TIDMCKN
RNS Number : 4027R
Clarkson PLC
08 March 2021
8 March 2021
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.
Preliminary results
Clarkson PLC today announces preliminary results for the 12
months ended 31 December 2020.
Summary
-- Robust underlying financial performance, ahead of market expectations
-- Strong performance in Broking more than offset weakness in Financial services
-- Continued strong free cash flow generation
-- 18(th) consecutive year of dividend growth
-- One-off, non-cash impairment charge of GBP60.6m in relation to securities and offshore
-- Forward order book going into 2021 is larger than at the same time last year
-- Robust balance sheet with free cash resources(1) of GBP81.1m (31 December 2019: GBP68.7m)
-- Rapid transition to remote working expedited rollout of our Sea/ products to clients
-- Medium-term macro environment for shipping favourable as
demand / supply dynamics set to improve post pandemic
-- Well positioned to support the green transition in shipping
and benefit from the expected economic and global trade
recovery
(1) Free cash resources are cash and cash equivalents and
current investment deposits, after deducting amounts accrued for
performance-related bonuses, outstanding loans and monies held by
regulated entities.
Year ended Year ended
31 December 31 December
2020 2019
Revenue GBP358.2m GBP363.0m
Underlying profit before taxation * GBP44.7m GBP49.3m
Reported (loss)/profit before taxation (GBP16.4m) GBP0.2m
Underlying earnings per share * 106.0p 118.8p
Reported loss per share (95.2p) (42.4p)
Dividend per share 79p 78p**
* Before exceptional item of GBP60.6m and acquisition related
costs of GBP0.5m (2019: exceptional item of GBP47.5m and
acquisition related costs of GBP1.6m).
** Includes the equivalent of the 2019 final dividend of 53p
which was paid as an interim dividend in 2020, the timing of which
was delayed to allow the Board to assess the impact of
COVID-19.
Andi Case, Chief Executive Officer, commented:
"2020 could never be described as business as usual, with
disruption in demand and global trade, significant volatility in
commodity prices and a massive shift in the working environment. So
Clarksons are proud to announce a very robust set of full year
results for 2020 which are ahead of market expectations and
demonstrate the resilience of our business and the important role
we play in the global shipping industry. Given the strong cash
generation, I am pleased to announce that the Board is recommending
its 18th consecutive year of increased dividends.
"As a market leader, Clarksons continues to benefit from its
robust business model and from the investment of recent years in
tools for trade. Our key areas of focus are not only on growth in
all core segments, but also importantly on growth in new segments
including renewables, the green transition of the maritime world
where we are helping our clients to achieve their ambitious carbon
and GHG reduction targets and continuing the rollout of our
technology solution, the Sea/ platform, to clients.
"I would like to thank the entire Clarksons team for their hard
work and dedication. As a result of the efforts of the Clarksons
team, we are well positioned to benefit from the expected economic
and global trade recovery in the years ahead."
Enquiries:
Clarkson PLC:
Andi Case, Chief Executive Officer
Jeff Woyda, Chief Financial Officer & Chief Operating
Officer 020 7334 0000
Camarco:
Billy Clegg 020 3757 4983
Jennifer Renwick / 4994
Alternative performance measures (APMs)
Clarksons uses APMs as key financial indicators to assess the
underlying performance of the Group. Management considers the APMs
used by the Group to better reflect business performance and
provide useful information. Our APMs include underlying profit
before taxation and underlying earnings per share. An explanation
and reconciliation of the term 'underlying' and related
calculations are included within the financial review.
About Clarkson PLC
Clarkson PLC is the world's leading provider of integrated
services and investment banking capabilities to the shipping and
offshore markets, facilitating global trade.
Founded in 1852, Clarksons offers its diverse and growing client
base an unrivalled range of shipbroking services, sector research,
on-hand logistical support and full investment banking capabilities
in all key shipping and offshore sectors. Clarksons continues to
drive innovation across its business, developing digital solutions
which underpin the Group's unrivalled expertise and knowledge with
leading technology.
The Group employs over 1,600 people in 53 different offices
across its four divisions and is number one or two in all its
market segments.
The Company has delivered 18 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
Overview
In what has been, without doubt, the most globally disruptive
and challenging time in living memory, I have been deeply impressed
with the exceptional response of the entire Clarksons team.
Colleagues have risen to the challenge of providing each other and
their clients with excellent support and service throughout the
COVID-19 pandemic. Clarksons works hard to remain the market
leader, with the best teams, technology, research, insights and
information flows. However, in the face of the huge challenges we
have faced in 2020, our major focus has been on keeping our people
safe and the global delivery of a first-class service across all
our offices by every member of the Clarksons team.
Given the circumstances, to have delivered a strong set of
underlying results that were both cash-generative and exceeded
market consensus, is a testament to our robust business model and
the quality of our team.
Whilst the most pressing issue for the business has been the
impact of COVID-19, the accelerating importance of sustainability
and the green transition has also been a major area of focus.
Clarksons continues to play a key role as an agent of change in the
environmental agenda. This year we have again expanded our
capabilities in execution, financing, data and support of the
renewables industry. Within shipping we are working with charterers
and owners, service providers and industry bodies to drive change
through lower emissions of greenhouse gases powered by cleaner
energy.
The rapid transition to remote working has expedited the rollout
of our Sea/ products to clients as it became apparent that the
pandemic was going to impact working practices globally. Sea/
provides a highly efficient and compliant platform to enable our
clients to manage their risk, monitor their fleet performance and
transact globally, regardless of their location.
Results
Underlying profit before taxation was GBP44.7m (2019:
GBP49.3m).
Maritime capital markets and energy demand have been severely
affected by events during this challenging time and consequently,
in keeping with many businesses, the Board determined that it would
be appropriate to take a goodwill impairment charge relating to
securities and offshore of GBP60.6m (2019: GBP47.5m). I should
however stress that this is a consequence of exceptional market
change, is a non-cash item, and will have no impact on
distributable reserves or the Company's capacity to pay
dividends.
Consequently, reported loss before taxation was GBP16.4m (2019:
GBP0.2m profit before taxation). Underlying basic earnings per
share was 106.0p (2019: 118.8p). The reported basic loss per share
was 95.2p (2019: 42.4p).
Free cash resources as at 31 December 2020 were GBP81.1m (2019:
GBP68.7m).
Dividend
In March 2020, the Board announced that it had deferred its
decision on the amount and timing of the 2019 final dividend to
give the business the time it needed to assess the financial impact
of COVID-19. The Company has clearly risen to the challenges
presented and its robust cash position gave the Board confidence to
announce in August that the Company would pay the equivalent of the
2019 final dividend of 53p per share as an interim dividend on 21
September 2020 and a further interim dividend for 2020 of 25p per
share (2019: 25p per share) on 11 December 2020.
In recognition of the importance of Clarksons' progressive
dividend policy, the Company is increasing its dividend for the
18th consecutive year. The Board is recommending a final dividend
of 54p (2019: 53p). Combined with the interim dividend in respect
of 2020 results of 25p (2019: 25p), the resulting full year
dividend in respect of 2020 results is 79p (2019: 78p). The
dividend will be payable on 28 May 2021 to shareholders on the
register on 14 May 2021, subject to shareholder approval.
People
It has become even clearer over the past year that a business
like Clarksons relies wholly on the quality of its people, and how
they come together as a team. In 2020 the Clarksons team performed
at the highest level and found new strengths by working even closer
together across the Group. At a time when we have all had our own
personal challenges, our global offices have continued to provide
remote support at the very highest levels to our clients when they
have needed us the most. Not only have we supported our clients,
but the team has ensured that we supported each other, the shipping
community and the local communities that are home to Clarksons
offices around the world. Our CSR Committee has organised a wide
range of fundraising and community-focused activities helping those
in need and has established a registered charity, The Clarkson
Foundation.
I thank all our colleagues in the Clarksons team for their
exceptional efforts through this challenging period.
Board
We were delighted to welcome Laurence Hollingworth as an
independent Non-Executive Director during this period. Laurence
joined the Board in July as a member of the Remuneration Committee
and Audit and Risk Committee, and brings extensive experience in
the capital markets and a strong understanding of the broking
environment following a 37-year career in stockbroking. The Board
and management of Clarksons have already benefited from the
strategic perspectives and insights that he has brought to the
business. In October we welcomed Sue Harris to the Board as an
independent Non-Executive Director. Sue serves as a member of the
Remuneration Committee and is Chair of the Audit and Risk
Committee, succeeding Marie-Louise Clayton, who retired from the
Board on 31 January 2021. Sue has held a number of senior executive
positions at FTSE 100 businesses and non-executive roles across a
broad range of sectors, and brings significant financial, risk
management and listed company experience to the Board.
On behalf of the Clarksons team, I would like to thank
Marie-Louise for her valuable contribution during her four years on
the Board and wish her continued success in the future.
Outlook
Until the worst of the COVID-19 pandemic has passed, its
longer-term impact on the global economy remains uncertain.
However, we are confident that government stimulus, the energy
transition, the widespread desire for the world to return to
normality, and the pent-up demand for travel will ensure that when
a sustained recovery begins, the effects will be positively felt in
the world of shipping.
We start 2021 with a stronger forward order book and firmer
freight rates in a number of verticals, but sterling has
strengthened against the US Dollar creating an additional headwind,
particularly within Broking, and the global COVID-19 pandemic,
whilst improving, remains unresolved. The expected recovery in
demand is now unlikely to gather momentum until later in the year
and thus in 2021 we believe our results will revert to being second
half weighted.
As such, the Board remains confident in both the outlook for the
shipping, offshore and renewables markets and, indeed, in the Group
itself.
Sir Bill Thomas
Chair
5 March 2021
Chief Executive Officer's review
This year has presented very challenging circumstances for
everyone at Clarksons, with volatile markets and the COVID-19
pandemic causing severe disruption to both the way business is done
and everyday lives. Despite this disruption, I am pleased to report
that the business has continued to perform well, characterised by
the delivery of a strong underlying performance for the full year
and a forward order book going into 2021 which is larger than at
the same time last year.
A review of 2020
During 2020, our teams have had to adapt to unfamiliar working
practices, but our investment in tools for trade has helped us
deliver a market-leading service and diverse offering,
demonstrating how robust the Clarksons business model is, even
against the harshest of market backdrops.
Undoubtedly, one of the key reasons for this strong financial
and operational performance has been the outstanding response to
the COVID-19 pandemic from all our employees, who have continued to
deliver a first-class service to our clients during these troubling
times. I would like to thank everyone at Clarksons, across every
facet of the business, for their contribution during this difficult
period and for stepping up to meet the challenge. Our people are
our core asset, and this year above all has demonstrated the
importance to our clients of their unique market insight, advice
and execution in the most critical of times.
2020 has been a truly unprecedented year full of new challenges
and, whilst in many ways productive for the Company, it has been
extremely hard on colleagues and their families, especially those
who have suffered from illness and from the premature loss of our
colleagues and friends Peter Richards, Patrick Curry, Rob Byrne,
John Milner, Hossam El Sayed Abdo Ibrahim and Essam Bella. We once
again send our condolences to their families. I am also sad to
report that we lost an ex-Chairman, Tony Klima, who passed away in
January and is fondly remembered by many at Clarksons and the
shipping industry at large.
It is against this backdrop, that we are particularly proud of
the outstanding advance in sustainable community engagement led by
our CSR Committee. During 2020, the Group was involved in a range
of initiatives which gave rise to donations being made to charity
from staff, their families and the Company. Overall, these
initiatives raised more than GBP350,000. Our catering team, whilst
providing meals for the few staff that have used the London office,
have also produced 19,000 meals for the homeless in London, and we
have established The Clarkson Foundation, a charitable foundation
which will be the fulcrum for future giving.
Throughout 2020, we supported our staff and their families
through the challenges of the pandemic, ensured that all our
offices were COVID-19 safe, and facilitated staff working from home
for a significant proportion of the year, ensuring that all had the
requisite technology to be able to continue with as little
disruption as possible. The Company took no government loans, no
staff were furloughed, all suppliers were paid in good time and the
2019 final dividend, while initially deferred, was paid as an
interim dividend in September 2020, maintaining our 18-year
progressive dividend policy.
Once again, thank you to all our colleagues.
The performance of the Broking division during 2020 has been
excellent, despite the backdrop of a global pandemic and severe
disruption to energy demand throughout the year. The teams adapted
very quickly to the new working conditions, reporting profits
before taxation of GBP55.4m (2019: GBP55.5m), driven by excellent
performances across most market segments but stand-out performances
from the tanker, gas, sale and purchase and futures divisions.
Elsewhere, the Financial division had a mixed year. Our project
finance teams, principally transacting within Norwegian real
estate, had another successful year increasing profits compared to
2019. Clarksons Platou Securities, however, had a very challenging
year, due to the pandemic and negative investor sentiment towards
global trade and the impact on the shipping and oil services
capital markets. As announced at the interim results, we undertook
a strategic review at the end of 2019 to identify areas within the
division where we could improve efficiencies and reduce costs,
which we implemented during the first half of the year.
