TIDMCKN
RNS Number : 2075Z
Clarkson PLC
13 March 2017
13 March 2017
Clarkson PLC (Clarksons) is the world's leading provider of
integrated shipping services. From offices in 21 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 today announces preliminary results for the twelve
months ended 31 December 2016.
Summary
-- Continued strong performance despite challenging markets
-- Underlying profit before taxation fell from GBP50.5m to
GBP44.8m, reflecting significantly lower freight rates and asset
values during the year, offset by increased transaction volumes,
increased market share and a strong US dollar
-- Reported profit before taxation increased from GBP31.8m to GBP47.3m
-- Robust balance sheet, including a 64% increase in net
funds(1) to GBP74.8m (2015: GBP45.5m)
-- Dividend increased by 5% to 65p; 14 consecutive years of dividend increases
(1) Net funds are cash and cash equivalents and current
investment deposits, after deducting amounts accrued for
performance-related bonuses and outstanding loan notes
Year ended Year ended
31 December 31 December
2016 2015
Revenue GBP306.1m GBP301.8m
Underlying profit before taxation* GBP44.8m GBP50.5m
Reported profit before taxation GBP47.3m GBP31.8m
Underlying earnings per share* 105.2p 121.9p
Dividend per share 65p 62p
2015 financials include 11 months post-acquisition results of
Platou
* Before exceptional income of GBP11.1m (2015: GBP2.5m expense)
and acquisition related costs of GBP8.6m (2015: GBP16.2m)
Andi Case, Chief Executive Officer, commented:
"Clarksons remains cash generative and highly profitable,
allowing us to deliver continued dividend growth for our
shareholders despite the challenging shipping markets. A number of
indicators suggest that the shipping and offshore markets are
beginning to recalibrate and we are well positioned to capitalise
on the opportunities this presents in 2017 and beyond."
Enquiries:
Clarkson PLC:
Andi Case, Chief Executive Officer
Jeff Woyda, Chief Financial Officer
and Chief Operating Officer 020 7334 0000
Camarco:
Billy Clegg 020 3757 4983
Jennifer Renwick / 4994
Alternative performance measures (APMs)
Clarksons uses APMs as key financial indicators to assess the
underlying performance of the Group. Management considers the APMs
used by the Group to better reflect business performance and
provide useful information. Our APMs include underlying profit
before taxation and underlying earnings per share. Explanations of
the term 'underlying' and related calculations are included within
the financial review.
About Clarkson PLC
Clarkson PLC is the world's leading provider of integrated
services and investment banking capabilities to the shipping and
offshore markets, facilitating global trade.
Founded in 1852, Clarksons offers its diverse and growing client
base an unrivalled range of shipbroking services, sector research,
on-hand logistical support and full investment banking capabilities
in all key shipping and offshore sectors. Clarksons continues to
drive innovation across its business, developing digital solutions
which underpin the Company's unrivalled expertise and knowledge
with leading technology.
The Group employs 1,398 people in 49 different offices across
its four divisions and is number one or two in all its market
segments.
The Company has delivered 14 years of consecutive dividend
growth. The highly cash generative nature of the business,
supported by a strong balance sheet, has enabled Clarksons to
continue to invest to position the business to capitalise on the
upturn in its markets.
Clarksons is listed on the main market of the London Stock
Exchange under the ticker CKN and is a member of the FTSE 250
Index.
For more information, visit www.clarksons.com.
Chairman's review
Overview
2016 has been another challenging year for shipping markets,
characterised by continued difficult trading conditions and tonnage
oversupply. Freight rates have seen historic lows in some sectors
during the year whilst in the second half volatility has been
added, on the upside, by the strengthening of the US dollar (the
currency of the great majority of our revenues) and, less
positively, by the weakness of the pound sterling against several
of the currencies in which our overhead costs are incurred. Against
this uncertain backdrop, we are pleased Clarksons has delivered a
robust performance and, once again, value for our shareholders. We
have remained focused on our core strategy of delivering continuous
service enhancement, thus offering Clarksons' clients the unique
breadth of product and global reach that has enabled us to
maintain, and in many cases extend, our leading position in our
markets. One significant and virtuous outcome of this has been the
actual growth of our broking transaction volumes in 2016, as has
the healthy cash generation underlying our profit performance.
We have continued to invest in the technology to drive
innovation across our business and we regard our focus in this area
to be a key differentiator and source of even greater competitive
advantage for the future; our research capability already underpins
our full client service offering, and in 2017 we intend to offer
further knowledge and data based initiatives to our clients. Our
position at the heart of the shipping and offshore markets has
ensured that in these difficult times, clients have turned to
Clarksons for our deep sector knowledge and tailored ability to
service their requirements; our capacity to offer both broking and
a range of financial market solutions creates synergies and
outcomes that are not available elsewhere.
Integration of the Platou business is now complete, with
anticipated synergies realised and the complementary expertise of
the combined businesses proven. The acquisition has broadened our
service offering to clients and puts us in a strong position for
when markets recover.
Our ability to continue to grow and gain share in more difficult
markets has given us considerable confidence in the business.
Clarksons is significantly more diverse in terms of product
offering, reach and balance sheet strength than we were before the
last upturn in the sector; we are well placed to continue the solid
performance delivered in 2016 and are leveraged to benefit strongly
from growth when the shipping cycle turns.
Results
Underlying profit before taxation was GBP44.8m (2015: GBP50.5m).
Reported profit before taxation was GBP47.3m (2015: GBP31.8m).
Underlying earnings per share was 105.2p (2015: 121.9p).
Reported earnings per share was 119.7p (2015: 68.2p).
Dividend
Clarksons continues to maintain its remarkable dividend record,
having increased the dividend paid every year since 2002. In line
with this progressive dividend policy, Clarksons again intends to
raise the dividend paid to its shareholders. The Board is
recommending a final dividend of 43p (2015: 40p). The interim
dividend was 22p (2015: 22p), resulting in a 5% increase in the
total dividend for the year to 65p (2015: 62p).
The dividend will be payable on 2 June 2017 to shareholders on
the register at 19 May 2017, subject to shareholder approval.
People
Our people are the heart of our business and are the key to our
success. This year we have continued to hire and invest across our
business divisions to ensure we always have the best people
delivering the best advice and the best transactional execution. We
have a position to protect as the leading employer and operator in
the sector and remain determined to do so.
Board
As previously announced, James Morley will be retiring from the
Board following the AGM on 12 May 2017. I would like to thank James
for the always wise guidance he has given Clarksons over the last
nine years as a Board member and Chair of the audit committee.
I am delighted to have welcomed Marie-Louise Clayton to the
Board at the beginning of 2017. Marie-Louise brings a wealth of
board experience to the role and we look forward to her taking over
as Chair of the audit committee.
Outlook
In the short-term at least, shipping markets seem most likely to
remain challenging whilst current difficult market conditions and
an unusually opaque global macro-economic environment persist, but
there are now a number of indicators of improvement in the industry
via measurable, if as yet relatively modest, demand growth and a
slowing in the new capacity reaching the market.
James Hughes-Hallett
Chairman
10 March 2017
Chief Executive Officer's review
2016 has been a year of growth, consolidation and delivery for
Clarksons, despite the shipping market undergoing one of the most
challenging periods in living memory, as highlighted by the lowest
level for the ClarkSea Index since 1990, and the offshore market
facing challenges as a result of the depressed oil price. To have
once again increased market share shows we have a stronger, more
diverse business that remains cash generative and highly profitable
and has enabled us to deliver a 14th consecutive year of dividend
growth for investors.
We had anticipated that 2016 would be another tough year, with
oversupply, volatile commodity prices and global macro-economic
uncertainty creating significant challenges for the sector as a
whole. It is testament to the calibre of our teams and the breadth
and depth of our client offering that, even in the most difficult
of times, we have maintained or improved upon our market leading
position across all of our divisions.
Despite the headwinds, we have focused on our long-term strategy
for growth, delivering 'best in class' client service, investing in
tools for trade and positioning the business to capitalise when the
upturn in our markets comes.
Shipping markets are multi-cyclical, and our strategy of
diversifying within our core markets has given us a unique product
breadth and global reach and an ability to grow consistently, even
in downturns. In these difficult times, we have continued to
benefit from a 'flight to quality', in which clients are choosing
Clarksons as their service provider.
Overall our broking teams have performed well, even though in
offshore the operators continue to focus on cost cutting, with
limited sanctioning of new field developments and moderated
maintenance activities. The dry cargo market, which started the
year with the weakest rates in recorded history, was also
depressed, though there were some more encouraging signs towards
the end of the year. However, the tankers, specialised products,
gas and sale and purchase markets performed particularly well.
Clarksons' teams have again increased broking volumes.
Our research offering has grown significantly this year,
particularly in digital and valuations income, as our clients
continued to value the importance of authoritative
intelligence.
The port services teams remained profitable in some of the
toughest markets ever seen for this type of business; the reduced
spending by the oil and gas sector in the North Sea affected our
supplies activities.
