TIDMCKN
RNS Number : 6617C
Clarkson PLC
10 March 2011
10 MARCH 2011
CLARKSON PLC
PRELIMINARY RESULTS FOR THE TWELVE MONTHS ENDED 31 DECEMBER
2010
Clarkson PLC ('Clarksons') is the world's leading shipping
services group. From offices in 17 countries on five continents, we
play a vital intermediary role in the movement of the majority of
commodities around the world.
Preliminary results
Clarkson PLC ('Clarksons') today announces preliminary results
for the twelve months ended 31 December 2010.
Results for 2010 Year ended Year ended
31 December 31 December
2010 2009
Revenue GBP202.6m GBP176.7m +14.7%
Profit before taxation GBP32.4m GBP22.5m +44.0%
Earnings per share 125.4p 90.0p +39.3%
Dividend per share 47p 43p +9.3%
SUMMARY
-- Excellent performance delivered by the Clarksons team enabled
the group to exceed financial expectations over the course of
2010
-- Continued growth in market share across all broking
divisions, consolidating Clarksons' positions as market leader,
despite uncertain shipping markets
-- Significant new hires in 2010 across global network to
further strengthen the group's best in class teams
-- Strong balance sheet, with all bank borrowings repaid since
the year-end
Andi Case, Chief Executive, commented:
"The dedication, commitment and professionalism of every one of
the Clarksons' teams has once again been exceptional, matched only
by their performance in terms of results achieved.
Clarksons continues to gain from increased trading volumes
against a backdrop of volatile freight rates in the first few weeks
of 2011. I firmly believe our business is now in excellent shape,
supported by a strong balance sheet, to take advantage as market
conditions evolve and opportunities arise."
Enquiries:
Clarkson PLC: Andi Case, Chief Executive Jeff Woyda, Finance Director 020
7334
0000
Hudson Sandler: Charlie Jack Kate Hough 020
7796
4133
CHAIRMAN'S REVIEW
Overview
The group has delivered an excellent performance over 2010. The
slow but emerging recovery in global trade throughout the year led
to some improvement in the markets, with Asian demand for
commodities being the key driver behind growth during the year.
Through the breadth of Clarksons' offer, with unparalleled research
and analysis at its heart, we have continued to strive to be the
leader in all of the markets in which we trade and remained the
leading broker in the majority of shipping markets.
We have continued to leverage our experience and reach to
further develop our products and services to maximise opportunities
in both existing and new markets. Our global, integrated offering
has allowed Clarksons to maintain its absolute focus on optimising
the service it delivers to its clients and meet their evolving
needs.
Our commitment to employing the best in class has ensured that
our expanded teams across the world have continued to grow market
share and through increased trading volumes have enabled the group
to exceed financial expectations throughout the year.
Results
Revenue was up 14.7% to GBP202.6m (2009: GBP176.7m), reflecting
the strong performance of our teams, particularly our broking
division which benefited from continued improvement in the global
shipping markets. Total administrative expenses increased by
GBP14.3m to GBP160.1m, reflecting increased staff numbers and the
profit-related bonus scheme. Operating profit was GBP34.5m (2009:
GBP22.6m) and profit before tax was GBP32.4m (2009: GBP22.5m).
Dividends
The board is recommending a final dividend of 30p (2009: 27p).
The interim dividend was 17p (2009: 16p) giving a total dividend of
47p (2009: 43p). This dividend is covered 2.7 times.
The dividend will be payable on 10 June 2011 to shareholders on
the register as at 27 May 2011, subject to shareholder
approval.
Colleagues
On behalf of the entire board I would like to thank all our
employees, throughout the 17 countries in which Clarksons operate,
for their continued hard work and commitment to meeting the needs
of our growing number of clients.
The future
Whilst uncertainty remains over the pace of global economic
recovery in 2011 we are confident that Clarksons is well positioned
and structurally aligned to maximise opportunities in shipping and
its related markets.
Our leading global market position and financial strength will
allow us to continue to develop opportunities to further
serviceclients and their needs and we therefore look to 2011 with
confidence.
Bob Benton
CHAIRMAN
CHIEF EXECUTIVE'S STRATEGIC REVIEW
Over the last three years Clarksons has seen a significant
evolution in its strategy. We have refocused our business around
its core market-leading client service offering, building on our
heritage and leveraging our strong global presence, leading
technology and market research. Against an unprecedented and
turbulent macro-economic backdrop we have continued to grow volume
year-on-year and take market share, consolidating our position as
leader in the vast majority of markets in which we operate. During
2010, both the shipping and commodity markets have seen historic
levels of volatility with a challenging freight environment
impacting rates. However we have navigated through these conditions
to our advantage, demonstrating the strengths of our strategy.
Once again the dedication, commitment and professionalism of
every one of the Clarksons' teams has been exceptional, matched
only by their performance in terms of results achieved. I
congratulate the whole team for their strong performance during
2010. Today, we are the leading broker in almost all key shipping
markets across the world. The combination of our market expertise
and local presence is vital to the best in class service we provide
to our clients. Wherever they are, our clients and teams have
access to our market-leading research which underpins everything we
do and we have continued to make significant investment in our
internal and external technology platforms over the course of the
year to further strengthen and support our offer.
More of our brokers are now based abroad than in the UK, close
to our diverse local client base and centred in all major shipping
hubs, enabling a truly global service to our international clients,
large or small. Given our focus on client relationships it is
critical that we continue to attract, retain and develop the best
people in the industry. Throughout the year our international
offices have made a number of significant new hires and we have
already started to see the benefit of these appointments.
