TIDMCKN
RNS Number : 6353I
Clarkson PLC
12 August 2019
12 August 2019
Clarkson PLC (Clarksons) is the world's leading provider of
integrated shipping services. From offices in 23 countries on six
continents, we play a vital intermediary role in the movement of
the majority of commodities around the world.
Interim results
Clarkson PLC today announces unaudited interim results for the
six months ended 30 June 2019.
Summary
-- Robust first half performance despite challenges remaining in
the shipping, offshore and capital markets
-- Particularly strong trading in the broking division
-- Underlying profit before taxation of GBP20.1m (2018: GBP19.2m)
-- Underlying earnings per share of 48.5p (2018: 45.8p)
-- Robust balance sheet, with GBP58.3m of free cash resources(1)
(30 June 2018: GBP44.1m)
-- Increased interim dividend of 25p per share (2018: 24p per share)
-- Outlook for the full year remains unchanged
(1) Free cash resources are cash and cash equivalents and
current investment deposits, after deducting interest-bearing loans
and borrowings, amounts accrued for performance-related bonuses and
amounts held by regulated businesses
Six months Six months
ended ended
30 June 2019 30 June 2018
Revenue GBP167.8m GBP152.6m
Underlying profit before taxation* GBP20.1m GBP19.2m
Reported profit before taxation GBP19.2m GBP18.0m
Underlying earnings per share* 48.5p 45.8p
Reported earnings per share 46.2p 42.5p
Interim dividend per share 25p 24p
* Before acquisition related costs of GBP0.9m (2018:
GBP1.2m).
Andi Case, Chief Executive Officer, commented:
"Clarksons has delivered a robust performance in the first half
of 2019, with revenue up 10% and underlying profit up 5% on the
first half of 2018, despite suppressed investor appetite weighing
on the financial markets.
"As in previous years, our business remains second half weighted
and we anticipate that the upcoming introduction of IMO 2020 will
cause market disruption supporting higher freight rates as the
supply of available vessels is impacted. This, and a broader
re-balancing of supply and demand dynamics, means we remain
confident in the outlook for Clarksons and the shipping markets,
both in the coming months and longer-term."
Enquiries:
Clarkson PLC 020 7334 0000
Andi Case, Chief Executive Officer
Jeff Woyda, Chief Financial Officer & Chief Operating
Officer
020 3757 4983 /
Camarco 4994
Billy Clegg
Jennifer Renwick
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. An explanation
and reconciliation of the term 'underlying' and related
calculations are included within the Chief Executive Officer's
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 1,605 people in 50 different offices across
its four divisions and is number one or two in all its market
segments.
The Company has delivered 16 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.
Chair's review
I am delighted to present my first Chair's interim statement
since my arrival at Clarksons in February 2019. Over the last six
months I have met a large number of colleagues and stakeholders and
have been impressed by both the quality of the global team and the
robust and diverse business spanning all shipping and offshore
sectors.
The global shipping, offshore and capital markets have remained
challenging in the first half as the headwinds highlighted in our
annual report in March slowed the speed of recovery expected from
the downturn experienced over the past decade. Overcapacity in the
global fleet is however slowly re-balancing with the continued low
supply of new vessels, and the Board believes the supply/demand
dynamics are beginning to equalise. Since the half year end, this
is particularly highlighted within the dry cargo segment where the
Baltic Dry Index has increased by 42%. The overall freight market
however is more muted with the ClarkSea Index having increased by
2%.
The breadth and diversity of Clarksons' business has helped
deliver good results for the first half of 2019 which are in line
with our expectations, following strong performances in our
broking, research and support businesses, whilst our financial
services business was impacted by investor sentiment in the capital
markets. Continued market leadership across the verticals in
broking has contributed to this solid financial performance.
We continue to invest in our outstanding and highly valued
people, the core of the success of Clarksons, and in technology for
the future. The innovative Sea/ platform, which offers end-to-end
digitisation of the freight transaction supply chain, remains a
clear differentiator for our business and will increase
efficiencies and connectivity with clients.
The Board continues to expect 2019 to be second half weighted
and the outlook for the full year remains unchanged. The
introduction of the IMO 2020 sulphur cap regulations is rapidly
approaching and, as the shipping fleet adjusts with both the
retrofitting of scrubbers and requirements for new, more
sustainable vessels, we believe that shipping supply dynamics will
result in improving freight rates.
Bill Thomas
Chair
9 August 2019
Chief Executive Officer's review
I am pleased to report that Clarksons has delivered a robust
first half performance in 2019, with our broking and research
businesses reporting significantly improved performances on last
year, despite the continued challenging shipping markets and
broader investor macro-economic concerns weighing on market
activity.
Headwinds from geo-political uncertainty have continued to
affect general sentiment in the first half, however events such as
trade wars also create market inefficiencies as goods travel
different, and often longer, routes to their end destinations,
creating opportunities for Clarksons. Without doubt, investor
confidence has been impacted and this has been particularly evident
in the capital markets, which have remained all but closed in the
first half. As a result, our financial services division has had a
particularly challenging first six months, despite having a strong
pipeline of signed mandates which await a recovery in
sentiment.
Clarksons has continued however to be a profitable and
cash-generative business and our ongoing success is a reflection of
the strength and quality of our people. We continue to evolve and,
I believe, we have the best brokers in the world at Clarksons, with
the smartest next generation of young brokers coming through the
ranks, bringing renewed focus and vigour to the business and
positioning Clarksons as a real force for future success. I would
like to thank all of my colleagues for their tireless hard work and
dedication in ensuring that our clients consistently receive first
class service and truly expert insights and advice. Our results
demonstrate the continued effectiveness of the scale and breadth of
our offering, our market-leading positions and the strong
relationships Clarksons fosters with its clients.
We remain confident in the outlook for the shipping markets,
with the ClarkSea Index pointing to improving underlying
fundamentals as it increased 8% year-on-year in the first half to
move marginally above the trend last seen since the financial
crisis. Whilst the average of the Baltic Dry Index (BDI) in the
first half of 2019 was 26% weaker than the first half of 2018 and
40% weaker than the second half of 2018, we have begun to see
increases in the BDI in recent weeks and the tanker market has
recorded earnings up 80% year-on-year in the first half.
The imminent IMO 2020 sulphur cap regulations are set to provide
market disruption for some sectors in the second half of 2019 and
certainly into 2020 as time out of service for scrubber retrofit
will reduce available 'active' capacity, supporting further market
gains and earnings for charter market vessels as freight rates
continue to improve. We also expect to see route inefficiencies for
the foreseeable future as a lack of suitable fuel availability
forces vessels to travel further to source the required fuel,
combined with potentially slower steaming if the price of fuels
vary dramatically.
The broking teams delivered a strong first half of 2019, despite
a fall in dry cargo earnings from their six-year highs as the
impact of the Vale dam disaster, adverse weather conditions and the
US-China trade war resulted in some seaborne trade disruptions.
Earnings in the tanker market during the first half of 2019 were
significantly stronger than the first half of 2018, benefiting from
high levels of oil production and exports and containership market
conditions made progress over the period, albeit more gradually
than expected. Container charter rates in the larger sizes saw by
far the greatest gains, up on average c.40% since early 2019, with
improvements for the smaller ships more limited in the first half.
On the newbuild supply side, growth is slowing alongside a slower
pace of deliveries and clients are being more strategic in the
tonnage being ordered. Activity in the sale and purchase market was
more challenging than expected.
The first half of 2019 has been difficult for our financial
division. Weak investor sentiment on the back of macro-economic
concerns have made capital markets transactions particularly
challenging. There were no new listings of companies within our
covered verticals on exchanges in the US or Norway during the first
quarter. We did however complete six equity offerings and two debt
offerings, raising approximately US$830m, with a number of further
transactions postponed due to market conditions. Whilst market
sentiment remains fragile, our financial division has a strong
pipeline of mandated transactions ready to be executed as market
conditions begin to improve.
Clarksons Research revenue grew by 6% during the first half,
supported by significant ongoing investment and innovation, and
remains the market leader in the provision of authoritative data
and intelligence across shipping, trade, offshore and energy. Our
data and analysis continues to be widely used and trusted across
the shipping industry to support a range of decision-making by our
clients. Our data offering also provides wide ranging support to
the broking and finance teams of Clarksons and, increasingly, to
the new Sea/ suite of systems.
The port services team continues to grow both in the UK and in
Egypt, while offshore activities continue to increase in Scotland
and the east coast of England in both the oil and gas and
renewables markets.
We have previously talked about the importance of innovation and
technology in the shipping industry and I am very proud to announce
that we have established Maritech, a ring-fenced corporate
subsidiary of Clarksons, through which we have launched Sea/, the
world's first end-to-end digital shipping platform. Sea/ is an
enabler and tool for trade, servicing users all along the shipping
chain, digitalising the freight transaction workflow for partners
including charterers, owners, traders, operators and brokers. Sea/
is highly complementary to brokers and will enable them to increase
connectivity with their clients and enhance the service they
offer.
Results
The Group's underlying results exclude the impact of acquisition
related costs, which are shown separately on the face of the income
statement due to their nature and size, as management believes this
provides further useful information, in addition to statutory
measures, to assist users of the interim report to understand the
results for the period. Total revenue in the first half was
GBP167.8m (2018: GBP152.6m) and administrative expenses were
GBP139.7m (2018: GBP128.3m). Underlying profit before taxation was
GBP20.1m (2018: GBP19.2m), which, after acquisition related costs
of GBP0.9m (2018: GBP1.2m), resulted in a reported profit before
taxation of GBP19.2m (2018: GBP18.0m). Underlying earnings per
share, before acquisition related costs, were 48.5p (2018: 45.8p).
