TIDMCKN
RNS Number : 8756O
Clarkson PLC
16 March 2009
16 MARCH 2009
PRELIMINARY RESULTS FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2008
Clarkson PLC ('Clarksons') is the world's leading shipping services group. It
has 20 offices on five continents whose services and expertise facilitate the
efficient functioning of global seaborne trade.
Preliminary results
Clarkson PLC ('Clarksons') today announces unaudited preliminary results for the
twelve months ended 31 December 2008.
+--------------------------------------+----------------+----------------+--------------+
| Results for 2008 | Year ended | Year ended | Year-on-year |
+--------------------------------------+----------------+----------------+--------------+
| | 31 December | 31 December | % change |
| | 2008 | 2007 | |
+--------------------------------------+----------------+----------------+--------------+
| Revenue+ | GBP250.3m | GBP173.4m | +44% |
| | | | |
+--------------------------------------+----------------+----------------+--------------+
| Profit before taxation and | GBP39.2m | GBP31.6m | +24% |
| exceptional item+ | | | |
| | | | |
+--------------------------------------+----------------+----------------+--------------+
| Profit before taxation+* | GBP18.2m | GBP25.6m | -29% |
| | | | |
+--------------------------------------+----------------+----------------+--------------+
| Earnings per share* | 41.9p | 101.9p | -59% |
| | | | |
+--------------------------------------+----------------+----------------+--------------+
| Dividends per share* | 42.0p | 40.0p | +5% |
+--------------------------------------+----------------+----------------+--------------+
+Continuing operations
*After exceptional item
HIGHLIGHTS
· Second consecutive year of record growth; underlying operating profit up 44%
to GBP38.0m (2007: GBP26.4m)
· Expansion of global franchise with new full service offices opened in Geneva,
Delhi, Hamburg, Perth and Brisbane
· Investment Services business, a key strategic area of development, received
regulatory consent in the UK
· Settlement reached with Sovcomflot and Novoship
Andi Case, Chief Executive, commented:
"We are proud that Clarksons has delivered another record year of underlying
profits, despite the numerous challenges the group faced during 2008. The
extremely volatile markets resulting from the financial crisis and economic
downturn in the second half of the year led to much more difficult trading
environments for some sectors. However, the settlement of major litigation now
allows us to move forward and maximise the opportunities that will no doubt
arise.
Trading conditions in some shipping markets have led to
significant declines in revenue from these parts of the group since the
beginning of 2009. Whilst we expect market conditions throughout 2009 to remain
challenging, revenues will continue to be supported by our forward order book
and the US$ exchange rate should they remain at the current level.
I
firmly believe that Clarksons' unique competitive advantages position the group
to benefit from the flight to quality advice and services that inevitably occurs
during more difficult periods."
+---------------------------------------------------------+-------+----------------+
| Enquiries: | | |
+---------------------------------------------------------+-------+----------------+
| Clarkson PLC: | | 020 7334 0000 |
| Andi Case, Chief Executive | | |
| Jeff Woyda, Finance Director | | |
| | | |
+---------------------------------------------------------+-------+----------------+
| Hudson Sandler: | | 020 7796 4133 |
| Jessica Rouleau | | |
| Kate Hough | | |
| Fran Read | | |
+---------------------------------------------------------+-------+----------------+
CHAIRMAN'S REVIEW
Overview
I am delighted to report the group delivered another record year of results.
This was achieved notwithstanding the deteriorating trading conditions in the
second half resulting from the global economic slowdown and financial crisis.
Importantly, during 2008, we settled the claims brought against H Clarkson &
Company Limited by the two Russian shipping companies, Sovcomflot and Novoship.
As a result, we were very pleased to have drawn a line under the dispute with
these companies so that the executive management and reconfigured board were
able to fully dedicate themselves to developing the group's prospects.
The group's global ability to service its client base is now well established
and we continue to build on our unrivalled market knowledge and expertise to
provide the top quality services for which we are known. The diversification of
Clarksons' business across shipping markets and the strength of our specialist
teams have supported the group's achievement of 2008's very strong performance.
These key elements of our business model position Clarksons well as we look
ahead to a more challenging trading and economic environment in 2009.
Results
Revenue increased by 44% to GBP250.3m (2007: GBP173.4m). Our physical broking
and ?nancial divisions both delivered strong uplifts in revenue as a result,
respectively of record highs in freight rates and volatility in the derivatives
market.
Underlying operating pro?t on continuing operations increased by 44% to GBP38.0m
(2007: GBP26.4m). This was achieved after providing GBP13.9m for impairment of
goodwill and intangibles, relating to acquisitions over the past four years.
Pro?t before tax was GBP18.2m (2007: GBP25.6m) due to the GBP21.0m provision
made as a result of the settlement with Sovcom?ot and Novoship, two Russian
shipping companies.
Dividend
The board is recommending a ?nal dividend of 26p (2007: 26p). The interim
dividend was 16p (2007: 14p) giving a total dividend of 42p, an increase of 5%.
In taking its decision, the board took into consideration the record year and
strength of the balance sheet notwithstanding current market conditions. The
dividend is covered by basic EPS and 2.9 times by EPS before the exceptional
item.
The dividend, if approved, will be payable on 12 June 2009 to shareholders on
the register as at 29 May 2009.
Board
There have been a signi?cant number of changes to the board during the year.
On 28 August 2008 Tim Harris retired as chairman of the group, having served on
the board since 2002. Following Tim's retirement, I was immediately appointed
chairman of the group. On 30 September 2008 Martin Clark, senior independent
director, resigned. On behalf of the board, I would like to thank both Tim and
Martin for their long and dedicated service to Clarksons.
Andi Case, formerly managing director of Global Broking, became interim chief
executive at the end of April, after Richard Fulford-Smith stepped down. Andi
was con?rmed as new chief executive in mid-June. At the end of June, we
announced the appointment of two new non-executive directors: Paul Wogan and Ed
Warner. Paul has 22 years of experience in the shipping industry within global
organisations. Ed has spent his career in ?nancial services. Ed became chairman
of the remuneration committee and Paul became senior independent director in
November.
Also in November, James Morley joined the board as a non-executive director
becoming chairman of the audit committee. James is a chartered accountant with
some 25 years of experience as an executive board member at both listed and
private companies, primarily in the insurance sector.
The strength and breadth of the new board's expertise across shipping and
?nancial services, the two major areas of our business, will be invaluable as we
continue to implement our strategy of building on Clarksons' unique competitive
advantages to further develop and grow the group.
Colleagues
The record performance achieved by Clarksons in 2008 would not have been
possible without its dedicated and talented teams. The board of directors
understand and appreciate just how much effort, enterprise and initiative the
employees put into making last year such a successful one for the group. I would
like to take this opportunity on behalf of the directors to thank all our
colleagues across our global group for their hard work and commitment during the
year.
The future
Trading conditions, brought about by the credit crisis and global economic
slowdown, are extremely challenging. However, I firmly believe that Clarksons'
unique competitive advantages position the group to benefit from the flight to
quality advice and services that inevitably occurs during these periods. We will
continue to develop our core business areas of research, broking, financial
services and support.
Bob Benton
CHAIRMAN
16 March 2009
CHIEF EXECUTIVE'S REVIEW
We are proud that Clarksons has delivered another record year of underlying
profits, despite the numerous challenges the group faced during 2008. The
extremely volatile markets resulting from the financial crisis and economic
downturn in the second half of the year led to much more difficult trading
environments for some sectors. However, the settlement of major litigation now
allows us to move forward and maximise the opportunities that will no doubt
arise.
156 years since its foundation, Clarksons has firmly reinforced its position as
the market leading services business dedicated to the maritime industry with a
focus on delivering top quality services and advice globally to our clients.
