TIDMCKN
RNS Number : 8445G
Clarkson PLC
09 March 2015
9 MARCH 2015
Clarkson PLC
Clarkson PLC (Clarksons) is the world's leading shipping
services group. From offices in 20 countries on six 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 2014.
Year ended Year ended
31 December 31 December
2014 2013
Revenue GBP237.9m GBP198.0m +20%
Underlying profit before taxation* GBP33.8m GBP25.1m +35%
Earnings per share* 134.2p 98.0p +37%
Dividend per share 60p 56p +7%
* Before exceptional item and acquisition costs of GBP8.6m
(2013: GBP3.1m)
Summary
-- Results ahead of expectations
-- Underlying profit before taxation increases by 35% and
underlying earnings per share increases by 37%
-- Continued increases in transaction volumes across broking division
-- Dividend increased for twelfth consecutive year to 60p
-- Solid balance sheet, including GBP92.3m of net funds
-- 10% increase in the forward order book for 2015 to US$110m
-- Completion of acquisition of RS Platou ASA (Platou) in February 2015
Andi Case, Chief Executive, commented:
"Once again our proven strategy has enabled us to exceed
expectations and generate strong results with a 35% increase in
underlying profit before taxation.
"We have continued to expand and develop our unique offering
into a fully integrated business and I am extremely excited that
the acquisition of Platou not only brings together two great teams,
but transforms the strength and depth of our offering and further
enhances the best in class service we deliver to our global
clients.
"Shipping and offshore is a multi-cyclical business and once
again we face extremely challenging conditions in some markets. We
continue to see a flight to quality and believe that our extended
tool box underpinned by our strong balance sheet ensures we are
best placed for long-term growth.
"We are delighted to maintain our progressive dividend policy
for a twelfth year and we remain focused on shareholder
returns."
Enquiries:
Clarkson PLC:
Andi Case, Chief Executive
Jeff Woyda, Finance Director 020 7334 0000
Hudson Sandler:
Andrew Nicolls
Katie Matthews 020 7796 4133
Chairman's review
Overview
I am delighted to report that Clarksons has delivered strong
results in 2014, ahead of market expectations. The year has seen
recovery in a number of sectors and continued challenges in others.
However, the diversity of our product offer, global reach and
experience and knowledge of our teams has meant that, wherever
there was activity, we have been at the forefront.
Results
Underlying profit before taxation of GBP33.8m (2013: GBP25.1m)
was 35% higher than the previous year. This was ahead of
expectations as our teams were quick to take advantage of renewed
activity in a number of our markets.
Underlying earnings per share was 134.2p (2013: 98.0p) resulting
in basic earnings per share of 91.9p (2013: 82.2p).
Acquisition of RS Platou ASA
On 25 November 2014, we were delighted to announce the terms of
a transformational deal with RS Platou ASA (Platou), a leading
international broker and investment bank, focused on the offshore
and shipping markets. The board firmly believes this is a unique
opportunity to combine two leading businesses, led by proven and
experienced management teams, to create a 'best in class' fully
integrated offer across shipping and offshore, broking and banking.
The businesses are highly complementary with little overlap and we
expect to generate significant opportunities for organic revenue
and margin growth, creating shareholder value over the
medium-term.
The transaction completed on 2 February 2015 and the enlarged
group moves forward with a strong balance sheet, ensuring we are
well placed to make further investments across the business as we
continue to expand and develop our operations.
Acquisition of Michael F. Ewings (Shipping) Limited
Earlier in the year we were pleased to announce that our port
and agency business, Clarkson Port Services (CPS) had acquired
Michael F. Ewings (Shipping) Limited. The acquisition extends the
geographic coverage of CPS, for vessel agency, broking and supply
logistics to Northern Ireland and enables CPS to broaden its
services to existing and new customers.
Dividend
For the twelfth consecutive year, Clarksons intends to raise the
dividend paid to our shareholders. The board is recommending a
final dividend of 39p (2013: 37p). The interim dividend was 21p
(2013: 19p), resulting in a 7% increase in the total dividend for
the year to 60p (2013: 56p). The dividend will be payable on 5 June
2015 to shareholders on the register as at 22 May 2015, subject to
shareholder approval.
Following the acquisition of Platou, the board intends to
continue with the company's current policy of paying dividends on a
progressive basis.
People
Since joining the board in August 2014 and becoming chairman on
1 January 2015, I have worked closely with Andi and the team and
what has struck me most is the experience, knowledge and cultural
'can-do' approach of the people throughout Clarksons. Following the
recently completed acquisition of Platou, we now welcome the Platou
team and look forward to working together as we enter a new chapter
in our history.
Board
After nine years with the group, six of which as chairman, Bob
Benton retired from the board on 1 January 2015. Bob has chaired
the group through a very significant period of growth and
development in its history and on behalf of the board, I thank him
for his commitment and support.
I would also like to welcome Peter M. Anker, chief executive of
Platou, to the Clarkson PLC board as an executive director and
president of broking and investment banking of the enlarged group,
and Birger Nergaard, board director of Platou, as non-executive
director of Clarkson PLC. Their knowledge of the Platou business
and experience in our markets will be invaluable.
The future / current trading
2015 looks set to be a transformational year for Clarksons, as
we combine the two leading businesses of Clarksons and Platou to
create a fully integrated offer across shipping and offshore,
broking and banking. We have a solid forward order book and,
despite heightened challenges in some of our markets, we are
confident that our proven strategy and best in class service will
continue to provide enhanced returns for our shareholders.
James Hughes-Hallett
Chairman
6 March 2015
Strategy and operations
'Best in class client service' is at the heart of Clarksons'
strategy. Our management team has built a reputation for unrivalled
professionalism, expertise and support underpinned by over 160
years of marine broking heritage, delivering a business model which
is committed to servicing our increasingly diverse client base
across all sectors of the shipping and offshore industry. In line
with this strategy, in the second half of 2014 we were delighted to
announce the terms of a transformational deal with RS Platou ASA
(Platou), a leading international broker and investment bank,
focused on the offshore and shipping markets.
Andi Case, chief executive of Clarkson PLC, outlines the
rationale behind this transaction and the opportunities that lie
ahead for the new group as we move forward into 2015.
Why is this deal transformational?
What is exciting about this deal is what it means for our
current and prospective clients. This is a unique opportunity to
combine two leading businesses to create an unrivalled and
integrated offer across shipping and offshore, broking and banking.
Clarksons has always prided itself on being able to offer the
strength and depth of product diversity supported by excellent
global reach. Platou's business is incredibly complementary to
ours, with very little overlap both in terms of service offer and
geographic reach. On a day-to-day basis client relationships will
remain unchanged; still working with the same experienced team.
What is significant is the international scale and product
diversity that we can now provide. Together the teams at Clarksons
Platou will be able to offer clients a truly 'best in class'
integrated service, across broking, finance, support and research
in all the key global shipping and offshore sectors and across all
areas of financing; public equity, private equity and debt capital
markets.
Can you tell us more about Platou?
Platou is an excellent business. Established in Oslo in 1936,
like us they have a longstanding heritage in shipping and today are
a leading international broker and investment bank providing high
value brokerage, financial and advisory services focused on the
offshore and shipping markets. Culturally, I believe our two
businesses are very similar. We have known Peter M. Anker and the
team for many years and I am delighted they are now working with
us. They bring with them invaluable expertise and knowledge of our
markets and their global relationships, especially with
Scandinavian and industrial clients, establishing a broader client
mix within global shipping and offshore markets for the enlarged
group.
Given Clarksons and Platou are such a complementary fit, what
are the opportunities for growth for the enlarged group?
Recent years have witnessed some of the most turbulent shipping
markets in history. In challenging times, we have benefited from a
flight to quality as clients look to work with the most
experienced, creative and knowledgeable advisors. I believe this
has encouraged the consolidation we have seen across our industry
in 2014 and this transaction ensures that as the market leader, the
enhanced group is best placed to meet the evolving requirements of
current and prospective clients.
Both our management teams are highly experienced with a proven
track record of delivering a fully integrated service offer. We
have a very clear shared vision for the future growth of the
enlarged group and believe there are significant opportunities for
medium-term organic revenue and margin growth.
How will the breadth of your marine and offshore broking offer
change as part of this deal?