Clarksons' leading position in the market creates an obligation
for ongoing investment to ensure that the best, young talent
available pursue successful careers within the maritime sector. We
have significantly enhanced our internal and graduate recruitment
schemes with great success during 2010, improving links with
leading academic institutions around the world. We have also hired
a dedicated training officer and launched an ongoing training
programme underpinned by the Jon Marshall lectures.
The strength of Clarksons' balance sheet has improved
dramatically over the past few years, giving us unparalleled
resilience in the shipbroking sector, which can support the
business in more challenging market conditions. This strong
financial position is, in part, testament to the highly cash
generative nature of our business but also to the success of the
strategy we have in place. The year has seen us exit areas that do
not support our client service focus including shipowning
activities and logistics. Additionally, since the year-end, we have
withdrawn from our fund management activities of the shipping hedge
funds due to the difficulty of raising assets under management in
the current market conditions for specialist niche funds.
In turn, we have focused on leveraging our position as the
market leader in shipping services to broaden our core client
offer. We have built traction through innovative products launched
around the group. Clarkson Securities has continued the development
of container futures through the Container Freight Swap Agreement
(CFSA), which allows clients to take positions in the shipping
markets either to fulfil trading or risk management strategies.
Important milestones during the year have included the execution of
both the first bilateral and cleared CFSA contracts as well as the
launch of an on-line pricing screen (www.clarksonboxclever.com)
which is targeted at small- to medium-sized companies in the
container sector. Clarkson Research has launched a major new range
of products, led by Offshore Intelligence Monthly, the new leading
source of information to the offshore sector, and is increasingly
publishing data to clients using new technologies and applications.
Clarkson Investment Services has also started to generate revenues.
Since the year-end the team has already signed deals that, when
finalised, should make a meaningful contribution to 2011
revenues.
Current trading and outlook
Since the year-end we have repaid all bank borrowings and
redeemed the seed capital of GBP11.4m from the two hedge funds. We
now enter 2011 with strong net funds and have negotiated a GBP25m
committed but undrawn credit facility with our bankers to enable us
to take advantage of opportunities quickly, when and where they
arise.
Looking forward we are focusing all our efforts on strengthening
and developing our best in class, client service offer. The
relationship between economic recovery and each of the shipping
markets is different today than in the past, as demand is improving
but the demand/supply imbalance is often the key determinant of
freight rates. In the past, vessel supply and utilisation was clear
and predictable but in the aftermath of the financial crisis this
is increasingly grey and evolves on a daily basis. Clarksons'
ability to capture and interpret these changes is an important part
of adding value to our clients. Recent unforeseeable events have
shown the world to be uncertain and have led to increased
volatility across markets but particularly in commodities. Rates in
shipping and offshore markets have started to reflect this but the
full effects will only be seen as the future unfolds.
Nevertheless, Clarksons continues to gain from increased trading
volumes against a backdrop of volatile freight rates in the first
few weeks of 2011 and I firmly believe our business is now in
excellent shape for the future.
Andi Case
CHIEF EXECUTIVE
BUSINESS REVIEW
Clarksons is the world's leading shipping services group. From
offices in 17 countries on five continents, we play a vital role in
the movement of the majority of commodities around the world.
We are the market leader in the majority of the broking markets
in which we operate and over the course of the year our teams have
worked hard to leverage this position by building transaction
volumes and growing market share in our core broking markets. This
has been achieved against a market backdrop which, whilst showing
signs of recovery, continued to be uncertain with freight rates
exhibiting volatility. The lack of broader market confidence was
also evidenced by the continued prevalence of spot market
trading.
However, the breadth of Clarksons' offer has enabled the group
to benefit where freight rates have improved. Furthermore we have
continued to grow our headcount through employing best in class
individuals and increasing our physical presence in established and
emerging shipping hubs throughout the world. Accordingly we have
been able to maximise opportunities in certain territories and
markets by meeting our client needs at every stage.
We continue to utilise both our knowledge and understanding of
the shipping markets to broaden the services we can provide to our
clients with our market-leading research underpinning everything we
do. We have leveraged our expertise to assist shipowners worldwide
through all stages of a vessel's life cycle from newbuild through
to secondhand and demolition. Our growing financial services
division continues to build traction in both futures broking and
investment services ensuring that Clarksons remains the dominant
leader in shipping and its related markets.
Broking
Revenue: US$261.7m (2009: US$218.2m)
Segment result: GBP41.3m (2009: GBP26.7m)
Forward order book for 2011: US$92m*(At 31 December 2009 for
2010: US$108m*)
* Directors' best estimates of deliverable FOB
Dry bulk
The recovery seen in the dry bulk markets in 2009 continued into
2010 with international dry bulk seaborne trade exceeding three
billion tons over the course of the year. Chinese demand for raw
materials continued to drive this growth, with a resurgence in
demand for dry goods from the Western World further underpinning
activity in the first half of the year. Coal trade was particularly
strong with trade growth in excess of 13% or 110 mt year-on-year as
Asian demand for coal far exceeded the reduced requirements of
Western economies.
Regional consolidation in dry bulk markets has enabled us to
further strengthen our global presence in key territories,
particularly Europe, Africa, India and Asia. The market has
continued its trend toward spot fixtures, which has benefited our
'cargo' based teams. Overall, period time charter and spot trip
activity were not compromised in our effort to deliver year-on-year
growth in performance.
We anticipate coal and iron ore to remain the major growth
commodities in 2011, albeit capped by mining expansion capacity.
