TIDMCKN
RNS Number : 1179H
Clarkson PLC
15 August 2016
15 August 2016
CLARKSON PLC
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHSED 30 JUNE 2016
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.
Overview
-- Robust performance despite continued challenging market conditions in many of our markets
-- Revenue of GBP147.2m (2015: GBP145.3m)
-- Underlying profit before taxation* GBP21.8m (2015: GBP23.6m)
-- Profit before taxation GBP17.5m (2015: GBP10.8m)
-- Underlying earnings per share* 52.9p (2015: 54.3p)
-- Earnings per share 41.7p (2015: 15.0p)
-- Interim dividend maintained at 22p per share (2015: 22p per share)
-- Strong balance sheet, with GBP46.7m of net funds(1)
underpinning long-term growth (30 June 2015: GBP41.3m)
* Before acquisition related costs and exceptional items
(1) Net funds is cash and cash equivalents, less bonus
entitlements and all outstanding loan notes
Andi Case, Chief Executive, commented:
"The global shipping industry is experiencing the most
challenging rate environment seen in many years which, as
previously highlighted, has inevitably impacted the Group's
performance for the first six months of 2016.
"In the short-term we believe our markets will remain highly
challenged, reflecting the ongoing supply demand imbalance with the
resultant low levels of newbuilding contracts and a prevalence of
spot business continuing to limit forward visibility of earnings.
However, we believe industry operators and investors will look to
these difficult trading conditions to seek solutions and exploit
areas of opportunity and Clarksons' full service client offer,
underpinned by our geographic reach, will continue to ensure we are
at the forefront of all activity.
"Clarksons' clear strategy is aligned to the long-term
fundamental drivers in our markets. Our business is highly cash
generative and through our strong balance sheet we will continue to
invest and take advantage of opportunities, positioning the Group
for upturns in each of our markets when they come."
Enquiries:
020 7334
Clarkson PLC 0000
Andi Case, Chief Executive
Jeff Woyda, Chief Financial Officer and Chief
Operating Officer
020 7796
Hudson Sandler 4133
Kate Hoare
Chairman's review
Global economic and political uncertainty continues to impact
the international shipping, offshore and capital markets. No
business in our industry is immune and, whilst Clarksons' teams
have worked extremely hard to be at the forefront of activity, the
difficult trading environment will inevitably be reflected in the
Group's performance for the year, as previously outlined in our
recent trading update.
Over the years shipping has been an industry exposed to cyclical
volatility of markets but the Board firmly believes that we have a
robust strategy in place which is aligned to the long-term
fundamentals of our markets, regardless of short-term market
turbulence. Clarksons' focus on developing 'best in class' client
service, coupled with our unique product breadth and global reach
and underpinned by our market-leading research and expert teams,
positions us to tackle the current market headwinds.
Our business is highly cash generative and supported by a strong
balance sheet. This enables us to continue to invest where
appropriate and to capitalise on opportunities as they become
available, thus positioning Clarksons for the longer term return of
higher freight rates, increased asset values and renewed activity
in the capital markets.
James Hughes-Hallett
Chairman
12 August 2016
Chief Executive's review
The global shipping industry is experiencing the most
challenging environment seen in many years. The spread of
challenges across the individual shipping and offshore markets,
caused by the continuing imbalance between supply and demand,
compounded by global economic uncertainty has seen rates under
severe pressure in the first half of 2016. The performance of the
ClarkSea Index in the same period of 2016 was down 18% on the
index's average since 2009 and down 30% compared to the respective
average for H1 2015. The Baltic Dry Index has similarly fallen
sharply year-on-year, testing all-time lows during the period.
Against these market headwinds, Clarksons' focus remains on our
clear, long-term growth strategy, positioning our business to
capitalise when the upturn in our markets comes. The breadth of our
fully integrated client offer combined with our geographic reach
has enabled us to grow significantly volumes in our broking
division during the period, but the fall in freight rates and asset
values has impacted revenues and driven the market to be spot
focused with sharply reduced newbuilding activity. The offshore
markets also remain severely challenged. Whilst the recent recovery
in the oil price has driven some return to activity in offshore
broking, any recovery will have to be sustained for some time
before confidence returns and meaningful volumes start to come
through.
Falling rates and asset values, along with subdued capital
markets and continued weak investor confidence, has led to reduced
activity within our financial division in the first half of the
year. However, our experienced teams have leveraged opportunities
across the business to close deals and put in place an encouraging
mandate pipeline, even if visibility on execution timelines will
remain limited until broader market conditions start to
improve.
Our support business continues to be impacted by the challenges
facing the offshore industry, although we have seen an encouraging
increase in activity in the offshore renewable sector and a strong
performance from our dry cargo business.
In difficult markets, the value our clients place on trusted,
industry-leading analysis has increased and our research team has
continued to deliver a very good performance over the period with
strong growth in underlying sales driven by the market's need for
quality valuation services and our continually developing digital
solutions.
We continue to prioritise and drive innovation across our
business, underpinning Clarksons' unrivalled expertise and
knowledge with leading technology. This facilitates our integrated
business model and ability to share information across our
business, which also allows us to develop 'best in class' solutions
and services for our clients and we continue to make investments in
this important field across the Group.
The strength of the Clarksons team is core to our business and,
despite the difficult trading environment, we remain a leader in
every sector in which we operate. That position is underpinned by
the expertise and determination of our team and our 'can-do'
culture, and I am delighted that we have been able to attract some
great additions to our team during the period, ensuring we are best
placed for when trading conditions improve.
Results
The Group's underlying results exclude the impact of acquisition
related costs and exceptional items in order to present the results
from the ordinary course of business. The first half of 2016
incorporates a full six months of results from Platou, whereas the
first half of 2015 included five months post acquisition. First
half revenues increased by 1% to GBP147.2m (2015: GBP145.3m) and
administrative expenses increased by 5% to GBP121.5m (2015:
GBP115.4m). Underlying profit before taxation was GBP21.8m (2015:
GBP23.6m), which after acquisition related costs of GBP4.3m (2015:
GBP9.1m acquisition related costs and GBP3.7m exceptional items),
resulted in a reported profit before taxation of GBP17.5m (2015:
GBP10.8m). Underlying earnings per share, before acquisition
related costs, was 52.9p (2015: 54.3p before exceptional items and
acquisition related costs). Basic reported earnings per share was
41.7p (2015: 15.0p).
Cash and dividends
Clarksons has a strong balance sheet with cash balances at 30
June 2016 of GBP106.3m (30 June 2015: GBP130.3m) and a further
GBP5.4m (30 June 2015: GBP5.3m) in short-term investments, being 95
day notice deposits at UK banks. These balances reflect the payment
of the final dividend relating to 2015 in early June 2016 and the
repayment of GBP23.4m of loan notes at the end of June 2016. Net
funds, after deduction of bonus entitlements and all outstanding
loan notes but including short-term investments, amounted to
GBP46.7m (30 June 2015: GBP41.3m).
The Board has declared an unchanged interim dividend of 22p per
share (2015: 22p per share) which will be paid on 23 September 2016
to shareholders on the register at the close of business on 9
September 2016.
