FY24 Final Results

596/2014) WHICH IS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018.

BRAEMAR PLC

("Braemar", the "Company" and together with its subsidiaries the "Group")

Audited Final Results for the year ended 29 February 2024

Strong trading performance building resilience and sustainable returns for shareholders,

with a platform for future growth

Braemar Plc (LSE: BMS), a leading provider of expert investment, chartering and risk management advice to the shipping and energy markets, announces its audited results for the year ended 29 February 2024 ("FY24"), which are in line with market expectations[1].

The board is delighted to report another strong performance for the Group, which demonstrates the Group's strategy to grow the business, build resilience, and generate sustainable shareholder returns across the shipping cycle. Following the 51% increase in revenues in the prior year, FY24 revenues were sustained at £152.8 million (FY23: £152.9 million).

The strong performance from the acquisitions completed in FY23 and the Group's growing securities business contributed to a more balanced revenue mix, offsetting weaker shipping rates in some sectors. Overall fixture volumes grew by 8% and the increased breadth and depth of the Group's operations helped deliver both a strong financial result for the year, and build a platform for sustainable profitability in the years going forward.

The Group generated underlying operating profit of £16.5 million (FY23: £20.1 million), after a negative £2.6 million foreign exchange swing over the previous year and expensing £1.5 million of acquisition-related costs (£18.1 million before acquisition-related expenditure).

FY25 has started well, the Group has entered the year with a total forward order book at 29 February 2024 of $82.6 million (FY23: $56.2 million) and looks forward to continuing the successful execution of its growth strategy, through hiring talented individuals, geographic expansion and making selective acquisitions, while at all times maintaining a strong focus on cost efficiencies and improving operating margins, as the business continues to scale.

As a result, and reflecting the board's confidence in the future of the business, the board has recommended a final dividend for FY24 of 9.0 pence per share. Total dividends for the year if approved will be 13.0 pence per share (FY23: 12.0 pence), an increase of 8%.

RESULTS HIGHLIGHTS

Financial performance

* Underlying results measures above are before specific items, including some acquisition-related charges and internal independent investigation costs.

Financial highlights

• Revenue at £152.8 million was unchanged on the prior year, demonstrating improved resilience across the Group (FY23: £152.9 million), with strong performances from acquisitions and Risk Advisory offsetting cyclically weaker performances in other parts of the business.
• Underlying operating profit before acquisition-related items of £18.1m in line with market expectations1 (FY23: £20.1m).
• Impact on operating profit of acquisition-related costs and foreign exchange swing totalling £4.1m.
• Reported profit after tax for the year unchanged from prior year at £4.6m.
• Balance sheet remains strong with positive cash position maintained.
• Continuation of the Group's progressive dividend policy, with a recommended final dividend for FY24 of 9.0 pence per share, reflecting the board's confidence in the future of the business. Total dividends for the year if approved will be 13.0 pence per share (FY23: 12.0 pence) an increase of 8%.

Operational highlights

• Continued growth with total fixture numbers up 8% from the prior year.
• Acquisitions of Southport Maritime Inc. in the USA and the Madrid tanker desk in Spain performed well in their first full year as part of the Group, realising the opportunities of being part of Braemar's global business.
• Natural gas desk grew strongly throughout the year.
• Headcount up 7% to 409 as the business continues to invest, average revenue per head continues to be strong at £373,000, 6% lower than the prior year.
• The internal independent investigation commenced in June 2023 was completed in October 2023.

Current trading and outlook

• FY25 has started well with market conditions remaining positive - greater demand resulting from geo-political and natural events on a broadly unchanged global fleet size.
• Continued execution of the growth strategy, hiring talented individuals and teams, and through selective acquisitions in the fragmented shipbroking market. This will be supported by the Group's platform, driving ongoing efficiencies, and improving margins.
• The Group's forward order book strengthened throughout the year, standing at $82.6m as at 29 February 2024, 47% higher than the $56.2m as at 28 February 2023.
• With the Group's strategy delivering and a clear focus on future growth, the board looks to the future with confidence.

James Gundy, Group Chief Executive Officer, commenting on the Group's FY24 results, said:

"This was another year of strong performance. I am delighted that it clearly shows how much more resilient and balanced Braemar has become. In FY23, we enjoyed high rates and activity across all sectors delivering a 51% increase in revenue. I am delighted that this performance was sustained this year. We maintained FY23's strong revenue levels through our growing securities business and strong performances from our acquisitions, with overall fixture volumes growing by 8%. We have built a platform that can support a growing business and as we hire more brokers and make further acquisitions, whilst maintaining a keen focus on cost management and efficiencies, we will build greater resilience and further improve operating margins.

The overall market outlook remains positive. Geo-political and natural events, as well as environmental considerations are leading to longer voyage times, and global seaborne trade continues to grow, while the total fleet size remains at similar levels.

We started FY25 with a strong forward order book at $82.6m, and will continue to invest in our people, offices, and technology, whilst taking advantage of a fragmented shipbroking market to hire and make acquisitions. I look forward to another strong performance by the Group."

Results Roadshow and Online Presentations

The Company is hosting a results presentation for analysts on Thursday, 23 May 2024 at 10.30 a.m. at Buchanan's offices at 107 Cheapside, London, EC2V 6DN. Please contact the team at Buchanan via braemar@buchanan.uk.com for further details.

In addition, the Company is also hosting an online investor presentation with Q&A on Tuesday, 28 May 2024, commencing at 1 p.m. To participate, please register with PI World at https://bit.ly/BMS_FY24_webinar.

The 2024 Annual Report and Accounts will be available on the Company's website (www.braemar.com) shortly.

The accompanying notes form an integral part of these Financial Statements.

Consolidated Statement of Comprehensive Income

For the year ended 29 February 2024

Other comprehensive income/(expense)

Items that will not be reclassified to profit or loss:

The accompanying notes form an integral part of these Financial Statements.

Consolidated Balance Sheet

As at 29 February 2024

Adjustment for non-operating transactions included in profit before tax:

The accompanying notes form an integral part of these Financial Statements.

Consolidated Statement of Changes in Total Equity

For the year ended 29 February 2024

The accompanying notes form an integral part of these Financial Statements.

Notes to the Financial Statements

General information

Braemar plc (the "Company") is a public company limited by shares incorporated in the United Kingdom under the Companies Act. The Company is registered in England and Wales and its registered address is 1 Strand, Trafalgar Square, London, United Kingdom, WC2N 5HR. The consolidated Financial Statements of the Company as at and for the year ended 29 February 2024 comprise the Company and its subsidiaries (together referred to as the "Group")

1 Basis of preparation

1.1 Basis of preparation and forward-looking statements

The financial information set out above does not constitute the Group's statutory accounts for the years ended 28 February 2023 or 28 February 2022 but is derived from those accounts. Statutory accounts for 2023 have been delivered to the registrar of companies, and those for 2024 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified; (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report; and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The consolidated Financial Statements incorporate the Financial Statements of Braemar Plc and all its subsidiaries made up to 28 February each year or 29 February in a leap year.

• IFRS 17 "Insurance Contracts" (including the June 2020 and December 2021 Amendments to IFRS 17);
• Amendments to IAS 12 "Income Taxes" - Deferred Tax related to Assets and Liabilities arising from a Single Transaction;
• Amendments to IAS 12 "Income Taxes - International Tax Reform - Pillar Two Model Rules";
• Amendments to IAS 8 "Accounting Polices, Changes in Accounting Estimates and Errors - Definition of Accounting Estimates".

The Group has adopted the amendments to IAS 1 in the current year. The amendments change the requirements in IAS 1 with regard to disclosure of accounting policies. The amendments replace all instances of the term 'significant accounting policies' with 'material accounting policy information'. Accounting policy information is material if, when considered together with other information included in an entity's financial statements, it can reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. The Group has reviewed the impact of the changes to IAS 1, which has resulted in some immaterial accounting policies being removed and updates to the presentation of the financial statements to aid users in their understanding and navigation.

The adoption of the above has not had any material impact on the amounts reported or the disclosures in these financial statements.

The following amendments are effective in future periods and have not been early adopted by the Group:

• Classification of Liabilities as Current or Non-current (Amendments to IAS 1);
• Non-current Liabilities with Covenants (Amendments to IAS 1);
• Supplier Finance Arrangement (Amendments to IAS 7 and IFRS 7);
• Lease Liability in a Sale and Leaseback (Amendments to IFRS 16).

The adoption of these standards and amendments is not expected to have a material impact on the Financial Statements of the Group in future periods.

In January 2020, the IASB issued amendments to IAS 1, which clarify the criteria used to determine whether liabilities are classified as current or non-current. These amendments clarify that current or non-current classification is based on whether an entity has a right at the end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period. The amendments also clarify that "settlement" includes the transfer of cash, goods, services, or equity instruments unless the obligation to transfer equity instruments arises from a conversion feature classified as an equity instrument separately from the liability component of a compound financial instrument. Following concerns raised by stakeholders, the IASB issued further amendments in October 2022 to specify that only those covenants which an entity must comply with on or before the reporting period should affect classification of the corresponding liability as current or non-current. The October 2022 amendments defer the effective date of the January 2020 amendments by one year in order that both sets of amendments are effective for annual reporting periods beginning on or after 1 January 2024 with earlier application permitted.

Under the Group's current accounting policy, a financial liability with an equity conversion feature is classified as current or non-current disregarding the impact of the conversion option. The amendments to IAS 1 will result in the equity conversion feature relating to certain of the Group's financial liabilities, impacting the classification of those liabilities. While the Group's assessment of the impact is ongoing, the Group expects that amounts included as non-current in relation to "Convertible Loan Notes" will be reclassified to current liabilities.

1.2 Going concern

The Group Financial Statements have been prepared on a going concern basis. In reaching this conclusion regarding the going concern assumption, the directors considered cash flow forecasts to 31 August 2025 which is more than 12 months from the date of issue of these Financial Statements.