Reported earnings per share were 46.2p (2018: 42.5p).
2019 2018
GBPm GBPm
Underlying profit before taxation 20.1 19.2
Acquisition related costs (0.9) (1.2)
====== ------
Reported profit before taxation 19.2 18.0
====== ------
Cash and dividends
Clarksons is a cash-generative business which enables us to
maintain our progressive dividend policy for investors whilst
maintaining sufficient funds to invest in the business, take
advantage of opportunities as they may arise and provide sufficient
headroom for us to weather the challenges and cyclicality of the
shipping market.
Clarksons has a strong balance sheet with cash balances at 30
June 2019 of GBP109.1m (30 June 2018: GBP95.9m) and a further
GBP1.7m (30 June 2018: GBP0.5m) in short-term deposit accounts,
classified as current investments on the balance sheet. These
balances are struck following payment of the final dividend
relating to 2018. Net cash and available funds, after deducting
amounts accrued for performance-related bonuses but including
certain short-term investments, amounted to GBP60.3m (30 June 2018:
GBP60.2m). Free cash resources, after adjusting for amounts held by
regulated businesses, amounted to GBP58.3m (30 June 2018:
GBP44.1m).
The Board has declared an increased interim dividend of 25p per
share (2018: 24p per share) which will be paid on 20 September 2019
to shareholders on the register at the close of business on 6
September 2019. This is in line with our progressive dividend
policy, which has seen 16 years of consecutive dividend
increases.
Should the challenges of the offshore and financial divisions
continue, Clarksons may be required to recognise an impairment
charge to goodwill held within our intangible assets in the future.
Such an impairment charge would not be expected to have an impact
on Clarksons' distributable reserves, cash position or our ability
to pay dividends.
Outlook
Despite the ongoing challenges from market sentiment and global
macro-economic uncertainty, we are encouraged by current trading
conditions in the broking sector. As highlighted at the year-end,
we continue to expect our full year results to be second half
weighted.
We have a strong pipeline of mandated financial transactions
ready to be executed should the capital markets open up again. Our
continued investment in technology positions Clarksons at the
forefront of the sector, with our end-to-end digital shipping
platform evolving the way our brokers, charterers and shipowners
interact and operate. We remain confident in the longer-term
outlook for Clarksons, as we look to further strengthen our
market-leading position across the shipping markets.
Andi Case
Chief Executive Officer
9 August 2019
Business Review
Broking
Revenue: GBP130.1m (2018: GBP111.5m)
Segment underlying profit: GBP21.8m (2018: GBP15.9m)
Dry cargo
The freight market during the first half of 2019 was a huge
disappointment due to severe seaborne trade disruptions. The
seasonal first quarter downturn was amplified by the impacts of the
Brumadinho dam rupture at Vale's mine in Brazil and subsequently
adverse weather in the northern parts of Brazil and in Australia's
Pilbara iron ore region. As a result, iron ore seaborne trade
suffered a 4% decline compared to the same period last year.
African swine fever, which requires infected pigs to be culled,
reduced the soybean feedstock demand significantly and the US-China
trade war stifled industrial production.
The average of the BDI was 26% weaker than the first half of
2018 and 40% weaker than the second half of 2018. This market
weakness led to accelerated demolition of older uneconomical
tonnage, which reached 4.5m dwt, almost double the volume of the
first half of last year. More robust new delivery volumes however
resulted in expansion of the fleet by 2.5% year-on-year.
With the incoming IMO 2020 regulations, some ships took an early
opportunity to enter ship repair yards to fit exhaust gas cleaning
systems (scrubbers), which reduced the active fleet. That, together
with the recent recovery in iron ore volumes and a robust East
Coast South America corn season, assured the normalisation of rates
and sent the BDI to 1,858 which is 42% above the rate at 30 June
2019.
Ongoing economic growth in emerging Asian countries and China's
infrastructure stimulus support dry bulk seaborne demand. With the
tightness in the active fleet prevailing as ships prepare for the
monumental shift in the industry fuel usage requirements, freight
rates should remain more buoyant than the first half.
Containers
Containership market conditions overall saw some degree of
progress in the first half of 2019, but, with the exception of
vessel earnings at the larger end of the charter market, this was
more gradual than expected. The container freight market
experienced a difficult first half; spot box freight rates
generally trended downwards (as they did in the first half of 2018)
though started to stabilise towards the end of the second quarter.
The key Shanghai Containerised Freight Index fell by 9% between
December 2018 and June 2019, although the first half average was
still up 6% year-on-year. Despite this backdrop, containership
charter rates improved in the first six months of 2019 with the
'basket' containership charter rate index up 12% between early 2019
and the end of the first half; although the average index was still
down 15% year-on-year, the trend is now clearly upwards and
sentiment has improved. Charter rates in the larger sizes saw by
far the greatest gains, up on average c.40% since early 2019, with
improvements for the smaller ships significantly more limited in
the first half. The one year charter rate for a 6,800 TEU
containership, for example, increased from US$11,000 per day at the
end of 2018 to US$20,250 per day at the end of June 2019.
In terms of fundamentals, global seaborne box trade growth
appeared relatively soft in the first six months of 2019; clear
headwinds from the world economy, including the US-China 'trade
war', had an impact and projections have been downgraded. Box trade
growth is now expected to reach 3.4% in TEU terms (2.9% in
TEU-miles), although significant risks remain and further
downgrades are possible. On the supply side, growth is now clearly
slowing. Total fleet capacity expansion stood at 1.8% so far in
2019 (compared to 5.6% in full year 2018) and is expected to reach
a more moderate 2.9% for the whole of 2019 (and 3.2% in 2020),
alongside a slower pace of deliveries. Boxship time 'out of
service' for scrubber retrofit started to reduce available 'active'
capacity in the first half of 2019 and is currently estimated to
absorb c.1% of capacity across the whole of 2019 (c.2% above 8,000
TEU in size). Boxship contracting has remained subdued in the first
six months of 2019 at 0.3m TEU and the order book remains
historically limited at 11% of fleet capacity. Overall, fundamental
re-balancing has been limited so far in 2019; however, there
appears to be some upside for demand growth in the second half,
although significant risks clearly remain. Improvements are
expected in the remainder of 2019 and into 2020, but further
re-balancing is likely to be gradual. Nevertheless, vessel scrubber
retrofit time and other impacts related to the IMO 2020 regulations
could support further market gains, and earnings for larger charter
market vessels in particular.
Tankers
Crude tanker earnings in the first half of 2019 were
significantly stronger than the very weak earnings seen in the
first half of 2018, although somewhat weaker than the stronger
levels seen in the second half of 2018. Clarksons assessed earnings
for VLCCs trading on the main Middle East-Far East route were 146%
higher than in the first half of 2018 but 28% down on the second
half. Clarksons assessed average suezmax and aframax earnings
increased by 117% and 91% respectively year-on-year in the first
half of 2019, and were 25% and 17% lower respectively when compared
to the second half of 2018.
In the early part of the year, crude tanker markets continued to
feel residual benefit from the high levels of oil production and
exports seen in the fourth quarter of 2018, as well as record
levels of both reported US crude exports in February and delays in
the Turkish Straits. Earnings weakened in the second half of March,
with contributory factors believed to be: heavy newbuilding
deliveries in the early part of the year; the OPEC and non-OPEC
production cuts; the further decline in Venezuelan exports; easing
of vessel delays; and seasonal refinery maintenance.
Earnings for VLCCs and suezmaxes strengthened somewhat once
again in June, influenced by recent incidents involving tankers in
the Middle East. The crude tanker market is expected to remain
significantly stronger than in 2018 overall, supported by:
increasing US crude exports, particularly in the second half of the
year; a lower level of newbuilding deliveries in the second half of
2019; retrofitting of vessels with scrubbers; significant expansion
of refining capacity in Asia; further restrictions on shipments
from Iran and on Iranian tonnage, leading to additional shipments
from elsewhere using spot market tonnage; and pre-IMO 2020
disruption in the fourth quarter.
In the clean tanker market, assessed earnings for LR2s on the
benchmark Middle East-Far East route increased by 98% year-on-year
in the first half of 2019 when compared to the first half of 2018
and also increased by 38% when compared to the levels seen in the
second half of 2018. Assessed earnings for LR1s on the same route
increased by 73% year-on-year in comparison to first half 2018
earnings and increased by 35% against the second half 2018 level of
assessed earnings for LR1s on this route.
Assessed average clean MR earnings increased by 39% in the first
half of 2019 compared to the first half of 2018 and by 45% compared
to the second half of 2018. These increases should be seen in the
context of a weak market in all but the last two months of 2018
however, they do demonstrate that the expected stronger market in
2019 is materialising.
The stronger earnings have coincided with the forward curve for
gasoil being in contango, with forward prices at higher levels than
current prices, which is generally considered beneficial for
trading, as well as strong demand for gasoline imports into the US
due to a combination of planned and unplanned refinery outages.
Looking forward, the closure of the largest oil refinery on the
US East Coast is expected to support higher imports of gasoline
into that region, and the commissioning of new refining capacity in
China may drive increased products exports from the country. We
also continue to anticipate an increase in overall products trade
volumes and changes to trading patterns due to IMO 2020, leading to
increased products tanker demand towards the end of the year. On
the supply side, a lower level of newbuilding deliveries, together
with retrofitting of LR2 products carriers with scrubbers, are also
expected to support markets in the second half of the year.
