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Braemar overpaid for Naves acquisition, says new chief

Listed shipbroker hopes to ‘hit the jackpot’ with all main markets rising if projections for post-pandemic world trade pan out, says James Gundy

‘I’ve been in the chair for two months and I’m feeling pumped… People are looking for deals on the street,’ bullish former broker claims

BRAEMAR is set to integrate Hamburg ship finance unit Braemar Naves into its core London-based shipbroking activities, after the listed company’s new chief executive said his predecessor overpaid for the acquisition in 2017.

Deferred consideration still owed to the previous owners has been shunted back for more than four years, with the €2.9m ($3.5m) due for payment in the next 12 months rescheduled to be paid no earlier than September 2025, and some €750,000 of that to be satisfied with new equity, James Gundy added.

“I can’t sit here and play the blame game, but [the Naves deal] is probably the reason I am in the chair,” he said in an interview. “There are some things I wouldn’t have done, and I would have done a bit more due diligence. But that’s not to say Naves is not a good business, it’s a great business.”

Mr Gundy was speaking as Braemar announced that chairman Ronald Series will step down.

The chairman felt “this was an appropriate time to step down”, the company said as it laid out a trading update.

He will stay on until a new chairman has been appointed.

Mr Gundy’s predecessor, James Kidwell, purchased what was then Naves Corporate Finance as a diversification play, paying €24m up front, with earn out terms that could take the final price up to €35m.

While Braemar Naves — as it subsequently became — has made money at least some of the time, it is known not to have delivered on profit forecasts.

Asked if the company has paid too much at the time, Mr Gundy said: “Probably, yes. It was a strong price.”

However, Naves is securing 20%-plus margins on what it does and will work well as part of the shipbroking team, he insisted.

“I will run the business in a lot more open way than previously. I will embrace everyone’s ideas. I want people to be involved in the business. Maybe there was a bit of segregation before, but the commodities in the business are the guys on the floor, that’s what our business is all about.”

The company’s Cory Brothers ship agency has signed non-binding heads of agreement with Dutch counterpart Vertom UCS to form a joint venture that would be positioned to expand beyond the two entities’ existing European base, especially in Asia and the US.

Cory has been a beneficiary of Brexit, thanks to the demand created for customs clearance and other paperwork-related import-export services during the past three months, although the surge may not be permanent.

“How long that’s going to last, and how many clients will continue to use a third party rather than hire someone in house remains to be seen. But there’s no doubt results for the last year will have had a bit of a pick-up from Brexit.”

Both the Naves and Cory Brothers moves form part of Mr Gundy’s broader plan to get the Braemar back to its historic roots as a broking shop, in line with own background as a broker, who came into the business with Braemar’s acquisition of ACM Shipping seven years ago.

Broking has done well over the past 12 months, initially due to the tanker spike and more recently thanks to a pick-up in dry bulk and in sales and purchase.

Mr Gundy has high hopes of a vintage year ahead if the predicted post-pandemic boost to world trade does emerge.

“It’s not hard to sit here and say the world is going to get better. All the futures curves are pointing upwards,” he said. “Being a very diversified business, there’s a very good chance we will hit the jackpot, with all markets going up at the same time. I’m confident for the third and fourth quarters of the year.”

More generally, he professed excitement at taking over the top job.

“I’ve been in the chair for two months and I’m feeling pumped about that. People are starting to believe in the future and they see the markets moving. People are looking for deals on the street.”

However, the newfound buoyancy has yet to show up in the numbers, despite higher than expected revenues and lower expenses due to pandemic restrictions.

Underlying operating profit for the year ended February 28 is expected to be at least £8.7m ($12.1m) when results are announced on June 3, down from £9.6m in the same period a year earlier. A dividend is not expected.

Braemar also sold 9.6m shares in AqualisBraemar LOC associate, raising £600,000 but reducing ownership from around 20% to around 10%. Efforts to sell engineering division Wavespec remain underway.

Net bank debt is expected to be substantially reduced at around £10m, from £21m last February, and total net debt including deferred acquisition consideration to fall to around £18m from £30m when results are announced on June 3.

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