A set of cash flow forecasts ("the base case") have been prepared by management to cover the going concern period and reviewed by the directors based on revenue and cost forecasts considered reasonable in the light of work done on budgets for the current year and the current shipping markets. In putting together these forecasts, particular attention was paid to the following factors:

• Expected market demand, the impact on market rates and the Group's forward order book.
• The Group's compliance with sanctions put in place as a result of the conflict in the Ukraine has meant additional work reviewing compliance obligations on a regular basis as the laws have been amended but did not have a material effect on trading in FY24, nor is it expected to have an impact in FY25.
• The level of likely cost inflation, particularly around salaries.
• Geopolitical tensions can cause volatility in shipping markets, but, if anything, that uncertainty can give rise to additional opportunities for the business to support the industry and clients further. There is therefore no expectation that the current global political tensions will have an adverse impact on trading in FY25.

The Group continues to have a strong balance sheet, as at 29 February 2024 the Group held net bank cash of £1.0 million (2023: £6.9 million). As at 30 April 2024 the Group had net bank cash of £8.9 million.

The Group continued to maintain a revolving credit facility ("RCF") with its main bankers, HSBC throughout the year. The RCF is for £30.0 million plus an accordion limit of £10.0 million and has an initial termination date of November 2025 with an option, subject to lender approval, to extend the term of the facility by 24 months. Drawdown of the accordion facility is subject to additional credit approval. It has an EBITDA leverage covenant of 2.5x and a minimum interest cover of 4x. At 31 May 2023, 31 August 2023, 30 November 2023 and 29 February 2024 the Group met all financial covenant tests. In addition, there is a further requirement to provide HSBC with the Group's audited financial statements within six months of the year-end. Due to the delay in completing the FY23 audited financial statements, the Group obtained waivers for this in advance so there was no breach of this requirement.

The cash flow forecasts in the base case assessed the ability of the Group to operate both within the banking covenants and the facility headroom, including a number of downside sensitivities on budgeted revenue, including a reverse stress test scenario. The directors consider revenue as the key assumption in the Group's budget. The cost base is largely fixed or made up of discretionary bonuses, which are directly linked to profitability. Based on two flex scenarios; a revenue decrease of 7.5% and a revenue decrease of 15% from the base case, only very minor mitigations were necessary to meet banking covenants.

A reverse stress test was also performed to ascertain the point at which the covenants would be breached in respect of the key assumption of budgeted revenue decline. This test indicated that the business, alongside certain mitigating actions which are fully in control of the directors, would be capable of withstanding a reduction of approximately 38% in budgeted revenue from the base case assumptions from March 2024 through to May 2025. In light of current trading, forecasts and the Group's performance over FY24, the directors assessed this downturn in revenue and concluded the likelihood of such a reduction remote, especially in the light of the forward order book of $83m at the end of February 2024 ($38m of which is for the financial year ending February 2025), such that it does not impact the basis of preparation of the Financial Statements and there is no material uncertainty in this regard.

1.3 Use of estimates and critical judgements

The preparation of the Group's Financial Statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. Key estimates are those that the Group has made in the process of applying the Group's accounting policies and that have a significant risk of resulting in material adjustments to the carrying amounts of assets and liabilities within the next financial year. Critical judgements are those that the Group makes, apart from those involving estimations, that the directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the Financial Statements.

The following table provides a summary of the Group's key estimates and critical judgements, along with the location of more detailed information relating to those judgements.

Climate‐related risks and opportunities

Management has considered the impact of climate-related risks in respect of impairment of goodwill, recoverability of receivables and the recoverability of deferred tax assets in particular and does not consider that climate‐related risks have a material impact on any key judgements, estimates or assumptions in the consolidated Financial Statements.

In the prior year, climate change was assessed as part of ongoing discussions of key and emerging risks for the Group and the shipping and energy sectors within which it operates. Consideration of the potential short to medium-term impact of the Environment and Climate Change risk resulted in its inclusion as a Group Principal Risk.

1.4 Material accounting policies

The accounting policies applied by the Group in relation to specific transactions and balances are disclosed in the note to which they relate. The following section includes those accounting policies which apply pervasively across the Financial Statements and to avoid repetition are disclosed in this note.

Business combinations

Key estimate Acquisition accounting Business combinations are accounted for under the acquisition method, based on the fair values of the consideration paid. Assets and liabilities, with limited exceptions, are measured at their fair value at the acquisition date. The Group estimates the provisional fair values and useful lives of acquired assets and liabilities at the date of acquisition. The valuation of acquired intangibles is subject to estimation of future cash flows and the discount rate applied to them. The valuation of the customer-related intangible assets is determined based on an excess earnings methodology while the valuation of the marketing-related intangible asset is based on a royalty savings method. Key judgement Assessment of business combinations During the prior year, the Group acquired the entity Madrid Shipping Advisors S.L. For a business combination to exist, the Group must obtain control of a business. To be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. As part of the transaction, no assets were acquired (such as brand, order book, property, plant and equipment), nor were any liabilities assumed. The entity holds the service contracts for key employees and was a newly incorporated company, set up specifically for the acquisition. The Group has made the judgement that the acquisition did not meet the definition of a business combination as the acquired entity did not meet the definition of a business. The transaction was treated as the recruitment of a broker team, which is consistent with the substance of the arrangement.

• fair values of the assets acquired;
• liabilities incurred to the former owners of the acquired business;
• equity interests issued by the Group;
• fair value of any asset or liability resulting from a contingent consideration arrangement; and
• fair value of any pre-existing equity interest in the subsidiary.

Acquisition-related costs are expensed as incurred.

Due to the nature of the Group's business, amounts paid or shares issued to sellers are often linked to their continued employment. An assessment is performed to determine whether the amounts are part of the exchange for the acquiree, or should be treated as a transaction separate from the business combination. Transactions that are separate from the business combination are accounted for in accordance the relevant IFRSs which generally results in the amounts being treated as a post-combination remuneration expense.

Foreign currencies

Transactions and balances

Transactions in currencies other than sterling are recorded at the rates of exchange prevailing on the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currency are recognised in the Income Statement.

In order to hedge its exposure to certain foreign exchange risks, the Group enters into derivative financial instrument contracts, mainly forward foreign currency exchange contracts which are designated as cash flow hedges (see Note 4.4). For a qualifying hedge relationship, the fair value gain or loss on the hedging instrument is recognised as part of revenue when the underlying transaction is recognised in accordance with the Group's revenue recognition policy.

Translation to presentation currency

The presentational currency of the Group is sterling. Assets and liabilities of overseas subsidiaries, branches and associates are translated from their functional currency into sterling at the exchange rates ruling at the Balance Sheet date. Trading results are translated at the average rates for the period. Exchange differences arising on the consolidation of the net assets of overseas subsidiaries are recognised through other comprehensive income in the foreign currency translation reserve (see Note 6.4).

• Impairment
• Contingent assets

2 Performance-related information

Revenue recognition

Key judgement Revenue recognition IFRS 15 "Revenue from Contracts with Customers" requires judgement to determine whether revenue is recognised at a "point in time" or "over time" as well as determining the transfer of control for when performance obligations are satisfied. For Chartering, in relation to single voyages, the Group has defined the performance obligation to be satisfied at the point in time where the negotiated contract between counterparties has been successfully completed, being the discharge of cargoes, and therefore revenue is recognised at this point in time. This is a critical judgement since revenue recognition would differ if the performance obligations were deemed to be satisfied over a time period, or at a different point in time. For time charters, the performance obligation is to provide operational support and act on behalf of the principal over the course of hire. As a result, the Group believes the performance obligation is satisfied over the period of hire and revenue is recognised accordingly.

Deep Sea Tankers, Specialised Tankers and Gas, Dry Cargo and Offshore:

• for single voyage chartering, the contractual terms are governed by a standard charterparty contract in which the broker's performance obligation is satisfied when the cargo has been discharged according to the contractual terms; and
• Risk Advisory desks

Securities:

Investment Advisory

Financial:

• income comprises retainer fees and success fees generated by corporate finance-related activities. Revenue is recognised in accordance with the terms agreed in individual client terms of engagement. Recurring monthly retainers allow customers to benefit from services when required, and as such, are generally recognised in the month of invoice. Success fees are recognised at the point when the performance obligations of the particular engagement are fulfilled.

Sale and Purchase:

• with regard to newbuilding contracts, the commission is recognised when contractual stage payments are made by the purchaser of a vessel to a shipyard which in turn reflects the performance of services over the life of the contract; and

Dividend income from investments is recognised when the right to receive payment is established.

2.1 Business segments

The table below shows the make-up of the Groups segments by underlying component.

The segmental analysis is consistent with the way the Group manages itself and with the format of the Group's internal financial reporting. The board considers the business from both service line and geographic perspectives. A description of each of the lines of service is provided in the Operating and Financial Review. The Group's main geographic markets comprise the UK, Singapore, the US, Australia, Switzerland, Germany and the Rest of the World. The Group's geographical markets are determined by the location of the Group's assets and operations.

Geographical segment - by origin

Geographical information determined by location of customers is set out below:

Revenue

Remaining performance obligations

The Group enters into some contracts which are for a duration longer than twelve months and where the Group has outstanding performance obligations on which revenue has not yet been recognised at the Balance Sheet date. The amount of revenue that will be recognised in future periods on these contracts when those remaining performance obligations are satisfied is set out below:

Forward order book

2.2 Specific items

Specific items are significant items considered material in size or nature (including acquisition and disposal-related gains and losses) as well as items which are not considered to be part of the trading performance of the business in the current year. These are disclosed separately to enable a full understanding of the Group's ongoing financial performance, but may not be comparable with disclosures provided by other companies. The Group's adjusted performance measures are reviewed by the Group's Chief Operating Decision Maker and are used as the basis to determine the discretionary bonus pools and measure earnings per share performance related to targets for awards under the Group's Long Term Incentive Plan.

Key judgement Classification and recognition of specific items In reporting financial information, the Group presents Alternative Performance Measures ("APMs") which are not defined or specified under the requirements of International Financial Reporting Standards ("IFRS"). The Group believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide stakeholders with additional helpful information and enable an alternative comparison of performance over time. The Group excludes specific items from its underlying earnings measures. Management judgement is required as to what items qualify for this classification. There can also be judgement as to the point at which costs should be recognised and the amount to record to ensure that the understanding of the underlying performance is not distorted. Further details of the Group's specific items are included in the note below.