Specialised products
The first few weeks of the year began with a reasonable earnings
environment, however this soon gave way to a much more challenging
backdrop, with owner earnings at a five year low for the balance of
the first half. One of the key drivers keeping the market subdued
has been the performance of the heavily linked petroleum products
tanker market, which remains stuck in neutral across much of the
globe. We are once again seeing instances of part-capable IMO MRs
competing with chemical carriers for bulk cargoes, particularly in
arterial routes ex-Middle East Gulf.
Benchmark spot rates have declined with the Clarksons Platou
Specialised Products Bulk Chemical Index recording a 5% decrease
over the first half of 2019 and the Clarksons Platou Specialised
Products Edible Oils Index showing a steeper decline of 10%. The
latter is particularly influenced by the ebb and flow of the
petroleum products market due to the transient nature of tonnage
trade between the two sectors. In a similar manner to the
prevailing spot markets, the period charter and secondhand sectors
were also bereft of activity with little deal flow. Continued
uncertainty surrounding the impending IMO 2020 regulations and
their impact was undoubtedly a persistent driver of lower liquidity
in the chemical tanker projects space.
The volume of specialised products seaborne trade growth remains
encouraging, with an upgraded annual growth figure of 6.3%
year-on-year in 2018. While earnings and market sentiment are
lacklustre, a combination of vast infrastructure spending,
urbanisation rates, growing populations and increasing social
mobility are positive mega-trends which we expect to continue
driving specialised products trade in the medium and long-term. The
US and Middle East's downstream liquid chemical investment schemes
continue, with a raft of key project announcements showing no signs
of weakening. We continue to believe in robust seaborne volume
growth of around 5% in 2019 and 5% in 2020. Average trading
distances are expected to increase marginally this year, thus
giving tonne-mile growth of just greater than 5%. US-China trade
wars have thus far had little direct impact on our overall market
as the trade lane only accounts for just over 0.5% of total
seaborne trade. That said, arguably it has decreased the
productivity of the fleet during the period due to some re-routing
of vessels and cargo, meaning more ships are required to transport
the same amount of cargo.
On the supply side, with the inclusion of swing tonnage, real
net fleet growth is expected to be marginally lower than tonne-mile
growth this year. The overall chemical tanker order book now stands
at just 6% of the in-service fleet by dwt, the lowest across all
major shipping sectors and well below the long-run chemical tanker
average of 16% over the last 18 years. Overall, we expect average
annual net fleet growth to marginally decrease from 5.4% in 2018 to
5.3% in 2019, before falling to a little more than 2% in 2020.
In our view, development of the average haul and productivity of
the fleet, so important in the relatively complex chemical tanker
world, continue to be two major factors for freight rates in future
years. The fourth quarter of 2019 and 2020 remain set to be key
periods for the chemical tanker market, with an expectation of
increases in fleet utilisation.
Gas
2019 began on a relatively weak note for the VLGC carrier
market, much in line with the traditional seasonal trend. This was
compounded by lower exports from the US in February and March due
to fog delaying loadings through the Houston ship channel and
later, as a result of a chemical spill. Over February, more of the
Asian volumes were sourced from the Middle East, which served to
reduce tonne-mile demand. As we progressed into the second quarter,
however, the knock on effects of the delays started to be felt. As
a result of tight availability of tonnage, combined with a slower
pace of newbuilding deliveries, in the first half of 2019 relative
to 2018 freights started to move steeply upwards, reaching a peak
of just shy of US$80 pmt Arabian Gulf-Japan at the beginning of
July. This is the highest spot freight seen since October 2015 and
year-to-date earnings are currently 173% up year-on-year, averaging
US$33,446 per day. Despite the dip in February, US export volumes
have continued to rise this year as the build out of volumes from
the new Marcus Hook was more rapid than expected and as we have
seen higher throughput through Mariner South and the P66 terminal
in Freeport. Partially on the back of a stronger VLGC market, but
also due to a slowdown in newbuilding deliveries, we have also seen
freights for the midsizes start to show some signs of improvement.
In the first half of this year, the assessed 12 month time charter
rate for a 35,000 cbm vessel
averaged US$511,000 pcm compared with US$423,000 pcm last year
and the premium for the modern 38's has continued to grow and has
averaged US$67,000 pcm above the 35's this year compared with
US$27,000 pcm for the first half of 2018. This has also supported
the handysize market, which has become increasingly reliant on
petrochemicals trade, and freights in this segment have risen 8%
compared to the first six months of 2018.
LPG trade is continuing to grow, underpinned by healthy NGL
production in the US and the continued expansion of terminal
capacity. Both Targa and Enterprise in the US Gulf Coast have
expansions planned this year and next, and the existing terminals
have also been running at high utilisation levels. Despite the
imposition of US sanctions on Iran, volumes from the Middle East
have also held up well. Additionally, we have seen new volumes
starting to flow from Australia and the start-up of Canada's first
LPG terminal located on the West Coast. The impact of tariffs is
continuing to impact trade flows with US tonnes redirected to other
Asian import markets, whilst China has been sourcing more volume
from the Middle East. Ammonia trade has proven fairly disappointing
so far this this year, although the new volumes from Indonesia have
been flowing well. Supply side factors have also helped to support
the freight market this year as the pace of newbuilding deliveries
has slowed across all segments, although there have been very few
units removed from the fleet this year.
The smaller size semi-refrigerated vessels have continued to
face competition from the larger handysize units, which have become
increasingly reliant on these trades as the midsizes have competed
for LPG volumes. Yet, despite this, assessed time charter rates for
the 8,250cbm carriers have remained fairly flat. Pressure carrier
rates, in contrast, have strengthened slightly on last years'
levels as a result of a marginal contraction in the fleet. However,
they have remained flat overall since the start of this year.
LNG
The near-term LNG spot market was slightly softer in the first
half of 2019 compared with the same period in 2018, with spot rates
for conventional 160km(3) Tri-Fuel Diesel Electric tonnage around
15% lower at an average of US$52,096 per day. Although global LNG
traded volumes were higher, LNG freight rates were being pressured
by lower northeast Asian LNG spot prices.
More specifically, the narrower price spread between European
natural gas and Asian LNG prices meant that Atlantic cargoes were
making shorter-haul voyages and staying in the Atlantic Basin. This
contrasts with last year, where high Asian demand resulted in
Atlantic Basin cargoes making the longer-haul voyage to the Pacific
Basin.
The spread between northeast Asia LNG and UK natural gas
narrowed to US$0.76 per million BTU in the first half of 2019,
compared with US$1.71 per million BTU in the equivalent period in
2018. While China continued to increase LNG purchases, Japan and
South Korea reduced imports with a mild winter reducing gas
consumption. Meanwhile, Europe nearly doubled LNG imports to nearly
41m tonnes as it started to absorb Atlantic Basin cargoes,
especially new production from the US.
Seasonal patterns means that rates usually rise from the second
half of the year as the northern hemisphere enters winter.
Discussions for multi-month periods to cover winter have been
active this year, with some market participants keen to secure
tonnage.
Increased global traded volumes also provided some support to
the LNG shipping market. Around 170m tonnes was traded in the first
half of 2019, up by 10.1% compared with the first six months of
2018. As well as production ramping up from projects that started
last year, Australia's 3.6m tonnes per annum Prelude project and
the US' 4.5m tonnes per annum Cameron T1 unit also started exports
in 2019 and added to tonnage demand.
An additional five liquefaction projects with a total export
capacity of 16.8m tonnes per annum are scheduled to start in the
second half of 2019. In total, 20 LNG carriers were delivered in
the first half of 2019 and another 18 LNG carriers are scheduled
for delivery before the end of the year.
Meanwhile, LNG newbuild ordering activity remains on par with
last year. In the first six months of 2019, 24 orders were placed
compared with 25 in the same period in 2018.
Three new liquefaction projects have been approved in 2019: US
Golden Pass, US Sabine Pass T6 expansion, and the Mozambique LNG
export projects. These should result in additional demand for
tonnage in the longer-term when the facilities start production in
around mid-2020.
Sale and purchase
Secondhand
In line with recent years, we have found the first half of 2019
to be more challenging than expected when it comes to concluding
sale and purchase business and we once again look to the second
half of the year to be more productive than the first, which it is
already proving to be.
There are various reasons for lower activity such as the dam
disaster at the Vale mine in Brazil in January, which resulted in
significant disruption to that country's iron ore production,
reducing the seaborne tonne-mile equation and thus driving down
freight rates in the dry cargo market all at the same time.
Further, there is the well reported on/off trade war between the US
and China, which has created uncertainty across all shipping
sectors and given potential buyers more reason to be cautious.
The continued difficulties for owners to access finance from
either the traditional shipping banks or the capital markets only
goes to reinforce why there has been such a dearth in sale and
purchase activity across the board. Simply put, it has been a case
of not having enough buyers combined with sellers' reluctance to
discount their price ideas in order to tempt them.
However, with the fast approaching dates for both the new IMO
fuel regulations, and the requirement to install Ballast Water
Treatment Systems we are starting to see a real urgency for some
owners to transact as many simply do not have the capacity to cover
these huge capital costs across their entire fleet within such a
short space of time. When this pressure is added to a rising
optimism in the freight market, then we see those with cash
returning as buyers look to leverage their position to find
interesting opportunities to purchase tonnage.