In addition to the growth in its core broking businesses, Clarksons has always
been an innovator and has leveraged its sector expertise to broaden and grow its
mix of services into new areas, such as financial services. By doing this,
Clarksons has brought additional added value to its heritage clients within the
maritime sector and widened its client base.
As a result, Clarksons has a strong and diverse client base of both traditional
and non-traditional shipping players. Our relationships with non-traditional
shipping clients have developed, primarily, through the growth of our regulated
financial services businesses. During 2008, we established Clarkson Investment
Services, our third regulated business, which offers sector specialist
investment banking services to a broad range of clients.
In addition to having a team of well known and experienced operators, this new
business benefits from the depth and breadth of Clarksons' maritime expertise
and industry relationships. Its development and growth will also be supported by
Clarksons' reputation as leading industry validator for both market data and
asset valuations. Following the recent turmoil in financial markets, we believe
more than ever that the time is right for Clarksons, a sector specialist, to
take advantage of its very strong platform and the changed competitive landscape
in investment banking services to grow this new area of the group.
Over the last six years, Clarksons has been through a period of sustained growth
and expansion. Our resources will now, therefore, be focused on our core broking
heritage, our research products and the further development of our financial
services businesses. It is now time to consolidate our position further, by
developing these areas, in which we have both scale and expertise.
Central to our plans in these areas are the group's research and analyst teams.
These teams provide in-depth and timely market intelligence to colleagues and
clients alike and are a key source of competitive advantage. This long standing
expertise in shipping markets, the extent of which is unrivalled amongst brokers
or other financial intermediaries, is at the core of our ability to innovate.
Another key competitive advantage is Clarksons' international footprint and the
group has yet to fully realise the potential of its global scale. In order to do
so, we have changed our focus from being a London-based broking business with
overseas offices to being an integrated global provider of shipping services. A
number of initiatives have already been put in place to facilitate this change,
including a review of our global office locations and services and ongoing
investments in IT that ensure greater cross fertilisation of ideas across the
group.
During the year, we opened an office in Geneva offering a full range of
services, which has had a very strong start. We closed our operations in San
Francisco, focusing all our US operations via our Houston office. In September,
we sold our 25% stake in Panasia, a specialised product brokerage based in
Singapore, for US$2.4m in cash to existing Panasia shareholders. We will
continue to develop our global footprint by ensuring our international offices
are part of an integrated global group, as we believe this is the best way to
deliver both our best in class local knowledge and global expertise to our
clients.
Our people are the key to our success. Team Clarksons is second to none and we
are very focused on ensuring that we hire and retain the best teams in the
market. Nurturing talent and ensuring an open environment for exchange of ideas
are extremely important in a people business, such as ours.
Current Trading
Since the beginning of 2009, revenues in dry cargo and sale and purchase broking
have declined significantly as a result of the global economic downturn and
exceptional conditions in the financial and credit markets. Tanker broking,
whilst affected by this difficult trading environment, has not experienced the
same degree of reduction in business. In our financial division, increased
volatility created by the current trading environment has been driving high
volumes, albeit at lower rates.
Outlook
As anticipated at the time of our interim management statement in November 2008,
we expect market conditions throughout 2009 to remain challenging. The existence
of global recession is now clear with only its severity and length still the
subject of debate. In addition, the lack of financing available to the shipping
market continues to be problematic.
Although it is still early in the year to predict how the many markets in which
we are active will develop, revenues in 2009 will continue to be supported by
our forward order book and the US$ exchange rate, should they remain at the
current level. The breadth of Clarksons' market and global coverage are of
particular benefit during these times, and will enable Clarksons to take maximum
advantage of the opportunities wherever they arise.
Andi Case
CHIEF EXECUTIVE
16 March 2009
BUSINESS REVIEW
During 2008, the global economy swung from growth to recession and the world's
financial system moved into crisis. For shipping markets, it was equally a year
of opposites, with unprecedented extremes experienced in some markets, such as
dry bulk. Freight rates for large dry bulk vessels reached an all-time high of
US$233,000 per day in June in sharp contrast to the low of US$2,316 per day in
December. In the period since the year-end, these rates have continued to be
volatile and we have seen highs of US$39,538 per day.
Access to funding and credit for shipping markets was severely curtailed by the
global ?nancial crisis and contributed to large swings in asset valuations.
These dynamics fuelled a rapid change in outlook for the global supply and
demand for ships, which has led to the potential for cancellation of newbuild
contracts, and created some uncertainty as to how far the supply of new tonnage
will contract. Events of 2008 were further complicated by a 41% move in the US$
to Sterling exchange rate from a high of 2.03 to a year-end low of 1.44.
Clarksons' strategy over the last ?ve years to broaden its services across
shipping markets has, without doubt, been of bene?t in this year of opposites.
The strategic importance of this diversity became all the more apparent as we
moved into a far more dif?cult trading and economic environment in the fourth
quarter.
Against this very challenging market background, we are pleased to report that
Clarksons achieved another year of record underlying pro?t before tax. For 2008,
underlying pro?t before tax increased by 24% to GBP39.2m (2007: GBP31.6m). This
result was achieved after providing GBP13.9m (2007: nil) for impairment of
acquired goodwill and intangibles. As a result of the settlement provision of
GBP21.0m, pro?t before taxation was GBP18.2m (2007: GBP25.6m).
Revenue
Revenue from continuing operations increased 44% to GBP250.3m (2007: GBP173.4m).
Indeed, 2008 revenues were more than double the GBP116.6m achieved in 2006. This
impressive increase was delivered through revenue growth across the majority of
business segments, both in sterling and dollar terms.
Geographic Performance
+-----------------------------+------------+----------+---------------+-------------------+
| | Revenue | Segment | Growth in | Growth in |
| | GBPm | Results | revenue | segmental results |
| | | GBPm | % | % |
+-----------------------------+------------+----------+---------------+-------------------+
| Europe, Middle East and | 193.8 | 39.0 | 41% | 39% |
| Africa | | | | |
+-----------------------------+------------+----------+---------------+-------------------+
| Asia Pacific | 46.2 | 5.5 | 62% | -41% |
+-----------------------------+------------+----------+---------------+-------------------+
| Americas | 10.3 | 1.6 | 40% | 261% |
+-----------------------------+------------+----------+---------------+-------------------+
| | 250.3 | 46.1 | | |
+-----------------------------+------------+----------+---------------+-------------------+
Clarksons is a global group providing services to its clients from its 20 of?ces
located in most of the major maritime centres of the world. In 2008, 85% of
segment results were derived from EMEA, 12% from Asia Paci?c and 3% from the
Americas. To ensure the continued growth and development of best in class
services that meet the changing needs of our clients, we continued to invest in
new of?ces during the year.
Divisional Performance
+-----------------------------+------------+----------+---------------+---------------+
| | Revenue | Segment | Growth in | Growth in |
| | GBPm | Results | revenue | segmental |
| | | GBPm | % | results |
| | | | | % |
+-----------------------------+------------+----------+---------------+---------------+
| Broking | 193.3 | 44.9 | 43% | 42% |
+-----------------------------+------------+----------+---------------+---------------+
| Financial | 33.9 | 4.2 | 67% | -28% |
+-----------------------------+------------+----------+---------------+---------------+
| Support | 17.0 | (3.8) | 45% | n/a |
+-----------------------------+------------+----------+---------------+---------------+
| Research | 6.1 | 0.8 | 2% | -33% |
+-----------------------------+------------+----------+---------------+---------------+
| | 250.3 | 46.1 | | |
+-----------------------------+------------+----------+---------------+---------------+
New of?ces were established in Geneva, New Delhi, Hamburg, Perth and Brisbane,
all of which are offering Clarksons' full range of services to clients. Our
ability to leverage the group's expertise across shipping services is unique and
of signi?cant advantage. It has enabled the group to rapidly develop geographic
market share, with, for example, our Geneva office already firmly established as
one of the largest and most active brokers in Switzerland during its first year
of operation. A review during the year also led to the decision to close our
dry bulk broking operation in San Francisco, as it no longer matched our
clients' requirements.