We are also particularly encouraged with the performance of our
financial division, in its first 12 months as a fully-integrated
division. The solutions and expertise of the financial team has
greatly enhanced our client offering, uniquely positioned our
business amongst its peers and places us well to deliver a service,
with deep industrial understanding, to debt and equity providers
alike. The team has achieved a leading position in the market,
participating as sole or joint lead on a number of capital-raising
transactions throughout shipping and offshore, whilst also leading
restructuring mandates and generating a strong pipeline for future
business.
Clarksons is a highly cash generative business and our strong
balance sheet ensures that we have been able to invest
strategically and react quickly to take advantage of opportunities
as they arise. Our cash position gives us great comfort that,
regardless of market conditions, we can position the Group for
upturns in each of our markets when they come, invest in growth
(tools for trade) and deliver shareholders a growing cash return.
We have also looked hard at the structure of the business and
focused on efficiencies where necessary to ensure our model is fit
for purpose and best placed for the current market conditions.
We are seeing significant benefits from our investment in our
market-leading technology platform, which is changing the way our
brokers are able to access and use information, increasing
knowledge and improving the communication of vast amounts of data
across the business. The sheer scale of the market activity in
which Clarksons is involved means that we are able to leverage our
deep understanding of activity across the market by interpreting
this data, and thus delivering the best advice to our clients.
We constantly strive to deliver 'best in class' client service,
and the quality, knowledge and experience of our employees are
central to Clarksons' continued outperformance across all sectors
and geographies. We are a truly international and culturally
diverse business, employing the best people from 65 nationalities
across 21 countries to deliver first rate advice and expertise to
our clients. The security of a robust balance sheet gives us the
ability to hire and retain the best candidates and we have also
made a number of extremely experienced hires across all of our
divisions this year. As a team, we share the same goals and
ambitions and I would like to thank all of our employees for their
hard work and dedication over the course of the year.
Whilst we anticipate that the market will remain challenging in
the near-term, we believe the medium-term outlook for the sector is
more positive. Demand continues to progress and the recalibration
of the demand/supply balance is improving following lower levels of
ordering and continued scrapping assisted by the impact of
environmental regulation. Seaborne trade continues to increase and
further positives for growth include the prospect of higher
infrastructure spending from the world's two largest economies. We
have also seen a change in investor appetite from the fourth
quarter. All of this gives us encouragement that the shipping and
offshore markets are recalibrating. Accordingly, we are well
positioned to benefit from any improvement.
The diverse nature of our business has enabled Clarksons to
deliver healthy profits and continued dividend growth despite
challenging shipping markets. As the markets progress, we believe
we are well positioned to capitalise on the opportunities that 2017
will provide and look forward to the year ahead. We remain focused
on executing our proven strategy of delivering 'best in class'
service and offering a unique product breadth across our globally
connected business.
Andi Case
Chief Executive Officer
10 March 2017
Business review
Broking
Revenue: US$314.4m (2015: US$365.3m)
Revenue (sterling equivalent): GBP233.6m (2015: GBP239.5m)
Segment underlying profit: GBP40.2m (2015: GBP49.1m)
Forward order book for 2017: US$112m* (At 31 December 2015 for
2016: US$151m*)
* Directors' best estimate of deliverable forward order book
(FOB)
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 year.
Dry cargo
2016 was an extraordinary year in the dry cargo sector, which
started with the weakest rates in recorded history as the Baltic
Dry Index (BDI) bottomed out at 290 in February. Vessels moved into
various stages of idleness and lay-up and older tonnage rushed to
demolition yards, witnessing the third highest level of demolition
on record. Cash flow pressures led many owners to cancel or defer
newbuilds, resulting in less than half of the 2016 order book being
delivered on time.
After two years of lacklustre industrial production and a
decline in new housing starts, China eased monetary policy which
resulted in higher public investments and a recovery in the
property market. New housing starts grew for the first time in two
years, driving the demand for construction and thereby steelmaking
raw materials. Thermal power demand has also surged and, together
with Chinese coal mining cuts, created a rise in imports in what
had previously been thought of as a defunct trade.
Commodity prices reached multi-year lows in February, before
rebounding to significantly higher rates by the end of the year.
The new record high rates were reinforced by the newly elected US
President's infrastructure investment promises and the continuation
of the multi-billion dollar infrastructure investment in the
Chinese "One-Belt, One-Road" initiative. The positivity sent the
BDI above 1,000 in November to a year high of 1,257 on 18 November,
followed by the unwinding towards the traditional weaker first
quarter.
Although the demand outlook remains positive for 2017, there is
still more to contend with. Relatively firmer rates are likely to
slow down demolition activity, whilst the still substantial amounts
of newbuilds yet to deliver will likely push net fleet growth
higher and therefore likely result in uninspiring earnings.
However, due to the market weakness in 2016, newbuild
contracting slipped to the lowest levels since 2001. A more
positive rates scenario could act as a catalyst for additional
ordering, however, for this to happen the newbuild price premium
over the secondhand market will need to narrow considerably.
Looking ahead, our base case is for seaborne trade to increase
by 3.4% and fleet growth to be slightly lower than this at 3.1% in
2017. As a result, freight rates could improve depending on the
promptness of the fleet to adjust to the seasonal demand increases.
Sudden acceleration in new deliveries will be less responsive than
in demolition and thereby should act as a catalyst to volatility
which should favour a more positive rate environment in 2017.
We have increased transaction volumes across all continents in
the world and have continued to strengthen our presence by
recruiting and relocating key staff as appropriate. In the final
quarter we also benefited from the opening of a new office in
Japan.
Containers
2016 saw the container shipping sector remain, as many expected,
under severe pressure. Box freight rates in general remained weak,
although by late in the year it did appear that they might be
bottoming out on some trade lanes. Against this backdrop, charter
market vessel earnings remained extremely challenged, at bottom of
the cycle levels. The one year rate for a 2,750 TEU ship averaged
US$6,000 per day in 2016, 27% lower than the average since the
start of 2009. Old panamax types fared even worse, averaging
US$4,979 per day in 2016, 56% down on the same basis, with the
opening of the new locks at the Panama Canal impacting vessel
deployment patterns.
Demand conditions did however improve in 2016, with global
volumes projected to expand by around 3% in the full year to 181m
TEU. Volumes on the key Far East-Europe trade returned to positive
growth and the rate of growth on the intra-Asian trades accelerated
back to more robust levels. However, North-South volumes and trade
into the Middle East remained under severe pressure from the impact
of diminished commodity prices, though volumes into the Indian
Sub-Continent grew strongly.
Containership capacity growth did slow significantly in 2016,
reaching not much more than 1% in the full year. Deliveries slowed
dramatically to 0.9m TEU and demolition accelerated rapidly to a
new annual record of 0.7m TEU. However, given the level of surplus
built up in the sector in recent years, and in particular the
impact of the delivery of substantial capacity, much of it in the
form of new 'megaships', the improved fundamental balance seen in
2016 was not enough to generate an improvement in conditions. At
the end of the year, 7% of total fleet capacity stood idle. The
financial collapse of a major Korean operator was a further
illustration of the acute distress facing the sector.
Looking ahead, further improvements in fundamentals still appear
necessary to generate improved market conditions. However,
pressurised earnings, financial distress and regulatory
requirements are all expected to drive further recycling, and the
ordering of newbuild capacity dropped to just 0.2m TEU in 2016, a
dramatic slowdown compared to recent years; the order book fell to
16% of fleet capacity. Moreover, further significant steps in the
consolidation of the sector have been taken in the form of merger
and acquisition activity involving major operators.
We have made considerable progress in the last 12 months with a
number of key clients and, as a result of the consolidation within
the sector, significantly increased volumes.
Tankers
As expected, the tanker market was somewhat weaker in 2016 after
the very strong market seen in 2015, as fleet growth took its toll.
Earnings for VLCCs, suezmaxes and aframaxes were each down by some
40% on 2015's levels, however VLCC spot market earnings
nevertheless averaged a relatively healthy US$41,000 per day, in
line with long-run averages. Earnings in the products tanker sector
were also lower in 2016, with returns on key routes down by between
35% and 50% on average from the high levels seen in 2015.
Rising Middle Eastern crude oil exports, coupled with very
strong growth in Chinese and Indian crude imports, led to further
increases in crude tanker demand. However the market suffered from
disrupted Nigerian exports in the third quarter, leading to a
deeper than anticipated seasonal downturn. In the products tanker
sector trade growth continued, albeit at a slower pace, as an
overhang of products inventory weighed on the market.
Both the crude and products tanker fleets grew by some 6% in
2016. The crude tanker fleet is expected to grow by a further 5.1%
in 2017, maintaining supply side pressure on earnings. Products
tanker fleet growth is expected to fall to 3.7% in 2017. However,
following strong fleet growth in 2015 and 2016, supply side
pressure will likely remain in this sector. Extremely low levels of
tanker ordering in 2016 point to reduced deliveries from 2018 and
recent regulatory developments may accelerate removals of older
tonnage.
Oil production cuts from both OPEC and non-OPEC countries seem
likely to compound the strong crude tanker fleet growth in 2017.