Our Research capabilities have been in high demand this year,
positively impacted by the pandemic as clients sought out
Clarksons' unparalleled insights to help guide them in their
decision-making, albeit this was in part offset by a reduction in
income from valuations due to a fall in asset and capital market
transactions by our clients. With an expanding portfolio of
products, and a significant broadening into data around the green
transition, we are confident that 2021 should see resurgent growth
in this business.
Our innovative Sea/ suite of technology modules has seen
heightened interest from clients throughout the year, with
disrupted working practices providing many opportunities for new
business. The offering of enhanced analytics combined with an
increased level of execution, risk control, audit, compliance,
efficiency, communication and data integrity has led to the
Maritech team winning several new large corporate clients during
the year. The rollout to these clients gained significant pace in
the final quarter of 2020 and early 2021, and the value proposition
in pre-trade and at-trade decisions, execution and communication is
now becoming evident to the industry.
The performance of the Support division was impacted heavily by
the wider macro environment and the negative impact on oil price
and energy demand from the pandemic in the first half. However, I
am pleased to report a significant recovery across all areas of
this business in the second half, led by our increasingly strong
position servicing the offshore renewables industry.
2021 and beyond
We have for some time talked about the multi-cyclical nature of
the maritime markets. Whilst overall, these markets have been
oversupplied, there has more recently been an increased shortening
of the supply of ships. The shock to demand from the pandemic has
meant the impact of this shortening has not yet been properly
reflected in the markets. In 2021, we have already seen stronger
rates in a number of sectors, and even if not sustained in the
short term, we are clearly no longer in markets saturated by excess
tonnage.
This change in the underlying economics comes at a time when
both increased regulation and corporate desire is very focused on
reducing carbon and other greenhouse gases (GHG). There are no
immediate solutions to the eradication of GHGs but clear targets
have been set by the IMO and the industry itself, some by 2030 and
more still by 2050, and there are very significant steps that will
be made towards this green transition.
The green transition is now one of the Group's key areas of
strategic focus and Clarksons has made sure to invest into its
market-leading teams to support this growing area of the business.
As clients target a reduced carbon footprint, Clarksons has
established a carbon emissions broking desk; strengthened our
position in gas markets; expanded our renewables broking teams
around the world; continued to lead in consultancy and execution of
alternate fuelled newbuilding of vessels; arranged finance across
many exciting renewables projects; initiated a research database of
analytics covering the green transition; extended our already
strong support teams to service offshore wind projects; and
developed Sea/ solutions for the capture and analysis of emissions
data. As the industry takes material steps to reduce GHGs, our
growing involvement in this space at all levels of the business,
shows that Clarksons seeks to play its part at the forefront of
shipping's green transition.
Whilst the shipping industry has had to face several stiff tests
over this past year, Clarksons has continued to perform well as a
business. We expect the Broking division to continue to perform
well in 2021, whilst the new opportunities arising as a result of
the green transition, an insatiable appetite by clients for data
and analysis, and the increased awareness of digitisation and
technology mean the fundamental medium-term business outlook for
the Group remains strong.
We remain confident that with the strength of our revenue
generation, the depth of our balance sheet, our first-rate
employees and our best-in-class client service, Clarksons is well
positioned to benefit from the expected economic and global trade
recovery post COVID-19.
Andi Case
Chief Executive Officer
5 March 2021
Financial review
Revenue: GBP358.2m (2019: GBP363.0m)
Underlying profit before taxation*: GBP44.7m (2019:
GBP49.3m)
Reported loss before taxation: GBP16.4m (2019: GBP0.2m
profit)
Dividend per share: 79p (2019: 78 p)
* Before exceptional items and acquisition related costs
Results
The Group generated revenue of GBP358.2m (2019: GBP363.0m) and
incurred underlying administrative expenses of GBP298.5m (2019:
GBP298.2m). The majority of revenue and a significant proportion of
expenses are denominated in currencies other than sterling.
Underlying profit before taxation was GBP44.7m (2019: GBP49.3m).
The term 'underlying' excludes the impact of exceptional items and
acquisition related costs, which are shown separately on the face
of the income statement. Management separates these items due to
their nature and size and believe this provides further useful
information, in addition to statutory measures, to assist readers
of the annual report to understand the results for the year.
2020 2019
GBPm GBPm
Underlying profit before taxation 44.7 49.3
Exceptional items (60.6) (47.5)
Acquisition related costs (0.5) (1.6)
======= -------
Reported (loss)/profit before taxation (16.4) 0.2
======= -------
Exceptional items
The Board reviewed the need for a non-cash impairment relating
to the acquisition of RS Platou ASA. The Board determined that an
impairment charge, relating to goodwill attributable to securities
and offshore broking following continued challenging trading
conditions in these markets, amounting to GBP60.6m (2019: GBP47.5m)
was required.
Acquisition related costs
Acquisition related costs include GBP0.3m of amortisation of
intangibles and GBP0.2m of cash and share-based payments spread
over employee service periods. We estimate acquisition related
costs for 2021 to be GBP0.5m, assuming no further acquisitions are
made.
Taxation
The Group's underlying effective tax rate was 21.3% (2019:
23.1%), reflecting the broad international operations of the Group
and lower disallowable costs in 2020 due to the pandemic.
Earnings per share
Underlying basic earnings per share was 106.0p (2019: 118.8p),
calculated as underlying profit after taxation divided by the
weighted average number of ordinary shares in issue during the
year. The reported basic loss per share was 95.2p (2019:
42.4p).
Forward order book (FOB)
The Group earns some of its commissions on contracts where the
duration extends beyond the current year. Where this is the case,
amounts that are able to be invoiced during the current financial
year are recognised as revenue accordingly. Those amounts which are
not yet invoiced, and therefore not recognised as revenue, are held
in the FOB. In challenging markets, such amounts may be cancelled
or deferred into later periods.
The Directors review the FOB at the year-end and only publish
the FOB items which will, in their view, be invoiced in the
following 12 months. At 31 December 2020, this estimate was 3%
higher than the prior year at US$116m (31 December 2019:
US$113m).
Dividend
As announced on 27 March 2020, the Board deferred the decision
on the amount and timing of the 2019 final dividend to protect the
Company until the impact of COVID-19 on the business became
clearer. The robust performance and cash position of the Company
meant that the Board decided to pay the equivalent of the 2019
final dividend of 53p per share as an interim dividend on 21
September 2020 to shareholders on the register on 4 September
2020.
The Board is recommending a final dividend in respect of 2020 of
54p (2019: 53p) which, subject to shareholder approval, will be
paid on 28 May 2021 to shareholders on the register at the close of
business on 14 May 2021.
Together with the interim dividend in respect of 2020 of 25p
(2019: 25p), this would give a total dividend of 79p for 2020, an
increase of 1% on 2019 (2019: 78p). In taking its decision, the
Board took into consideration the Group's 2020 performance, balance
sheet strength, ability to generate cash and FOB.
This increased dividend represents the 18th consecutive year
that the Board has raised the dividend.
Foreign exchange
The average sterling exchange rate during 2020 was US$1.29
(2019: US$1.28). At 31 December 2020, the spot rate was US$1.37
(2019: US$1.32).
Cash and borrowings
The Group ended the year with cash balances of GBP173.4m (2019:
GBP175.7m) and a further GBP22.8m (2019: GBP2.5m) held in
short-term deposit accounts, classified as current investments on
the balance sheet.
Net cash and available funds, being cash balances after the
deduction of accrued bonuses, at 31 December 2020 were GBP95.4m
(2019: GBP84.7m). The Board uses this figure as a better
representation of the net cash available to the business, since
bonuses are typically paid after the year-end, hence an element of
the year-end cash balance is earmarked for this purpose. It should
be noted that accrued bonuses include amounts relating to the
current year and amounts held back from previous years which will
be payable in the future.
A further measure used by the Board in taking decisions over
capital allocation is free cash resources, which deducts monies
held by regulated entities from the net cash and available funds
figure. Free cash resources at 31 December 2020 were GBP81.1m
(2019: GBP68.7m).
In addition to the free cash resources above, the Group has a
strong balance sheet and has consistently generated an underlying
operating profit and good cash inflow. Management has stress tested
a range of scenarios, modelling different assumptions with respect
to the Group's cash resources, and as a result continues to adopt
the going concern basis in preparing the financial statements.
Balance sheet
Net assets at 31 December 2020 were GBP328.4m (2019: GBP380.6m).
The reduction in net assets arises principally as a consequence of
the non-cash impairment identified above; this impairment has had
no effect on distributable reserves as it is offset against the
merger reserve which arose on the initial acquisition. The balance
sheet remains strong, with net current assets and investments
exceeding non-current liabilities (excluding pension provisions and
lease liabilities as accounted for under IFRS 16) by GBP95.0m
(2019: GBP93.7m).
The overall loss allowance for trade receivables was GBP12.3m
(2019: GBP14.2m).
The Group's pension schemes have a combined surplus before
deferred tax of GBP12.0m (2019: GBP11.0m).
Jeff Woyda
Chief Financial Officer & Chief Operating Officer
5 March 2021
Business review
Broking
Revenue: GBP282.6m (2019: GBP283.0m)
Segment underlying profit: GBP55.4m (2019: GBP55.5m)
Forward order book for 2020: US$116m* (At 31 December 2019 for
2020: US$113m*)
* Directors' best estimate of deliverable forward order book
(FOB)
The performance of the Broking segment during 2020 has been
excellent.
Dry cargo
The Baltic Dry Index (BDI) suffered a 21% year-on-year decline
in 2020.
COVID-19 and its impact on trade and industries dominated the
year with dry cargo witnessing the largest ever downturn in coal
seaborne trade. China's V-shaped economic recovery, however, led to
the restocking of many commodities which stimulated bulker seaborne
demand and supported freight rates which recovered strongly by
mid-year. Heightened political tension between Beijing and
Canberra, together with Chinese import quota limitations, impacted
Australian coal cargoes, causing extraordinary waiting times at
Chinese coal ports and deviation from traditional trade routes.
Although seaborne trade by weight declined by 2.1%, tonne-mile
demand continued to grow, albeit at a slow 0.5%, as many
Atlantic-originated cargoes normally intended for the Atlantic
market deviated to China.
Capesize rates suffered the biggest decline, falling by 27%,
with underperforming volumes during the first five months alongside
reduced iron ore supplies and COVID-19-induced coal demand
destruction. For vessels smaller than capesizes, markets also
declined with rates down for kamsarmaxes by 20%, supramaxes by 18%
and handysizes by 16%. However, sub-cape vessels were supported by
a buoyant grain and oilseeds sector, driven by plentiful supply and
the rapid recovery in China's animal feed market, which cushioned
the gap that was left by the severe downturn in coal demand.
Many newbuild ships entered the fleet, although tonnage growth
was countered by accelerated recycling of obsolete ore carriers and
heightened fleet inefficiencies caused by COVID-19-related
requirements, such as quarantine periods for crew changes, minimum
sailing days between ports, newbuilding and repair yard delays and
increased port waiting times.
Looking ahead, dry cargo seaborne trade is forecast to rebound
by 4.3% along with a 5% increase in tonne-miles in 2021. The demand
for most dry cargo commodities is expected to grow, particularly
with infrastructure-based economic stimuli, continued grain demand
and any recovery in coal consumption. While the growth is not
expected to be uniform across all commodities and all countries,
each sector of the dry cargo fleet should see solid demand-side
support compared with the unprecedented disruption of 2020. Fleet
growth is expected to reduce to less than 3%.
The drive towards decarbonisation will be debated as regulatory
and market-led initiatives gain traction, while many older vessels
could head for early recycling as it becomes too costly under such
new green regimes.
Containers
Containership market conditions in 2020 saw dramatic trends, in
both directions, with COVID-19 dominating the dynamics. Despite the
effects of COVID-19 on consumer activity and supply chains, which
significantly reduced container trade flows and the box shipping
markets overall, 2020 ended with container markets looking
extremely positive.
The initial COVID-19 'shock' placed box trade volumes and
container shipping markets under severe stress; the SCFI box
freight index was 20% down in April relative to the start of the
year. The boxship charter market saw acute downward pressure on
earnings with the rate index down 33% from the start of the year by
end of the first half. Idle capacity hit 12% of the fleet in May.
In the second half, with volumes returning ahead of expectations,
the markets bounced back firmly and the SCFI index increased by
178%, with box spot freight rates surging globally in the final
quarter. Charter rates tightened from June and saw major
improvements by the end of the year, with the index up 129%
relative to that at the end of June. The one-year time charter rate
for a 4,400 TEU 'old panamax' unit, for example, increased more
than threefold in the second half to US$25,000 per day at the end
of the year. At the year-end, the Clarksons Containership Charter
Rate Index stood at a 12-year high, with the average across the
year up 3% on 2019. On the container freight market, the SCFI index
reached the highest level on record of 2,783 at the end of 2020, an
average annual increase of 56% compared to 2019, with liner
companies reporting operating margins not seen for a decade.