Broking
Revenue: US$355.7m (2007: US$271.5m)
Segment result: GBP44.9m (2007: GBP31.6m)
Forward order book for 2009: US$106m* (At 31 December 2007 for 2008: US$131m)
* Directors' best estimates of deliverable FOB
Dry bulk
2008 was truly a year of two halves for the dry bulk market. In the ?rst six
months of the year freight rates in all dry bulk ship sizes reached their
highest level for more than 20 years. This was driven by strong demand for dry
bulk commodities and as a result many charterers entered into longer term
contracts in order to lessen the impact of signi?cant increases in spot market
rates. This market dynamic enabled the team to conclude record breaking amounts
of new business. During the second half of the year, the banking crisis
coincided with a slowdown in Chinese steel production which resulted in a
dramatic downturn in rates. In this very challenging trading environment it is a
credit to the skill and hard work of the team that the majority of long-term
contracts in which we were involved were successfully renegotiated.
The significant reduction in rates, especially during the last quarter, across
all dry bulk ship sizes had a huge negative effect on shipowners' average
earnings. This resulted in a large number of postponements and cancellations for
newbuilds, a situation that is expected to impact the 2009 global order book.
Although we had initially anticipated the 2008 dry bulk order book might beat
2007's record of 161m dead weight tons, we are con?dent that the team's global
capability and expertise will ensure that we continue to lead the market in this
business segment.
Containers
2008 was a dif?cult year for the container market due to reduced global demand
for ?nished goods. By the third quarter both trans-Paci?c and Asia-Europe
volumes fell below minimum forecasts. This development contributed to a collapse
in rates as the market prepared to take delivery of the largest ever number of
new ships between 2008 and 2010, in the absence of any effective freight market
support. Despite challenging trading conditions, the team continued to grow
Clarksons' market share and concluded an increased number of deals, both for
immediate billing and for the forward order book.
Deep sea
In contrast to the container market, the deep sea tanker market, which covers
the shipping of both crude and refined products, had an extremely positive year.
This was driven by the demand for and price volatility of oil with Very Large
Crude Carrier (VLCC) average earnings 66% higher than in 2007 and the Suezmax
and Aframax markets also performed well. Although the products market did not
experience the same level of increase in freight rates, the team
increased Clarksons' market share and profitability.
Our crude and products teams delivered a record result, achieving good growth in
market share. Switzerland (Geneva) and India (New Delhi), countries in which we
believe there are signi?cant opportunities to grow our tanker business, have
already started delivering in their ?rst year of operation.
The curtailment in demand for oil and subsequent collapse in the oil price
combined with an expected increase in oil supply during 2009, create an
uncertain backdrop for next year. However, we believe these conditions may also
create a need for consolidation amongst tanker owners and potentially in tanker
broking. Given the global nature of our team, we are con?dent that Clarksons'
tanker business is well positioned to take advantage of any opportunities that
may arise.
Specialised products
The specialised products market is more contract-based and therefore less
susceptible to ?uctuations in freight rates. Following signi?cant investment,
integration and development over the past three years, Clarksons now operates a
truly global specialised products broking team with regional presence in
Singapore, Dubai, Geneva, Hamburg, London and Houston. Our investment is now
paying off, with good organic growth leading to increases in both revenue and
pro?tability through a broadening of the client base and an increase in market
share.
Like most other shipping markets, the petrochemical gas shipping market had a
buoyant ?rst half, but suffered from a dramatic downward shift in the fourth
quarter. Falling demand for gases resulted in lower product prices and a drop in
freight rates. Our team, however, grew market share by concluding a number of
new contracts and attracting new clients, substantially improving its
contribution during the year.
Gas
Against the background of a volatile and challenging product market and also
impacted by rapidly increasing numbers of vessel deliveries, the gas shipping
market was broadly weaker than in 2007. Our team, however, delivered another
impressive performance. Market share was grown in all areas of gas chartering
activities and, despite generally weaker freight rates, overall pro?tability
improved.
A signi?cant number of new vessels were delivered in the key Very Large Gas
Carrier (VLGC) ship market with only minimal scrapping and removal of older
tonnage. Furthermore, as a result of delays in important LPG production
expansions, charterers showed a preference for spot cover with only limited
period ?xing. The combination of these factors drove considerable volatility in
the spot market with the benchmark AG/Japan peaking at US$81 per tonne though
later falling to a low of US$17.50 per tonne.
Notwithstanding the weaker market, our VLGC specialists performed particularly
well, increasing market share for the third year running and concluding a
signi?cant share of what period business was done. Our market share in the
smaller Large Gas Carrier (LGC) sector also increased. In the mid-sizes, much of
the business globally was negotiated by Clarksons, notwithstanding the fact that
the number of opportunities for spot business was limited due to the very high
levels of period cover.
Sale and purchase
Both revenue and profitability increased in 2008 leading to another record year
in sale and purchase. This very strong performance, however, masks the
significant change in the market that occurred during the year. During the first
half, the team delivered significant growth both in terms of volume and
transaction value. By the fourth quarter, however, the banking crisis led to an
almost complete halt in sale and purchase activity. In this latter part of the
year, the team successfully ensured that completed transactions, put at risk due
to the dramatic reduction in values and a severe lack of financing, were
finalised. Adding to these issues, with the onset of the economic downturn, the
continuing growth in the size of the newbuilding order book also became of
concern. Currently, the bid offer spread is quite wide and in some markets
vastly different, in part due to the cost of finance and lack of available
finance. As values have settled down since the initial falls volume are starting
to return, but 2009 is expected to prove challenging, especially whilst the main
ship finance banks remain closed.
2008 was a much more difficult year for newbuilding volumes than 2007, which was
a truly exceptional year. The year started well with strong, mainly dry bulk
demand, limited supply and rising contract prices. However, by the end of the
second quarter, volumes had started to decline as buyers were put off by peak
prices being demanded by the yards. Since August there have been very few
conventional vessels ordered in any yard and the forward order book has
consequently reduced. Despite these extremely challenging conditions from the
second quarter onward, our team concluded a significant number of new deals in
the year. With many unbuilt ships currently worth far less than their contracted
price and buyers finding it increasingly hard to perform due to reduced cash
flows and lack of debt finance, existing deals are under threat. Notwithstanding
these unprecedented market conditions, we are satisfied with our current
position. Clarksons' focus on doing business with established, financially
viable yards and owners is underpinning the relative security of our forward
order book. Nonetheless, given the very serious problems in this market, we are
not assuming that Clarksons will remain immune from the cancellations and
renegotiations which are likely to characterise the market in 2009.
Research
Revenue: GBP6.1m (2007: GBP6.0m)
Segment result: GBP0.8m (2007: GBP1.2m)
In 2008 Clarkson Research Services maintained its steady growth. Shipping
research performed strongly, following the same pattern as earlier years, with
hard copy products holding steady whilst digital products grew strongly. The
slowdown in shipping ?nancial market activity meant that consultancy had a
quieter year, but customer services performed well and so did valuations. On the
offshore side the pattern of product sales was similar, though less buoyant,
with steady hard copy sales and growth of digital products. Advertising had a
dif?cult year and sales were lower than in 2007.
Whilst building on the partnership of hard copy products, digital and services,
the company continues to develop its product range, with a focus on digital
products. The Shanghai of?ce has expanded, covering the shipbuilding, container
and dry bulk markets, and the Research sales of?ce network has been broadened to
include Shanghai as the hub for covering the Asian market.