The enhanced shipbroking business will offer leading coverage
and broking in all types of contract and across all sectors of the
chartering market, whilst also covering the full lifecycle of ships
from newbuilding through to sale and purchase and demolition. Each
of these teams will provide both a service to local clients and a
global service for international conglomerates from a market
leading position in Europe, the Far East, Australasia, the Middle
East and the US.
In the offshore market, Platou have long been recognised as one
of the leading global players in the sector. At a time of
significant market change, the enlarged Clarksons Platou offshore
operations will have teams covering the chartering, sale and
purchase, newbuilding and demolition of OSVs, PSVs, AHTSs, subsea,
rigs, jackups, accommodation units, FPSOs, renewables and seismic
services. We will be able to offer extensive geographic coverage
from a global platform with teams located across Europe, Asia,
South America and the US.
Our research values the opportunity in the combined marine and
offshore market at approximately US$1.6tn and I firmly believe the
strength and breadth of our combined broking operations mean we can
be at the forefront of this activity, wherever it occurs in the
markets.
This deal transforms your financial division. What services can
you now offer clients?
Recent years have seen Clarksons leverage our expertise and
knowledge in our markets, to develop an integrated maritime
financial services and risk management business. The acquisition of
Platou's thriving investment banking and project finance businesses
transforms the scale and shape of our financial operations. We now
have the capability to offer our clients a full range of investment
banking services as well as debt advisory, project finance and risk
management in each of the Oslo, New York and London financial
markets.
In line with our strategy to deliver an integrated full service
client offer, in addition to current clients, our newly enlarged
investment banking teams will work closely with clients from our
broking and support businesses, supporting them on the execution of
their overall strategies. We believe this will provide a
significant source of both capital market and corporate finance
opportunities.
Support has been an area of investment for Clarksons in recent
years, does this still remain core to your strategy?
Absolutely, our support business is an important cornerstone and
in recent years we have strengthened our operations with a series
of acquisitions, building a comprehensive support function for our
clients which includes vessel agency, industrial supplies,
stevedoring and warehouse management, project logistics and freight
forwarding. 2013 saw us make the strategically important
acquisition of Aberdeen-based Gibb Tools, a leading specialist tool
supplier to the industrial maritime and offshore sector. This
acquisition has provided a step change for our client offer in this
area and has significantly increased our capability to tender for
larger offshore and renewable contracts.
During the course of 2014 we were also pleased to announce the
acquisition of Michael F. Ewings (Shipping) Ltd, the Belfast-based
port agent. This acquisition was in line with our plans to expand
our ports business into new locations to further meet the needs of
existing and potential clients and allows us to leverage our
network further to develop this area of our business.
Will research continue to underpin your strategy for the
combined group? With a now 1,400 strong team across 20 countries,
how can you ensure all your teams have access to this important
tool?
The deal enhances the group's data, research and analysis
capabilities. Clarkson Research Services is by far the largest
commercially-led research unit in the maritime world, providing
historical intelligence through registers, databases, periodicals
and on a more bespoke level through validation and consulting. Our
databases track around 114,000 vessels and 6,000 offshore fields
and Shipping Intelligence Network is viewed more than two million
times per year. Not only do we have a research team dedicated to
publishing and consulting, but also dedicated analysts within every
commercial team across the enlarged group. This quality and depth
of research is unique and central to the group's strategy, as we
aim now and in the future to strengthen our role as industry
validator and reinforce our ability to deliver clients a
consultancy and execution service.
In recent years Clarksons has invested heavily in ensuring our
teams have the best tools at hand to empower them. Across the
business high quality research is supported by leading edge,
in-house developed IT systems which ensure that all our teams
across our enlarged business, wherever they may be across our
global network, will have access to these important tools,
empowering them to offer the best client service they can.
You still have a very strong balance sheet. Should we expect to
see further acquisitions?
This is a transformational acquisition and we are now focused on
integration. That said, our strong balance sheet means we will
continue to invest across all our businesses where appropriate
opportunities emerge, to ensure we are best placed for long-term
growth.
Do you have the right board and management structure in place to
support the growth of the enlarged group going forward?
We are delighted to welcome James Hughes-Hallett who joined in
August 2014 and was appointed chairman on 1 January 2015. To have
someone with James' considerable expertise and experience as
chairman is testament to the position we now hold in the global
trading markets. His broad experience across a wide range of
businesses from shipping to offshore as well as banking will be
invaluable as we continue to build our business across a broader
range of sectors.
I would also like to personally thank Bob Benton for his valued
guidance, support and stewardship through his tenure with the
group.
Following the transaction, we also welcome Birger Nergaard, a
board director of Platou. He brings with him extensive knowledge of
the Platou business and our markets and we are very pleased that he
has agreed to join the board of Clarkson PLC.
Finally, on a personal note, I am delighted to now be working
closely with Peter M. Anker who has joined the board of Clarksons.
Peter's exceptional industry and business experience and market
relationships will be invaluable as we move forward into this
exciting new phase of growth and development.
Andi Case
Chief executive
6 March 2015
Business review
Broking
Revenue: US$302.0m (2013: US$251.0m)
Revenue (sterling equivalent): GBP183.4m (2013: GBP160.3m)
Segment result: GBP34.1m (2013: GBP27.5m)
Forward order book for 2015: US$110m* (At 31 December 2013 for
2014: US$100m*)
* Directors' best estimates of deliverable FOB
Dry bulk
2014 started on a high note, as the Australian iron ore miners
experienced no weather-related disruption and many ships were still
deployed on the last raw ore shipments from Indonesia after the
Indonesian export ban took effect in January 2014. The first
quarter Baltic Dry Index (BDI) averaged 1,403, a 25% quarterly
decline after an exceptionally strong last quarter of 2013. The
index further declined in the second and third quarters by 30% and
4% respectively. The trend was reversed during the first two months
of the fourth quarter, but rapidly lost ground in December to end
close to the low point of the year. The 2014 average BDI was down
by 8% at 1,105 making 2014 the second worst year since the index
started in 1999.
There were a number of key factors that derailed the dry bulk
freight market recovery. In China the year-on-year decline in coal
imports and overall disappointing growth reduced demand. The
stockpiling ahead of the aforementioned Indonesian ban on raw ore
exports in January 2014 had provided support to the market;
thereafter some 200 shipments per month were no longer required.
The easing of grain port congestion in South America during the
second quarter improved the efficiency of the fleet thereby
effectively increasing supply. The fleet continued to expand
robustly with net growth of 4.5% during 2014. The decline in oil
prices has eroded the advantages of slow steaming and narrowed the
premium of fuel-efficient ships.
In 2014 we significantly increased the volume of fixing
worldwide. We also added a new office in New York, which we intend
to expand further.
With continued new ship deliveries expected in 2015, unless
counterbalanced by slippage of newbuildings or scrapping which has
already started, demand growth will struggle to correct the current
supply/demand imbalance.
Containers
2014 was a difficult year for the container shipping market.
Boxship charter market earnings remained depressed, and owners
continued to battle with historically low charter rates in most
size sectors. Idle capacity and cascading continued to limit any
significant increase in earnings.
At these levels few liner companies can make significant
profits, but the falling bunker prices towards the end of the year
started to reduce costs. However, the continued redeployment of
panamax vessels surpassed expectations, which supported gains in
charter rates in the panamax sector not really seen elsewhere.
On the demand side, global container trade growth is estimated
to have reached 6% in 2014. The recovery in volumes on the trades
from Asia to Europe and the US first seen in 2013 came through
strongly in 2014, supplementing the growth in volumes on the
intra-Asian trade and a number of regional trade lanes. On the
supply side, the fully cellular fleet stood at 18.2m 20-foot
equivalent unit (TEU) at the end of the year having grown by around
6% since the start of 2014. The order book of 3.3m TEU now
represents 18% of existing capacity.
The sector still faces issues: surplus capacity generated by the
slowdown in trade during the downturn, and the mismatch between a
delivery schedule dominated by very large ships and a more balanced
pattern of global demand. This is still leading to a substantial
degree of 'cascading', which keeps the pressure on charter tonnage
and creates freight rate volatility. However, surplus capacity from
the downturn is gradually being absorbed, with slow steaming
accounting for much of it, and levels of boxship demolition remain
elevated. Idle boxship capacity stood at around 1.0-1.5% of the
fleet at the end of 2014; this level is significantly lower than
that seen in the winter periods in the three previous years; this
could be indicative of slowly tightening market conditions.
