TIDMCKN
RNS Number : 7756D
Clarkson PLC
07 March 2022
CLARKSON PLC
7 March 2022
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 2021.
Summary
-- Record underlying profit before taxation(*) of GBP69.4m
(2020: GBP44.7m), an increase of 55.3%
-- Underlying earnings per share increased 56.2% to 165.6p (2020: 106.0p)
-- Particularly strong performance in Broking and Financial segments
-- 19(th) consecutive year of dividend growth
-- Forward order book for invoicing in 2022 was US$165m (2021: US$116m), an increase of 42.2%
-- Robust balance sheet with free cash resources(*) of GBP92.3m (2020: GBP81.1m)
Year ended Year ended
31 December 31 December
2021 2020
Revenue GBP443.3m GBP358.2m
Underlying profit before taxation * GBP69.4m GBP44.7m
Reported profit/(loss) before taxation GBP69.1m (GBP16.4m)
Underlying basic earnings per share * 165.6p 106.0p
Reported basic earnings/(loss) per share 164.6p (95.2p)
Dividend per share 84p 79p
* Classed as an Alternative Performance Measure ('APM'). See
'Other information' at the end of this announcement for further
information.
Andi Case, Chief Executive Officer, commented:
"Our record 2021 results are testament to the strategy which we
have followed and communicated to stakeholders over recent
years.
It is with great pride that I reflect on the strength of our
people in all sectors, roles and geographies, together comprising
the best team in the world of shipping, offshore and
renewables.
We are positive about the future of the shipping industry. The
outlook for Clarksons remains strong and we believe the business
will continue to benefit from its market-leading position."
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 'Other information' section at
the end of this announcement for further information. All APMs used
within this announcement are denoted by an asterisk (*).
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 52 different offices
across its four divisions and is number one or two in all its
market segments.
The Company has delivered 19 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
This announcement contains inside information as defined in
Article 7 of the retained EU law version of the Market Abuse
Regulation No 596/2014 ("UK MAR") and has been announced in
accordance with the Company's obligations under Article 17 of UK
MAR.
Chair's review
Overview
I am delighted and privileged to have been appointed Chair of
Clarksons after what has been a record year for the Group. The
Group's strategy, combined with vision, quality and determination
across the entire business, has enabled us to successfully navigate
the global pandemic, maintain our excellent service for our
clients, maximise the opportunities of improving markets and once
again deliver shareholder value.
2021 saw the start of a recovery in the shipping markets, with
improved rates and increasing asset values in many verticals,
resulting from a better supply/demand balance, low market order
book and congestion arising from COVID-19 and supply chain
challenges. Clarksons has emerged from the pandemic in better shape
than ever. We enter 2022 from a position of strength and are very
well placed to capitalise on favourable market dynamics.
The green transition is a global megatrend which is underpinning
change in shipping. As shipowners and charterers drive to meet
their net zero commitments, all are looking closely at supply
chains for a lower emissions option. Over the past year, Clarksons
has made significant progress in scaling up its offering to advise
our clients on the changing industry and the importance of becoming
a more responsible business.
It is in our ethos to continue to adapt to the market and our
clients' demands, and we will continue to do this into 2022 and
beyond.
Results
Underlying profit before taxation* was GBP69.4m (2020: GBP44.7m)
with underlying basic earnings per share* of 165.6p (2020: 106.0p).
Reported profit before taxation was GBP69.1m (2020: GBP16.4m loss)
with reported basic earnings per share of 164.6p (2020: 95.2p
loss).
Free cash resources(*) as at 31 December 2021 were GBP92.3m
(2020: GBP81.1m).
Dividend
Clarksons is increasing its dividend for the 19th consecutive
year, continuing its progressive dividend policy to reflect the
cash-generative nature of the business, the strong balance sheet
and record forward order book. In addition, the Board has retained
resources to enable it to maximise shareholder value by maintaining
flexibility to act swiftly, particularly to opportunities arising
from the green transition, technology and other areas of our
business.
The Board is recommending a final dividend for 2021 of 57p
(2020: 54p). Combined with the interim dividend in respect of 2021
of 27p (2020: 25p), the resulting full year dividend in respect of
2021 results is 84p (2020: 79p). The dividend will be payable on 27
May 2022 to shareholders on the register on 13 May 2022, subject to
shareholder approval.
People
The people throughout Clarksons are of the highest quality, and
through dedication, hard work and expertise they have continued to
overcome the challenges thrown at them over this past year from the
pandemic and changing economic backdrop. We are hugely grateful to
all our colleagues for their contribution and commitment.
At Clarksons we take pride in helping others. There has never
been a more important time to give back to the community, and
during the past year The Clarkson Foundation has focused on
projects covering mental health, homelessness, opportunities for
employment and global poverty. The Foundation aims to make
meaningful positive change around the world and has exciting
initiatives planned for 2022.
Board
Clarksons was pleased to welcome Martine Bond to the Board and
as a member of the Audit and Risk Committee in March 2021. Martine
brings extensive technology expertise to the Board, as well as more
than 20 years' experience in the financial services industry. She
has significant board experience across legal entities in Europe,
North America and Asia, further adding to the Board's international
expertise.
On behalf of the Clarksons team, I would like to thank Sir Bill
Thomas for his valuable contribution during his tenure as Chair and
wish him every success in his future endeavours.
Outlook
In 2022, we expect the favourable supply/demand dynamics to
continue. The supply of new ships continues to be affected by the
structural reduction in shipbuilding capacity compared to 2008
whilst the economic recovery from the COVID-19-induced pandemic has
strengthened the demand side. We have a very strong forward order
book and the outlook for freight rates remains positive.
We remain conscious of the current geopolitical uncertainty,
which could impact sanctions, exchange rates and commodity supply,
alongside the global backdrop of inflationary pressures and rising
interest rates. The team is therefore extremely focused on
intelligence, analysis and relationships to ensure that we are well
placed to support our clients as the market continues to
evolve.
We will always evaluate opportunities to invest in the business.
We will continue to hire the best emerging talent available to
further consolidate our position in the industry. The green
transition and technology will continue to be at the forefront of
change in the maritime industry, and we will continue to invest
significantly to help our clients reduce the environmental impact
of the shipping industry.
We are positive about the future of the business, and believe we
are in a strong position to continue to deliver for our clients
across all verticals and thus increase shareholder value over the
long term.
Laurence Hollingworth
Chair
4 March 2022
Chief Executive Officer's review
I am delighted to report that the 2021 results represent a
record performance for Clarksons. They are testament to the
strategy which we have followed and communicated to stakeholders
over recent years.
For some years we have highlighted that tightening of shipping
capacity against increased demand and the requirement for
decarbonising the trade would be key drivers for our business. But
it is important to remember that our performance in 2021 was
delivered against the background of COVID-19-induced congestion and
supply chain issues which added further complexity to market
dynamics. Of course, COVID-19 did not just have an impact on ports
and logistics, but impacted everyone in all parts of the world.
Indeed, even today, there are still many of our teams who are
unable to travel, restricted in their access to meet clients and
colleagues in person and suffering from the impact of illness and
changed working conditions both for themselves and their
families.