Newbuilding
The first half of 2019 has been challenging for shipyards and as
of the end of June 2019, the global order book totalled 3,172
vessels of a combined 198.0m dwt and 78.9m cgt, representing a 13%
decline in dwt terms since the end of 2018 and the lowest level
since the end of September 2017.
Due to firm deliveries and limited ordering, the global tanker
order book shrunk significantly in the first six months of the
year, by 24% in dwt terms, to stand at 602 vessels of a combined
53.3m dwt as of the end of June 2019. The VLCC order book shrunk by
25% in dwt terms in the first six months of the year, driven in
part by firm deliveries from South Korean yards, to stand at 81
units of a combined 24.9m dwt as of the end of June. This
represents the lowest level since the end of December 2013.
Whilst the conventional dry and wet markets have remained
challenged, the LNG carrier sector has remained relatively active
and accounted for 21% of newbuild contracts placed in the first
half of 2019 in cgt terms, with 30 vessels of a combined 2.4m dwt
and 4.3m cgt reported ordered globally. Whilst this is down 27%
year-on-year following record ordering in the sector last year,
there has still been some speculative endeavour against a bullish
forward outlook.
There remains some optimism for an improved second half as yards
push to sell pockets of more imminent capacity that remains
uncommitted, as well as the continued drive towards LNG and greener
propulsion that may well catalyse further investment into
newbuilding as we push into the second half of the year and into
2020.
Offshore
General
The first six months of 2019 have been challenging for the
offshore oil services sector, though as usual, with certain
sub-segment differences and signs of optimism. During the first
half of the year, the oil price has been relatively stable ranging
between US$60 and US$68. Even though we have seen production
interferences or involuntary production cutbacks from Iran,
Venezuela, Libya and Nigeria, it has become evident that the market
suffers from potential oversupply and that discipline from OPEC is
still required to balance the market. During the first six months
of 2019, we have seen a steady increase in rig tendering, fixing
activity and slightly improving utilisation for selected rig and
offshore support vessel (OSV) segments. Field development activity
is however still progressing slowly and operators in general did
not increase sanctioning of new developments notably compared to
last year. Offshore contractors and suppliers however regained some
optimism and seem to be preparing for increasing activity levels
forward. This is visible, for example, through increasing sale and
purchase activity and to some extent secondhand values in certain
segments. In spite of the cautious optimism, utilisation and rates
in general across the different offshore service segments remain at
depressed levels.
Drilling market
Total offshore rig demand continued to improve in the first half
of 2019 having bottomed in early 2017 and gained momentum through
2018. The global offshore rig count (rigs on contract) was at 494
units as of the end of June, up from 457 units at year-end 2018.
Active utilisation is currently around 72% (end of 2018: 69%) for
jackups and 74% (end of 2018: 65%) for floaters.
A deeper analysis of the rig market displays significant
regional and sub-segment variances. In shallow water, we see
increased rig demand in the Middle East, Asia and West Africa. For
the deep water and ultra-deep water floater segment, we see
indications of demand growth in Brazil, West Africa and Asia. The
North Sea Harsh Environment (HE) semi-submersible market remains
the strongest floater segment, especially in Norway. This segment
has experienced pronounced tightening due to rising demand and
significant supply side attrition, resulting in day rates in this
segment having generally doubled from trough levels.
Re-balancing of the broader rig market continues to progress
further on the back of low utilisation and rates, financial stress
and contractors' realisation of the need to reduce capacity across
the industry. As such, contractors have retired approximately 40%
of the total floater fleet since late 2014. We expect the
retirement trend to continue as the industry is still looking to
cut costs. Retirement of assets in the jackup segment has been less
pronounced and unless this picks up, re-balancing of the jackup
segment may likely be pushed further out in time.
The subsea and field development market
In spite of improved oil prices during the first half of 2019
and leading operators generally reporting very strong cash flow,
sanctioning of new offshore field developments has not yet seen a
significant uptick. This is likely related to the underlying oil
market balance and the operators' perception of how this is likely
to evolve going forward. A large share of offshore oil projects
seem to be economically viable even after oil prices have dropped
strongly from peak levels, and as such, should not prevent
operators from increasing sanctioning activity. Actual sanctioning
level in 2019 seems to have been broadly in line with that observed
in 2018. There are a number of ways to gauge this, but number of
sanctioned projects, total sanctioned capex, number of new floating
production unit contracts and level of subsea equipment awards are
all good indicators. With certain exceptions and nuances, these
indicators are broadly in line with 2018 levels, suggesting a
stable development in sanctioning activity, rather than an uptick.
This impacts the subsea and field development market, with the
backlog for leading contractors only being moderately up from
year-end levels, but with hints of trending upwards. The order
backlog is however down significantly from levels seen in 2015 and
2016, and as a consequence, fleet utilisation for leading subsea
contractors has continued to be low so far in 2019. This has
adverse knock on effects for vessel providers, leading to low
global subsea fleet utilisation. A slight increase in the market
for subsea inspections, maintenance and repairs and strong activity
in the offshore wind segment has compensated somewhat, but this is
far from sufficient to cover the shortfall in subsea engineering,
procurement, construction and project work.
Offshore support vessels (PSV and AHTS)
The market for OSVs also remains challenging, still
characterised by vessel overcapacity. Rate improvements in key
regions combined with an uptick in OSV utilisation has encouraged
reactivation. The number of OSVs in layup has decreased in net
terms by more than 350 vessels since the peak 18 months ago. Global
fleet utilisation (also taking into account stacked vessels) for
large OSVs is currently around 65% and 74% for AHTS and PSV
respectively, while active utilisation levels in some regions
naturally remain substantially higher (84% and 90% globally for
AHTS and PSV respectively). Most vessel operators are struggling
significantly, and we have continued to witness high corporate
activity in terms of refinancing, restructuring and consolidation.
Some of the US players have managed to reduce their debt
substantially as a result of these processes, making them more
competitive going forward. Increased consolidation and significant
vessel attrition bodes well for the longer-term re-balancing of the
segment, but on back of the overcapacity, we anticipate a recovery
to more sustainable day rate levels to still be some time out. As
for rigs, regional differences do apply, and rates have come up
already in several regions with, for example, the North Sea
experiencing significant rate strengthening for large PSVs in
particular.
Futures
Dry index values were adversely impacted in the first half of
2019 by the dam collapse in Brazil and the ongoing trade dispute
between the US and China. Capes averaged US$10,034 (against
US$13,963 for the first half of 2018), panamax US$8,243 (2018:
US$11,030) and supramax US$8,203 (2018: $11,113).
Volumes on all dry markets increased with capes totalling
263,014 lots (compared with 199,229 lots in the first half of
2018), panamax 331,362 lots (2018: 277,662) and supramax 85,708
lots (2018: 79,273).
Option volumes have marginally fallen to 138,556 lots (2018:
141,971 lots).
Iron ore has experienced significant market growth with a daily
average volume of 4.9m tonnes year to date compared to 3.5m tonnes
per day over 2018. Options volumes have similarly grown to 1.9m
tonnes per day from 0.9m tonnes per day in 2018.
On the wet FFA side, volumes of clean have improved to 82,623
lots (2018: 62,309 lots) but the significant volume growth has been
in the dirty side, where volumes shot to 135,793 lots (2018: 62,526
lots).
Financial
Revenue: GBP16.1m (2018: GBP22.7m)
Segment underlying profit: GBP1.1m (2018: GBP4.7m)
Securities
The first half of 2019 can only be described as extremely
difficult. Despite our healthy pipeline, it was very challenging to
raise any equity or debt within our sectors and as a result, our
first quarter was the worst ever, with total revenue down almost
50% from the same period last year. One indicator of the challenges
were that no new listings of companies on exchanges in the US or
Norway occurred during the first quarter. In the second quarter,
markets have been calm, however this was disturbed in May with
politics taking centre stage as Brexit negotiations and the trade
war between the US and China. All major indexes fell sharply as a
result across all major regions - the US equity market delivered
its worst May return in seven years with energy stocks falling the
most. Also, global bonds fell markedly in May. The market's fear is
that these ongoing trade disputes will derail global economic
growth and as a result, the global capital markets have been
closed.
The market turbulence is particularly impacting the commodity
and energy industries in which we operate. For offshore, the
uncertainty about the timing of a market recovery is making
investors apply a wait-and-see approach to equity opportunities.
For shipping, companies have been trading well below net asset
value, but the market sentiment has shown signs of recovery as the
ripple effects of IMO 2020 regulations are becoming visible.
In June, the central banks took action. Confronted by weaker
economic data, risks to the trade outlook and continuing low
inflation, the US Federal Reserve and the European Central Bank
both indicated clear signals that further monetary stimulus would
be coming shortly. For the time being, therefore, investors look
set to remain confident and focus on the upcoming corporate
reporting season, which has the potential to deliver support once
more thanks to low expectations.
Clarkson Platou Securities (CPS) nevertheless managed to
complete six equity offerings and two debt offerings raising
approximately US$830m, while three transactions were pulled due to
the challenging market conditions. The now established convertible
bond team are also actively working for a number of clients with a
net investment book for facilitating client business struck at
GBP21.5m at the end of June. CPS has built a strong pipeline of
mandated transactions ready to be executed as the market conditions
for primary issuances continue to improve.
