Braemar slumps 20% after big profit warning

Shares in Braemar Shipping Services plc (LON: BMS) kicked off the week with a whopping 20% fall on Monday after the Aberdeen-based shipping broker and technical consultancy announced a significant drop in profits. 

In a Q4 trading update, the Group said its underlying PBT for the year ending 28 February was expected to be between £3-£3.5m, significantly lower than the previously forecast £9m. The fault for the decline was placed with the Group's technical division and its logistics business:

"This lower forecast is largely attributable to the Technical division and, to a much lesser extent, the freight forwarding element of our Logistics business."

The Technical division underperformed throughout the period, with the oil and gas sector weakening further, and the Board says it failed to anticipate such a significant decline in the sector and its impact on the division. The firm has begun a wide-ranging restructuring programme to address the issue:

"... [the restructuring programme will] significantly change the management and operating structure of the division... and has resulted in significant reductions in its ongoing cost base. It is expected that the annualised cost savings will be in excess of £6 million for the next financial year."

The Company's largest division, Shipbroking, generated over 40% of expected Group revenue and traded well. A positive note in an otherwise negative update.

Broker Stockdale Securities said the results were "significantly" below expectations due to poor performance from the Technical division. As a result, it has downgraded its FY17E PBT estimate by a huge 63%:

"It has been impacted by further weakness in the oil & gas sector and a marked deterioration in replacement work. Shipbroking continues to trade well, in line with expectations. FY2017 operating profit is now expected to be £3.0m-£3.5m vs. (SSL estimate £9.0m). The final dividend will be lower than forecast at 5p, making a total of 14p (26p)."