It is therefore with great pride that I reflect on the strength
of our people in all sectors, roles and geographies, together
comprising the best team in the world of shipping, offshore and
renewables. I thank every member of staff for their hard work and
dedication throughout 2021. It has been a challenging year, but the
team has again shown its quality in successfully navigating the
business through this period and positioning it to thrive as more
favourable market conditions return.
2021 was a year when we saw our cargo clients, driven by
consumer demand and regulatory requirements, increasingly focus on
the actions needed to reduce harmful emissions. We have therefore
created a dedicated Green Transition team to coordinate, focus on
and deliver Clarksons' expert services to our clients. Analysis,
research, data, advice, execution expertise, support services,
technology and finance are essential ingredients in all our
clients' decisions, and the breadth and depth developed throughout
Clarksons in recent years is now proving its worth and providing
real added value to the industry.
Broking
The shipping markets performed well in 2021, with the average
ClarkSea Index** being 93% higher than that of 2020. However, the
strategy to be best in class across all verticals within shipping
and offshore has never been more important. 2021 saw the most
challenging period for the tanker markets, offset by strength in
other markets, particularly the dry cargo and container chartering
markets and in asset business within sale and purchase and
newbuilding where each of these teams performed particularly well.
The investment we have made in people, geographic expansion and the
tools for trade of our brokers has certainly improved efficiency
and increased our footprint globally. This has meant that we are
better placed to benefit from improving markets.
The container chartering market performed very strongly driven
by a combination of factors, including a strong rebound in global
container volumes and major logistical disruption caused by the
pandemic. Port congestion significantly reduced available capacity,
which is expected to continue throughout 2022.
Dry bulk rates were at their highest levels for over a decade,
helped by good growth in minor bulks and grains, and the Baltic Dry
Index reached a 12-year high in the fourth quarter.
The LNG market showed strength in 2021, with tonnage demand and
LNG trade volumes both increasing. The importance of this market is
growing, and the expertise within the Group is developing alongside
our LPG, ammonia and petrochemical gas teams.
After many years of recession, the offshore oil and gas market
also improved, spurred on by the increased oil price and the
longer-term outlook for greater demand. Increasing strategic energy
needs and a drive to expand beyond fossil fuels has driven an
increase in the offshore renewables market, where our
market-leading teams around the world have increased their
transaction revenues and volumes. Our expertise, market analysis
and insight are helping our clients in their push for expansion in
this area.
The tanker market, as already highlighted, was the weakest it
has been for some 30 years, with demand for oil remaining low,
impacted particularly by reduced travel and consumption. This was
accentuated year on year, due to the extremely high rates in the
first half of 2020 arising from the contango in the oil price.
Finally, the sale and purchase team has had a very high volume
year, as increasing numbers of people want to buy into the upward
trend in rates. Our newbuilding team has also been incredibly busy,
particularly in LNG and containers tonnage, with berth space, as
anticipated due to reduced overall capacity amongst shipyards, now
full for the foreseeable future.
A key focus for growth in the last few years within Broking has
been our projects and period business, comprising both longer-term
charters and newbuilding business, which made material profit in
2021 and has enabled us to significantly build the forward order
book. Unlike many of our competitors, we disclose only that element
of the forward order book we believe to be secure and due to be
invoiced in the following year. At the year-end, the forward order
book for 2022 was $165m, 42.2% higher than the $116m brought
forward in 2021.
Overall, segmental profit before taxation from Broking was
GBP73.6m, up GBP18.2m over the year, with a margin of 21.6%.
Financial
Our Financial division has had an exceptional year, reporting
GBP13.3m of profit (2020: GBP2.5m). Within Clarksons Platou
Securities, a total of 40 large corporate finance deals have been
executed in the year, raising in excess of $3.5bn across metals and
minerals, shipping, offshore energy and renewables. In addition,
our real estate team launched 24 new projects and sold 11 existing
projects and our shipping and offshore team placed a total of 27
vessels and sold a further 14.
Green transition
The green transition is becoming increasingly important and we
believe it will be one of the key drivers of the demand and supply
dynamics in shipping for the foreseeable future, as regulation
becomes an ever-increasing priority. Our Green Transition team,
launched in 2021, has seen very strong client demand and is playing
a hugely important role in assisting clients in reducing emissions
and pushing forward the agenda of positive change.
Research
The Research division continued to perform strongly during the
period with sales of digital products across both shipping and
offshore growing in excess of expectations. The impact of exchange
rate movement dampened the results from valuation income year on
year as this revenue is charged in US dollars, but we are now
seeing a resurgence in this income stream and, together with
digital sales, the future is looking strong as clients have an
increasing need for data to assess and benchmark decisions.
Support
The Support division performed strongly over the course of the
year, with our agency, supplies, customs clearance and freight
forwarding businesses contributing to a return to profit levels
last seen before the pandemic. We see growth opportunities in the
future, from both hiring good people and corporate activity, across
all areas of Support including those particularly focused on
renewables.
Sea/
The Sea/ platform continues to make progress and we have made
real strides over the year in commercialising the technology that
we believe will become so vital to the shipping industry. The
launch of Sea/fix in January 2021 to the mining community, for
negotiation and execution of business, has been a success with a
significant number of major players now signed-up users and putting
all their business through the platform. In the second half of 2021
we also launched SeaCarbon/, a complete CO(2) shipping toolkit for
the maritime industry which has now tracked more than 1,400
voyages, equating to 9.9m nautical miles, and resulting in the
saving of 4.2m tonnes of CO(2) .
Brand update
Since the acquisition of RS Platou ASA in 2015, our Broking and
Financial divisions have used the combined brand Clarksons Platou.
Now that all teams are fully integrated, we have decided to align
the branding of all businesses within the Group by referring to
just Clarksons.
Looking forward to 2022
The supply/demand dynamics in the industry continue to be
positive as the supply of new ships lags behind the ever-increasing
demand for vessels driven by the green transition, increasing
demand for commodities and a recovery in the global economy. This
means that we start 2022 with a positive backdrop for our
markets.
As the impact from COVID-19 reduces, we are anticipating
increased business costs as we see a return to business travel and
corporate hospitality, which has been virtually non-existent during
the pandemic. Nevertheless, our increased forward order book,
combined with the strength of spot markets, a positive pipeline in
Financial and continued growth across Research, Support and Sea/,
means that we approach 2022 from a position of strength.
The outlook for Clarksons remains strong and we believe the
business will continue to benefit from its market-leading
position.
Andi Case
Chief Executive Officer
4 March 2022
** Whilst this index is a good high-level guide to shipping, it
only represents spot freight rates during the year in certain key
segments, weighted by the number of vessels in that fleet. It
specifically does not include period rates, asset transactions,
specialist sectors in shipping and offshore. The weightings of the
index also do not reflect the weightings of Clarksons'
earnings.