During 2014, we expanded our container sale and purchase
presence in London and expanded our offering in Hamburg. The team
concluded a number of projects on post-panamax vessels including,
several long-term sale and charter backs and newbuilding contracts
where we also sourced the financing and arranged post-delivery time
charters. As a result of these developments we grew our chartering
performance year-on-year and continued to increase market
share.
In 2015, demand growth is expected to outpace capacity
expansion. Together with the rapid rate of demolition, the thin
order book outside the larger sizes and a likely slowdown of the
'cascade', this may in the medium-term lend gradual support to the
earnings environment.
Tankers
The crude tanker market strengthened considerably in 2014,
albeit from very low levels seen in 2013. With far fewer
newbuilding deliveries entering the market, lower fleet growth
helped to underpin the recovery. In the VLCC sector, average
earnings on the benchmark AG-East route increased by 55% versus the
weak levels that were seen in 2013. China was once again key to
driving vessel demand growth with rising seaborne crude oil imports
including increased long-haul shipments from Latin America and West
Africa. The first and fourth quarters saw particular strength in
earnings, with a smaller rally seen during the summer, in line with
seasonal refinery throughput and demand changes. Looking ahead to
2015, fewer VLCC newbuildings are expected to enter the market and
further refinery capacity development and strategic stock building
in China and India is expected to continue to support VLCC demand.
At the time of writing, the VLCC sector has already seen additional
demand for vessels employed in floating storage due to the contango
in the market with the consequence of an improvement in market
rates.
Suezmax average earnings increased by 79% from the levels seen
in the previous year, sharp spikes were also seen at the beginning
and end of the year, with a small rally mid-year. The suezmax
market was supported by a lower number of newbuilding deliveries
entering the market meaning the fleet size remained relatively
stable. On the demand side, suezmaxes continued to benefit from
increased long-haul west to east shipments as well as increased
employment in the Middle East and in West Africa to Europe trades.
Suezmax fleet growth is expected to remain low or negative in 2015,
with very few newbuildings expected to be delivered from shipyards.
The surplus that appears to be building in crude oil markets also
points to further employment in shipping cargoes to storage
facilities and potentially some floating storage employment in
2015.
In the aframax sector, average earnings increased by 75% in
2014. The rise in earnings was assisted by the aframax fleet
reducing in size for the second successive year. Newbuilding
deliveries were at the lowest level since 2001 and removals
continued at a strong pace despite the rise in benchmark earnings.
The dirty trading aframax fleet shrunk by an even greater amount
than the overall fleet, as the majority of aframax sized
newbuildings delivered into the market were coated LR2 products
tankers that entered the clean products trading market rather than
the dirty markets. The western aframax markets also saw sharp
spikes in earnings at the start and end of the year, with a more
modest rally in the middle of the year, while the markets east of
Suez saw a more modest first half of the year there was more
consistent strength in the second half. The erratic nature of
exports from Libya played a part in some of the considerable
volatility that was seen in the market, particularly west of
Suez.
Another significant development in 2014 was the steep fall in
crude oil prices in the second half. Front month Brent futures
prices peaked in mid-June at US$115/barrel, falling to below
US$60/barrel at the end of the year. In spite of the fall in
prices, OPEC decided at its 27 November meeting to maintain current
levels of production, a decision which prompted further price
declines. The OPEC decision and the fall in prices appears to be a
positive development for the tanker market in 2015, maintaining
high levels of seaborne crude oil trade and potentially stimulating
greater demand for oil. In addition, if the surplus in crude oil
continues to grow, floating storage employment may support vessel
earnings. The persistence or growth of this surplus of oil will be
contingent on production levels in areas that have been subject to
instability, any further decisions that are taken by OPEC during
the year and the ability or desire of non-OPEC producers to
maintain or increase output in the face of lower prices.
In the clean products tanker market, average earnings for LR2
product carriers on the benchmark AG-Far East route increased by
34% versus 2013's average levels. Earnings remained at weak levels
in the first half of the year, as the market was affected by the
large number of LR2s that switched from dirty to clean trading
throughout 2013. The market strengthened considerably in the second
half of the year, coinciding with the full operation of new Middle
Eastern refining capacity and high volumes of naphtha being shipped
from Northwest Europe and the Mediterranean to the Far East.
Average earnings for LR1s on the benchmark AG-Far East market
increased 18% in 2014 versus 2013's levels. The LR1 market also saw
a relatively weak start to the year and a stronger second half.
This sector was also affected by the amount of both LR2 and LR1
tonnage that switched from dirty to clean trades in 2013, however
the total LR1/panamax fleet shrunk for the third successive year,
with very few newbuildings delivered into the market.
Benchmark clean products average earnings for MR products
tankers were 7% lower in 2014 versus 2013's levels. The influx of
MR newbuilding tonnage, together with the enlarged LR1 and LR2
clean trading fleets, weighed on the market in the first half of
the year when earnings were weaker than those seen in the first
half of 2013. However, earnings strengthened in the second half of
the year, particularly in the fourth quarter when earnings reached
levels not seen since 2008. Falling crude prices in the second half
of the year led to improved refining margins and higher outputs in
a number of regions, which together with new Middle Eastern
refining capacity and the closure of refining capacity in
Australia, helped to support vessel demand.
Looking ahead to 2015, MR deliveries are expected to be
maintained at a relatively high level, potentially exceeding the
number of deliveries seen in 2014. In addition, deliveries of LR2
products tankers are expected to increase in 2015. However, the
LR1/panamax fleet is expected to continue shrinking with barely any
newbuilding deliveries expected. It is also possible that a
stronger market for dirty trading aframaxes will draw some LR2s
back to that market sector, particularly as the dirty trading
aframax fleet will otherwise continue to shrink. Seaborne oil
products trade is expected to continue its robust growth, driven by
several factors including the commissioning of more new refining
capacity in the Middle East and the likely closure of further
capacity in Europe and Australia. Lower oil products prices may
also stimulate additional demand and higher trading volumes.
During 2014, the success of our operations around the world,
boosted by excellent co-ordination between the principal offices in
supporting clients, illustrates our second-to-none service and the
geographical spread of our operations.
Specialised
Market participants within the specialised sphere entered 2014
in an upbeat mood, looking forward to a number of positive trade
fundamentals on the horizon. In reality, whilst contract of
affreightment renegotiation levels have been broadly positive
throughout the year, the average annual Clarksons Specialised
Analysis Spot Indices recorded just a 0.1% rise for chemicals and a
3.5% decrease for edible oils in 2014 when compared to the previous
year. The interlinked period charter markets have also been lacking
vitality for much of the year.
This generally subdued market performance, largely driven by
China's economic downshifts and strategic moves to advance their
own domestic chemical production, caused a weak summer market for
most arterial trade lanes which has persisted towards the year-end.
Elsewhere, with the global specialised markets coupled with wider
macroeconomic performance, a fragile economy in Europe and reduced
economic growth from key 'emerging market' nations such as Brazil
and India, has further constrained performance. Despite facing
global headwinds, the American chemical industry has continued to
expand in 2014.
The widely reported sharp decline in crude oil pricing has also
filtered through to chemical commodity values. These shifts could
play into the hands of those regions geared to utilising naphtha as
a petrochemical feedstock. Whilst it could be argued that the
chemical markets are more driven by supply and demand fundamentals
and less by sentiment than the crude markets, recent price
volatility has undoubtedly impacted on the specialised shipping
markets in the short term.
In the edible oils sector, overall volumes have remained robust,
but have seen some changeability throughout the year due to
clean/dirty petroleum products market shifts and also legislative
influence. One such example of the latter has been reduced tax
mechanisms for the world's largest two crude palm oil producers,
Malaysia and Indonesia.
The overall specialised fleet and order book has seen limited
growth during 2014 with most contracting activity focused on the
stainless steel chemical tanker segment which resonated with the
investment community, particularly in the first half.
Many owners and operators still face challenging market
conditions whilst there is undoubtedly a cost pressure on the
industry which is set to increase with tightening environmental
regulations such as SOx/NOx emissions control areas and the
potential requirement for ballast water treatment systems.
The medium- to long-term outlook for our markets remains
encouraging. Fresh ship contracting activity has been scarce of
late and net fleet growth looks set to be limited in future years.
Expected growth in overall seaborne trade of specialised and
ongoing investments within the US and Middle East Gulf should
generate revised supply chains acting as a tonne-day demand
provider for our markets.
We have reinforced our position as the market leader in this
sector and implemented a number of initiatives which have driven
growth and returns.