Secondhand prices, which fell in the first half, increased
significantly in the second half, with the overall index up by 14%;
for example, the price of a ten-year old 6,600 TEU unit increased
by 62% to US$34m, with transaction volumes also picking up (125
vessels in the second six months compared to just 49 in the first).
Idle capacity fell to 4% of the fleet during December.
Whilst robust capacity management by operators provided the
initial support to alleviate pressure on freight rates, the primary
driver of the dramatic swings was the major recovery in trade
volumes. Global box trade fell by an estimated 1.1% (in TEU) in
2020, a better result than initially feared. However, the annual
trend did not capture the full magnitude of the variation in
volumes within the year. Seaborne box trade volumes dropped 10%
year-on-year in the second quarter alone. In the second half of the
year, returning volumes were driven by a range of factors,
including firmer than expected improvements in some economies
unlocking 'pent up' demand, inventory restocking and frontloading
in key regions, shifts in consumer spending patterns away from
services towards goods and shipments of PPE. Global volumes were up
by 6% year-on-year in the last quarter and 16% on the levels in
May, led by rapid Transpacific growth. A shortage of box
availability in Asia (with inland moves disrupted in key import
regions) combined with regional port congestion provided
significant disruption, which amplified the market impact of
returning trade volumes.
These trends took place against the backdrop of a supply side
providing underlying support. Containership fleet growth remained
manageable at 2.9%. The order book fell to a new low of 8% of the
fleet in October, though a pick-up in orders (1.0m TEU in the full
year) took it to 10% by the end of the year. Operating speeds,
though increasing towards the end of the year, were on average 1.3%
down on 2019. Scrubber retrofitting absorbed on average over 2% of
fleet capacity across the year.
Meanwhile the container sector greenhouse gas footprint,
arguably closer to consumer consciousness than in bulk shipping,
remains firmly in focus. Over the last decade slower service speeds
and the introduction of 'eco' ships have helped reduce boxship
emissions, which are now 40% below 2008 levels. Alternative fuels,
which make up 25% of TEU capacity on order, are also now gaining
traction, and a range of units have been fitted with energy saving
technology equipment. The green transition and technology will be
key themes in post-COVID-19 planning for boxship operators and
owners.
Heading into 2021, fundamental expectations suggest continued
support for positive market conditions in the near-term. However,
with such acute impetus seen in the second half of 2020, some
easing back of rate gains is probable at some stage, and
significant COVID-19-related uncertainty clearly remains.
Tankers
2020 was a mixed year for tankers, both in terms of the contrast
between the first and second halves of the year and the changes in
the earnings for different sectors compared to 2019. The first half
of the year was characterised by generally very strong and
extremely volatile earnings, while the second half saw weaker
earnings.
Clarksons' published annual average earnings for VLCCs on the
main Middle East to Far East route increased by 16% compared with
the 2019 average, however Clarksons' published annual average
earnings for suezmaxes and aframaxes decreased by 4% and 15%
respectively when compared with 2019. VLCC earnings were well above
the long-run average levels, whilst suezmax earnings matched
long-run averages and aframax earnings fell marginally below the
long-run average level.
Crude tankers
In the early part of the year, crude tanker earnings continued
to be supported by sanctions that restricted the trading activity
of a significant number of VLCCs. The lifting of these sanctions,
combined with simultaneous COVID-19-related oil demand destruction,
led to a short period of weaker earnings in February before the
market moved upwards very sharply in early March following the
decision by the key OPEC+ group of oil producers to increase
production in spite of falling demand. This led not only to a sharp
increase in the volume of crude oil cargoes to be lifted, but also
a surge in time charter enquiry and floating storage, as oil prices
collapsed, and crude oil forward price curves moved into steep
contango. These developments all contributed to very strong crude
tanker earnings from mid-March until early May, further supported
by recovering demand in China and crude pricing that was attractive
to buyers, which culminated in new record levels of Chinese crude
imports and additional vessel congestion along the Chinese
coast.
Crude tanker earnings started to fall back to lower levels from
early May, after major oil producers regrouped in mid-April to
agree steep crude production cuts that led to a sharp reduction in
cargo liftings and hence reduced demand for tankers and lower
earnings. Although these oil production cuts began to be eased from
August, crude tanker earnings remained generally low throughout the
third and fourth quarters as a combination of compensatory
production cuts from countries that had previously over-produced
and unwinding of floating storage employment kept cargo shipments
low and added tonnage back to the trading fleet. By the end of the
year the number of suezmaxes and aframaxes employed in floating
storage had fallen back towards levels seen in 2018 and 2019. VLCC
floating storage remained at elevated levels, albeit substantially
below the peak levels.
The crude tanker fleet grew by a modest 3.3% in 2020, while the
size of the trading fleet throughout the year was restricted by a
combination of floating storage, sanctions and fluctuations in the
number of vessels in dry docks. Crude tanker newbuilding deliveries
are expected to remain modest in 2021, however fleet growth may
decline if demolition of older tonnage, which was low in 2020,
starts to increase once again.
The early part of 2021 has seen a mixed reaction from the OPEC+
group of oil producers, with an agreement to increase production in
January followed by a commitment from Saudi Arabia to reduce
production once again in February and March, while other producers
in the group are due to either hold production steady or slightly
increase volumes. Looking ahead, we anticipate further tapering of
oil production cuts as oil demand recovers throughout 2021 and
crude oil inventories are drawn down. This is expected to lead to
increased crude oil shipments and rebounding levels of crude tanker
demand.
Products
The products tanker market also witnessed similar strength and
volatility in earnings in the first half of the year followed by
generally weaker earnings in the second half, albeit punctuated by
some volatility particularly on the larger sizes of vessels.
Clarksons' assessed average earnings for LR2s on the benchmark
Middle East to Far East route increased by 30% year-on-year in
2020, while assessed average earnings for LR1s on the same route
increased by 31% year-on-year. Meanwhile, assessed average clean MR
earnings increased by 11% in 2020 compared to 2019.
A sharp increase in floating storage, time charter enquiry and
vessel delays as well as long-haul shipments from West to East, all
contributed to the very strong earnings that were seen across the
products tanker markets in the first half of the year. However, by
mid-year, products tanker earnings had also fallen back to lower
levels as the reduced level of underlying products demand and
refinery run cuts took their toll, despite many vessels remaining
in floating storage employment.
The second half of the year saw low earnings across the products
tanker sector as a result of the low levels of demand and refinery
output. However, the LR2s and LR1s did see some increases to
healthier levels based on some periods of greater activity.
Products tanker fleet growth was modest at 2.4%, while the
trading fleet size was also restricted by floating storage,
particularly in the second quarter. By the fourth quarter, the vast
majority of products tanker floating storage had unwound. Products
tanker deliveries are expected to increase slightly in 2021, while
remaining at modest levels overall. Fleet growth may decline from
2020 levels due to an increase in products tanker demolition.
Meanwhile, the anticipated restoration of higher oil demand and
refinery runs throughout 2021 and depletion of excess product
inventories is expected to lead to increasing levels of products
tanker demand.
Looking further ahead, in both the crude and products tanker
sectors, the requirement for significant fleet renewal in the next
few years, together with measures to reduce existing vessels' CO(2)
emissions and dilemmas regarding the specification of newbuilding
tankers that will reduce emissions, may all act to restrain fleet
capacity growth and create tighter market conditions.
Specialised products
Despite the impact of COVID-19, the specialised products market
performed much better than expected in 2020. The freight
environment in the first quarter was strong, driven in part by a
buoyant products tanker sector. The start of the second quarter saw
the customary slowdown. The crude oil price crash in April/May led
to a huge increase in edible oil and bulk chemical freight rates,
as swing tonnage exited the edibles sector to take advantage of the
higher CPP earnings that were available as a result of the oil
price contango-driven floating storage boom. We also saw a small
number of IMO2 MRs leave the chemicals sector for the first time
for the same reason.
The second half of the year was difficult with performance below
2019 levels. Second waves of COVID-19 and lockdowns across the
globe severely hampered spot market sentiment. However, Chinese
demand for bulk chemical feedstock volumes was largely flat
year-on-year, a factor that was reflected in the performance of CoA
nominations. As the year ended, demand for 'Made in China' plastic
goods seemed to perform well with containerised exports from the
region holding up in the face of the pandemic. Chemical inventory
levels were also decreasing, suggesting that manufacturing supply
chains had recovered to some extent. Spot chemical freight rates
closed at 7% up for the year compared to 2019. This relates more to
the influence of the petroleum products market rather than
increased chemical tonnage demand. Meanwhile, edible oil freight
rates finished the year 2% lower than 2019 as this sector is much
more closely aligned to the volatility of the petroleum products
market, and so it will exhibit any adverse effects with a higher
degree of severity than in chemicals.
Deal liquidity in the time charter market was limited for much
of the year due to the uncertainty caused by COVID-19.
At the beginning of the COVID-19 pandemic, it was expected that
specialised seaborne trade levels would contract by as much 5%.
However, it appears that the CoA volumes driven by encouraging PMI
and IP data, particularly in the Chinese markets, led to a slightly
improved picture. Seaborne trade is now expected to have contracted
by approximately 2% in 2020, to around 365m tonnes. The key
end-user markets of China and India remain pivotal to the future
performance of seaborne trade, and tonnage demand for imports held
up for much of the year. We do expect some delays to US shale gas
liquid chemical projects because of financing, legal and
environmental issues in some cases. Whilst project delays in the
Middle East are also likely, no major cancellations have been
announced and as such, in our view, the outlook for bulk chemical
export growth remains strong.
On the supply side, the chemical tanker fleet was recorded at
55.5m dwt at the start of 2020. 3.5m dwt was added to the fleet
during the year, whilst 0.9m dwt was removed. The order book still
remains at the lowest level in 20 years and is recorded at just
over 6% of the in-service tonnage as at the end of 2020. We do not
expect much change in the order book considering the lack of
finance that is available and thus we expect the fleet to contract
through 2021 and into 2022.
The green transition is very much at the forefront of all
stakeholders' minds. The breadth and depth of the business means
that we are uniquely positioned to utilise our unparalleled market
knowledge to advise and support charterers and shipowners alike in
their green agendas. Throughout 2020, our market share of the
biofuels sector remained strong, supported by an improved analysis
and strategy provision. This is a key area of growth for the sector
and the business continues to expand.
Overall market sentiment was downbeat as we approached the end
of the year. Spot market tonnage demand was depressed and chemical
tanker earnings were under considerable pressure at a time when
bunker prices were rising amid geo-political and macro-economic
uncertainty. The speed with which global manufacturing supply
chains return to pre-COVID-19 levels will be crucial to a recovery
in tonnage demand and fleet utilisation levels. However, the very
low order book will provide a floor, with any sustained recovery in
the products sector likely to lead to a more bullish edible and
chemical freight rate environment.
Gas
The larger LPG carrier market proved surprisingly healthy in
2020 despite an influx of newbuildings, a lack of removals and some
demand destruction as a result of COVID-19 from the petrochemical
and autogas sector. It was only the second quarter that was
characterised by a steep dip in VLGC freights. In the West, demand
faced some headwinds from cheaper naphtha, when oil prices
collapsed. Meanwhile, although demand in Asia dipped in the first
quarter, most notably in China, it started to rebound as the year
progressed supported by a recovery in PDH utilisation levels and
the start of new petrochemical capacity in the second half of the
year. Demand growth from the domestic sector in India was also
aided by the introduction of a free LPG programme for the poorer
segments of the population. A combination of a contraction of
Middle Eastern and other export regions' volumes largely due to
OPEC cuts, and a 5m mt increase in exports from North America,
meant more longer-haul exports were required to cover this deficit
in the East, in addition to the incremental demand growth. Overall
seaborne LPG trade has risen only marginally compared with 2019,
but it has been the changes in flows which have been of greater
importance.
With West-East flows on the ascendency, this placed growing
pressure on the NeoPanama canal which, in combination with growing
demand from other sectors of the shipping market, resulted in an
increase in waiting time for the LPG carriers. Additionally, delays
at key discharge ports added to the already extended voyage times.
Although there were no delays in newbuilding deliveries, with an
additional 21 vessels added into the VLGC fleet in 2020, and no
units sold for recycling, a heavy and postponed dry dock schedule
served to also remove supply side pressure, further underpinning
the recovery in freights during the fourth quarter in particular.
Reflecting this, average annual VLGC time charter equivalent
earnings rose by 8% year-on-year, with levels breaching US$3m per
month in December. Despite a strong start to the year, with a heavy
export schedule from the US and increased seasonal domestic demand,
rising prices started to place margins into the East under pressure
and by the end of January 2021, time charter equivalent earnings
had fallen to just below US$1.4m per month.