Financial review
Revenue: GBP443.3m (2020: GBP358.2m)
Underlying profit before taxation*: GBP69.4m (2020:
GBP44.7m)
Reported profit before taxation: GBP69.1m (2020: GBP16.4m
loss)
Dividend per share: 84p (2020: 79 p)
Financial performance
2021 was a record year for the Group. Revenue increased 23.8%,
including increases in all segments of the business, and underlying
profit before taxation(*) increased by 55.3%.
The Broking division benefitted from the longer-term strategy
implemented in recent years, to increase our global footprint and
be best in class across every segment of shipping and offshore. As
we went into 2021, the shortening in supply of ships, highlighted
in last year's outlook, created the backdrop for stronger freight
rates and asset prices in several but not all verticals. Overall,
Broking generated a profit of GBP73.6m in the year (2020:
GBP55.4m), with an increased margin of 21.6% (2020: 19.6%) driven
by strong performances in dry bulk, containers and sale and
purchase, offset in part by weakness in tanker markets.
The Financial division performed exceptionally well, generating
a profit of GBP13.3m and margin of 23.8% (2020: GBP2.5m and 7.4%),
reflecting active capital markets across shipping, metals and
minerals and renewables, and strong deal flow in shipping, offshore
and real estate project finance. The Support and Research divisions
also experienced good revenue and profit growth, with our port
services business returning to pre-pandemic levels.
The Group incurred underlying administrative expenses(*) of
GBP355.7m (2020: GBP298.5m) in the year, an increase of 19.2%,
largely from an increase in variable compensation due to the
improved business performance. Within these expenses, central costs
unallocated to business segments increased to GBP25.2m (2020:
GBP18.8m), again reflecting an increase in variable remuneration
due to increased profits, as well as higher PLC costs, investment
into central IT systems and people, and increased Sea/ technology
costs. Sea/ costs on a cash basis were similar to 2020, but less
were capitalised in 2021 than in previous years and there was an
increase to amortisation reflecting the successful roll-out to a
broad base of clients.
Exceptional items
The Board reviewed the need for a non-cash impairment relating
to goodwill on the balance sheet and determined that, following
improved trading conditions in the Offshore and Securities
cash-generating units ('CGUs') compared to those seen in 2020, no
impairment charge was required in 2021 (2020: GBP60.6m).
Acquisition-related costs
Acquisition-related costs include GBP0.2m (2020: GBP0.3m)
relating to amortisation of intangibles and GBP0.1m (2020: GBP0.2m)
of cash and share-based payments spread over employee service
periods. We estimate acquisition-related costs for 2022 to be
GBP0.2m, assuming no further acquisitions are made.
Taxation
The Group's underlying effective tax rate* was 21.2% (2020:
21.3%), reflecting the broad international operations of the Group,
which remain consistent with the prior year.
Earnings per share
Underlying basic earnings per share* increased by 56.2% to
165.6p (2020: 106.0p) and is calculated as underlying profit after
taxation* attributable to equity holders of the Parent Company
divided by the weighted average number of ordinary shares in issue
during the year. The reported basic earnings per share was 164.6p
(2020: 95.2p loss).
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 2021, this estimate was 42.2%
higher than the prior year at US$165m (31 December 2020:
US$116m).
Dividend
The Board is recommending a final dividend in respect of 2021 of
57p (2020: 54p) which, subject to shareholder approval, will be
paid on 27 May 2022 to shareholders on the register at the close of
business on 13 May 2022.
Together with the interim dividend in respect of 2021 of 27p
(2020: 25p), this would give a total dividend of 84p for 2021, an
increase of 6% on 2020 (2020: 79p). In taking its decision, the
Board took into consideration the Group's 2021 performance, balance
sheet strength, ability to generate cash and FOB.
This increased dividend represents the 19th consecutive year
that the Board has raised the dividend.
Foreign exchange
The average sterling exchange rate during 2021 was US$1.38
(2020: US$1.29). At 31 December 2021, the spot rate was US$1.35
(2020: US$1.37).
Cash and borrowings
The Group ended the year with cash balances of GBP261.6m (2020:
GBP173.4m) and a further GBP9.6m (2020: GBP22.8m) held in
short-term deposit accounts and government bonds, 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 2021 were GBP122.3m
(2020: GBP95.4m). 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 2021 were GBP92.3m
(2020: GBP81.1m).
In addition to these free cash resources, 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 2021 were GBP361.6m (2020: GBP328.4m).
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
GBP120.2m (2020: GBP95.0m).
The overall loss allowance for trade receivables was GBP12.9m
(2020: GBP12.3m).
The Group's pension schemes had a combined surplus before
deferred tax of GBP22.0m (2020: GBP12.0m).
Jeff Woyda
Chief Financial Officer & Chief Operating Officer
4 March 2022
Business review
Broking
Revenue: GBP340.0m (2020: GBP282.6m)
Segmental split of underlying profit before taxation: GBP73.6m
(2020: GBP55.4m)
Forward order book for 2022: US$165m^ (At 31 December 2020 for
2021: US$116m^)
^ Directors' best estimate of deliverable forward order book
('FOB')
Shipping markets performed well, with long-term charters and
newbuilding business allowing us to significantly build the forward
order book
Dry cargo
It was a year of recovery for dry bulk markets with returning
confidence, a rebound in trade volumes, moderate fleet growth and
more logistical inefficiencies. This led to soaring rates, with the
Clarksons average bulker earnings index reaching a 13-year high in
the fourth quarter.
The year started with a rare first quarter rise in freight
rates, led by an increase in trade within the Asia-Pacific region.
China's early economic rebound gave strength to the market at a
time when many charterers traditionally wait for a seasonal lull to
the market before taking freight cover. As overall trade improved,
a record number of ships were waiting at Chinese ports and delays
intensified with strict quarantine rules and restrictions on crew
changes.
During the second quarter rates were firmer with a robust start
to China's construction and East Coast South America's soybean
seasons. Iron ore shipments improved while coal trade continued to
rise, sending seaborne dry bulk trade in excess of 1.2bn tonnes for
the first time in a single quarter.
Building on the sound seaborne trade foundation and with Europe
and the US's exit from lockdown, pent-up demand and optimism
resulted in rates reaching 12-year highs in October, as did many
commodity prices.
In Asia, however, a second wave of COVID-19 sent many Southeast
Asian nations into renewed temporary lockdowns and heightened
quarantine requirements in ports in the third quarter. Adding to
the already high waiting times in ports, a super typhoon in the
Pacific and a hurricane in the US Gulf caused further disruptions.
Fleet inefficiencies increased to levels similar to those seen at
the start of the year, with significant additional capacity tied up
at ports in China.
China's intervention to cool commodity prices from record levels
led to severe steel production cuts and lower output in other
industrials. Additionally, the fall-out from a high-profile real
estate debt default added to the weaker sentiment and led to a
steep decline in iron ore prices which resulted in a downward
correction in Cape rates followed by the smaller ship sizes in the
fourth quarter. Freight rates founded a temporary floor with
additional coal demand and seasonal year-end iron ore supply growth
before heading for the seasonal slowdown.