Project finance
Shipping
2019 started off with high expectations across most shipping
sectors and good activity in the project finance market. However,
the optimism slowed in line with the weaker dry bulk, container and
tanker markets. Several projects were delayed as investors moved
into a wait-and-see attitude.
The main focus is still 'asset play' investments in close
cooperation with shipowners who are looking for co-investors to
expand their fleet. Shipping banks are still trimming down their
shipping portfolios and investment opportunities are developed.
Our first project in 2019 came through a shipowner who
negotiated the purchase of two small chemical tankers directly with
a bank. The vessels were fixed on two years' time charter to a
European operator and we raised the required equity from our
investors in addition to external bank financing. The combination
of buying vessels with employment for a short period of time is
reducing the initial risk for investors and also making it easier
to find banks who are willing to lend to the project.
The second quarter of 2019 has seen more activity and we have
been busy arranging the finance for three small bulkers that were
fixed on long-term bareboat charter to Norwegian interests. We have
also financed an aframax tanker together with a Swedish shipowner
as a pure 'asset play', with the expectation that the IMO 2020
regulations will firm up the market during the second half of the
year.
Additionally, two projects were completed at the end of the
second quarter with delivery expected during the summer. One
product tanker with eight years bareboat charter to an Italian
charterer and put/call option at the end of the period. The last
project has been the purchase of a 3,500 TEU container vessel
together with German partners with close connections to a German
bank who wanted to exit their loan and sell the vessel.
Although the first half of the year did not meet our
expectations we still believe the second half of the year will
bring new optimism into the market as we are approaching the
deadline for the new IMO 2020 regulations.
Real estate
During the first half of 2019, Clarksons Platou Real Estate has
concluded five new projects, placing both debt and equity. In
addition, we have sold one project and are in the process of
selling an additional two older projects structured by us, giving
us the best first half start in our ten year history.
Besides the sale and purchase of projects, the first half of
2019 has also been busy with the continuing development of Oslo
AirPort City (OAC) and we have now secured the two first rental
agreements and building projects including a four star hotel of 400
rooms.
The markets have been comparable to 2018 with strong supply and
demand, but yields levelling out in all segments including retail,
office, logistics, hotels and light industrial.
Clarksons Platou Real Estate Investment Management AS, our real
estate fund arm, has made two investments on behalf of its first
fund in the first half of 2019. The fund continues to search for
additional investments, though widespread interest in Norwegian
real estate is making the search more complex.
Structured asset finance
Financing to the shipping industry in the first half of 2019
remains illiquid and a two-tier market continues to develop. For
the few top tier credits, bank financing remains in good supply and
attractively priced; for the rest, cheap bank debt is being
replaced with more expensive capital from alternative providers.
For the banks still active in the shipping space, there is also a
shift towards a global regulatory focus on matters of
environmental, social and governance significance. Eleven major
banks with a global shipping portfolio of US$100bn have now signed
up to the Poseidon Principles, which aims to support the shipping
industry's reduction of carbon emissions by 50% by 2050. It is
clear that the industry is moving towards a more sustainable
future, and the development of green ship financing is certainly
one to watch. We believe this initiative will continue to evolve
over time, with green scrapping initiatives already on the agenda
for discussion and inclusion within the principles.
The beneficiaries of reduced bank capacity are primarily the
leasing companies and alternative financiers. On the leasing side,
this continues to be led by the Chinese leasing companies. Whilst,
in our view, their lending appetite has diminished and is becoming
more targeted towards the sought after top-tier clients with
demonstrable strong cash flows, they remained an important source
of financing in 2018, contributing a combined new business volume
of US$12.9bn. For the alternative capital providers, more
asset-based transactions can be considered but higher priced
risk-adjusted returns is the trade-off. These capital providers
continue to take on an important and expanding role in ship
finance.
The reporting requirements under the new global lease accounting
standards continue to test resources and systems and early signs of
balance sheet optimisation are starting to emerge as finance
departments and treasury teams become more involved in the shipping
decision-making processes. Top-tier clients are beginning to
leverage their credit standing and bargaining power to exert more
control over the supply chain. As a result, the relationship
between vessel owners and cargo owners is beginning to change.
Clarkson Platou Structured Asset Finance continues to maintain
dialogue with all active lenders to the industry in order to
develop and maintain our pipeline
Support
Revenue: GBP13.3m (2018: GBP10.6m)
Segment underlying profit: GBP1.3m (2018: GBP0.9m)
Agency - UK
Grain exports performed better than expected in the first half
of the year. Additional tonnage became available for export due to
the two major bioethanol plants on the east coast either shutting
or switching supply away from UK grain. A significant amount of
malting barley was exported in the first three months due to
exporters fulfilling contracts prior to the originally anticipated
29 March Brexit date.
Grain imports remained steady with continued shipments from the
US and Canada.
We expect to see a significant increase in volumes in the second
half of 2019 due to a predicted increase in exportable surplus from
what looks to be a very good harvest.
Animal feed imports remained in line with expectation, with an
increase in the first three months as the majors attempted to
ensure the maximum tonnage was imported prior to 31 March.
Offshore activities continue to increase both in Scotland and
the east coast of England. Along with the return of the offshore
oil and gas market as production is increased, we have also won
contracts in the offshore renewables sector. In the first half of
the year we opened our Invergordon office in support of the
renewables sector and we continue to look at other locations where
we believe we would benefit from a presence in support of this
business.
Our aggregate business continues to increase and is now a
significant part of our work on the Thames, Humber and Tyne. We
have also brought aggregate into Aberdeen in support of the
building of a new port facility coordinating the berthing of the
largest vessel ever to enter the port.
Agency - Egypt
In the first half of 2019, operated vessels for port were 70
vessels compared with 62 in the first half of 2018, with a 20%
increase in gross revenue.
Operated vessels for the transit division were 256 in the first
half of 2019, compared with 170 in the first half of 2018, with a
65% increase in gross revenue.
Revenue increases can be attributed to new clients and operating
different types of vessels as well as our existing clients
maintaining their volumes.
Gibb Tools
Our supply business has had a very successful start to the year
both in Aberdeen and Great Yarmouth. Along with the increase in oil
and gas activity, we have seen a marked increase in orders from the
offshore renewable sector. Both offices have increased resources in
order to react to demand as we see volumes beginning to move back
towards levels we were experiencing prior to the drop in oil price
a few years ago.
For the second half of the year we intend to move our Gibbs
operation into a purpose-built premises in Great Yarmouth where
they will be joined by our agency, freight and chartering business
under one roof.
We are also starting to evaluate the requirement to relocate our
operation in Aberdeen in order to cater for increased demand.
Stevedoring
The first half of the year was better than expected for our
stevedoring business in Ipswich. This was due to better than
anticipated import volumes augmented by increased export volumes.
Despite the poor harvest in 2018, we were able to largely keep our
warehouses operating to capacity.
For the second half of the year we expect our activities to
essentially switch from import to export with the prediction of a
large UK harvest. Around the UK we predict port side storage to be
in high demand, and we continue to work with UK port authorities to
find storage solutions for our customers. Along with storage
solutions, we remain committed to investment in plant and machinery
to allow us to work with UK ports to provide ship loading
solutions.
Freight forwarding and logistics
Freight forwarding in Aberdeen, Great Yarmouth and Belfast
continue to be a major part of our business, both in support of our
agency activities and also in support of the offshore oil and
renewables industry.
We continue to carefully watch the developments around Brexit as
this could have a significant effect on our forwarding business as
we support our customers through whatever changes may be put in
place.
Liners - Egypt
2018 was the first operational year for liners in Egypt and was
a success, exceeding our clients' expectations.
During the first half of 2019, we have succeeded in maintaining
the same operational levels and sustaining customer satisfaction
with increased revenues compared with the first half of 2018 and an
improvement in cost control.
Research
Revenue: GBP8.3m (2018: GBP7.8m)
Segment underlying profit: GBP2.8m (2018: GBP2.4m)
Research revenue grew by 6% during the first half of 2019 to
reach GBP8.3m (2018: GBP7.8m), with profits increasing to an
encouraging GBP2.8m (2018: GBP2.4m). Supported by significant
ongoing investment and innovation, Clarksons Research remains the
market leader in the provision of authoritative data and
intelligence across shipping, trade, offshore and energy. Our data
and analysis continues to be widely used and trusted across the
shipping industry to support a range of decision-making by our
clients. Our data offering also provides wide ranging support to
the broking and finance teams of Clarksons and, increasingly, to
the new Sea/ suite.
Sales across our integrated digital portal increased by 11% in
the first half. Utilising our experienced in-house IT development
team, this growth was supported by specific enhancement plans
across each of our products. Improvements to Shipping Intelligence
Network, the market-leading commercial shipping database, included
expansion to our indices database and improved data visualisation
around shipping supply and demand forecasts.
The continued tracking of topical market issues across our
platform, including expert analysis and insights of the shipping
context of the US-China trade war, the Vale dam burst, the
expansion phase in LNG trade, the changing energy mix and the
potential market impact of IMO 2020 regulations, were well received
by our clients. Our report series has been expanded in the first
half to include new monthly reports on LNG, One Belt One Road and
refinery expansion. The World Fleet Register, our online vessel
register with a focus on new technology and the increasing
regulatory timetable, has also continued to receive excellent
feedback as we support our clients in tracking and understanding
the complex environmental regulations impacting shipping. A new
ship repair and retrofit module to the World Fleet Register is now
being actively used by clients.