A heathier VLGC carrier market also affected the fortunes of the
sizes below, with both LGC and midsize freights firming. The
Clarksons' assessed 12-month time charter rate for a 59,000 cbm LGC
rose from US$0.8m per month in 2019 to US$0.9m per month in 2020.
Similarly the midsizes market also strengthened, with assessed time
charter rates on 38,000 cbm units rising by 20% to US$0.8m per
month as the LPG tonne-miles rose and as seaborne trade contracted
much less than anticipated earlier in the year. The midsizes also
received support from the handysize carriers which benefited from
the addition of new ethylene volumes with the start-up of the new
Enterprise/Navigator terminal in the US Gulf. As a result of this,
and the rising market share of petrochemical trades generally,
assessed 12-month time charter rates on the 20,500 semi-ref units
rose by the same magnitude as the midsizes.
Looking ahead, whilst newbuildings are expected to deliver into
each of the size categories, the challenges of fleet supply growth
are expected to be mitigated somewhat by continued market
inefficiencies, dry-docking schedules and petrochemical feedstock
demand growth in Asia. Additionally, both LPG and ammonia seaborne
trade volumes are expected to register growth of over 3%. LPG
volumes will be affected by the level of export flow from the US
and the proportion of which is destined for Asia to fill the
continued shortfall in supply East of Suez. Further growth is also
expected in ethylene exports from the US, even if the new terminal
does not run at full capacity on a continual basis.
The smaller sized vessels, in contrast, have continued to fare
less well than the larger units. Support for the larger handysize
units from the increased ethylene volumes relieved some of the
downward pressure they had exerted on the smaller sizes. Despite
this, idle time remained an unwelcome feature of the market and the
assessed 12-month time charter on the benchmark 8,000 cbm ethylene
vessels fell 2.1% year-on-year, although the term market was
virtually non-existent, and the 3,200 semi-refs fell by 6.5%. The
decline in assessed pressure rates was more dramatic with the
average falling 5.7% in the East and over 20% in the West. The fall
in spot levels, however, was far more severe across the sectors.
Despite this, the age profile of the fleet continues to
deteriorate, most notably in the smaller sizes sub 6,000 cbm, where
there are also limited newbuilding orders. The prospects of the
smaller size sectors overall will be very much dictated by
operating levels at crackers and PDH facilities run in 2021.
LNG
Near-term LNG freight rates dropped on an annual basis in 2020,
principally as a result of weak demand for LNG in first half of the
year which was eventually balanced by LNG exports cuts, reducing
tonnage demand for spot cargoes in the process.
The spot headline rates for conventional 160km(3) Tri-Fuel
Diesel Electric tonnage fell 12.1% year-on-year averaging US$60,900
per day in 2020. However, the trading environment was particularly
volatile through 2020, with spot rates bottoming in July at
US$27,000 per day, before rebounding in the second half of 2020 to
US$145,500 per day, on the back of wide open Atlantic-Pacific
arbitrage.
The spread between the Northeast Asia LNG price and the US Henry
Hub natural gas price fell 25% year-on-year to US$2.24 per million
British Thermal Unit (BTU) in 2020, from US$2.99 per million BTU in
2019. The narrower price spread resulted in the US Gulf Coast
export plants operating well below their nameplate capacity,
especially in the second and third quarters of 2020, reducing
tonnage demand eventually. However, the spread recovered in the
second half of 2020 to US$3.44 per million BTU, driven by cold
weather-related demand from Asia, unplanned outages at several
export plants in the Pacific, Middle East and Africa and delays in
the transit of LNG carriers through the Panama Canal.
The spread between the Northeast Asia LNG price and the European
Title Transfer Facility natural gas price rose 12% year-on-year to
US$1.19 per million BTU in 2020, with the spread trading above
US$3.00 per million BTU in the fourth quarter of 2020, which helped
incentivise LNG cargo re-exports to Asia.
Global LNG trade volumes were up 1.7% to 363m mt in 2020, pushed
primarily by new supplies from the US and to a lesser extent by
higher exports from Papua New Guinea and Qatar. US LNG exports rose
by around 32% to 48.2m mt with the commissioning of Cameron T2-3
and Freeport T2-3, and the ramp-up of projects commissioned in
2019. However, in the second and third quarters of 2020, US LNG
exports plunged as much as 60% compared to the first quarter due to
a price-sensitive reduction in output of some 150-180 LNG cargoes.
Exports from Papua New Guinea and Angola rose by a combined 14.1%
to 12.8m mt, driven by increased spot tender activity. Qatar
retained its position as the world's biggest exporter with exports
rising by 1.0% to 77.6m mt in 2020. Australia's LNG exports were up
0.6% to 77.3m mt, as higher exports from Pluto LNG and projects in
the Northern Territory were partially offset by lower exports at
Prelude FLNG and Gorgon LNG, both impacted by unplanned outages.
Elsewhere, Egypt's LNG exports plummeted 64% to 1.2m mt in 2020,
Malaysia's exports were down 7% to 23.8m mt and exports from
Indonesia fell 8% to 13.9m mt; all were largely attributed to the
low LNG price environment of the first half of 2020. Exports from
Trinidad and Tobago were down 19% to 10.9m mt in 2020 and Norway's
exports were down 28% to 3.4m mt, driven by long-lasting unplanned
outages at their export terminals. LNG re-export increased by 240%
to 7.0m mt, driven by surging activity in the Northwest European
terminals, used to tranship Russian's Yamal LNG cargoes to other
destinations in Europe and Asia.
On the demand side, Japan-Korea-Taiwan remained the largest
demand area, while the biggest rise in imports were recorded in
China, India and Turkey. LNG imports into China rebounded from the
drop in the first quarter and increased by 11.3% to 67.1m mt on the
back of industrial demand, natural gas grid expansion and the
debottleneck of the Zhoushan terminal and residential demand
induced by the colder winter weather in the fourth quarter. Imports
into India rose by 12.9% to 25.2m mt, driven by price-sensitive
industrial demand and declining domestic gas production, while
imports into Turkey rose 21% to 11.0m mts, offsetting a decline in
gas pipeline imports from Russia and Iran. Japan remained the
largest importer at 74.6m mt, but its imports slipped 2.1% on the
back of lower power demand and high inventories in the first half
of 2020. Imports into Europe, including Turkey, dropped by 0.8% or
0.7m mt to 87.2m mt, with the fall in the second half of 2020 more
than offsetting rather strong growth in the first half of the
year.
LNG tonnage demand continued to grow in 2020 by 7.9% to 1,543
trillion tonne-miles driven by growth in LNG trade flows on a
long-haul voyage, on the back of a 16.4% growth to 46.5m mt in West
to East trade, in particular LNG exports from US towards Asia. The
average laden distance sailed by LNG carriers was up 6.1% to 4,250
nm in 2020, compared to 4,006 nm a year ago, driven by LNG cargoes
shipments from US to the Far East Asia and India.
32 conventional LNG carriers and three FSRUs were delivered in
2020, a drop of eight LNG vessels from 2019, with several
deliveries delayed to early 2021 for commercial reasons. 49
conventional LNG carriers were ordered in 2020, in line with 2019
levels, with a total of 16 LNG conventional carriers ordered from
the Arctic LNG 2 project in Russia alone. In addition, two
medium-size LNG carriers and two large FSUs were ordered for
projects in Malaysia and in Russia respectively.
Traded volumes are expected to increase again in 2021, led by US
project Corpus Christi T3, Indonesia's Tangguh T3 and Russia's
Yamal LNG T4 which are set to bring online some 9.2m tonnes per
annum and stronger utilisation of those plants whose output was
reduced due to the low-price environment in the first half of the
year. The majority of developers which were anticipated to reach
final investment decisions in 2020 for export projects in the US,
Qatar, Canada, Australia and Africa have delayed the announcement
to 2021-2022, on the basis of market uncertainties and the low oil
and LNG price environment of 2020. The only LNG export project
reaching final investment decision in 2020 was the 3.5MTPA Energia
Costa Azul in Mexico.
Newbuild ordering is expected to continue into 2021, supported
by several liquefaction projects which anticipate reaching final
investment decision, by portfolio players holding long-term supply
contracts on a FOB basis from projects under construction and by
players looking at renewing existing tonnage with more efficient
LNG carriers.
Sale and purchase
Secondhand
In March, sale and purchase business was challenging as crew
changes became almost impossible to organise at short notice,
resulting in some vessels ballasting in circles around the Far East
looking for a port where changes of ownership could be arranged.
Shipowners had so many logistical problems with their own fleets
that they had little interest in buying more vessels and with the
recycling beaches of the Indian sub-continent closed down,
transaction levels for new business pretty much ground to a halt.
In March and April we also struggled to maintain existing business
which had already been concluded, with effectively deals failing
exceeding the ships we managed to sell in this period. We made real
efforts to maintain morale during those challenging times. With
clients reluctant to talk about new business and our existing
business falling away, the early months of lockdown were difficult
for sale and purchase and the year at that point looked bleak.
However, as things settled into the new normal and it became
clear that fundamentals were not going to change quickly, shipping
as always started to find ways around the new obstacles. For
example, buyers agreed to take over sellers' existing crews or
sellers found specific jurisdictions that started specialising in
allowing vessel deliveries and crew changes. Globally across sale
and purchase, the team worked hard at sharing this sort of
information with each other. New business started to move again
during the summer months with a certain amount of pent-up demand
accelerating that process to the extent that the second half of the
year more than made up for that initial market paralysis.
On a global basis, year-on-year against 2019, there was a
significant increase in the volume of transactions concluded for
2020.
Newbuilding
The newbuilding market remained challenging for the large part
of 2020.
Overall, output fell to 29.0m CGT, according to Clarksons
Research, down 15% year-on-year to its lowest level since 2005 and
to 50% of the 2010 production peak. New orders fell by a third to
20.2m CGT, representing the second lowest level since 2009, despite
increased activity in the final quarter.
Macro-economic volatility and the ongoing debate around the
green transition also had a major part to play in inhibiting
investment decision. However, despite these challenges, several
markets showed resilience and overall meaningful levels of
contracting and activity remained, albeit at historically
diminished levels.
Whilst the speculative end of the market was stifled by the more
macro variables, project demand and the industrial sector remained
relatively active. The dry cargo market was also heavily buoyed by
Asian interests, namely domestic buyers in China, and Japanese
owners who accounted for broadly over 80% of contracting activity
across the major segments. Gas and container business also remained
active and we saw a material increase in activity in the fourth
quarter of the year as competitively priced deals across the large
asset classes were motivated by yards seeking to compensate for a
quiet year and soak up opportunity prior to year-end.
31% of new orders placed in 2020 incorporated alternative fuels
and there remains an increasing attention to transition to green as
the market adjusts in preparation for the approaching IMO 2030
measures. Going forward, we fully expect this trend to be a pivotal
driver of new demand.
As a Group, we continue to leverage our strengths and offering
into the industrial markets, which accounted for a large part of
our activity in 2020. In parallel, we continue service to our
historical and heritage relationships and invest into being at the
forefront of this meaningfully transitional phase in the market.
Our market share continues to grow and we remain a major tonnage
provider to the key global shipbuilding players. We remain well
placed to capitalise on this next phase of shipbuilding as we
progress into 2021.
Offshore
General
2020 was a year of significant contrasts within offshore and
offshore renewables. The traditional offshore market, focused on
the oil and gas business, saw a lacklustre year with a significant
decline in activity, utilisation levels and day rates. However, the
offshore renewables (wind) business, has seen continued strong
growth, healthy earnings and a record volume of new projects
sanctioned.
The significant decline in the traditional offshore business was
induced by COVID-19 and the fall in the price of oil. This decline,
combined with an uncertain outlook for near- and mid-term oil
demand, forced Exploration and Production (E&P) companies to
rapidly and significantly reduce investment levels and operating
expenses. Global E&P spending dropped 30% in 2020 compared to
2019 and the latest indications suggest flat spending or moderate
further reductions in 2021. Additionally, most operators also
paused, deferred or cancelled already initiated projects due to
operational and logistical challenges induced by COVID-19. This has
also had an adverse effect on offshore services in general.
Finally, most owners faced significant increases in their own
operating expenses due to COVID-19, which have been far from
compensated by operators. Consequently, we saw another significant
round of refinancing, restructuring and Chapter 11 processes in the
sector.
The continued strong growth for offshore renewables (wind) is
underpinned by solid, long-term drivers; the green transition and
the world's desire to decarbonise primary energy supply. As the
pandemic escalated, market participants discussed whether it could
derail the strong growth for renewables in general, due to the risk
of countries and regions reverting to fossil fuels as these became
cheaper. If anything, it seems to have accelerated the pace of
growth for renewables. Many of the fiscal stimuli packages that
have been launched have a solid 'green component', based on the
'build back better' rationale. Several countries have launched very
significant programmes, hoping to stimulate and cultivate domestic
industry and, to some extent, establish market-leading positions.