Total dry bulk demand is forecast to grow by 6% in 2011. However
port congestion, changing trade patterns and an imbalance in global
trade means that the required vessel tonnage to move those volumes
needs to increase at 8%. Inefficiencies in the fleet could also
give rise to short-term positional and freight rate volatility.
Fleet growth, which is currently forecast to exceed 16%, will
dominate short-term sentiment and put increasing pressure on vessel
rates.
Containers
The start of 2010 saw a period of unexpected activity across the
container markets, primarily a result of improved cargo volumes as
international trade continued to improve. Container trade growth
resumed over the course of the year and is now close to the
historical sector average of 12% p.a., having seen a 9% contraction
in 2009.
There was strong interest in the secondhand market from new
buyers and vessel values improved by as much as 60% during the
year. Charter rates also improved and moved quickly off the
historical lows of 2009. Consequently, owners were once again able
to start covering their costs of operation after two difficult
years, although there is still a long way to go before rate levels
can be expected to reach previous highs. Whilst approximately 11%
of the fleet was laid up in January 2010, most of this tonnage was
reactivated throughout the year, such that now only approximately
3% of the fleet remains unemployed.
We firmly believe that over the medium-term the container market
offers good opportunities for future growth. During the latter part
of 2010, we strengthened the container broking team with the
addition of several new experienced brokers and we have already
seen the benefits of these hires as we continue to build market
share. With the re-opening of the period market, Clarksons is well
placed through both the strength of our teams and client
relationships to benefit as the market improves further.
Deep sea
The crude market made a slight recovery in 2010 with average
Very Large Crude Carrier (VLCC) rates increasing by 17%. Whilst
earnings from Suezmaxes and Aframaxes rallied from the lows of
2009, the refined products market remained sluggish during 2010.
Overall average earnings increased by 17%. Against this background,
Clarksons' deep sea broking teams continue to grow market share and
perform strongly.
Our undoubted global strength in both crude and refined products
broking, together with our enhanced capability in market analysis,
positions us well to overcome the challenging market conditions
anticipated in 2011 and further grow our market share. The freight
market remains susceptible to market spikes, particularly where
there is disruption in the availability of vessels, and continued
growth in China and India may also alleviate some of the downward
pressure created by the delivery of new buildings in 2011. As the
world economy recovers, and with it the demand for crude and
refined oil products, we believe we are ideally placed to take full
advantage.
Specialised products
During 2010 there was new found optimism in the specialised
products market, though this was based more on sentiment than
fundamentals, as freight markets saw little recovery throughout
2010. The oversupply of vessels in the market, as a result of the
boom period from 2003 to 2008, presented a notable headwind to a
full recovery. Key market players continued to seek a
re-distribution of their order book via cancellations and
renegotiations of new delivery contracts. Throughout the year a
significant proportion of owners operated at a loss resulting from
challenging trading conditions, high operating costs and an
increase in bunker prices.
Clarksons' specialised products team, with its far reaching
customer base and global structure was able to maintain growth
across its broad areas of activity through 2010. Accessing an
enviable clientele via our seven regional offices, we provided an
unequalled level of service to all segments within the sector.
Volume of new business concluded exceeded historical highs,
providing a counter balance to the weakened freight trends. Our
highly driven and active presence within the spot market, coupled
with a long-term time charter and contract of affreightment
portfolio has created encouraging foundations for future
consolidation and growth. We deliver ever higher value to our
clients and will work together with them to create new initiatives
through the unique product range that only Clarksons can offer.
We do not envisage a sustained increase in freight rates
throughout much of 2011 with the majority of contracts of
affreightment already renegotiated at decreased freight levels.
However, we anticipate a more optimistic and positive sentiment to
return to the market thereafter.
Petrochemical gases and small LPG
Market conditions were generally weak across this part of the
bulk shipping market until the middle of 2010. The resulting idle
time and additional ballast legs accelerated scrapping and record
levels of scrappage were witnessed in the early part of the year.
However, trade levels recovered in the second half of 2010 as new
production and downstream problems in the Middle East gave way to
export opportunities. This provided welcome employment to the
semi-refrigerated, pressure and ethylene tonnage which was followed
by an upturn in freight rates.
Whilst the weaker market environment at the start of the year
impacted period business and proved challenging in terms of new
spot fixtures, Clarksons' client base and market share have grown
during this period, gathering pace as the market recovered during
the latter part of 2010. It is encouraging to see the improvement
in market conditions has continued into 2011 with rates showing a
sharp increase.
Gas
At the start of 2010 we were reasonably confident of a modest
upturn in freight rates across the gas markets as LPG trade volumes
finally started to edge upwards and ammonia trade recovered.
Nevertheless, the improvement in freight levels was muted as the
amount by which the surplus in ship supply shrank during 2010 did
not reach the levels required.
The Clarksons gas broking team continued to strengthen with more
consistent activity across the size categories of trades and the
number of trades brokered. Brokerage in the trading market showed
good results despite unprecedented difficulties in the market which
saw some traders exit the business and others struggle for
survival. Derivative brokerage expanded. The sale and purchase
market was largely inactive; however some liquidity returned to the
market in the second half of 2010 which allowed us to conclude
newbuildings and secondhand sales. Using our strong emphasis on
research and analysis the team has continued to diversify our
gas-related activities, growing market share in all areas of the
business and increasing the number of transactions over previous
years.