Other operating income

A gain on purchase in relation to the acquisition of Southport was recognised in the prior year. The Group does not consider this gain to reflect the performance of the business in the year, and so is treated as a specific item.

Revaluation of the contingent receivable due in respect of the Cory Brothers disposal resulted in a gain of £0.1 million (2023: £0.2 million). See Note 4.9 for further details.

The tax charge on specific items included within other operating income was £nil (2023: £nil).

Operating costs

Investigation costs

During the preparation of the 2023 Annual Report, the board instigated an investigation into a transaction which originated in 2013 and involved payments being made through to 2017. The investigation engaged multiple external specialist firms and resulted in a significant cost to the business of £2.6 million in the year to 29 February 2024 which the Group does not consider reflects the trading of the business in the year and as a result is treated as a specific item. No significant further costs are expected in FY25.

Board change costs

The Group appointed a new Chief Financial Officer with effect from 1 August 2023 to replace Nick Stone who left on 31 July 2023. The recruitment costs incurred of £0.2 million are not considered part of the trading performance of the business and so are treated as specific items.

Unlawful dividend rectification

Following the identification of the payment of historic unlawful dividends, the Group incurred costs of £0.2 million in relation to their rectification, which are not expected to recur, are not considered part of the trading performance of the business and so are treated as specific items.

Commission obligation

In the prior year, as set out in Note 7.1 Provisions, the Group recognised a provision in relation to an uncertain commission obligation. During the prior year, an amount of £0.3 million was recognised to increase the provision. Due to the nature of the provision being an historical transaction and not related to current trading, the Group treated the cost as a specific item.

Impairment of financial asset

In the prior year, an impairment charge of £0.8 million was recognised in relation to a disputed staff loan with an ex-employee of our Indian operations. Since no significant progress had been made with the ongoing legal case it is now the opinion of the directors that recovery of this debt is unlikely. Due to the size of the impairment and the fact that the original debt arose several years previously and is not related to trading, this impairment charge is not deemed to relate to the performance of the business and as such was treated as a specific item.

Impairment of goodwill

In the prior year, an impairment of goodwill of £9.1 million was recognised in relation to the goodwill allocated to the Corporate Finance business. The Group does not believe that this impairment reflected the performance of the business during the year, and as such, was treated as a specific item.

Other operating costs

In the current year, operating costs includes the fair value loss on the revaluation of the Group's investment in London Tanker Brokers Panel. Consistent with the previous revaluation gain being included as a specific item, the Group has treated the current year loss as a specific item as it does not relate to the trading performance of the business in the year. In the prior year, the final transaction costs of £0.1 million related to disposals in the preceding year were received.

The tax income on specific items included within operating costs was £0.7 million (2023: £0.1million)

Acquisition-related items

Consideration treated as an employment expense

Following the acquisition of Southport Maritime Inc. in December 2022, due to the requirement for ongoing employee service, the upfront cash payment of £6.0 million and IFRS 2 charge related to share awards made to the sellers and existing employees of Southport are treated as a post-combination remuneration expense. The total expense for the year related to amounts linked to ongoing employee service in connection with the acquisition of Southport was £3.6 million (2022: £1.3 million). The period of required employee service is three years from the acquisition date.

Madrid post-contractual obligation

• An upfront cash payment of £1.3 million with a further payment of £1.3 million made in December 2023.

The upfront payments and share awards have a clawback mechanism which is linked to the continued employment of the brokers over a three-year period from December 2022. The costs associated with the upfront payments and share awards are not considered by the Group to be specific items as they relate to the recruitment of brokers and not a business combination, but are disclosed as acquisition-related expenditure given their size and will be amortised over three years to December 2025. In addition, certain brokers are entitled to a payment on termination in return for a non-compete obligation. The cost related to the post-contractual payment obligation is treated as a specific item because it is akin to a transaction cost with no requirement to provide service. The Group recognised a cost of £0.4 million during the year in relation to this obligation (2023: £0.3 million).

Acquisition of Naves Corporate Finance GmbH

In the prior year, the Group incurred total costs of £0.1 million in relation to employment costs due to the management sellers conditional on their ongoing service to the Group. As the service condition was satisfied in the prior year there is no further employment cost to be recognised.

Amortisation of acquired intangible assets

An amount of £0.4 million (2022: £0.4 million) relates to the amortisation of acquired intangible assets, primarily in relation to intangible assets recognised as a result of the acquisition of Southport Inc.

The tax income on acquisition-related items was £0.1 million (2023: £0.1 million). The tax effect of expenses not deductible for tax was £1 million.

Other specific items

Cory brothers earnout deferred consideration receivable

The unwinding of the discounting of the deferred receivable due in respect of the Cory Brothers disposal contributed interest income of £0.1 million (2023: £0.1m). See Note 4.9 for further information. This income is not related to the trading of the business in the period but is related to the disposal of the logistics business in a prior year. As a result, it is treated as specific item.

Foreign exchange and derivative movement on Naves liability

The foreign exchange gain and fair value gain on the Naves-related liabilities and derivative of £0.3 million (2023: £0.3 million loss) is included as a specific item as it relates to the acquisition of Naves and is not related to trading.

The tax charge on specific items included within other items was £nil (2023: £0.2 million). The tax effect of income not taxable was £0.2 million.

2.3 Operating profit from continuing operations

Operating profit represents the results from operations before finance income and costs, share of profit/(loss) in associate and taxation.

This is stated after charging/(crediting):

2.4 Staff costs

• Staff costs for the Group during the year (including directors)

1 The acquisition related staff costs relate to upfront cash payments made in connection with the acquisition of Southport Maritime Inc. and the upfront payments made on the acquisition of Madrid Shipping Advisors SL, which are both treated as a remuneration expense. For further details on the upfront payments, see Note 2.2.The numbers above include remuneration and pension entitlements for each director.

Average number of employees

Pension costs relate to contributions made to a defined contribution pension scheme on behalf of four (2023: three) members of key management.

2.5 Finance income and costs

The tables below provide a breakdown of the key components of finance income and finance costs.

2.6 Auditor's remuneration

A more detailed analysis of the auditor's services is provided below:

Audit services:

Fees payable to the Group's auditor and its associates for other services:

All fees paid to the auditor were charged to operating profit in both years. Included in the FY24 audit fees disclosed above is an amount of £0.4 million in relation to incremental audit cost related to the investigation work undertaken. See Note 2.2 for further detail.

2.7 Taxation

The taxation expense represents the sum of the current and deferred tax.

Tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the Income Statement because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group and Company's liability for current tax is calculated using rates that have been enacted or substantively enacted by the Balance Sheet date.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated Financial Statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from the initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss and does not give rise to equal taxable and deductible temporary differences. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised, or the deferred income tax liability is settled. Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax are recognised in the Income Statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Analysis of charge in year

1Included within the prior year adjustment, a £0.5 million credit arose in the UK as a result of a foreign tax credit claim. In addition, in the prior year, as part of the Group's estimate in relation to uncertain tax positions, the Group had applied a tax rate of 17% in Singapore, but after meeting the qualifying criteria a rate of 10.5% is applicable which has resulted in a credit of £0.4 million in the current year.

2 The Group has £0.2 million of unrecognised deferred tax asset relating to £0.8 million of losses. The expiry date of operating losses carried forward is dependent upon the law of the various territories in which losses arise. As at 29 February 2024 the losses have no expiry. The prior year amount was incorrectly reported as a decrease of £0.2m but has been updated in the current year with the offsetting movement included in other differences leading to a decrease in tax.

Included within the total tax charge is £0.8 million credit (2023: £0.2 million) in respect of specific items disclosed separately on the face of the Income Statement. See Note 2.2.

The Group's future tax charge will be sensitive to the geographic mix of profits earned, the tax rates in force and changes to the tax rules in jurisdictions that the Group operates in. The UK main rate increased to 25% from 1 April 2023. The impact of UK rate changes on deferred tax were taken into account in the prior year.

Amounts recognised in OCI

Items that will not be reclassified to profit or loss

Within the UK current year origination and reversal of temporary differences there is no amount (2023: £414,000 debit) in respect of deferred tax on the actuarial gain on the Group's defined benefit pension scheme.

Deferred tax asset

Deferred Tax Asset

A deferred tax asset of £2.9 million (2023: £4.8 million) has been recognised as the directors believe that it is probable that there will be sufficient taxable profits in the future to recover the asset in full.

Deferred tax liability

No deferred tax has been provided in respect of temporary differences associated with investments in subsidiaries and interests in joint ventures where the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future. The aggregate amount of temporary differences associated with investments in subsidiaries, for which a deferred tax liability has not been recognised, is approximately £nil (2023: £nil).

2.8 Earnings per share

3 Balance sheet non-current assets

3.1 Goodwill

Key estimate Impairment of goodwill Goodwill is tested for impairment on an annual basis, and the Group will also test for impairment at other times if there is an indication that an impairment may exist. Determining whether goodwill is impaired requires an estimation of the value-in-use of the cash-generating units to which these assets have been allocated. The value-in-use calculation estimates the present value of future cash flows expected to arise for the cash-generating units. The key estimates are therefore the selection of suitable discount rates and the estimation of future growth rates which vary between cash-generating units depending on the specific risks and the anticipated economic and market conditions related to each cash-generating unit. As part of determining the value in use of each CGU group, Management has considered the potential impact of climate change on the business performance over the next five years, and the terminal growth rates. While there is considerable uncertainty relating to the longer term and quantifying the impact on a range of outcomes, management considers that environmental-related incremental costs are expected to have a relatively low impact. Recognising that there are extreme but unlikely scenarios, the Group considers that while exposed to physical risks associated with climate change (such as flooding, heatwaves, sea level rises and increased precipitation) the estimated impact of these on the Group is not deemed material. In addition, the Group is exposed to transitional risks which might arise, for example, from government policy, customer expectations, material costs and increased stakeholder concern. The transitional risks could result in financial impacts such as higher environmentally focused levies (e.g. carbon pricing). While the Group is exposed to the potential financial impacts associated with transitional risks, based on information currently available, these are not deemed to have a significant impact. The key assumptions and the sensitivity of them to the carrying values are provided in the note below.