PCG and small LPG
Shipping markets in the petrochemical sector for
semi-refrigerated tonnage have been challenging, with idle time and
ballasting increasing as the year progressed. Those owners with
period cover fared better than those exposed to the unpredictable
spot market. Some trading lanes have held their freight levels
well, whilst other lanes have needed owners to reduce their rates
to enable arbitrage product movement. The fall in the oil price has
helped to underpin owner's returns despite the fall in some spot
rates.
The European petrochemical sector has witnessed a number of
announcements from producers securing ethane feedstock from the US
on a long-term basis, giving support to the European sector that
use this lighter feed in crackers. This will help to underpin the
employment prospects in the smaller ethylene and semi-refrigerated
sector. The longer term future of the heavy feed crackers, allowing
for the recent softening in crude prices, remains questionable.
Asia will also start to see a change in trading patterns as the
Chinese PDH (propane dehydrogenation) plants come on stream; as a
consequence propylene imports to China will be reduced which will
be to the detriment of the pressure sector. Nevertheless, this may
give way to longer haul opportunities in the larger
semi-refrigerated sector.
Whilst seaborne trade in petrochemical gases is expected to
increase year-on-year, there are 14 units over 12,000 cbm to be
delivered. In the smaller size sector, with minimal deliveries and
ageing tonnage, the prospects look brighter; this sector is term
orientated and therefore less exposed to the spot market.
The pressure sector had a particularly difficult year with rates
falling across the sector. The 3,500 cbm have been the hardest hit
with a 25% reduction in time charter levels. The future looks
rather ominous with 37 units due to deliver in 2015 more than
offsetting the 12 units which will reach the difficult age of
25.
Clarksons' petrochemical gas team is not immune to the
volatility of the market. However, the team has held its market
position with a strong term portfolio and an increased position in
our forward order book.
Gas
Main gas team
2014 was a dramatic year for the LPG market with strong growth
in seaborne trade volumes and relatively modest fleet growth
underpinning a record setting year for VLGC freights. The growth in
US LPG exports, supported by continued shale related NGL recovery
and terminal expansions provided the bulk of the growth in trade.
However, export volumes from the Middle East and Africa also added
to overall shipping demand. With Asia accounting for 80% of the
growth in imports, a significant proportion of which was sourced
from western exporters, this provided a further boost to
tonne-miles and culminated in an all-time spot market high of
US$149 pmt AG-Japan during the summer. The smaller vessel sizes
have also experienced some recovery this year, with midsized
handysize freight rates edging steadily upwards throughout the
year.
Toward the end of 2014, VLGC spot freights have more than halved
- as the weakening crude price and the impending wave of new
deliveries started to dampen both product and freight enquiries.
Weaker bunker prices have served to help support earnings, however,
and freights still remain at relatively firm levels
historically.
In line with these developments, Clarksons has continued to
build our presence in the US and also in Asia. Nevertheless, the
2015 market is expected to undergo a period of unprecedented change
as the energy markets adapt to a new pricing environment. These
changes will coincide with the most rapid phase of expansion in the
VLGC fleet since 2008 which suggests that another interesting year
lies ahead. We have made additional new hires in Houston and
Singapore in 2014 as well as more extensively covering commodity
and derivatives giving greater exposure to these markets and
creating greater flexibility to adapt to market conditions and
client requirements.
LNG
The spot market saw a 25% increase in activity in 2014. Despite
the market experiencing a noticeable downward correction in rates
at the start of the year, on the back of a significant number of
redelivered vessels and in anticipation of 17 deliveries of
newbuildings, rates remained mostly steady from February onwards.
The spot market for modern tri-fuel LNG carriers averaged around
US$72,000/day, while steam-power LNG carriers on average earned
around US$50,000/day. With the newbuildings deliveries of a two or
even three tier market evolved with each tier commanding different
charter rates.
Short-term chartering activity during 2014 was primarily driven
by excess production from Australia's North West Shelf and
Indonesia's Bontang, uninterrupted production from Nigeria and
Norway, along with new supplies from Papua New Guinea. In addition
to the large number of tenders from production plants, in the first
half we had a record number of re-exports from European terminals
in Spain, Belgium and the Netherlands. Amidst sharp fall in crude
and LNG prices, the arbitrage opportunities were limited in the
second half of 2014. Thus the 2014 short-term chartering market was
dominated by intra-regional trades (short-term in nature)
punctuated by some inter-basin arbitrage opportunities from the
Atlantic to the Pacific basin.
Three new LNG production projects commenced operation: Algeria,
Papua New Guinea (which started few months ahead of schedule) and
the first coal-bed methane project in Queensland, Australia. There
are around 19 new export projects under construction adding nearly
150 million tonnes of LNG production capacity in the next 3-4
years. The new liquefaction capacity will require substantial fleet
increase and in 2014 we saw some very strong ordering representing
the second most active year in the sector's history after 2004. We
concluded a number of deals with a significant number of new
clients during the year and also hired new key individuals into the
business.
The long-term fundamentals for LNG demand remain strong and the
shipping market continues to expand. We are well positioned for
changing sector dynamics and already see the benefits of efforts we
have made developing our team and enhancing the market coverage. We
have increased our chartering market share considerably concluding
a substantial number of short-term fixtures. In 2015, we are
focused on giving greater impetus to the spot market and in project
business.
Sale and purchase
Secondhand
The positive momentum, and optimism, gained towards the end of
2013 spilled over into the first quarter of 2014 allowing us to
conclude a pleasing number of transactions both on the secondhand
and newbuilding desks as buyers looked to secure vessels that could
offer prompt charter-free delivery at increasingly firm values.
The dry cargo freight markets failed to firm positively as had
been expected with daily earnings across the board weakening
through until year-end. This prolonged downturn filtered through to
the values which have been dropping as a result and, in turn,
reduced the liquidity of the secondhand sale and purchase markets
whilst sellers took time to adjust to the re-calibration of buyers'
price ideas. However, the weakening Japanese yen against the US
dollar has meant that a steady stream of tonnage is building from
the larger Japanese owners who are finding their customers keen to
redeliver their vessels back to them at the earliest possible
opportunity and we do feel that with the Japanese financial
year-end approaching, we will start to see an increased volume of
sales candidates in the first quarter of 2015 willing to face these
new, lower levels. So there is reason to be confident of increased
levels of activity going forward, albeit at reduced prices.
The tanker market on the contrary has enjoyed a very buoyant
year-end as the benefits of the falling oil prices began to show
themselves clearly in the amount of crude oil being shipped out to
the major world consumers with China topping that list. As earnings
lifted substantially, values followed suit and the volume of
transactions we were able to conclude increased fairly immediately
as optimism returned that this better market might be more than a
short-term seasonal lift. We were able to benefit from this
increased deal activity better than most not only on spot business
but also using the opportunity to finalise some of the larger
project transactions we had been working on during the year.
This, combined with the successful completion of a number of
sale and leaseback transactions we handled, has enabled us to
increase significantly our transaction volumes year-on-year. The
challenge remains to continue this success going forward into
2015.
Newbuilding
2014 concluded a successful year for the newbuilding team, with
key transactional activity prevailing across the key market asset
classes.
The first half of the year was bolstered by the carry through of
capital markets backed transactions from the end of 2013, which
continued to drive volume into the asset markets, alongside
Clarksons concluding some cornerstone industrial business in China.
The newbuilding team was again well placed to capitalise on this
momentum and strong internal synergies within the group added value
to the depth of service that we were able to provide to our client
base.
The second half of 2014 showed a slow-down in contracting
activity as capital markets and private equity players took stock
against an active approach to the market over the previous 12 month
period. This did, however, make room for the return of the more
traditional owner base to the market, who stepped back in to pick
up a more conventional approach to ordering volumes, with a
particular focus on the crude and MGC sectors of the market. Again,
Clarksons' heritage client base has allowed us to position
ourselves successfully here and ensured that the year closed again
as an active and successful year for the team.
Looking to 2015, there are a number of challenges on the
horizon, but with strong momentum again carrying through from last
year, we anticipate a healthy run up to the Lunar New Year in the
Far East. The depth of activity within the group continues to
create new opportunities and the Clarksons newbuilding team is well
placed to continue to capitalise on these as we move through
2015.
