Restructuring efforts are expected to push Braemar Shipping Services’ technical division back to profit in the next full financial year, the group’s chief executive says.

Braemar this morning released a profit warning noting the difficult offshore market environment proved a drag on the technical division’s performance in the fiscal year to the end of February 2017.

James Kidwell, chief executive of Braemar Shipping Services, told TradeWinds the conditions facing the technical arm had become “appreciably tougher” during the past few months.

Work at the division has become more focused on short-term contracts and Braemar has extended a previous £3m cost cutting effort to £6m.

The business, which recorded a profit of £5m in the year to February 2016, will finish the 2017 financial year in the red, Kidwell said.

However, with the restructuring efforts now executed, a return to the back is anticipated in the 2018 fiscal year, Kidwell explained, noting all planned cost reductions have already been implemented.

No sale planned

Despite the challenges faced by the technical business, the Braemar boss says there are no plans to divest the division.

Instead, it is “battening down the hatches” and plans to be active in the market when offshore demand recovers.

When the time comes, Kidwell adds it will likely be in a position to benefit from a skills shortage in the sector.

Overall, London-listed Braemar Shipping Services’ is projecting an underlying profit of between £3m ($3.73m) and £3.5m for the 12 months to the end of February.

Its forecast excludes a £1.7m gain from the sale of its stake in the Baltic Exchange and £2.7m in restructuring costs.

Broking holds firm

In a trading update today, Braemar said its shipbroking arm has traded well and is set to meet expectations this year.

Kidwell says the tanker market remains relatively strong despite healthy newbuilding arrivals, while sale and purchase volumes are good.

He adds the group’s offshore shipbroking activity is facing a challenging market but is “not a drain on the company”. 

Forecasts reduced

Peter Ashworth, an analyst at Stockdale, is now projecting Braemar will post pre-tax profit of £3.2m in fiscal 2017, rising to £7.8m in 2018, below his previous £11.2m forecast for the next full year. 

“The group remains committed to the development of a diversified portfolio of broking and advisory businesses within the marine and energy sectors, to withstand better the cyclical nature of its markets, despite the current year having been extremely challenging in a number of sectors,” Ashworth wrote.

Full year dividend is likely to come in at 14 pence, down from 26 pence in fiscal 2016.

The payout will grow by a penny in fiscal 2018 and further to 17 pence the following year, Stockdale forecasts.