£'000

Cost

All goodwill is denominated in the Group's reporting currency, with the exception of the Corporate Finance Division which is denominated in euros. Goodwill denominated in foreign currencies is revalued at the Balance Sheet date. The exchange adjustment at 29 February 2024 was a loss of £0.1 million (2023: gain of £0.6 million).

i) Business performance over the next five years - The estimated cash flows were based on the approved annual budget for the next financial year and projections for the following four years which are based on management's estimates of revenue growth and cost inflation which reflect past experience and management's expectation of future events given the specific risks and economic and market conditions of each cash-generating unit. The assumptions behind these projections are consistent with the viability statement. Cash flows have been used over a period of five years as management believes this reflects a reasonable time horizon for management to monitor the trends in the business.

• Long-term growth rates - This is the average growth rate used to extrapolate cash flows beyond the budget period.
• Discount rates - The post-tax discount rate was determined based on a weighted average cost of capital ("WACC") and adjusted for CGU-specific risk factors specific to the CGU group.

The results of the impairment tests are as follows:

Chartering

The key assumptions and resulting net present values are as follows:

1 No year-on-year revenue growth is assumed in year 1

At 29 February 2024, the net present value of the Chartering segment is significantly higher than the carrying value of the goodwill in respect of this cash-generating unit. At the Balance Sheet date, management concluded that there were no reasonably possible changes in the key assumptions used in the impairment review that would reduce headroom to £nil or result in an impairment.

Corporate Finance

Revenues for the Corporate Finance Division are challenging to forecast because of the highly variable nature of success fees. Management forecasts over the five year forecast period consider recent performance and reflect management's best estimate of success fee taken into account of volatility of the success fee. Growth rates used in the value-in-use test reflect this variability and were based on the best estimate of the Management.

1 Year-on-year growth in year 1 is 29%, which reflects recovery of revenue after lower than historically achieved performance in FY24

Sensitivity to impairment for Corporate Finance

• revenue growth rate from year two to five;
• post-tax discount rate; and
• revenue outperforms or underperforms forecast in year 1 with subsequent revenue growth in line with the above assumptions in years two to five.

The recoverable amount of the Group's goodwill relating to Corporate Finance exceeds its carrying value by £0.6 million. The below table presents the net variance in the calculated value in use of Corporate Finance under each scenario:

Further, the break-even points of the impairment review which would result in an impairment when flexing these three key assumptions are as below:

Change in assumption Increase/(decrease)

The effect on cash flows of climate change was considered but assessed to have no material impact at this time. Management does not believe that climate-related risks nor the potential impact of climate change on the Group's operations would materially affect the recoverability of goodwill in either of the cash-generating units (see Note 3.1).

3.2 Other intangible assets

Computer software

Other intangible assets

Intangible assets acquired as part of a business combination are stated in the Balance Sheet at their fair value at the date of acquisition less accumulated amortisation and any provision for impairment. The amortisation of the carrying value of the capitalised forward order book and customer relationships is charged to the Income Statement over an estimated useful life, which is between four months to twelve years. The amortisation in respect of capitalised brand assets is expensed to the Income Statement over an estimated useful life, which is between three and twelve years.

1 The gross cost and gross accumulated amortisation of other intangible assets at 28 February 2022 included fully amortised acquired order books relating to historical business combinations. The Group believes that once all orders in the order book have been satisfied and revenue recognised,, there is no further asset to benefit from. For order books satisfied at 28 February 2022 the Group has restated the opening gross cost and gross accumulated amortisation to correct the opening gross positions in relation to other intangible assets. The impact of the restatement is a reduction of £8.5 million to the gross cost and gross accumulated amortisation at 28 February 2022, with no impact to net book values or amortisation expense in the current or prior year.

Other intangible assets brought forward from the prior year relate to forward books of income acquired in acquisitions which are amortised over the period that the income is recognised; customer relationships which are amortised over a period of up to twelve years; and brand which is amortised over a period of up to ten years.

The addition of £3.5 million in the prior year related to the acquisition of Southport, which gave rise to customer-related intangible assets of £3.1 million (including customer relationships of £2.8 million and order backlog of £0.3 million) and an asset of £0.4 million in relation to the trade name. The amortisation period for customer relationships is twelve years, order backlog is four months, and trade name is five years.

The customer relationships and order backlog were valued using an excess earnings method. Under the excess earnings method, a stream of revenue and expenses are identified as those associated with a particular group of assets. This group of assets includes the subject intangible asset as well as other assets (contributory assets) that are necessary to support the earnings associated with the subject intangible asset. By identifying and subtracting contributory assets, the residual earnings are estimated to be attributable to the subject intangible asset and are discounted to present value at an appropriate discount rate (estimated at 19%). The trade name was valued using a royalty savings method. The royalty savings method is a derivation of the income approach often used to value intangible property that may be licensed to third parties. Under this method, it is assumed that a company, without a similar asset, would license the right to use this intangible asset and pay a royalty related to turnover achieved. The value of the asset is established by calculating the present value of the royalty stream (estimated at 4%) that the business is saving by owning the asset.

3.3 Investments

In accordance with IFRS 9, the Group's investments in unlisted equity investments are measured at fair value through profit or loss as the Group has not elected to recognise fair value gains and losses through other comprehensive income.

A list of subsidiary undertakings is included in Note 7.3.

The Financial Statements of the principal subsidiary undertakings are prepared to 29 February 2024.

The Group's unlisted investments include 1,000 (2023: 1,000) ordinary £1 shares in London Tanker's Broker Panel Limited. The investment is carried at fair value of £1.6 million, see Note 4.4 for further details.

3.4 Investment in associate

Investments

Zuma Labs Limited

Zuma Labs Limited is a private company incorporated in England and Wales and its registered address is Kemp House, 128 City Road, London, United Kingdom, EC1V 2NX. Zuma Labs Limited has one share class and each share carries one vote.

At 29 February 2024, the Group's shareholding was 2,500 shares, which equates to 20.0% of Zuma Labs Limited's share capital and 20.0% of voting rights (2023: 2,500 shares, 20% of share capital and 20% of voting rights). The Group has representation on the board of Zuma Labs Limited, and, as a result, the Group considers that it has the power to exercise significant influence in Zuma Labs Limited and the investment in it has been accounted for using the equity method.

A purchase price allocation exercise was undertaken to measure the fair value of the net assets on the date at which Zuma Labs Limited became an associate, and also at each date at which further shares were subscribed for. Based on the purchase price allocation exercise, the difference between the cost of the investment and the Group's share of the net fair value of Zuma Labs Limited's identifiable assets and liabilities is accounted for as goodwill. Amortisation of that goodwill is not permitted.

IAS 28 requires the most recent financial statements of an associate are used for accounting purposes, and that coterminous information should be used unless it is impractical to do so. Zuma Labs Limited has a year-end of 31 March and accounts up to 31 December 2023 have been made available, so for practical reasons Zuma Labs Limited's management accounts for the nine months ended 31 December 2023 will be used for the purposes of the Group's full-year reporting at 29 February with adjustments made for any significant transactions and events. Zuma Labs Limited will prepare its next set of Financial Statements for the year ended 31 March 2024. At 29 February 2024 Zuma Labs Limited had no contingent liabilities.

Management has reviewed the carrying value of the investment in Zuma Labs Limited at 29 February 2024 and does not consider this to be impaired.

The movements in the investment in associates are provided below.

Zuma £'000

3.5 Property, plant and equipment

Property, plant and equipment are shown at historical cost less accumulated depreciation and any provision for impairment.

Depreciation is provided at rates calculated to write off the cost, less estimated residual value of each asset, on a straight-line basis over its expected useful life as follows (except for long and short leasehold interests which are written off against the remaining period of the lease):

Computer equipment - four years

Fixtures and equipment - four years

At 29 February 2024, the Group had no contractual commitments for the acquisition of property, plant and equipment (2023: £nil).

3.6 Leases

The Group as a lessee

The Group has various lease arrangements for properties, and other equipment. At inception of a lease contract, the Group assesses whether the contract conveys the right to control the use of an identified asset for a certain period of time and whether it obtains substantially all the economic benefits from the use of that asset, in exchange for consideration. The Group recognises a lease liability and a corresponding right-of-use asset with respect to all lease arrangements in which it is a lessee, except low-value leases and short-term leases of twelve months or less, costs for which are recognised as an operating expense within the Income Statement on a straight-line basis.

For the Group, lease payments generally comprise the following:

− Fixed payments, less any lease incentives receivable;

− Variable payments that are based on an index or rate; and

− Payments to be made under extension options which are reasonably certain to be exercised.

The Group as a lessor

The Group classifies leases as either operating or finance leases based on the substance of the arrangement. At commencement of a finance lease, a receivable is recognised at an amount equal to the Group's net investment in the lease. Finance income is recognised reflecting a constant periodic rate of return on the net investment in the lease. Lease payments from operating leases are recognised as income on a straight-line basis.

Right-of-use assets

The Group leases a number of properties in the jurisdictions from which it operates. In some jurisdictions it is customary for lease contracts to provide for payments to increase each year by inflation and in other property leases the periodic rent is fixed over the lease term. The Group also leases certain items of plant and equipment which are typically motor vehicles. These contracts normally comprise only fixed payments over the lease term.

In the prior year, right-of-use assets and lease liabilities arising on business combinations represents leases on property of £86,000. The total cash outflow for leases is £3,332,000 (2023: £4,039,000), of which £189,000 (2023: £175,000) represents payment of interest.

Lease receivables

Lease liabilities

Contractual payments by maturity are provided in Note 4.4 (f).

Lease receivables

Contractual receipts by maturity are provided in the table below:

During the year, the financial effect of revising lease terms arising from the effect of exercising extension and termination options was an increase of £375,000 million (2023: increase of £98,000) in the recognised lease liabilities. As at 29 February 2024, undiscounted potential future cash outflows of £2.9 million (2023: £3.9 million) have not been included in the lease liability because it is not reasonably certain that the leases will be extended (or not terminated).

4 Balance sheet - Operating assets and liabilities

4.1 Other long-term receivables

For the accounting policy and further details on deferred and contingent consideration receivable, see Note 4.9. The accounting policy for finance lease receivables is set out in Note 3.6.