Several stakeholders have also highlighted the risk of relying too
heavily on imported energy in potential future pandemic situations
and have thus pushed to develop local or regional energy supply,
which, in many cases, implies wind and solar. Finally, the capacity
freed up in the oil and gas business (and other industries) has
made it easier for companies in the renewables sector to recruit
and retain highly capable professionals and rapidly build and grow
their organisations.
This contrasting backdrop has also affected Clarksons Platou
Offshore and Renewables, with a significant drop in sale and
purchase and newbuilding activity in the traditional offshore
business, while the renewables team has continued to see strong
growth both in chartering, newbuilding and sale and purchase
activities.
Drilling rig market
Whilst total offshore rig demand saw some improvement in the
first quarter of 2020, overall rig demand saw a significant drop
following the oil price crash in March/April. Total rig demand at
the year-end was down 10% year-on-year with significant differences
between the jackup (shallow water) and floater
(mid-/deep-/ultradeep-water) segments. The demand for jackups
declined by about 5% through 2020, whereas floater demand came down
as much as 22%. The global offshore rig demand was at 462 units at
the end of 2020, down from 506 units in December 2019, based on
data from Clarksons Research. The demand for floaters was at 110
units in December 2020, down from 135 in December 2019. The current
contracted level for floaters is the lowest we have observed for
more than a decade. In line with the significant decline in demand,
utilisation and day rate levels also came under pressure. At the
year-end, global jackup utilisation was at around 74%, down from
76% a year earlier, whereas floater utilisation was as low as 61%,
down from 68% at the end of 2019. While drillers have been faced
with declining utilisation and day rate levels, they have at the
same time faced significantly increasing operating expenses due to
COVID-19. Crew change costs and other logistical costs associated
with keeping contracted rigs active have generally escalated and
operators have only to a highly limited extent been inclined to
compensate for this. Consequently, most of the world's large
drillers have been, or are, in some form of financial
restructuring. Several of these processes are approaching a
conclusion and we expect to see numerous companies emerge from
restructuring during the first half of 2021. Further consolidation
in the drilling market is a likely consequence once the companies
have completed these processes, and we expect to see this
materialise throughout 2021 and 2022.
Subsea and field development market
Sanctioning of new offshore field developments largely came to a
halt following the oil price decline in early 2020. However,
despite this, the major subsea contractors continued to see a
decent order intake through the year with combined book-to-bill
level around 100% through the third quarter. This was driven by a
combination of awards related to already sanctioned projects, the
sum of smaller contracts and, importantly, some major contracts for
renewable projects (offshore wind). Despite sustained backlogs,
major contractors continued to face declining fleet utilisation,
revenues and earnings. Consequently, most of the contractors have
released chartered vessels back to the market and announced
significant cost reduction efforts. This had an adverse impact on
subsea vessel owners who have continued to struggle to secure
employment for their vessels. There has been no meaningful
improvement in the market for subsea inspections, maintenance and
repairs (IMR), which has further contributed to depressed fleet
utilisation. Continued strong activity in the offshore wind segment
compensated somewhat, but this was not enough to cover the
shortfall in subsea EPC/project work and IMR.
Offshore Support Vessels (OSVs), Platform Supply Vessels (PSVs)
and Anchor Handling Tug and Supply Vessels (AHTSs)
The market for OSVs also generally remains challenging and was
characterised by significant vessel overcapacity. Current day rates
were generally in line with or barely above vessel operating
expenditure levels. All regions saw rock-bottom rates and low
utilisation, which led to significant financial stress for owners.
Many owners have been or are still going through financial
restructuring and the sale and purchase market was particularly
challenging with exceptionally few industrial owners left with
capacity to transact. Chartering volumes are currently indicating a
marginal pick up in some selected markets at the beginning of 2021,
but higher activity levels, particularly in the drilling market,
are needed to see a more meaningful recovery for the OSV
segment.
Renewables (wind)
The offshore renewables market continued its strong growth
throughout 2020 and was, to a great deal, shielded from the global
shocks witnessed in the traditional oil service industry and other
commodity markets following the outbreak of COVID-19. 2020 was a
year of record investments into the sector, seeing a total of 7.0
GW of new field developments being sanctioned for Europe, around
9.0 GW in China and another 1.3 GW in the rest of the world,
according to Clarksons Research. This level of investment eclipsed
all earlier years. There is a continued upward trajectory when it
comes to planning for, sanctioning and construction of offshore
wind farms, but 2020 also marked the year in which many deep water
shipping and oil service companies initiated their 'pivot'
strategy, shifting resources and funding away from hydrocarbon and
natural resources and allocating it towards offshore wind. More
than US$2bn of investments in key offshore wind vessel segments
were made in 2020 (firm orders); including letters of intent and
options, that number could be more than twice as high.
We are witnessing the beginning of an infrastructure supercycle,
driven by three key parameters. Firstly, an unprecedented
acceleration in national climate pledges, with the EU, China and
Japan, among others, setting very ambitious targets. With a new US
President, the renewables industry is eagerly awaiting the
implications on US climate strategy as well, including ambitions in
offshore wind. Secondly, a supply and demand squeeze; with the
upsizing trend of key equipment needed to build and operate a wind
farm, such as the wind turbine, the current vessel fleet is not
capable of building and supporting the planned industry growth in
the years after 2024. More vessels are required, which, if not met
by increased supply, could drive up day rates. Finally, the
financial ESG factor, where investor sentiment has led to increased
demand for securities that meet those requirements, which in turn
has led to strong share price performance for the listed companies
and record IPO activity. More capital has entered the space -
inflows into ESG funds in 2020 were 118% higher than in 2019.
Futures
Dry FFAs
COVID-19 proved to have a mixed impact on the freight market in
2020. Trader appetite increased and volumes year-on-year were up by
nearly 15%. However, rates dropped significantly.
Total dry FFA volumes in 2020 were up 14% to 1,562,653 lots. The
panamax market was again the largest sector by volume with 744,237
lots, up 11% year-on-year. Capesizes saw a similar 11% rise
(592,519 lots), whilst supramaxes had a more significant 32% jump
(225,897 lots).
The underlying rates however were not so encouraging. Capesizes
averaged US$12,855 per day for 2020 after a dismal first and second
quarter, down from US$18,025 per day in 2019. Panamaxes averaged
US$8,563 per day, down from US$11,112 per day. Supramaxes averaged
US$8,173 per day, down from US$9,948 per day in 2019.
The introduction of the panamax 5TC index has still not gained
traction despite attempts by clients to push the market that way.
Others followed the open interest. When there is a substantial move
to 5TC, the critical mass will follow and the 4TC index will die
out.
FFA options, similar to swaps, saw a good a volume push to
327,183 lots in 2020 from 244,866 lots in 2019. Capesizes remained
dominant with 54% share but the panamax market saw growth with 44%
of the market.
2021 will inevitably be dominated by the direction the dry
product consumer countries take to stabilise and restore their
economies.
Wet FFAs
It was another strong year for the tanker-focused wet FFA team
with a very busy first half of the year. Volumes increased again on
both clean and dirty from 2019. In 2020, clean volumes were up 39%
to a total of 225,929 lots and dirty volumes up 52% to a total of
375,067 lots which is a record high. This was mainly due to oil
storage plays in the first half of the year and new market
participants.
LNG and LPG FFAs
Having arranged the first LNG FFA trade in December 2019, we
maintained our market-leading position in this market for 2020.
Volumes remain low but we hope to see them improve in 2021,
especially if the product is listed on ICE.
LPG FFA volumes increased to over 13,000 lots in 2020 from 7,114
lots in 2019. We increased our market share in 2020 and aim to do
the same in 2021.
Financial
Revenue: GBP33.9m (2019: GBP35.5m)
Segment underlying profit: GBP2.5m (2019: GBP3.3m)
The Financial segment had a mixed year.
Securities
2020 was an extremely challenging year due to COVID-19. To an
extent unseen in most of our lifetimes and unexpected 12 months
ago, it has caused one of the largest and sharpest economic
contractions in recent history. Not only has the year been
challenging due to the volatile oil price and collapse in freight
markets, but also due to fears of global recession. Despite periods
of optimism during the summer when it appeared that the virus was
under control, and the end of the year with the arrival of
vaccines, the year has been very volatile with new highs and new
lows in all markets. 2020 can be summed up as a Bull-Bear-Bull
market, as the majority of indices have gained between 5% and 15%
from the start of the year to the end.
As news unfolded of the spread of the virus, global financial
markets responded with sell-offs, volatility and a sharp increase
in borrowing costs, which rivalled, and at times exceeded, those
seen during the 2008 global financial crisis. March 2020 will
surely go down as one of the most turbulent months as COVID-19
spread worldwide.
April saw global equities rebound as investors began to focus on
expectations that economic lockdowns could soon ease and economies
start to recover. The S&P 500 Index saw its strongest monthly
rally in 30 years, shrugging off negative data which indicated
sharply rising unemployment. Eurozone equities advanced as some
countries began to allow some parts of their economies to reopen.
The healthcare and information technology sectors were among the
top gainers. UK and Norwegian equities recovered over the period as
the governments declared they had passed the peak of COVID-19 and
began preparations to ease lockdown measures.
The price of Brent crude oil plummeted in March due to various
lockdowns in countries and travel bans. Coming from an average
price at US$64 per bbl in January and US$56 per bbl in February, by
the end of April the Brent crude price had plummeted to below US$20
per bbl. Optimism over tighter supply also pushed oil prices up in
May and June. Iraq and Kazakhstan pledged to comply better with oil
cuts and data showed the number of oil and gas rigs in the US and
Canada fell to a record low in June. In the second half of the
year, the Brent crude oil price remained volatile and ended at
US$52, down 15% from the start of the year.
The offshore oil and gas industry began 2020 on a cautiously
optimistic note. That optimism was quickly shattered with the onset
of COVID-19 and the equally rapid collapse in crude oil prices.
Having initially projected offshore Final Investment Decisions
(FID) would total over US$100bn in 2020, Clarksons Research
reported only US$41bn across the year.
In shipping, regulatory uncertainty is holding back newbuilding
investments. The IMO has established long-term decarbonisation
targets but has yet to decide on how to regulate emissions from
vessels. Many shipowners and investors alike have refrained from
building new vessels due to uncertain regulatory requirements, so
the order books in most shipping sectors currently are at
decades-low levels. With the lack of active shipbuilding activity,
there is also less need for financing and consequently less ECM
activity in the shipping capital market segment. The current low
vessel ordering environment will, however, lead to reduced vessel
supply and less competition in the coming years, boosting existing
players' profitability so they can better prepare for low-emission
shipping in the future.
The escalated focus on climate change has during 2020, and 2019,
contributed to the energy sector being less favourable and
investors have a focus on going green, boosted by the new US
President's announcement of a US$2tn investment plan focused on
developing clean energy, lowering emissions and rebuilding
infrastructure. Our new investment banking renewables team has,
despite the challenging year, arranged a total of four transactions
with a total value of NOK 900m within solar, cleantech and wind,
with more mandates secured to be performed in 2021.
In the fourth quarter, stock prices powered higher and
emboldened investors thanks to a series of positive news events,
including the announcement of three COVID-19 vaccines which drove a
risk-on mood in the financial markets with the added fuel of the
post-US elections. The stock market rebounded so quickly because
investors were encouraged that COVID-19 would not trigger a more
severe financial crisis.
During 2020, the S&P 500 Index increased 14%, the Dow Jones
Industrial Average, which lagged throughout much of the year,
jumped 10%, while the Nasdaq Composite rose a staggering 30%. In
Norway, the Oslo Stock Exchange Benchmark Index increased by more
than 5%.
Despite the volatile year, we completed 20 transactions with a
total value of US$1.1bn. The majority of completed transactions
were within the shipping (seven transactions) and metals and
minerals (four transactions) sectors with a total value of NOK 8bn.
There were a further five within the offshore/oil services sector
and four within the renewables sector. Over 70% of all transactions
were equity capital market transactions.
Project finance
Shipping
Given the overall conditions of the shipping markets in 2020,
most shipowners shifted their focus and resources from growth
opportunities and refinancing to operational issues and crew
changes. This also had an effect on the project finance market,
with lower activity in the first three quarters of the year. We
started to see a gradual recovery in shipping market activity
during the second and third quarters. The year ended on a positive
note with most segments at profitable levels and with transaction
activity returning.
Overall, the first part of the year became a real-life
stress-test of the project portfolio we have arranged, and we were
happy to see that all projects have sailed through the crisis
relatively well due to good charter coverage and low loan to
values.
The team arranged three sale and leaseback deals, sold three
vessels from existing projects and arranged a strategic share deal
in an existing project.