In 2011 we expect freight rates to be stronger, at least for
VLGCs. Term shipping business may be difficult however as,
generally speaking, charterers are seeking to minimise their term
exposure, making period business more difficult to write. With
seaborne trade expected to expand generally we hope that commodity
brokerage will increase. We also expect some liquidity to return on
the derivative trades which should boost revenues. On the asset
side we anticipate the market to be more active as older units are
traded or scrapped and recent entrants to the business explore ways
of consolidating or exiting the business.
Sale and purchase
Secondhand
Following the turmoil and difficulties of 2009, secondhand
markets stabilised in 2010 and vessel values across all sectors
recovered to varying degrees; average secondhand tanker values
increased by 10% and bulkers by 6%. As a result the volume of
business concluded returned to some sort of normality, enabling us
to concentrate on continuing to grow our market share.
We were once again at the forefront of the market as larger
corporate clients capable of very large capital transactions have
recognised the depth of knowledge available to them from our team.
Indeed, we were successful in concluding a number of transactions
with gross values in excess of US$500m, illustrating the trust that
our clients are willing to place with us.
Offshore
The dip in the offshore chartering market experienced in 2010
was the result of the lingering effects of the 2008 financial
slump, coupled with the Macondo incident in the Gulf of Mexico. The
latter had a significant impact on exploration and construction
across all aspects of the offshore sector during the second half of
2010.
Even though the chartering market remained weak throughout 2010
the perception from owners is that they expect to see an upturn
going into 2011 and 2012 and as such we have been able to take
advantage of this in the newbuild market. Our rig team in Houston
was particularly successful. On the supply vessel side, which is
predominantly based in Aberdeen and Singapore, we had some success
making in-roads into the chartering market and have been appointed
as sole brokers for a number of oil companies. On the secondhand
and newbuilding side of the supply boat market, 2010 was relatively
quiet although we did manage to both order and sell a number of
ships, between our London and Singapore desks. We are also active
in the offshore wind industry.
As a result of the Macondo incident, a number of projects in the
Gulf of Mexico have experienced delays, although this work is
expected to pick up once more in 2011 and into 2012. This has
resulted in a high number of planned projects in the pipeline for
2011, particularly subsea based developments. While projected
figures for offshore activity in 2011 are optimistic, we certainly
expect 2011 to be a better year than 2010 in terms of chartering
activity and in turn this should lead to further investment in new
vessels and structures, especially as post-2011 is looking even
stronger.
Newbuilding
2010 turned out much better in terms of newbuilding volumes than
expected. Newbuilding costs, on average, were the lowest we have
seen over the last five years, with an average newbuilding in 2010
costing in the region of US$45m compared to a high in 2007 of
approximately US$70m per ship. European owners - with the exception
of the Greeks - were relatively inactive in 2010, but more than 50%
of the new orders came from Chinese owners into Chinese
shipyards.
Total new business concluded by both our London and Shanghai
teams had a gross value of US$2.7bn, excluding offshore. This was
our best year ever in terms of total share of the newbuilding
orderbook.
For 2011, we believe that buyers remain, but are very conscious
of costs across all asset classes as charter rates are not there in
the near term to support higher newbuilding pricing. An
appreciating domestic currency against the dollar coupled with no
positive movement on steel price, continues to limit the yards'
ability to drive pricing down. With the yards having filled
capacity in most cases through to 2013, there is also a lack of
immediate pressure to force the market down.
Financial
Revenue: US$17.3m (2009: US$23.4m)
Segment result: GBP4.3m loss (2009: GBP0.5m loss)
Forward order book for 2011: US$3m* (At 31 December 2009 for
2010: US$5m*)
* Directors' best estimates of deliverable FOB
Futures broking
In 2010 Clarkson Securities Ltd (CSL) once again had a
profitable year and expanded its activities from dry bulk and wet
freight into LPG, iron ore and container futures. All of these
activities are logical additions to the core activity but are, for
the most part, markets in their infancy. Container futures and the
index they are settled on have been pioneered by CSL and 2010 saw
CSL in the headlines regularly as milestones of "first container
swap" and "first container cleared swap" were passed.
2011 shows signs of being a tough one in terms of dry bulk
values but with some key hires and reorganisation, we expect to
grow our market share. We anticipate slow but steady growth in the
container sector where we currently have over 85% of the cleared
market share, although we anticipate this percentage will diminish
as the volume of container swaps trade grows. We have launched an
online pricing screen (ClarksonBoxClever) which is targeted at the
small- to medium-sized companies in the container sector. This will
complement our existing offering on Bloomberg where we
differentiate ourselves with the richest product offering in dry
bulk, container and iron ore futures.
Fund management
Following a period of change in the hedge fund market, with the
focus moving away from smaller niche specialist funds and the
reduced influence of fund of funds as a source of capital, we
decided to close the Clarkson Freight Fund and the Clarkson
Shipping Hedge Fund after the year-end, and withdraw our GBP11.4m
of seed capital from both hedge funds. Whilst we continue to seek
suitable opportunities to enable us to re-enter this market, there
will be no costs associated with this activity in the year
ahead.
Financial services
Given the current inactivity of KG financing in Germany, the
Clarkson Financial Services team has concentrated its activities on
financial brokerage, bank advisory and the arrangement of
structured finance.
To meet this new challenge, the team has been strengthened with
the appointment of senior banking professionals with many years of
experience in the shipping and offshore market.
As a result, the company has managed to secure a number of
high-profile debt financing mandates which are expected to generate
significant income in 2011.
Investment services
Clarkson Investment Services (CIS) is now regulated in Dubai,
London and Houston. The team offers investment services around the
globe and can now provide investment service advice and research to
clients in the Middle East and the US. During the year CIS has
started to generate revenues, including one completed project
advising on a US$105m investment into a Middle East oilfield
services business. The team continues to secure and work on a
number of mandates.
