TIDMCKN
RNS Number : 1760R
Clarkson PLC
07 March 2016
7 March 2016
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 2015.
Year ended Year ended
31 December 31 December
2015 2014
Revenue GBP301.8m GBP237.9m
Underlying profit before taxation* GBP50.5m GBP33.8m
Profit before taxation** GBP31.8m GBP25.2m
Underlying earnings per share* 121.9p 134.2p
Dividend per share 62p 60p
*Before exceptional items and acquisition costs of GBP18.7m
(2014: GBP8.6m)
**After exceptional items and acquisition costs
All financials include 11 months post-acquisition results of
Platou
Summary
-- Robust performance in challenging markets
-- Integration now successfully complete following the
acquisition of RS Platou ASA in February 2015
-- Dividend increased by 3% to 62p; unbroken progressive dividend increases since 2002
-- Forward order book for the enlarged group for 2016 of US$151m
-- Solid balance sheet, including GBP91.6m of net funds(1)
(1) Net funds is cash and cash equivalents and current
investments, after deducting amounts accrued for
performance-related bonuses
Andi Case, Chief executive, commented:
"In what has been an incredibly challenging year across our
markets, Clarksons has delivered a robust performance. Offshore has
experienced the most challenging environment, whereas significant
movements in commodity prices have changed trade flows, which in
turn has created both positive and negative impacts to shipping
demand as the volatility has played out. Throughout, our 'best in
class' service offer, underpinned by unique breadth, global reach
and the depth of expertise, has enabled us to not only be at the
forefront of activity in the markets, but benefit from a flight to
quality as operators look to work with the most experienced and
creative solution providers in the industry.
"Once again, seaborne trade grew in 2015. However, the primary
concern remains the oversupply of tonnage in a number of the
shipping markets, combined with the additional challenge of debt
and equity funding increasingly witnessed across the global
shipping industry. The geo-political and macro-economic environment
remains very uncertain and, as such, we do not anticipate any
changes to our markets in the near term. However our business model
has proven to be robust and the strategic advances we have made in
2015, coupled with our strong balance sheet, ensure that we are
'fit for the future'. As we continue to see building blocks for the
creation of healthier shipping markets, we feel best placed to
capitalise on new opportunities."
Enquiries:
Clarkson PLC:
Andi Case, Chief Executive
Jeff Woyda, Chief Financial Officer and Chief
Operating Officer 020 7334 0000
Hudson Sandler:
Kate Hoare
Michael Sandler 020 7796 4133
Chairman's review
Overview
Whilst shipping and offshore markets have seen some good
opportunities during 2015, overall there have been unprecedented
challenges, so we are very pleased Clarksons has once again
delivered a robust performance. Key to this has been sticking to
our strategy of 'best in class' service offer, underpinned by
unique breadth, global reach and the expertise of our people.
Without losing sight of the really important day-to-day service,
difficult times often require new solutions. The integrated tool
box now available to clients, combined with real execution
expertise, has been key to these results and is also essential for
the way forward.
On 2 February 2015 we completed the acquisition of RS Platou ASA
(Platou), a leading international broker and investment bank,
focused on the offshore and shipping markets. Through this
acquisition we have combined two leading businesses and highly
experienced and proven management teams to create a fully
integrated offer across shipping and offshore, broking and banking.
The board firmly believes that this deal sets new standards in the
broking industry. The integration of our two businesses has
continued at great pace over the course of the year and is now
effectively complete. On behalf of the board I would like to
congratulate the entire team across the business on this
significant achievement.
Results
The results in 2015 include 11 months' contribution from
Platou.
Underlying profit before taxation was GBP50.5m (2014: GBP33.8m).
Profit before taxation was GBP31.8m (2014: GBP25.2m).
Underlying earnings per share was 121.9p (2014: 134.2p)
resulting in basic earnings per share of 68.2p (2014: 91.9p).
Dividend
Clarksons has increased the dividend every year since 2002 in
line with its progressive dividend policy, and in 2015 again
Clarksons intends to raise the dividend paid to our shareholders.
The board is recommending a final dividend of 40p (2014: 39p). The
interim dividend was 22p (2014: 21p), resulting in a 3% increase in
the total dividend for the year to 62p (2014: 60p). The dividend
will be payable on 3 June 2016 to shareholders on the register at
20 May 2016, subject to shareholder approval.
People
The most important core strength of the group is the quality of
our people, who constitute the heart of everything we do, and I am
delighted to confirm that the integration process has gone well.
The combined team now fields experts across the globe in every part
of our business: shipping and offshore, banking and broking,
research and support.
Board
Following completion of the Platou acquisition, and as
highlighted in my report last year, Peter M. Anker and Birger
Nergaard joined the board. Their contribution and breadth of
experience has been of great value.
During the course of the year we were delighted to announce the
appointment of Jeff Woyda as chief operating officer of the group
in addition to his role as chief financial officer. Jeff joined
Clarksons in 2006 and has played a major role in the growth and
development of the business in the last nine years. The board
believes this appointment better reflects Jeff's remit and role
within the business.
Outlook
The challenges witnessed across the global shipping markets have
continued into 2016. The macro-economic environment remains very
uncertain and as such we do not anticipate any changes to our
markets in the near term.
Despite this backdrop, growth remains a central plank of our
strategy. Market turbulence continues to drive a flight to quality
which, as the market leader, we have benefited from. It has also
encouraged the consolidation we have seen in the industry in recent
years and of which we have been at the forefront. Over the course
of 2015 we have taken significant strides to strengthen the fully
integrated Clarksons' offer with the very best people supported by
valued research and unique technology, positioning our business for
the long-term.
James Hughes-Hallett
Chairman
4 March 2016
Chief executive's review
Challenge and opportunity have been our watchwords in 2015. The
global shipping and offshore markets have faced severe challenges
throughout the course of the year as the shift in oil and other
commodity prices, coupled with the macro-economic environment, gave
rise to a consequential change in the demand/supply balance in many
market sub-sectors. Whilst these dynamics have regularly made
global news headlines in 2015 and their impact has undoubtedly been
felt by all connected to the sector, we must remember that ours is
an industry which has experienced unparalleled market volatility
over the years. At Clarksons, our long-standing strategic focus on
developing 'best in class' client service, coupled with our unique
product breadth and global reach, has allowed us to face these
headwinds again and continue to invest in our business, ensuring we
are positioned for future opportunity in whichever marine market it
shows.
Despite the turbulent market environment, we have remained
focused on our strategy for long-term growth and at the start of
2015 we were delighted to announce the completion of the
transformational acquisition of RS Platou ASA (Platou) which has
taken our capability and client offer to a new level. Both
businesses are incredibly complementary with very little overlap in
terms of service offer and geographic reach. The pace of
integration has been good and over the course of the year we have
successfully integrated our two businesses. Where each company had
operations in the same city; Oslo, New York, Singapore and Dubai,
we have brought together our teams into one office. We now have
international reach across 20 countries through 46 offices,
underpinning our ability to provide clients with invaluable global
reach and insight at a local level.
As our business stands today our truly integrated service spans
broking, financial, support and research in all the key global
shipping and offshore sectors and across all areas of financing;
public equity, private equity, debt capital markets, M&A,
restructuring project finance and bank debt advisory. During the
year we completed the rebranding of our broking and financial
services operations as Clarksons Platou to reflect the strength of
both brands in their respective marketplaces. This has further
enhanced our 'best in class' position as we are now a market leader
in each of our operations.
