think our equity story is clear and what we delivered over the last 5 years. So I'm hopeful that we'll have a positive road show.

But it's only rumors and market say. I mean, so ICAP as far as I know, haven't come out and said anything about it or denied or confirmed anything. So it's just market rumors as far as we're concerned.

Thank you. That's the last of the questions. Unless anyone has any other questions, please feel free to.

Perfect. Thank you both for answering those questions. Before we ask investors to share their feedback, which I know is important to you, James, if I could just ask you for a few closing comments to wrap up with, that would be great.

This feels a bit strange to my last one to be doing this. It's been going. But at the same time, I want to thank you for taking time to listen to our presentation. I think you can see it's a very robust set of figures and are resilient.

And I'd like to think you can see now the business has built out its breadth. It's a completely different business than it was 5 years ago. We know what we want to do. We know what we want to achieve. That is the key factor. And I also want to wish once again, Grant all the very best going forward. But thank you once again.

Thank you.

Brilliant. Thank you, guys, once again. Ladies and gentlemen, can I ask that you don't close the session just yet as you'll now be automatically redirected to a page to give your feedback, which helps the company better understand your views and expectations.

On behalf of the management team, we'd like to thank you for attending today's presentation. I wish you all a good afternoon.

Thanks a lot.

Good afternoon, and welcome to the Braemar plc Investor Presentation.

[Operator Instructions] 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.

Good afternoon, and thank you. Once again, thank you so much for joining us today. We really appreciate. Today, myself and Grant will talk you through the various slides and give you an update on where we are in the first half of this year and about some of the shipping markets, et cetera, and basically talks to the strategic framework of the business we put in place last May, et cetera. So thank you once again.

Okay. Right. First of all, I'd like to say it's been -- it's definitely been a first half of some challenging markets. But at the same time, I think we can prove and show to you today that the resilience of the business and the diversification of where Braemar is today, we've been able to come through that first half, and we're looking very optimistic for the second half of the business going forward.

On top of that, we had unchanged for our FY '26 numbers, a strong forward order book. We're still improving. As you can see later in the slides, we're now to strengthening from where we were at the end of -- end of August and further increase in September against what we would call geopolitical upheavals in the first half, the tariffs, et cetera. But at the same time, the business has proved itself very -- got very strong in that respect.

That's basically proving the fact that we've added many streams to our bow on the back of the fact that our securities business has performed exceptionally well and a number of key hires have been made within the business. We've obviously -- you see that we've announced the fact that we've opened an office in Africa in Cape Town. The U.K. OTF license is live now with the intention to get our EU OTF license application progressing very well. And of course, we applied for DFIC in Dubai for our financial markets.

Apart from that, we're still very clear on where our objectives were in May last year about where we are looking for opportunities to actively complement our present business. So thank you.

Thanks, James. Good afternoon, everyone. I'll talk about the group's financial performance. So revenue at GBP 63.9 million for the first half was 16% lower than the previous period, and that was really driven by weaker chartering performance and particularly in tankers, where we saw weaker rates and longer voyage times. Given the geopolitical upheaval, we saw vessels taking longer voyage times, which also led to fewer fixtures because there were fewer vessels available.

In U.S. dollars, revenue was GBP 73.8 million, which is 13% lower. So we also suffered a bit from the weaker U.S. dollar in the period. Underlying operating profit before acquisition-related items was GBP 5.6 million, 29% lower than the previous period, really driven by those lower revenues. Underlying operating profit margin at 9% was 1% lower than the same period last year. And again, that was really just driven by the lower revenues. We have strong operational leverage in the business. And as you grow the revenues, you expand your operating profit margin. And as that revenue came down a bit, we saw a small decrease in the operating profit margin.

The forward order book, as James mentioned, continues to be strong. At the end of August, it was $73.8 million, and in September, we've seen that increase further to $81.2 million, and that gives us confidence for the full year outlook.