Goodwill and investments
Goodwill and other intangibles arising in 2015 are primarily
held in currencies other than sterling. With the weakening of
sterling just prior to the period end, and after amortisation, the
carrying values increased by GBP29.7m.
On 18 July 2016, the Group made a strategic minority investment
of US$5m in CargoMetrics Technologies LLC, a quantitative
investment manager that leverages proprietary maritime trade
data.
The Board notes the recent announcement made by SGX that it has
agreed with The Baltic Exchange to proceed with the solicitation of
support from The Baltic Exchange shareholders to acquire The Baltic
Exchange for a total consideration of GBP77.6m and the potential
for a total final dividend of at least GBP9.1m conditional upon
SGX's proposed cash offer becoming effective. As stakeholders are
aware, Clarksons owns 14.5% of The Baltic Exchange, and I am
delighted to confirm that the Board is supportive of SGX as owner
of The Baltic Exchange. Nevertheless, there can be no assurance
that SGX's proposed cash offer will become effective.
Outlook
In the current uncertain macro-economic environment, we believe
our markets will continue to be highly challenged, with low levels
of newbuilding contracting and a prevalence of spot business
continuing to limit forward visibility of earnings.
Industry operators and investors will, however, look to these
difficult trading conditions to exploit areas of opportunity and
our full service client offer will ensure we are at the forefront
of this activity as it arises. Our broking teams seek to maintain
and increase the strong volumes achieved in the first half of the
year and our financial division is working on an encouraging
pipeline of mandates, although investor confidence is impacting
execution and lengthening deal conversion.
We have a clear strategy for long-term growth. Through our
strong balance sheet we will continue to strategically invest in
our business and take advantage of the opportunities as they arise,
whilst at the same time managing our costs to meet the challenges
of this current market environment and thereby ensuring we are
positioned for the upturn in our market cycle when it comes.
The Board's expectations as to the full year results remain
unchanged from our last update to the market on 4 July 2016, with
greater balance between the first and second halves.
Andi Case
Chief Executive
12 August 2016
Business Review
Broking
Revenue: GBP115.5m (2015: GBP110.1m)
Segment underlying profit: GBP19.3m (2015: GBP22.0m)
As previously outlined, rates and asset values across the
majority of shipping markets were very low during the first half of
2016. However, Clarksons' breadth and depth in broking and
offshore, supported by our geographic reach meant that our teams
were able to capitalise on areas of opportunity, albeit at much
lower rates.
There has continued to be a flight to quality, with operators
looking to work with the most experienced advisors in the industry.
The Clarksons teams have worked hard to grow volumes and take
market share with particularly robust performances from our sale
and purchase, gas, tankers and specialised products teams during
the period.
Dry cargo
Against the backdrop of global economic uncertainty, weakness in
financial markets and the glut of delayed December ships entering
the market in early 2016, the Baltic Dry Index (BDI) dropped to its
lowest level in history in the first quarter of 2016.
There were some key areas of the dry cargo market which showed
encouraging signs in the second quarter and as a consequence, the
BDI almost doubled when compared to the first quarter, albeit that
rates remain too low in relation to operating costs. After two
years of dismal industrial production growth in China, the Chinese
government released a record RMB 6.6 trillion in social financing
during the first quarter. This stimulated new housing projects and
steel and iron ore prices reacted strongly with both commodities
gaining more than 40% from the lows at the beginning of the year.
Some positive sentiment in the freight market ensued as iron ore
demand strengthened.
China's grain imports also remained strong benefiting South
American exports. Whilst Argentina entered the grain market in
force when its long-reigning punitive export tax was lifted earlier
the year, this was short-lived as severe floods destroyed a large
part of the harvest. Nevertheless, Brazil is experiencing one of
its best seasons in grain exportation.
Irrespective of the fact that these factors have helped drive
high volumes in the dry cargo market this year-to-date, freight
rates are struggling to recover owing to the glut of ships entering
the market. Earnings seldom cover the operating cost of vessels,
forcing ship owners to take the unenviable decision to either
demolish, idle or lay up their ships. By the end of June 2016 a
record 293 ships had been sold for demolition, another 233 face the
costly five-yearly special survey in 2016 and over 90 bulkers are
in lay-up bays in countries such as Greece and Brunei. Many ships
are also simply waiting idle for better earnings levels to
return.
Given weak earnings, owners have been postponing deliveries of
newbuilds. 343 ships had been delivered by the end of June,
implying a slippage rate of 40% which in turn has put pressure on
the financial performance of the shipyards. A dry cargo freight
market recovery will therefore be dictated by the speed at which
fleet oversupply can be eradicated.
Containers
During the first six months of 2016, the container shipping
sector continued to experience very challenging conditions, with
boxship charter earnings under severe pressure at bottom of the
cycle levels. By the end of June, the one year time charter rate
for a 4,400 TEU panamax vessel had decreased from US$6,000/day at
the end of 2015 to US$5,150/day whilst the one year time charter
rate for a 2,750 TEU sub-panamax vessel slipped from US$6,500/day
at the end of 2015 to US$6,000/day. In the larger size ranges, the
three year time charter rate for a 6,800 TEU sub-panamax vessel
stood at US$30,000/day at the end of 2015 and had dropped to
US$25,500/day by the end of June.
The key driver of the deterioration in the charter rates was the
significant slowdown in demand growth, as weakening volume trends
on key box trades eroded charterers' vessel demand. The level of
idle capacity which had increased to over 8% of the fleet in early
March, fell below 5% by the end of the first half.
At the end of June 2016, the spot freight rate on the key Far
East-Europe trade stood at US$680/TEU, relatively low but above the
2015 full year average. On the demand side, global container trade
is still expected to expand by around 4% in 2016, but this is
clearly subject to downside risk from uncertainty in the world
economy. On the supply side, the fully cellular fleet stood at 20
million TEU at the start of July 2016 having grown by just 1.1%
since the start of the year. Total containership capacity growth is
now expected to slow significantly in 2016, to around 3% from over
8% in 2015.
Tankers
As expected, the strong crude tanker market persisted into 2016
although year-to-date vessel earnings are somewhat lower than they
were in the equivalent period of 2015. Continued high levels of
exports from Saudi Arabia and Iraq, and a faster than expected
increase in exports from Iran, have helped to maintain strong crude
tanker demand, and both Chinese and Indian crude oil imports have
continued to set new records. The general oversupply of crude oil
and products, combined with logistical constraints, have also led
to growing levels of floating storage. Low bunker prices have also
continued to support higher earnings for owners in what is still a
relatively tight vessel supply/demand balance. In recent weeks
however, global uncertainties including unrest in Nigeria, Canadian
wild fires, power shortages and logistical difficulties in
Venezuela, strikes in France and the continued challenges in Libya
have undermined demand for VLCCs and suezmaxes resulting in softer
earnings.
While earnings across the crude tanker sector have been
relatively firm during the first six months of 2016, it is the
VLCCs that have once again performed most strongly with earnings in
the suezmax and aframax sectors under more pressure. Suezmaxes have
been directly impacted by the disruption in Nigeria, as West Africa
is typically the largest loading area for this vessel size. In the
aframax sector, the reduction in Ceyhan shipments due to attacks on
the Iraq-Ceyhan pipeline, the absence of significant winter delays
seen in previous years and a modest ice season in the Baltic, have
all meant that the market has not reached the heights seen in
2015.