(MORE TO FOLLOW) Dow Jones Newswires
March 07, 2016 02:00 ET (07:00 GMT)
In the multi-cyclical shipping markets, this breadth of product
offer is vital as our performance in 2015 has shown. The dry cargo
markets have remained severely depressed, reflecting the slowdown
in Chinese economic output, and the low oil price continues to put
offshore operators under significant pressure. However, in
contrast, the tankers, specialised products and gas markets have
all performed well and the Clarksons teams have been at the
forefront of market activity, once again taking increased market
share.
As we highlighted over the course of the year, activity levels
in the maritime capital markets have been negatively impacted.
These markets became increasingly difficult in the second half of
2015 and volumes across Clarksons Platou Securities were
substantially down on 2014. However, our teams have worked hard to
maintain their leading positions for capital raising in the energy
and maritime industries and completed a significant proportion of
the corporate activity which took place in the sector. It is
encouraging to see that even in these very difficult markets we
have still been able to leverage our product portfolio and work
closely with clients from our broking and support businesses,
supporting them on the execution of their overall strategies.
Our strong client relationships have been built through many
years of being the market-leading provider. In tighter, more
difficult markets there is often a move to work with the teams who
have the expertise, market understanding and placing power to
execute in the most difficult of markets and can fully support
clients across all their service requirements.
Research and analysis continue to play a crucial role in
underpinning our full service client offer. We are the industry's
leading provider of data and market intelligence on the shipping
and offshore industries and our trusted research team is by far the
largest commercially-led unit in the maritime world. Despite the
challenging markets, the increasing strength of our research
business reflects the importance we and our clients place on this
valuable market insight.
Our long-standing focus and investment in technology has also
ensured that the wealth of information across our business can be
shared globally, further strengthening the quality of the offer and
services that we can provide to our clients on a local basis. This
is evident throughout all of our offices where open plan design and
technology infrastructure is designed to facilitate the sharing of
knowledge and expertise across both our different business
divisions and global network to ensure a totally integrated and
consistent global offer.
We are a people business. The quality of the people in our
business is exceptional and the integration of the Platou team has
strengthened that further. The 'Can Do' attitude of our combined
team, their professionalism, dedication, commitment and sheer
determination has been remarkable and allowed us to seize
opportunities even in difficult markets and I would like to thank
each and every one of them for their hard work over the course of
the year.
As we look forward to 2016, the market outlook remains supressed
and the challenges in the dry cargo and offshore markets continue
to dominate overall sentiment. However, our business model has
proven to be robust and the strategic advances and investments we
have continued to make ensure that we are 'fit for the future'. As
we continue to see building blocks for the creation of healthier
shipping markets, we feel best placed to capitalise on new
opportunities.
Andi Case
Chief executive
4 March 2016
Business review
Broking
Revenue: US$365.3m (2014: US$313.2m)
Revenue (sterling equivalent): GBP239.5m (2014: GBP190.2m)
Segment result: GBP49.1m (2014: GBP34.6m)
Forward order book for 2016: US$151m* (At 31 December 2014 for
2015: US$110m*)
* Directors' best estimate of deliverable FOB
Dry cargo
The dry cargo market endured one of its most difficult years in
2015, experiencing lows not seen since the mid-1980s. The Baltic
Dry Index (BDI) established a new all-time low in February 2015
which has since dropped further in 2016. Charter rates across all
four main vessel segments hovered around cash operating costs,
causing a substantial decline in fleet valuations and exerting
pressure on shipowner balance sheets.
The main cause of the weakness has been the slowdown in
industrial activity within China, which has had a pronounced impact
on the seaborne trade of dry commodities. China represents nearly
40% of the major bulk trade of iron ore, coal and grain and
accounts for two-thirds of the iron ore trade alone. In 2015 total
global dry cargo trade is estimated to have remained flat with
levels from 2014, a material change from the 5-7% growth rate seen
during the previous four years.
The dry cargo fleet grew by a net 3% in 2015 after taking into
account a relatively high 4-5% of scrapping. Charter rates remained
at low levels, irrespective of this scrapping, as the lack of any
demand growth meant additional newbuilding tonnage could not be
absorbed.
Against incredibly challenging trading conditions, the Clarksons
Platou dry cargo team have worked hard to increase fixture volumes
and build market share. Following the smooth and successful
integration, we have further strengthened our combined team to
ensure we have the right people to compete in what is a very
challenging marketplace. Encouragingly we have also seen greater
interaction between our teams across our expanded office network
and this has been evidenced by the increasing number of deals
co-broked between offices.
Containers
2015 was another difficult year for the container shipping
market, with volumes growing 2-3% compared to over 5% growth during
2014. Although boxship charter market earnings registered increases
in the first half of the year, the second half saw earnings trend
back down to historically low levels.
In early 2015, the more positive charter market was driven by
limited supply side growth in the small and medium sized
containership fleets. The key driver of the deterioration in the
charter rate environment in the second half of 2015, however, was
the significant slowdown in demand growth. In addition, sentiment
weakened with regard to charterers' vessel demand, and idle
capacity increased once again, reaching around 7% of the fleet late
in the year.
The box freight market across 2015 was not only volatile but
also subject to severe downward pressure, significantly impacting
liner company performance. At the end of December 2015, the spot
freight rate on the key Far East-Europe trade stood at US$313/TEU,
73% lower than the 2014 full year average, with rates having hit
levels around historical lows on more than one occasion during the
year.
On the demand side, the outlook has softened considerably.
Global container trade growth is estimated at 2.5% in 2015,
significantly down on original expectations. Volumes on the key Far
East-Europe trade have contracted on the back of weak European
economic performance, reduced Russian volumes and cutbacks in
inventory stocking. Meanwhile, growth in intra-Asian volumes has
slowed to around 3% due to slowing economic expansion in China and
weaker economic progress elsewhere in Asia. Global container trade
is expected to expand by around 4% in 2016, but this is clearly
subject to downside risk.
On the supply side, the fully cellular fleet stood at 19.7
million TEU at the end of 2015 having grown by 8.1% in the full
year. The order book of 3.8 million TEU represented 19% of fleet
capacity at the end of 2015.
In this challenging trading environment the Clarksons Platou
container team leveraged its truly global network to drive fixing
volumes. Following the integration with our colleagues from Platou,
we have seen greater interaction with our expanded securities
business which has broadened our offer to our corporate clients. We
have also strengthened the team further and expanded into
Japan.
Tankers
The tanker market in 2015 had its best year since 2008. VLCC
spot earnings averaged US$60,000/day, above the 2009-2014 average
of US$23,000/day, and comparable to the 2003-2008 'bull market'
average of US$68,000/day. There are several key drivers behind this
market strength, some of which are expected to continue for 2016.
Lower oil prices have catalysed demand with global oil consumption
growing at an estimated 2% compared to 1% on average annually
during the previous 10 years. Oil consumption in China is estimated
to have grown over 5% in 2015, despite the general slowdown in its
economy, as lower oil prices appear to have had a positive impact
on demand.
Other key factors supporting the tanker market have been higher
refining margins, increased long-haul trade from the Middle East
and Atlantic Basin, a persistent contango in the oil futures curve
supporting inventory-building and a lack of meaningful tonnage
additions.
Crude tanker demand is estimated to have grown by 4-5% during
2015 compared to fleet growth of just 1-2%, causing a substantial
increase in fleet utilisation. The clean products market saw demand
increase by an estimated 6%, in line with the 6% supply growth. The
combination of higher refining margins worldwide and new refinery
capacity in the Middle East and Asia supported product carrier
earnings. Stronger crude tanker rates helped drive product carrier
rates higher - especially considering the switching capability
between the crude aframax and clean aframax LR2 classes. LR2s
averaged US$30,000/day in 2015, double the earnings average seen
since the financial crisis while MRs earned US$21,500/day (also
double the annual averages since 2008).