We declared an interim dividend of 2.5p, and that reflects the capital allocation framework that we launched in May when we announced our FY '25 full year results. At the period end, we had net debt of GBP 5.6 million, and that really reflects the usual working capital cycle of the business. We also completed a share buyback in this period of just under GBP 2 million. And of course, we saw a weaker performance in the first half, so we had slightly less cash coming in, in the first half. And pleasingly, at the end of October, that was net cash positive.

So just looking at the income statement in a little more detail now. As I've said, revenue for the period was 16% lower at GBP 63.9 million, 13% lower in dollar terms. Chartering was 25% lower. Investment Advisory, which includes sale and purchase and corporate finance was 6% lower. And Risk Advisory, which is our securities business was 9% higher. Importantly, we call it Risk Advisory but we do not take market risk. It's a broking-only agency broking business where we just collect commissions.

Operating expenses were 14% lower, and that was really primarily driven by lower bonus costs on the back of a lower revenue performance. Underlying operating profit before acquisition-related items, GBP 5.6 million, as I said, 29% lower with that margin reducing slightly to 9%. Underlying earnings per share, 9.3p and in line with our updated capital allocation framework, as I mentioned, the interim dividend is 2.5p.

If we look at the breakdown of revenue in a little more detail, whilst overall revenues are down, you can really see the importance of having a more diversified revenue base and building resilience, and we've presented a very similar slide in previous periods. While total revenue was down 16%, Chartering revenues were actually 25% lower, where we had those lower rates and longer voyage times impacting revenues.

And the Braemar Tanker Index, which is a measure of tanker rates, was actually down 29% versus the same period last year, whilst the Braemar Dry Index was down 17% than where it was a year earlier. Our offshore desk continued to perform strongly.

Investment Advisory, as Purchase and Corporate Finance was GBP 1 million lower and the S&P team, the sale and purchase team were very busy in the first half but it was impacted to some extent by the ongoing uncertainty in the markets but they are very busy, and we expect to see a good performance from S&P in the second half. And corporate finance revenues, whilst not particularly large, we pleasingly saw a 49% improvement in those revenues as the team moved into different mandates. The lower revenues were partially offset by the Risk Advisory and securities revenues, which increased by GBP 1.1 million. And that was a strong performance from our wet forward freight desk, our coal desk and our natural gas desk as the organized trading facility or OTF went live in the U.K. and that allowed our clients to trade more products with us.

Moving on to operating costs. They continue to be well controlled, and we're continuing to really focus on balancing between driving efficiencies and investing for the future. Staff costs were GBP 10.4 million lower, reflecting slightly lower headcount but primarily lower bonus costs on the back of the reduced revenue. We had an increase of GBP 0.5 million on one-off payments to leavers as we focus on efficiencies across the business. And office costs in the period were GBP 0.6 million higher as we had some space that was let, that tenants moved out, and we're now reletting that space at the moment.

So at the end of the period, looking at liquidity, the group had a net debt position of GBP 5.6 million. And that really, as I said, reflects the typical working capital cycle of the group. We pay bonuses after the year-end, and then we build up the cash as we go through the period. That GBP 5.6 million includes GBP 1.9 million of restricted cash, which will be used to settle the commission obligation that went back to the investigation from 2023.

So looking at the movements, the opening net debt on the 1st of March, GBP 2.5 million, operating cash flows of GBP 5.7 million. General working capital movements was a decrease of GBP 1.7 million. We paid financing tax of GBP 1.3 million. We continue to buy shares for the employee share ownership plan of GBP 1.5 million, of course, then the share buyback of GBP 1.8 million. We had lease repayments of GBP 1.4 million and various other cash flows of GBP 1.1 million to give us that net debt position of GBP 5.6 million. But as I said, at the end of October, the business returned to a net cash positive position.