Support
Revenue: GBP14.8m (2009: GBP16.0m)
Segment result: GBP0.5m (2009: GBP0.4m loss)
Port services
Clarkson Port Services, which comprises agency and stevedoring
at English ports, short sea broking and support to the offshore
wind energy sector, has delivered a record year.
The stevedoring business enjoyed record grain export volumes in
2010 mainly due to market conditions favouring the early export of
much of the 2010 harvest exportable surplus. The extra tonnages
also led to additional agency income and other volume related
revenues. Coal imports remained weak through Liverpool where it was
only at the very end of the year that monthly volumes returned to
pre-recession levels. Supporting offshore wind energy projects
provided a large increase in revenue, although this was in part
offset by a bad debt from Subocean's passage into
administration.
Property services
Also included within the support segment are the revenues and
profits derived from property services. Clarkson PLC holds the head
lease of St. Magnus House in Lower Thames Street, London EC3, with
an unexpired term of four years. Clarksons occupies 30% of the
available space, with the remainder sublet on full commercial
rents. Clarkson PLC also owns the freehold of Hamilton Barr House
in Godalming, which is also let on a full commercial rent.
Technical services
Clarkson Technical Services (CTS) operates from London, Fujairah
and Singapore. The business offers ship repairs, maintenance,
project management skills and spare parts to vessel owners,
managers and the offshore industry.
2010 was a difficult year for the ship repair market worldwide.
Many owners were making losses during 2010 and accordingly reduced
their repair spend to the minimum necessary. Reduced volumes and
lower margins resulted in CTS generating a trading loss. The
general outlook for the repairs and spares market for 2011 remains
challenging.
Logistics
Logistics was non-core and during the period we were pleased to
complete the sale of MT Hermien to Panre Agility Corporation for a
total cash consideration of US$7.3m. In line with the previously
outlined strategy, this sale represents the final stage in the exit
of Clarksons from shipowning activities.
Research
Revenue: GBP7.0m (2009: GBP6.7m)
Segment result: GBP1.5m (2009: GBP1.1m)
Research remains at the very core of Clarksons and revenue
increased further during 2010 to GBP7.0m (2009: GBP6.7m) reflecting
the considerable importance our clients place on access to the best
data and information in continually changing markets.
The Clarkson Research Services Ltd (CRSL) team of 72 across
collection, validation, analysis and management of data,
consultancy services and sales and marketing, is the largest within
a commercial broking group. We continued to build analyst and sales
teams in the Asian markets where we currently have 10 people
already in place.
CRSL derives its income from the following principal sources of
data and publications:
Ship register
These specialist reference books cover the full scope of the
shipping and offshore markets.
Periodicals
CRSL publishes a number of weekly, monthly and quarterly
publications which are available both in print and online. These
are renowned throughout the market as the key source of data for
anyone wishing to review changes in shipping markets as they
happen. Shipping Intelligence Weekly remains the leading weekly
source of data in shipping. We launched the World Fleet Register in
the first half of 2010 which further enhanced our offering.
Customer services
A specialist team concentrates on bespoke research projects for
banks, shipyards, engineering companies, insurers and other
corporates. Revenues grew 34% in this area in 2010.
Digital sales
Sales in 2010 grew for the tenth consecutive year since the 2000
launch of CRSL's flagship database, Shipping Intelligence Network
with revenues being 21% ahead of the previous year. A significantly
upgraded product was fully launched during the first half of the
year.
Offshore
Now that a full data integration process is complete, a number
of updated offshore market-related products were released at the
start of 2011 to enable the best decisions across the whole
spectrum of shipping, oilfields and offshore. Revenues from other
offshore publications were slightly ahead in 2010.
Valuations
Clarkson Valuations Ltd has a fully independent team providing
services to clients ranging from banks and credit providers to
owners and fleet operators. In 2010 we continued to provide bespoke
detailed valuations for all our clients and increased the volume of
business and revenues from valuations. This illustrates the
importance the market places on informed, independent and high
quality services in this area.
FINANCIAL REVIEW
Profit before tax: GBP32.4m (2009: GBP22.5m)
Basic EPS: 125.4p (2009: 90.0p)
Overview
The group remains strongly cash generative and there has been a
substantial improvement in the quality of the balance sheet.
Revenue increased by 14.7% during 2010, leading to an increase in
profit before tax of 44.0% to GBP32.4m (2009: GBP22.5m). Total
administrative expenses increased by GBP14.3m to GBP160.1m,
reflecting the impact of exchange rates on costs incurred overseas,
increased staff numbers and the results of bonus schemes being
linked to profits. There was a one-off release of a GBP2.0m
remuneration provision in our US business.
Amortisation and impairment of assets
A detailed review of our businesses has demonstrated no need for
an impairment charge in 2010.
Taxation
The group's effective tax rate was 27.5% (2009: 24.9%). This
overall effective tax rate is lower than the standard UK rate of
tax, due to impact of profits generated in lower tax rate
jurisdictions and reduced non-deductible losses. In 2009 the impact
of releasing deferred tax provisions previously held against
overseas retained profits, following the changes in UK legislation
relating to the treatment of foreign dividends, resulted in a
one-off reduction in the effective rate; this has not been repeated
in 2010. The group continues to incur a significant level of
disallowable trading expenses, in keeping with its peers, which
increases the overall effective tax rate.
Earnings per share (EPS)
Basic EPS was 125.4p per share (2009: 90.0p per share).
Dividends
The board is recommending a final dividend of 30p (2009: 27p).