Financial
Revenue: US$62.4m (2007: US$40.7m)
Segment result: GBP4.2m (2007: GBP5.8m)
Forward order book for 2009: US$12m* (At 31 December 2007 for 2008: US$26m)
* Directors' best estimates of deliverable FOB
Futures Broking
Bene?ting from the uplift in the dry bulk market in the ?rst half of 2008, the
futures broking operation was able to capitalise on its strong market position
to generate record revenues and operating pro?t during the year. Whilst global
?nancial and economic developments in the second half resulted in some
counterparty defaults, we were largely unaffected as most of our client's
business is in cleared markets. The new team in Hong Kong and selective team
development in London enabled us to increase market share.
Fund Management
In a year of unprecedented ?nancial turmoil, many hedge funds experienced large
losses and redemptions that radically reduced the value of, and in some cases
eliminated, assets. The Clarkson hedge fund delivered a creditable performance
in comparison, limiting losses net of fees to 4.4% for the year. We attribute
this performance to strong risk management focused on capital preservation,
diligent research and maintaining a liquid and dynamic portfolio. Assets under
management as at 31 December 2008 were US$161m (31 December 2007: US$168m).
Since the year-end, performance has improved with 2009 year to date returns to
28 February of 0.1%. However, in line with the general market, redemptions have
decreased assets under management to US$54m as at 1 March 2009.
Financial Services
The ?nancial services team supports the sale of ships into the German KG market.
This is a highly specialised area of shipping and asset prices during the early
part of 2008 reached levels considered too high for acceptable investment risk.
This limited the ability of our team to generate revenues. A project initiated
in 2007 and due for placement in 2008 was affected by the slow down in KG equity
sales during the second half. This delayed vessel delivery and completion into
early 2009.
Investment Services
During the year, we received regulatory consent in the UK for this newly
established business. Application for registration in Dubai was also made and we
concluded a joint venture with Johnson Rice, based in Houston, to service the US
market.
The team is currently involved in a number of mandates for M&A, debt
restructuring and advisory work which, as anticipated, generated limited revenue
in 2008.
Investment services is a key strategic area of development for Clarksons and we
are con?dent that current market conditions provide us with a number of
opportunities to leverage our specialist knowledge and client base to develop
this business further in 2009.
Support
Revenue: GBP17.0m (2007: GBP11.7m)
Segment result: GBP3.8m loss (2007: GBP0.9m loss)
Our port and agency services business delivered record revenue and operating
pro?t in 2008. These services are reliant on the agricultural and offshore
industries and as such, rising commodity prices have encouraged investment,
which in turn has led to an increase in shipping activity. Through an investment
in Tilbury we now offer agency services in all of the main UK ports between the
Wash and the Mersey, including the Thames. Our stevedoring and warehousing
operations, based in Ipswich and Great Yarmouth, bene?ted from a large increase
in grain exports and noticeable growth in offshore activities. The result of
this business was much improved on 2007.
Clarkson PLC holds the head lease of St Magnus House in Lower Thames Street,
London EC3 with an unexpired term of six years. Clarksons occupies 30% of the
136,000 square feet of available space. The remainder of the space is let on
full commercial rents. Clarkson PLC also owns the freehold of Hamilton Barr
House in Godalming which is let on a full commercial rent. This business
generated increased revenues and pro?ts during the year.
The technical services segment grew rapidly during 2008. We now operate out of
London, Fujairah and Singapore providing skilled riding squads ex-shipyard and
project management services to blue chip vessel owners and managers. Revenues
more than doubled during the year and the business is now pro?table.
Logistics is not one of the group's core activities and, as previously
announced, we are in the process of exiting from this business. The Jet Express
was sold in October 2008 after the termination of a jet fuel transport contract,
to Prompt Fortune Group Limited for US$1.0m in cash. The Paci?c Dhow, a modern
and versatile chemical and oil tanker, is currently employed in European waters.
Unpro?table trading and write-downs in the logistics business resulted in an
operating loss for the support division.
Financial Review
Exceptional item
During the year, the group settled litigation with Sovcom?ot and Novoship, two
Russian shipping companies for US$55m (GBP27m). This settlement gave rise to an
exceptional charge in 2008 of GBP21m (2007: GBP6m) reflected within
administration expenses. A tax credit has been recognised in respect of this
item amounting to GBP6.0m (2007: GBP1.8m).
Administration expenses
Staff costs are the major component of administrative expenses and have
increased by GBP49.3m during the year. The group continues to keep ?xed
remuneration increases to a minimum. A key element of remuneration is
performance related bonuses which continue to represent approximately 50% of
relevant net pro?ts. Also included within administrative expenses are GBP4.5m of
legal costs incurred defending the litigation.
Amortisation and impairment of assets
In light of extreme movements in freight rates, particularly in the dry cargo
market, the group has assessed the value it holds in the balance sheet for
acquired goodwill and intangibles. Whilst the prospects for medium to long-term
pro?ts in acquired activities remain good, forecasts for the next ?ve years are,
in some cases, lower than the value brought forward from 31 December 2007. In
accordance with best accounting practice, the group has therefore made an
impairment charge of GBP13.9m (2007: GBPnil).
Taxation
The group's effective tax rate before amortisation, impairment of intangibles
and exceptional item improved to 30.9% (2007: 32.3%). The overall effective tax
rate of 57.1% (2007: 32.8%) is higher than the standard UK rate of tax, due to
the impact of impairment adjustments which are not eligible for tax relief and
disallowable trading expenses.
Earnings per share
Adjusted basic EPS increased 3% to 122.9p per share (2007: 119.9p per share).
The board believes this is the most appropriate EPS measurement ratio for the
group as it better re?ects the business's underlying cash earnings. Adjusted
basic EPS excludes the exceptional item. The group's basic EPS was 41.9p (2007:
101.9p).
Dividends
The board is recommending a ?nal dividend of 26p (2007: 26p). The interim
dividend was 16p (2007: 14p) giving a total dividend of 42p, an increase of 5%.
In taking its decision, the board took into consideration the record year and
strength of the balance sheet notwithstanding current market conditions. The
dividend is covered by basic EPS and 2.9 times by EPS before the exceptional
item.
Cash
The group is strongly cash generative and ended the year with cash balances of
GBP184.4m (2007: GBP115.3m), despite having paid GBP27.0m settling the
litigation dispute. After the year-end, cash payments will be made including the
final dividend, if approved, and performance-related bonuses. After deducting
these items, net cash amounted to GBP87.5m (2007: GBP57.9m) which, after
borrowings, left net available funds of GBP33.5m (2007: GBP6.1m).
Balance sheet
Net assets increased by GBP18.4m during the year to GBP102.4m (2007: GBP84.0m).
Total non-current assets fell by GBP11.7m to GBP87.2m (2007: GBP98.9m),
predominantly re?ecting the impairment and amortisation of intangible assets.
Net current assets increased to GBP80.6m (2007: GBP53.2m). As at 31 December
2007, non-current liabilities exceeded net current assets by GBP14.9m. During
the year this position improved significantly so that net current assets at the
year-end exceeded non-current liabilities by GBP15.2m.
During the year, the group renewed its GBP50m revolving credit facility for
general business purposes with Barclays Bank PLC. The term of the facility is
three years from November 2008. A further GBP3.3m was borrowed from DVB Bank in
Singapore secured on the MV Paci?c Dhow. This facility will be repaid during
2009.
Risk Management
Credit risk
The group has an extensive client base, across all regions of the world, and is
exposed to credit related losses from the non-payment of invoices by these
clients. The group mitigates this risk by closely monitoring outstanding
amounts, both locally and globally, and by adopting a conservative approach to
accounting for bad debt. The turmoil in the ?nancial and freight markets has
undoubtedly increased the amount of debt that may be irrecoverable, despite the
44% increase in revenue in 2008. However, stringent management action has
ensured that the level of trade and other receivables has decreased by 12% in
underlying currency and increased by only 21% year-on-year in sterling terms.