The cuts may be partially offset by additional cargo from Nigeria
and Libya, which are exempt from OPEC's agreement, and Brazil may
also raise exports. Uncertainty over compliance with production
cuts and instability in some producing countries means there is
potential for unexpected increases or decreases in crude tanker
demand through 2017. In the US, higher oil prices resulting from
the production cuts and potentially less stringent regulation,
following the presidential election, point to a possible rebound in
production. The derestriction of US crude exports now means that
exports will likely increase as output grows and reductions in
imports may be more muted. New refining capacity and strategic
stock building should drive further growth in Chinese and Indian
crude imports.
Re-balancing of the global oil market resulting from production
cuts may eventually assist products' tanker demand, as inventories
become depleted and trading opportunities re-emerge. Above average
oil demand growth is still projected for 2017 by the major
forecasting agencies, despite an expectation of somewhat higher
prices.
We continue to increase volumes with the addition of new
clients.
Specialised products
Despite limited signs of an increase on certain arterial trade
lanes towards the end of 2016, the chemical tanker spot markets
have softened considerably. The Clarksons Platou Spot Chemical
Index has seen a 6.9% decline year-on-year whilst the Edible Oils
Index is 20.7% lower year-on-year. Earnings continue to remain
under pressure and are significantly lower than seen in 2015. The
delta between owners' and charterers' ideas has grown considerably
into the second half of 2016, and, as such, deal volume on the
period charter and asset markets has been lacklustre for the latter
part of the year.
Overall trade volume growth in specialised products has been
robust throughout 2016. That said, sentiment has been weak for the
second half due primarily to petroleum products' market dynamics
and also the hangover from the El Nino weather phenomenon and its
impact on palm oil trade. Overall seaborne trade is estimated to
have gained 2.3% year-on-year in 2016, to 283m mts.
China's imports of specialised products drove the market in 2015
with a gain of 8%, but during the first 11 months of 2016 Chinese
import growth slowed to 3.2% year-on-year. India, now the world's
fastest growing major economy, saw seaborne specialised products
import growth of 16% for the first half of 2016 compared to the
first half of 2015.
We estimate that the other part of the tonne-mile factor,
distance growth, continued its increase in 2016 with chemical
tankers on average travelling 1.8% further per voyage. US-China
seaborne trade of specialised products gained 67% for
January-August 2016 when compared to the same period in 2015.
Average annual growth for the total chemical tanker fleet
accelerated in 2016 due to a number of stainless steel vessels
being delivered throughout the year. From 2017 onward, we believe
deliveries will slow down at a faster rate, with net fleet growth
reducing from high 4% in 2016 to high 3% in 2017.
Our base case points to expected volumes at approximately 1.1x
world GDP growth or around 3.5% per year, for the next few years.
With average annual fleet growth in 2016 above these levels, we
believe that steady utilisation continues to depend on both
economic growth and longer trading distances contributing as
expected.
Despite the persistence of weak market sentiment in the second
half of 2016, and for the most part a lack of seasonality, based
purely on fundamentals the medium-long term outlook for the sector
remains encouraging.
Gas
As expected, the LPG carrier market has succumbed to a softer
freight environment during 2016 as fleet supply continued to
expand, most notably in the VLGC sector. VLGC freight rates
continued to be placed under downward pressure with time charter
earnings for an 84,000 cbm unit averaging 74% lower compared to
2015 levels. Spot freights have fallen by a similar magnitude,
though the reduction has been slightly less marked with a 67%
reduction.
Seaborne trade growth of LPG has continued during 2016, though
export volumes from the US were dealt a blow over the summer months
as price margins with Asia narrowed. This adversely impacted
tonne-mile demand and an increase in export volumes from the Middle
East placed additional downward pressure on average voyage time.
The prospects for ammonia trade growth offer minimal respite in the
near term, although growth in tonne-mile demand is expected to
improve as Caribbean volumes are displaced into the North African
and Asian markets. If US oil and gas production is encouraged by
the new Trump administration, this should only prove positive for
NGL availability.
There has been a significant volume of newbuilding tonnage
delivered, with still more vessels to be absorbed in 2017 as an
additional 27 units look set to hit the water. The order book
begins to thin out from 2018 onwards, slowing the pace of fleet
growth, which suggests that we may then start to see some
tightening of the supply/demand balances.
Following a weak start to the year, the market for the smaller
LPG carriers improved in the final months of 2016.
This uptick helped to slow the scale of the decline in freight
rates year-on-year. Benchmark 12 month time charter levels for the
small 3,500 cbm pressure vessels ended the year 6% down on 2015 at
around US$170,000 pcm whilst the rates for the 3,200 cbm semi-refs
fell by a more modest 2%.
Sluggish coastal LPG trade combined with reduced propylene
import demand into China were the key factors behind the softer
freight sentiment, as in the smaller segments there has been
minimal change in fleet supply.
With no newbuildings currently on the order book, any increase
in demand may shift the fundamental balance in the market.
The general feeling in the smaller sizes is that we may have
reached the bottom of the market. That said, the size sector 8,000
cbm and above remains long, due to upsizing, plus newbuildings have
still to deliver in the larger pressure segment.
Time charter levels for the 8,250 cbm ethylene units have fallen
by 5% year-on-year whilst the assessed rates for the 12,000 cbm
ethylene units dropped almost 9% on the back of fleet growth
through 2015/16. Within the size segment 5-14,999 cbm there is
still 7% of the fleet left to deliver in the pressure sector and 6%
in the ethylene capable sector. Therefore, this diverging trend
amongst the smaller and larger units is expected to continue
through 2017.
The Clarksons Platou gas teams in London, Oslo, Singapore and
Houston have all increased volumes in 2016.
LNG
The LNG shipping market fundamentals improved from June onward,
after going through a challenging first half. The freight rate
assessment for modern dual fuelled ships was at US$45,000 per day
in late December, whilst averaging US$33,500 per day for the full
year, around US$3,000 less than a year earlier. Shipping demand is
estimated to have grown by 2% while the net fleet expanded by 7%
during the year. The spot chartering activity continued to grow as
over 210 fixtures were concluded in 2016, compared with circa 180
in 2015.
The 'wave' of new LNG production capacity started to reach the
markets and after four stagnant years the seaborne trade increased
by 7%, reaching circa 265m tonnes. Australia was the main
contributor with five new liquefaction trains commissioned, lifting
the nation's exports by 50% to 43m tonnes. Qatar, the world's
biggest LNG exporter, also increased its exports by 3m tonnes and
for the first time utilised its entire production capacity. The
long-awaited LNG from US shale also started to reach the markets
with the commissioning of two trains in the Sabine Pass.
Asian markets absorbed most of the incremental volumes in 2016.
Flows into the world's two largest markets, Japan and Korea,
remained relatively flat whilst China's appetite for LNG increased
significantly with a 30% hike in imports. India experienced
encouraging import growth on the back of lower gas prices,
government subsidies and high economic activity.
Middle East LNG imports were also strong, up by 50%, and the
region formed a new significant market for spot trading and
shipping. Low gas prices combined with an uptick in coal prices
also proved an important factor for a 10% increase in European LNG
imports.
The relatively low increase in shipping demand was attributed to
the decline in average LNG transport distance as trade has become
increasingly intra-basin. 29 new vessels entered the fleet in 2016,
adding 4.9m cbm of carrying capacity, of which two ships were
FSRUs. Meanwhile, two vessels were sold for scrapping and six
carriers, one FSRU and one LNG bunkering vessel were ordered.
The tightening in the shipping market witnessed through the
second half of 2016 is expected to carry through 2017 as
significant new volumes from new plants commissioned through 2016
and 2017 will be lifted. These cargoes, coupled with an increase in
short-term trading, will result in an alteration of the shipping
balance as the growth in fleet supply, despite remaining strong,
will still be below the growth in demand for required LNG
tonnage.
On the LNG projects side, we could finally see an FID in
Mozambique as well as potentially more decisions taken on US
brownfield terminals where the new administration may provide
favourable conditions for oil and gas industry and LNG export
growth.
Sale and purchase
Secondhand
As mentioned in our half year commentary, 2016 continued to be
an extremely challenging year across all sectors so it is with some
degree of pride that we can report an increase in the number of
second hand sale and purchase transactions we concluded
year-on-year against 2015. Of course, with values under the
pressures they were then, it was not possible to maintain the same
levels of income but considering that we had the Baltic Indices at
all-time lows in the early part of the year, the difference is not
too negative, and when combined with our newbuilding desk overall
we were up when compared to last year.
Looking forward into 2017, we have reason to be confident that
for dry cargo the worst may well be behind us and that the
oversupply of tonnage that the sector as a whole has been suffering
for the past few years has started to work its way through,
resulting in a level of confidence which we have not seen for some
time. Sub-opex level charter rates are a thing of the past and the
period time charter markets have even started to return, allowing
asset values at least to stabilise if not yet start to rise. We are
by no means out of the woods but with newbuilding business
remaining very quiet, it is reasonable to assume that negative
fleet growth might even start to happen come 2018 as the new
ballast water treatment regulations accelerate demolition of the
older vessels.
On the tanker side, having generally enjoyed a better than
expected 2016 as far as earnings are concerned, there is a rather
more pessimistic view, at least in the short-term, and this
continues to hamper the volume of business we are able to conclude.