Product tanker earnings have been lower in 2016 when compared to
the same period for the prior year. Estimated average earnings for
LR2s on the benchmark AG-Japan route were US$20,773/day, down 26%
on the equivalent period in 2015 and estimated earnings for LR1s on
the same route have dropped 34% to US$16,226/day. LR1s have seen a
marked decline in the key Europe-West Africa trade due to a
combination of difficulties in importing cargoes into Nigeria and
some switching to greater use of MRs on that trade route this year.
LR2 and LR1 product tanker markets have also been affected by
petrochemical cracker maintenance in Asia and competition from LPG
as a feedstock, resulting in lower Japanese and Korean naphtha
imports in the first four months of the year. On the supply side,
the product tanker fleet is expected to grow by some 5% in 2016 and
2017, so strong trade growth will need to continue in order to
maintain earnings.
Specialised products
As anticipated, many market participants entered 2016 in a
cautiously optimistic mood, with the continuance of healthy
earnings set against a backdrop of persistent economic and
geo-political uncertainty. Healthy demand growth throughout the
first six months of the year has been primarily driven by both a
significant increase in methanol exports ex-US Gulf from new
projects coming online and displaced Trinidadian product being
required to find a new home.
The Clarksons Platou Specialised Products Spot Chemicals Freight
Index recorded a 0.5% increase for the first half of 2016 when
compared to the same period in the previous year, as nominal
freight levels were broadly improved. The Clarksons Platou
Specialised Products Spot Edible Oils Freight Index posted a
decrease of 14% for 2016 when compared to the same period in 2015
which is mainly a result of a weaker CPP market and the El Niño
weather phenomenon curbing palm oils production which is so
strategically important to tonnage in the region. This
progressively softening market has resulted in a 16% decline in the
first half of 2016 in the edibles index.
As a result of the unsettled economic backdrop and distressed
trading conditions in other major shipping sectors, private equity
interest into the maritime markets has been subdued, impacting
activity levels in the sale and purchase markets for chemical and
other specialised product tankers.
Gas
The downward correction in VLGC freights witnessed from the
second half of 2015 continued into the first quarter of 2016,
gathering momentum through Q2. The Baltic AG-Japan rate fell to a
low of US$24.50/tonne in June and has remained range bound between
this level and the low US$30s since. These low freights were a
reflection of much weakened sentiment following the delivery of 33
VLGC newbuildings (the highest level of deliveries in any six month
period) as well as concern over US production levels. However US
exports have actually increased by over 3 million mt year-on-year,
following the expansion of the Enterprise and USEC terminals. While
the rapid pace of growth in the fleet suggested some downward
correction in freight levels from the highs of 2014 and 2015, the
accompanying growth in trade should not have meant this correction
was as steep as we have witnessed. Although lower bunker prices
offered some initial support to freight levels, average TCE levels
to the end of June were down 63%.
This downward adjustment in freight levels for the larger units
has resulted in freights in the smaller sizes also succumbing to
pressure. In combination with unsensational ammonia trade at the
start of the year, LGC freights have now fallen 48% whilst time
charter rates for both the mid and the handysizes have fallen by a
less dramatic 17% and 10% respectively year-on-year.
LNG
Driven by new LNG production capacity, the LNG trade has
expanded by 6% year-on-year in the first five months of 2016. With
the abundance of supply, LNG demand has become the key issue for
the industry. Most of the new supply commissioned in 2015/2016 is
contracted without a fixed destination clause, thus those volumes
are marketed on a short-term basis. Consequently the spot LNG price
is expected to remain low with little correlation to the price of
oil. The main demand growth area so far this year is the Middle
East-South Asia region, which appears to benefit most from the low
LNG price.
The market has seen the number of concluded fixtures up 23% in
the first six months of 2016 against the equivalent period last
year. This activity, however, did little to absorb shipping
availability and, as a result, commercial terms remained under
considerable downward pressure.
PCG and small LPG
Despite some recovery in the petrochemical long-haul market, the
freight markets have remained depressed as a result of increased
tonnage supply and downward pressure from the handy market. The
pressure carrier sector continued to feel the brunt of both changes
in trade flows and the recent expansion in the fleet rates in this
sector experienced the largest drop in the year-to-date. However,
rates have shown some greater resilience more recently and assessed
time charter levels have started to level out.
Static fleet supply and growth in intra-regional petrochemical
movements, as cracker runs remained healthy in Europe, helped
support freights for the smaller ethylene and semi-refrigerated
units which were only fractionally down on the same period last
year. The larger ethylene carriers did not fare quite so well,
however, and the assessed 12 month time charter level for an 8,250
cbm vessel dropped by 3% as larger units competed for cargoes.
Sale and purchase
Secondhand
Activity in the sale and purchase market in the first few months
of 2016 was subdued, although momentum increased as the first half
progressed.
In the dry cargo sector, secondhand activity has started to
improve. The floor in asset prices was in March 2016 and since then
confidence has increased. In the secondhand tanker market, prices
are drifting downwards with low volumes of sales. Owners continue
to experience reasonable spot rates so are unwilling to reduce
their expectations but buyers are unwilling to pay current prices,
especially in the absence of period business to support their
acquisitions.
Newbuilding
Contracting activity in the newbuilding sector has fallen
significantly, down some 80% year-on-year, reflecting the broader
instability in the global shipbuilding market and its transition
into a new phase of consolidation and restructuring.
In the short-term there remains a prevailing sentiment of
volatility within the shipbuilding market. However, the sector is
seeing some niche areas of activity in segments such as ROPAX and
ferries.
Offshore
Offshore supply vessels
The North Sea PSV market has remained difficult for owners in
2016, with spot rates ranging between GBP3,229 and GBP14,286/day
for 499-900m(2) deck PSVs, and between GBP3,695 and GBP13,994/day
for 900m(2) PSVs (weekly numbers high and low). Term rates seem to
have bottomed out between GBP4,750 and GBP5,500/day for the
different categories, representing a 30-37% drop compared to H1
2015. However, as the rates are hovering around operating expenses
levels, the decrease from H2 2015 to H1 2016 has been modest,
ranging between 3-7%. Utilisation has been falling steadily since
the middle of 2014, and the 900m(2) deck PSVs have obtained an
average utilisation of 64% in the first four months of the year,
compared to 83% H1 last year. Approximately 70 PSVs vessels have
been laid up, and this has led to some more spikes in the spot
market.
The North Sea AHTS market has also been challenging in 2016,
with spot rates ranging between GBP4,750 and GBP52,920/day for
16,000 and 19,999 BHP AHTSs, and between GBP7,574 and GBP62,705/day
for the largest class of AHTSs. Weather conditions have been very
important, creating periods of unforeseen tightening of the market
and spot rate spikes, however, the market for long-term AHTS
contracts is almost non-existent. Around 30 vessels are laid up in
the North Sea, representing 41% of the fleet and a significant
number of rigs have and will come off contract in 2016. North
Atlantic fixing activity has also been depressed, with further
reduced international demand for the large AHTS vessels. Globally,
rates have fallen both year-on-year and versus the second half of
2015.