So just moving on to the key performance indicators. As I've said, revenue 16% weaker really reflecting those lower Chartering rates. Revenue per head improved slightly from the second half of last year to GBP 166,000 or $214,000, which reflects a slightly lower headcount in the period. Operating profit margin at 9%, slightly lower, just reflecting the operational gearing in the business. The forward order book remains strong at GBP 73.8 million and it's increased further in September. I covered off the debt and the dividend at 2.5p.

Now just talking a little bit about the forward order book in a bit more detail. The forward order book is a measure of revenue to come in future periods, whether it be that we had vessels on time charter, which for a certain period, and we're going to earn commissions whilst the vessels on those time charters or sale and purchase transactions where it could be a secondhand vessel that's to deliver or a new build, which we get stage payments over many years.

But we've seen that since 2022, the forward order book has strengthened significantly, up 46% from where it was at that point. At the end of September, we had $26.7 million of revenue, which is going to come through in the remaining 5 months. And you can see the amounts going into FY '27 and beyond are amongst the highest they've been. So we've really focused on growing that forward order book and the revenues looking forward.

And you can see on the right there how that breaks down. Broadly, the breakdown of the forward order book is 50-50 between Chartering, time charters, et cetera, and sale and purchase, whether it be new builds or secondhand deliveries.

I'll now hand back to James to give the strategy update.

Thank you, Grant. Okay. So for us, we put some things in place, as I mentioned earlier, back in May last year and strategic framework. So basically diversification, the most important thing was 5 years ago when I came into the CEO role was to diversify the business and mainly concentrating on the ship broking business and businesses that we diversify to complement those business that we've done. And that's proving very clearly.

For example, I can tell you that tanker rates were down some 25% in the last 6 months. So our cargo rates are down some 17% in the last 6 months but our revenue fell by 16%. So that shows you that by having a diversified model that we're seeing our other departments compensate for those downward trends. So obviously, for us, it's about also obviously globalizing the business and moving into new jurisdictions, which is done. We've ticked that box already in Cape Town. And obviously, next thing we need to do is to move on the consolidation and target complementary business that we have been doing.

We've rolled out many business that did not complement the business and did not work for certain aspects. But the fact is we've maintained the discipline, and we've also proven the fact that the acquisitions we have made in the last 2 or 3 years have complement the business and highly improved on the margin of the business.

Operational excellence, that's the graph very much on top of the focus on data and technology, a larger company with some 45 years of data going back is obviously imperative for the markets and seeing where the trends are for our clients. We continue to invest in compliance. That's becoming an important factor for our business. Shipbroking is not necessarily regulated, but it's moving more and more towards that case and compliance is a large part of our business and our clients are expecting it. And it's also potentially helping us as far as acquiring smaller business because the cost of those small business having compliance, et cetera, and is needed so much that's easy for us. And obviously, we want to drive efficiency and reward performance.

Now we also mentioned in May that we intend to move the business to a GBP 200 million group revenue by FY '30. I got to mention the broking alone is making $65 million of revenue some 10 years ago. So we've already come a long way. We're also setting ourselves some strong targets. The Risk Advisory business, we are saying -- we've mentioned the fact that we want to be at GBP 30 million by FY '30, and we're very confident on that. We've grown that business. Underlying operating profit margin by 15% by FY '30 and net debt maintained below 1.5 EBITDA.

Now we set some targets about 10 new hires. We're well on track for that and we have some very key staff within the business. So you can see from that progress report at the bottom, we've moved on very clearly on that strategy there. We mentioned about the fact we want to move into one new jurisdiction. We've done that in Cape Town. That business we knew very, very well. And I can tell you now that the reason why they want to join us is because they felt they were too small in what was becoming and more becoming in a business that is consolidating. So that made it very easy for us. So we've obviously done that already.

The globalization of globalized tank operations, this is about more about efficiency and making sure that [indiscernible] work together, and we will look to obviously see how we can obviously improve the margin there with looking elsewhere on the claims side of the business. So you can see we're moving across those arrows there. As regarding the -- as I said, we've completed one transaction. So as far as that, we were on -- we're definitely on track for our strategic framework.