Offshore
Whilst 2014 started with signs of optimism in certain sectors of
the offshore market, by the end of the year there was negative
sentiment, with an over supplied rig and vessel market exacerbated
by a rapidly falling oil price. There had been expectations of a
more buoyant performance in the subsea sector, but it became clear
as the year progressed that subsea contractors had difficulty
finding work for their vessels as many of the expected subsea
projects were either postponed or cancelled.
Despite the falling market, we have managed to increase our
exposure to the OSV chartering market winning some significant
long-term contracts through our Singapore office as well as being
able to secure a number of newbuilding contracts for Middle Eastern
clients. In Aberdeen, we continued to grow market share on the
chartering front as well as winning a number of significant field
development projects which kick in for the 2015 and 2016 seasons.
On the subsea side we concluded a number of long-term charters at
the start of the year as well as taking delivery of a couple of
newbuildings both in our Singapore and London offices. The downturn
in the market resulted in our rig team concluding little new
business.
For 2015, negative sentiment should mean that we see a little
more volatility in both secondhand and charter pricing, which both
our chartering and project teams will be able to take advantage of.
We do expect challenging trading conditions, however we are
optimistic that over the next 12 months a significant volume of
deals will get concluded.
Financial
Revenue: US$25.5m (2013: US$18.2m)
Revenue (sterling equivalent): GBP15.5m (2013: GBP11.6m)
Segment result: GBP1.4m loss (2013: GBP3.3m loss)
Futures broking
The surprisingly strong first quarter 2014 cape market,
averaging US$16,250 per day, generated significant optimism in the
dry sector and a vibrant trading environment. The subsequent second
quarter erosion, with the average down to US$11,900 per day, caused
some doubts and the focus shifted towards the final quarter which
is customarily the strongest of the year. The fourth quarter
average of just over US$14,000 per day was significantly lower than
most expectations; the peak of US$26,802 per day in early November
was lower than the US$35,316 level achieved on 2 January 2014. The
cape average for 2014 was US$13,758 per day with panamax at
US$7,713 per day and supramax at US$9,815. Cape FFA volumes for the
year were improved at 633,294 lots (up from 588,130 in 2013) whilst
panamax and supramax markets were marginally down on the previous
year. Options volumes were similarly slightly lower than 2013.
Iron ore pricing eroded sharply over 2014 with the year starting
at US$135 per tonne and ending the year at just over US$70 per
tonne. The volumes traded on derivatives increased from 236m tonnes
in 2013 to 484m tonnes in 2014. Given these challenging market
conditions, Clarkson Securities performed well with significant
revenue being generated once again from our options team and a
strong performance on the capes. Our enlarged team in Singapore
gained market share in iron ore.
2015 has started with levels on all sizes close to their lows;
capes US$3,580, panamax US$6,591 and supramax US$9,239. Whilst
these levels are challenging, there is plenty of scope for
volatility and our strength in options will allow us to take
advantage of the moves as they occur. We will look to grow our
Singapore presence this year in both freight and iron ore and will
also extend our options presence into the iron ore market.
Financial services
2014 was an interesting, albeit challenging year for shipping
finance. While we have seen the volume of marine finance loans
rising for a third consecutive year accompanied by the lower
margins and longer loan tenors, this is largely limited to stronger
credit counterparties leaving smaller shipping players with
comparatively limited access to finance. Additionally, many of the
traditional shipping banks were affected by the challenge of
EU-wide stress testing undertaken by the European Banking
Authority. Overall, the results of the assessment were better than
originally expected, with all main shipping banks passing the
stress tests. In spite of this, we anticipate that the stress-test
results will have longer term implications amongst the weaker banks
who will inevitably have to make substantial efforts to reduce the
number of non-performing loans in their respective portfolios to
comply with capital requirements going forward. 2014 saw the entry
to the market of a number of major alternative finance providers;
these lenders were largely attracted to good-quality, long-term
cash flow projects generating higher rates of return than may
otherwise be available in their traditional fields of
investment.
For Clarkson Financial Services, 2014 was a good year during
which a number of high profile innovative transactions that
included structured finance, debt raising and financial advisory
assignments were successfully closed demonstrating the ability of
Clarksons to validate transactions through our comprehensive market
analysis. One of those deals has since been nominated for a
prestigious 'Marine Money' award on the basis of the innovative
structure implemented.
For 2015 there is a strong pipeline of transactions and we
continue to pursue our growth strategy.
Investment services
The first half of 2014 started strongly with continued interest
in both private and public capital raises for nearly all sectors of
shipping. As the year progressed and charter rates fell in the bulk
sectors, deal activity also declined as investors appeared no
longer willing to push asset prices higher without stronger support
from charter markets. Activity in LPG and LNG shipping remained
high though, underpinned by record high spot rates in the case of
the former and attractive long-term charters packaged into
yield-oriented investment vehicles such as MLPs in the case of the
latter. There was anticipation of a strong final quarter in terms
of deal activity that never materialised, as an expected recovery
in dry bulk rates never came to fruition followed by significant
market turbulence associated with the declining oil price.
For Clarkson Capital Markets (CCM), the group continued its
growth and positioning in the market acting as a joint bookrunner
in an initial public offering (IPO) in May and completing a number
of sole managed private equity placements. In addition, the sales
and trading desk enjoyed strong growth with a more than doubling of
revenues versus 2013, and consistently recording quarter-on-quarter
sales growth. In total, CCM closed 11 investment banking
transactions in 2014 with a gross value of over US$3.3bn
encompassing both private and public equity raises, convertible and
high yield bonds and mezzanine debt.
Support
Revenue: GBP28.6m (2013: GBP16.4m)
Segment result: GBP4.0m (2013: GBP3.1m)
Port services
2014 was an exciting year for Clarkson Port Services (CPS)
seeing the first full year of trading for Gibb Tools and the
acquisition in June of Michael F. Ewings (Shipping) Limited
(Ewings).
Agency
The southern CPS offices performed well in 2014 with grain and
animal feed shipments remaining strong. The 2014 harvest produced a
sizeable exportable product that, due to the current market
position, has largely been exported outside the EU in 25,000+
metric tonne sizes. This benefited our offices covering ports
capable of handling handy size vessels, but meant a slower year for
the coastal ports.
Coal and biomass imports have again remained strong with new
contracts awarded and existing contracts renewed.
In Belfast, our new acquisition, Ewings, has performed well,
focusing on conventional dry cargo and oil rig support. We are
optimistic that revenue in Belfast will increase in 2015 with a
rise in oil rig and offshore support activity.
In our north England and Scotland offices, offshore oil and gas
revenue remained steady, but activity levels did not increase as
hoped in the second half of the year. This seems attributable, in
part, to some caution in the market due to the falling oil price.
There is a concern that this cautious approach will continue into
2015 with the oil price continuing to fall. Clarkson EnShip was
able to maintain results due to an increased focus on specialist
offshore project support throughout Europe, Africa and the
Americas. This will continue to be a focus in 2015 as we see this
as an area we can add great value to our customers' operations.
Gibb Tools and Opex Industrial Supplies (Opex)
Gibb Tools and Opex had an excellent first half to the year, but
monthly sales returned to levels that are more normal during the
second half. This seems to be due to caution from our customers
caused by the falling price of oil. During their first full year of
trading following our acquisition, Gibb Tools has performed in line
with expectations, and continues to experience strong year-on-year
growth. During 2015, we will continue to focus on marketing and
operating Gibb Tools and Opex as a single entity, maximising the
combined strength they possess in the offshore supply industry.
Stevedoring
Activity in our Ipswich stevedoring operation remained steady
both in our conventional grain export business and in the more
specialised areas of our business, such as rice cleaning and seed
import. As Ipswich is unable to handle larger grain exports due to
restrictions on vessel dimensions within the port, we did not
realise the full benefits of the large UK grain harvest that we had
predicted. It is hoped that for 2015 a shift in the market towards
smaller, inter-EU, shipments will show an increase in our grain
export activity.
Freight forward
With continued support from major offshore oil rig operators,
and the CPS agency business, our freight forwarding operations in
Great Yarmouth, Aberdeen and Belfast had a strong year performing
ahead of expectations. In 2015, we intend to focus on knitting
together, and expanding, our three forwarding operations in order
to fully maximise the service levels we can offer.
Property services
Included within the support segment are the revenues and profits
derived from property services.
In June, Clarkson PLC signed a 15 year lease for a new flagship
head office at Commodity Quay, St. Katharine Docks, commencing from
the last quarter of 2014. The state of the art new head office will
be Clarksons' main London trading base from mid-2015, following an
extensive fit out. The lease on the current head office, St. Magnus
House, Lower Thames Street, London will expire in December 2015.