The subsea market
As previously reported, low sanctioning activity has had a
significant impact on demand for Construction/ Installation and
SURF subsea services. 2015 saw the lowest level of subsea tree
awards since 2000, reflecting cuts in exploration and production
capital expenditure. Recovery in this market will be highly
dependent on the oil market rebalancing. Inspection Maintenance and
Repair (IMR) work is driven by the level of existing
infrastructure, combined with its age profile. With oil companies
cutting IMR-related costs wherever possible, this is likely to lead
to a backlog of work at a later date, though exact timing is
uncertain.
The mobile offshore drilling unit market
Reduced oil prices, combined with cost and cash flow issues
within oil and gas companies have put severe downward pressure on
rig fixing activity, which has fallen more than 65% since
2012/2013. The resultant demand for MODUs is therefore declining
rapidly and active rig utilisations have dropped to as much as 70%
for both jackups and floaters. Day rates have followed and are
approaching operational costs. Rig owners are reassessing their
strategies and given the age of the existing fleet, scrapping and
removals have started to come through, especially on the floater
side. There have also been considerable delays and cancellations in
the order book.
However, significantly lower exploration and production spending
is leading to renewed optimism for a higher oil price and hence
demand for oil services, including offshore rigs. Some budding
signs of renewed activity have already been seen in the North
America onshore rig count, which has bottomed and begun to rise.
Nevertheless it is expected that the recovery in offshore rig
utilisation and profitability is likely to take some time, mainly
due to the overhang of supply.
Futures
Despite reaching new lows in Q1, the Cape 4TC 172 index
rebounded to reach a peak in late April of 8,374 (a rise of 1,600%)
proving that volatility is still very evident in this market.
Panamax and supramax movements have been less pronounced where the
average values year-to-date are US$3,907 and US$4,634
respectively.
Options had a promising start to the year with market volumes in
Q1 more than three times greater than the same period last year,
although the trend in Q2 has been much more inconsistent.
Iron ore volumes have nearly doubled from just over 150m tonnes
in Q1 2015 to close to 400m tonnes in Q1 2016. The widely
publicised volatility in iron ore pricing has created a vibrant
swaps and options environment in which we continue to grow our
market share.
Financial
Revenue: GBP16.7m (2015: GBP17.3m)
Segment underlying profit: GBP2.4m (2015: GBP2.2m)
Securities
Macro-economic and political uncertainty has continued to impact
the global financial markets. With investor confidence across the
shipping markets already weak, these combined factors have made for
difficult trading conditions for our financial division.
Although activity levels have been reduced, the Clarksons Platou
Securities (CPS) team have had some notable successes, executed in
a very challenging market, including the US$70m equity offering in
Scorpio Bulkers in which CPS acted as lead manager and sole
bookrunner and the Golar and Stonepeak launch of Golar Power in
which CPS acted as sole financial advisor. The team has also
advised on a number of smaller placements, valuations and
restructurings.
Project finance
Shipping
Activity in the shipping project finance market has been
slightly lower in the first half of 2016 compared to 2015. The year
started on a slower note, with transaction activity picking up
towards summer. The current distressed situation in the dry cargo,
container and offshore markets, has had an adverse effect on the
opportunity to access debt finance for new projects. The access to
traditional debt finance is now limited, as most commercial banks
have significant exposure to these segments and are currently
focused on restructuring and supporting their existing clients
through the low part of the shipping cycle. For ship owners, the
low charter levels and decline in ship values has had a negative
effect on liquidity and balance sheets, which has affected their
credit worthiness and access to finance. On the positive side,
challenging market conditions also create opportunities for
consolidation, the potential for new equity investments at
historical low levels and more creative financial structures, which
generates more activity for alternative finance providers.
Over the last six months, our team has focused on ensuring that
our existing projects are performing well with several notable
successes over the period, all achieved against difficult market
headwinds. Our project sales team has generated a record high in
secondary transaction volume and continues to provide a
well-functioning secondary marketplace for new and existing
investors.
Real estate
The Nordic real estate market reached all-time high in 2015 with
Norway being the fifth largest European transaction market after
the UK, Germany, France and Sweden. Across the entire Nordic
market, yields on prime assets compressed as institutional funds
sought yielding assets with stable dividends in stable
macro-economies like the Nordic. Foreign investors have had an
increasing appetite for the Norwegian market over recent years and
in 2015 they were behind more than 50% of the total transaction
value for the first time, with the trend continuing into the first
half of 2016. Even though yields on prime assets have declined, the
yield gap (difference between real estate yield and interest rate
level) is historically high. The underlying market drivers are
therefore more sustainable than we have seen in previous periods
with yield compression.
Whilst total transaction values have declined in H1 2016
compared to H1 2015, mostly due to the lending restraints the banks
are under and lack of supply, we still see a strong demand from the
equity side and expect this to continue.
Debt and leasing solutions
The market has continued to be very challenging with the new,
more stringent capital regulations restricting the flexibility the
banks have to manage problem loans. Established banks have
consequently been forced to make large provisions and/or accept
credit losses. Global transaction volumes in the shipping and
offshore markets during Q1 2016 were at their lowest since 2012,
highlighting the reduction in lending activity. Those still in a
position to lend continued to focus on quality, top-tier and
financially strong clients.
There also continues to be a shift in the geographical spread of
lenders. Throughout the last five years Asian financiers have
proactively increased their portfolios and gained market share from
the more traditional European lenders. Through our broad geographic
footprint, Clarksons Platou debt and leasing services continues to
maintain and develop strong relationships with both the traditional
lenders and the alternative international finance providers. Over
the course of the period we have further strengthened the team with
key hires.
Support
Revenue: GBP8.3m (2015: GBP12.9m)
Segment underlying profit: GBP0.8m (2015: GBP2.0m)
Port services
Agency
The Clarksons agency business continues to experience mixed
fortunes. Our dry cargo agency business has performed well over the
period driven by strong grain exports following a good 2015 harvest
combined with low freight rates. This business has mainly been
driven through our Ipswich, Tilbury and Southampton offices,
although we have seen increased involvement in grain shipments from
the north east of England and Scotland.
Coal volumes have continued to fall as demand decreases from
coal fired power stations; however, this volume has largely been
replaced by imports of biomass into Tyne and Liverpool.
Trading in our offshore oil and gas agency business continues to
be very challenging reflecting the broader market conditions.
However the period has seen some increase in activity in the
offshore renewable sector with several government proposed sites
starting to be developed in 2016 and further sites planned for
2017.
Gibb Tools and Supplies
Our supply business continues to suffer from the downturn in the
offshore oil and gas market. During the period, the integration of
Opex Industrial Supplies into Gibb Tools was completed. The
business now trades as Gibb Tools and Supplies, from one location
in Aberdeen and one in Great Yarmouth.
Stevedoring
Our stevedoring operation in Ipswich has had an excellent start
to 2016, and the first half of the year saw a record crop year
tonnage at around 460,000 tonnes exported.
Indications are that export volumes should remain strong until
the end of the harvest year. At present, it is too early to predict
how the next harvest will affect our tonnages for the second half
of 2016, but we are confident that as our customer base broadens we
will handle a large share of the agricultural products being
imported and exported from the East Anglia region.