Real estate
Clarksons Platou Project Sales (CPPS), which now incorporates
Clarksons Platou Real Estate (CPRE), started 2020 with a
fundamental optimism for the year and strong investor demand for
new investment opportunities. When COVID-19 hit in March all
transaction activity was frozen immediately. The period from March
to June was primarily focused on securing cash flow from existing
projects and reassuring banks and bond-lenders that the assets they
financed remained 'in the money'. However, activity significantly
improved towards the summer. Total transaction volume for 2020 is
estimated to have exceeded NOK 100bn and might even surpass 2019's
all-time high of NOK 105bn. The market activity ended strongly,
fuelled by appealing yield spreads due to reduced financing costs,
as Norway was one of the few countries in Europe that had room for
further interest rate reductions. 2020 was characterised by large
deals: at least 24 deals above NOK 1bn were observed compared with
19 in 2019; five deals were above NOK 2.5bn.
CPPS also had an all-time-high year, passing more than NOK 100m
in new business transaction fees and together with Property
Management, Sales and Investment Management we passed NOK 160m.
CPRE concluded 24 projects, eight of which were sales of existing
projects delivering solid return to our investors. We have now sold
34 projects since 2011, paid out more than NOK 3.5bn in equity to
our investors and delivered an annual return (IRR) of almost 40%
based on the sold projects.
Clarksons Platou Real Estate Investment Management (CPREIM) was
focused on maintaining, securing and executing on the business
plans of the existing portfolio of its main fund (Oslo
Opportunity), but also on new investments. In the spring we focused
on finding potential assets for acquisition (as Oslo Opportunity
had available investment capacity), but most sellers sat firmly 'on
the fence' awaiting visibility. Despite limited transaction
activity in the second quarter, CPREIM secured three new
acquisitions for Oslo Opportunity from June to November. Oslo
Opportunity's investment period ended in December 2020 and CPREIM
is already planning the successor fund (Oslo Opportunity II) which
has received significant interest from both new and existing
investors. CPREIM plans to place the new fund during first quarter
of 2021 with potential investments for the new fund already
identified.
The real estate sector has, in recent years, made a significant
leap towards the technological and environmental trends driven by
authorities, entities, tenants and ultimately investors. The
demands for technologically advanced, energy efficient and
sustainable buildings are ever increasing, along with the ability
to create engaging buildings and neighbourhood environments in
which to live, work and socialise. Clarksons Platou Project
Development (CPPD) was established in 2020 to bring the
professional expertise and capacity of this ever-increasing complex
development environment in-house. During the first six months of
business, CPPD has secured development projects with building costs
totalling NOK 370m in the first phases and with the potential of
further fees in the following phases. Several major development
projects are in the pipeline, with the expectation of growing the
project portfolio to NOK 635m during 2021. CPPD's development fees
are expected to grow significantly towards the completion of
ongoing projects, which are expected to be during 2021 and 2022, as
the development fee structure is skewed towards projects'
completions.
Structured asset finance
2020 began on a positive note with a few significant and
innovative transactions closed by the team. By March 2020 however,
sentiment had changed completely with the onset of COVID-19. Margin
spreads widened significantly for all deals as the immediate fight
to preserve liquidity commenced in earnest, albeit the effect of
this margin increase was somewhat mitigated by the general
reduction in the overall cost of LIBOR. Thankfully, towards the end
of 2020, these were signs that margin spreads had returned to
pre-COVID-19 levels for most deals.
Likewise, the onset of COVID-19 saw credit committees seek
detailed 'deep dive' reviews of existing lending portfolios and
tightened credit criteria for new deals as the primary measures to
identify and avoid future losses. Over the course of 2020, whilst
initial pessimism did not materialise into significant loan
defaults and shipping lending performed relatively well, we still
have not, even in early 2021, seen any significant relaxation in
the credit requirements and do not expect to see much during the
next 12 months.
Generally, the biggest drivers for many credit approvals now are
debt service visibility and the 'green credentials' of the
borrower, the project and the asset. Where once lenders could look
to the vessels for ultimate recourse and security (and to help
reduce capital allocation costs), now with ESG firmly on the
forefront and with Basel IV getting ever closer, one could argue
that taking security over the current vessel fleet is becoming more
and more of a hindrance, certainly for traditional shipping
banks.
Overall, 2020 was a continuance of prior years' trends, albeit
at reduced overall transaction levels compared to 2019. For the
most part, transactions remain private and confidential with few
confirmed details being made public, but early indicators are that
we move ever closer to a balanced funding market, split evenly
between traditional shipping banks and ECAs, alternative direct
lenders and leasing companies.
2021 has started on a positive note with a lot of asset
financing activity. We see plenty of availability of senior debt
facilities from the traditional shipping banks and export credit
agencies for the right 'green' transactions sponsored by blue chip
names, as long as debt service is clear. We are also seeing
increased enthusiasm from pension funds and insurance companies for
these same types of deals, so expect margin spreads here to remain
under pressure. Outside these deals, the clear two-tier market in
terms of pricing continues and this in itself is seeing increased
interest from private equity and private wealth investors who are
attracted by the higher yields on offer for vanilla senior debt
refinancing opportunities for slightly older vessels. Structures
and platforms are also being developed to allow for increased
'tokenisation' and 'trading' of loan participations which itself
will open up more liquidity from this type of capital.
From our perspective, interest from our target clients,
typically those in control of the cargo continues to grow for
arranging and execution of bespoke structured facilities and for
financial advice and validation services. The major corporates of
the world seem to have largely digested the balance sheet impacts
of IFRS16 and now seem more willing to consider how to put their
balance sheets to work efficiently.
Support
Revenue: GBP24.9m (2019: GBP27.7m)
Segment underlying profit: GBP1.7m (2019: GBP3.1m)
There was a significant recovery across all areas in the second
half, led by our increasingly strong position servicing the
offshore renewables industry.
Agency
The year began very strongly with good demand for agency and
shipbroking services across our grain, animal feedstuff, offshore
energy and wider product customer base. However, the arrival of
COVID-19 and the governmental restrictions saw certain sectors of
our business go into either a short decline whilst customers
adjusted to the new business environment or, as with offshore oil
and gas, a much more prolonged reduction in activity levels.
The UK recorded one of its weakest wheat harvests for many
years. Whilst grain exports in the first half were good, the lack
of UK wheat for export in the second half meant reduced agency
income. This fall in income was offset through strong barley export
volumes and imported wheat volumes which grew markedly. Other bulk
product volumes held up reasonably well despite some
COVID-19-induced volume losses where activity levels fell for a
period, particularly in the first half of the year when the UK was
in a strict lockdown.
Our offshore energy business enjoyed a very strong second half
of the year, representing a range of installation and cabling
clients for offshore wind projects off the English and Scottish
coasts. These projects continue with different phases into 2021 and
our agency business is extremely well placed to meet the needs of
this expanding sector with the planned wind farm developments off
both the Scottish and English coasts for many years to come. Income
from offshore oil and gas was much reduced with customer activity
levels dropping to a minimum because of the fall in the price in
oil and gas.
As we neared the end of the year, we invested heavily in our
Customs Clearance capabilities to meet our customers' needs to
clear all products in and out of the UK following the end of the
transition period as the UK finally left the EU. 2021 onwards will
see a marked increase in activity levels in this area both for all
bulks leaving and arriving in the UK as well as the offshore energy
sector requirements to meet the new regulations now the UK is not
part of the EU.
For all vessels under our agency, from the very beginning of the
COVID-19 restrictions we implemented protocols to ensure vessels
and their crew members could continue to pass through ports safely
and without interruption.
In Egypt, we arranged 103 vessel port calls in 2020 compared
with 138 vessels in 2019. The reduced numbers were due to COVID-19
and local market conditions. By the end of 2020 we had started to
provide more services to our customers. We arranged the transit of
582 vessels in 2020 compared with 589 vessels in 2019. Our liner
division has achieved a 15% increase in revenues in 2020 compared
with 2019. In 2021 we expect a rebound in port calls and are
targeting new clients to diversify our portfolio of vessel
types.
Gibb Group
2020 has been one of the most exciting, yet challenging, years
for Gibb despite having to navigate a path through continual change
and new ways of working.
It was a year of transition: in March 2020 we relocated the
Great Yarmouth business to a new purpose-built facility where we
managed to get the move completed just ahead of lockdown.
We have gone from being Gibb Tools for more than 70 years -
predominantly a tool and associated equipment supplier - to Gibb
Group Ltd, a new name to coincide with the launch of Gibb Safety
and Survival. The new division is true to our roots of servicing
the marine and energy sector with all things safety and
survival.
2021 will see more changes with the rollout of our fully
digitised business operationally and a full e-commerce client
experience website from the second quarter of 2021, which will
offer no less than 20,000 different stock items to our clients,
enabling Gibb to offer a true global reach.
In the space of two years, our business has successfully
transitioned from a business which relied on oil and gas for 90% of
its revenues, to one which is now 50% renewable activities and 50%
oil and gas. We continue to make great progress as we actively
pursue work in the renewable sector and gain the trust and custom
of many tier 1 wind farm operators.
With the new Safety and Survival division, we have welcomed some
of the industry's best individuals into the business to assist our
plans to grow the brand. We have committed to a new recruitment
process to bring apprenticeships into the business and use this
model as the pathway to our future talent in the business.
The new name of Gibb Group Ltd will better reflect the business
offering with both the tools and safety division placed under the
Gibb Group brand. We already have plans which could lead to more
divisions on our journey.
Stevedoring
Our Ipswich-based business had a strong year investing in
additional space to meet customer demand, particularly in the
second half. Export volumes held up very well despite the poor UK
wheat harvest and import volumes exceeded our expectations. We
began a new venture in Portsmouth to meet client demand and we hope
that this grows in future periods.
Research
Revenue: GBP16.8m (2019: GBP16.8m)
Segment underlying profit: GBP5.6m (2019: GBP5.4m)
Our Research capabilities have been in high demand this
year.
Despite the difficult trading conditions, Research revenues
remained steady at GBP16.8m (2019: GBP16.8m), with profits
increasing to GBP5.6m (2019: GBP5.4m). Across the challenges of
2020, Research has maintained full research output while continuing
to invest in its offering, including new initiatives to profile the
complex impact of COVID-19 on the shipping markets and to track
trends across the accelerating green transition. Our trusted
intelligence and well received new coverage strengthened, in a
period of uncertainty and change, our position as global market
leaders in the provision of data and intelligence around shipping,
trade, offshore and energy. Research significantly expanded its
support of the Sea/ suite technology platform during 2020 while
continuing its role as a core data provider to the Broking,
Financial and Support teams of Clarksons. Research has also helped
maintain and enhance the profile for the Clarksons Group through
our provision of highly respected research to a wide client
base.
Our long-term strategy to focus on data, intelligence and
insights around the green transition continued across 2020. This is
a hugely important area for the shipping industry and one that has,
along with technology, arguably been 'amplified' as stakeholders
across maritime look to embed 'green' and 'tech' initiatives into
their post COVID-19 planning. The shipping industry produces 810mt
of CO(2) each year, which represents 2.4% of global CO(2)
emissions. There are ambitious reduction targets set by
governmental bodies, such as the IMO and EU, and key industry
stakeholders including financiers and cargo. Our initiatives to
explain emissions regulation and policies to commercial decision
makers, track technology uptake including alternative fuels,
analyse the economic impact on markets, earnings and asset value
and project scenarios for fleet renewal investment have been
integrated into our research offering as part of our fuelling
transition series and are receiving excellent client feedback. This
data and intelligence is being utilised across the shipping
industry, including by governments and policy makers. During 2020,
we also launched an energy transition model, providing integrated
long-term scenarios for the energy mix specific to the maritime
'universe' including seaborne energy trade trends and the split of
energy production by onshore and offshore locations. These
scenarios show exciting long-term prospects for the offshore
renewables industry and we have significantly expanded our data
coverage around projects, farms, turbines and the wind fleet to
support our clients and the Clarksons Platou Renewables broking
team.
Research collects, validates, manages, processes and analyses
data around the shipping and offshore markets, helping support our
clients with their strategy and general decision-making processes.
Our global Research team, with a headcount of over 120 and a strong
Asia Pacific presence, showed excellent flexibility during the
year. Expansions to our proprietary database are increasingly
supported by our data analytics team, utilising innovative
techniques to produce near-term and high frequency data series.
Despite some subscription deferrals, our expanded sales operation
has ensured good client renewal and a flow of new business, helping
annuity revenue reach over 80% of overall sales.
Digital
Sales across our digital platform grew by 5% in 2020. Specific
development plans for each of our digital products continue to be
executed, to ensure that all systems remain content relevant,
capture the benefits of our expanded database and utilise the
latest technology including new data visualisation and
customisation tools. Our investment into underlying digital
architecture, including Application Programming Interface (API), is
providing wide-ranging benefits. Users of our single access
integrated platform have reached over 8,000.