During the final quarter of 2014, and throughout 2015 there are
additional rent and service charges, including an onerous lease
provision on the existing property, of approximately GBP3.4m; these
will be disclosed separately in the income statement as exceptional
items.
Clarkson PLC also owns the freehold of Hamilton Barr House in
Godalming, which is let on a full commercial rent.
Research
Revenue: GBP10.4m (2013: GBP9.7m)
Segment result: GBP3.5m (2013: GBP3.0m)
Research revenues grew strongly in 2014, reaching GBP10.4m
(2013: GBP9.7m) and continuing a consistent long-term growth
profile. Despite challenging markets, underlying sales grew by 7%
during the year, supported by demand for our market-leading
shipping products, growth of offshore and energy related sales and
a strong performance by our service contract and valuation
business.
Clarkson Research is well established as a market leading
provider of authoritative intelligence related to both shipping and
trade and offshore and energy. Activities focus primarily on the
collection, validation, management and analysis of data about the
shipping and offshore markets. Clarkson Research continues to
invest heavily in expanding its wide ranging proprietary database,
developing and enhancing its broad product offering and supporting
and promoting the Clarkson group across the global shipping and
offshore industries. The research database includes coverage on
over 100,000 vessels, over 20,000 companies, around 600 active
shipyards and fabricators and over 100,000 time series.
The majority of Clarkson Research sales are derived from annuity
revenue and the client base is broad and extensive with strong
market penetration across the financial, asset owning, equipment
suppliers, insurance, private equity, governmental, energy,
commodity, shipyard, fabrication and oil service sectors. There is
also broad global client spread and a strong position in expanding
markets, with sales to Asia Pacific growing by over 15% in 2014.
Research continues to broaden its geographic footprint, with the
headcount outside of the UK expanding.
Research derived its income from the following principal
sources:
Digital
Sales from digital products increased by 10% during the year,
taking its share of revenue to 43%. Sales of Shipping Intelligence
Network, our flagship commercial database, continued to grow and
significant investments during the year will be rolled out in an
upgrade in early 2015. A further enhancement to our leading online
vessel register, World Fleet Register, during the year helped grow
sales and this register is now firmly established as an
authoritative source across our corporate and institutional client
base. Continued data and product enhancements have helped Research
consolidate its position as a leading provider of offshore data to
the insurance market while the development of a broad digital
offering within offshore and energy is now well advanced and being
utilised by clients. Our offshore and energy database offers our
clients comprehensive access to market intelligence on over 25,000
structures and companies, over 6,000 oil and gas fields,
intelligence on over 1,000 oil and gas projects, global
Geographical Information System coverage and wide ranging
commercial data and time series. Clarkson Research continues to
develop new data areas within our offering, including additional
company information, trade and commodity flows, tracking capital
market activity, machinery and environmental packages on board
ships and subsea and pipeline infrastructure.
Publications
Clarkson Research produces weekly, monthly, quarterly and annual
publications, registers and maps, available both in print and
online. An upgrade to our long standing and popular Shipping
Intelligence Weekly during 2014 was particularly well received by
our clients and has been followed by improvements and expansion
across the publication range. Over recent years our
well-established shipping range has been supplemented by a
comprehensive offshore offering to which we continue to add a
number of enhancements and new publications. Publications remain an
important aspect of our overall offering besides generating
important provenance and profile.
Services
Clarkson Research continues to expand its provision of customer
service contracts to a range of large corporate and institutional
clients in both the shipping and offshore industries. A specialist
team concentrates on managing retainers and providing bespoke
research, consultancy, valuations and data for banks, shipyards,
fabricators, engineering companies, insurers, governments, asset
owners and other corporates. This continues to be an important
growth area, with sales growing by 7% in 2014. Clarkson Research
continues to be a leading provider of data to clients producing
capital market prospectuses across a range of issuance types and
exchanges. Clarkson Valuations remains the leading provider of
asset valuation services to the industry: including many of the
world's leading ship finance banks and public listed shipping
companies, and performed particularly strongly throughout 2014.
Financial review
Net assets: GBP167.3m (2013: GBP137.7m)
Earnings per share*: 134.2p (2013: 98.0p)
Dividend per share: 60p (2013: 56p)
*Before exceptional item and acquisition costs
Results
Underlying profit before taxation, the exceptional item and
acquisition costs was GBP33.8m (2013: GBP25.1m). Profit before
taxation was GBP25.2m (2013: GBP22.0m).
Acquisition of RS Platou ASA
On 2 February 2015, the group concluded the acquisition of RS
Platou ASA for a total consideration of GBP281.1m. Of this
consideration, 75.00% was satisfied by the issuance of 9,518,369
new 25p ordinary shares in Clarkson PLC (consideration shares),
16.66% by the issuance of vendor loan notes totalling GBP46.8m
(loan notes) and the remaining 8.34% or GBP23.4m in cash (cash
consideration). The consideration shares are subject to lock-up
provisions covering the next three years and the loan notes are
repayable in two equal instalments on 30 June 2016 and 30 June
2017. Further information is set out in note 15.
On 2 December 2014, 1,613,698 new 25p ordinary shares in
Clarkson PLC were issued and placed, generating net proceeds of
GBP30.6m, to help finance the cash consideration and the repayment
of the loan notes.
Acquisition of Michael F. Ewings (Shipping) Limited
On 12 June 2014, Clarkson Port Services Limited (CPS) acquired
Michael F. Ewings (Shipping) Limited, a Belfast-based port agent.
The acquisition extends the geographic coverage of CPS, for vessel
agency, broking and supply logistics into Northern Ireland and
enables CPS to broaden its service to existing and new
customers.
Acquisition costs
Acquisition costs of GBP7.0m (2013: GBP2.1m) are shown in the
2014 income statement. The increase over 2013 reflects the costs
incurred in respect of the acquisition of RS Platou ASA and
additional deferred consideration arising from the Gibb Tools
acquisition. Estimated acquisition costs for 2015 will amount to
GBP5.1m.
Exceptional item
In June 2014, Clarkson PLC signed a 15 year lease for a new
flagship head office at Commodity Quay, St. Katharine Docks. Rent
commenced in the last quarter. Consequently, as previously
reported, to allow for the new offices to be fitted out, there will
be additional costs to the business from both the existing head
office and the new head office through to the end of 2015. In 2014,
these costs, including an onerous lease provision on the existing
property, have been treated as an exceptional charge and amounted
to GBP1.6m. A further exceptional charge of approximately GBP1.8m
will be incurred in 2015.
Taxation
The group's effective tax rate, before the exceptional item and
acquisition costs, was 25.9% (2013: 27.4%). After the exceptional
item and acquisition costs, the rate was 32.0% (2013: 30.5%) which
reflects the disallowable nature of certain acquisition costs.
Earnings per share (EPS)
Basic EPS before the exceptional item and acquisition costs was
134.2p (2013: 98.0p), an increase of 36.9%. After the exceptional
item and acquisition costs, the basic EPS was 91.9p (2013:
82.2p).
Dividends
The board is recommending a final dividend of 39p (2013: 37p).
The interim dividend was 21p (2013: 19p) which, subject to
shareholder approval, would give a total dividend of 60p (2013:
56p). In taking its decision, the board took into consideration the
2014 performance, the strength of the group's balance sheet and its
ability to generate cash and the forward order book. The dividend
is covered 1.5 times by basic EPS (2013: 1.5 times).
Foreign exchange
The average sterling exchange rate during 2014 was US$1.65
(2013: US$1.57). At 31 December 2014 the spot rate was US$1.56
(2013: US$1.66).
Cash and borrowings
The group remains cash generative, ending the year with cash
balances, including the GBP30.6m raised from the issue of new
shares, of GBP152.9m (2013: GBP96.9m). A further GBP25.3m (2013:
GBP25.2m) was held in short-term deposit accounts, classified as
current investments on the balance sheet.
After deducting amounts accrued for 2014 performance-related
bonuses, which are generally paid during the first half of 2015,
and the GBP23.4m paid in relation to the cash consideration on the
acquisition of RS Platou ASA, net cash and available funds amounted
to GBP92.3m (2013: GBP75.0m).
Balance sheet
Net assets at 31 December 2014 were GBP167.3m (2013: GBP137.7m).