Deferred consideration of £1.3 million and contingent consideration of £0.5 million relates to the earnout payments receivable in respect of the disposal of Cory Brothers, further detail is provided in Note 4.9. Prepayments includes an asset of £2.4 million (2023: £4.8 million) which is the non-current element of the clawback provision on joining incentives paid to certain employees. The receivable is amortised over the clawback period.

See Note 3.6 for a maturity analysis which reconciles the long-term finance lease receivables to the undiscounted lease receipts and unearned finance income.

4.2 Trade and other receivables

Trade receivables and contract assets

Trade receivables and contract assets are initially recognised at fair value (less transaction costs) and subsequently measured at amortised cost.

Specific provision is made where there is evidence that the balances will not be recovered in full. A provision for expected credit losses is made for trade receivables and contract assets using the simplified approach. A provision matrix is used to calculate an expected credit loss as a percentage of carrying value by age. The percentages are determined based on historical credit loss experience as well as forward-looking information. Expected credit loss provisions are made for other receivables based on lifetime expected credit losses using a model that considers forward-looking information and significant increases in credit risk.

Other items

For the accounting policy and further details on deferred and contingent consideration receivable, see Note 4.9. The accounting policy for finance lease receivables is set out in Note 3.6.

Key estimate Provision for impairment of trade receivables and contract assets Trade receivables and contract assets are amounts due from customers in the ordinary course of business. Trade receivables and contract assets are classified as current assets if collection is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current assets. The provision for impairment of trade receivables and contract assets represents management's best estimate at the Balance Sheet date. A number of judgements are made in the calculation of the provision, primarily the age of the invoice, the existence of any disputes, recent historical payment patterns and the debtor's financial position. When measuring expected credit losses, the Group uses reasonable and supportable forward-looking information, which is based on assumptions for the future movement of different economic drivers and how these drivers will affect each other. Probability of default constitutes a key input in measuring expected credit losses. Probability of default is an estimate of the likelihood of default over a given time horizon, the calculation of which includes historical data, assumptions and expectations of future market conditions. The expected loss rates applied to receivables are provided in this note.

Deferred consideration of £1.3 million and contingent consideration of £0.6 million relate to the earnout payments receivable in respect of the disposal of Cory Brothers; further detail is provided in Note 4.9.

Included in other receivables in both years are VAT and other sales tax receivables and employee loans. In the prior year, security deposits are also included.

Prepayments includes an asset of £3.5 million (2023: £4.0 million) in respect of the current portion of the clawback provision on joining incentives paid to certain employees which are being charged to the Income Statement in accordance with the clawback provisions of the underlying contracts. The receivable is amortised over the clawback period.

The movement in the asset between years is due to the invoicing of all prior year assets and the accrual of amounts relating to the current year.

The total receivables balance is denominated in the following currencies:

As at 29 February 2024, trade receivables of £2,339,000 (2023: £3,003,000) which were over 12 months old were treated as credit impaired and have been provided for. No provision (2023: £nil) has been made for specific trade receivables which are less than 12 months overdue.

The expected loss rates are based on the Group's historical credit losses and rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group's customers. Trade receivables and contract assets are written off where there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the group, and a failure to make contractual payments for a period of greater than 365 days past due.

Movements on the provision for impairment of trade receivables and contract assets were as follows:

Amounts receivable written off in the year relate to previously fully provided for amounts.

Contract assets

£'000

4.3 Trade and other payables

Commissions payable to co-brokers are recognised in trade payables due within one year on the earlier of the date of invoicing or the date of receipt of cash. The accounting policy for lease liabilities is set out in Note 3.6.

Accruals primarily includes accrued bonuses and other general accruals.

The directors consider that the carrying amounts of trade payables approximate to their fair value.

4.4 Financial instruments and risk management

The Group is exposed through its operations to the following financial risks:

• Currency risk;
• Interest rate risk;
• Credit risk; and
• Liquidity risk.
• Financial instruments
• Principal financial instruments
• Trade and other receivables;
• Cash and cash equivalents;
• Deferred consideration receivable;
• Contingent consideration receivable;
• Unlisted investments;
• Trade and other payables;
• Revolving credit facility;
• Lease liabilities; and
• Derivative financial instruments.
• Financial instruments by category

Financial instruments measured at fair value

1Currency forwards with a fair value of £1.3 million (2023: £1.2 million) maturing within twelve months have been shown as current assets. Currency forwards with a fair value of £0.2 million (2023: £0.0 million) maturing within 12 to 24 months of the Balance Sheet date have been shown as non-current assets. Liabilities include currency forwards with a fair value of £0.2 million (2023: £1.1 million) maturing within twelve months shown as current liabilities and currency forwards with a fair value of £0.0 million (2023: £0.7 million) maturing within 12 to 24 months of the Balance Sheet date shown as non-current liabilities.

Fair value hierarchy

Financial assets and liabilities are classified in their entirety into one of three levels:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 3: Inputs for the asset or liability that are not based on observable market data.

Valuation processes

The Group's finance team and Group Chief Financial Officer are responsible for fair value measurement of financial instruments and makes the decision as to the valuation technique to be applied, along with the level of external support required. The Group uses external specialists to value some of the financial instruments included within Level 3 of the fair value hierarchy. The results of those valuations are reviewed at each reporting date within the finance team.

Unlisted investments

The unlisted investment primarily relates to the Group's investment in the London Tanker's Broker Panel, see Note 3.3. In the prior year the investment was carried at fair value, based on the value of the most recent comparable transaction and was therefore classified as Level 2 in the fair value hierarchy. Due to the time which has passed since the most recent comparable market transaction, the Group has valued the investment in the current year based on an income approach which has resulted in the fair value being deemed to be in Level 3 of the fair value hierarchy. The Group's policy is that the beginning of the financial year is considered the date of transfer between levels in the fair value hierarchy. The significant unobservable inputs into the valuation are:

• a discount rate of 16.4%; and
• expected income from the investment.

Contingent consideration receivable

The fair value of the contingent consideration receivable includes unobservable inputs and are therefore classified as Level 3. The contingent consideration receivable relates to the disposal of the Logistics Division whereby the Group is entitled to three future cash payments. The SPA provides for a minimum guaranteed amount in each of the three years; this amount has been classified as deferred consideration. The balance of the earnout consideration is contingent on the future performance of the combined business up to a maximum specified in the SPA; this has been classified as contingent consideration. The fair value of the contingent consideration has been calculated by reference to management's expectation of the future profitability of the combined business and discounted to present value using a discount rate of 5.29%. The discount rate is based on the credit risk of Vertom Agencies BV assessed by a third-party credit agency. See Note 4.9 for further details and a sensitivity analysis on the contingent element.

Derivative contracts

Forward currency contracts

Currency options

The fair value of the currency options are based on prices quoted by the counterparty within these contracts versus the market rate at the Balance Sheet date and have therefore been classified as Level 2 in the fair value hierarchy.

Embedded derivative

The convertible loan note instruments issued on the acquisition of Naves contain an embedded derivative, being a euro liability of principal and interest. The equity value of the underlying derivative is not considered closely related to the debt host, therefore the loan note is considered to be a financial liability host with an embedded derivative convertible feature which is required to be separated from the host. The fair value of the embedded derivative includes unobservable inputs and is therefore classified as Level 3. The key assumptions underpinning the fair value of the embedded derivative relate to the expected future share price of the Group and the GBP:EUR exchange rate. The fair value has been determined using a Black-Scholes valuation model.

A gain of £244,000 (2023: loss of £18,000) has been recognised in the Income Statement in respect of the fair value movement of the embedded derivative from 1 March 2023 to 29 February 2024.

Financial instruments not measured at fair value

The Group's financial assets and liabilities that are not measured at fair value are measured at amortised cost. Due to their short-term nature or frequent repricing, the carrying value of these financial instruments approximates their fair value. Their carrying values are as follows:

Deferred consideration receivable

Currency risk

Currency risk arises when Group entities enter into transactions denominated in a currency other than their functional currency. The Group's policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency with the cash generated from operations in that currency. The Group's currency risk exposure arises mainly as a result of the majority of its earnings being denominated in US dollars while the majority of its costs are denominated in sterling. There is also some currency exposure related to convertible loan notes and deferred consideration denominated in euros and from the carrying values of its overseas subsidiaries being denominated in foreign currencies.

The Group manages its transactional exposures to foreign currency risks using forward exchange contracts and currency options. The Group is primarily exposed to fluctuations in US dollar to sterling exchange rates on foreign currency sales and hedges a proportion of those expected cash flows out to 17 months. The principal source of hedge ineffectiveness is the risk of changes in timing of the forecast transaction or that they do not occur, which is addressed by only hedging a proportion of future foreign currency sales. There were no hedged transactions forecast in the current year which did not occur (2023: £nil).

Hedge accounting

Derivatives are initially recognised at fair value and are subsequently remeasured at their fair value at each Balance Sheet date with gains and losses recognised immediately in the Income Statement unless hedge accounting is applied. Recognition of the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if it is, the nature of the item being hedged. Changes in the fair value of derivatives that do not qualify for hedge accounting are recognised immediately in the Income Statement within finance costs or income.

Financial assets and liabilities are classified in accordance with the fair value hierarchy specified by IFRS 13. See Note 4.4.

Cash flow hedge accounting

Cash flow hedges are used to hedge the variability in cash flows of highly probable forecast transactions caused by changes in foreign currency exchange rates and interest rates. Where a derivative financial instrument is designated in a cash flow hedge relationship with a highly probable forecast transaction, the effective part of any change in fair value arising is deferred in the cash flow hedging reserve within equity, via the Statement of Comprehensive Income. The Group designates a portion, being the first US dollar amounts in a particular period, of forecast revenue transactions in cash flow hedges and reports any gain or loss as part of revenue when the revenue is recognised. The gain or loss relating to the ineffective part is recognised in the Income Statement within net finance expense. Amounts deferred in the cash flow hedging reserve are reclassified to the Income Statement in the periods when the hedged item is recognised in the Income Statement.

If a hedging instrument expires or is sold but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised immediately in the Income Statement.