In general, values have yet to fall to the levels that buyers feel
they need to be at in order for them to invest whilst sellers
remain under little pressure to reduce their price expectations,
having enjoyed the good earnings of 2016. For those who need to
transact, the buying market is quite thin and as brokers we are not
sure that this will change in the near term.
Having said that, our ability to continue to act for more
corporate clients with their own ongoing requirements regardless of
market cycles should shelter us somewhat from this. Additionally,
we would hope to be able to continue to replicate some high value
project type transactions in conjunction with our project finance
and structured asset finance teams as some clients look to
re-finance away from traditional bank debt more towards sale and
leaseback type structures.
Newbuilding
In 2016 the shipping industry saw significant supply side
adjustments in reaction to continued market pressures. Historically
low levels of newbuild demand, higher levels of delivery slippage
and strong demolition saw fleet growth fall to its lowest level in
over a decade.
2016 was an extremely challenging year for the shipbuilding
industry. Contracting activity fell to its lowest level in over 20
years with just 480 orders reported, down 71% year-on-year.
Domestic ordering proved important for many builder nations and 68%
of orders in dwt terms reported at the top three shipbuilding
nations were placed by domestic owners last year. Despite a 6%
decline in newbuild price levels over 2016, few owners were tempted
to order new ships, especially with the secondhand market offering
'attractive' opportunities. Only 48 bulkers and 46 offshore units
were reported contracted globally last year, both record lows, and
tanker and boxship ordering was limited. As a result, just 126
yards were reported to have won an order (1,000+ GT) in 2016, more
than 100 yards fewer than in 2015.
However, a record level of cruise ship and ferry ordering
provided some positivity in 2016. Combined, these ship sectors
accounted for 52% of last year's US$33.5bn estimated contract
investment and, whilst such segments had not been a traditional
focus for the Group, the addition of the newbuilding team in Oslo
enabled us to take advantage of these more industrially routed
opportunities, with contracting in these segments accounting for a
significant proportion of Clarksons Platou newbuilding contracting
activity in 2016.
European shipyards were clear beneficiaries, taking 3.4m CGT of
orders in 2016, the second largest volume of orders behind Chinese
shipbuilders' 4.0m CGT. Year-on-year, contracting at European yards
increased 31% in 2016 in terms of CGT while yards in China, Korea
and Japan saw contract volumes fall by up to 90% year-on-year.
In light of such weak ordering activity, the global order book
declined by 29% over the course of 2016, reaching a 12 year low of
223.3m dwt at the start of January 2017. This is equivalent to 12%
of the current world fleet. The number of yards reported to have a
vessel of 1,000 GT or above on order has fallen from 931 yards back
at the start of 2009 to a current total of 372 shipbuilders.
Looking forward, 2017 will continue to be a challenging
proposition for shipbuilders and volumes are likely to remain
tempered against the backdrop of prevailing fragility in the
freight markets and a continued disconnect between secondhand
values and newbuilding prices. Nevertheless, with the shipbuilding
market having now endured a substantial period of inactivity, there
is the potential for builders to consider making some strategic
decisions in order to incentivise buyers and maintain levels of
production and this in turn may deliver a little more activity into
2017.
Offshore
General
In spite of continued oil price strengthening in the last
quarter of 2016, market conditions in general in the offshore
segment remain highly challenging. Operators continue to focus on
cost cutting, implying limited sanctioning of new field
developments and moderated maintenance activities. This, combined
with continued substantial overcapacity in the asset-heavy segments
of offshore oil services, supported persistent low utilisation and
rates. Looking to 2017, we expect activity to increase somewhat in
certain offshore segments, but it will generally take time to work
through overcapacity, suggesting adverse market conditions for most
contractors. Operators have also signalled further investment
reductions in 2017. Previous downturns have demonstrated that
rebasing supply-chain costs usually takes 12-24 months. Even though
costs have already come down significantly, we believe operators
will seek further expenditure reductions and also require higher
oil prices and visibility on the anticipated sustainability of
prices before increasing investments again.
The Clarksons Platou offshore team continued to build market
share in chartering, sale and purchase and restructuring,
strengthening the team in anticipation of the recovery.
Drilling market
Reduced spending by operators has put severe downwards pressure
on rig fixing activity which has declined by more than 65% since
2012-13. At the same time, legacy contracts have expired rapidly,
and as a result active rig utilisation has dropped to 66% and 63%
for jackups and floaters respectively. Day rates have followed and
are close to operating expenses on both categories in all regions
of the world. Rig owners are naturally aware of the situation and,
due to the age of the existing fleet, scrapping/removals have
started to come to fruition, especially on the floater side. There
has also been considerable movement in the order book, where units
have been delayed and cancelled. In spite of this, a rebalancing of
the MODU-market is likely to take some time, mainly due to the
overhang of supply.
The subsea market
For the subsea industry low sanctioning activity will have a
great impact on demand for construction/installation and SURF
subsea services. 2015 represented the lowest level of subsea tree
awards since 2000, reflecting operators' reduced E&P spending
and re-bidding of contracts to obtain the lowest possible pricing.
The end result for 2016 was an even lower level of subsea equipment
awards. On the back of the oil price strengthening, sanctioning of
new projects could increase with more subsea equipment awards
during 2017. This is important for SURF work, which is largely
driven by new field developments. Subsea maintenance activity has
also now largely been deferred for about two years, implying
potential demand could be pent up. We are starting to see
increasing tendering activity within the subsea maintenance sector,
and we expect awards in this segment to increase through 2017. This
should lead to a gradual improvement of subsea fleet utilisation,
which was around 50% on a global basis in December 2016, naturally
with significant variations per sub-segment.
PSV
The North Sea PSV market has remained challenging for owners in
2016, with spot rates ranging between GBP2,740 and GBP14,826 per
day for 499-900m(2) deck PSVs and between GBP2,410 and GBP13,994
per day for 900m(2) PSVs. Term rates have bottomed out between
GBP4,750-GBP6,000 per day for the different categories and year to
date numbers are down 21-22% vs last year. Utilisation has been
falling steadily since the middle of 2014, and the 900m(2) PSVs
have obtained an average utilisation of 75% in the first 11 months
of the year, compared to 88% for the same period last year. The
current utilisation for the largest vessel category is 68%.
Approximately 130 PSVs have been laid up in the North Sea, compared
to 97 at the beginning of the year. As term contracts are at
operating expense levels, and laid up vessels are still being bid
for longer-term contracts, we expect rates to remain steady through
2017. Globally, rates have still decreased further both
year-on-year and versus the second quarter of 2016. PSV rates
across the vessel categories declined by an average of 13%, 20% and
1% versus the second quarter of 2016 in GoM, Brazil and West
Africa. Figures for the first 11 months are down 35%, 28% and 32%
versus the same period from 2015. Vessel lay ups have also
increased in all regions of the world and around 30% of the global
fleet is currently laid up.
AHTS
As for the PSVs, the North Sea AHTS market has remained
challenging in 2016 with spot rates ranging between GBP4,750 and
GBP52,920 per day for 16-20,000 BHP AHTS and between GBP5,997 and
GBP62,705 per day for the largest class of AHTSs. The market for
long-term AHTS contracts, historically a very small market, is
almost non-existent. Around 56 vessels are currently laid up in the
North Sea, representing 62% of the fleet. Utilisation has been
falling steadily since mid-2014, and the 20,000 BHP category has
obtained an average utilisation of 35% in the first 11 months of
the year, compared to 51% for the same period last year. The
current utilisation for the largest vessels is 29%. At the same
time, we are seeing reduced demand for large AHTS vessels in
certain regions. Globally, rates have still decreased further both
year-on-year and versus the second quarter of 2015. Term rates
across the AHTS vessel categories declined by an average of 7%, 10%
and 1% versus the second quarter of 2016 in GoM, Brazil and West
Africa, and year to date figures are down 26%, 23% and 26% versus
year to date 2015 for the same regions.
With more vessels coming off contracts internationally
(especially in Brazil), an increasing number of vessels will likely
find their way to the North Sea spot market. Owners have few other
places to trade large AHTS units, but many of these units will
likely go straight into lay-up.
Futures
The first quarter of 2016 produced new lows for the Cape 4TC 172
with a record index of US$485 posted on 17 March. Panamax and
supramax markets fared little better with first quarter averages of
US$3,067 and US$3,800 respectively. By late April the same index
had risen to US$8,374, proving once again the intrinsic volatility
in the dry freight market. Despite a lacklustre summer, September
saw a further rise and a period of increased volatility from a
higher base, with capes peaking at US$20,063 on 17 November. The
cape index for the year averaged US$6,373 (2015: US$6,996) whilst
panamax averaged US$5,562 (2015: US$5,560) and supramax US$6,268
(2015: US$6,965). Market volumes on cape futures fell 14.3%, whilst
the smaller panamax and supramax sectors showed minor volume
improvements.
The promising start in freight options volumes witnessed in the
first quarter was not sustained and the market volume ultimately
shrank 10% year-on-year. Despite this we performed well.
The iron ore growth story continues with a 56% rise in market
volumes to 1.34bn tonnes. Once again, we have increased our market
share in this growing sector.