The balance sheet quality continues to improve with net current
assets and investments exceeding non-current liabilities (excluding
pension provisions) by a further GBP36.4m to GBP113.8m (2013:
GBP77.4m) principally as a result of the placing.
The overall provision for impairment of trade receivables is
little changed from the previous year at GBP9.9m (2013: GBP9.7m),
though the underlying US dollar balance has reduced by US$0.7m.
The group's pension schemes have a combined liability before
deferred tax of GBP10.3m (2013: GBP1.8m). This deterioration arises
from the significant reduction in the discount rates used, which
declined from 4.6% to 3.4%, and more than offset the positive
investment returns and contributions by the company.
Principal risks
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 sufficient funds to meet all
of its foreseeable requirements. The strong generation of cash flow
in the business, combined with the 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. The group assesses the rate of exchange and
non-sterling balances held continually, and has predominantly sold
in the spot market during 2014, though some forward cover for 2015
and 2016 has been taken.
Interest rate risk
The group had no borrowings at the year-end. Monies held on
longer 95 day notice accounts earn interest based on a margin above
LIBOR, the actual interest rate is reset each month.
Reputational risk
The group has built an enviable reputation in the market over
the past 163 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. Our dedicated
training officer and training programme continue to improve
consistency and approach. 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
6 March 2015
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 ended 31 December 2014. 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 that:
-- the consolidated financial statements, which have been
prepared in accordance with IFRSs as adopted by the European Union,
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;
-- the management report represented by the report of the
directors, and material incorporated by reference, 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 they face; and
-- the annual report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to access the company's performance, business model
and strategy.
This responsibility statement was approved by the board of
directors on 6 March 2015 and is signed on its behalf by:
James Hughes-Hallett
Chairman
6 March 2015
Consolidated income statement
for the year ended 31 December
2014 2013
Before After Before After
exceptional exceptional exceptional exceptional
item and item and item and item and
acquisition Exceptional Acquisition acquisition acquisition Exceptional Acquisition acquisition
costs item costs costs costs item costs costs
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 237.9 - - 237.9 198.0 - - 198.0
Cost of sales (13.3) - - (13.3) (6.2) - - (6.2)
============= ============= ============= ============ ------------- ------------- ------------- ------------
Trading profit 224.6 - - 224.6 191.8 - - 191.8
Administrative
expenses (191.3) (1.6) (7.0) (199.9) (166.9) (1.0) (2.0) (169.9)
============= ============= ============= ============ ------------- ------------- ------------- ------------
Operating
profit 33.3 (1.6) (7.0) 24.7 24.9 (1.0) (2.0) 21.9
Finance revenue 0.7 - - 0.7 0.7 - - 0.7
Finance costs - - - - - - (0.1) (0.1)
Other finance
costs -
pensions (0.2) - - (0.2) (0.5) - - (0.5)
============= ============= ============= ============ ------------- ------------- ------------- ------------
Profit before
taxation 33.8 (1.6) (7.0) 25.2 25.1 (1.0) (2.1) 22.0
Taxation (8.7) 0.3 0.4 (8.0) (6.9) 0.1 0.1 (6.7)
============= ============= ============= ============ ------------- ------------- ------------- ------------
Profit for the
year 25.1 (1.3) (6.6) 17.2 18.2 (0.9) (2.0) 15.3
============= ============= ============= ============ ------------- ------------- ------------- ------------
Attributable
to:
Equity holders
of the parent 25.1 (1.3) (6.6) 17.2 18.2 (0.9) (2.0) 15.3
============= ============= ============= ============ ------------- ------------- ------------- ------------
Earnings per
share
Basic 134.2p 91.9p 98.0p 82.2p
Diluted 130.8p 89.6p 95.8p 80.4p
============= ============= ============= ============ ------------- ------------- ------------- ------------
Consolidated statement of comprehensive income
for the year ended 31 December
2014 2013
GBPm GBPm
Profit for the year 17.2 15.3
Other comprehensive income:
Items that will not be reclassified to profit
or loss:
Actuarial (loss)/gain on employee benefit
schemes - net of tax (8.2) 4.5
Items that may be reclassified subsequently
to profit or loss:
Foreign exchange differences on retranslation
of foreign operations 1.5 (1.8)
Foreign currency hedge - net of tax (3.4) 2.3
====== ------
Total comprehensive income for the year 7.1 20.3
====== ------
Attributable to:
Equity holders of the parent 7.1 20.3
====== ------
Consolidated balance sheet
as at 31 December
2014 2013
GBPm GBPm
Non-current assets
Property, plant and equipment 7.7 8.5
Investment property 0.3 0.4
Intangible assets 40.4 40.2
Trade and other receivables 0.4 0.5
Investments 1.9 1.8
Deferred tax asset 15.0 12.5
======== -------
65.7 63.9
======== -------
Current assets
Inventories 1.4 0.9
Trade and other receivables 42.7 45.2
Income tax receivable 1.5 2.6
Investments 25.3 25.2
Cash and cash equivalents 152.9 96.9
======== -------
223.8 170.8
======== -------
Current liabilities
Trade and other payables (102.2) (85.5)
Income tax payable (2.9) (3.9)
Provisions (3.0) -
======== -------
(108.1) (89.4)
======== -------
Net current assets 115.7 81.4
======== -------
Non-current liabilities
Trade and other payables (1.8) (1.3)
Provisions - (2.0)
Employee benefits (10.3) (1.8)
Deferred tax liability (2.0) (2.5)
======== -------
(14.1) (7.6)
======== -------
Net assets 167.3 137.7
======== -------
Capital and reserves
Share capital 5.2 4.7
Other reserves 35.5 35.7
Retained earnings 126.6 97.3
======== -------
Total equity 167.3 137.7
======== -------
Consolidated statement of changes in equity
for the year ended 31 December
Share Other Retained Total
capital reserves earnings equity
GBPm GBPm GBPm GBPm
Balance at 1 January 2014 4.7 35.7 97.3 137.7
========= ========== ========== ========
Profit for the year - - 17.2 17.2
Other comprehensive income:
Actuarial loss on employee benefit schemes
- net of tax - - (8.2) (8.2)
Foreign exchange differences on retranslation
of foreign operations - 1.5 - 1.5
Foreign currency hedge - net of tax - (3.4) - (3.4)
========= ========== ========== ========
Total comprehensive income for the year - (1.9) 9.0 7.1
========= ========== ========== ========
Transactions with owners:
Net ESOP shares utilised - 0.7 - 0.7
Gain on ESOP shares - - 0.9 0.9
Share-based payments - 1.0 - 1.0
Share issues 0.5 30.1 - 30.6
Transfer - (30.1) 30.1 -
Tax on other employee benefits - - 0.1 0.1
Dividend paid - - (10.8) (10.8)
========= ========== ========== ========
0.5 1.7 20.3 22.5
========= ========== ========== ========
Balance at 31 December 2014 5.2 35.5 126.6 167.3
========= ========== ========== ========
Share Other Retained Total
capital reserves earnings equity
GBPm GBPm GBPm GBPm
Balance at 1 January 2013 4.7 37.5 83.8 126.0
--------- ---------- ---------- --------
Profit for the year - - 15.3 15.3
Other comprehensive income:
Actuarial gain on employee benefit schemes
- net of tax - - 4.5 4.5
Foreign exchange differences on retranslation
of foreign operations - (1.8) - (1.8)
Foreign currency hedge - net of tax - 2.3 - 2.3
--------- ---------- ---------- --------
Total comprehensive income for the year - 0.5 19.8 20.3
--------- ---------- ---------- --------
Transactions with owners:
Net ESOP shares acquired - (3.3) - (3.3)
Gain on ESOP shares - - 0.2 0.2
Share-based payments - 1.0 - 1.0
Tax on other employee benefits - - 2.7 2.7
Tax on other items in equity - - 0.4 0.4
Dividend paid - - (9.6) (9.6)
--------- ---------- ---------- --------
- (2.3) (6.3) (8.6)
--------- ---------- ---------- --------
Balance at 31 December 2013 4.7 35.7 97.3 137.7
--------- ---------- ---------- --------
Consolidated cash flow statement
for the year ended 31 December
2014 2013
GBPm GBPm
Cash flows from operating activities
Profit before taxation 25.2 22.0
Adjustments for:
Foreign exchange differences (4.4) 0.3
Depreciation of property, plant and equipment 2.9 2.2
Depreciation of investment property 0.1 -
Share-based payment expense 1.4 1.0
Gain on sale of property, plant and equipment - (0.2)
Amortisation of intangibles 0.1 0.5
Impairment of intangibles 0.2 -
Impairment of investments 0.2 -
Difference between pension contributions paid
and amount
recognised in the income statement (1.9) (2.2)
Finance revenue (0.7) (0.7)
Finance costs - 0.1
Other finance costs - pensions 0.2 0.5
Increase in inventories (0.5) -
Decrease/(increase) in trade and other receivables 6.0 (7.2)
Increase in bonus accrual 14.8 8.5
Increase in trade and other payables 0.8 2.5
Increase in provisions 1.0 0.2
======= ------
Cash generated from operations 45.4 27.5
Income tax paid (7.6) (4.7)
======= ------
Net cash flow from operating activities 37.8 22.8
======= ------
Cash flows from investing activities
Interest received 0.5 0.5
Purchase of property, plant and equipment (1.8) (1.6)
Proceeds from sale of investments - 0.1
Proceeds from sale of property, plant and equipment 0.1 0.4
Purchase of investments (0.2) -
Transfer to current investments (funds on deposit) (0.1) -
Acquisition of subsidiaries, including deferred
consideration (4.5) (6.6)
Cash acquired on acquisitions 0.5 3.2
Dividends received from investments 0.2 0.2
======= ------
Net cash flow from investing activities (5.3) (3.8)
======= ------
Cash flows from financing activities
Dividend paid (10.8) (9.6)
Proceeds from shares issued (net of transaction 30.6 -
costs)
======= ------
Net cash flow from financing activities 19.8 (9.6)
======= ------
Net increase in cash and cash equivalents 52.3 9.4
Cash and cash equivalents at 1 January 96.9 89.4
Net foreign exchange differences 3.7 (1.9)
======= ------
Cash and cash equivalents at 31 December 152.9 96.9
======= ------
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 financial statements for the years ended 31 December 2013
and 2014, but is derived from those financial statements. Statutory
financial statements for 2013 have been delivered to the Registrar
of Companies and those for 2014 will be delivered following the
company's Annual General Meeting. External auditors have reported
on the financial statements for 2013 and 2014; 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
Conduct Authority. The financial information is in accordance with
the accounting policies set out in the 2014 financial
statements.