Sales from Sea/net, the vessel tracking system blending AIS
movement data with proprietary vessel and ports data, continued to
grow, supported by new aggregate statistical analysis including
vessel speed indices, port callings and deployment trends. The
client base to our offshore and energy intelligence systems,
including World Offshore Register and Offshore Intelligence
Network, was further expanded in the first half, supported by the
addition of a renewable energy module, new oil company investment
profiles, decommissioning intelligence and further utilisation
data.
Our services team, who manage service and consultancy contracts
with a range of corporates across the shipping industry, maintained
good client retention. There was also record attendance at our six
monthly seminar series, 'Shipping and Shipbuilding to 2030' and
'Offshore and Energy to 2030'. Clarksons Valuations grew sales in
the first half, consolidating their leading position while now
managing fully digitalised workflows and adopting technology
delivery tools during a period of change across the ship finance
client base.
Investments into our highly structured, relational and
proprietary database, into our digital product offering and into
our business development capabilities continue. Specialist data
teams, increasingly supported by our data analytics team, continue
to expand the depth and quality of our data offering. A range of
projects to expand the volume of data we derive and aggregate,
added further depth to our database during the first half as did
expansion of GIS capabilities. Newly developed dashboard monitoring
of data processing volumes and coverage has helped drive quality.
Our comprehensive database now includes coverage of the 2bn dwt
international shipping fleet, 12.1bn tonnes of world trade
(60,376bn tonne miles), over 40,000 companies, over 4m port calls
per year, 6,000 global ports, 15,000 berths, 1,000 refineries, 400
LNG plants, yards and fabricators, over 600 repair yards,
environmental equipment including SOx scrubbers, 7,000 offshore oil
and gas fields and associated infrastructure including platforms
and subsea trees, offshore drilling rigs, renewables, capital
market activity, ship valuations and wide ranging commercial
indices and time series on prices and earnings of ships.
Our Asia Pacific headcount has increased further, with a range
of new initiatives already implemented following a management
summit of our Asian teams at the end of 2018. A broad and stable
client base was retained in the first half, with 80% of revenue now
derived on an annuity basis. Specialist teams across subscription
renewals, account management and business development are
benefiting from an increased regional presence and improved sales
support tools. This wide client base, alongside the provision of
highly respected research, allows us to maintain an excellent
profile for the broader Clarksons Group.
Directors' responsibilities statement
The Directors confirm that:
-- these 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 4.2.7R, being an indication of important events that
have occurred during the first six months of the financial year
ending 31 December 2019, and their impact on the interim financial
statements; and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
(b) DTR 4.2.8R, being material related party transactions that
have taken place in the first six months of the financial year
ending 31 December 2019, and any material changes in the related
party transactions described in the 2018 annual report.
The Directors of Clarkson PLC are listed in the Clarkson PLC
annual report for 31 December 2018. 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 interim 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
Bill Thomas
Chair
9 August 2019
Independent review report to Clarkson PLC
Report on the interim financial statements
Our conclusion
We have reviewed Clarkson PLC's interim financial statements
(the "interim financial statements") in the interim report of
Clarkson PLC for the six month period ended 30 June 2019. 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 Guidance and Transparency Rules
sourcebook 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 2019;
-- the consolidated income statement and consolidated statement
of comprehensive income for the period then ended;
-- the consolidated statement of changes in equity for the period then ended;
-- the consolidated cash flow statement 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 Guidance and Transparency Rules
sourcebook 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.
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 Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express 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 Guidance and Transparency Rules sourcebook 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.
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,
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.
PricewaterhouseCoopers LLP
Chartered Accountants
London
9 August 2019
Consolidated income statement
for the half year to 30 June
2019 2018
============================================= ----------------------------------------------
Before
acquisition Acquisition After Before Acquisition After
related related costs acquisition acquisition related costs acquisition
costs (note 4) related costs related costs (note 4) related costs
Notes GBPm* GBPm* GBPm* GBPm* GBPm* GBPm*
------------- -------------- -------------- -------------- -------------- --------------
Revenue 3 167.8 - 167.8 152.6 - 152.6
Cost of sales (7.2) - (7.2) (5.5) - (5.5)
============= ============== ============== -------------- -------------- --------------
Trading profit 160.6 - 160.6 147.1 - 147.1
Administrative
expenses (139.7) (0.9) (140.6) (128.3) (1.2) (129.5)
============= ============== ============== -------------- -------------- --------------
Operating profit 3 20.9 (0.9) 20.0 18.8 (1.2) 17.6
Finance revenue 0.6 - 0.6 0.5 - 0.5
Finance costs (1.6) - (1.6) (0.3) - (0.3)
Other finance
revenue -
pensions 0.2 - 0.2 0.2 - 0.2
============= ============== ==============
Profit before
taxation 20.1 (0.9) 19.2 19.2 (1.2) 18.0
Taxation 5 (4.6) 0.2 (4.4) (4.7) 0.3 (4.4)
============= ============== ============== -------------- -------------- --------------
Profit for the
period 15.5 (0.7) 14.8 14.5 (0.9) 13.6
============= ============== ============== -------------- -------------- --------------
Attributable to:
Equity holders of
the Parent
Company 14.7 (0.7) 14.0 13.7 (0.9) 12.8
Non-controlling
interests 0.8 - 0.8 0.8 - 0.8
============= ============== ============== -------------- -------------- --------------
Profit for the
period 15.5 (0.7) 14.8 14.5 (0.9) 13.6
============= ============== ============== -------------- -------------- --------------
Earnings per
share
Basic 6 48.5p 46.2p 45.8p 42.5p
Diluted 6 48.3p 46.1p 45.6p 42.3p
------------- -------------- -------------- -------------- -------------- --------------
* Unaudited
Consolidated statement of comprehensive income
for the half year to 30 June
2019 2018
GBPm* GBPm*
======= -------
Profit for the period 14.8 13.6
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Actuarial gain on employee benefit schemes - net of tax 0.5 5.9
Items that may be reclassified subsequently to profit or loss:
Foreign exchange differences on retranslation of foreign operations 3.6 7.0
Foreign currency hedges recycled to profit or loss - net of tax 0.3 (0.8)
Foreign currency hedge revaluations - net of tax (0.4) (0.6)
======= -------
Other comprehensive income 4.0 11.5
======= -------
Total comprehensive income for the period 18.8 25.1
======= -------
Attributable to:
Equity holders of the Parent Company 18.0 24.2
Non-controlling interests 0.8 0.9
======= -------
Total comprehensive income for the period 18.8 25.1
======= -------
* Unaudited
Consolidated balance sheet
as at 30 June
Notes
2019 2018 31 December 2018
GBPm* GBPm* GBPm+
======== -------- -----------------
Non-current assets
Property, plant and equipment 25.6 28.2 27.0
Investment properties 1.2 1.1 1.2
Right-of-use assets 8 49.5 - -
Intangible assets 9 298.6 296.8 293.4
Trade and other receivables 1.5 1.6 1.1
Investments 4.7 4.9 4.8
Employee benefits 10 19.3 23.1 18.2
Deferred tax assets 8.5 7.9 8.6
======== -------- -----------------
408.9 363.6 354.3
======== -------- -----------------
Current assets
Inventories 0.8 0.6 0.8
Trade and other receivables 83.5 84.0 77.0
Income tax receivable 1.0 0.5 1.2
Investments 11 38.9 4.7 9.7
Cash and cash equivalents 12 109.1 95.9 156.5
======== -------- -----------------
233.3 185.7 245.2
======== -------- -----------------
Current liabilities
Interest-bearing loans and borrowings 13 (6.0) - -
Trade and other payables (122.1) (94.7) (135.4)
Lease liabilities 14 (8.6) - -
Income tax payable (6.5) (5.5) (8.0)
Provisions (0.2) (0.1) (0.2)
========
(143.4) (100.3) (143.6)
======== -------- -----------------
Net current assets 89.9 85.4 101.6
======== -------- -----------------
Non-current liabilities
Interest-bearing loans and borrowings (0.1) - -
Trade and other payables (2.6) (10.4) (10.5)
Lease liabilities 14 (51.5) - -
Provisions (0.1) (0.2) (0.2)
Employee benefits 10 (4.3) (3.2) (4.2)
Deferred tax liabilities (6.5) (7.1) (6.4)
======== -------- -----------------
(65.1) (20.9) (21.3)
======== -------- -----------------
Net assets 433.7 428.1 434.6
======== -------- -----------------
Capital and reserves
Share capital 15 7.6 7.6 7.6
Other reserves 241.9 238.5 237.1
Retained earnings 182.1 180.3 185.9
======== -------- -----------------
Equity attributable to shareholders of the Parent Company 431.6 426.4 430.6
Non-controlling interests 2.1 1.7 4.0
======== -------- -----------------
Total equity 433.7 428.1 434.6
======== -------- -----------------
* Unaudited + Audited
Consolidated statement of changes in equity
for the half year to 30 June
Attributable to equity holders of the Parent Company
============================================================
Notes Total
Share capital Other reserves Retained earnings Total Non-controlling equity
GBPm* GBPm* GBPm* GBPm* interests GBPm* GBPm*
============== =============== ================== ======= ================= ========
Balance at 1
January 2019 7.6 237.1 185.9 430.6 4.0 434.6
Impact of change
in accounting
policy 2 - - (2.6) (2.6) - (2.6)