Research
Revenue: GBP6.7m (2015: GBP5.0m)
Segment underlying profit: GBP2.3m (2015: GBP1.5m)
Despite challenging markets, research sales grew strongly
through the period, up 34% year-on-year to reach GBP6.7m (2015:
GBP5.0m). This growth builds on a consistent long-term growth
profile in a competitive market, with underlying research sales
growing at an average of 8% over the past five years. Over 75% of
sales are annuity based and there is excellent customer
retention.
While sales across our shipping and trade offering continued to
grow, there was particularly encouraging growth across our offshore
and energy offer (20% increase in sales year-on-year), as our newly
developed market reports, such as Offshore Drilling Rig Monthly,
and websites, such as World Offshore Register, continue to gain
traction with the client base despite the market conditions.
Clarksons research digital products also performed well, with
sales of our market-leading Shipping Intelligence Network and World
Fleet Register (WFR) up 8% year-on-year as clients continue to
value the importance of authoritative intelligence. A major upgrade
to our WFR, with a range of new features and data made available,
has been well received and we expect good growth from this product
in the second half. The expansion of our register has now extended
our fleet coverage to over 135,000 vessels.
There was robust growth in valuation income in the first six
months, with challenging market conditions increasing client
requirements for validation from authoritative and comprehensive
sources. There was also a strong performance from our retainer
services and consultancy team, who manage bespoke product and
service packages for our larger corporate clients.
We continue to invest in this important area of our business,
driving the expansion in the depth and breadth of our proprietary
database and ensuring our research product offering continues to be
market-leading and utilises the latest technology. New digital
products and further product enhancement are expected to come on
stream in the second half of the year, along with further
investments into the operating support systems for the accounting
and valuation team. Total research head count has increased to 94,
with additional hires into our service and valuation teams and
continued growth in our geographic footprint, including hires into
Shanghai and Singapore.
Directors' responsibilities statement
The Directors confirm that:
-- these condensed interim financial statements have been
prepared in accordance with International Accounting Standard 34,
'Interim Financial Reporting' as adopted by the European Union;
and
-- the interim report includes a fair review of the information required by:
(a) DTR 4.2.7, being an indication of important events that have
occurred during the first six months of the financial year ending
31 December 2016, and their impact on the condensed set of
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
(b) DTR 4.2.8, being material related party transactions that
have taken place in the first six months of the financial year
ending 31 December 2016, and any material changes in the related
party transactions described in the 2015 annual report.
The Directors of Clarkson PLC are listed in the Clarkson PLC
annual report for 31 December 2015. A list of current Directors is
maintained on the Clarkson PLC website: www.clarksons.com.
The maintenance and integrity of the Clarkson PLC website is the
responsibility of the Directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial statements since they were
initially presented on the website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
On behalf of the Board
James Hughes-Hallett
Chairman
12 August 2016
Independent review report to Clarkson PLC
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Clarkson PLC's condensed consolidated interim
financial statements (the interim financial statements) in the
interim report of Clarkson PLC for the six month period ended 30
June 2016. Based on our review, nothing has come to our attention
that causes us to believe that the interim financial statements are
not prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
What we have reviewed
The interim financial statements comprise:
-- the consolidated balance sheet as at 30 June 2016;
-- the consolidated income statement and consolidated statement
of comprehensive income for the period then ended;
-- the consolidated statement of cash flows for the period then ended;
-- the consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the interim report
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK and
Ireland) and, consequently, does not enable us to obtain assurance
that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
We have read the other information contained in the interim
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the Directors
The interim report, including the interim financial statements,
is the responsibility of, and has been approved by, the Directors.
The Directors are responsible for preparing the interim report in
accordance with the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Our responsibility is to express to the Company a conclusion on
the interim financial statements in the interim report based on our
review. This report, including the conclusion, has been prepared
for and only for the Company for the purpose of complying with the
Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority and for no other purpose. We do not, in giving
this conclusion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior
consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
12 August 2016
Consolidated income statement
for the half year to 30 June
2016 2015
---------------------------------------- ------------------------------------------------------
Before After
exceptional exceptional
Before Acquisition After items and Acquisition items and
acquisition related acquisition acquisition Exceptional related acquisition
related costs related related items costs related
costs (note 5) costs costs (note 4) (note 5) costs
Notes GBPm* GBPm* GBPm* GBPm* GBPm* GBPm* GBPm*
------------ ------------ ------------ ------------ ------------ ------------ ------------
Revenue 3 147.2 - 147.2 145.3 - - 145.3
Cost of sales (4.3) - (4.3) (5.9) - - (5.9)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Trading profit 142.9 - 142.9 139.4 - - 139.4
Administrative
expenses (121.5) (3.7) (125.2) (115.4) (3.7) (8.7) (127.8)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Operating profit 3 21.4 (3.7) 17.7 24.0 (3.7) (8.7) 11.6
Finance revenue 0.6 - 0.6 0.6 - - 0.6
Finance costs (0.2) (0.6) (0.8) (0.8) - (0.4) (1.2)
Other finance
costs -
pensions 14 - - - (0.2) - - (0.2)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit before
taxation 21.8 (4.3) 17.5 23.6 (3.7) (9.1) 10.8
Taxation 6 (5.4) 0.9 (4.5) (6.4) 0.7 1.1 (4.6)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit for the
period 16.4 (3.4) 13.0 17.2 (3.0) (8.0) 6.2
------------ ------------ ------------ ------------ ------------ ------------ ------------
Attributable to:
Equity holders
of the parent 15.9 (3.4) 12.5 15.2 (3.0) (8.0) 4.2
Non-controlling
interests 0.5 - 0.5 2.0 - - 2.0
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit for the
period 16.4 (3.4) 13.0 17.2 (3.0) (8.0) 6.2
------------ ------------ ------------ ------------ ------------ ------------ ------------
Earnings per
share
Basic 7 52.9p 41.7p 54.3p 15.0p
Diluted 7 52.3p 41.3p 53.5p 14.8p
------------ ------------ ------------ ------------
* Unaudited
Consolidated statement of comprehensive income
for the half year to 30 June
2016 2015
GBPm* GBPm*
------- -------
Profit for the period 13.0 6.2
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Actuarial (loss)/gain on employee benefit schemes - net of tax (3.3) 4.1
Items that may be reclassified subsequently to profit or loss:
Foreign exchange differences on retranslation of foreign operations 36.7 (1.3)