The annual average year-on-year seaborne trade growth is
estimated at 3.8% in 2021, the highest in four years, following a
1.6% contraction in 2020. The fleet expanded by 3.6% although
additional capacity was added with ships re-entering the fleet
following lengthy waiting times at Chinese ports during 2020 when
Australian coal cargoes were banned from discharging. This resulted
in a net fleet growth nearer to 5% over the year. Nevertheless, the
rebound in trade was enough to absorb that fleet growth and send
average freight rates to 12-year highs.
Looking forward, on an average basis we expect rates to match
the average annual levels we have seen in 2021 given limited fleet
growth, solid base-case demand expectation and continued
COVID-19-related fleet inefficiencies. However heightened
geopolitical tensions and a broader economic slowdown in China are
expected to lead to reduced seaborne demand in 2022.
Decarbonisation efforts in the shipping industry ahead of the
forthcoming IMO and EU carbon mandates of 2023 will gain more
traction during 2022 as owners, operators and charterers prepare
for the changing regulatory environment ahead. Net fleet growth
might be lower than anticipated with high carbon emitting vessels
forced into early retirement.
We remain well represented around the globe in the three main
dry cargo markets: capesize, panamax and supra/handymax.
Containers
The container shipping sector experienced extraordinary market
conditions throughout 2021. These were driven by the combination of
a strong rebound in global container trade volumes and major
COVID-19-related logistical disruption, including port congestion,
which significantly reduced available capacity.
Container freight rates and containership charter earnings
reached all-time highs in 2021 and ended the year at, or close to,
record levels. The SCFI spot box freight rate index exceeded 5,000
for the first time at the end of 2021, having repeatedly set new
all-time highs throughout the year, and the index averaged 3,773
during 2021, (2020: 1,234). The Clarksons Containership Timecharter
Rate Index rose to 402 in October 2021, more than double the
previous 2005 high, although some segments saw a slight easing
towards the year-end. Multi-year period charters have become the
norm, and near-term available vessel capacity in most size segments
remains extremely limited.
The containership sale and purchase market saw a new record
volume of activity in 2021, with 1.6m TEU of capacity sold across
the year. Secondhand asset prices saw major gains and the Clarksons
Containership Secondhand Price Index stood at 110 at the end of
2021 (end of 2020: 41). The price for a 10-year old 6,600 TEU
containership, for example, surged from US$34m at the end of 2020
to reach US$115m at the end of 2021.
2021 saw an impressive rebound in global container trade
volumes, with box trade estimated to have grown by 6.1% in TEU
following the decline of 1.3% in 2020. Surging trade volumes have
been driven by a range of factors including pent-up demand, major
stimulus, consumer spending patterns focusing more heavily on goods
than services and in the main an improving macro-economic backdrop.
Port congestion and other logistical disruption (including the
blockage at the Suez Canal in March and an acute shortage of box
equipment) has proved pivotal. The level of containership capacity
'at port' across 2021 averaged 35% of total fleet capacity (37% in
late October 2021), materially higher than the average between 2016
and 2019 of 31%.
Containership fleet capacity grew by 4.5% in 2021 (2020: 2.9%).
However, with sentiment buoyed by market conditions, containership
newbuild contracting set a new annual record in 2021 at 4.3m TEU
across 569 units, taking the order book to 23% of total fleet
capacity (end of 2020: 11%); this may generate supply pressures
when new vessels are delivered over 2023-24.
The containership fleet's GHG footprint remains firmly in focus,
particularly against the backdrop of a continued ramp-up in
decarbonisation regulation. Over the last decade, slower operating
speeds and an increased share of 'eco' vessels (33% of fleet
capacity was 'eco modern' at the end of 2021) have helped reduce
boxship emissions but there remains much to do. Uptake of
alternative fuels (24% of order book capacity alternative fuel
'capable' at end 2021) has continued and approximately 700 units in
the fleet had at least one energy saving technology ('EST') fitted
at the end of 2021.
Container shipping market conditions appear likely to remain
extremely firm in 2022, even if vessel charter earnings and box
freight rates see some easing at some point, with industry
expectations of prolonged disruption and continued firm demand.
Global seaborne box trade is projected to grow by approximately 4%
in 2022, with fleet capacity growth next year at a moderate
3.6%.
Buoyed by a rising market, our Containers business continued to
grow. Despite not having regular face-to-face contact, our
international team assisted clients to arrange multiyear chartering
deals, secondhand sales and newbuild contracting.
Tankers
2021 was characterised by generally weak earnings for tankers as
oil demand, refinery runs and oil supply declined to below
pre-pandemic levels on average.
Global oil supply in the first quarter was 8% lower than in the
equivalent period in 2020, largely due to the steep oil production
cuts implemented by the 'OPEC+' countries and reduced production
levels in the US. Oil demand, oil supply and refinery runs
recovered very strongly throughout the year. Both global oil demand
and supply are estimated to have risen by as much as 6% in the
fourth quarter relative to the first quarter of the year, albeit
still 2% below the average level for 2019. Overall, the global oil
trade in 2021 remained broadly unchanged year on year and 8% lower
than in 2019.
Growth in the deep sea tanker fleet was well below average
levels at 1.8%, with deliveries below long-run average levels and
an increase in removals from the fleet. However, the low levels of
demand kept earnings suppressed.
Clarksons' published average earnings for non-eco and
non-scrubber fitted VLCCs fell by 94% when compared with the strong
levels seen in 2020. Clarksons' published average earnings for
non-eco and non-scrubber fitted Suezmaxes and Aframaxes in 2021
fell by 76% and 63% respectively when compared to 2020. For the
same period, in the products tanker sector Clarksons' published
earnings for non-eco and non-scrubber fitted LR2 and LR1 products
tankers trading on the key Middle East to Far East route fell by
73% and 64% respectively and by 58% for non-eco and non-scrubber
fitted MR products tankers.
Tanker freight markets in 2021 were less volatile than in 2020.
Vessel earnings remained at generally low levels throughout the
year although there were some spikes which were generally caused by
various delays to vessels. In all of the major sectors of the deep
sea tanker market, the fourth quarter showed the strongest vessel
earnings, reflecting both the normal seasonal uplift and the sharp
rise in global oil demand and supply.
Global oil demand and supply are expected to continue recovering
strongly throughout 2022. Newbuilding deliveries are expected to
remain below average levels whilst removals from the fleet are
expected to remain elevated above long-run average levels.
Our global deep sea team performed well, assisted by our
continued investment in IT, despite the challenging market
conditions and an inability to travel. The projects desk, which we
have strengthened in recent years, was extremely active and
concluded longer-term charters, which is important when freight
rates are depressed.
Specialised products
The specialised products market continues to be driven by the
underlying demand from China and the wider Asian markets. The
reliance on 'Made in China' plastic goods continues to support the
bulk chemical shipping markets. Elsewhere, we continue to see rapid
development in the biofuels sector. Regulation, particularly from
the EU, is the key factor in this regard with the growing global
environmental movement helping to contribute to the transition away
from traditional crude oil and natural gas derived vehicle fuel
feedstocks. Biofuels will continue to be crucial to the growth of
seaborne trade in future years and to the specialised products
business. We estimate that seaborne trade grew by 1.3% in 2021 to
371m tonnes following a 1.2% contraction in 2020.