Liquidity risk
The group's policy is to maintain borrowings and facilities at such a level that
they provide access to funds suf?cient to meet all of its foreseeable
requirements. In the ?nal quarter of 2008, the group determined that in order to
be able to seize opportunities that may present themselves, despite the
potential for reduced credit facilities available generally in the market in the
future, it would renew the revolving credit facility for a further three years.
The strong generation of cash ?ow in the business, combined with the facilities
drawn down and cash available in the balance sheet, means that the group is well
placed to fund future developments of its global business.
Foreign exchange risk
The major trading currency of the group is the US dollar. Movements in the US
dollar relative to other currencies, particularly sterling, have the potential
to impact the results of the group both in terms of operating results and the
revaluation of the balance sheet. Where there are borrowings taken that
speci?cally relate to assets held in foreign currencies, the borrowings are
taken in the same currency as the assets. The group assesses the rate of
exchange and non-sterling balances held continually, and has predominantly sold
in the spot market during 2008. The rates of exchange seen in the ?nal quarter
of 2008 and beginning of 2009 are, however, very attractive as they approach
10-year lows. The group has therefore taken some forward cover for 2009 and
2010.
Interest rate risk
The group's borrowings are at variable rates of interest, and currently there is
no cover taken to mitigate the exposure to interest rate movements.
Reputational risk
The group has built an enviable reputation in the market over the past 156
years, and relies upon this to attract business from all major participants in
its markets. Clarksons protects against reputational risks by promoting an
ethical work environment and providing training programmes where appropriate.
The investment in compliance, quality assurance and legal functions also act to
ensure that best practices are put in place throughout the group.
Operational risk
Operational risks are where the group may suffer direct or indirect losses from
people, systems, external in?uences or failed processes. The group continually
reviews the systems in place to mitigate against operational risk, and puts in
place plans to protect against such risks wherever they are signi?cant and
practicable. Examples include Business Continuity Plans, Staff Contracts and IT
security arrangements. The group also keeps in place and under review
appropriate levels of insurance cover.
Jeff Woyda
FINANCE DIRECTOR
16 March 2009
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2008
+----------------------------------------+--------------+-------------+--------------+
| | Before | Exceptional | After |
| | exceptional | item | exceptional |
| | item | GBPm | item |
| | GBPm | | GBPm |
+----------------------------------------+--------------+-------------+--------------+
| Revenue - continuing operations | 250.3 | - | 250.3 |
+----------------------------------------+--------------+-------------+--------------+
| Cost of sales | (7.5) | - | (7.5) |
+----------------------------------------+--------------+-------------+--------------+
| Trading profit | 242.8 | - | 242.8 |
+----------------------------------------+--------------+-------------+--------------+
| Administrative expenses | (190.9) | (21.0) | (211.9) |
+----------------------------------------+--------------+-------------+--------------+
| Impairment of intangible assets | (13.9) | - | (13.9) |
+----------------------------------------+--------------+-------------+--------------+
| Operating profit - continuing | 38.0 | (21.0) | 17.0 |
| operations | | | |
+----------------------------------------+--------------+-------------+--------------+
| Share of profits of associates and | - | - | - |
| joint ventures | | | |
+----------------------------------------+--------------+-------------+--------------+
| Finance revenue | 4.3 | - | 4.3 |
+----------------------------------------+--------------+-------------+--------------+
| Finance costs | (4.0) | - | (4.0) |
+----------------------------------------+--------------+-------------+--------------+
| Other finance revenue - pensions | 0.9 | - | 0.9 |
+----------------------------------------+--------------+-------------+--------------+
| Profit before taxation - continuing | 39.2 | (21.0) | 18.2 |
| operations | | | |
+----------------------------------------+--------------+-------------+--------------+
| Taxation | (16.4) | 6.0 | (10.4) |
+----------------------------------------+--------------+-------------+--------------+
| Profit for the year - continuing | 22.8 | (15.0) | 7.8 |
| operations | | | |
+----------------------------------------+--------------+-------------+--------------+
| Profit for the year from discontinued | - | - | - |
| operations | | | |
+----------------------------------------+--------------+-------------+--------------+
| Profit for the year | 22.8 | (15.0) | 7.8 |
+----------------------------------------+--------------+-------------+--------------+
| Attributable to: | | | |
+----------------------------------------+--------------+-------------+--------------+
| Equity holders of the parent | 22.8 | (15.0) | 7.8 |
+----------------------------------------+--------------+-------------+--------------+
| | | | |
+----------------------------------------+--------------+-------------+--------------+
| Earnings per share | | | |
+----------------------------------------+--------------+-------------+--------------+
| Basic - continuing operations | 122.9p | | 41.9p |
+----------------------------------------+--------------+-------------+--------------+
| Diluted - continuing operations | 121.0p | | 41.3p |
+----------------------------------------+--------------+-------------+--------------+
| Basic - profit for the year | 122.9p | | 41.9p |
+----------------------------------------+--------------+-------------+--------------+
| Diluted - profit for the year | 121.0p | | 41.3p |
+----------------------------------------+--------------+-------------+--------------+
CONSOLIDATED INCOME STATEMENT continued
For the year ended 31 December 2007
+----------------------------------------+--------------+-------------+--------------+
| | Before | Exceptional | After |
| | Exceptional | item | Exceptional |
| | item | GBPm | item |
| | GBPm | | GBPm |
+----------------------------------------+--------------+-------------+--------------+
| Revenue - continuing operations | 173.4 | - | 173.4 |
+----------------------------------------+--------------+-------------+--------------+
| Cost of sales | (3.3) | - | (3.3) |
+----------------------------------------+--------------+-------------+--------------+
| Trading profit | 170.1 | - | 170.1 |
+----------------------------------------+--------------+-------------+--------------+
| Administrative expenses | (143.7) | (6.0) | (149.7) |
+----------------------------------------+--------------+-------------+--------------+
| Impairment of intangible assets | - | - | - |
+----------------------------------------+--------------+-------------+--------------+
| Operating profit - continuing | 26.4 | (6.0) | 20.4 |
| operations | | | |
+----------------------------------------+--------------+-------------+--------------+
| Share of profits of associates and | 0.4 | - | 0.4 |
| joint ventures | | | |
+----------------------------------------+--------------+-------------+--------------+
| Finance revenue | 6.9 | - | 6.9 |
+----------------------------------------+--------------+-------------+--------------+
| Finance costs | (3.2) | - | (3.2) |
+----------------------------------------+--------------+-------------+--------------+
| Other finance revenue - pensions | 1.1 | - | 1.1 |
+----------------------------------------+--------------+-------------+--------------+
| Profit before taxation - continuing | 31.6 | (6.0) | 25.6 |
| operations | | | |
+----------------------------------------+--------------+-------------+--------------+
| Taxation | (10.2) | 1.8 | (8.4) |
+----------------------------------------+--------------+-------------+--------------+
| Profit for the year - continuing | 21.4 | (4.2) | 17.2 |
| operations | | | |
+----------------------------------------+--------------+-------------+--------------+
| Profit for the year from discontinued | 1.0 | - | 1.0 |
| operations | | | |
+----------------------------------------+--------------+-------------+--------------+
| Profit for the year | 22.4 | (4.2) | 18.2 |
+----------------------------------------+--------------+-------------+--------------+
| Attributable to: | | | |
+----------------------------------------+--------------+-------------+--------------+
| Equity holders of the parent | 22.4 | (4.2) | 18.2 |
+----------------------------------------+--------------+-------------+--------------+
| Earnings per share | | | |
+----------------------------------------+--------------+-------------+--------------+
| Basic - continuing operations | 119.9p | | 96.4p |
+----------------------------------------+--------------+-------------+--------------+
| Diluted - continuing operations | 118.6p | | 95.3p |
+----------------------------------------+--------------+-------------+--------------+
| Basic - profit for the year | 125.4p | | 101.9p |
+----------------------------------------+--------------+-------------+--------------+
| Diluted - profit for the year | 124.1p | | 100.8p |
+----------------------------------------+--------------+-------------+--------------+
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the year ended 31 December 2008
+---------------------------------------------------+-------+----------+----------+
| | | 2008 | 2007 |
| | | GBPm | GBPm |