Foreign currency hedge - net of tax (3.7) 0.8
------- -------
Other comprehensive income 29.7 3.6
------- -------
Total comprehensive income for the period 42.7 9.8
------- -------
Attributable to:
Equity holders of the parent 41.8 8.2
Non-controlling interests 0.9 1.6
------- -------
Total comprehensive income for the period 42.7 9.8
------- -------
* Unaudited
Consolidated balance sheet
as at 30 June
Notes
2016 2015 31 December 2015
GBPm* GBPm* GBPm+
-------- -------- -----------------
Non-current assets
Property, plant and equipment 30.2 19.5 30.8
Investment property 1.2 0.3 1.2
Intangible assets 10 292.9 288.6 263.2
Trade and other receivables 1.6 0.9 1.1
Investments 1.9 1.9 1.9
Deferred tax asset 12.6 12.9 12.5
-------- -------- -----------------
340.4 324.1 310.7
-------- -------- -----------------
Current assets
Inventories 0.8 1.2 0.9
Trade and other receivables 73.2 69.9 61.3
Income tax receivable 3.5 3.0 1.7
Investments 11 5.7 5.9 5.7
Cash and cash equivalents 12 106.3 130.3 168.4
-------- -------- -----------------
189.5 210.3 238.0
-------- -------- -----------------
Current liabilities
Interest-bearing loans and borrowings 12,13 (23.3) (30.4) (23.1)
Trade and other payables (111.2) (106.8) (139.3)
Income tax payable (6.6) (5.8) (5.9)
Provisions - (3.4) (0.2)
-------- -------- -----------------
(141.1) (146.4) (168.5)
-------- -------- -----------------
Net current assets 48.4 63.9 69.5
-------- -------- -----------------
Non-current liabilities
Interest-bearing loans and borrowings 13 - (22.7) (23.0)
Trade and other payables (10.3) (3.3) (8.1)
Employee benefits 14 (7.2) (8.9) (4.1)
Deferred tax liability (3.5) (5.7) (4.1)
-------- -------- -----------------
(21.0) (40.6) (39.3)
-------- -------- -----------------
Net assets 367.8 347.4 340.9
-------- -------- -----------------
Capital and reserves
Share capital 15 7.6 7.5 7.6
Other reserves 223.3 213.5 194.2
Retained earnings 134.5 123.8 136.2
-------- -------- -----------------
Equity attributable to shareholders of the parent 365.4 344.8 338.0
Non-controlling interests 2.4 2.6 2.9
-------- -------- -----------------
Total equity 367.8 347.4 340.9
-------- -------- -----------------
* Unaudited
+ Audited
Consolidated statement of changes in equity
for the half year to 30 June
Attributable to equity holders of the parent
--------------------------------------------------
Notes Retained Total
Share capital Other reserves earnings Total Non-controlling equity
GBPm* GBPm* GBPm* GBPm* interests GBPm* GBPm*
-------------- --------------- ----------------- ------- ----------------- --------
Balance at 1
January 2016 7.6 194.2 136.2 338.0 2.9 340.9
-------------- --------------- ----------------- ------- ----------------- --------
Profit for the
period - - 12.5 12.5 0.5 13.0
Other
comprehensive
income:
Actuarial loss
on employee
benefit
schemes -
net of tax - - (3.3) (3.3) - (3.3)
Foreign
exchange
differences on
retranslation
of foreign
operations - 36.3 - 36.3 0.4 36.7
Foreign
currency hedge
- net of tax - (3.7) - (3.7) - (3.7)
-------------- --------------- ----------------- ------- ----------------- --------
Total
comprehensive
income for the
period - 32.6 9.2 41.8 0.9 42.7
-------------- --------------- ----------------- ------- ----------------- --------
Transactions with
owners:
Employee share
schemes - (3.5) 1.0 (2.5) - (2.5)
Tax on other
employee
benefits - - 0.1 0.1 - 0.1
Tax on other
items in
equity - - (0.1) (0.1) - (0.1)
Dividend paid 8 - - (11.9) (11.9) (1.4) (13.3)
-------------- --------------- ----------------- ------- ----------------- --------
- (3.5) (10.9) (14.4) (1.4) (15.8)
-------------- --------------- ----------------- ------- ----------------- --------
Balance at 30
June 2016 7.6 223.3 134.5 365.4 2.4 367.8
-------------- --------------- ----------------- ------- ----------------- --------
Attributable to equity holders of the parent
--------------------------------------------------
Notes Retained Total
Share capital Other reserves earnings Total Non-controlling equity
GBPm* GBPm* GBPm* GBPm* interests GBPm* GBPm*
-------------- --------------- ----------------- ------- ----------------- --------
Balance at 1
January 2015 5.2 35.5 126.6 167.3 - 167.3
-------------- --------------- ----------------- ------- ----------------- --------
Profit for the
period - - 4.2 4.2 2.0 6.2
Other
comprehensive
income:
Actuarial gain
on employee
benefit
schemes -
net of tax - - 4.1 4.1 - 4.1
Foreign
exchange
differences on
retranslation
of foreign
operations - (0.9) - (0.9) (0.4) (1.3)
Foreign
currency hedge
- net of tax - 0.8 - 0.8 - 0.8
-------------- --------------- ----------------- ------- ----------------- --------
Total
comprehensive
(loss)/income
for the period - (0.1) 8.3 8.2 1.6 9.8
-------------- --------------- ----------------- ------- ----------------- --------
Transactions with
owners:
Net ESOP shares
utilised - 0.5 - 0.5 - 0.5
Loss on ESOP
shares - - (0.6) (0.6) - (0.6)
Share-based
payments - 0.1 - 0.1 - 0.1
Share issues 2.3 177.5 - 179.8 - 179.8
Tax on other
employee
benefits - - 1.1 1.1 - 1.1
Tax on other
items in
equity - - 0.1 0.1 - 0.1
Acquisition of
subsidiary - - - - 10.8 10.8
Dividend paid 8 - - (11.7) (11.7) (9.8) (21.5)
-------------- --------------- ----------------- ------- ----------------- --------
2.3 178.1 (11.1) 169.3 1.0 170.3
-------------- --------------- ----------------- ------- ----------------- --------
Balance at 30
June 2015 7.5 213.5 123.8 344.8 2.6 347.4
-------------- --------------- ----------------- ------- ----------------- --------
* Unaudited
Consolidated cash flow statement
for the half year to 30 June
Notes 2016 2015
GBPm* GBPm*
Cash flows from operating activities
Profit before taxation 17.5 10.8
Adjustments for:
Foreign exchange differences (4.2) (0.2)
Depreciation of property, plant and equipment 2.5 1.3
Share-based payment expense 0.9 0.9
Amortisation of intangibles 10 3.2 4.4
Difference between pension contributions paid
and amount recognised in the income statement (1.1) (1.2)
Finance revenue (0.6) (0.6)
Finance costs 0.8 1.2
Other finance costs - pensions - 0.2
Decrease in inventories 0.1 0.2
(Increase)/decrease in trade and other receivables (13.0) 9.2
Decrease in bonus accrual (38.6) (51.8)
Increase/(decrease) in trade and other payables 8.4 (10.9)
(Decrease)/increase in provisions (0.1) 0.4
------- -------
Cash utilised from operations (24.2) (36.1)
Income tax paid (4.9) (7.3)
------- -------
Net cash flow from operating activities (29.1) (43.4)
------- -------
Cash flows from investing activities
Interest received 0.4 0.3
Purchase of property, plant and equipment (1.1) (8.7)
Proceeds from sale of investments - 6.8
Proceeds from sale of property, plant and equipment 0.1 0.1
Transfer from current investments (funds on deposit) - 20.0
Acquisition of subsidiaries, including settlement of deferred consideration (23.7) (23.5)
Net cash and cash equivalents acquired on acquisitions - 43.2
Dividends received from investments 0.1 0.3
------- -------
Net cash flow from investing activities (24.2) 38.5
------- -------
Cash flows from financing activities
Interest paid (0.2) (0.8)
Dividend paid 8 (11.9) (11.7)
Dividend paid to non-controlling interests (1.4) -
Repayment of borrowings - (12.0)
ESOP shares acquired (4.8) -
------- -------
Net cash flow from financing activities (18.3) (24.5)
------- -------
Net decrease in cash and cash equivalents (71.6) (29.4)
Cash and cash equivalents at 1 January 168.4 152.9
Net foreign exchange differences 9.5 (0.9)
------- -------
Cash and cash equivalents at 30 June 12 106.3 122.6
------- -------
* Unaudited
Notes to the interim financial statements
1 Corporate information
The interim consolidated financial statements for the six months
ended 30 June 2016 were authorised for issue in accordance with a
resolution of the Directors on 12 August 2016. Clarkson PLC is a
public limited company listed on the London Stock Exchange,
registered in England and Wales and domiciled in the UK.