(MORE TO FOLLOW) Dow Jones Newswires
March 07, 2016 02:00 ET (07:00 GMT)
There has been a sizable increase in long-haul trade as OPEC has
publicly sought to maintain and increase its market presence.
Looking ahead there are signs of production risk in the US, with
non-OPEC supply in 2016 projected to decline for the first time
since 2008. This is supportive of continued long-haul movements on
both crude tankers and product carriers. Potential output declines
also position the US as a growing importer of oil after several
years of declining imports.
Crude vessel additions are projected to increase meaningfully in
2016 as the fleet is expected to grow by 5-6% compared to 1-2% for
2015. Product carrier fleet growth is expected at 5%, below the 6%
for 2015. While crude tanker supply growth increases in 2016,
demand is projected to maintain pace with 2015 and thus the market
outlook remains positive.
International agreements allowing for potentially higher Iran
oil volumes are expected to lend some support while there are
increasing geo-political risks particularly within the Middle East
following the recent tensions between Saudi Arabia and Iran. It is
early to provide a proper assessment but this is a development
requiring close attention.
The Clarksons Platou tanker team has been at the forefront of
all activity across the sector, leveraging its leading market
position, unrivalled global market coverage and scale.
Specialised products
Despite volatile commodity markets and an uncertain economic
outlook, we have seen overall improvements in seaborne cargo
volumes within the specialised products industry.
Whilst the Clarksons Platou specialised products Spot Chemicals
Index recorded an average decrease of 2% year-on-year and the Spot
Edible Oils Index posted a gain over the same period of just 5%,
the average price of 380 CST fuel oil has also fallen by 49%. The
drop in the price of crude oil and the effect on marine fuel
pricing has significantly reduced the cost base for our industry,
with those owners operating predominantly on the spot charter
markets gaining the most immediate benefit. The interlinked period
charter markets experienced an increased appetite from market
participants as they sought to gain access to the improved returns
on offer. As a result, average one year time charter rates for
benchmark units increased by 11% in 2015 when compared to 2014.
The fall in crude oil price has had numerous ramifications for
chemical producers around the globe. Those producers using naphtha
as a feedstock, primarily in Europe and Asia, have experienced
lower feedstock costs but also lower end-product prices and
therefore typically maintained their margins. Other key regions,
such as the US, have seen their competitive advantage eroded
somewhat as input costs for shale gas fed crackers have remained
largely unchanged over the period. Whilst these shifts have
resulted in some projects stalling in the planning phase, the
region remains extremely competitive on a global scale and there
have been a number of new project announcements in recent times.
The fleet of available specialised products tankers has seen
moderate growth in 2015 of 4% to 47.9m dwt when compared to 2014.
The end of year scheduled order book has now reduced from 14.6% of
the in-service fleet by dwt in 2014 to 12.3% at the end of 2015.
There have been pockets of fresh contracting activity, but in many
cases this is now for vessels which are part of strategic tonnage
replacement programmes by established operators, rather than new
entrants into the marketplace.
The Clarksons Platou specialised products team has had a busy
year and 2015 has seen us develop and expand our service offer in
this market. The integration of the Platou team has played a key
role in this with their strong relationships bringing new growth
opportunities. Over the course of the year we also strengthened the
team further with key hires.
Gas
The biggest factor underpinning the strength of the market was
the continued growth in US export volumes which ran at very close
to terminal capacity levels to hit 20.8m mt from a base of 14.7m mt
in 2014. Throughput of existing facilities was expanded as new
terminal capacity commenced production.
Having broken previous market highs in 2014, the VLGC sector
enjoyed another strong year. The continued fall in oil prices and
bunkers served to further boost earnings with time charter
equivalent earnings averaging over US$2.7m a month compared with
US$2.3m last year. Despite the addition of 35 newbuildings during
the course of the year, strong growth in LPG trade volumes combined
with an increase in the percentage share of US exports headed for
Asia (most notably China) continued to support tonne-mile demand
growth. This strength was largely mirrored in the sizes below,
particularly the LGCs.
The midsizes continued to benefit from the growth in LPG export
volumes despite trade growth in ammonia proving fairly
unsensational in 2015. The combination of minimal deliveries (three
in the year), rising US exports and growing import demand in the
Med and South America helped continue to underpin midsize
requirements. The handysize sector, however, did not fare so well
as there have been more additions, both in number and cubic size,
to the fleet.
Smaller sized gas carriers have not performed as well as the
larger units as the sector has been hit by the dual effects of
fleet growth and a slowdown in trade. The exception to this has
been the smaller semi-refrigerated and ethylene sectors which have
performed better.
The Clarksons Platou gas team continued to grow and increase
market share during 2015.
LNG
The expectation at the start of 2015 was for global LNG demand
to grow by around 6% on the back of the new supply coming from
Australia and Papua New Guinea. However, a decline in production
from Yemen and Algeria resulted in a modest growth of approximately
2%. This meant that trade volume remained almost unchanged since
2011 in the range of 240-250 mt of LNG.
With the northern hemisphere experiencing its third consecutive
mild winter, the consumer demand for heating and power generation
remained low, adversely impacting LNG imports to key markets in the
Far East. Japan and Korea, by far the largest importers of LNG,
maintained very high inventories throughout the year and have
therefore been all but absent from the spot market.
Nevertheless, the market has by no means been static. A number
of new importing markets emerged in 2015 which were actively
seeking new supply and thus impacted the dynamics in the spot
shipping and trading marketplaces. Floating storage and
regasification units played a major role in unlocking these new
markets, which proved the centres for demand growth in 2015.
The spot market once again saw increased activity of
approximately 30% from 2014 levels and 80% from 2013 levels. The
decline in LNG imports in the Far East and the lower tonne-mile
demand due to the closer proximity of new supply to the consumers,
combined with the tonnage oversupply, pushed charter rates down.
The spot market for modern tri-fuel carriers averaged approximately
US$36,000/day, while steam powered LNG carriers on average earned
approximately US$26,000/day (decline of approximately 50% from 2014
average in both segments). Modern tonnage dominated the spot
market, with approximately 75% of fixtures concluded with modern
tri-fuel tonnage, whilst steam turbine ships competed in a limited
number of trades.
In 2015, the fleet expanded by approximately 7% with around a
third of this expansion being speculative, adding pressure on the
charter market. However, most of the speculative tonnage ordered in
the 2011/2012 period has now been delivered, which should start
easing pressure on rates going forward. Around 35 vessels are
scheduled for delivery in 2016, of which only three remain without
a charter.
Against this backdrop, the Clarksons Platou LNG team have worked
hard to significantly increase volumes, despite the poor freight
rates, and have taken market share in the sector.
Sale and purchase
Secondhand
With dry cargo freight rates in the doldrums and the tanker
markets (both crude and clean) continuing at firm levels, the
secondhand sale and purchase markets were challenging for wet and
dry over the course of 2015 but for differing reasons.
The complete disconnect between the performance of the wet and
dry sale and purchase markets in all sizes is historically very
unusual. Tonnage oversupply caused pain in dry cargo whilst at the
same time the collapsing price of crude oil drove tanker rates back
to historic highs.