+---------------------------------------------------+-------+----------+----------+
| Actuarial (loss)/gain on employee benefits - net | | (1.7) | 0.9 |
| of tax | | | |
+---------------------------------------------------+-------+----------+----------+
| Foreign exchange differences on retranslation of | | 14.6 | 0.3 |
| foreign operations | | | |
+---------------------------------------------------+-------+----------+----------+
| Total recognised directly in equity | | 12.9 | 1.2 |
+---------------------------------------------------+-------+----------+----------+
| Profit for the year | | 7.8 | 18.2 |
+---------------------------------------------------+-------+----------+----------+
| Total recognised income and expense for the year | | 20.7 | 19.4 |
+---------------------------------------------------+-------+----------+----------+
| Attributable to: | | | |
+---------------------------------------------------+-------+----------+----------+
| Equity holders of the parent | | 20.7 | 19.4 |
+---------------------------------------------------+-------+----------+----------+
CONSOLIDATED BALANCE SHEET
As at 31 December 2008
+---------------------------------------------------+-------+----------+----------+
| | | 2008 | 2007 |
| | | GBPm | GBPm |
+---------------------------------------------------+-------+----------+----------+
| Non-current assets | | | |
+---------------------------------------------------+-------+----------+----------+
| Property, plant and equipment | | 17.7 | 18.6 |
+---------------------------------------------------+-------+----------+----------+
| Investment property | | 0.4 | 0.4 |
+---------------------------------------------------+-------+----------+----------+
| Intangible assets | | 32.3 | 47.2 |
+---------------------------------------------------+-------+----------+----------+
| Investments in associates and joint ventures | | 0.4 | 1.1 |
+---------------------------------------------------+-------+----------+----------+
| Trade and other receivables | | 1.3 | 2.0 |
+---------------------------------------------------+-------+----------+----------+
| Investments | | 16.1 | 16.4 |
+---------------------------------------------------+-------+----------+----------+
| Employee benefits | | 9.7 | 9.9 |
+---------------------------------------------------+-------+----------+----------+
| Deferred tax asset | | 9.3 | 3.3 |
+---------------------------------------------------+-------+----------+----------+
| | | 87.2 | 98.9 |
+---------------------------------------------------+-------+----------+----------+
| Current assets | | | |
+---------------------------------------------------+-------+----------+----------+
| Trade and other receivables | | 53.7 | 43.4 |
+---------------------------------------------------+-------+----------+----------+
| Cash and short-term deposits | | 184.4 | 115.3 |
+---------------------------------------------------+-------+----------+----------+
| Income tax receivable | | 1.5 | 0.8 |
+---------------------------------------------------+-------+----------+----------+
| | | 239.6 | 159.5 |
+---------------------------------------------------+-------+----------+----------+
| Current liabilities | | | |
+---------------------------------------------------+-------+----------+----------+
| Interest-bearing loans and borrowings | | (3.3) | (0.8) |
+---------------------------------------------------+-------+----------+----------+
| Trade and other payables | | (146.5) | (101.4) |
+---------------------------------------------------+-------+----------+----------+
| Provisions | | (0.3) | (0.3) |
+---------------------------------------------------+-------+----------+----------+
| Income tax payable | | (8.9) | (3.8) |
+---------------------------------------------------+-------+----------+----------+
| | | (159.0) | (106.3) |
+---------------------------------------------------+-------+----------+----------+
| Net current assets | | 80.6 | 53.2 |
+---------------------------------------------------+-------+----------+----------+
| Non-current liabilities | | | |
+---------------------------------------------------+-------+----------+----------+
| Interest-bearing loans and borrowings | | (50.7) | (51.0) |
+---------------------------------------------------+-------+----------+----------+
| Trade and other payables | | (4.7) | (3.1) |
+---------------------------------------------------+-------+----------+----------+
| Provisions | | (0.9) | (6.7) |
+---------------------------------------------------+-------+----------+----------+
| Employee benefits | | (1.2) | - |
+---------------------------------------------------+-------+----------+----------+
| Deferred tax liability | | (7.9) | (7.3) |
+---------------------------------------------------+-------+----------+----------+
| | | (65.4) | (68.1) |
+---------------------------------------------------+-------+----------+----------+
| Net assets | | 102.4 | 84.0 |
+---------------------------------------------------+-------+----------+----------+
| | | | |
+---------------------------------------------------+-------+----------+----------+
| Capital and reserves | | | |
+---------------------------------------------------+-------+----------+----------+
| Issued capital | | 4.7 | 4.7 |
+---------------------------------------------------+-------+----------+----------+
| Share premium | | 27.1 | 25.4 |
+---------------------------------------------------+-------+----------+----------+
| ESOP reserve | | (0.8) | (3.5) |
+---------------------------------------------------+-------+----------+----------+
| Deferred share consideration | | - | 0.9 |
+---------------------------------------------------+-------+----------+----------+
| Employee benefits reserve | | 1.8 | 0.8 |
+---------------------------------------------------+-------+----------+----------+
| Capital redemption reserve | | 2.0 | 2.0 |
+---------------------------------------------------+-------+----------+----------+
| Profit and loss | | 54.0 | 54.7 |
+---------------------------------------------------+-------+----------+----------+
| Currency translation reserve | | 13.6 | (1.0) |
+---------------------------------------------------+-------+----------+----------+
| Clarkson PLC group shareholders' equity | | 102.4 | 84.0 |
+---------------------------------------------------+-------+----------+----------+
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2008
+---------------------------------------------------+-------+----------+----------+
| | | 2008 | 2007 |
| | | GBPm | GBPm |
+---------------------------------------------------+-------+----------+----------+
| Cash flows from operating activities | | | |
+---------------------------------------------------+-------+----------+----------+
| Profit before tax from continuing operations | | 18.2 | 25.6 |
+---------------------------------------------------+-------+----------+----------+
| Profit before tax from discontinued operations | | - | 1.4 |
+---------------------------------------------------+-------+----------+----------+
| Profit before tax | | 18.2 | 27.0 |
+---------------------------------------------------+-------+----------+----------+
| Adjustments for: | | | |
+---------------------------------------------------+-------+----------+----------+
| Exceptional item | | 21.0 | 6.0 |
+---------------------------------------------------+-------+----------+----------+
| Foreign exchange differences | | (12.3) | 0.4 |
+---------------------------------------------------+-------+----------+----------+
| Depreciation | | 5.4 | 2.5 |
+---------------------------------------------------+-------+----------+----------+
| Share-based payment expense | | 1.6 | 0.8 |
+---------------------------------------------------+-------+----------+----------+
| Loss/(profit) on sale of property, plant and | | 1.2 | (1.9) |
| equipment | | | |
+---------------------------------------------------+-------+----------+----------+
| Profit on sale of investments | | (3.1) | (0.1) |
+---------------------------------------------------+-------+----------+----------+
| Amortisation and impairment of intangibles | | 15.3 | 1.4 |
+---------------------------------------------------+-------+----------+----------+
| Provision for investments in associates and | | 0.3 | 0.5 |
| joint ventures | | | |
+---------------------------------------------------+-------+----------+----------+
| Difference between ordinary pension contributions | | (0.4) | (0.5) |
| paid and amount | | | |
| recognised in the income statement | | | |
+---------------------------------------------------+-------+----------+----------+
| Share of profits of associates and joint | | - | (0.4) |
| ventures | | | |
+---------------------------------------------------+-------+----------+----------+
| Finance revenue | | (4.3) | (6.9) |
+---------------------------------------------------+-------+----------+----------+
| Other finance revenue - pensions | | (0.9) | (1.1) |
+---------------------------------------------------+-------+----------+----------+
| Finance costs | | 4.0 | 3.2 |
+---------------------------------------------------+-------+----------+----------+
| Increase in trade and other receivables | | (2.4) | (12.9) |
+---------------------------------------------------+-------+----------+----------+
| Increase in bonus accrual | | 45.3 | 18.4 |
+---------------------------------------------------+-------+----------+----------+
| Increase in trade and other payables | | 6.2 | 21.0 |
+---------------------------------------------------+-------+----------+----------+
| Increase / (decrease) in provisions | | 0.2 | (0.1) |
+---------------------------------------------------+-------+----------+----------+
| Cash generated from operations | | 95.3 | 57.3 |
+---------------------------------------------------+-------+----------+----------+