The interim dividend was 17p (2009: 16p) which, subject to
shareholder approval, would give a total dividend of 47p (2009:
43p). In taking its decision, the board took into consideration the
2010 performance, the strength of the group's balance sheet and its
ability to generate cash and the forward order book. The dividend
is covered 2.7 times by basic EPS.
Cash and borrowings
The group remains strongly cash generative and ended the year
with cash balances of GBP176.3m (2009: GBP143.2m) after reducing
bank borrowings to GBP44.0m. After the year-end, cash payments will
be made including the final dividend and performance-related
bonuses. After deducting these items, net cash amounted to
GBP100.8m (2009: GBP81.4m) which, after borrowings, left net
available funds of GBP56.8m (2009: GBP33.1m). Due to the high
levels of cash generation in the business over the past year, all
outstanding bank borrowings were repaid in full in February 2011.
We also reduced the multicurrency revolving credit facility from
GBP50m to GBP25m, and renewed it for a term of three years. There
are no current plans to draw down on this facility. Part of the
funds used to repay the bank borrowings were derived from the
redemption of the hedge fund investment.
Balance sheet
Net assets at 31 December 2010 were GBP116.4m (2009: GBP96.8m).
There has been a substantial improvement in the quality of the
balance sheet whereby, before pension provisions and current asset
investments, the group had GBP49.7m of net current assets less
non-current liabilities as at the end of 2010 (2009: GBP28.9m). In
addition, the group had invested seed capital in the Clarkson hedge
funds of GBP11.4m (2009: GBP12.6m) which was redeemed after the
year-end.
The group's pension schemes have, in the second half of 2010,
shown a significant recovery in their funding position. At the time
of our interim announcement, the balance sheet reflected a deficit
of GBP12.8m. However, significant increases in pension investment
returns more than offset the effects on the liabilities of reduced
discount rates during the second half of the year and as at 31
December 2010 the combined deficit had reduced to GBP0.8m (2009:
deficit GBP6.9m). Provisional triennial valuations for both schemes
were prepared based on the position as at 31 March 2010; the
combined results as at that date showed a deficit of GBP8.8m.
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. Uncertainty in freight markets continues to affect the
amount of debt that may be irrecoverable.
Liquidity risk
The group's policy is to maintain facilities at such a level
that they provide access to funds sufficient to meet all of its
foreseeable requirements. The strong generation of cash flow in the
business, combined with the available facilities 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 were borrowings taken that
specifically relate to assets held in foreign currencies, the
borrowings were 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 2010, though some forward cover for 2011 and 2012 has
been taken.
Interest rate risk
The group's borrowings are, to the extent that they are drawn
down, at variable rates of interest. Since the year-end, all drawn
down facilities were repaid and consequently, there is at the date
of this report no requirement to cover interest costs.
Reputational risk
The group has built an enviable reputation in the market over
the past 159 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; indeed training is
now of such a focus, that during the year, a dedicated training
officer has been appointed. 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 influences 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 significant 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
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The statement of Directors' Responsibilities below has been
prepared in connection with the company's full Annual Report for
the year ending 31 December 2010. Certain parts of the Annual
Report have not been included in this announcement as set out in
note 1 of the financial information.
We confirm to the best of our knowledge:
-- the consolidated financial statements, which have been
prepared in accordance with IFRSs as adopted by the European Union
and in accordance with rule 4.1.12(3)(a) of the Disclosure and
Transparency Rules, have been prepared in accordance with the
applicable set of accounting standards and give a true and fair
view of the assets, liabilities, financial position and profit of
the group and the undertakings included in the consolidation taken
as a whole; and
-- the business review has been prepared in accordance with rule
4.1.12(3)(b) of the Disclosure and Transparency Rules, and includes
a fair review of the development and performance of the business
and the position of the group and the undertakings included in the
consolidation taken as a whole, together with a description of the
principal risks and uncertainties that the group faces.