Surprisingly this has translated into more sale and purchase
activity within dry cargo than perhaps we might have expected. Poor
charter rates coincided with traditional shipping banks coming
under increased pressure to reduce their loan books and private
equity seemingly unwilling to continue to plug the gap. The result
in some instances has been forced decisions, as so-called
'distressed sellers' have had to exit their investments at any
price or risk having their vessels taken by their lenders, who are
becoming more active as the weeks go by.
Some of our more traditional, private family-owned clients have
seen this as an opportunity to purchase modern assets at knockdown
prices and so volatility has produced liquidity and those with cash
reserves have been leveraging their strength at the expense of
those without. We have been able to conclude a good number of
transactions, albeit at reduced price levels, and have enjoyed
growth in market share. There is no doubt that the increased level
of information we have enjoyed from our new merged team has
supported this.
In addition, 2015 saw a dramatic increase in the levels of
tonnage being scrapped. Our market share in this sector has
increased due to our specialist demolition desk where revenues have
doubled.
(MORE TO FOLLOW) Dow Jones Newswires
March 07, 2016 02:00 ET (07:00 GMT)
For the tanker markets it has been more difficult as the lack of
pressure on sellers, due to improved earnings, has resulted in them
asking for higher prices throughout the year. These have become
ever harder to achieve, with buyers questioning how long they might
be able to enjoy these very positive earnings. Long-term
uncertainty has had a negative effect on activity levels as buyers
found themselves unable to find period employment beyond two years
at anything close to the spot market. Nevertheless, we have once
again concluded some very high value transactions.
Newbuilding
The Clarksons Platou newbuilding team performed well in 2015.
Integration post-merger brought a number of key opportunities and
the enlarged team delivered growth in new market sectors whilst at
the same time continuing to drive heritage relationships.
Ordering volume globally fell year-on-year by some 30%. This was
partly in response to an incredibly challenging dry cargo market
but also a reduced appetite from the capital markets-backed players
that were responsible for driving significant volume into the
global order book over the past two years.
Key industrial and end user relationships within the group were,
however, capitalised upon and a number of notable projects were
concluded. Clarksons Platou placed 25% of the global LPG order book
in 2015, by capitalising on established project structures with
major participants, and the continuing development of key private
relationships. Similarly in the tanker segments, the group was the
major service provider to the prominent Korean builders.
Looking forward, we expect that 2016 will continue to be
challenging as regulatory shifts put pressure on shipyards to
manage their cost base in an environment that is becoming
increasingly price sensitive. It is likely that the market will
need some time to adjust and re-establish fundamentals, but the
team is well positioned to capitalise on all opportunities that
present themselves.
Offshore
2015 was a challenging year for the offshore market as charter
and spot rates continued to fall.
The year started with falling utilisation and increasing
availability of vessels as contracts came to an end. This trend
continued and was exacerbated as contracts were terminated and
renegotiated. Oil companies were aiming for 20-30% cost reduction
across the board and continue to be relentless in their pursuit of
these cost savings. Those national oil companies that are managing
to maintain activity levels are more than offset by those
state-owned companies which are struggling and super majors who are
cutting back.
Towards the end of the year, the reduced oil price increased
demand and this trend is expected to continue for 2016. Whilst much
of the growth is being met by increased onshore and shallow water
offshore production by Saudi Arabia and US shale gas, it is not
clear how much further this can continue. If Iran becomes a
significant supplier, it may create further demand for replacement
offshore assets.
On the supply side, utilisation rates fell as increasing numbers
of rigs and OSVs have been stacked up. As a result, we saw multiple
bidders and as many as 30 rigs being offered for one job, implying
further downward pressure on rates. The subsequent financial cost
of not having regular revenues on assets is resulting in rig and
OSV players having to restructure, to the potential benefit of the
securities team. There are also some signs that owners are being
more realistic about asset prices which may create opportunities
for sale and purchase transactions.
Although not immune to the challenging markets, the Clarksons
Platou offshore team has fared comparatively well. We have worked
hard to further build and strengthen our significant share of the
OSV chartering market and have seen good sale and purchase activity
levels, albeit at comparatively low values. The strength of our
teams coupled with our high quality analysis and research has
positioned us to take advantage of the flight to quality in our
markets and wherever there have been signs of activity the scale of
our team and placing power has meant we have been at the
forefront.
Futures
2015 started with levels very close to historic lows. The cape
index opened at US$3,580 and, despite a brief move upwards in late
January, maintained an average over the first half of the year
below US$5,000. The panamaxes similarly averaged below US$5,000 for
the same period whilst the supramaxes provided the only surprise in
performing best over the first six months of all sizes at close to
US$6,600.
Q3 provided some relief from the negativity of the first half
and values on capes rose to nearly US$19,500 in August, whilst
panamaxes peaked at US$9,403 and supramaxes at US$9,770. The
anticipated spike in Q4 failed to materialise and the cape q4 index
declined steadily to end the year at US$4,028. Average value for
the year on capes was US$6,996 whilst panamaxes averaged US$5,560
and supramaxes averaged US$6,965.
Volumes on freight swaps were generally similar to 2014 but the
options market proved more interesting with volumes growing
68%.
Disappointing though the market was in 2015, we continued to
build market share in the options market and offset some of the
difficulties in the swaps market, where we continue to have a
strong market share in all sizes.
Iron ore market volumes grew and ended the year at 844,119,300
mt (up 70.32% on 2014). Values deteriorated steadily with the year
starting at US$71.20 for TSI 62% and ending the year at US$42.90.
By comparison, 2014 values fell from an open of US$135 to a close
of US$71.20. Our swaps volume in this growing area has improved and
we have recently entered the iron ore options market where we
expect further growth.
In these challenging markets we continue to see a flight to
quality as clients want reassurance that they are working with
expert teams at highly credible and sustainable brokerages.
Financial
Revenue: US$43.8m (2014: US$14.3m)
Revenue (sterling equivalent): GBP28.7m (2014: GBP8.7m)
Segment result: GBP1.2m profit (2014: GBP1.9m loss)
Securities
The global stock markets have been severely depressed over the
course of 2015 reflecting the tumbling oil price and broader global
economic uncertainty. Investors' confidence by the end of 2015 was
drained. Developments across various asset classes in the US and
European financial markets were largely influenced by international
factors, including a weakening global growth outlook and falling
commodity prices.
The first half of 2015 was dedicated to integrating the former
Clarkson Capital Markets (CCM) with the Platou markets group,
establishing the Clarksons Platou securities group located in Oslo,
New York and Houston. Our enlarged team has a strong sales force
covering investors globally focused on energy and maritime
industries, in addition to a strong research team providing
industry leading research to our customers.
Corporate finance revenues in 2015 were driven by equity capital
markets transactions, however the markets became increasingly
difficult during the second half. Although volumes were
substantially down from 2014, the securities group has strong
market share in our core segments. We have maintained our leading
position in raising capital for the energy and maritime industries,
raising a total of US$1bn for companies within our core sectors. We
have also continued to hold a very strong position in global
shipping transactions working with the most active issuers listed
in the US. On the fixed income side, securities has been one of the
most active restructuring and divestment advisors, a position
maintained during 2015. Commission from the secondary trading of
equities has also increased compared to 2014.
Project finance
The first half of 2015 was an active year in shipping project
finance, with special focus on the tanker and feeder container
segments. In the dry cargo market, the recent drop in secondhand
and vessel resale values has once again created interesting
opportunities for asset play projects that can be financed using
100% equity, as today's charter rates are not high enough to cover
debt servicing as well as operating expenses.