The interim consolidated financial statements do not comprise
statutory accounts within the meaning of section 434 of the
Companies Act 2006. Statutory accounts for the year ended 31
December 2015 were approved by the Board of Directors on 4 March
2016 and delivered to the Registrar of Companies. The auditors'
report on those accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006. The interim
consolidated financial statements have been reviewed, not
audited.
Copies of the interim financial statements will be circulated to
all shareholders and will also be available from the registered
office of the Company at Commodity Quay, St. Katharine Docks,
London E1W 1BF and on www.clarksons.com.
2 Statement of accounting policies
2.1 Basis of preparation
The interim consolidated financial statements for the six months
ended 30 June 2016 have been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Conduct
Authority and with IAS 34 'Interim Financial Reporting' as adopted
by the European Union.
The interim consolidated financial statements do not include all
the information and disclosures required in the annual financial
statements, and should be read in conjunction with the Group's
annual financial statements for the year ended 31 December 2015,
which were prepared in accordance with IFRSs as adopted by the
European Union.
The Group has considerable financial resources available and a
strong balance sheet. As a result of this, the Directors believe
that the Group is well placed to manage its risks successfully,
despite the challenging backdrop. The Directors have a reasonable
expectation that the Group has sufficient resources to continue in
operation for at least 12 months from the date of approval of the
financial statements. Having reassessed the principal risks, the
Directors considered it appropriate to adopt the going concern
basis of accounting in preparing the interim consolidated financial
statements.
The interim consolidated income statement is shown in columnar
format to assist with understanding the Group's results by
presenting profit for the period before acquisition related costs
(2015: before exceptional items and acquisition related costs);
this is referred to as underlying profit. Items which are
non-recurring in nature and considered to be material in size are
shown as 'exceptional items'. The column 'acquisition related
costs' includes acquisition related professional fees, interest on
deferred consideration, amortisation of intangibles and the
expensing of the cash and share-based elements of consideration
linked to ongoing employment obligations.
2.2 Accounting policies
The accounting policies adopted in the preparation of the
interim consolidated financial statements are consistent with those
followed in the preparation of the Group's annual financial
statements for the year ended 31 December 2015, except as described
below:
-- Taxes on income in the interim period are accrued using the
tax rate that would be applicable to expected total annual profit
or loss
-- Amendment to IAS 19, 'Employee benefits' regarding defined benefit plans
-- Annual improvements (2010 - 2012) and (2012 - 2014)
-- Amendment to IFRS 10, 'Consolidated financial statements' and
IAS 28, 'Investments in associates and joint ventures'
-- Amendment to IFRS 11, 'Joint arrangements'
-- Amendments to IAS 1, 'Presentation of financial statements'
There were no other new IFRSs or interpretations issued by the
IFRS Interpretation Committee (IFRS IC) that had to be implemented
during the year that significantly affects these interim
consolidated financial statements.
As at the date of authorisation of these interim consolidated
financial statements, the following standards and interpretations
were in issue but not yet effective (and in some cases had not yet
been adopted by the EU). The Group has not applied these standards
and interpretations in the preparation of these financial
statements.
-- Amendments to IAS 7, 'Statement of cash flows'
-- Amendment to IAS 12, 'Income taxes'
-- Amendments to IFRS 2, 'Share based payments'
-- IFRS 9, 'Financial instruments'
-- IFRS 15, 'Revenue from contracts with customers'
-- Amendment to IFRS 15, 'Revenue from contracts with customers'
-- IFRS 16, 'Leases'
The impact on the Group's financial statements of the future
adoption of these and other new standards and interpretations is
still under review. The Group does not expect, with the exception
of IFRS 15, 'Revenue from contracts with customers' which will be
effective on or after 1 January 2018 and IFRS 16, 'Leases' which
will be effective on or after 1 January 2019, that any of these
changes will have a material effect on the results or net assets of
the Group.
There were no other new IFRSs or IFRS IC interpretations that
are not yet effective that would be expected to have a material
impact on the Group.
2.3 Accounting judgements and estimates
The preparation of the interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets, liabilities, revenues and expenses. Actual
results may differ from those estimates.
In preparing these interim financial statements, the significant
judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the
same as those that applied to the consolidated financial statements
for the year ended 31 December 2015, with the exception of changes
in estimates that are required in determining the provision for
income taxes.
2.4 Seasonality
The Group's activities are not subject to significant seasonal
variation.
2.5 Forward-looking statements
Certain statements in this interim report are forward-looking.
Although the Group believes that the expectations reflected in
these forward-looking statements are reasonable, it can give no
assurance that these expectations will prove to have been correct.
Because these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward-looking statements. The Group undertakes no
obligation to update any forward-looking statements whether as a
result of new information, future events or otherwise.
3 Segmental information
For the half year to 30 June
Revenue Results
------ -------- ------ --------
2016* 2015 2016 2015
GBPm GBPm GBPm GBPm
------ -------- ------ --------
Broking 115.5 110.1 19.3 22.0
Financial 16.7 17.3 2.4 2.2
Support 8.3 14.5 0.8 2.0
Research 6.7 5.0 2.3 1.5
------ -------- ------ --------
147.2 146.9
Property services revenue arising within the Group, included in support - (1.6)
------ --------
Segment revenue/underlying profit 147.2 145.3 24.8 27.7
------ --------
Head office costs (3.4) (3.7)
------ --------
Operating profit before exceptional items and acquisition related costs 21.4 24.0
Exceptional items - (3.7)
Acquisition related costs (3.7) (8.7)
------ --------
Operating profit 17.7 11.6
Finance revenue 0.6 0.6
Finance costs (0.8) (1.2)
Other finance costs - pensions - (0.2)
------ --------
Profit before taxation 17.5 10.8
Taxation (4.5) (4.6)
------ --------
Profit for the period 13.0 6.2
------ --------
* All revenue generated externally.
4 Exceptional items
2016
There are no exceptional items in 2016.
2015
The exceptional charge in 2015 consisted of an additional
GBP1.9m rent and service charges for the Company's new head office,
Commodity Quay. Also included were GBP1.5m of restructuring costs
and an onerous lease provision of GBP0.3m for a property in
Singapore.
5 Acquisition related costs
Included in acquisition related costs are cash and share-based
payment charges of GBP0.5m (2015: GBP1.3m) relating to previous
acquisitions. These are contingent on employees remaining in
service and are therefore spread over the service period. Also
included is GBP3.2m (2015: GBP4.4m) relating to amortisation of
intangibles acquired as part of the Platou acquisition. Interest on
the loan notes issued as part of the Platou acquisition totals
GBP0.6m (2015: GBP0.4m). Also included are GBPnil (2015: GBP3.0m)
of legal and professional fees relating to the Platou and other
acquisitions.