Now the outlook and summary. Okay. Chartering markets, as I said -- as I mentioned to you before, the fact that the tanker rates was hugely down in the first 6 months of the year, I mentioned some 25% and the dry cargo was down 17%. You can see from our Braemar index there. But the good news I can tell you is in the last 2 months, the markets have massively returned, although there was uncertainty in the tariffs and as it was going on between the U.S. and China, that seems to settle down. We've seen some recent issues with some major companies being sanctioned again. This is creating the rates to move up. And I can obviously say from -- I can tell you now that some of the dark fleet and gray fleet is moving out of the market or moving into a storage situation. So the rates are moving massively, and we're seeing more longer haul business.

The Dry Cargo market has picked up as well in the last couple of months. And so we're seeing strength there. And we are definitely gaining our dry cargo presence in Australia as we've seen a strong harvest in the year as well.

Okay. Looking further ahead on demand, global GDP is on target. I think you can see that on the graph, you're well aware on that. China industrial growth. We've mentioned before in the past, we were expecting probably a bit more of China to come out after COVID but that didn't necessarily happen. We saw major housing crisis, et cetera, in China. That's starting to turn again, and we're seeing that in the markets, which we are involved in. And the oil demand index, well, that's obviously, since Russia has been had more squeeze on the sanctions, as I said to you, that's increasing the OPEC outflow, which is creating more longer haul, especially U.S. exports as well. So that's all in a good [indiscernible].

Thanks, James. I'll just talk a little bit more about our Risk Advisory or Securities business. So you can see quite clearly here the success we've had growing this business. It comprised 20% of revenues for the first 6 months of the year, up from 16% for the full year last year. And you can see quite clearly on the chart here, this particular revenue stream up 254% since 2022. And we've got plans to continue to grow that. So we said, as I said earlier, our U.K. organized trading facility, which is a specific venue that you need to trade certain securities products on went live in May. Our U.K. clients are using that, and we can trade more products. We're expanding that offering by establishing a European OTF and that progress, it's a very time-consuming process.

Our U.K. OTF took over 18 months to obtain. Our Spanish OTF is where we're putting in Europe is progressing well. We expect to have that in the first half of calendar year 2026. And we're also establishing a presence within the Dubai International Finance Center. We have a freight desk in Dubai but we're going to expand our securities offering there as well, again, to service our clients and their requirements going forward.

Thank you, Grant. Okay. So summary and outlook. I think we -- as you hear from the presentation today that we've explained where the first half was, and we can feel that the resilience of the business and diversification story has pulled us through what we can say was a weak freight market and chartering market. So it shows the business is very robust, and we're building that business out to help that to help accommodate those freight problems.

Underlying operating profit margin down by slightly 9% returned to net cash position in October, as Grant talked about the U.K. OTF and the European OTF, and were interim dividend at 2.5p. So on the outlook, expectation in line with where we were for '26, remains unchanged. To start the second half, we've seen the markets return. We're feeling a lot more bullish than we were a few months ago. The forward order book is helping as we further build the forward order book and our future departments are doing very well on the back of the volatility in the markets today.

So that leads us down to what our framework we put in place back in May, and we feel we are very much on track to deliver what we said we'd deliver. The pressure is upon us to deliver that. I think hopefully, you can see that some of the businesses we bought already are proving very well, and we've definitely ironed out a few things that didn't work, but we are focusing on ones that can work and complement the business. And the market fundamentals remain strong. So we're feeling good about the next 6 months.

That's great, James Grant. Thank you very much indeed for your presentation.

[Operator Instructions] I would like to remind you that recording of this presentation along with a copy of the slides and the published Q&A can be accessed via investor dashboard.

James, Grant, 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.

Thank you very much. I'll read the questions here that come on the iPad. Question is, what is the ideal long-term balance between Chartering, Investment Advisory and Risk Advisory to smooth the earnings cycles?