The traditional shipping banks' appetite to look at new
transactions has slowed down noticeably, as their exposure in
offshore, container and dry cargo is challenging loan-to-values and
earnings in the spot market are only enough to cover operating
costs. In projects with newer vessels, long underlying time
charters or bareboat charters to large owners, debt financing for
projects is still available.
Over the course of 2015 we have grown our team with a new
project sales desk designated to focus on increasing both our
investor base and the liquidity of shares in the secondhand market
within shipping/offshore and real estate.
Our real estate team had a very busy year in 2015 and delivered
a strong performance. The Nordic real estate market reached
all-time highs in the first half of the year, and yields on prime
assets are under pressure from institutional funds seeking stable
dividends in stable macro-economies like the Nordic.
Foreign investors have had an increasing appetite for the
Norwegian market over recent years, and we saw this trend continue
in 2015 with the year ending with record high transaction volumes.
For the first time the Norwegian market outperformed the Swedish
market, that has traditionally been one of the top five in
Europe.
Debt and leasing solutions
2015 started with a wave of optimism from the debt and leasing
markets. Many of the financial institutions that had slowed their
lending in the wake of the financial crisis and enhanced regulatory
pressure were showing signs of using their balance sheets with
renewed vigour. However, as the year moved on, the traditional debt
and leasing structures began to slow again and by the third quarter
there was a very noticeable caution around the market. By the end
of the year the traditional lenders were essentially inactive and
looking into 2016, the outlook remains tight.
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Against this challenging trading environment, we delivered a
satisfactory trading performance, whilst rebranding our business as
Clarksons Platou Debt and Leasing Solutions. The enlarged team
focused on continuing the development of our excellent relations
with alternative shipping lenders and Asia Pacific banks (in
particular China). The new and enhanced relationships are allowing
the desk to provide viable funding solutions to our clients and add
further value to the Clarksons Platou platform.
Support
Revenue: GBP22.5m (2014: GBP28.6m)
Segment result: GBP3.3m (2014: GBP4.0m)
Port services
2015 was a good year for all our port services activities linked
to conventional bulk shipping, although this has been heavily
tempered by the downturn in the oil and gas market, which has
negatively impacted the overall performance for the year. We
continue to explore avenues away from oil and gas, whilst ensuring
we are in a strong position to react when this market shows signs
of recovery.
Agency
The southern Clarkson Port Services (CPS) offices performed well
in 2015. Although shipments of grain were slow in the first half,
they increased significantly in the second half, giving a strong
result for the year. We have seen a return to our traditional mix
of short and deep sea activity, and have benefited from taking over
grain export agency business at the Tilbury grain terminal. Imports
of animal feed have remained steady, supporting our Ipswich and
west coast UK offices.
In contrast, the performance of our northern CPS offices has
continued to be impacted by the weak oil price which has depressed
industry activity in this region.
Coal import volumes have remained low, and the indication is
that they will continue at this level in 2016 due to the closure or
reduced operations of several coal fired power stations. Biomass
has now largely replaced our coal volumes, with a notable new
contract being awarded in Liverpool.
We have seen a growing confidence in offshore renewables, and an
increased level of activity in preparation for new wind farm
projects. CPS is well positioned for securing contracts in this
sector during 2016.
Our newest acquisition in Belfast had an excellent year,
performing well above expectations and supporting several oil rig
and offshore projects in conjunction with their traditional bulk
business. For 2016, we anticipate several opportunities for this
success to continue.
Gibb Tools and Opex Industrial Supplies (Opex)
Gibb Tools and Opex had a weaker year than originally
anticipated due to the low oil price and a market reluctance to
invest, which affected our supply business.
However, our team has focused on preparations for the merger of
these two supply-based businesses into a single headquarters in
Aberdeen.
Stevedoring
Our stevedoring operation in Ipswich had a slow start to the
year caused by markedly reduced grain export volumes. This was
exacerbated by the weak euro making shortsea destinations
unattractive. In contrast, the second half of the year saw much
higher volumes giving us strong results for the year overall.
We won further customer support over the course of 2015,
allowing us to expand our operations and take additional storage
from the Ipswich Port Authority. We now have storage capacity for
approximately 40,000 mt of bulk cargo.
Freight forwarding
Despite a good start to the year, our freight forwarding
operation in Great Yarmouth suffered from lower volumes in the
second half, primarily caused by lower activity levels from our
major oil rig owners. As with other areas of our business, this is
linked to reduced operations in the North Sea.
Property services
Included within the support segment are the revenues and profits
derived from property services.
In 2014, the group 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 group moved into this new head office
on 20 July 2015.
During the year, our teams in Oslo and Singapore moved into new
premises, having signed leases for 12 and 5 years respectively.
The group also owns a number of freehold properties which are
either owner-occupied or let on a full commercial rent.
Research
Revenue: GBP11.1m (2014: GBP10.4m)
Segment result: GBP3.4m (2014: GBP3.5m)
Research revenues grew strongly in 2015, reaching GBP11.1m
(2014: GBP10.4m) 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 digital sales and a strong performance
by our service contract and valuation business. Across 2015 there
has also been a trend towards annuity based digital and service
contract business, which has increased the amount of overall
revenue being deferred.
Clarksons Research is respected worldwide as a market-leading
provider of authoritative intelligence across shipping, trade,
offshore and energy. Activities focus primarily on the collection,
validation, management and analysis of integrated data about the
shipping and offshore markets. Including wide ranging technical and
commercial information in a fully integrated and relational format,
the coverage and depth of the shipping research and trade database
continues to expand and now includes coverage on over 100,000
vessels, over 40,000 companies, over 25,000 machinery models, over
600 active shipyards and fabricators, over 600,000 fixtures and
over 100,000 time series.
The offshore and energy database provides comprehensive coverage
of all offshore fields, projects, platforms, subsea infrastructure,
rigs, support vessels and construction vessels, wholly integrated
within a Geographical Information System. Clarksons Research
continues to invest heavily to expand its wide-ranging proprietary
database, to develop and enhance its product offering and to
support and promote the Clarksons group across the global shipping
and offshore industries. The provision of data to the expanded
Clarksons group was also enhanced during 2015.
The majority of Clarksons Research sales are derived from
annuity revenue, with high customer retention levels. The client
base is broad and diversified with excellent market penetration
across the financial, asset owning, insurance, equipment supplier,
governmental, private equity, energy, commodity, shipyard,
fabrication and oil service sectors. There is also broad
geographical spread and a strong position in expanding markets,
with sales to the Asia Pacific region growing by over 24% in 2015.
We continue to broaden our geographic footprint, with the expansion
of operations in both Shanghai and Singapore during 2015.
Research derived its income from the following principal
areas:
Digital
Sales from digital products increased by an encouraging 9%
during the year. Our flagship maritime commercial database,
Shipping Intelligence Network, has benefited from the roll out of a
major upgrade during 2015 which has been well received by our
client base. There was robust growth from our market-leading online
vessel register, World Fleet Register, with further innovations to
the system planned for 2016. Our digital offering across offshore,
including World Offshore Register, continues to gain traction and
our position as the leading provider of offshore data to the
insurance market has been consolidated. Clarksons Research
continues to develop new proprietary data areas within their
offering including the utilisation of AIS data, additional company
information, trade and commodity flows, the tracking of capital
market activity, machinery and environmental packages on board
ships and subsea and pipeline infrastructure.
Publications
Clarksons Research produces weekly, monthly, quarterly and
annual publications, registers and maps, available both in print
and within our digital offering. In 2015 our well-established
shipping range was supplemented by new publications covering global
trade and the capital markets. Our comprehensive offshore offering,
including Offshore Drilling Rig Monthly and Offshore Support Vessel
Monthly, continues to gain traction. Publications remain an
important aspect of our overall offering, besides generating
important provenance and profile.