Major digital products include:
Shipping Intelligence Network (SIN)
SIN is the market-leading commercial shipping database,
providing wide-ranging data and analysis tracking and projecting
market supply/demand, vessel earnings, vessel values and
macro-economic data around trade flows and global economic
developments. Our early launch of a dedicated COVID-19 market
impact intelligence series provided a framework around the huge
uncertainties and complexities facing the shipping industry and was
very well received by our clients. This profiled huge 'swings' in
trade volumes, elements of 'disruption upside', stresses in markets
such as cruise and ferry and the shortening order book to historic
lows. Other new content included a port call activity tracker and a
monthly trade index that helped monitor trends such as the early
recovery in China and rebounding container volumes in the second
half of 2020. We also launched a floating storage tracker (for
example, 12% of tanker fleet was utilised as storage in the second
quarter) and issued regular briefings on topical issues such as the
impact of Brexit on seaborne trade.
World Fleet Register (WFR)
There was strong sales growth of the WFR, supported by client
interest around the green transition. The WFR focuses on providing
intelligence around the world shipping fleet and companies,
environmental regulation and policy, the tracking of new technology
on-board ships including scrubbers and alternative fuels and market
trends in the shipbuilding market. New time series, 'eco' profiles,
emissions tracking reports and dashboards monitoring 'green'
technology were added in 2020; by the end of 2020, 29% of the
newbuilding order book was alternative fuelled, up from 21% a year
earlier.
World Offshore Register (WOR)
Our comprehensive offshore register provides detailed
intelligence on offshore oil and gas fields, oil company investment
projects, offshore rigs and support vessels. Offshore oil and gas
represent 17% of global energy supply with offshore renewables at
0.2% of the energy mix, although this could rise to 7% by the
middle of the century. We made significant investments into our
renewables database during 2020 and a new module is planned for
launch in 2021. Clarksons Research remained the market leader in
data provision to the insurance market, where our data is used as
the core reference in identifying rigs and platforms.
Offshore Intelligence Network (OIN)
Despite significant economic stress across the oil service
sector, our digital offshore-related sales remained steady. Our
COVID-19 Market Impact Assessment series for the offshore market,
documenting the huge swings in oil market supply and demand and the
associated impacts across the offshore supply chain, was well
received by clients.
Sea/net
Developed in conjunction with Maritech (a wholly owned
subsidiary of Clarksons), our vessel movement system Sea/net blends
satellite and land-based AIS data with our proprietary database of
vessels, ports and berths. Research continues to improve the depth
of our underlying movement and deployment data.
Services
Our specialist services team focuses on developing and managing
retainers that provide bespoke data, consultancy and tailored
intelligence to a range of corporate clients. Good progress was
made in further expanding our client base during the year, with a
number of successful contracts incorporating API delivery
concluded. Our long-standing 'Shipping and Shipbuilding to 2030'
forum, where analysis and modelling of the market outlook, earnings
projections, long-term trade development, energy transition,
technology scenarios to meet reduced emissions, ship finance
requirements and newbuilding demand are presented to key retainer
clients, was successfully hosted as a webinar, with record
attendance and excellent feedback received. Our 'Offshore and
Energy to 2030' forum was also held virtually and included the
launch of a detailed report around the rapidly growing offshore
renewables market. Our bespoke services typically become embedded
within our clients' workflows, supporting good client retention.
Important client groups include banks, leasing companies,
shipyards, fabricators, engineering companies, insurers,
governments, asset owners and other corporates.
Clarksons Valuations is the largest provider of valuation
services to the shipowning and financial community and is
recognised as the leading provider of authoritative valuations to
the industry, combining leading broker expertise, research and
technology. Reflecting the softer transactional environment of
2020, and long-term changing financial landscape, there was a small
reduction in valuation volumes for the team. Clarksons Valuations
maintained good relationships with all major ship finance banks,
leasing companies and asset owners during 2020, providing regular
updates on the impact of COVID-19 on asset values and transaction
volumes. Previous investments into the team's operating platform,
and in digitalising workflows, proved highly effective during
periods of remote working.
Reports
Benefiting from over 50 years of heritage, our comprehensive
market intelligence report series, including flagships such as
Shipping Intelligence Weekly, continues to generate important
provenance and profile. Although some of these reports can be
accessed individually in digital format, they are largely accessed
via our web offerings and we plan to accelerate this consolidation
in 2021.
Risk management
Full details of our principal risks and how we manage them are
included in the risk management section of the 2020 annual report,
together with our viability and going concern statements.
Our principal risks are:
-- Loss of key personnel - Board members
-- Economic factors
-- Cyber risk and data security
-- Loss of key personnel - normal course of business
-- Adverse movements in foreign exchange
-- Financial loss arising from failure of a client to meet its obligations
-- Breaches in rules and regulations
-- Changes in the broking industry
Directors' responsibilities statement
The statement of Directors' responsibilities below has been
prepared in connection with the Group's full annual report for the
year ended 31 December 2020. Certain parts of the annual report
have not been included in this announcement as set out in note 1 of
the financial information.
We confirm that:
-- to the best of our knowledge, the consolidated financial
statements, which have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 and international financial
reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union, give a true and fair
view of the assets, liabilities, financial position and loss of the
Group;
-- to the best of our knowledge, the strategic report includes a
fair review of the development and performance of the business and
the position of the Group, together with a description of the
principal risks and uncertainties that it faces; and
-- we consider the annual report, taken as a whole, is fair,
balanced and understandable and provides the information necessary
for shareholders to assess the Company's performance, business
model and strategy.
This responsibilities statement was approved by the Board of
Directors on 5 March 2021 and is signed on its behalf by:
Sir Bill Thomas
Chair
5 March 2021
Consolidated income statement
for the year ended 31 December
2020 2019
------------ ------------- ------------- ------------ ------------ ------------- ------------- ------------
Before After Before After
exceptional exceptional exceptional exceptional
items and items and items and items and
acquisition Acquisition acquisition acquisition Acquisition acquisition
related Exceptional related related related Exceptional related related
costs items costs costs costs items costs costs
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============ ============= ============= ============ ------------ ------------- ------------- ------------
Revenue 358.2 - - 358.2 363.0 - . - 363.0
Cost of sales (13.3) - - (13.3) (14.3) - . - (14.3)
============ ============= ============= ============ ------------ ------------- ------------- ------------
Trading profit 344.9 - - 344.9 348.7 - . - 348.7
Administrative
expenses (298.5) (60.6) (0.5) (359.6) (298.2) (47.5) (1.6) (347.3)
============ ============= ============= ============ ------------ ------------- ------------- ------------
Operating
profit/(loss) 46.4 (60.6) (0.5) (14.7) 50.5 (47.5) (1.6) 1.4
Finance revenue 1.2 - - 1.2 1.3 - . - 1.3
Finance costs (3.1) - - (3.1) (2.9) - . - (2.9)
Other finance
revenue -
pensions 0.2 - - 0.2 0.4 - . - 0.4
============ ============= ============= ============ ------------ ------------- ------------- ------------
Profit/(loss)
before taxation 44.7 (60.6) (0.5) (16.4) 49.3 (47.5) (1.6) 0.2
Taxation (9.5) - 0.1 (9.4) (11.4) - 0.3 (11.1)
============ ============= ============= ============ ------------ ------------- ------------- ------------
Profit/(loss)
for the year 35.2 (60.6) (0.4) (25.8) 37.9 (47.5) (1.3) (10.9)
============ ============= ============= ============ ------------ ------------- ------------- ------------
Attributable to:
Equity holders
of the Parent
Company 32.1 (60.6) (0.4) (28.9) 36.0 (47.5) (1.3) (12.8)
Non-controlling
interests 3.1 - - 3.1 1.9 . - . - 1.9
============ ============= ============= ============ ------------ ------------- ------------- ------------
Profit/(loss)
for the year 35.2 (60.6) (0.4) (25.8) 37.9 (47.5) (1.3) (10.9)
============ ============= ============= ============ ------------ ------------- ------------- ------------
Earnings/(loss)
per share
Basic 106.0p (95.2p) 118.8p (42.4p)
Diluted 105.8p (95.2p) 118.6p (42.4p)
============ ============= ============= ============ ------------ ------------- ------------- ------------
Consolidated statement of comprehensive income
for the year ended 31 December
2020 2019
GBPm GBPm
======= -------
Loss for the year (25.8) (10.9)
Other comprehensive loss:
Items that will not be reclassified to profit
or loss:
Actuarial gain/(loss) on employee benefit
schemes - net of tax 1.0 (3.1)
Changes in the fair value of equity instruments (2.1) -
at fair value through other comprehensive
income - net of tax
Items that may be reclassified subsequently
to profit or loss:
Foreign exchange differences on retranslation
of foreign operations (2.9) (16.4)
Foreign currency hedges recycled to profit
or loss - net of tax 1.5 0.7
Foreign currency hedge revaluations - net
of tax 1.6 0.9
Other comprehensive loss (0.9) (17.9)
------- -------
Total comprehensive loss for the year (26.7) (28.8)
======= -------
Attributable to:
Equity holders of the Parent Company (29.8) (30.5)
Non-controlling interests 3.1 1.7
------- -------
Total comprehensive loss for the year (26.7) (28.8)
------- -------
Consolidated balance sheet
as at 31 December
2020 2019
GBPm GBPm
======== --------
Non-current assets
Property, plant and equipment 24.3 25.6
Investment properties 1.2 1.2
Right-of-use assets 47.0 53.4
Intangible assets 182.9 238.2
Trade and other receivables 3.1 2.1
Investments 2.9 4.8
Employee benefits 18.1 15.5
Deferred tax assets 10.6 9.1
======== --------
290.1 349.9
======== --------
Current assets
Inventories 1.3 1.1
Trade and other receivables 76.6 77.0
Income tax receivable 0.2 0.1
Investments 31.1 15.6
Cash and cash equivalents 173.4 175.7
======== --------
282.6 269.5
======== --------
Current liabilities
Interest-bearing loans and borrowings - (1.2)
Trade and other payables (160.6) (151.3)
Lease liabilities (8.4) (8.7)
Income tax payable (7.9) (9.1)
Provisions (0.5) (0.3)
======== --------
(177.4) (170.6)
======== --------
Net current assets 105.2 98.9
======== --------
Non-current liabilities
Interest-bearing loans and borrowings (0.1) (0.1)
Trade and other payables (2.7) (2.4)
Lease liabilities (47.7) (53.7)
Provisions (1.5) (1.5)
Employee benefits (6.1) (4.5)
Deferred tax liabilities (8.8) (6.0)
======== --------
(66.9) (68.2)
======== --------
Net assets 328.4 380.6
======== --------
Capital and reserves
Share capital 7.6 7.6
Other reserves 104.6 158.4
Retained earnings 211.9 211.5
======== --------
Equity attributable to shareholders of
the Parent Company 324.1 377.5
Non-controlling interests 4.3 3.1
-------- --------
Total equity 328.4 380.6
======== --------
Consolidated statement of changes in equity
for the year ended 31 December
Attributable to equity holders
of the Parent Company
----------------------------------------------
Non-controlling
Share Other Retained interests Total
capital reserves earnings Total GBPm equity
GBPm GBPm GBPm GBPm GBPm
========== =========== =========== ======== ================ =========
Balance at 1 January
2020 7.6 158.4 211.5 377.5 3.1 380.6
(Loss)/profit for the
year - - (28.9) (28.9) 3.1 (25.8)
Other comprehensive income/(loss) - 0.2 (1.1) (0.9) - (0.9)
Total comprehensive income/(loss)
for the year - 0.2 (30.0) (29.8) 3.1 (26.7)
========== =========== =========== ======== ================ =========
Transfer from merger
reserve - (54.7) 54.7 - - -
Transactions with owners:
Share issues - 0.6 - 0.6 - 0.6
Employee share schemes - 0.1 (0.5) (0.4) - (0.4)
Tax on other employee
benefits - - (0.2) (0.2) - (0.2)
Tax on other items in
equity - - 0.1 0.1 - 0.1
Dividend paid - - (23.7) (23.7) (1.8) (25.5)
Contributions to non-controlling
interests - - - - (0.1) (0.1)
========== =========== =========== ======== ================ =========
Total transactions with
owners - 0.7 (24.3) (23.6) (1.9) (25.5)
========== =========== =========== ======== ================ =========
Balance at 31 December
2020 7.6 104.6 211.9 324.1 4.3 328.4
========== =========== =========== ======== ================ =========
Attributable to equity holders
of the Parent Company
----------------------------------------------------
Non-controlling
Share Other reserves Retained interests Total
capital GBPm earnings Total GBPm equity
GBPm GBPm GBPm GBPm
---------- ----------------- ----------- -------- ---------------- ---------
Balance at 1 January
2019 7.6 237.1 185.9 430.6 4.0 434.6
Impact of change in accounting
policies - - (3.9) (3.9) - (3.9)