| Settlement of exceptional item | | (27.0) | - |
+---------------------------------------------------+-------+----------+----------+
| Income tax paid | | (10.4) | (4.9) |
+---------------------------------------------------+-------+----------+----------+
| Net cash flow from operating activities | | 57.9 | 52.4 |
+---------------------------------------------------+-------+----------+----------+
| Cash flows from investing activities | | | |
+---------------------------------------------------+-------+----------+----------+
| Interest received | | 3.7 | 3.5 |
+---------------------------------------------------+-------+----------+----------+
| Purchase of property, plant and equipment | | (3.5) | (3.3) |
+---------------------------------------------------+-------+----------+----------+
| Proceeds from sale of investments | | 6.7 | 0.3 |
+---------------------------------------------------+-------+----------+----------+
| Proceeds from sale of property, plant and | | 1.0 | 4.0 |
| equipment | | | |
+---------------------------------------------------+-------+----------+----------+
| Investment in associates and joint ventures | | - | (0.8) |
+---------------------------------------------------+-------+----------+----------+
| Disposal of associate | | - | 0.2 |
+---------------------------------------------------+-------+----------+----------+
| Acquisition of subsidiaries and businesses, | | (2.3) | (3.1) |
| including deferred | | | |
| consideration | | | |
+---------------------------------------------------+-------+----------+----------+
| Cash acquired on acquisitions | | - | 1.7 |
+---------------------------------------------------+-------+----------+----------+
| Dividends received from associates and joint | | 0.4 | 0.6 |
| ventures | | | |
+---------------------------------------------------+-------+----------+----------+
| Dividends received from investments | | 0.6 | 0.5 |
+---------------------------------------------------+-------+----------+----------+
| Net cash flow from investing activities | | 6.6 | 3.6 |
+---------------------------------------------------+-------+----------+----------+
| Cash flows from financing activities | | | |
+---------------------------------------------------+-------+----------+----------+
| Interest paid | | (3.3) | (3.2) |
+---------------------------------------------------+-------+----------+----------+
| Dividends paid | | (7.9) | (6.7) |
+---------------------------------------------------+-------+----------+----------+
| Proceeds from borrowings | | - | 0.9 |
+---------------------------------------------------+-------+----------+----------+
| Repayments of borrowings | | (2.7) | (0.9) |
+---------------------------------------------------+-------+----------+----------+
| ESOP shares acquired | | (2.3) | (6.1) |
+---------------------------------------------------+-------+----------+----------+
| Net cash flow from financing activities | | (16.2) | (16.0) |
+---------------------------------------------------+-------+----------+----------+
| Net increase in cash and cash equivalents | | 48.3 | 40.0 |
+---------------------------------------------------+-------+----------+----------+
| Cash and cash equivalents at 1 January | | 115.3 | 74.8 |
+---------------------------------------------------+-------+----------+----------+
| Net foreign exchange differences | | 20.8 | 0.5 |
+---------------------------------------------------+-------+----------+----------+
| Cash and cash equivalents at 31 December | | 184.4 | 115.3 |
+---------------------------------------------------+-------+----------+----------+
NOTES TO THE PRELIMINARY FINANCIAL STATEMENTS
1 General information
The preliminary announcement of results for the year ended 31 December 2008 is
an extract from the forthcoming 2008 annual report and does not constitute the
group's statutory financial statements for 2008 nor 2007. Statutory financial
statements for 2007 have been delivered to the Registrar of Companies, and those
for 2008 will be delivered following the company's annual general meeting. The
auditors have reported on the 2007 financial statements; their report was
unqualified and did not contain statements under Sections 237(2) or (3) of the
Companies Act 1985. The auditors have not yet reported on the 2008 financial
statements.
2 Accounting policies
Whilst the financial information included in this preliminary announcement has
been prepared in accordance with International Financial Reporting Standards
(IFRSs) adopted for use in the European Union, this announcement does not itself
contain sufficient information to comply with IFRSs. The company expects to
publish full financial statements that comply with IFRSs on 8 April 2009. This
preliminary announcement is prepared on the same basis as set out in the
previous year's annual accounts, except for the adoption of IFRIC 14 IAS 19: The
Limit on a Defined Benefit Asset, Minimum Funding Requirements and their
Interaction.
3 Segmental analysis
Segmental information on continuing operations for revenue and results is as
follows:
+----------------------------------------+--------+----------+----------+----------+
| Business segments | Revenue | Results |
+----------------------------------------+-------------------+---------------------+
| | 2008 | 2007 | 2008 | 2007 |
| | GBPm | GBPm | GBPm | GBPm |
+----------------------------------------+--------+----------+----------+----------+
| Dry bulk chartering | 78.9 | 51.3 | 21.9 | 14.6 |
+----------------------------------------+--------+----------+----------+----------+
| Container chartering | 4.4 | 3.5 | 1.1 | 1.0 |
+----------------------------------------+--------+----------+----------+----------+
| Deep sea chartering | 37.8 | 23.1 | 10.3 | 5.9 |
+----------------------------------------+--------+----------+----------+----------+
| Specialised products chartering | 17.3 | 13.5 | 3.3 | 2.6 |
+----------------------------------------+--------+----------+----------+----------+
| Gas chartering | 8.7 | 6.7 | 1.7 | 1.3 |
+----------------------------------------+--------+----------+----------+----------+
| Sale and purchase broking | 46.2 | 37.3 | 6.6 | 6.2 |
+----------------------------------------+--------+----------+----------+----------+
| Research services | 6.1 | 6.0 | 0.8 | 1.2 |
+----------------------------------------+--------+----------+----------+----------+
| Futures broking | 31.6 | 16.4 | 10.8 | 5.5 |
+----------------------------------------+--------+----------+----------+----------+
| Fund management | 1.8 | 2.6 | 0.2 | 0.6 |
+----------------------------------------+--------+----------+----------+----------+
| Financial and investment services | 0.5 | 1.3 | (6.8) | (0.3) |
+----------------------------------------+--------+----------+----------+----------+
| Port and agency services | 4.5 | 3.8 | 0.4 | 0.2 |
+----------------------------------------+--------+----------+----------+----------+
| Property services | 6.7 | 6.5 | 1.2 | 1.0 |
+----------------------------------------+--------+----------+----------+----------+
| Logistics and technical services | 8.6 | 3.9 | (5.4) | (2.1) |
+----------------------------------------+--------+----------+----------+----------+
| | 253.1 | 175.9 | | |
+----------------------------------------+--------+----------+----------+----------+
| Less property services revenue arising | (2.8) | (2.5) | | |
| within the group | | | | |
+----------------------------------------+--------+----------+----------+----------+
| Segment revenue/results | 250.3 | 173.4 | 46.1 | 37.7 |
+----------------------------------------+--------+----------+----------+----------+
| Unallocated other costs | | | (4.5) | (5.9) |
+----------------------------------------+--------+----------+----------+----------+
| Head office costs | | | (6.7) | (5.7) |
+----------------------------------------+--------+----------+----------+----------+
| Unallocated foreign exchange | | | - | 0.3 |
| differences | | | | |
+----------------------------------------+--------+----------+----------+----------+
| Profit on sale of investments | | | 3.1 | - |
+----------------------------------------+--------+----------+----------+----------+
| Operating profit before exceptional | | | 38.0 | 26.4 |
| item | | | | |
+----------------------------------------+--------+----------+----------+----------+
| Exceptional item | | | (21.0) | (6.0) |
+----------------------------------------+--------+----------+----------+----------+
| Operating profit after exceptional | | | 17.0 | 20.4 |
| item | | | | |
+----------------------------------------+--------+----------+----------+----------+
| Share of profits of associates and | | | - | 0.4 |
| joint ventures | | | | |
+----------------------------------------+--------+----------+----------+----------+
| Finance revenue | | | 4.3 | 6.9 |
+----------------------------------------+--------+----------+----------+----------+
| Finance costs | | | (4.0) | (3.2) |
+----------------------------------------+--------+----------+----------+----------+
| Other finance revenue - pensions | | | 0.9 | 1.1 |
+----------------------------------------+--------+----------+----------+----------+
| Profit before taxation | | | 18.2 | 25.6 |
+----------------------------------------+--------+----------+----------+----------+
| Taxation | | | (10.4) | (8.4) |
+----------------------------------------+--------+----------+----------+----------+
| Profit after taxation | | | 7.8 | 17.2 |
+----------------------------------------+--------+----------+----------+----------+
4 Exceptional item
In June 2008 the group announced the settlement of the claims brought against
the subsidiary H Clarkson & Company Limited by the Russian companies, Sovcomflot
and Novoship for GBP27.0m. As a result of this settlement the group provided a
further GBP21.0m in addition to the GBP6.0m provided in 2007.