Services
Clarksons 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. Clarkson Research continues to be a
leading provider of data to clients, producing capital market
prospectuses across a range of issuance types and exchanges.
Clarksons Valuations has been expanded and remains the leading
provider of asset valuation services to the industry, including to
many of the world's leading ship finance banks and public listed
shipping companies, and performed particularly strongly across
2015.
Financial review
Net assets: GBP340.9m (2014: GBP167.3m)
Profit before taxation*: GBP50.5m (2014: GBP33.8m)
Dividend per share: 62p (2014: 60p)
*Before exceptional items and acquisition costs
Results
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The increase in group revenue of 27% to GBP301.8m (2014:
GBP237.9m) reflects a consistent performance within the underlying
business from higher transactional volumes, and is augmented by the
inclusion of 11 months of trading from Platou, following completion
of the acquisition in February 2015. Administrative expenses
increased by 27% to GBP242.0m (2014: GBP191.3m), however
post-acquisition cost synergies arising from integration will
amount to an annualised benefit of some GBP4.0m. An additional
interim dividend of GBP1.4m was received from The Baltic Exchange
in December 2015. Underlying profit before taxation was GBP50.5m
(2014: GBP33.8m), which, after acquisition costs of GBP16.2m (2014:
GBP7.0m) and GBP2.5m (2014: GBP1.6m) of exceptional items, resulted
in a reported profit before taxation of GBP31.8m (2014:
GBP25.2m).
Balance sheet effects of the Platou acquisition
The acquisition of the Platou group was completed during the
first quarter. The balance sheet now combines the assets and
liabilities of both Clarksons and Platou. The purchase price
allocation has confirmed that a major proportion of the acquisition
price, adjusted to the fair value at closing, relates to goodwill.
A number of specifically identifiable intangible assets amounting
to GBP21.9m were recognised on acquisition and are subject to
amortisation over a two to four year period. Long-term
interest-bearing bank loans and all bank overdrafts held by Platou
have been repaid. Deferred consideration, in the form of vendor
loan notes, is held on the balance sheet, repayable in two
instalments in June 2016 and June 2017. Overall, the net assets of
the group have increased by GBP173.6m. Merger relief was applied to
the new shares issued by Clarkson PLC, resulting in an increase in
other reserves.
Acquisition costs
Acquisition costs of GBP16.2m (2014: GBP7.0m) are shown in the
income statement. The increase over 2014 reflects the costs
incurred in respect of the acquisition of Platou and amortisation
of the separately identifiable intangible assets. Estimated
acquisition costs for 2016 will amount to GBP8.2m.
Exceptional items
Exceptional items comprise the additional rent and associated
costs for Commodity Quay in London and the onerous lease provision
for an office in Singapore. Also included are costs associated with
the restructuring and integration of the two businesses. The
release of the unutilised portion of the St. Magnus House
dilapidation provision has been treated as exceptional other
income.
Taxation
The group's effective tax rate, before exceptional items and
acquisition costs, was 24.9% (2014: 25.9%). After exceptional items
and acquisition costs, the rate was 29.8% (2014: 32.0%), which
reflects the disallowable nature of certain acquisition costs.
Earnings per share (EPS)
Underlying basic EPS was 121.9p (2014: 134.2p). After
exceptional items and acquisition costs, the basic EPS was 68.2p
(2014: 91.9p).
Dividends
The board is recommending a final dividend of 40p (2014: 39p),
which will be paid on 3 June 2016 to shareholders on the register
at the close of business on 20 May 2016. The interim dividend was
22p (2014: 21p) which, subject to shareholder approval, would give
a total dividend of 62p (2014: 60p). In taking its decision, the
board took into consideration the 2015 performance, the strength of
the group's balance sheet and its ability to generate cash and the
forward order book. The dividend is covered 1.1 times by basic EPS
(2014: 1.5 times).
Foreign exchange
The average sterling exchange rate during 2015 was US$1.53
(2014: US$1.65). At 31 December 2015 the spot rate was US$1.47
(2014: US$1.56).
Cash and borrowings
The group remains cash generative, ending the year with cash
balances of GBP168.4m (2014: GBP152.9m). A further GBP5.4m (2014:
GBP25.3m) was held in short-term deposit accounts, classified as
current investments on the balance sheet. After deducting amounts
accrued for performance-related bonuses, which are generally paid
during the first half of 2016, net cash and available funds
amounted to GBP91.6m (2014: GBP92.3m).
Balance sheet
Net assets at 31 December 2015 were GBP340.9m (2014: GBP167.3m).
The balance sheet remains strong with net current assets and
investments exceeding non-current liabilities (excluding pension
provisions) by GBP36.2m (2014: GBP113.8m). The overall provision
for impairment of trade receivables was GBP12.3m (2014: GBP9.9m)
and the underlying US dollar balance increased by US$2.7m. The
group's pension schemes have a combined liability before deferred
tax of GBP4.1m (2014: GBP10.3m). This decrease is a result of the
discount rate increasing from 3.4% to 3.8%, which is partially
offset by the addition of the Stewarts scheme in the year.
Jeff Woyda
Chief financial officer and chief operating officer
4 March 2016
Risk management
Full details of our principal risks and how we manage them will
be included in the risk management section of the 2015 Annual
Report, together with our viability and going concern
statements.
Our principal risks are:
-- Failure to achieve strategic objectives
-- Negative perception of the group as a result of employee conduct
-- Loss of regulatory licence
-- Financial loss or operational disruption caused by a cyber event
-- Challenging market conditions
-- Loss of key personnel
-- Adverse movements in foreign exchange rate
-- Adverse financial commitments relating to pensions
-- Financial loss arising from a failure of a client to meet its obligations
Directors' responsibilities statement
The statement of directors' responsibilities below has been
prepared in connection with the company's full annual report for
the year ended 31 December 2015. 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 that:
-- to the best of our knowledge, 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;
-- to the best of our knowledge, the strategic report includes a
fair review of the development and performance of the business and
the position of the group, together with a description of principal
risks and uncertainties that it faces; and
-- we consider the annual report, taken as a whole, to be fair,
balanced and understandable and provides the information necessary
for shareholders to assess the company's position and performance,
business model and strategy.