A gain of £2,231,000 (2023: £4,826,000 loss) in relation to effective hedges has been recognised in the Income Statement in respect of derivative contracts which have matured in the period. No ineffectiveness in relation to hedge accounting has been recognised in the period.

In the prior year the Group entered into currency options featuring a "cap and floor" feature. The intrinsic value of the options is designated in cashflow hedge relationships. The time value of the options is deferred in equity as a cost of hedging and reclassified to the Income Statement in the period that the hedged cash flow affects the Income Statement.

In a prior year the Group also entered into a currency option which was not designated in a cash flow hedge relationship and expired during the year (2023: £0.2 million liability). The £0.2 million movement in fair value in the period was charged to the Income Statement (2023: £0.2 million) and is included within Finance costs.

The effects of the foreign currency-related hedging instruments on the Group's financial position and performance are as follows:

Net investment hedge accounting

The Group uses its US dollar denominated borrowings as a hedge against the translation exposure on the Group's net investment in overseas companies. The Group designates the spot rate of the loans as the hedging instrument. There was no ineffectiveness to be recognised on hedges of net investments in foreign operations. Where the hedge is fully effective at hedging the variability in the net assets of such companies caused by changes in exchange rates, the changes in value of the borrowings are recognised in the translation reserve within equity, via the Statement of Comprehensive Income. The ineffective part of any change in value caused by changes in exchange rates is recognised in the Income Statement within finance income or costs. The effective portion will be recycled into the Income Statement on the sale of the foreign operation.

The table below provides further information on the Group's net investment hedging relationships:

The balances and movements into and out of the foreign currency translation reserve are shown in the Consolidated Statement of Comprehensive Income and the Consolidated Statement of Changes in Equity respectively. The amount in the foreign currency translation reserve in relation to hedge accounting is a gain of £0.1 million (2023: £0.1 million loss) and is split as follows:

• continuing net investment hedges gain of £0.1 million (2023: £0.1 million loss); and
• hedging relationships for which hedge accounting is no longer applied, £nil (2023: £nil).

The effect on equity and profit before tax if the US dollar or the euro strengthened/(weakened) by 10% against sterling, with all other variables being equal, is as follows:

Interest rate risk

The Group is exposed to interest rate risk from borrowings at floating rates. The Group minimises its short-term exposure to interest rate risk on its cash and cash equivalents by pooling cash balances across the Group's entities.

Credit risk

The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets. Concentrations of credit risk with respect to trade receivables are limited due to the diversity of the Group's customer base. The directors believe there is no further credit risk provision required in excess of normal provisions for doubtful receivables, estimated by Management based on prior experience and their assessment of the current economic environment. The Group seeks to trade only with creditworthy parties and carries out credit checks where appropriate. The maximum exposure is the carrying amount as disclosed in Note 4.4.

Liquidity risk

The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. Management receives rolling 13-week cash flow projections on a weekly basis to ensure the Group has sufficient liquidity.

The board receives rolling twelve month cash flow projections on a monthly basis as well as information regarding cash balances. At the end of the financial year, these projections indicated that the Group expected to have sufficient liquid resources to meet its obligations under all reasonably expected circumstances.

The Directors consider that the carrying amounts of these assets approximate to their fair value.

4.6 Long-term borrowings

Arrangement costs for loan facilities are capitalised and amortised over the life of the debt at a constant rate. Finance costs are charged to the Income Statement, based on the effective interest rate of the associated external borrowings and debt instruments.

Modification of terms of financial liabilities

When the terms of an existing financial liability are modified, management will consider both quantitative and qualitative factors to assess whether the modification is substantial. In the case that the modification of the terms of existing financial liability is considered to be substantial, the modification shall be accounted for as an extinguishment of that financial liability and the recognition of a new financial liability. If the modification is not considered substantial, then the existing financial liability is remeasured in accordance with its original classification and any gain or loss is recognised immediately in the Income Statement.

The Group's revolving credit facility ("RCF") is for £30.0 million plus an accordion limit of £10.0 million and has an initial termination date of November 2025 with an option, subject to lender approval, to extend the term of the facility by 24 months. Drawdown of the accordion facility is subject to additional credit approval. The RCF agreement has an EBITDA leverage covenant of 2.5x and a minimum interest cover of 4x. At 31 May 2023, 31 August 2023, 31 November 2023 and 29 February 2024 the Group met all financial covenant tests. Amounts can be rolled on a monthly basis until the facility expires subject to certain conditions, and on that basis the borrowings have been classified as non-current. The amounts drawn under the RCF bear interest based on SONIA, SOFR and EURIBOR from amounts drawn in sterling, US dollars and euros respectively, plus a credit margin dependent on the Group's leverage ratio.

All revolving credit facilities are drawn by Braemar Plc and appear in the accounts of the Company. See Note 4.5 for details of the Group's cash pooling arrangements and the net overdraft available to the Group.

4.7 Convertible loan notes

The convertible loan notes are considered to be a financial liability host with an embedded derivative convertible feature which is required to be separated from the host. The Group has an accounting choice to record the instrument in its entirety at fair value through profit and loss but has not chosen to apply this treatment. Instead, the financial liability host is recognised as a euro liability initially recognised at fair value and prospectively accounted for applying the effective interest rate method. As the loan notes are denominated in euros, the conversion feature does not meet the definition of an equity instrument. As a result, it is treated as a separated embedded derivative and is recognised at fair value through profit and loss. Where there are conversion options that can be exercised within one year the liability is recognised as current.

In September 2017, the Group acquired the entire share capital of Naves Corporate Finance GmbH ("Naves"). Naves is an established and successful business, headquartered in Hamburg, Germany, which advises national and international clients on corporate finance related to the maritime industry, including restructuring advisory, corporate finance advisory, M&A, asset brokerage, interim/pre-insolvency management and financial asset management including loan servicing.

• at completion in cash of £7.3 million (€8.3 million), in shares of £1.3 million (€1.5 million) and in convertible loan notes of £6.4 million (€7.4 million); and
• deferred consideration in cash of £0.5 million (€0.6 million) and convertible loan notes of £0.5 million (€0.6 million), payable in instalments over the three years after the acquisition.

The acquisition agreement also provided deferred amounts that would be payable to management sellers, conditional on their ongoing service in the business. IFRS 3 states that amounts paid to former owners which are conditional on ongoing service are for the benefit of the acquirer and not for the benefit of former owners. Consideration linked to the ongoing service of former owners is treated as remuneration for post-combination services and classified as acquisition-related expenditure under specific items in the Income Statement.

The deferred amounts payable to management sellers comprised:

• deferred cash of £1.3 million (€1.5 million) and deferred convertible loan notes of £4.3 million (€4.9 million) conditional only on the individual management seller's continued service payable in instalments over the five years after the acquisition; and

Following the issuance of new convertible loan notes in the prior year, at February 2024 no amounts are subject to future service conditions.

No post-acquisition remuneration associated with the acquisition was incurred during the year ended 29 February 2024 (2023: £0.1 million).

Convertible instruments

These convertible loan note instruments are unsecured, unlisted and non-transferable. The notes are euro denominated and carry a 3% per annum coupon. Each tranche is redeemable on or after two years from the date of issue by the Group or by the individual holder. The conversion prices were fixed at 390.3 pence for management sellers and 450.3 pence for non-management sellers.

The convertible loan note instruments carry certain accelerated conversion rights in the event of default on financial commitments associated with the instruments or business distress within the Group. The loan notes shall automatically convert or be redeemed in the event that any person or persons acting in concert hold more than 50% of the issued share capital of the Group or an impairment charge in excess of £43.9 million (€50.0 million) is reflected in the audited Financial Statements of the Group.

The embedded derivatives within the convertible loan notes are valued using level 3 hierarchy techniques under IFRS 13. See Note 4.4.

The total value of convertible loan note liabilities, including linked derivatives, is £3.1 million (2023: £3.9 million). The following table shows amounts in the Group balance sheet relating to the convertible loan notes issued on the acquisition of Naves.

The current year cash paid includes interest of £0.1 million (2023: £0.2 million).

The loan notes have the following maturities:

Note that current liabilities in respect of the loan notes differs from the amounts shown above maturing within one year due to interest payable within one year on non-current loans and the outstanding current liability to deliver cash and shares in respect of matured loan notes.

4.8 Reconciliation of liabilities from financing activities

1 In the prior year, RCF borrowings and the convertible loan notes were disclosed in the aggregate. The movement in balances during the year ended 28 February 2023 has been updated to reflect the current year presentation which provides the reconciliation separately for the RCF and the convertible loan notes.

2 In the prior year, 'Interest accruing in the period' included cash settled interest charges in relation to lease liabilities and the combined total for the RFC and convertible loan notes. These charges were offset by interest 'Cash flows' as reported in the reconciliation. The prior year numbers have been updated to remove these interest cash flows from both 'Interest accruing in the period' and 'Cash flows'. The effect is to reduce 'Cash flows' by £0.5 million and reduce 'Interest accruing in the period' by £0.2 million and include an additional item relating to fees paid of £0.3 million. There is no overall impact on total reported cash flows, opening or closing balances.

4.9 Deferred and contingent consideration receivable

Contingent consideration receivable is initially recognised at fair value and is subsequently remeasured at its fair value at each Balance Sheet date. The resulting gain or loss is recognised immediately in the Income Statement. Contingent consideration receivable is classified as Level 3 in accordance with the fair value hierarchy specified by IFRS 13. Deferred consideration is initially measured at its fair value and subsequently measured at amortised cost less provision for impairment.