This responsibility statement was approved by the board of
directors on 9 March 2011 and is signed on its behalf by:
Bob Benton
CHAIRMAN
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December
2010 2009
Continuing operations GBPm GBPm
Revenue 202.6 176.7
Cost of sales (8.0) (8.3)
-------- --------
Trading profit 194.6 168.4
Administrative expenses (160.1) (145.8)
Operating profit 34.5 22.6
Finance revenue 0.8 1.6
Finance costs (3.3) (1.8)
Other finance revenue - pensions 0.4 0.1
-------- --------
Profit before taxation 32.4 22.5
Taxation (8.9) (5.6)
-------- --------
Profit for the year 23.5 16.9
-------- --------
Attributable to:
Equity holders of the parent 23.5 16.9
-------- --------
Earnings per share
Basic 125.4p 90.0p
-------- --------
Diluted 124.7p 88.9p
-------- --------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December
2010 2009
GBPm GBPm
Profit for the year 23.5 16.9
Actuarial gain/(loss) on employee benefits
- net of tax 2.9 (11.6)
Foreign exchange differences on retranslation
of foreign operations 0.3 (5.0)
Foreign currency hedge - net of tax (1.1) 1.4
====== =======
Total comprehensive income for the year 25.6 1.7
====== =======
Total comprehensive income attributable
to:
Equity holders of the parent 25.6 1.7
====== =======
CONSOLIDATED BALANCE SHEET
As at 31 December
2010 2009
GBPm GBPm
Non-current assets
Property, plant and equipment 8.7 14.6
Investment property 0.4 0.4
Intangible assets 32.7 32.5
Investments in associates and joint ventures - 0.2
Trade and other receivables 0.5 0.6
Investments 1.8 14.9
Deferred tax asset 12.0 11.6
======== =======
56.1 74.8
======== =======
Current assets
Trade and other receivables 28.4 29.7
Income tax receivable 0.5 0.9
Investments 11.4 -
Cash and short-term deposits 176.3 143.2
======== =======
216.6 173.8
======== =======
Current liabilities
Interest-bearing loans and borrowings (44.0) -
Trade and other payables (100.3) (86.9)
Income tax payable (5.3) (3.3)
Provisions (0.3) (0.3)
======== =======
(149.9) (90.5)
======== =======
Net current assets 66.7 83.3
======== =======
Non-current liabilities
Interest-bearing loans and borrowings - (48.3)
Trade and other payables (1.1) (1.0)
Provisions (1.4) (1.1)
Employee benefits (0.8) (6.9)
Deferred tax liability (3.1) (4.0)
======== =======
(6.4) (61.3)
======== =======
Net assets 116.4 96.8
======== =======
Capital and reserves
Share capital 4.7 4.7
Other reserves 40.0 40.6
Profit and loss 71.7 51.5
======== =======
Clarkson PLC group shareholders' equity 116.4 96.8
======== =======
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December
Share Other Profit Total
capital reserves and loss equity
GBPm GBPm GBPm GBPm
Balance at 1 January 2010 4.7 40.6 51.5 96.8
--------- ---------- ---------- --------
Profit for the year - - 23.5 23.5
Other comprehensive income:
Actuarial gain on employee
benefit schemes - net of tax - - 2.9 2.9
Foreign exchange differences on
retranslation of foreign
operations - 0.3 - 0.3
Foreign currency hedge - net of
tax - (1.1) - (1.1)
--------- ---------- ---------- --------
Total comprehensive
(expense)/income for the year - (0.8) 26.4 25.6
--------- ---------- ---------- --------
Transactions with owners:
ESOP shares utilised - 1.4 - 1.4
Share-based payments - (1.2) (0.1) (1.3)
Tax on other employee benefits - - 2.2 2.2
Dividend paid - - (8.3) (8.3)
--------- ---------- ---------- --------
- 0.2 (6.2) (6.0)
--------- ---------- ---------- --------
Balance at 31 December 2010 4.7 40.0 71.7 116.4
--------- ---------- ---------- --------
Share Other Profit Total
capital reserves and loss equity
GBPm GBPm GBPm GBPm
Balance at 1 January 2009 4.7 43.7 54.0 102.4
--------- ---------- ---------- --------
Profit for the year - - 16.9 16.9
Other comprehensive income:
Actuarial loss on employee
benefit schemes - net of tax - - (11.6) (11.6)
Transfer of currency translation
reserves on closure of company - 0.1 (0.1) -
Foreign exchange differences on
retranslation of foreign
operations - (5.0) - (5.0)
Foreign currency hedge - net of
tax - 1.4 - 1.4
--------- ---------- ---------- --------
Total comprehensive
(expense)/income for the year - (3.5) 5.2 1.7
--------- ---------- ---------- --------
Transactions with owners:
ESOP shares acquired - (1.2) - (1.2)
Shares issued - 0.7 - 0.7
Share-based payments - 0.9 0.2 1.1
Dividend paid - - (7.9) (7.9)
--------- ---------- ---------- --------
- 0.4 (7.7) (7.3)
--------- ---------- ---------- --------
Balance at 31 December 2009 4.7 40.6 51.5 96.8
--------- ---------- ---------- --------
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December
2010 2009
GBPm GBPm
Cash flows from operating activities
Profit before tax 32.4 22.5
Adjustments for:
Foreign exchange differences (1.5) 0.6
Depreciation and impairment of property,
plant and equipment 2.9 3.7
Share-based payment expense 1.2 0.9
Loss on sale of investments - 0.2
Impairment of investments 0.6 0.2
Difference between ordinary pension contributions
paid and amount
recognised in the income statement (1.6) (0.6)
Finance revenue (0.8) (1.6)
Finance costs 3.3 1.8
Other finance revenue - pensions (0.4) (0.1)
Decrease in trade and other receivables 0.3 23.8
Increase/(decrease) in bonus accrual 13.6 (38.7)
Decrease in trade and other payables (1.9) (17.6)
Increase in provisions 0.3 0.2
======= =======
Cash generated/(utilised) from operations 48.4 (4.7)
Income tax paid (6.1) (13.3)
======= =======
Net cash flow from operating activities 42.3 (18.0)
======= =======
Cash flows from investing activities
Interest received 0.4 0.6
Purchase of property, plant and equipment (1.3) (1.5)
Proceeds from sale of property, plant and
equipment 4.6 0.1
Disposal of associates and joint ventures - 0.2
Acquisition of subsidiaries and businesses,
including deferred consideration - (0.6)
Dividends received from associates and
joint ventures 0.1 -
Dividends received from investments 0.4 0.2
======= =======
Net cash flow from investing activities 4.2 (1.0)
======= =======
Cash flows from financing activities
Interest paid (1.6) (1.8)
Dividends paid (8.3) (7.9)
Repayments of borrowings (4.7) (4.5)
Net cash flow from financing activities (14.6) (14.2)
======= =======
Net increase/(decrease) in cash and cash
equivalents 31.9 (33.2)
Cash and cash equivalents at 1 January 143.2 184.4
Net foreign exchange differences 1.2 (8.0)
======= =======
Cash and cash equivalents at 31 December 176.3 143.2
======= =======
NOTES TO THE PRELIMINARY FINANCIAL STATEMENTS
1 General information
The preliminary financial information (financial information)
set out in this announcement does not constitute the consolidated
statutory accounts for the years ended 31 December 2009 and 2010,
but is derived from those accounts. Statutory accounts for 2009
have been delivered to the Registrar of Companies and those for
2010 will be delivered following the company's Annual General
Meeting. External auditors have reported on the accounts for 2009
and 2010; their reports were unqualified, did not draw attention to
any matters by way of emphasis without qualifying their report and
did not contain statements under s498(2) or (3) Companies Act
2006.