6 Taxation
Income tax expense is recognised based on management's best
estimate of the weighted average annual income tax rate expected
for the full financial year. The estimated average annual tax rate,
excluding acquisition related costs, used for the year to 31
December 2016 is 25% (the estimated tax rate used for the six
months ended 30 June 2015 was 27%). The effective tax rate, after
acquisition related costs, is 25.9% (2015: 42.6% after exceptional
items and acquisition related costs).
7 Earnings per share
Basic earnings per share amounts are calculated by dividing
profit for the period attributable to ordinary equity holders of
the parent by the weighted average number of ordinary shares in
issue during the period.
Diluted earnings per share amounts are calculated by dividing
the profit attributable to ordinary equity holders of the parent by
the weighted average number of ordinary shares in issue during the
period, 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:
For the half year to 30 June
2016 2015
GBPm GBPm
--------- ---------
Earnings 12.5 4.2
--------- ---------
2016 2015
Million Million
--------- ---------
Weighted average number of ordinary shares 29.9 28.1
Dilutive effect of share options and acquisition related share awards 0.3 0.4
--------- ---------
Diluted weighted average number of ordinary shares 30.2 28.5
--------- ---------
8 Dividends
For the half year to 30 June
2016 2015
GBPm GBPm
------ ------
Declared and paid during the period:
Final dividend for 2015 of 40p per share (2014: 39p per share) 11.9 11.7
------
Payable (not recognised as a liability at 30 June):
Interim dividend for 2016 of 22p per share (2015: 22p per share) 6.7 6.6
------ ------
9 Business combinations
2016
There were no material business combinations in 2016.
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.
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.
Further information on the Platou acquisition, including details
of the consideration paid, the fair value of the assets acquired
and the liabilities assumed, can be found on pages 88 and 89 of the
2015 annual report.
10 Intangible assets
Goodwill and other intangible assets are held in the currency of
the businesses acquired and are subject to foreign exchange
retranslations to the closing rate at each period end. As a result
of this retranslation, at 30 June 2016 the carrying value of
goodwill increased by GBP31.7m and the carrying value of other
intangible assets increased by GBP1.2m.
11 Investments
Included within current investments are GBP5.4m of deposits with
a maturity of 95 days (30 June 2015: GBP5.3m, 31 December 2015:
GBP5.4m). These deposits are held with an A-rated financial
institution.
12 Cash and cash equivalents
30 June 30 June
2016 2015 31 December 2015
GBPm GBPm GBPm
-------- -------- -----------------
Cash at bank and in hand 98.7 128.5 161.3
Short-term deposits 7.6 1.8 7.1
-------- -------- -----------------
Cash and cash equivalents included in the balance sheet 106.3 130.3 168.4
Bank overdraft - (7.7) -
-------- -------- -----------------
Cash and cash equivalents included in the cash flow statement 106.3 122.6 168.4
-------- -------- -----------------
Net funds, after deduction of bonus entitlements and all
outstanding loan notes but including short-term investments
amounted to GBP46.7m (30 June 2015: GBP41.3m, 31 December 2015:
GBP45.5m).
13 Interest-bearing loans and borrowings
Included within interest-bearing loans and borrowings is
GBP23.3m (30 June 2015: GBP45.4m, 31 December 2015: GBP46.1m) of
loan notes relating to the Platou acquisition. Interest is charged
at 12 month sterling LIBOR plus 1.25%. Some of the loan notes were
repaid on 30 June 2016, the balance is repayable on 30 June
2017.
14 Employee benefits
The Group operates three defined benefit pension schemes being
the Clarkson PLC scheme, the Plowrights scheme and the Stewarts
scheme.
The following tables summarise amounts recognised in the
consolidated balance sheet and the components of the net benefit
charge recognised in the consolidated income statement.
Recognised in the balance sheet
30 June 30 June
2016 2015 31 December 2015
GBPm GBPm GBPm
-------- -------- -----------------
Fair value of schemes' assets 184.4 173.5 170.1
Present value of funded defined benefit obligations (189.3) (181.6) (172.8)
-------- -------- -----------------
(4.9) (8.1) (2.7)
Minimum funding requirement in relation to the Plowrights scheme (2.3) (0.8) (1.4)
-------- -------- -----------------
Benefit liability recognised in the balance sheet (7.2) (8.9) (4.1)
-------- -------- -----------------
Deferred tax asset on above liability 1.1 1.6 0.7
-------- -------- -----------------
Recognised in the income statement
2016 2015
GBPm GBPm
------ ------
Expected return on schemes' assets - recognised in other finance costs - pensions 3.2 2.8
Interest cost on benefit obligation and minimum funding requirement
- recognised in other finance costs - pensions (3.2) (3.0)
Service cost - recognised in administrative expenses (0.1) (0.1)
------ ------
Net benefit charge recognised in the income statement (0.1) (0.3)
------ ------
15 Share capital
30 June 2016 30 June 2015 31 December 2015 30 June 2016 30 June 2015 31 December 2015
Million Million Million GBPm GBPm GBPm
------------- ------------- ----------------- ------------- ------------- -----------------
Ordinary shares of
25p each 30.2 30.1 30.2 7.6 7.5 7.6
------------- ------------- ----------------- ------------- ------------- -----------------
On 2 February 2015, 9,518,369 ordinary shares were issued in
relation to the Platou acquisition, refer to note 9.
16 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.
17 Principal risks and uncertainties
The Directors consider that the nature of the principal risks
and uncertainties which may have a material effect on the Group's
performance in the second half of the year is unchanged from those
identified in the risk management section of the 2015 annual report
on pages 32 and 33. These take into account the acquired Platou
Group, and include strategic risk, reputational risk, operational
risk, people risk and financial risk. Note 26 of the 2015 annual
report sets out the financial risk management objectives and
policies of the Group. These are also unchanged from the
year-end.
18 Related party disclosures
The Group's significant related parties are as disclosed in the
2015 annual report. There were no material differences in related
parties or related party transactions in the period ended 30 June
2016.
19 Financial instruments
Fair value measurements apply to the foreign currency contracts
of GBP6.1m liability at 30 June 2016 (GBP1.4m liability at 31
December 2015). These are classified as level 2. The method for
determining the hierarchy and fair value is consistent with that
used at the year-end, as disclosed on page 103 of the 2015 annual
report. Investments in unlisted ordinary shares are carried at cost
because a fair value cannot be determined reliably.
Loan notes, included in interest-bearing loans and borrowings,
are measured at amortised cost using the effective interest method.
The carrying value of the loan notes and other current and
non-current financial assets and liabilities is deemed to equate to
fair value at 30 June 2016.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR MMGMRNZNGVZM
(END) Dow Jones Newswires
August 15, 2016 02:00 ET (06:00 GMT)
Grafico Azioni Clarkson (LSE:CKN)
Storico
Da Giu 2024 a Lug 2024
Grafico Azioni Clarkson (LSE:CKN)
Storico
Da Lug 2023 a Lug 2024