============== =============== ================== ======= ================= ========
Adjusted balance
at 1 January 2019 7.6 237.1 183.3 428.0 4.0 432.0
============== =============== ================== ======= ================= ========
Profit for the
period - - 14.0 14.0 0.8 14.8
Other
comprehensive
income:
Actuarial gain
on employee
benefit schemes
- net of tax - - 0.5 0.5 - 0.5
Foreign exchange
differences on
retranslation
of foreign
operations - 3.6 - 3.6 - 3.6
Foreign currency
hedges recycled
to
profit or loss
- net of tax - 0.3 - 0.3 - 0.3
Foreign currency
hedge
revaluations
- net of tax - (0.4) - (0.4) - (0.4)
============== =============== ================== ======= ================= ========
Total
comprehensive
income for the
period - 3.5 14.5 18.0 0.8 18.8
============== =============== ================== ======= ================= ========
Transactions with
owners:
Employee share
schemes - 1.3 (0.3) 1.0 - 1.0
Dividend paid 7 - - (15.4) (15.4) (2.8) (18.2)
Contributions
from
non-controlling
interest - - - - 0.1 0.1
============== =============== ================== ======= ================= ========
Total transactions
with owners - 1.3 (15.7) (14.4) (2.7) (17.1)
============== =============== ================== ======= ================= ========
Balance at 30 June
2019 7.6 241.9 182.1 431.6 2.1 433.7
============== =============== ================== ======= ================= ========
Attributable to equity holders of the Parent Company
------------------------------------------------------------
Notes Non-controlling Total
Share capital Other reserves Retained earnings Total interests equity
GBPm* GBPm* GBPm* GBPm* GBPm* GBPm*
-------------- --------------- ------------------ ------- ------------------ --------
Balance at 1
January 2018 7.6 234.7 177.4 419.7 3.7 423.4
-------------- --------------- ------------------ ------- ------------------ --------
Profit for the
period - - 12.8 12.8 0.8 13.6
Other
comprehensive
income:
Actuarial gain
on employee
benefit
schemes - net
of tax - - 5.9 5.9 - 5.9
Foreign
exchange
differences on
retranslation
of foreign
operations - 6.9 - 6.9 0.1 7.0
Foreign
currency
hedges
recycled to
profit or loss
- net of tax - (0.8) - (0.8) - (0.8)
Foreign
currency hedge
revaluations
- net of tax - (0.6) - (0.6) - (0.6)
-------------- --------------- ------------------ ------- ------------------ --------
Total
comprehensive
income for the
period - 5.5 18.7 24.2 0.9 25.1
-------------- --------------- ------------------ ------- ------------------ --------
Transactions with
owners:
Employee share
schemes - (1.7) 0.2 (1.5) - (1.5)
Tax on other
employee
benefits - - (0.6) (0.6) - (0.6)
Tax on other
items in
equity - - (0.2) (0.2) - (0.2)
Dividend paid 7 - - (15.2) (15.2) (2.9) (18.1)
-------------- --------------- ------------------ ------- ------------------ --------
Total
transactions
with owners - (1.7) (15.8) (17.5) (2.9) (20.4)
-------------- --------------- ------------------ ------- ------------------ --------
Balance at 30
June 2018 7.6 238.5 180.3 426.4 1.7 428.1
-------------- --------------- ------------------ ------- ------------------ --------
* Unaudited
Consolidated cash flow statement
for the half year to 30 June
Notes 2019 2018
GBPm* GBPm*
Cash flows from operating activities
Profit before taxation 19.2 18.0
Adjustments for:
Foreign exchange differences (0.1) -
Depreciation 6.4 2.6
Share-based payment expense 0.6 0.7
Loss on sale of investments 0.1 -
Amortisation of intangibles 0.6 0.8
Difference between pension contributions paid
and amount recognised in the income statement (0.2) (0.2)
Finance revenue (0.6) (0.5)
Finance costs 1.6 0.3
Other finance revenue - pensions (0.2) (0.2)
Increase in trade and other receivables (6.8) (23.2)
Decrease in bonus accrual (40.9) (51.8)
Increase in trade and other payables 13.1 11.0
Increase in provisions 0.1 0.1
======= -------
Cash utilised from operations (7.1) (42.4)
Income tax paid (5.2) (4.8)
======= -------
Net cash flow from operating activities (12.3) (47.2)
======= -------
Cash flows from investing activities
Interest received 0.6 0.4
Purchase of property, plant and equipment (1.1) (0.9)
Purchase of intangible assets (2.3) (2.0)
Proceeds from sale of investments 11 16.1 0.2
Proceeds from sale of property, plant and equipment - 0.3
Purchase of investments 11 (30.0) (4.0)
Transfer from current investments (funds on deposit) - 5.0
Net cash flow from investing activities (16.7) (1.0)
======= -------
Cash flows from financing activities
Interest paid and other charges (1.5) (0.3)
Dividend paid 7 (15.4) (15.2)
Dividend paid to non-controlling interests (2.8) (2.9)
Proceeds from borrowings 13 6.0 -
Payment of lease liabilities (4.1) -
Contribution from non-controlling interests 0.1 -
Net cash flow from financing activities (17.7) (18.4)
======= -------
Net decrease in cash and cash equivalents (46.7) (66.6)
Cash and cash equivalents at 1 January 156.5 161.7
Net foreign exchange differences (0.7) 0.8
======= -------
Cash and cash equivalents at 30 June 12 109.1 95.9
======= -------
* Unaudited
Notes to the interim financial statements
1 Corporate information
The interim financial statements of Clarkson PLC for the six
months ended 30 June 2019 were authorised for issue in accordance
with a resolution of the Directors on 9 August 2019. Clarkson PLC
is a public limited company, listed on the London Stock Exchange,
incorporated and registered in England and Wales and domiciled in
the UK.
The interim 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 2018 were
approved by the Board of Directors on 8 March 2019 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 financial statements have been
reviewed, not audited.
2 Statement of accounting policies
2.1 Basis of preparation
The interim financial statements for the six months ended 30
June 2019 have been prepared in accordance with the Disclosure
Guidance and Transparency Rules sourcebook of the Financial Conduct
Authority and with IAS 34 'Interim Financial Reporting' as adopted
by the European Union.
The interim 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 2018,
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 business risks
successfully, despite the challenging market backdrop. The
Directors have a reasonable expectation that the Group has
sufficient resources to continue in operation for at least the next
12 months. For this reason, they continue to adopt the going
concern basis in preparing the 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;
this is referred to as underlying profit. The column 'acquisition
related costs' includes the amortisation of intangible assets
acquired through business combinations and the expensing of the
cash and share-based elements of consideration linked to ongoing
employment obligations on acquisitions.
2.2 Accounting policies
The accounting policies adopted in the preparation of the
interim financial statements are consistent with those followed in
the preparation of the Group's annual financial statements for the
year ended 31 December 2018, 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.
-- IFRS 16 'Leases', effective and applied from 1 January 2019.
This standard represents a significant change in the accounting
and reporting of leases for lessees as it provides a single lessee
accounting model that replaces the current model where leases are
either recognised as a finance or operating lease.
The Group has adopted IFRS 16 from 1 January 2019, but has not
restated comparatives for the 2018 reporting period, as permitted
under the specific transitional provisions in the standard. The
reclassifications and the adjustments arising from the new leasing
rules are therefore recognised in the opening balance sheet on 1
January 2019. The standard permits a choice on initial adoption, on
a lease-by-lease basis, to measure the right-of-use asset at either
its carrying amount as if IFRS 16 had been applied since the
commencement of the lease, or an amount equal to the lease
liability, adjusted for accruals or prepayments. The majority of
right-of-use assets were measured as if IFRS 16 had been applied
since commencement of the lease. All of the right-of-use assets
were in relation to properties.
On adoption of IFRS 16, the Group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 'Leases'. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as of 1 January 2019. The weighted average lessee's
incremental borrowing rate applied to the lease liabilities on 1
January 2019 was 3.5%.
The Group is using practical expedients on transition to leases
previously classified as operating leases, including:
i) accounting for operating leases with a remaining lease term
of less than 12 months as at 1 January 2019 as short-term
leases;
ii) excluding initial direct costs from the initial measurement of the right-of-use asset; and
iii) using hindsight in determining the lease term where the
contract contains options to extend or terminate the lease.
Key judgements made in calculating the initial impact of
adoption include determining the lease term where extension or
termination options exist. In such instances, all facts and
circumstances that may create an economic incentive to exercise an
extension option, or not exercise a termination option, have been
considered to determine the lease term. Extension periods (or
periods after termination options) are only included in the lease
term if the lease is reasonably certain to be extended (or not
terminated). Estimates include calculating the discount rate which
is based on the incremental borrowing rate.
On transition to IFRS 16, the following adjustments were
made:
GBPm
Right-of-use assets 53.4
Deferred tax assets 0.5
Prepayments (0.9)
Other payables - current 0.3
Lease liability -
current (8.4)
Other payables - non-current 8.1
Lease liability -
non-current (55.8)
Provisions - non-current 0.2
Retained earnings 2.6
For the current period, there was no significant impact on
profit before taxation, however, the unwinding of the discount on
the lease liabilities has resulted in a GBP1.1m charge being
included in finance costs, whereas under IAS 17 all operating
leases were included in administrative expenses. There is no effect
on overall cash flows from implementing IFRS 16, however, there is
a presentational change in that GBP5.2m of cash outflows are now
disclosed under financing whereas under IAS 17 these would have
been shown as operating cash outflows.