I would say I'll take that first. I think that -- I don't think there is an ideal balance. I think that by virtue of the fact that we are diversified, that does give us the balance. So if you look back on that slide a couple of presentations ago, you would have seen that we had a very strong performance from tankers and a weaker performance in dry cargo. So overall Chartering was flat and we grew in Investment Advisory and Risk Advisory. And you've seen weaker performance in Chartering but we've seen an improvement in risk advisory.

So I don't think there is an ideal balance per se that we want x percent of this and x percent of that. But I think it's important to continue to grow all of those revenue streams with hiring individuals or teams or completing M&A acquisitions, which are complementary to build the scale within the business. And so you just continue to drive the growth. I don't think we have -- I don't think necessarily that we have a specific percentage target for each of division.

James, you want to add?

No, I'll just slightly add to that. How I see it is that because the business is more simplified in the last 5 years and we understand the sectors that we're in fully. Of course, the most important thing is to build the breadth out of the business but making sure that the complementary of the business works. The fact is the desks work in harmony. If the spot market is rising, the futures market is busy. If the futures market is busy and the spot market is busy, the S&P transaction owners will be buying ships on the back of the present spot market. On the basis that our desks are talking to each other, there's a good reason why we're ahead of the curve compared to our competition. And we are, for sure, seeing the rewards on that as the markets pick up.

Next question, do you consider the current sentiment valuation to be in a trough with a decent rebound ahead as markets normalize?

I assume we're talking about the share price here. Look, you can look at any of the analysts that are covering the stock and the target price that most of them have is certainly above where we're trading at the moment. So they clearly believe that there's upside. There's obviously the challenges that the U.K. market is particularly small cap faces at the moment with the significant redemptions, which are weighing not just on Braemar but on a number of many, many stocks in the small and mid-cap sector. So I think that's certainly having an impact. And I would like to think as we start to see fund flows come back into not just the FTSE 100 but start trickling down to the mid and small cap that we'll see some improvement as more funds come in.

And we've proven the fact that we put a buyback out, which we successfully completed back in September. So we the shares are undervalued. But at the same time, we will build the business out to grow that, and we have confidence that we can move that share price in the right direction.

A question here about what we consider the company could be a takeover target. We've got a view on that. We're just focusing on delivering what we are, many U.K. listed businesses are looking cheap at the moment. So I want to...

No, I just think that the shipbroking space is -- I've been in this business some 40 years. So I've seen weak markets and I've seen bull markets. And this market definitely feels different to where it was during the -- back in 2008 before the crash. It feels there's a lot more longevity for many, many reasons. I mentioned before the fact that we're seeing some 25% cut in shipbuilding capacity. So leading back to the question, yes, I mean, look, that's always a potential possibility someone comes forward but the fact is we feel we're undervalued and our job is to build ourselves out. And we feel there's a lot of things that we can get into that still complement the business and parts of the world we can reach to create more business.

Question here on costs. How much of the 30% rise in central cost is one-off? And should we expect margin improvement in H2?

There is an element of one-off costs. If you look at the RNS, you'll see how we split it down. It's up 30%. There's a couple of elements in there. First of all, the one-off restructuring costs as we focus on efficiencies and that was staff related. That was GBP 0.5 million, which was a one-off in the first half. I mentioned that we had some additional property costs in there in respect of the space that we're actually -- it was let. We're in the process of reletting it taken at the moment. I'm hoping that, that won't be in there for the full second half and should be lower.

But if you think about the margin improvement, this business is very operationally geared and the revenue -- we're expecting the revenue to improve in the second half. So if you look at the first half versus second half, you would naturally see an improvement in operating margin.

What is the outlook for Tanker and Dry Bulk charter rates? Would you expect them to fall back now that China-U.S. trade tensions have eased certainly talked about the chart on that?