Reflecting the diminished volume in freight swaps, our team has
reduced in size but renewed vigour has resulted in improved
performance. At the same time, we have increased our staffing in
the growing iron ore sector both in London and Singapore, where our
volumes remain on a growth trajectory.
The adoption of the cape 180,000 5TC contract seems likely to
take place early in 2017, removing some of the trader uncertainty
and immediately providing an uplift in values of approximately
US$1,000.
Financial
Revenue: US$55.2m (2015: US$43.8m)
Revenue (sterling equivalent): GBP41.0m (2015: GBP28.7m)
Segment underlying profit: GBP6.8m (2015: GBP1.2m)
The solutions and expertise provided by the financial team have
greatly enhanced our client offering and uniquely positions our
business amongst its peers and places us well, as some of the major
banks step back from lending to the shipping market.
Securities
2016 will be remembered as the year the UK voted to leave the
European Union and the year Donald Trump was elected the incoming
US President. Although these issues were predicted to impact the
financial markets significantly, the capital markets have been
relatively stable and resilient and have throughout the year
survived relatively untroubled as a whole.
2016 started as 2015 left off; namely with a continuing downward
spiral in the stock markets whereby major indices took a 10%
haircut the first few weeks into 2016. The downward spiral was
fuelled by concerns of China's slowing economy and the ever-falling
oil prices. At the worst the oil price was below US$30 but at the
end of the year was back above US$50. Our corporate finance
revenues, however, increased approximately 40% compared to the same
period in 2015. Similar to 2015, the first quarter of 2016 saw very
strong secondary trading in bonds, mainly relating to trading in
distressed offshore bonds, however activity came down in March and
continued into April. Corporate finance revenues in the first
quarter of 2016 were driven by equity capital markets transactions
which kicked off in February with Golden Ocean (raising US$200m)
followed by Scorpio Bulkers (raising US$63m) in March.
In the second quarter of 2016, the markets again took a hit as
the UK voted to leave the EU, causing mass confusion about the
future of European financial markets and the value of the British
pound. Despite the difficult markets, we led a US$192m equity
offering for Scorpio Bulkers Inc. in June, and advised Golar LNG in
the establishment and private placement of US$500m of Golar Power
in July, in addition to being retained as advisor for several
Norwegian and international companies.
In the third quarter of 2016, markets were somewhat shut down
within our core sectors despite our strong pipeline. Despite the
still difficult market conditions we led the US$51.5m equity issue
in Star Bulk Carriers Corp. completed in September 2016. In
addition, we were retained for performing valuations and submitting
fairness opinions to two US listed companies, one of which was a
new client.
In the fourth quarter of 2016 markets recovered from the initial
shocks following the Brexit vote and the soothing of China's
stimulus that stabilised the global economy. The election of Donald
Trump as the new President of the United States shook the markets
in the minutes that followed, but ultimately resulted in a rally.
Major indices added between 6% and 12% through the end of the year
as investors bid up stocks in anticipation of deregulation, lower
taxes, inflation and infrastructure spending. For Clarksons Platou
Securities (CPS), markets opened up, and we completed six equity
offerings raising in total approximately US$545m for, amongst
others, Golar LNG, Maritime & Merchant Bank, Songa Bulk and
Standard Drilling, in addition to being a part of the syndicate
raising US$150m in senior notes for Rowan Industries, a new client
of CPS, and a US$225m offering of convertible senior notes for Ship
Finance International.
Looking into 2017, we believe it will likely be a more positive
capital markets environment as we see improvement in both commodity
prices and increasing investor risk appetite. Hence we remain
cautiously optimistic for the year to come.
Project finance
Shipping
At the beginning of the year and until the end of the second
quarter of 2016, we experienced lower transaction activity and
fewer projects being placed in the Norwegian project finance market
compared to earlier years. One major reason for this is clearly the
lack of finance, due to the fact that banks have enough shipping
exposure, and earnings in most segments are not sufficient to
provide a cash flow that covers interest, amortisation and a return
on equity. Another reason has been that the low charter levels and
decline in ship values have had a negative effect on liquidity and
balance sheets of shipowners, which has affected their
creditworthiness and hence their access to finance.
In 2016, we have seen that the project finance market has been
split into two categories: opportunistic asset play projects and
long-term leasing deals. The asset play segments have been mostly
dry cargo, offshore and containers, while we have seen leasing
activity on the tanker side being quite active. The investors in
the asset play deals have been mostly European investors with the
deals arranged and syndicated in the Norwegian project finance
market. On the leasing side, the Chinese leasing banks have been
very active, and a few other private equity funds specifically
targeting the offshore industry have also concluded a couple of
transactions.
In the second half of the year we focused on financing projects
with 100% equity. The activity picked up significantly after the
summer, and in the second half of the year, we structured and
placed three PSV projects (seven vessels), one handysize bulker
project (one vessel) and one feeder containership project (two
vessels). The total equity raised in these transactions amounted to
close to US$65m.
In addition to this, our project sales team has successfully
worked together with Clarksons Platou Securities on the placement
of three private placement transactions.
The outlook for 2017 is positive, as we have several projects in
the pipeline and the momentum going forward is strong.
Real estate
The Nordic real estate market continued the strong path in 2016
with strong growth in Sweden, Finland and Denmark compared to 2015.
The Norwegian market however dropped from NOK118bn to an estimate
of NOK70bn in 2016 mainly due to fewer large transactions than we
experienced in 2015. Across the entire Nordic market, yields on
prime assets and long leases compressed as institutional funds and
family offices 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
but this was significantly down in 2016. The major reason is the
continuous drop in CBD Oslo Yields with 3.75% as a new all-time-low
record. This makes Oslo one of the most expensive commercial real
estate markets in Europe. Domestic property companies and property
funds (listed and unlisted) accounted for 63% of the volume. Even
though yields on prime assets have declined, the yield gap
(difference between real estate yield and interest rate level) is
still attractive. The vacancy rate in the Oslo office market is
expected to decline over the next two years as a result of
conversion and demolition of older office buildings to residential
properties combined with few new office buildings.
Whilst total transaction values have declined in 2016 compared
to 2015 we still see strong demand from the equity side and expect
this to continue.
Structured asset finance
During the course of 2016, it was evident that traditional
shipping finance (particularly from financial institutions in
Europe) had become much harder to obtain. This was largely driven
by more stringent capital regulations, ongoing legacy portfolio
losses and a more cautious approach to credit risk towards the
sector. Whilst a number of smaller banks began to increase exposure
to the sector, this in no way made up for the flight to quality and
reduced syndicated lending from the major shipping banks.
The continuing emergence of global leasing companies (notably in
China and Japan) has provided some of the much needed additional
financing support for the sector but again, whilst these leasing
companies are in expansionary mode and are actively looking for
sound business opportunities beyond their national borders, they
alone do not fill the void. Insurance companies, pension and wealth
funds, incentivised by regulation to match medium-term liabilities
with assets, remain hungry for volume and yield but continue to
have limited risk appetite for the sector and this pool of capital,
aside from a few notable recent US Private Placement transactions,
remains largely untapped by the industry.
In summary, shipping financing is still available for the right
transactions but liquidity is very tight and unlikely to improve in
the next 12 months.
Support
Revenue: GBP17.8m (2015: GBP22.5m)
Segment underlying profit: GBP2.1m (2015: GBP3.3m)
It has been a very strong year for most areas of our business
handling dry cargoes, but, as expected, 2016 was a struggle for
those areas in the oil and gas sector. We have concentrated,
therefore, on controlling overheads whilst providing a
market-leading level of service.
Agency - dry cargo
Grain
As far as grain exports are concerned, 2016 has been an
excellent year for the agency business. Ipswich, Tilbury and
Southampton have seen high shipping volumes, and the smaller
coastal ports such as Poole and Boston have remained busy too.
Additional grain export business has been won which has not only
increased our activity in our traditional grain ports, but also has
seen us handling grain in Sheerness and on the Tyne.
The indications from the trade are that volumes will fall off in
the early part of 2017 as much of the UK exportable surplus has
already been shipped, but levels should pick up again after July's
harvest.
Animal feed
After a steady start to 2016, animal feed imports picked up
significantly in the last few months of the year, with Liverpool
and Avonmouth seeing much increased volumes.
Coal / biomass
Coal imports have now largely been replaced by biomass as power
stations are either converted or closed. The switch of fuel type
alone has not affected Clarkson Port Services (CPS) but we have
seen an overall reduction in activity as customers reduce volumes
due to both planned maintenance on their burners and teething
problems with new port side handling facilities. In 2017 we expect
to return to more normal import volumes.
Agency - liquids
Although in 2016 CPS handled a small number of liquid calls,
mainly based around Harwich, Fawley, Thames and the Mersey, the
agency fees offered by the tanker owners remain very low.
Agency - offshore
Oil and gas
This has been much the hardest part of our business in 2016. We
have seen volumes more than halved because of the downturn, forcing
us to restructure our offices and decrease overheads, whilst
ensuring we remain in a strong position to react to our customers'
requirements both now and in the future.