5 Earnings per share
Basic earnings per share amounts are calculated by dividing net profit
attributable to ordinary equity holders of the parent by the weighted average
number of ordinary shares in issue during the year.
Diluted earnings per share amounts are calculated by dividing the net profit
attributable to ordinary equity holders of the parent by the weighted average
number of ordinary shares in issue during the year, plus the weighted average
number of ordinary shares that would be issued on the conversion of all the
dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the basic and diluted
earnings per share computations:
+-----------------------------------+-------------+-------------+-------------+-------------+
| | 2008 | 2008 | 2007 | 2007 |
| | Before | After | Before | After |
| | exceptional | exceptional | exceptional | exceptional |
| | item | item | Item | item |
| | GBPm | GBPm | GBPm | GBPm |
+-----------------------------------+-------------+-------------+-------------+-------------+
| Earnings - continuing operations | 22.8 | 7.8 | 21.4 | 17.2 |
+-----------------------------------+-------------+-------------+-------------+-------------+
| Earnings - discontinued | - | - | 1.0 | 1.0 |
| operations | | | | |
+-----------------------------------+-------------+-------------+-------------+-------------+
| Profit for the year | 22.8 | 7.8 | 22.4 | 18.2 |
+-----------------------------------+-------------+-------------+-------------+-------------+
| | | 2008 | | 2007 |
| | | Number | | Number |
| | | millions | | millions |
+-----------------------------------+-------------+-------------+-------------+-------------+
| Weighted average number of | | 18.6 | | 17.8 |
| ordinary shares | | | | |
+-----------------------------------+-------------+-------------+-------------+-------------+
| Diluted weighted average number | | 18.8 | | 18.0 |
| of ordinary shares | | | | |
+-----------------------------------+-------------+-------------+-------------+-------------+
6 Dividends
The board is recommending a ?nal dividend of 26p (2007: 26p), giving a total
dividend of 42p. This final dividend, if approved, will be payable on 12 June
2009 to shareholders on the register at the close of business on 29 May 2009.
7 Intangible assets
+----------------------------------------------+-------------+----------+----------+
| | Intangibles | Goodwill | Total |
| | GBPm | GBPm | GBPm |
+----------------------------------------------+-------------+----------+----------+
| Cost | | | |
+----------------------------------------------+-------------+----------+----------+
| At 1 January 2008 | 6.8 | 42.3 | 49.1 |
+----------------------------------------------+-------------+----------+----------+
| Deferred consideration adjustment | - | (0.7) | (0.7) |
+----------------------------------------------+-------------+----------+----------+
| Foreign exchange differences | - | 1.3 | 1.3 |
+----------------------------------------------+-------------+----------+----------+
| At 31 December 2008 | 6.8 | 42.9 | 49.7 |
+----------------------------------------------+-------------+----------+----------+
| Amortisation and impairment | | | |
+----------------------------------------------+-------------+----------+----------+
| At 1 January 2008 | 1.4 | 0.5 | 1.9 |
+----------------------------------------------+-------------+----------+----------+
| Amortisation | 1.4 | - | 1.4 |
+----------------------------------------------+-------------+----------+----------+
| Impairment | 4.0 | 9.9 | 13.9 |
+----------------------------------------------+-------------+----------+----------+
| Foreign exchange differences | - | 0.2 | 0.2 |
+----------------------------------------------+-------------+----------+----------+
| At 31 December 2008 | 6.8 | 10.6 | 17.4 |
+----------------------------------------------+-------------+----------+----------+
| Net book value at 31 December 2008 | - | 32.3 | 32.3 |
+----------------------------------------------+-------------+----------+----------+
| Net book value at 31 December 2007 | 5.4 | 41.8 | 47.2 |
+----------------------------------------------+-------------+----------+----------+
In 2008, impairment testing identified the value in use of intangible assets
were less than their carrying amount. The group has taken an impairment charge
of GBP4.0m on intangibles and GBP9.9m on goodwill.
8 Employee benefits
The group operates two defined benefit schemes: the Clarkson main scheme and the
JO Plowright scheme.
As at 31 December 2008 these schemes had a combined surplus of GBP9.7m, in
accordance with IAS 19 Employee Benefits. The market value of the assets is
GBP114.6m and independent actuaries have assessed the present value of funded
obligations at GBP104.9m. The company has provided deferred tax on the GBP9.7m
reported surplus amounting to GBP2.7m. In addition the company has provided a
minimum funding liability of GBP1.2m and an associated deferred tax asset of
GBP0.3m.
9 Analysis of net funds
+------------------------------------+----------+--------------+------+-------------+----------+
| | 31 | Reallocation | Cash | Foreign | 31 |
| | December | GBPm | flow | exchange | December |
| | 2007 | | GBPm | differences | 2008 |
| | GBPm | | | GBPm | GBPm |
+------------------------------------+----------+--------------+------+-------------+----------+
| Cash and short-term deposits | 115.3 | - | 48.3 | 20.8 | 184.4 |
+------------------------------------+----------+--------------+------+-------------+----------+
| Current interest-bearing loans and | (0.8) | (2.4) | 0.9 | (1.0) | (3.3) |
| borrowings | | | | | |
+------------------------------------+----------+--------------+------+-------------+----------+
| Non-current interest-bearing loans | (51.0) | 2.4 | 1.8 | (3.9) | (50.7) |
| and borrowings | | | | | |
+------------------------------------+----------+--------------+------+-------------+----------+
| Net funds | 63.5 | - | 51.0 | 15.9 | 130.4 |
+------------------------------------+----------+--------------+------+-------------+----------+
10 Contingencies
Since June 2006, H Clarkson & Company Limited received commissions amounting to
US$15.2m which were the subject of the litigation as previously described. H
Clarkson & Company Limited held those monies in separate designated accounts
pending determination as to who was entitled to receive them. It became clear to
the board that these monies were rightfully payable to the Claimants and thus,
as part of the settlement agreed with the Claimants on 26 June 2008, they were
released to their account. There remain Part 20 claims from two of the
defendants that these monies are rightfully theirs. After taking extensive legal
advice and closely reviewing the evidence, the board believes that the Part 20
claims have no foundation whatsoever and they will not succeed.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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