Key estimate On 28 February 2022, the Group sold Cory Brothers to Vertom Agencies BV for maximum consideration of £15.5 million. Initial cash proceeds of £6.5 million were received on completion of the transaction, and three contractual "earn out" payments will be made, being an agreed percentage of the future gross profits of the combined VertomCory business over three subsequent twelve month earn out periods. The remaining "earnout" payments are subject to a combined minimum of £2.7 million and a combined maximum of £6.4 million. The minimum earnout consideration has been classified as deferred consideration receivable. The minimum amount is specified in the SPA and is therefore not an estimate, however an estimate of a discount rate is necessary to discount the deferred consideration receivable. A discount rate of 2.39% was used to calculate the net present value; this was based on the credit risk of Vertom Agencies BV following a credit check performed by management. Deferred consideration receivable is initially recognised at fair value and subsequently measured at amortised cost. The balance of the earnout consideration, up to the maximum specified in the SPA has been classified as contingent consideration receivable because it is contingent on the future profitability of the combined business. The fair value of the contingent consideration receivable involves two critical estimates: the future profitability of the combined business and the discount rate used to calculate the net present value. The future profitability forecasts are based on a business plan prepared by the combined VertomCory business. Contingent consideration receivable is initially recognised at fair value and subsequently measures at fair value through profit and loss. The fair value of the contingent consideration is calculated using the forecast gross profit for the combined VertomCory business for each earnout period, applying the agreed percentage, deducting the minimum payment and discounting the forecast contingent cashflows. The valuation of the contingent consideration involves two critical estimates: the future profitability of the combined business and the discount rate used to calculate the net present value. The future profitability forecasts are based on a business plan prepared by the combined VertomCory business and was reviewed by management as part of the financial due diligence process. A discount rate of 5.45% (2023: 5.29%) was used to calculate the net present value; this was based on the credit risk of Vertom Agencies BV following a credit check performed by management. Set out below is a sensitivity analysis of the contingent consideration receivable to the discount rate and the assumptions of future profitability.

Fair value of Cory Brothers deferred and contingent consideration receivable

The agreed minimum earnout payment is presented as deferred consideration and measured at amortised cost, using a discount rate of 2.39% determined on initial measurement. The uncertain element of each earnout payment is measured at fair value through profit or loss and presented as contingent consideration.

Deferred and contingent consideration are included in other long-term receivables (see Note 4.1) and current other receivables (see Note 4.2). The amortised cost of the deferred consideration is £2.6 million (2023: £3.6 million). The fair value of the contingent consideration is £1.1 million (2023: £1.4 million).

During the year, the Group received £1.5 million (in the Group Cash Flow Statement, £1.4 million is allocated to investing activities and £0.1 million to interest received) in relation to the first deferred and contingent consideration payment. The receivable held on the Balance Sheet at 29 February 2024 in relation to the second earnout payment is £1.9 million (£1.3 million deferred consideration and £0.6 million contingent consideration).

Sensitivity analysis

Management have considered the sensitivity of the contingent consideration receivable arising from the second and third earnout payments to both changes in the estimate of future profitability of the VertomCory agency business, and the discount rate selected.

The 10% increase/decrease in future gross profits of the VertomCory agency business considered in the sensitivity analysis is selected to reflect a reasonably likely variation in outcomes, which lie within a range covered by the minimum and maximum earnout thresholds. The change in discount rate considered reflects the observed range of three-year GBP corporate bond rates with similar credit risk. No sensitivity is provided for the payment due on 31 May 2024 as the payment amount is based on actual reported performance.

5 Employee remuneration schemes

5.1 Long-term employee benefits

Key estimate

Valuation of defined benefit pension scheme

The Group uses an independent actuary to provide annual valuations of the defined benefit pension scheme. The actuary uses a number of estimates in respect of the scheme membership, the valuation of assets and assumptions regarding discount rates, inflation rates and mortality rates.

The membership details are provided by an independent trustee while the valuation of assets is verified by an independent fund manager. The discount rates, inflation rates and mortality rates are reviewed by management at each reporting date.

Critical judgement

Recoverability of defined benefit pension scheme net asset

As a result of actuarial movements during the year, including an increase in the discount rate from 4.9% at 28 February 2023 to 5.0% at 29 February 2024, the UK defined benefit scheme continues to be in an actuarial surplus position at 29 February 2024 (measured on an IAS 19 "Employee Benefits" basis) of £1.4 million (28 February 2023: £1.1 million). The surplus has been recognised on the basis that the Group has an unconditional right to a refund, assuming the gradual settlement of Scheme liabilities over time until all members have left the Scheme. The surplus will be subject to a tax charge on its recovery which the Group does not believe meets the definition of an income tax under IAS 12, and, as a result, the surplus has been presented net of the expected taxes payable of £0.8 million, at a rate of 35%. The free-standing tax charge will reduce from 35% to 25% from 6 April 2024, this measure was substantively enacted on 11 March 2024. The impact of the change in rate is not expected to have a material impact on the Group.

The Group has the following long-term employee benefits:

• Defined contribution schemes
• Defined benefit schemes

The Group operates a defined benefit scheme, the ACM Staff Pension Scheme, with assets held separately from the Group. The cost of providing benefits under the scheme is determined using the projected unit credit actuarial valuation method which measures the liability based on service completed and allowing for projected future salary increases and discounted at an appropriate rate.

Other long-term benefits

Funded defined benefit scheme

The scheme was closed to future accrual and from 1 February 2016, post-retirement benefits are provided to these employees through a separate defined contribution arrangement.

Profile of the Scheme

The Scheme duration is an indicator of the weighted average time until benefit payments are made. For the Scheme as a whole, the duration is around 14.8 years (2023: 15.3 years).

Funding implications

UK legislation requires that pension schemes are funded prudently. The most recent funding valuation of the Scheme was carried out by a qualified actuary as at 31 March 2023 and showed a surplus of £0.3 million.

Risks associated with the Scheme

The Scheme exposes the Group to a number of risks, the most significant of which are:

Asset volatility

Changes in bond yields

Inflation risk

Life expectancy

The Trustees insure certain benefits payable on death before retirement.

The principal assumptions used for updating the latest valuation of the Scheme were:

All members are assumed to retire at age 60.

The Scheme's assets are split by type of asset in the following table.

Changes to the present value of the defined benefit obligation are analysed as follows:

Changes in the fair value of plan assets are analysed as follows:

The Group does not expect to make any contributions to the scheme in the next twelve months (2023: £37,500).

1The inflation assumption sensitivity applies to both the assumed rate of increase in the CPI and the RPI, and includes the impact on the rate of increases to pensions, both before and after retirement.

Defined contribution schemes

There are a number of defined contribution schemes in the Group, the principal scheme being the Braemar Pension Scheme, which is open to all UK employees. Cash contributions paid into the defined contribution schemes are accounted for as an Income Statement expense as they are incurred. The total charge for the year in respect of this and other defined contribution schemes amounted to £2,247,000 (2023: £1,811,000) which was in respect of continuing operations.

Contributions of £180,000 were due to these schemes at 29 February 2024 (2023: £nil).

5.2 Share-based payments

The Group operates a number of equity-settled share-based payment schemes.

All of the Group's share schemes are accounted for as equity-settled share-based payments because they only entitle the employee to receive equity instrument issued by the Parent Company. The Group may provide a net settlement feature, whereby it withholds the number of equity instruments equal to the monetary value of the employee's tax obligation arising from the exercise (or vesting) of the award if the total number of shares that otherwise would have been issued to the employee. The Group has no contractual obligation to provide a net settlement option, and therefore the award is still accounted for as an equity-settled award in full and the value of the shares foregone by the employee is accounted for as a deduction from equity. Occasionally the Group, at its discretion, might repurchase vested equity instruments. In accordance with IFRS 2, such payments to employees are accounted for as a deduction from equity, except to the extent the payment exceeds the fair value of the equity instruments repurchased.

The net cost of the shares acquired for the shares held by the ESOP and the EBT are a deduction from shareholders' funds and represent a reduction in distributable reserves. Note 6.3 provides detail on the ESOP and the EBT and movements in shares to be issued.

Key estimate Share option vesting The fair value determined at the grant date of the equity-settled share-based payments is typically expensed on a straight-line basis over the vesting period, based on the Group's estimate of the number of equity instruments that will eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in the Income Statement such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to reserves. A 1% increase in the forfeiture assumption for all awards which were not vested at 29 February 2024 would result in an additional charge to the Income Statement of £0.1 million in FY24, while a 5% increase in the forfeiture assumption would result in an additional charge of £0.6 million to the Income Statement in FY24. While the Group believes that a change in estimate of 5% or greater for all awards in any one year is unlikely, due to the fact that the value of awards are not uniform between employees, the Group believes that there is a significant risk that a revision to the forfeiture estimate could result in a material impact to the Income Statement in the next financial year depending on the profile of leavers.

Share Option Scheme

During the prior year the Company operated the Braemar Plc Savings-Related Share Option Scheme 2014 (the "SAYE Scheme") and the Braemar Plc International Savings-Related Share Option Scheme 2019 (the "International SAYE Scheme"). Options are granted at up to a 20% discount to the prevailing market price and entitle employees to purchase shares in the Company at a fixed price subject to continued employment. The fair value of share options granted under the SAYE schemes is determined using a binomial pricing model. The number of awards which are expected to vest is estimated by management based on levels of expected forfeitures.

Deferred Bonus Plan ("DBP")

The Company adopted a Deferred Bonus Plan in May 2020 (the "2020 DBP"), pursuant to which future discretionary bonus awards will be granted to staff including executive directors. Awards under the New DBP may be linked to an option granted under the new Braemar Company Share Option Plan 2020, which was also adopted by the Company in May 2020 (the "2020 CSOP"). Where an employee receives a linked award under the 2020 DBP, if the Company's share price rises over the vesting period, the 2020 CSOP award can be exercised with the value of shares delivered on the vesting of the 2020 DBP award being reduced by the exercise gain on the 2020 CSOP award. Awards under the 2020 DBP and the 2020 CSOP may be settled by the issue of new shares of by way of transfer of shares from the ESOP. Historical practice has been to settle via the transfer of shares from the ESOP and it is the current intention to continue to operate in this manner.

Restricted Share Plan ("RSP")

During the year ended 28 February 2015, the Company established a Restricted Share Plan ("RSP"). This scheme was set up to grant awards to certain key staff to try to retain them following the merger between Braemar and ACM Shipping Group Plc, but it can also be used where the Remuneration Committee considers it necessary to secure the recruitment of a particular individual. Executive directors of the Company are not eligible to participate in the RSP. RSP awards are made in the form of a nil cost option and there are no performance criteria other than continued employment. Their fair value is estimated based on the share price at the time of grant less the expected dividend to be paid during the vesting period. The number of awards which are expected to vest is estimated by management based on levels of expected forfeitures.