A slight upturn was seen in the lower fee-earning PSV market
towards the end of 2016, and we are starting to receive enquiries
for a number of projects scheduled for early 2017. We hope that
this is a sign of a slow market improvement, although it will be
some time until it returns to previous levels.
Offshore renewables
Much of 2016 was spent laying the groundwork to ensure that CPS
is involved in the various offshore wind projects commencing around
the UK.
In the third quarter of 2016, we began handling projects in
Belfast and East Coast UK, which will continue well into 2017.
During the coming year we expect this activity to increase
significantly and currently have sight of projects that we should
be involved with at least until 2020.
Gibb Industrial Supplies
As with our other businesses involved in the oil and gas sector,
2016 was a tough year. Orders from the sector reduced significantly
as clients reined in their spending and, consequently, we cut
overhead in order to ensure we remain in a healthy position when
the market improves.
The second half of the year showed signs of improvement but we
continue to focus on promoting our supply business in other
sectors. In addition, in 2016 we completed the implementation of an
electronic stock system that will not only improve the service we
are able to offer our clients, but should also help us control
overheads.
Stevedoring
Our stevedoring operation in Ipswich has perhaps been the most
successful area of our business in 2016, benefiting from an
increased client base, a good harvest year and a widening of
products handled. We continue to benefit from being one of the few
facilities in the UK not directly connected to just a single major
grain house.
With the cooperation of Associated British Ports we have been
able to increase our storage facilities in the port, and are in
discussions to take on additional space in 2017.
Although the prediction is that grain volumes will decrease in
the first half of 2017, we are already seeing our customers
switching their attention away from grain export and focusing on
imported products such as animal feed and rice.
We continue to look for other stevedoring opportunities outside
Ipswich.
Freight forwarding and logistics
In 2016, we concentrated on expanding our focus to new sectors
including renewables, but the market remains challenging.
Research
Revenue: GBP13.7m (2015: GBP11.1m)
Segment underlying profit: GBP4.9m (2015: GBP3.4m)
Our 2016 performance builds on a consistent long-term growth
profile, supported by ongoing investment into this important area
of our business.
Research revenues and results grew strongly in 2016, with sales
reaching GBP13.7m (2015: GBP11.1m). Despite the challenging
markets, underlying sales grew by an encouraging 19% during the
year, as our clients continued to value the importance of
authoritative intelligence. This performance builds on a consistent
long-term growth profile, supported by ongoing investment into this
important area of our business.
Clarksons Research is respected and trusted worldwide as the
market-leading provider of authoritative intelligence and data
across shipping, trade, offshore and energy. We continue to invest
heavily to expand our wide ranging proprietary database, to develop
and enhance our digital product offering and to promote the
Clarksons' profile across the global shipping and offshore
industries. Research also continues to be a core data provider to
the broking, financial and support teams of Clarksons.
The research focus on the collection, validation, management,
processing and analysis of integrated data about the shipping and
offshore markets continues. Our fully integrated and relational
database continues to expand in breadth and depth, with our
shipping and trade database now providing coverage on over 135,000
vessels totalling 1.9bn dwt, over 40,000 companies, over 25,000
machinery models, over 600 active shipyards and fabricators, over
600,000 fixtures and over 100,000 commercial and trade time series,
including coverage of 11bn tonnes of seaborne trade. The offshore
and energy database provides comprehensive coverage of all offshore
fields, projects, production platforms, subsea infrastructure,
rigs, support vessels and construction vessels, all integrated
within a Geographical Information System (GIS). The development of
new proprietary data remains important, including the utilisation
of AIS data, trade and commodity flows, the tracking of capital
market activity and shipping loan data, machinery and environmental
packages on board ships, offshore renewables, ports and terminals,
ship repair yards and other shore side infrastructure relating to
trade and energy.
Over 75% of research sales are annuity based and there is
excellent customer retention. A broad and diversified client base
includes good market penetration across the financial, shipowning,
insurance, supplier, governmental, private equity, energy,
commodity, shipyard, fabrication and oil service sectors. There is
also broad global client spread, including across Asia Pacific.
Total research headcount is now over 100, with a continued
broadening of geographic footprint, involving expansion of
operations in both Shanghai and Singapore during 2016.
Research derived its income from the following principal
areas:
Digital
Sales from digital products performed very well in 2016, growing
by 19%. We continue to invest heavily in our digital product
offering, utilising our growing proprietary database, IT and data
analytics to remain both market leading and to develop new digital
products to add to our offer.
Sales from our flagship maritime commercial database, Shipping
Intelligence Network, continue to grow, while a major upgrade to
our online vessel register, World Fleet Register, during the year
was very well received by clients and helped support robust sales
growth of 27%. Our relaunched register offers a range of new and
powerful functionality including owner and yard profiles, alert
functions and expanded data on equipment, incidents and additional
fleet sectors. Sales of our digital offering across offshore
continue to expand and a further product enhancement to World
Offshore Register is planned for early 2017.
Our launch of a new ship tracking system in late 2016, Clarksons
SeaNet, blends satellite and land based AIS data with our
proprietary database of vessel characteristics and infrastructure.
It tracks global vessel movements for over 60,000 ships, with a
combined fleet tonnage of 1.2bn gt, across over 5,000 ports and
zones. This is a very positive development and is fully
complementary to both the research digital offer and broader
technology strategy across broking and financial. Further new
digital products and product enhancement are expected to come on
line in 2017.
Services
Clarksons Research continues to expand its provision of bespoke
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 data,
consultancy and valuations for banks, shipyards, fabricators,
engineering companies, insurers, governments, asset owners and
other corporates. These bespoke services often become embedded
within our clients' workflows, supporting client retention.
Clarksons Valuations performed particularly strongly in 2016,
growing its position as the leading provider of valuation services
to the ship finance sector. The valuations team work closely with
all major ship finance banks and leading owners, as the value our
clients place on authoritative and comprehensive support increases
with the challenging market conditions. The valuation team
headcount has been expanded in 2016, along with investment in their
operating support tools.
Reports
Market intelligence reports remain an important aspect of the
Clarksons Research overall offering, generating provenance and
profile. Research publishes weekly, monthly, quarterly and annual
reports, publications, registers and maps, available both in print
and within our digital offering, continuing a 50 year heritage. Our
flagship shipping report, Shipping Intelligence Weekly, remains
market-leading while our comprehensive offshore offering, including
Offshore Drilling Rig Monthly and Offshore Support Vessel Monthly,
continues to gain traction.
Financial review
Dividend per share: 65p (2015: 62p)
Underlying profit before taxation*: GBP44.8m (2015:
GBP50.5m)
*Before exceptional items and acquisition related costs
Results
The Group made revenue of GBP306.1m (2015: GBP301.8m) and
incurred administrative expenses of GBP253.0m (2015: GBP242.0m).
The majority of revenue, and a significant proportion of expenses,
are earned in foreign currency. Following the Brexit vote in 2016,
sterling has fallen against most currencies.
Underlying profit before taxation was GBP44.8m (2015: GBP50.5m).
The term 'underlying' excludes the impact of exceptional items and
acquisition related costs, which are shown separately on the face
of the income statement. Management separates these items due to
their nature and size and believe this provides further useful
information, in addition to statutory measures, to assist users to
understand the results for the year.
2016 2015
GBPm GBPm
Underlying profit before taxation 44.8 50.5
Exceptional items 11.1 (2.5)
Acquisition related costs (8.6) (16.2)
====== -------
Reported profit before taxation 47.3 31.8
====== -------
Exceptional items
Exceptional items include the gain on the sale of shares in The
Baltic Exchange to SGX. A special final dividend from The Baltic
Exchange, which was closely linked to the sale, was also treated as
an exceptional item in 2016, although the GBP1.4m special dividend
received in 2015 was included in underlying income in keeping with
the treatment in previous years.
Acquisition related costs
Acquisition related costs includes GBP6.6m of amortisation of
intangibles, GBP1.1m of cash and share-based payments spread over
employee service periods and GBP0.9m of interest on loan notes,
half of which were repaid in June 2016 and the last of which will
be repaid in June 2017. Estimated acquisition related costs for
2017, assuming no other acquisitions are made, would be
GBP4.9m.
Taxation
The Group's effective tax rate, before exceptional items and
acquisition related costs, was 25.0% (2015: 24.9%), reflecting the
broad international operations of the Group and the disallowable
nature of many incurred costs, particularly entertaining. After
exceptional items and acquisition related costs, the rate was 19.8%
(2015: 29.8%).
Earnings per share (EPS)
Underlying basic EPS was 105.2p (2015: 121.9p), calculated as
underlying profit after taxation divided by the weighted average
number of ordinary shares in issue during the year. The reported
basic EPS was 119.7p (2015: 68.2p).
Forward order book (FOB)
The Group earns some of its commissions on contracts where the
duration extends beyond the current year. Where this is the case,
amounts that are able to be invoiced and collected during the
current financial year are recognised as revenue accordingly.