This responsibility statement was approved by the board of
directors on 4 March 2016 and is signed on its behalf by:
James Hughes-Hallett
Chairman
4 March 2016
Consolidated income statement
for the year ended 31 December
2015 2014
Before After Before After
exceptional exceptional exceptional exceptional
items and items and item and item and
acquisition Exceptional Acquisition acquisition acquisition Exceptional Acquisition acquisition
costs items costs costs costs item costs costs
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 301.8 - - 301.8 237.9 - - 237.9
Cost of sales (10.3) - - (10.3) (13.3) - - (13.3)
============= ============= ============= ============ ------------- ------------- ------------- ------------
Trading profit 291.5 - - 291.5 224.6 - - 224.6
Other income - 1.3 - 1.3 - - - -
Administrative
expenses (242.0) (3.8) (15.1) (260.9) (191.3) (1.6) (7.0) (199.9)
============= ============= ============= ============ ------------- ------------- ------------- ------------
Operating profit 49.5 (2.5) (15.1) 31.9 33.3 (1.6) (7.0) 24.7
Finance revenue 2.5 - - 2.5 0.7 - - 0.7
Finance costs (1.1) - (1.1) (2.2) - - - -
Other finance
costs -
pensions (0.4) - - (0.4) (0.2) - - (0.2)
============= ============= ============= ============ ------------- ------------- ------------- ------------
Profit before
taxation 50.5 (2.5) (16.2) 31.8 33.8 (1.6) (7.0) 25.2
Taxation (12.6) 0.6 2.5 (9.5) (8.7) 0.3 0.4 (8.0)
============= ============= ============= ============ ------------- ------------- ------------- ------------
Profit for the
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year 37.9 (1.9) (13.7) 22.3 25.1 (1.3) (6.6) 17.2
============= ============= ============= ============ ------------- ------------- ------------- ------------
Attributable to:
Equity holders
of the parent 35.3 (1.9) (13.7) 19.7 25.1 (1.3) (6.6) 17.2
Non-controlling
interests 2.6 - - 2.6 - - - -
============= ============= ============= ============ ------------- ------------- ------------- ------------
Profit for the
year 37.9 (1.9) (13.7) 22.3 25.1 (1.3) (6.6) 17.2
============= ============= ============= ============ ------------- ------------- ------------- ------------
Earnings per
share
Basic 121.9p 68.2p 134.2p 91.9p
Diluted 120.5p 67.4p 130.8p 89.6p
============= ============= ============= ============ ------------- ------------- ------------- ------------
Consolidated statement of comprehensive income
for the year ended 31 December
2015 2014
GBPm GBPm
Profit for the year 22.3 17.2
Other comprehensive loss:
Items that will not be reclassified to profit
or loss:
Actuarial gain/(loss) on employee benefit
schemes - net of tax 7.2 (8.2)
Items that may be reclassified subsequently
to profit or loss:
Foreign exchange differences on retranslation
of foreign operations (20.4) 1.5
Foreign currency hedge - net of tax (1.1) (3.4)
------- -------
Other comprehensive loss (14.3) (10.1)
------- -------
Total comprehensive income for the year 8.0 7.1
======= -------
Attributable to:
Equity holders of the parent 6.3 7.1
Non-controlling interests 1.7 -
------- -------
Total comprehensive income for the year 8.0 7.1
------- -------
Consolidated balance sheet
as at 31 December
2015 2014
GBPm GBPm
Non-current assets
Property, plant and equipment 30.8 7.7
Investment property 1.2 0.3
Intangible assets 263.2 40.4
Trade and other receivables 1.1 0.4
Investments 1.9 1.9
Deferred tax asset 12.5 15.0
======== --------
310.7 65.7
======== --------
Current assets
Inventories 0.9 1.4
Trade and other receivables 61.3 42.7
Income tax receivable 1.7 1.5
Investments 5.7 25.3
Cash and cash equivalents 168.4 152.9
======== --------
238.0 223.8
======== --------
Current liabilities
Interest-bearing loans and borrowings (23.1) -
Trade and other payables (139.3) (102.2)
Income tax payable (5.9) (2.9)
Provisions (0.2) (3.0)
======== --------
(168.5) (108.1)
======== --------
Net current assets 69.5 115.7
======== --------
Non-current liabilities
Interest-bearing loans and borrowings (23.0) -
Trade and other payables (8.1) (1.8)
Employee benefits (4.1) (10.3)
Deferred tax liability (4.1) (2.0)
======== --------
(39.3) (14.1)
======== --------
Net assets 340.9 167.3
======== --------
Capital and reserves
Share capital 7.6 5.2
Other reserves 194.2 35.5
Retained earnings 136.2 126.6
======== --------
Equity attributable to shareholders of the
parent 338.0 167.3
Non-controlling interests 2.9 -
-------- --------
Total equity 340.9 167.3
======== --------
Consolidated statement of changes in equity
for the year ended 31 December
Attributable to equity holders
of the parent
------------------------------------------
Share Other Retained Non-controlling Total
capital reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January
2015 5.2 35.5 126.6 167.3 - 167.3
========= ========== ========== ======= ================ ========
Profit for the year - - 19.7 19.7 2.6 22.3
Other comprehensive income/(loss):
Actuarial gain on employee
benefit
schemes - net of tax - - 7.2 7.2 - 7.2
Foreign exchange differences
on
retranslation of foreign
operations - (19.5) - (19.5) (0.9) (20.4)
Foreign currency hedge
- net of tax - (1.1) - (1.1) - (1.1)
========= ========== ========== ======= ================ ========
Total comprehensive (loss)/income
for the year - (20.6) 26.9 6.3 1.7 8.0
========= ========== ========== ======= ================ ========
Transactions with owners:
Employee share schemes - 0.6 0.3 0.9 - 0.9
Share issues 2.4 178.7 - 181.1 - 181.1
Tax on other employee
benefits - - 0.7 0.7 - 0.7
Tax on other items in
equity - - (0.1) (0.1) - (0.1)
Acquisition of subsidiary - - - - 10.8 10.8
Dividend paid - - (18.2) (18.2) (9.6) (27.8)
========= ========== ========== ======= ================ ========
2.4 179.3 (17.3) 164.4 1.2 165.6
========= ========== ========== ======= ================ ========
Balance at 31 December
2015 7.6 194.2 136.2 338.0 2.9 340.9
========= ========== ========== ======= ================ ========
Attributable to equity holders
of the parent
-------------------------------------------
Share Other Retained Total
capital reserves earnings equity
GBPm GBPm GBPm GBPm
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March 07, 2016 02:00 ET (07:00 GMT)
Balance at 1 January 2014 4.7 35.7 97.3 137.7
--------- ---------- ---------- --------
Profit for the year - - 17.2 17.2
Other comprehensive income/(loss):
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 (loss)/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
--------- ---------- ---------- --------
Consolidated cash flow statement
for the year ended 31 December
2015 2014
GBPm GBPm
Cash flows from operating activities
Profit before taxation 31.8 25.2
Adjustments for:
Foreign exchange differences (1.9) (4.4)
Depreciation of property, plant and equipment 4.2 2.9
Depreciation of investment property - 0.1
Share-based payment expense 1.6 1.4
Gain on sale of property, plant and equipment (0.1) -
Loss on sale of investments 0.3 -
Amortisation of intangibles 9.2 0.1
Impairment of intangibles - 0.2
Impairment of investments - 0.2
Difference between pension contributions paid
and amount recognised in the income
statement (2.3) (1.9)
Finance revenue (2.5) (0.7)
Finance costs 2.2 -
Other finance costs - pensions 0.4 0.2
Decrease/(increase) in inventories 0.5 (0.5)
Decrease in trade and other receivables 20.8 6.0
(Decrease)/increase in bonus accrual (11.1) 14.8
(Decrease)/increase in trade and other payables (12.5) 0.8
(Decrease)/increase in provisions (2.8) 1.0
======= -------
Cash generated from operations 37.8 45.4
Income tax paid (13.1) (7.6)
======= -------
Net cash flow from operating activities 24.7 37.8
======= -------
Cash flows from investing activities
Interest received 0.8 0.5
Purchase of property, plant and equipment (24.4) (1.8)
Proceeds from sale of investments 6.8 -
Proceeds from sale of property, plant and equipment 0.3 0.1
Purchase of investments - (0.2)
Transfer from/(to) current investments (funds
on deposit) 20.0 (0.1)
Acquisition of subsidiaries, including settlement
of deferred consideration (26.5) (4.5)
Net cash and cash equivalents acquired on acquisitions 43.2 0.5
Dividends received from investments 1.7 0.2
======= -------
Net cash flow from investing activities 21.9 (5.3)
======= -------
Cash flows from financing activities
Interest paid (1.1) -
Dividend paid (18.2) (10.8)
Dividend paid to non-controlling interests (1.7) -
Repayment of borrowings (12.8) -
Proceeds from shares issued (net of transaction
costs) 1.2 30.6
======= -------
Net cash flow from financing activities (32.6) 19.8
======= -------
Net increase in cash and cash equivalents 14.0 52.3
Cash and cash equivalents at 1 January 152.9 96.9
Net foreign exchange differences 1.5 3.7
======= -------
Cash and cash equivalents at 31 December 168.4 152.9
======= -------
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 2014
and 2015, but is derived from those financial statements. Statutory
financial statements for 2014 have been delivered to the Registrar
of Companies and those for 2015 will be delivered following the
company's Annual General Meeting. External auditors have reported
on the financial statements for 2014 and 2015; 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 and basis of preparation
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 2015 financial statements
and have been prepared on a going concern basis.