In 2021 the Clarksons' Specialised Products Spot Chemical and
Edibles Oils Index performed below the long-run average of the
previous 12 years. During the second and third quarters, freight
rates showed gradual increases, driven by higher bunker pricing,
trade flow disruption caused by severe weather disruption in
Houston, and to a lesser extent the blockage of the Suez Canal. As
we approached the end of the third quarter and the start of the
fourth, a combination of port lockdowns in China caused by
COVID-19, and the resulting lack of pilots, as well as a brief
uptick in Asia CPP activity, saw the market in the Far East become
very tight. Benchmark freight rates rose to the highest point in
the last six years and recorded a 22% rise over the year, whilst
edible oil freight rates recorded a similar increase of 23%. The
direct impact of this was a greatly improved earnings environment
for owners, especially those operating in the Far East, which
remains the primary driver for these increases in freight
rates.
In 2022, we expect seaborne trade to grow by 4.5%, supported by
a continued increase in exports from the Middle East and US where
chemical project investment is beginning to pick up. Future fleet
growth prospects look minimal with appetite for newbuildings
remaining muted due to high prices, lack of yard space and
investment interest focused elsewhere. After less than 1% net fleet
growth in 2021 and around the same level expected in 2022, the
fleet is due to contract year on year from 2023 onward based on the
current picture.
The chemical tanker fleet was 60m DWT at the start of 2021. 2m
DWT was added to the fleet through the year and 1.7m removed. The
order book stands at just over 6% of the fleet at the start of
2022. The weak tanker markets led to tonnage oversupply throughout
the year; the ability for owners to triangulate their voyages
around CPP legs was made more challenging due to the lack of
products tonnage demand which weighed heavily on earnings,
particularly in the West.
The green transition is one of the drivers for the fleet
replacement. The looming EU ETS and EEXI/CII regulations in 2023
will no doubt raise questions over operating costs, tonnage
efficiency and alternative fuel choice. The specialised fleet could
see further contraction because of these regulations, with
scrapping a more cost-viable alternative. Conversely, the diverse
nature of the sector from a cargo perspective is complex yet
positive. Alternative fuel developments in the methanol space and
growth in the demand for biofuel have led to greater interest in
the sector. The breadth and depth of the specialised products
business is unparalleled and we remain in a unique position to
advise and support all our stakeholders on their green agendas, in
conjunction with our dedicated in-house Green Transition team.
As we enter 2022, sentiment is subdued after the emergence of
the Omicron variant, but the market is in a much improved position
compared to January 2021. Although uncertainty remains, the future
for our market is optimistic. This, combined with a petroleum
products sector that is showing some early signs of recovery, as
well as a very low order book, will continue to provide a floor for
freight rates and earnings over the coming year.
Gas
The LPG carrier market fared well in 2021.
VLGC freights averaged US$34,019 per day compared with US$34,923
in 2020.
LPG seaborne trade levels continued to rise, growing by
approximately 5% year on year. Tonne-miles also continued to
increase, supported by strong import demand in Asia which pulled a
growing North American export slate East in order to cover the
shortfall in Middle Eastern exports as OPEC cuts continued to take
their toll. North American exports were up by 17%, with over 69% of
those volumes going to Asia.
Despite the growth in voyage duration and volumes, the impact of
the addition of 18 newbuildings in 2021 resulted in only a marginal
decrease in freight rates. The LGC market continued to gain support
from increased waiting times for the VLGCs transiting the new
Panama Canal; consequently assessed 12-month time charter rates
rose from US$29,059 per day to US$29,202. Midsize sector freight
rates rose from an average of US$26,479 per day to US$27,170 in
2021, underpinned by flat fleet supply combined with increased LPG
trade volumes.
Trade volumes are expected to continue to increase in 2022,
supported by a recovery in Middle Eastern LPG exports and continued
growth in North American supply. The forthcoming influx of
newbuilding deliveries in both the VLGC and Midsize segments
remains a challenge, but the ageing profile of the fleet may see
the removal of some older units thereby mitigating some of the
impact.
Our shipping and product teams continue to grow and provide
multifaceted solutions (including newbuildings, secondhand sales
and longer-term charters) to our clients, against a backdrop of
volatility in the market.
PCG
The market for the smaller LPG carriers in 2021 started to show
marked improvement as the year progressed, most notably in the
fourth quarter, despite a disappointing start to the year.
The Handysizes continued to benefit from healthy US Ethylene and
Ethane exports. Freight rates for benchmark 22,500 cbm Semi Ref
carriers rose from $18,639 to $19,500 per day. The larger ship
market supported recovery in the smaller sizes, underpinned by
relatively flat fleet supply. Freight rates were supported by
unplanned outages at refineries and crackers. In the smallest size
categories, freights for 3,500 cbm pressure carriers in the west
rose from $220,000 pcm to $225,000 pcm whilst those for the 3,200
semi-refrigerated vessels rose from $227,000 pcm to $280,000 pcm.
The recovery in freight rates for the smaller sizes is expected to
continue as the age profile of the fleet deteriorates and there are
limited newbuildings.
LNG
The LNG shipping market began 2021 on a strong note for spot LNG
freight rates and term LNG supply contracts agreed. LNG freight
rates surged on the back of strong heating and restocking demand in
Asia and Europe; several LNG export plants outages in the Pacific
and Middle East replaced by US LNG export cargoes; severe delays
for LNG carriers through the Panama Canal; and limited available
tonnage.
In 2021 the spot headline rates for conventional 160,000 m(3)
Tri-Fuel Diesel Electric ('TFDE') tonnage climbed 50.5% year on
year and averaged US$89,179 per day. LNG freight rates were
volatile in 2021. Starting at US$195,000 per day at the start of
the year, rates declined to US$28,500 per day in early March as a
result of changing weather conditions in Asia and a reduction in US
exports. Throughout the summer rates were in the
US$50,000-US$70,000 range before surging to a peak of US$210,000
per day at the start of December. By the end of the year, rates
were back at US$80,750 per day.
The wider spreads between Asia and the US and between Asia and
Europe led to a significant volume of spot tonnage fixed for
long-haul voyages from the US Gulf Coast to Far East Asia,
increasing tonnage demand.
LNG tonnage demand grew by 13.8% during the year to reach an
all-time high of 1,744bn tonne miles, driven by the growth of
long-haul voyages. Trade between the Atlantic Basin and the Pacific
Basin climbed 38.2% to 64.6m mt. The average laden distance sailed
by LNG carriers increased 7.6% to 4,588 nm in 2021, compared to
4,265 nm a year ago.
Global LNG trade volumes rose by 5.8% to 381.1m mt in 2021, as
higher volumes from the US (whose exports surged 50.2%), Egypt
(fivefold increase) and Australia (which replaced Qatar as the
largest LNG exporter) were partially offset by losses from Nigeria,
Trinidad & Tobago, Norway, Peru and Angola.