However, those amounts which are not yet invoiced and recognised as
revenue are held in the FOB. In challenging markets, such amounts
may be cancelled or deferred into later periods. Consequently, the
Directors review the FOB at the end of the year, and only publish
the total of those items that are in the FOB which will, in their
view, be invoiced in the following 12 months. At 31 December 2016,
this estimate was US$112m (at 31 December 2015: US$151m). The
reduction in forward visibility of earnings reflects the low levels
of newbuilding contracting and the prevalence of spot business
arising from the highly challenged rate environment, as highlighted
in the interim statement.
Dividend
The Board is recommending a final dividend of 43p (2015: 40p),
which will be paid on 2 June 2017 to shareholders on the register
at the close of business on 19 May 2017. The interim dividend was
22p (2015: 22p) which, subject to shareholder approval, would give
a total dividend of 65p (2015: 62p). In taking its decision, the
Board took into consideration the 2016 performance, the strength of
the Group's balance sheet and its ability to generate cash and the
FOB. The dividend is covered 1.8 times by basic EPS (2015: 1.1
times). This increased dividend represents the 14th consecutive
year that the Board has raised the dividend.
Foreign exchange
The average sterling exchange rate during 2016 was US$1.35
(2015: US$1.53). At 31 December 2016 the spot rate was US$1.24
(2015: US$1.47).
Cash and borrowings
The Group continues to be cash generative, ending the year with
cash balances of GBP154.0m (2015: GBP168.4m), after the repayment
of the first tranche of loan notes amounting to GBP23.3m in June
2016. A further GBP29.4m (2015: GBP5.4m) was held in short-term
deposit accounts, classified as current investments on the balance
sheet. The Board believes that deducting accrued bonuses before
striking a total of net cash and available funds is a better
representation of the net cash available to the business, as
bonuses are typically only paid once a year after the year-end, and
thus an element of the cash held at the year-end is earmarked for
this purpose. Consequently, after deducting all outstanding loan
notes and amounts accrued for performance-related bonuses, net cash
and available funds amounted to GBP74.8m (2015: GBP45.5m). This
significant increase arises as a result of profits, the proceeds
from the sale of The Baltic Exchange, currency gains from holding
non-sterling denominated funds and improved working capital
management.
Balance sheet
Net assets at 31 December 2016 were GBP406.7m (2015: GBP340.9m).
The balance sheet remains strong, with net current assets and
investments exceeding non-current liabilities (excluding pension
provisions) by GBP58.1m (2015: GBP36.2m). The overall provision for
impairment of trade receivables was GBP15.5m (2015: GBP12.3m) and
the underlying US dollar balance increased by US$1.0m, reflecting
the continued challenging trading conditions in the shipping and
offshore markets. The Group's pension schemes have a combined
surplus before deferred tax of GBP2.3m (2015: GBP4.1m deficit).
This improvement is a result of positive investment performances
and updated actuarial assumptions more than offsetting the impact
of the significantly lower year-end discount rate.
Key performance indicators (KPIs)
1. Financial KPIs used in the management of the business include
revenue, profit before taxation, earnings per share and the
FOB.
2. The business also aims to generate long-term shareholder
value, as reflected by a review of total shareholder return.
Jeff Woyda
Chief Financial Officer and Chief Operating Officer
10 March 2017
Risk management
Full details of our principal risks and how we manage them will
be included in the risk management section of the 2016 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 misuse of confidential information
-- Cyber and data security
-- Economic factors
-- Loss of key personnel
-- Adverse movements in foreign exchange
-- 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 Group's full annual report for the
year ended 31 December 2016. 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 10 March 2017 and is signed on its behalf by:
James Hughes-Hallett
Chairman
10 March 2017
Consolidated income statement
for the year ended 31 December
2016 2015
Before After Before After
exceptional exceptional exceptional exceptional
items and items and items and items and
acquisition Acquisition acquisition acquisition Acquisition acquisition
related Exceptional related related related Exceptional related related
costs items costs costs costs items costs costs
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 306.1 - - 306.1 301.8 - - 301.8
Cost of sales (8.9) - - (8.9) (10.3) - - (10.3)
============= ============= ============= ============ ------------- ------------- ------------- ------------
Trading profit 297.2 - - 297.2 291.5 - - 291.5
Other income - 9.7 - 9.7 - 1.3 - 1.3
Administrative
expenses (253.0) - (7.7) (260.7) (242.0) (3.8) (15.1) (260.9)
============= ============= ============= ============ ------------- ------------- ------------- ------------
Operating profit 44.2 9.7 (7.7) 46.2 49.5 (2.5) (15.1) 31.9
Finance revenue 0.8 1.4 - 2.2 2.5 - - 2.5
Finance costs (0.1) - (0.9) (1.0) (1.1) - (1.1) (2.2)
Other finance
costs -
pensions (0.1) - - (0.1) (0.4) - - (0.4)
============= ============= ============= ============ ------------- ------------- ------------- ------------
Profit before
taxation 44.8 11.1 (8.6) 47.3 50.5 (2.5) (16.2) 31.8
Taxation (11.2) - 1.8 (9.4) (12.6) 0.6 2.5 (9.5)
============= ============= ============= ============ ------------- ------------- ------------- ------------
Profit for the
year 33.6 11.1 (6.8) 37.9 37.9 (1.9) (13.7) 22.3
============= ============= ============= ============ ------------- ------------- ------------- ------------
Attributable to:
Equity holders
of the Parent
Company 31.4 11.1 (6.8) 35.7 35.3 (1.9) (13.7) 19.7
Non-controlling
interests 2.2 - - 2.2 2.6 - - 2.6
============= ============= ============= ============ ------------- ------------- ------------- ------------
Profit for the
year 33.6 11.1 (6.8) 37.9 37.9 (1.9) (13.7) 22.3
============= ============= ============= ============ ------------- ------------- ------------- ------------
Earnings per
share
Basic 105.2p 119.7p 121.9p 68.2p
Diluted 104.2p 118.6p 120.5p 67.4p
============= ============= ============= ============ ------------- ------------- ------------- ------------
Consolidated statement of comprehensive income
for the year ended 31 December
2016 2015
GBPm GBPm
Profit for the year 37.9 22.3
Other comprehensive income/(loss):
Items that will not be reclassified
to profit or loss:
Actuarial gain on employee benefit
schemes - net of tax 4.0 7.2
Items that may be reclassified
subsequently to profit or loss:
Foreign exchange differences on
retranslation of foreign operations 50.5 (20.4)
Foreign currency hedge - net of
tax (3.9) (1.1)
------ -------
Other comprehensive income/(loss) 50.6 (14.3)
------ -------
Total comprehensive income for
the year 88.5 8.0
====== -------
Attributable to:
Equity holders of the Parent Company 85.8 6.3
Non-controlling interests 2.7 1.7
------ -------
Total comprehensive income for
the year 88.5 8.0
------ -------
Consolidated balance sheet
as at 31 December
2016 2015
GBPm GBPm
Non-current assets
Property, plant and equipment 30.0 30.8
Investment property 1.2 1.2
Intangible assets 300.5 263.2
Trade and other receivables 1.8 1.1
Investments 4.1 1.9
Employee benefits 7.5 -
Deferred tax asset 12.8 12.5
======== --------
357.9 310.7
======== --------
Current assets
Inventories 0.7 0.9
Trade and other receivables 56.7 61.3
Income tax receivable 2.3 1.7
Investments 29.8 5.7
Cash and cash equivalents 154.0 168.4
======== --------
243.5 238.0
======== --------
Current liabilities
Interest-bearing loans and borrowings (23.6) (23.1)
Trade and other payables (142.3) (139.3)
Income tax payable (6.5) (5.9)
Provisions - (0.2)
======== --------
(172.4) (168.5)
======== --------
Net current assets 71.1 69.5
======== --------
Non-current liabilities
Interest-bearing loans and borrowings - (23.0)
Trade and other payables (11.3) (8.1)
Provisions (0.1) -
Employee benefits (5.2) (4.1)
Deferred tax liability (5.7) (4.1)
======== --------
(22.3) (39.3)
======== --------
Net assets 406.7 340.9
======== --------
Capital and reserves
Share capital 7.6 7.6
Other reserves 240.1 194.2
Retained earnings 155.8 136.2
======== --------
Equity attributable to shareholders
of the Parent Company 403.5 338.0
Non-controlling interests 3.2 2.9
-------- --------
Total equity 406.7 340.9
======== --------
Consolidated statement of changes in equity
for the year ended 31 December
Attributable to equity
holders of the Parent Company
------------------------------------------
Share Other Retained Non-controlling Total
capital reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January
2016 7.6 194.2 136.2 338.0 2.9 340.9
========= ========== ========== ======= ================ ========
Profit for the
year - - 35.7 35.7 2.2 37.9
Other comprehensive
income:
Actuarial gain
on employee benefit
schemes - net
of tax - - 4.0 4.0 - 4.0
Foreign exchange
differences on
retranslation
of foreign operations - 50.0 - 50.0 0.5 50.5
Foreign currency
hedge - net of
tax - (3.9) - (3.9) - (3.9)
========= ========== ========== ======= ================ ========
Total comprehensive
income for the