3 Segmental information
Segmental information for revenue and results is as follows:
Business segments Revenue Results
2014 2013 2014 2013
GBPm GBPm GBPm GBPm
Broking 183.4 160.3 34.1 27.5
Financial 15.5 11.6 (1.4) (3.3)
Support 31.9 19.7 4.0 3.1
Research 10.4 9.7 3.5 3.0
====== ------ ====== ------
241.2 201.3
Less: property services revenue arising
within the group,
included under support (3.3) (3.3)
====== ------
Segment revenue/results 237.9 198.0 40.2 30.3
====== ------
Head office costs (6.9) (5.4)
====== ------
Operating profit before exceptional
items and acquisition costs 33.3 24.9
Exceptional items (1.6) (1.0)
Acquisition costs (7.0) (2.0)
====== ------
Operating profit after exceptional items
and acquisition costs 24.7 21.9
Finance revenue 0.7 0.7
Finance costs - (0.1)
Other finance costs - pensions (0.2) (0.5)
====== ------
Profit before taxation 25.2 22.0
Taxation (8.0) (6.7)
====== ------
Profit for the year 17.2 15.3
====== ------
4 Exceptional items
2014
In June 2014, Clarkson PLC signed a 15 year lease on a new
flagship head office at Commodity Quay, St. Katharine Docks,
London, commencing on 29 September 2014. The existing lease for St.
Magnus House, London expires in December 2015. An onerous lease
provision of GBP0.7m for St. Magnus House and the additional rent
charge for Commodity Quay of GBP0.9m have been treated as an
exceptional item.
2013
During 2013, the decision was made to restructure the cost base
of Clarkson Capital Markets, which included the closure of the
Dubai operation. This led to an exceptional charge of GBP1.0m.
5 Acquisition costs
Included in acquisition costs are cash and share-based payment
charges of GBP2.8m (2013: GBP1.3m) and interest of GBPnil (2013:
GBP0.1m) relating to acquisitions. These are contingent on
employees remaining in service and are therefore spread over the
service period.
Also included is GBP4.0m (2013: GBPnil) of legal and
professional fees relating to the Platou acquisition, GBP0.1m
(2013: GBP0.2m) of legal and professional fees relating to the
Ewings acquisition, and GBP0.1m (2013: GBP0.5m) relating to
amortisation of intangibles acquired as part of the 2011
acquisitions.
6 Taxation
The major components of the income tax charge in the
consolidated income statement are:
2014 2013
GBPm GBPm
Profit at UK average standard rate of corporation tax of 21.49% (2013: 23.25%) 5.4 5.1
Expenses not deductible for tax purposes 2.5 1.4
Other adjustments 0.1 0.2
------ ------
Total tax charge in the income statement 8.0 6.7
------ ------
7 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:
2014 2013
GBPm GBPm
Profit for the year attributable to ordinary
equity holders of the parent 17.2 15.3
========== -----------
2014 2013
Millions Millions
Weighted average number of ordinary shares 18.7 18.6
Diluted weighted average number of ordinary
shares 19.2 19.0
---------- -----------
8 Dividends
The board is recommending a nal dividend of 39p (2013: 37p),
giving a total dividend of 60p (2013: 56p). This final dividend
will be payable on 5 June 2015 to shareholders on the register at
the close of business on 22 May 2015, subject to shareholder
approval.
9 Intangible assets
On 12 June 2014, the group acquired 100% of the share capital of
Michael F. Ewings (Shipping) Limited. As a result of this
acquisition, goodwill of GBP0.4m has been recognised.
10 Current investments
The group held GBP25.3m in deposits with a maturity of 95 days
at the year-end (2013: GBP25.2m in deposits with a maturity of 100
days). These deposits are held with an A-rated financial
institution.
11 Cash and cash equivalents
2014 2013
GBPm GBPm
Cash at bank and in hand 150.8 95.4
Short-term deposits 2.1 1.5
------
152.9 96.9
====== ------
12 Employee benefits
The company operates two defined benefit schemes: the Clarkson
PLC scheme and the Plowrights scheme. The financial information
below relates to the sum of the two separate schemes.
As at 31 December 2014 the group had a deficit of GBP10.3m
(2013: GBP1.8m). This amount is included in full on the balance
sheet as a non-current liability; deferred tax of GBP2.1m (2013:
GBP0.4m) has been provided on this amount. The deficit includes
GBPnil (2013: GBP0.9m) relating to a minimum funding requirement on
the Plowrights scheme.
The market value of the assets was GBP163.0m (2013: GBP152.7m)
and independent actuaries have assessed the present value of the
funded obligations at GBP173.3m (2013: GBP153.6m).
13 Share capital and reserves
On 27 November 2014, the company placed 1,613,698 ordinary
shares in the capital of the company, raising gross proceeds of
GBP31.5m. The proceeds of GBP30.6m, net of GBP0.9m transaction
costs, are shown in the statement of changes in equity. No share
premium is recorded in the company's financial statements, through
the operation of the merger relief provisions of the Companies Act
2006.
14 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.
15 Post balance sheet event
On 2 February 2015, the group completed the acquisition of RS
Platou ASA (Platou).
Platou is a leading international broker and investment bank
providing high value brokerage, financial and advisory services
focused on the offshore and shipping markets, operating from
offices in 11 countries located in key global financial and
shipping centres. The Platou group's business comprises four core
divisions: offshore, shipbroking, investment banking and project
finance, which are complemented by a variety of research
capabilities.
Total consideration is GBP281.1m, of which 8.34% (GBP23.4m) of
cash was paid, and 75.00% (GBP210.9m) of consideration shares were
issued, on completion. The outstanding consideration of 16.66%
(GBP46.8m) is payable in loan notes.
The unaudited results for the Platou group for the 12 months
ended 31 December 2014 are set out below:
Continuing operations 2014
GBPm
(unaudited)
Revenue 115.3
Administrative expenses (87.7)
=============
Operating profit 27.6
Finance revenue 2.1
Finance costs (1.4)
Other finance costs (0.6)
=============
Profit before taxation 27.7
Taxation (7.5)
=============
Profit for the period 20.2
Minority interest (2.0)
=============
Retained profit 18.2
=============
On a constant currency basis the retained profit increased by
6.4% from the previous year.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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