On the demand side, Japan-Korea-Taiwan remained the largest
demand area with 141.0m mt of imports, but China overtook Japan as
the world's largest LNG importer with 81.0m mt against Japan's LNG
imports of 75.2m mt.
2021 saw 53 conventional LNG carriers (2020: 32) and 4 FSRUs
(2020: 4) (also able to operate as LNG carriers) delivered from
shipyards, 21 more than the previous year. 84 conventional LNG
carriers were ordered in 2021 compared with 32 in 2020. Two
medium-size LNG carriers were also ordered for projects in
China.
Tonnage demand is expected to increase again in 2022, led by
growth in LNG export volumes. Demand for LNG cargoes is underpinned
by restocking in Asia and Europe and China's gas demand growth,
supported by the increased import capacity of 10m tonnes per annum.
Trade flows are also expected to be supported by four LNG export
projects scheduled for commissioning in 2022: the 5m mt Sabine Pass
T6 and 10.0m mt Calcasieu Pass in the USA, the 3.4m mt Coral South
FLNG in Mozambique and the 3.8m mt Tangguh T3 in Indonesia.
Newbuild ordering is expected to continue into 2022. This is
supported by several liquefaction projects which anticipate
reaching final investment decision this year, by portfolio players
holding long-term FOB supply contracts from projects under
construction and by players looking at renewing existing tonnage
with more efficient LNG carriers.
Sale and purchase
Secondhand
The global sale and purchase ('S&P') markets continued to
recover in 2021, with sales volumes reaching record levels (over
147m dwt and US$47bn reported). Despite some remaining
COVID-19-related disruption (particularly around crew transfer),
the S&P markets have been extremely active, supported by highly
cash generative and strong charter markets (aside from tankers), a
generally improved economic outlook and the potential impact of
upcoming regulations. Transaction volumes increased most notably in
the containership sector, underpinned by the exceptional global
freight markets, with over US$14bn of sales (500 ships) reported,
more than triple the previous record level in dollar terms.
Activity also increased significantly in the bulkcarrier (961 units
of US$16bn reported, more than doubling in value) and tanker (522
units, US$11bn) sectors.
Asset values increased most rapidly in the containership sector,
with some price levels doubling or even tripling in value during
the year, with Clarksons' overall secondhand price index almost
doubling from 93 to 183 points. Values also increased in the
bulkcarrier sector (our 5-year-old 'eco' capesize index increased
from US$36m to US$47m over the year) against the backdrop of
improving charter markets, while tanker values still increased
slightly (our 5-year-old VLCC index increased from US$63m to
US$70m) despite weak charter markets. Escalating newbuild pricing
(with many newbuild values up 30-50% in 2021) and scrap prices (up
from approximately US$400/ldt at the start of the year to a peak of
around US$600/ldt in the fourth quarter) have also provided support
to secondhand pricing levels. Recent S&P trends amongst the
major shipowning countries continued, with Greek owners still the
biggest buyers and sellers of tonnage, whilst Chinese entities were
also notably active in 2021.
Our Secondhand business benefitted from these market conditions
and global sales volumes increased by 40%. This was further
enhanced as asset values rose. In tankers, despite an extremely
poor freight market throughout the year, the owning community
deployed profits generated from the other sectors in a form of
counter-cyclical buying activity. We sold more tankers than any
other sector, largely thanks to a mandate to handle the sale of a
major Asian owning group which had gone into liquidation with in
excess of 50 vessels in the fleet. The client recognised the
breadth and reach of our offering which is a testament to the hard
work and dedication of the team. Whilst such mandates do not come
along regularly, we believe our track record in this space will
help us win further mandates. All our offices globally contributed
to our success with London, Athens, Shanghai, Tokyo and Copenhagen
all reporting a significant increase in volumes of concluded
transactions. In Shanghai and Tokyo new team members joined and
enabled us to access new clients.
As we move into 2022 we feel confident that the markets will
allow us to continue where 2021 has left off.
Newbuilding
Activity in the global newbuilding market picked up
significantly during the year, with order volumes doubling to 48m
CGT and US$110bn. This represents the firmest level of ordering
since 2014, supported by strong underlying shipping markets,
improving economic outlook and interest in alternative fuels.
Investment was dominated by the containership sector, with record
orders of 4.3m TEU and US$43bn placed. There was also strong
activity in the LNG and LPG sectors, with orders of US$22bn placed.
We also saw a strong second half of ordering in the car carriers
market and a steadier flow of bulk carrier and tanker
newbuilds.
Newbuild prices generally rose by around a third over the year,
with 50% increases for larger containership pricing, as major
shipyards booked up capacity. After a period of decline, the global
order book backlog edged up again through 2021 to 90m CGT, although
this remains relatively low in historic terms at 9.4% (by dwt) of
the current fleet capacity. Shipyard output remained relatively
steady year on year, totalling 32m CGT, with Chinese yards (42%
market share) and South Korean yards (32% market share) delivering
the majority of tonnage.
The green transition continues to dominate planning across the
maritime industry, including an increasing emissions regulatory
framework from the IMO and EU alongside wide-ranging policy
announcements from stakeholders across maritime. This is increasing
fleet renewal requirements, with clients' focus on decarbonisation
intensifying and alternative fuels and ESTs becoming central to
newbuilding discussions. The share of the current order book that
is alternative fuelled increased to 35% of tonnage by the end of
2021, up from 28% a year ago and 10% five years ago. This includes
31% of order book tonnage set to use LNG as a fuel. Our activity
over the period is reflective of this trend, with close to 60% of
our contracting activity over 2021 having a capability to utilise
alternate fuels/propulsion, and in turn giving us a significant
insight into the adoption of these technologies going forward.
Our global newbuilding teams performed exceptionally over the
period with a record year of contracting activity in both Korea and
China. There were notable transactions in containers, LNG carriers,
drybulk vessels and tankers driven by speculative demand, as well
as significant project business leveraging the breadth of service
provision the Group offers to our client base.
We remain well placed to take advantage of market developments
driven by regulation and our robust contracting experience will
continue to provide unparalleled levels of market insight, value
and validation to our client base.
Offshore
General
2021 saw improvement in the traditional offshore oil and gas
business, while offshore renewables (wind) continued to see growth.
Commodity prices strengthened significantly through the year, with
oil prices up more than 50%, and Brent and WTI seeing their
strongest performance since 2016 and 2009 respectively. Natural gas
prices have also generally remained at high levels, across North
America, Asia and Europe. Oil and gas companies have seen very
strong performance with record-high operating cash flow for many of
the companies in the sector. However, despite the very strong cash
generation, exploration and production spending continues to be
restrained by an increased focus on decarbonisation and
prioritising direct shareholder returns and debt. The offshore
sector saw increased activity levels in 2021 and we have seen
improvements in all the sub-sectors and across most or all
geographical regions when compared with 2020, despite these
headwinds.
We expect 2022 to progress in the same direction, with likely
further improvement in activity levels and a corresponding positive
impact on fleet utilisation and day-rate levels.