Yes. Look, I mean, I think it's a situation, the impact on the various sanctions recently, and obviously, that -- so what I'm trying to say here is the fact the sanctions in Russia have increased and made it more difficult. So where some of that oil is going into to India to be blended and move out and that's not happening so much. So we're seeing less of those dark fleet ships that were doing that business now falling into a different scenario, which means that, as I mentioned earlier, going into storage, which potentially leads to believe there could be a massive contango in the forward markets.

So it brings in more modern ships of the unsanctioned ships that doing longer-haul voyages out of the U.S., et cetera. So we're just seeing more ton miles, and we've just seen the market massively rebound in the last 3, 3 months. So at the moment, we don't see that going away. I think if you also want to look at some of the equities in tanker stocks across the globe, you'll see they've also massively rallied in the last 2 or 3 months, and that's exactly for the reason why I just mentioned.

Question here, what is the reason for the -- the second half bullishness.

I think we talked about that when we've seen where the rates are. I think it's also worth mentioning, if you look at -- the business has an element of seasonality in it where second half, you do generally see an improvement in revenues in the second half driven by colder winters, et cetera. Last year, you didn't see that. It was very much a one-off. If you look back historically, you'll see second half performance will be first half performance, and we expect to see a return to normality in the second year, and that's added a bit more around what we've seen on rates, et cetera.

Trend in -- what is the trend in fixture volumes? Is the increase in charter rates enough to more than offset any decline in fixture volumes?

We've definitely, as I said at the start, there are longer voyages, so there's fewer ships available to fix. And of course, there's been -- approximately the best estimate we've got is that there's sort of 1,400 vessels are now in dark fleet. So they're out of the fixture pool, if you like. So yes, there has been a downward trend in fixtures, but we believe that what we're seeing on rates will offset that and mitigate that.

Given the rapid rise in the LNG fleet, is that a vertical you should have a much larger exposure to? If so, how can you expand this?

That's an interesting one, okay, because we're discussing that this morning. The LNG fleet has massively risen, and we are involved in LNG newbuildings and we have an LNG desk. The fact is the market is in its worst doldrums at the moment. And we feel we slightly were able to avoid some big hires we might have made a couple of years ago when the market crashed because a lot of the big transactions or deals that are supposed to happen like Mozambique coming on stream this year has been delayed by another 2 or 3 years.

So we're seeing the rates very weak. We're seeing newbuilding prices falling down in LNG because we realize the rates aren't there. So for us, this gives an opportunity to build the next 2 or 3 years for a market which we feel will return then. So moment we feel opportunities come open to us. But at the same time, for those having a large LNG desk, we'll be feeling the cost of that.

What's caused the newbuild purchase market to improve recently given the delay to the IMO net zero framework? Is it greater confidence in future rates and demand or availability of shipyard capacity?

I'd say I touched base on that earlier as well. I mentioned the fact that the shipbuilding capacity is cut by some 20%, 25% since the 2008 crash. There's obviously a big talk the last 2 or 3 years about alternative fuels, whether that be LNG fuel ships or ammonia or methanol, et cetera. We're seeing less on the ordering of those ships but we're seeing more increase in orders on conventional ships. So at the moment, we are seeing -- we're seeing ships now. We've been working some deals where we thought we could get delivery by second half '28, it's now moving into '29.

The market is obviously strong. There's an aging fleet. IMOs are sometimes slow to react on certain things. We worry as a broker looking at certain aspects of the business, how many ships are in the dark fleet and gray fleet as we would call it, flying probably on the flags of nonshipping national. So we worry about certain things that potentially these ships aren't being maintained correctly.

So I think at the moment, there's just a demand to build ships and the yards are definitely holding that. But also on top of that, it's slightly different from it was in 2008. It's so much more diversified as in what ships are being ordered because most markets are in a good shape. So that's putting pressure on the prices.

Just a question here. The analysts over the last 5 years have been generally positive with a buy recommendation but the shares have generally traded [indiscernible] look, I think that's frustrating for us. There's no doubt about that as well. And I think if you follow the story, you'll see that we recently -- obviously about a year ago now, we changed corporate broker. We've changed our financial adviser. We are making steps to articulate our equity story perhaps clearer than it has been historically. And so we are trying to address that. It's obviously a frustration internally as well as it must be for our existing shareholders.