Long Term Incentive Plan ("LTIP)

The Company operates a variety of share-based payment schemes which are listed below.

Share options

Details of the share options in issue and the movements in the year are given below:

During the prior year, 433,528 options were exercised. The weighted average share price on exercise for awards exercised in the prior year was £2.82.

These options are valued using a binomial pricing model. The value of the awards was expensed over the period from the date of grant to the vesting date.

Deferred Bonus Plan

Details of the share awards in issue and the movements in the year are given below:

The weighted average share price on exercise for awards exercised during the year was £2.82 (2023: £3.32). The weighted average share price at grant date for awards granted during the year was £2.75 (2023: £2.98).

Under the DBP, sufficient shares to satisfy each award are bought over the course of the vesting period and held in an employee trust ("ESOP") until vesting. As at 29 February 2024, the ESOP held 2,303,211 ordinary shares (2023: 3,587,130). The ESOP holding is in line with expectations of how many shares will be needed to satisfy the current awards under this scheme. This amount is net of expected lapses in the scheme and the fact that recipients typically forego sufficient shares in order to satisfy the associated tax liability that arises on their vesting.

Restricted Share Plan

Details of the RSP share awards in issue and the movements in the year are given below:

The weighted average share price on exercise for awards exercised during the year was £2.71 (2023: £3.32).

The fair value of the £nil cost options is approximated to the share price at the time of grant less the expected dividend to be paid during the vesting period.

The value of the awards is expensed over the period from the date of grant to the vesting date or if used as a recruitment incentive, from the date of joining to the vesting date. The awards are satisfied by the issue of new shares.

Long-Term Incentive Plan ("LTIP")

Details of the LTIP share awards in issue and the movements in the year are given below:

The weighted average share price at grant date for awards granted during the year was £2.75 (2023: £3.14).

The fair value of the LTIP 2021 award which has a TSR-based vesting condition has been calculated using a Monte Carlo simulation. The fair value of the other LTIPs is determined based on the share price at the time of grant less the expected dividend to be paid during the vesting period calculated using the market consensus dividend yield.

Other share-based payments

On 5 December 2022, 253,434 shares were awarded as a joining incentive to certain employees of Madrid Shipping Advisors SL and on 16 December 2022, 1,016,121 shares were issued to the former owners of Southport as part of the acquisition. In addition, on the acquisition of Southport, a further 872,821 shares were awarded to key employees of Southport. The fair value of the awards is determined based on the share price at the time of grant less the expected dividend to be paid during the three-year vesting period calculated using the market consensus dividend yield.

The value of the awards is recognised as an expense over the period from the date of grant to the vesting date. The Southport Maritime Inc. awards will be satisfied by the issue of new shares.

In the prior year, in connection with setting up a broker team in Madrid, 253,434 shares were issued to certain employees as a joining incentive; and 37,636 shares were issued to settle part of the deferred consideration payable in respect of the acquisition of Naves.

No shares remained unpaid at 29 February 2024 or 28 February 2023.

The Company has one class of ordinary shares which carry no right to fixed income.

6.2 Dividends

Amounts recognised as distributions to equity holders in the year:

The dividends paid by the Group during the year ended 29 February 2024 totalled £2.4 million (8.0 pence per share) relating to a final dividend in respect of the year ended 28 February 2023 paid on 9 February 2024. An interim dividend of £1.2 million (4.0 pence per share) was paid on 2 April 2024.

The right to receive dividends on the shares held in the ESOP has been waived (see Note 6.3). The dividend saving through the waiver is £0.2 million (2023: £0.4 million).

During the year ended 28 February 2023, the Group paid dividends totalling £3.2 million (11.0 pence per share), being a final dividend in respect of the year ended 28 February 2022 of £2.0 million (7.0 pence per share) paid on 14 October 2022 and an interim dividend for the year ended 28 February 2023 of £1.2 million (4.0 pence per share) paid on 4 January 2023.

In December 2022, the Company commenced a project to research various options for increasing the distributable reserves available to the Company in order to support the stated progressive dividend policy. After the payment of an interim dividend in January 2023, the outcome of the research identified an accounting practice of the Company used since IFRS 2 was introduced in 2005, which carried realised gains which could only be used in very limited circumstances with the consequence that a significant balance within retained earnings (that was not previously identified as created by unrealised gains) was incorrectly used by the Company in the calculation of distributable reserves.

Dividends paid between 2016 and 2023 were therefore paid by the Company without having sufficient distributable reserves from which to lawfully pay them. Having identified these issues, to rectify the gap in retained earnings and the unlawful payment of dividends, after the Balance Sheet date, the Company reduced its share premium account and capital redemption reserve and capitalised and reduced £19.8 million of the merger reserve ("Capital Reduction") and entered into releases from liability for the benefit of shareholders and directors (to ensure that no person was disadvantaged as a consequence of the payment of unlawful dividends).

On 15 February 2023 the Company entered into deeds of release in favour of shareholders receiving the unlawful dividends and the directors of the Company at the time the unlawful dividends were paid. These releases were conditional on various conditions including, shareholder approval for the Capital Reduction, the Capital Reduction becoming effective, and the terms of the deeds of release for shareholders and directors. At a General Meeting of the Company on 14 April 2023, shareholders approved the Capital Reduction and the deeds of release for shareholders and directors which allowed the Company to proceed with the process for the Capital Reduction by seeking approval from the High Court of Justice. On 9 May 2023 the High Court approved and confirmed the Capital Reduction and on 5 June 2023 the Capital Reduction became effective providing the Company with £73.9 million of distributable reserves at that time.

6.3 ESOP reserve

An Employee Share Ownership Plan ("ESOP") was established on 23 January 1995. The ESOP has been set up to purchase shares in the Company. These shares, once purchased, are held in trust by the Trustee of the ESOP, SG Kleinwort Hambros Trust Company (CI) Limited, for the benefit of the employees. Additionally, an Employee Benefit Trust ("EBT") previously run by ACM Shipping Group plc also holds shares in the Company. The ESOP and EBT are accounted for within the Company accounts.

£'000

As part of the acquisition of ACM Shipping Group plc in July 2014, the Company issued 125,621 shares into an Employee Benefit Trust ("EBT") previously run by ACM Shipping Group plc. As at 29 February 2024, the EBT held 62,290 (2023: 62,290) ordinary shares of 10 pence each.

The total cost to the Company of shares and cash held in the ESOP and EBT at 29 February 2024 was £7.1 million (2023: £10.6 million) including stamp duty associated with the purchase. The shares owned by the ESOP and EBT had a market value at 29 February 2024 of £6.3 million (2023: £10.9 million). The distribution of these shares is determined by the Remuneration Committee.

3,440,115 shares (2023: 1,877,473) have been released to employees during the year. The shares acquired by the ESOP had an aggregate cost of £6.1 million (2023: £8.0 million).

6.4 Other reserves

The capital redemption reserve arose on previous share buy-backs by the Company. The merger reserve arose on transactions where the Company issued shares pursuant to an arrangement to acquire more than a 90% interest in another company and no share premium was recorded. The merger reserve arose principally in 2001 in relation to the acquisitions of Braemar Shipbrokers Limited and Braemar Tankers Limited. Further additions have arisen in respect of Naves and Atlantic Brokers. The amounts in the merger reserve are unrealised profits relating to the corresponding assets acquired by the Company on the issue of shares. These profits may become realised on the disposal or write-down of these assets. During the year, following the Capital Reduction (see Note 6.2), the merger reserve was reduced by £19.8 million and the capital redemption reserve was reduced to £nil.

The hedging reserve comprises the effective portion of the cumulative net change in fair value of cash flow hedging instruments relating to hedged transactions that have not yet occurred of £1.3 million asset (2023: £0.3 million liability). The deferred tax movement recognised in equity in the year was a loss of £410,000 (2023: £97,000 loss).

7 Other supporting notes

7.1 Provisions

Short-term provisions for long service leave expected to be settled wholly within twelve months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled.

The provision for long service leave not expected to be settled within twelve months of the reporting date is measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

Key estimate Uncertain commission obligations In June 2023, the board commissioned an independent internal investigation into an historical transaction originating in 2013. The investigation was overseen by an Investigation Committee chaired by the Group's non-executive Chairman and was conducted by an independent specialist forensic accounting firm, and independent external counsel. The investigation was comprehensive and complex and ultimately encompassed several transactions between 2006 and 2013 which required further investigation. As a result of the investigation, the Group has recognised a provision of £2.0 million in relation to the uncertain obligations connected to a number of the transactions and commission obligations identified as part of the investigation. Of the £2.0 million, £1.7 million relates to an historical unsettled commission payable which was recorded in 2017 upon completion of the relevant contracts which originated in 2013. This balance was reclassified from trade payables to provisions in the prior year. During the year, £0.2 million was added to the provision following the return of previously paid amounts connected to the uncertain commission obligation. While the board cannot forecast with certainty final outcomes in respect of these obligations, based on the Group's current information, the amount recognised is the current best estimate of the amount required to settle the obligations at the balance sheet date, taking into account the risks and uncertainties surrounding the obligations, including interpretation of specific laws and likelihood of settlement. As the ultimate potential obligations and outcomes are uncertain in relation to the transactions subject to the internal investigation, there remains a risk that the final outcomes could materially impact the recognised balance within the next or in future financial years. It is impracticable to provide sensitivity estimates of potential downside variances at this time.

Employee entitlements of £0.4 million is included in other, which relate to statutory long service leave in Braemar Shipbroking Pty Limited. This is based on the principle that each Australian employee is entitled to eight weeks of leave over and above any annual leave on completion of ten years' continuous service. The provision is calculated with reference to the number of employees who have at least seven years of continuous service.

7.2 Contingent liabilities

7.3 Events after the reporting date

The Company paid an interim dividend of £1.2 million (4p per share) on 2 April 2024. There were no other adjusting or significant non-adjusting events between the reporting date and the date these Financial Statements were authorised.

Five-year financial summary (unaudited)

Consolidated Income Statement

[1] Company compiled consensus as at the date of this announcement: FY24 revenue of £150.4m and FY24 underlying operating profit (before acquisition-related expenditure) of £18m.

[2]