The continuing strong growth for offshore wind is underpinned by
solid, long-term drivers; the energy transition and the desire to
decarbonise energy supply. 2021 was another year of very high
authorisation activity for offshore wind farms, following a record
level in 2020. This provides a solid backdrop for many years ahead
of increasing offshore activity levels.
Drilling market
Total offshore rig demand measured by active (contracted) rigs
saw some improvement through 2021, having bottomed out in the early
part of the year. At December 2021, there were 360 jackup rigs on
contract (2020: 343). In the floater segment, 119 rigs were on
contract (2020: 110). Utilisation also improved through last year,
with working utilisation levels in December 2021 at 81% for jackups
(2020: 76%) and 74% for floaters (2020: 66%). Average dayrates for
floater rigs also started improving in 2021, albeit with
significant regional differences. Dayrates for jackups remained
largely flat throughout the year as jackup idle capacity was
higher. That segment remains more fragmented, with more contractors
offering rigs, and contract durations on average shorter. The
floater segment has seen more consolidation and retirement of rigs,
and the available relevant capacity is currently largely controlled
by a limited number of players. Most of the world's large drillers
have now been through some form of refinancing, and the current
round of restructuring seems to be coming to an end. Following
these restructurings, we have also seen several of the larger
companies in the segment consolidate, a process we think is likely
to continue in 2022.
Subsea field development market
Authorisations of new offshore field developments saw some
improvement in 2021. The major subsea contractors continued to see
a strong order intake through the year with combined backlog
building slightly more than 10% over the year. 2021 represented the
third year in a row that saw backlog growth for the major subsea
engineering, procurement and construction ('EPC') contractors. As
the average lead-time to execution for these companies is typically
12-24 months, we will see offshore activities ramp up from 2023
onwards. 2021 also saw a significant increase in contract awards
for new floating production storage and offloading ('FPSO') units,
with seven new contracts awarded globally, up from only four in
2020, illustrating the underlying improvement in the subsea field
development market. However, the chartering market for subsea
vessels in 2021 remained challenging due to lag-effects. We expect
the backlog build witnessed by the larger contractors in 2020 to
also lead to improving market conditions for subsea vessel owners.
Certain vessel categories started to see increased utilisation and
higher rates driven by high activity in the offshore wind sector,
with wind farm operators sourcing support vessels from subsea oil
and gas. We expect to see continued improvement ahead in the subsea
chartering market.
Offshore support vessels
The market for OSVs also saw meaningful improvement throughout
2021. Overall, activity for PSVs globally has recovered to
pre-COVID-19 levels and the number of vessels in layup has come
down. We have also seen tightened availability in several regions
for specific vessel categories. Average dayrates have strengthened
significantly. With overall activity levels likely to continue to
improve in 2022, particularly within drilling, we expect to see
further market strengthening throughout the year for the OSV
sector.
Offshore renewables (wind)
As expected, all renewables sectors experienced growth through
2021 with the offshore wind sector continuing its vigorous growth
trajectory throughout the year. An additional 3,450 wind turbine
generators ('WTGs'), representing a capacity of 18.7 GW, were
installed globally, driven by a surge in China, pushing total
global capacity to 50.6 GW. At the end of the year there were 253
farms and 10,831 turbines in operation.
Sanctioned Final Investment Decisions ('FID') amounted to 5.3 GW
for Europe and 7.0 GW in total, excluding mainland China. FIDs and
project sanctioning amounted to US$25bn and in 2022 is forecast to
reach US$36bn. The global energy market is set to grow at a 2.4%
compound annual growth rate until 2050; and the global offshore
wind market is expected to grow at 15-20% per annum with the UK
poised to be the largest market in the European region for the
foreseeable future.
2021 also saw the first FID for a large-scale offshore wind farm
in the US and, when combined with large announced Engineering
Production, Construction and Installation contracts, opens up an
exciting new market. Other new markets are also showing very
interesting development, with Poland awarding 6.0 GW of capacity,
and Japan awarding its first large auction, notably 1.7 GW to a
Mitsubishi-led consortium. 2021 saw a long list of new pledges for
renewable energy, with several countries including Germany, Denmark
and the Netherlands upping their offshore wind capacity targets by
2030, a key milestone for the industry. The WTG producers
(primarily Siemens Gamesa, Vestas and GE) introduced technological
advances including a record breaking 15 MW capable WTG. The
introduction of new technology in conjunction with larger projects
reinforces the benefits of economies of scale and thus lowers the
levelised cost of energy ('LCOE'). Renewable energy from offshore
wind will act as a leading energy source to decarbonise power and
provides a platform for reducing CO(2) emissions. Renewable energy
created by offshore wind is also close to benefitting from advances
in Power-to-X ('P2X') storage and offtake solutions using green
hydrogen or ammonia.
A total of 45 ships (excluding the Chinese domestic market),
designed to work with offshore wind farms, were ordered during the
year at an aggregate value of US$2.7bn, up 20% from 2020.
The outlook for the offshore wind space remains bright, and we
expect a very busy year for the industry in 2022.
Our renewables business has identified vessel procurement
services (chartering) and newbuild services as the key area of
expertise but with an increasing attention on advisory and sale and
purchase activities. We are the leading advisor to the UK/EU and
the nascent US markets. The renewables business also launched a new
service, Advisory, Intelligence and Research ('AIR') in the year.
We are well positioned to gain from the further expansion of the
industry as it matures into a global energy industry.
The chartering and newbuild teams managed and closed several
milestone deals, concluding a record number of years of
timecharter, They also brokered a number of specialised newbuilds
with an aggregate value of nearly US$1bn which will be needed to
install the massive pipeline of 200 GW of offshore wind production
projected to be installed by 2030.
The start of 2021 saw a high level of capital markets activity
in the segment, with IPOs and M&A across many segments and
there remains a high ESG focus, although investors are becoming
more selective, requiring a firmer outlook and a clearer path to
profitability from companies. The renewables business has assisted
in various commercial and financial transactions, including several
IPOs, supporting the wider Financial division.
Futures
The links between the Futures desks has been effective in 2021.
We have had very good cross-over of clients meaning that we have
traded with more clients this year than in any previous year.
Dry FFA
2021 was the best year in the last decade for the dry FFA
market.
The year saw relatively low dry bulk rates in the first quarter,
but the futures market saw much bigger volumes. As the year
progressed volumes remained high as rates increased in the third
quarter, seeing the highest rates since the financial crisis. Rates
slipped more than expected during the fourth quarter but remained
well up on last year.
Swaps
Capesize rates in 2021 averaged US$33,333 per day, over
US$20,000 higher than in 2020; daily traded volume increased to
3,187 lots (2020: 2,015 lots). Similarly, the panamax market saw
rates nearly triple relative to 2020 to average US$25,562 per day;
daily traded volume increased to 4,628 lots (2020: 2,957). The
supramax market saw the biggest growth with rates more than
tripling at $26,770per day and daily volume doubling to 1,686
lots.
Options
The panamax options market became the big story of the year with
volumes up 67% to 238,140 lots. The capesize option volumes shrank
by 34,788 lots to 141,925 lots. Supramax volumes, similar to swaps,
more than doubled to 16,775 in the year.