Perfect. That's great, James. Grant, thank you for addressing all those questions from investors today. And of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform.

But James, before I redirect investors to provide you with their feedback, which is particularly important to the company, could I please ask you for a few closing comments?

Yes. First of all, I'd say thank you for taking time to listen to our presentation today for the first half of '26 results. I'd like to emphasize again that we feel it's going to be a year 2 halves for sure. I think the first half has been a bit more challenging but I'd like to see from the results here, you can hear the fact that the business has been diverse to sort of take some of those punches on low chartering rates by building the model out, and we're feeling confident for the second half because the rates are returning. And you can see our forward book is increasing dropping into this year.

And we're excited. We feel we're in a good place. There is always some challenges in a broking business but the most important thing is we've got a good young team across the globe in some 19 offices around the globe in 13 different countries. And it feels at the moment that everyone is exceptionally busy, and that's the most important. And on top of that, I think we're seeing the dollar turning a bit more in our favor, which is always a bit more healthy compared to the first half.

So listen, first of all, thank you. Thank you so much for taking time. And by the way, myself and Grant are always there to answer any e-mail questions if you have further questions to ask afterwards. Okay. But thank you so much.

Thank you.

Fantastic. James, Grant, thank you once again for updating investors today.

Could I please ask investors not to close this session as you'll 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 valued by the company.

On behalf of the management team of Braemar plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.

Thank you.

Bye-bye.

It's been another busy 6 months at Braemar, and our results show the continued benefit of our diversified business model. In May, earlier this year, we presented a refreshed strategic framework with clear short- and medium-term targets to provide a road map for the future growth of the business. And I am pleased to report that we have delivered against our 1-year targets on a number of fronts.

We opened our first office in Cape Town, establishing a base in Africa that expands our global footprint to 19 offices across 13 countries. We also made some strong senior hires across the globe in what remains a competitive market. This included a new Head of Dry Cargo in Singapore and an experienced Global Head of Tanker Operations to help globalize our operations team. Complementary acquisitions continue to be actively identified and evaluated.

Alongside this, we continue to strengthen our Security business to provide further growth opportunities. In May, our U.K. Organized Trading Facility, or OTF, went live. We are also making progress with our application for an EU OTF and to operate within the Dubai International Financial Center. Our team are well placed to take advantage, building on our established positions in coal, natural gas and freight derivatives.

Our financial performance in the first half was robust against a challenging market backdrop. Group revenue was GBP 63.9 million, and underlying operating profit before acquisition-related items was GBP 5.6 million, reflecting softer chartering rates, particularly in tankers and dry cargo and a weaker U.S. dollar. Our diverse revenue streams helped offset lower Chartering activity, with Risk Advisory revenues up 9% and corporate finance within our Investment Advisory division increasing 49% year-on-year.

We also remain disciplined on costs, with ongoing focus on efficiency and further investment in compliance and technology. This ensures that as we grow revenue through further hiring and acquisitions, we can see operational leverage come through to growing our profits.

Earlier in the year, we also outlined an updated capital allocation framework, and we're pleased to have declared an interim dividend of 2.5p per share, having completed a GBP 2 million share buyback during the period. After ending the half year with net debt of GBP 5.6 million, we returned to a net cash position at the end of October, in line with our typical working capital cycle.

The Board's expectations for the current financial year remain unchanged, with market conditions in the second half showing pleasing signs of recovery. Chartering rates are improving, sale and purchase activity has increased and our forward order book has strengthened further. Meanwhile, our Risk Advisory business continues to perform well.

Looking further ahead, the fundamentals of our markets remain positive, and we have a very clear strategy to capitalize. We are confident this will help us achieve our FY '30 growth targets to become a GBP 200 million revenue business as a trusted broker of choice to shipping and energy markets.