2 Accounting policies
The financial information set out in this announcement is based
on the consolidated financial statements which are prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted for use by the European Union and complies with the
disclosure requirements of the Listing Rules of the UK Financial
Services Authority. The financial information is in accordance with
the accounting policies set out in the 2009 financial statements
except for adoption of new accounting standards in 2010, none of
which had a material impact to the results of the group.
3 Segmental information
Segmental information on continuing operations for revenue and
results is as follows:
Business segments Revenue Results
2010 2009 2010 2009
GBPm GBPm GBPm GBPm
Broking 169.6 139.1 41.3 26.7
Financial 11.2 14.9 (4.3) (0.5)
Support 18.0 18.8 0.5 (0.4)
Research 7.0 6.7 1.5 1.1
====== ====== ====== ======
205.8 179.5
Less property services revenue
arising within the group, included
under Support (3.2) (2.8)
====== ======
Segment revenue/results 202.6 176.7 39.0 26.9
====== ======
Head office costs (4.5) (4.3)
Operating profit 34.5 22.6
Finance revenue 0.8 1.6
Finance costs (3.3) (1.8)
Other finance revenue - pensions 0.4 0.1
====== ======
Profit before taxation 32.4 22.5
Taxation (8.9) (5.6)
====== ======
Profit after taxation 23.5 16.9
====== ======
4 Taxation
The major components of the income tax charge in the
consolidated income statement are:
2010 2009
GBPm GBPm
Continuing operations:
Accounting profit at UK average standard rate of corporation
tax of 28.0% (2009: 28%) 9.1 6.3
Tax on unremitted earnings of overseas operations - (1.6)
Expenses not deductible for tax purposes 1.6 3.2
Other adjustments (1.8) (2.3)
------ ------
Total tax charge in the income statement 8.9 5.6
------ ------
5 Earnings per share
Basic earnings per share amounts are calculated by dividing net
profit for the year 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:
2010 2009
GBPm GBPm
Net profit attributable to ordinary
equity holders of the parent 23.5 16.9
========== ==========
2010 2009
Number Number
millions millions
Weighted average number of ordinary
shares 18.7 18.7
---------- ----------
Diluted weighted average number
of ordinary shares 18.8 19.0
---------- ==========
6 Dividends
The board is recommending a nal dividend of 30p (2009: 27p),
giving a total dividend of 47p (2009: 43p). This final dividend
will be payable on 10 June 2011 to shareholders on the register at
the close of business on 27 May 2011, subject to shareholder
approval.
7 Investments
At 31 December 2010 the group had investments in the Clarkson
hedge funds of GBP11.4m (2009: GBP12.6m). These were redeemed
subsequent to the year-end. As a result, these have been
reclassified to current investments.
8 Employee benefits
The company operates two defined benefit schemes: the Clarkson
PLC scheme and the Plowrights scheme.
As at 31 December 2010 the Clarkson PLC scheme and the
Plowrights scheme had a combined deficit of GBP0.8m (2009: GBP6.9m
deficit). This amount is included in full on the balance sheet as a
non-current liability; the company has provided deferred tax on
this deficit amounting to GBP0.2m (2009: GBP1.9m). The market value
of the combined assets was GBP131.9m (2009: GBP121.6m) and
independent actuaries have assessed the present value of the
combined funded obligations at GBP132.7m (2009: GBP128.5m).
The reduction in the deficit is due to increases in the value of
plan assets and changes in the actuarial assumptions used for
inflation more than offsetting a decrease in discount rate used in
calculating scheme obligations.
9 Analysis of net funds
31 Foreign 31
December Cash exchange December
2009 flow differences Reclass-ification 2010
GBPm GBPm GBPm GBPm GBPm
Cash and
short-term
deposits 143.2 31.9 1.2 - 176.3
Current
interest-bearing
loans and
borrowings - - - (44.0) (44.0)
Non-current
interest-bearing
loans and
borrowings (48.3) 4.7 (0.4) 44.0 -
--------- ----- ------------ ------------------ ---------
Net funds 94.9 36.6 0.8 - 132.3
--------- ----- ------------ ------------------ ---------
The loans and borrowings represent a multicurrency revolving
credit facility with Barclays PLC. Due to the high level of cash
generation in the business over the past year, all outstanding bank
borrowings were repaid in full in February 2011. We also reduced
the facility from GBP50m to GBP25m, and renewed it for a term of
three years. There are no current plans to draw down on this
facility.
10 Contingencies
From time to time the group may be engaged in litigation in the
ordinary course of business. The group carries professional
indemnity insurance. There are currently no liabilities expected to
have a material adverse financial impact on the group's
consolidated results or net assets.
In December 2010 judgement was handed down regarding the
long-running litigation relating to commissions derived from
Russian based transactions between 2001 and 2004. The judgement was
in favour of Clarksons and consequently was in accordance with the
board's beliefs. Since the year-end, the claimant against Clarksons
has appealed this judgement. The board's views remain
unchanged.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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