---------- ----------------- ----------- -------- ---------------- ---------
Adjusted balance at 1
January 2019 7.6 273.1 182.0 426.7 4.0 430.7
---------- ----------------- ----------- -------- ---------------- ---------
(Loss)/profit for the
year - - (12.8) (12.8) 1.9 (10.9)
Other comprehensive loss - (14.6) (3.1) (17.7) (0.2) (17.9)
Total comprehensive (loss)/income
for the year - (14.6) (15.9) (30.5) 1.7 (28.8)
---------- ----------------- ----------- -------- ---------------- ---------
Transfer from merger
reserve - (67.1) 67.1 - - -
Transactions with owners:
Share issues - 0.8 - 0.8 - 0.8
Employee share schemes - 2.2 0.3 2.5 - 2.5
Tax on other employee
benefits - - 0.8 0.8 - 0.8
Tax on other items in
equity - - 0.2 0.2 - 0.2
Dividend paid - - (23.0) (23.0) (2.7) (25.7)
Contributions from
non-controlling
interests - - - - 0.1 0.1
---------- ----------------- ----------- -------- ---------------- ---------
Total transactions with
owners - 3.0 (21.7) (18.7) (2.6) (21.3)
---------- ----------------- ----------- -------- ---------------- ---------
Balance at 31 December
2019 7.6 158.4 211.5 377.5 3.1 380.6
---------- ----------------- ----------- -------- ---------------- ---------
Consolidated cash flow statement
for the year ended 31 December
2020 2019
GBPm GBPm
======= -------
Cash flows from operating activities
(Loss)/profit before taxation (16.4) 0.2
Adjustments for:
Foreign exchange differences 2.8 0.4
Depreciation 13.7 13.3
Share-based payment expense 1.4 1.1
Loss on sale of investments 0.1 -
Amortisation of intangibles 0.8 1.4
Impairment of intangibles 60.6 47.5
Difference between pension contributions paid
and amount recognised in the income statement 0.3 (0.2)
Finance revenue (1.2) (1.3)
Finance costs 3.1 2.9
Other finance revenue - pensions (0.2) (0.4)
Increase in inventories (0.2) (0.3)
Decrease/(increase) in trade and other receivables 0.3 (2.9)
Increase in bonus accrual 7.9 7.1
Increase in trade and other payables 3.4 8.0
Increase in provisions 0.2 0.2
======= -------
Cash generated from operations 76.6 77.0
Income tax paid (10.7) (9.2)
======= -------
Net cash flow from operating activities 65.9 67.8
======= -------
Cash flows from investing activities
Interest received 0.5 1.2
Purchase of property, plant and equipment (3.5) (3.9)
Purchase of intangible assets (6.3) (5.0)
Proceeds from sale of investments 8.7 10.9
Proceeds from sale of property, plant and
equipment 0.4 0.1
Purchase of investments (7.9) (11.8)
Transfer to current investments (cash on deposit) (20.3) -
Proceeds from sale of investments in associates 0.5 . -
Acquisition of subsidiaries, including deferred (1.1) . -
consideration
Cash acquired on acquisitions 0.7 . -
Dividends received from investments 0.2 0.1
======= -------
Net cash flow from investing activities (28.1) (8.4)
======= -------
Cash flows from financing activities
Interest paid and other charges (2.7) (2.8)
Dividend paid (23.7) (23.0)
Dividend paid to non-controlling interests (1.8) (2.7)
Proceeds from borrowings - 1.2
Repayments of borrowings (1.2) -
Payments of lease liabilities (8.9) (8.6)
Proceeds from shares issued 0.6 0.8
Contributions (to)/from non-controlling interests (0.1) 0.1
ESOP shares acquired (0.1) -
Net cash flow from financing activities (37.9) (35.0)
======= -------
Net (decrease)/increase in cash and cash equivalents (0.1) 24.4
Cash and cash equivalents at 1 January 175.7 156.5
Net foreign exchange differences (2.2) (5.2)
======= -------
Cash and cash equivalents at 31 December 173.4 175.7
======= -------
Notes to the preliminary financial statements
1 Corporate information
The preliminary financial statements of Clarkson PLC for the
year ended 31 December 2020 were authorised for issue in accordance
with a resolution of the Directors on 5 March 2021. 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 preliminary financial information (financial information)
set out in this announcement does not constitute the consolidated
statutory financial statements for the years ended 31 December 2019
and 2020, but is derived from those financial statements. Statutory
financial statements for 2019 have been delivered to the Registrar
of Companies and those for 2020 will be delivered following the
Company's Annual General Meeting. External Auditors have reported
on the financial statements for 2019 and 2020; their reports were
unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain
statements under s498(2) or (3) Companies Act 2006.
2 Statement of accounting policies
2.1 Basis of preparation
The financial information set out in this announcement is based
on the consolidated financial statements, which are prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 ('IFRS') and the
applicable legal requirements of the Companies Act 2006. The
consolidated financial statements also comply with international
financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union.
The Group has considerable financial resources available to it,
a strong balance sheet and has consistently generated an underlying
operating profit and good cash inflow. 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 created by COVID-19. Management has stress tested a range
of scenarios, modelling different assumptions with respect to the
Group's cash resources. Areas considered include varying levels of
profit and cash generation to reflect a significant impact on world
seaborne trade similar to that experienced in the global financial
crisis in 2008 and the period thereafter. Under all these
scenarios, the Group is able to generate profits and cash, and has
positive net funds available to it. Accordingly, 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 consolidated income statement is shown in columnar format to
assist with understanding the Group's results by presenting profit
for the year before exceptional items and acquisition related
costs; this is referred to as 'underlying profit'. When there are
items which are non-recurring in nature and considered to be
material in size, these are shown as 'exceptional items'. The
column 'acquisition related costs' includes the amortisation of
acquired intangible assets and the expensing of the cash and
share-based elements of consideration linked to ongoing employment
obligations on acquisitions.
2.2 Accounting policies
The financial information is in accordance with the accounting
policies set out in the 2020 financial statements and have been
prepared on a going concern basis.
A number of new or amended standards became applicable for the
current reporting period. The Group did not have to change its
accounting policies or make retrospective adjustments as a result
of adopting these standards.
As at the date of authorisation of these preliminary financial
statements, a number of amendments to standards and interpretations
were in issue but not yet effective. The Group has not applied
these standards and interpretations in the preparation of these
financial statements and does not expect these to have a material
impact on the Group.
2.3 Accounting judgements and estimates
The preparation of the preliminary 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.
2.4 Forward-looking statements
Certain statements in this announcement 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
Business segments Revenue Results
2020 2019 2020 2019
GBPm GBPm GBPm GBPm
Broking 282.6 283.0 55.4 55.5
Financial 33.9 35.5 2.5 3.3
Support 24.9 27.7 1.7 3.1
Research 16.8 16.8 5.6 5.4
====== ------ ======= -------
Segment revenue / underlying profit 358.2 363.0 65.2 67.3
====== ------
Head office costs (18.8) (16.8)
======= -------
Operating profit before exceptional
items and acquisition related costs 46.4 50.5
Exceptional items (60.6) (47.5)
Acquisition related costs (0.5) (1.6)
======= -------
Operating (loss)/profit after exceptional
items and acquisition related costs (14.7) 1.4
Finance revenue 1.2 1.3
Finance costs (3.1) (2.9)
Other finance revenue - pensions 0.2 0.4
======= -------
(Loss)/profit before taxation (16.4) 0.2
Taxation (9.4) (11.1)
======= -------
Loss for the year (25.8) (10.9)
======= -------
4 Exceptional items
As a result of the impairment testing of goodwill, an impairment
charge was recognised of GBP60.6m (2019: GBP47.5m).
5 Acquisition related costs
Included in acquisition related costs is GBP0.3m (2019: GBPnil)
relating to amortisation of intangibles acquired as part of the
Martankers acquisition and cash charges of GBP0.2m (2019: GBPnil)
relating to that acquisition. The cash charges are contingent on
employees remaining in service and are therefore spread over the
service period.
Also included is GBPnil (2019: GBP1.0m) relating to amortisation
of intangibles and GBP0.1m (2019: GBP0.6m) of cash and share-based
payment charges in relation to previous acquisitions.
6 Taxation
The major components of the income tax charge in the
consolidated income statement are:
2020 2019
GBPm GBPm
(Loss)/profit at UK average standard rate of corporation tax of 19% (2019: 19%) (3.1) -
Impairment charge not deductible for tax purposes 11.5 9.0
Expenses not deductible for tax purposes 1.7 1.8
Tax losses not recognised 0.9 0.8
Other (1.6) (0.5)
====== ------
Total tax charge in the income statement 9.4 11.1
====== ------
7 Earnings/(loss) per share
Basic earnings per share amounts are calculated by dividing
profit/(loss) for the year attributable to ordinary equity holders
of the Parent Company by the weighted average number of ordinary
shares in issue during the year.
Diluted earnings per share amounts are calculated by dividing
profit/(loss) for the year attributable to ordinary equity holders
of the Parent Company by the weighted average number of ordinary
shares in issue during the year, plus the weighted average number
of ordinary shares that would be issued on the conversion of all
the dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the
basic and diluted earnings/(loss) per share computations:
2020 2019
GBPm GBPm
Underlying profit for the year attributable to ordinary
equity holders of the Parent Company 32.1 36.0
Reported loss for the year attributable to ordinary equity
holders of the Parent Company (28.9) (12.8)
========== ----------
2020 2019
Million Million
Weighted average number of ordinary shares - basic 30.3 30.3
Weighted average number of ordinary shares - diluted 30.4 30.3
---------- ----------
8 Dividends
The Board is recommending a nal dividend of 54p (2019: 53p),
giving a total dividend of 79p (2019: 78p). This final dividend
will be payable on 28 May 2021 to shareholders on the register at
the close of business on 14 May 2021, subject to shareholder
approval.
9 Intangible assets
Additions of GBP7.5m in the year relate to GBP6.3m of
development costs and GBP1.2m arising on acquisitions. Goodwill and
other intangible assets are held in the currency of the businesses
acquired and are subject to foreign exchange retranslations to the
closing rate at each year-end, amounting to a decrease of GBP1.2m
in the carrying value of goodwill and GBP0.2m in the carrying value
of other intangible assets in the year.
Recognising the continued challenging trading conditions in the
offshore broking and securities markets, the directors have revised
the estimate of future cash flows expected from these
cash-generating units. Following these revisions, an impairment
loss of GBP60.6m (2019: GBP47.5m) has been recognised as an
exceptional item.
10 Investments
Included within current investments are deposits totalling
GBP22.8m (2019: GBP2.5m) with maturity periods greater than three
months. Also included is GBP8.3m (2019: GBP13.1m) relating to the
convertible bonds business within the Financial segment. In order
to hedge against price movements of the equity portion of these
investments, the Group has short-sold related equity securities.
The GBP2.8m balance as at 31 December 2020 (31 December 2019:
GBP6.5m) is shown under trade and other payables.
11 Cash and cash equivalents
2020 2019
GBPm GBPm
Cash at bank and in hand 172.4 173.4
Short-term deposits 1.0 2.3
------
173.4 175.7
====== ------
12 Employee benefits
The Group operates three final salary defined benefit pension
schemes, being the Clarkson PLC scheme, the Plowrights scheme and
the Stewarts scheme.
As at 31 December 2020, the combined schemes had a surplus of
GBP12.0m (2019: GBP11.0m). This was after an asset ceiling
adjustment of GBP3.9m (2019: GBP3.8m) in relation to the Plowrights
scheme. As there is no right of set-off between the schemes, the
benefit asset of GBP18.1m (2019: GBP15.5m) is disclosed separately
on the balance sheet from the benefit liability of GBP6.1m (2019:
GBP4.5m). The Group has recognised a deferred tax asset on the
benefit liability amounting to GBP1.2m (2019: GBP0.7m) and a
deferred tax liability on the benefit asset of GBP3.4m (2019:
GBP2.6m). The market value of the assets was GBP204.5m (2019:
GBP194.7m) and independent actuaries have assessed the present
value of funded obligations at GBP188.6m (2019: GBP179.9m).
13 Share capital
2020 2019
Million GBPm Million GBPm
Ordinary shares of 25p each, issued and fully paid 30.4 7.6 30.4 7.6
========== ====== ---------- ------
14 Contingencies
From time to time, the Group is engaged in litigation in the
ordinary course of business. The Group carries professional
indemnity insurance. There is currently no litigation that is
expected to have a material adverse financial impact on the Group's
consolidated results or net assets.
15 Related party disclosures
The Group's significant related parties are disclosed in the
2019 annual report. There were no material differences in related
parties or related party transactions in the year ended 31 December
2020, except for Jeff Woyda's appointment to the Board of Trustees
of The Clarkson Foundation and the appointment of Sue Harris as a
Non-Executive Director of Schroder & Co. Limited and Chair of
the Audit and Risk Committee of the Wealth and Management Division,
who are investment managers of the defined benefit section of the
Clarkson PLC pension scheme.
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