year - 46.1 39.7 85.8 2.7 88.5
========= ========== ========== ======= ================ ========
Transactions with
owners:
Share issues - 0.1 - 0.1 - 0.1
Employee share
schemes - (0.3) (1.8) (2.1) - (2.1)
Tax on other employee
benefits - - 0.3 0.3 - 0.3
Tax on other items
in equity - - (0.1) (0.1) - (0.1)
Dividend paid - - (18.5) (18.5) (2.4) (20.9)
========= ========== ========== ======= ================ ========
- (0.2) (20.1) (20.3) (2.4) (22.7)
========= ========== ========== ======= ================ ========
Balance at 31 December
2016 7.6 240.1 155.8 403.5 3.2 406.7
========= ========== ========== ======= ================ ========
Attributable to equity
holders of the Parent Company
------------------------------------------
Non-controlling
Share Other Retained interests Total
capital reserves earnings Total GBPm equity
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
(loss)/income:
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:
Share issues 2.4 178.7 - 181.1 - 181.1
Employee share
schemes - 0.6 0.3 0.9 - 0.9
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
--------- ---------- ---------- ------- ---------------- ---------
Consolidated cash flow statement
for the year ended 31 December
2016 2015
GBPm GBPm
Cash flows from operating activities
Profit before taxation 47.3 31.8
Adjustments for:
Foreign exchange differences (3.6) (1.9)
Depreciation of property, plant
and equipment 5.0 4.2
Share-based payment expense 1.3 1.6
Gain on sale of property, plant
and equipment (0.1) (0.1)
(Gain)/loss on sale of investments (9.6) 0.3
Amortisation of intangibles 6.6 9.2
Difference between pension contributions
paid and amount recognised in the
income
statement (1.9) (2.3)
Finance revenue (2.2) (2.5)
Finance costs 1.0 2.2
Other finance costs - pensions 0.1 0.4
Decrease in inventories 0.2 0.5
Decrease in trade and other receivables 13.9 20.8
Decrease in bonus accrual (3.0) (11.1)
Decrease in trade and other payables (1.9) (12.5)
Decrease in provisions (0.1) (2.8)
======= -------
Cash generated from operations 53.0 37.8
Income tax paid (7.4) (13.1)
======= -------
Net cash flow from operating activities 45.6 24.7
======= -------
Cash flows from investing activities
Interest received 0.6 0.8
Purchase of property, plant and equipment (3.1) (24.4)
Proceeds from sale of investments 11.3 6.8
Proceeds from sale of property, plant
and equipment 0.4 0.3
Purchase of investments (3.8) -
Transfer (to)/from current investments
(funds on deposit) (24.0) 20.0
Acquisition of subsidiaries, including
settlement of deferred consideration (23.7) (26.5)
Net cash and cash equivalents acquired
on acquisitions - 43.2
Dividends received from investments 1.5 1.7
======= -------
Net cash flow from investing activities (40.8) 21.9
======= -------
Cash flows from financing activities
Interest paid (0.1) (1.1)
Dividend paid (18.5) (18.2)
Dividend paid to non-controlling
interests (2.4) (1.7)
Repayment of borrowings - (12.8)
Proceeds from shares issued (net
of transaction costs) - 1.2
ESOP shares acquired (6.0) -
======= -------
Net cash flow from financing activities (27.0) (32.6)
======= -------
Net (decrease)/increase in cash and
cash equivalents (22.2) 14.0
Cash and cash equivalents at 1 January 168.4 152.9
Net foreign exchange differences 7.8 1.5
======= -------
Cash and cash equivalents at 31 December 154.0 168.4
======= -------
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 2015
and 2016, but is derived from those financial statements. Statutory
financial statements for 2015 have been delivered to the Registrar
of Companies and those for 2016 will be delivered following the
Company's Annual General Meeting. External Auditors have reported
on the financial statements for 2015 and 2016; 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 2016 financial statements
and have been prepared on a going concern basis.
3 Segmental information
Business segments Revenue Results
2016 2015 2016 2015
GBPm GBPm GBPm GBPm
Broking 233.6 239.5 40.2 49.1
Financial 41.0 28.7 6.8 1.2
Support 17.8 26.2 2.1 3.3
Research 13.7 11.1 4.9 3.4
====== ------ ====== -------
306.1 305.5
Less: property services revenue
arising within the Group,
included under support - (3.7)
====== ------ ------ -------
Segment revenue/results 306.1 301.8 54.0 57.0
====== ------
Head office costs (9.8) (7.5)
====== -------
Operating profit before exceptional
items and acquisition related
costs 44.2 49.5
Exceptional items 9.7 (2.5)
Acquisition related costs (7.7) (15.1)
====== -------
Operating profit after exceptional
items and acquisition related
costs 46.2 31.9
Finance revenue 2.2 2.5
Finance costs (1.0) (2.2)
Other finance costs - pensions (0.1) (0.4)
====== -------
Profit before taxation 47.3 31.8
Taxation (9.4) (9.5)
====== -------
Profit for the year 37.9 22.3
====== -------
4 Exceptional items
2016
Exceptional items include a gain of GBP9.7m on the sale of
shares in The Baltic Exchange to SGX. A special final dividend from
The Baltic Exchange of GBP1.4m, which was closely linked to the
sale, was also treated as an exceptional item in 2016, although a
GBP1.4m special dividend received in 2015 was included in
underlying income in keeping with the treatment in previous
years.
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 was also treated as exceptional other income.
5 Acquisition related costs
Included in acquisition related costs are cash and share-based
payment charges of GBP0.4m (2015: GBP2.1m) 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 (2015: GBP0.7m) 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 GBPnil (2015: GBP3.1m) of legal and
professional fees relating to the Platou and other acquisitions and
GBP6.6m (2015: GBP9.2m) 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 GBP0.9m (2015: GBP1.1m).
6 Taxation
The major components of the income tax charge in the
consolidated income statement are:
2016 2015
GBPm GBPm
Profit at UK average standard rate of corporation tax of 20.00% (2015: 20.25%) 9.5 6.4
Expenses not deductible for tax purposes 1.6 2.8
Non-taxable income (2.3) (0.3)
Tax losses not recognised 1.3 -
Other adjustments (0.7) 0.6
====== ------
Total tax charge in the income statement 9.4 9.5
====== ------
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 Company by the weighted average number of ordinary shares in
issue during the year.
Diluted earnings per share amounts are calculated by dividing
profit for the year attributable to ordinary equity holders of the
Parent Company 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:
2016 2015
GBPm GBPm
Profit for the year attributable to ordinary
equity holders of the Parent Company 35.7 19.7
========== -----------
2016 2015
Millions Millions
Weighted average number of ordinary shares 29.9 29.0
Diluted weighted average number of ordinary
shares 30.1 29.3
---------- -----------
8 Dividends
The Board is recommending a nal dividend of 43p (2015: 40p),
giving a total dividend of 65p (2015: 62p). This final dividend
will be payable on 2 June 2017 to shareholders on the register at
the close of business on 19 May 2017, subject to shareholder
approval.
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 year end. This has
resulted in an increase of GBP42.5m in the carrying value of
goodwill and GBP1.4m in the carrying value of other intangible
assets in the year.
11 Current investments
The Group held GBP19.4m (2015: GBP5.4m) in a deposit with a 95
day notice period. The Group also held GBP10.0m (2015: GBPnil) in a
deposit with a maturity of six months at the year-end. These
deposits are held with an A-rated financial institution.
Other current investments amount to GBP0.4m (2015: GBP0.3m).
12 Cash and cash equivalents
2016 2015
GBPm GBPm
Cash at bank and in hand 147.7 161.3
Short-term deposits 6.3 7.1
------
154.0 168.4
====== ------
13 Interest-bearing loans and borrowings
Interest-bearing loans and borrowings comprise the vendor loan
notes issued as part of the consideration for the Platou
acquisition of GBP23.6m. Interest is charged at 12 month sterling
LIBOR plus 1.25%. Half 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.
As at 31 December 2016 the combined schemes had a surplus of
GBP2.3m (2015: GBP4.1m deficit), including a minimum funding
requirement of GBP4.1m on the Plowrights scheme (2015: GBP1.4m). As
there is no right of set-off between the schemes, the benefit asset
of GBP7.5m (2015: GBPnil) is disclosed separately on the balance
sheet from the benefit liability of GBP5.2m (2015: GBP4.1m). The
Group has recognised a deferred tax asset on the benefit liability
amounting to GBP0.8m (2015: GBP0.7m) and a deferred tax liability
on the benefit asset of GBP1.2m (2015: GBPnil). The market value of
the assets was GBP200.5m (2015: GBP170.1m) and independent
actuaries have assessed the present value of funded obligations at
GBP194.1m (2015: GBP172.8m).
15 Share capital
2016 2015 2016 2015
Million Million GBPm GBPm
Ordinary shares of 25p each, issued and fully paid 30.2 30.2 7.6 7.6
========= --------- ------ ------
16 Contingencies
From time to time the Group is engaged in litigation in the
ordinary course of business. The Group carries professional
indemnity insurance. There is currently no litigation that is
expected to have a material adverse financial impact on the Group's
consolidated results or net assets.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR URORRBUAOAUR
(END) Dow Jones Newswires
March 13, 2017 03:00 ET (07:00 GMT)
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