-- IFRIC 23 is effective from 1 January 2019 and clarifies how
the recognition and measurement requirements of IAS 12 'Income
taxes' are to be applied where there is uncertainty over income tax
treatments. There was no material impact on the Group from applying
IFRIC 23.
As at the date of authorisation of these interim financial
statements, a number of amendments to standards, interpretations
and a new standard 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.
The impact on the Group's financial statements of the future
adoption of these is still under review and disclosure will be
provided in the annual report for the year ended 31 December
2019.
There were no other new IFRSs or interpretations issued by the
IFRS Interpretation Committee (IFRS IC) 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 reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities at the
reporting date. However, uncertainty about these assumptions and
estimates could result in outcomes that could require a material
adjustment to the carrying amount of the asset or liability
affected in the future.
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 2018, with the exception of changes
in estimates that are required in determining the provision for
income taxes, judgements made in calculating the lease term where
extension or termination options exist and estimates of the
discount rate to apply to leases.
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
Revenue Results
====== -------- ====== --------
2019 2018 2019 2018
GBPm GBPm GBPm GBPm
====== -------- ====== --------
Broking 130.1 111.5 21.8 15.9
Financial 16.1 22.7 1.1 4.7
Support 13.3 10.6 1.3 0.9
Research 8.3 7.8 2.8 2.4
====== -------- ====== --------
Segment revenue / underlying profit 167.8 152.6 27.0 23.9
====== --------
Head office costs (6.1) (5.1)
====== --------
Operating profit before acquisition related costs 20.9 18.8
Acquisition related costs (0.9) (1.2)
====== --------
Operating profit after acquisition related costs 20.0 17.6
Finance revenue 0.6 0.5
Finance costs (1.6) (0.3)
Other finance revenue - pensions 0.2 0.2
======
Profit before taxation 19.2 18.0
Taxation (4.4) (4.4)
====== --------
Profit for the period 14.8 13.6
====== --------
All revenue is generated externally.
4 Acquisition related costs
Included in acquisition related costs are cash and share-based
payment charges of GBP0.4m (2018: GBP0.4m) relating to previous
acquisitions. These are contingent on employees remaining in
service and are therefore spread over the service period. Also
included is GBP0.5m (2018: GBP0.8m) relating to amortisation of
intangibles acquired as part of a previous acquisition.
5 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 2019 is 23.0% (the estimated tax rate used for the six
months ended 30 June 2018 was 24.0%). The effective tax rate, after
acquisition related costs, is 23.1% (2018: 24.2%).
6 Earnings per share
Basic earnings per share amounts are calculated by dividing
profit for the period attributable to ordinary equity holders of
the parent company by the weighted average number of ordinary
shares in issue during the period.
Diluted earnings per share amounts are calculated by dividing
profit for the period attributable to ordinary equity holders of
the parent company 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:
2019 2018
GBPm GBPm
========= ---------
Profit for the period attributable to ordinary equity holders of the parent company 14.0 12.8
========= ---------
2019 2018
Million Million
Weighted average number of ordinary shares - basic 30.2 30.1
Dilutive effect of share options and acquisition related share awards 0.1 0.1
========= ---------
Weighted average number of ordinary shares - diluted 30.3 30.2
========= ---------
7 Dividends
2019 2018
GBPm GBPm
====== ------
Declared and paid during the period:
Final dividend for 2018 of 51p per share (2017: 50p per share) 15.4 15.2
======
Payable (not recognised as a liability at 30 June):
Interim dividend for 2019 of 25p per share (2018: 24p per share) 7.6 7.3
====== ------
8 Right-of-use assets
Upon adoption of IFRS 16, a right-of-use asset of GBP53.4m was
recognised on transition. During the period, these assets were
depreciated by GBP3.9m. See note 2.2 for further details.
9 Intangible assets
Included within Intangible assets is GBP290.6m (2018: GBP287.0m)
of Goodwill and GBP8.0m (2018: GBP6.4m) of other intangible assets.
These are held in the currency of the businesses acquired and are
subject to foreign exchange retranslations to the closing rate at
each period end.
In light of global macro-economic and geo-political uncertainty,
the Board keeps the carrying value of goodwill under constant
review. The Board has considered, but not identified any impairment
indicators that could trigger an impairment test as at 30 June
2019. In the event that any of the markets in which we operate has
a sustained downturn, an impairment of the relevant CGU's goodwill
may be required. See note 12 on page 159 of the 2018 annual report
for specific sensitivity disclosures.
10 Employee benefits
The Group operates three final salary 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
credit recognised in the consolidated income statement.
Recognised in the balance sheet
30 June 30 June
2019 2018 31 Dec 2018
GBPm GBPm GBPm
======== -------- ------------
Fair value of schemes' assets 199.0 195.4 188.8
Present value of funded defined benefit obligations (177.9) (167.8) (168.0)
-------- -------- ------------
21.1 27.6 20.8
Effect of asset ceiling in relation to the Plowrights scheme (6.1) (7.7) (6.8)
-------- -------- ------------
Net benefit asset recognised in the balance sheet 15.0 19.9 14.0
-------- -------- ------------
Net deferred tax liability on above asset (3.1) (3.3) (3.1)
-------- -------- ------------
Recognised in the income statement
2019 2018
GBPm GBPm
====== ------
Recognised in other finance revenue - pensions:
Expected return on schemes' assets 2.6 2.5
Interest cost on benefit obligation and asset ceiling (2.4) (2.3)
Recognised in administrative expenses:
Scheme administrative expenses (0.1) -
====== ------
Net benefit credit recognised in the income statement 0.1 0.2
====== ------
11 Investments
During the period the Group purchased investments totalling
GBP30.0m as part of its convertible bonds business, included within
the financial segment. The balance of GBP37.2m held as at 30 June
2019 is shown under current investments.
In order to hedge against price movements of the equity portion
of these investments, the Group has short-sold related equity
securities. The GBP15.7m balance as at 30 June 2019 is shown under
trade and other payables.
12 Cash and cash equivalents
30 June 30 June
2019 2018 31 Dec 2018
GBPm GBPm GBPm
======== -------- ------------
Cash at bank and in hand 107.1 93.1 154.0
Short-term deposits 2.0 2.8 2.5
======== -------- ------------
109.1 95.9 156.5
======== -------- ------------
Net available funds, after deducting amounts accrued for
performance-related bonuses but including current investments,
amounted to GBP60.3m (30 June 2018: GBP60.2m, 31 December 2018:
GBP73.4m). Free cash resources, being net available funds less
monies held by regulated entities and Board-approved capital
commitments, at 30 June 2019 were GBP58.3m (30 June 2018: GBP44.1m,
31 December 2018: GBP57.0m).
13 Interest-bearing loans and borrowings
During the period the group entered into a prime brokerage
agreement with a bank in relation to the convertible bonds business
as described in note 11. The balance represents amounts owed in
relation to the funding of certain convertible bonds
acquisitions.
14 Lease liabilities
Upon adoption of IFRS 16, current lease liabilities of GBP8.4m
and non-current lease liabilities of GBP55.8m were recognised on
transition. After lease payments and interest costs the balances as
at 30 June 2019 were GBP8.6m and GBP51.5m respectively. See note
2.2 for further details.
15 Share capital
31 Dec
30 June 2019 30 June 2018 31 Dec 2018 30 June 2019 30 June 2018 2018
Million Million Million GBPm GBPm GBPm
------------- ------------- ------------ ------------- ------------- -------
Ordinary shares of 25p each,
issued and fully paid 30.3 30.2 30.3 7.6 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 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 2018 annual report
on pages 66 to 69. These risks are a failure to achieve strategic
objectives, changes in the broking industry, economic factors,
cyber risk and data security, loss of key personnel, employee
misuse of confidential information, adverse movements in foreign
exchange and financial loss arising from failure of a client to
meet obligations. Note 24 of the 2018 annual report sets out the
financial risk management objectives and policies of the Group.
These are also unchanged from the year-end.
18 Financial instruments
IFRS 13 requires disclosure of fair value measurements by level
of the following fair value measurement hierarchy:
-- quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
-- inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2); and
-- inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level
3).
The following table presents the Group's assets and liabilities
that are measured at fair value.
30 Jun 2019 30 Jun 2018 31 Dec 2018
Assets Liabilities Assets Liabilities Assets Liabilities
GBPm GBPm GBPm GBPm GBPm GBPm
======= ============ ------- ------------ ------- ------------
Investments at fair value
through profit or loss
(FVPL) - Level 1 0.4 - 0.5 - 0.5 -
Investments at fair value
through profit or loss
(FVPL) - Level 2 37.7 - 4.8 - 8.5 -
Investments at fair value
through other comprehensive
income (FVOCI) - Level
3 3.8 - 3.8 - 3.8 -
Foreign currency contracts
- Level 2 - 1.3 0.2 0.7 - 1.3
Other payables - Level
1 - 15.7 - - - 1.3
======= ============ ------- ------------ ------- ------------
41.9 17.0 9.3 0.7 12.8 2.6
======= ============ ------- ------------ ------- ------------
The method for determining the hierarchy and fair value is
consistent with that used at the year-end. The fair values of
financial instruments that are held at amortised cost are not
materially different from their carrying amounts.
19 Related party disclosures
The Group's significant related parties are as disclosed in the
2018 annual report. There were no material differences in related
parties or related party transactions in the period ended 30 June
2019.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR MMGMRRGZGLZG
(END) Dow Jones Newswires
August 12, 2019 02:00 ET (06:00 GMT)
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