3 Segmental information
Business segments Revenue Results
2015 2014 2015 2014
GBPm GBPm GBPm GBPm
Broking 239.5 190.2 49.1 34.6
Financial 28.7 8.7 1.2 (1.9)
Support 26.2 31.9 3.3 4.0
Research 11.1 10.4 3.4 3.5
====== ------ ======= ------
305.5 241.2
Less: property services revenue arising
within the group,
included under support (3.7) (3.3)
====== ------ ------- ------
Segment revenue/results 301.8 237.9 57.0 40.2
====== ------
Head office costs (7.5) (6.9)
======= ------
Operating profit before exceptional
items and acquisition costs 49.5 33.3
Exceptional items (2.5) (1.6)
Acquisition costs (15.1) (7.0)
======= ------
Operating profit after exceptional items
and acquisition costs 31.9 24.7
Finance revenue 2.5 0.7
Finance costs (2.2) -
Other finance costs - pensions (0.4) (0.2)
======= ------
Profit before taxation 31.8 25.2
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Taxation (9.5) (8.0)
======= ------
Profit for the year 22.3 17.2
======= ------
4 Exceptional items
2015
During 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 lease for the previous
head office, St. Magnus House, London expired in December 2015. The
additional rent and associated costs in the year were GBP1.9m for
Commodity Quay up to the relocation date, and GBP0.4m for St.
Magnus House after relocation. An onerous lease provision of
GBP0.3m for a property in Singapore was also treated as an
exceptional item. Costs associated with the reorganisation of the
enlarged group post-acquisition totalling GBP1.2m were treated as
exceptional, as they are non-recurring. The release of the
unutilised portion of the dilapidation provision for St. Magnus
House of GBP1.3m has been treated as exceptional other income.
2014
An onerous lease provision of GBP0.7m for St. Magnus House and
the additional rent charge for Commodity Quay of GBP0.9m were
treated as an exceptional item.
5 Acquisition costs
Included in acquisition costs are cash and share-based payment
charges of GBP2.1m (2014: GBP2.8m) relating to previous
acquisitions. These are contingent on employees remaining in
service and are therefore spread over the service period. Also
included is GBP0.7m (2014: GBPnil) relating to the acquisition of
the remaining non-controlling interest in Clarksons Platou Tankers
AS. The charge consists of cash and share-based payment charges
which are linked to future service of the employees and are
therefore spread over a four year period.
Also included is GBP3.1m (2014: GBP4.1m) of legal and
professional fees relating to the Platou and other acquisitions and
GBP9.2m (2014: GBP0.1m) relating to amortisation of intangibles
acquired as part of the Platou and other prior acquisitions.
Interest on the loan notes issued as part of the Platou acquisition
totalled GBP1.1m (2014: GBPnil).
6 Taxation
The major components of the income tax charge in the
consolidated income statement are:
2015 2014
GBPm GBPm
Profit at UK average standard rate of corporation tax of 20.25% (2014: 21.49%) 6.4 5.4
Expenses not deductible for tax purposes 2.8 2.5
Other adjustments 0.3 0.1
------ ------
Total tax charge in the income statement 9.5 8.0
------ ------
7 Earnings per share
Basic earnings per share amounts are calculated by dividing
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 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, 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:
2015 2014
GBPm GBPm
Profit for the year attributable to ordinary
equity holders of the parent 19.7 17.2
========== -----------
2015 2014
Millions Millions
Weighted average number of ordinary shares 29.0 18.7
Diluted weighted average number of ordinary
shares 29.3 19.2
---------- -----------
8 Dividends
The board is recommending a nal dividend of 40p (2014: 39p),
giving a total dividend of 62p (2014: 60p). This final dividend
will be payable on 3 June 2016 to shareholders on the register at
the close of business on 20 May 2016, subject to shareholder
approval.
9 Business combinations
2015
On 2 February 2015, Clarkson PLC acquired 100% of the share
capital of RS Platou ASA (Platou), which subsequently changed its
name to Clarksons Platou AS.
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 and shipbroking (included within the broking
segment) and investment banking and project finance (included
within the financial segment), which are complemented by a variety
of research capabilities.
The acquisition complements the group's strategy to expand its
geographical reach and broaden its offshore and project finance
services to existing and new customers. The goodwill of GBP232.6m
represents the acquired workforce, as well as the potential new
customer relationships and revenue expected to be brought in by
experienced brokers and senior management team members. It also
represents the potential to achieve improved commercial
competitiveness and operational efficiency in the long-term. None
of the goodwill recognised is expected to be deductible for income
tax purposes.
The fair value of the consideration was GBP249.9m, of which
GBP23.5m was paid in cash, GBP179.9m being the fair value of
ordinary shares issued (based on the Clarkson PLC share price on
the acquisition date) and GBP46.5m comprised loan notes.
Under IFRS, the share price as at the acquisition date is
applied to record the relevant proportion of the investment in
Platou. The provisions of merger relief under the Companies Act
2006 are applicable in relation to the shares issued as
consideration such that no share premium is recorded, instead an
equivalent merger reserve is recorded, as required under IFRS and
permitted by the Companies Act 2006.
The total consideration of GBP249.9m varies from the GBP281.2m
stated in the circular dated 27 November 2014. The proposed fixed
number of shares to be issued was initially determined based on a
share price of GBP22.15. On acquisition, the shares were issued at
the closing market price of GBP18.90.
The following table summarises the consideration paid, the fair
value of the assets acquired and the liabilities assumed relating
to the acquisition of Platou:
Recognised amounts of identifiable assets acquired and liabilities GBPm
assumed:
Intangible assets *21.9
Property, plant and equipment 3.4
Investment property 0.9
Deferred tax 1.8
Investments 7.4
Trade and other receivables 46.2
Cash and cash equivalents 54.0
========
Total assets 135.6
========
Interest-bearing loans and borrowings - bank overdraft (10.8)
Interest-bearing loans and borrowings - bank loan (12.0)
Trade and other payables (67.7)
Income tax payable (7.4)
Employee benefits (4.7)
Deferred tax liability *(4.9)
========
Total liabilities (107.5)
========
Total identifiable net assets 28.1
Non-controlling interests' share of identifiable assets and
liabilities (10.8)
Goodwill 232.6
========
Total consideration 249.9
========
* Fair value adjustment made on acquisition.
Intangible assets comprise customer relationships, forward order
book and trade name identified on acquisition. The valuation of
these was performed by third party valuers.
Net cash acquired was GBP43.2m, being the cash and cash
equivalents of GBP54.0m and overdraft of GBP10.8m, included in
interest-bearing loans and borrowings.
2014
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