Currently, full year 2022 contracts are trading above US$24,000
per day on capesizes and US$22,000 per day on panamax.
Wet FFA
In 2021 tanker FFA market volumes were down on the previous year
reflecting challenging market conditions as mentioned in the
tankers section. Our volumes increased, despite the fall in market
volumes.
Carbon
Prices of EU Allowances in the EU ETS reached a 15-year and a
then all-time high of EUR88.88 on the back of broad-based economic
recovery and firmer energy markets. The highly liquid market on
which European industrial installations hedge their carbon price
exposure saw high volatility and firm trading volumes throughout
the year.
Awareness of the world's largest carbon market gained traction
in 2021 and more interest was generated by COP 26 in Glasgow.
Knowing that shipping will be adopted into the EU ETS from 2023
helped drive further enquiries to the Carbon desk from owners,
operators and charterers with European exposure.
As well as the regulated carbon market, we have seen
considerable interest from shipping-related clients for voluntary
offsets as part of their internal strategy and investment into new
projects.
As the industry adjusts to the green transition, we are well
placed to meet client demand for information and to enable access
to the market. We see the year ahead as being one of continual
development and expansion of our client base for the daily
transactions of both regulated and voluntary environmental
products.
Financial
Revenue: GBP56.0m (2020: GBP33.9m)
Segmental split of underlying profit before taxation: GBP13.3m
(2020: GBP2.5m)
An exceptional year for our Financial division as investor
confidence in the underlying markets improved
Securities
2021 marked a year of strong economic recovery supported by
US$16tn of global stimulus, the roll-out of vaccines and pent-up
demand. Against this backdrop, 2021 was the best shipping year
since 2013 and shipping equities had a solid year, with an average
gain of 41% based on 66 listed companies. Container equities were
the best performing sector with a gain of 244% whilst dry bulk
equities increased by 130%. LNG carrier equities ended the year 52%
higher. The shipping banking team completed 11 capital market and
M&A/advisory transactions and raised a total of US$0.8bn in
capital, maintaining a leading position in capital markets for
shipping.
'Green and Tech' are dominating post-COVID-19 planning, with the
focus intensifying on reducing the shipping industry's emissions.
Carbon regulations will continue to be increasingly important in
2022, with a forward-looking stock market likely to price in the
positive effects of emissions savings technologies. Companies with
eco-vessels are likely to benefit from upcoming carbon regulations
due to lower fuel consumption and emissions, with carbon taxes in
the EU also expected to have an impact. Consequently, companies
with a young eco-fleet, or the ability to invest/renew, could see a
multiple expansion. With the recovery from COVID-19 continuing and
disruption likely to take time to unwind, market sentiment remains
positive. While risks remain and progress may be uneven, the
improving economy, limited order book in many sectors and the green
transition are all supportive tailwinds for the moment.
Global energy markets continued to rebalance in 2021 and helped
oil prices improve through the year with an average US$71 per
barrel, up 72% compared to 2020. The total capital commitments for
new offshore oil and gas projects amounted to US$85bn, also up 72%.
These factors have positively impacted the offshore drilling space
where utilisation has developed positively throughout the year.
Dayrates have also seen a positive impact, particularly for high
specification floaters where dayrates above US$300k per day in the
US Gulf of Mexico have been seen. In terms of market dynamics,
several drillers have emerged with sustainable balance sheets after
completing their chapter 11 processes, which have laid the ground
for further consolidation in the sector. Asset transactions are
taking place at a higher pace. On the capital markets side, we
assisted Borr Drilling in completing two equity raises in 2021,
whilst newly established Deep Value Driller financed the
acquisition of the drillship Bolette Dolphin through a private
placement, and Shelf Drilling raised a senior secured bond. The OSV
market conditions have also improved during 2021 and activity
levels are currently above pre-COVID-19 levels. However, the sector
is still too fragmented and companies are struggling with stretched
balance sheets. We expect to see more ongoing restructurings in the
OSV segment in 2022 which will eventually trigger more M&A and
capital markets activity. We assisted Tidewater in raising a
US$175m senior secured bond to repay existing debt in 2021.
The outlook for global installed offshore wind capacity
continues to look strong with installed capacity for 2030 expected
to reach more than 250 GW, translating to a circa six times
increase from today's levels. This market backdrop made 2021 an
active year for owners of offshore wind service vessels, a segment
which has experienced increased focus and attention due to strong
demand outlooks combined with limited availability of specialised
offshore wind tonnage. Key players in this segment have focused on
increasing their market position through newbuild orders and
consolidation ahead of the vessel supply deficit expected to
materialise going forward. With a strong ESG profile and attractive
market fundamentals, the capital markets have remained open for
high-quality offshore wind service vessel companies, and 2021 was
an active year for capital markets transactions within this
segment. Over the year we advised companies such as IWS and Edda
Wind on their IPO in Norway, and assisted Eneti Inc. with raising
equity on NYSE. There were two notable M&A transactions in the
WTIV segment during
2021, with Eneti Inc. merging with Seajacks and OHT merging with
Seaway 7. From a capital markets perspective, the outlook for 2022
remains positive, largely driven by solid market fundamentals
combined with continued newbuild ordering activity. We see large
equity needs across the offshore wind service vessel segments to
fund capex programmes for both listed and private players. Given
the availability of attractive bank financing for offshore wind
vessel projects, the key focus is expected to remain on private and
public equity offerings as opposed to high yield bond issues.
In 2021 the metals and minerals team completed 11 transactions
and raised a total of US$1.9bn in capital with US$0.9bn in bonds
and US$1.0bn in equity. This resulted in total revenue of NOK142m.
Equity accounted for NOK42m of total revenue, whilst debt and
advisory accounted for NOK94m and NOK6m respectively. The
year-on-year revenue growth was an extraordinary 351% as the number
of completed transactions and revenues per transaction both
increased, driven by the strong tailwinds in commodities and the
strength of our long-term relationships. Going forward, we expect
mining majors to have strong balance sheets and liquidity and thus
will focus on M&A and potential investments in juniors.
Furthermore, we expect to see a significant demand for construction
financing for battery minerals and projects within the battery
value chain supported by the general demand for
electrification.
Renewable energy continued to break ground and most subsectors
exhibited strong growth rates. The IEA expects renewables as a
share of the electricity generation mix to have reached an all-time
high of 30% globally in 2021. Key technologies such as wind and
solar continue to see falling cost levels and improved
competitiveness, and new projects are being announced, backed up by
continued commitments to fast track the energy transition. In
capital markets, renewable energy and cleantech saw a particularly
strong interest in the beginning of the year and, in Oslo, almost
half of all listings were related to ESG or the energy transition.
With increasing interest rates and concerns about inflation, ESG
stocks saw more headwinds during the second half of the year. One
sector that stands out is the carbon capture industry, which has
experienced a breakthrough year with a 150% increase in European
carbon prices. Stocks have surged and the market is recognising
that carbon capture will be an important element in reaching the
Paris Agreement goals. 2021 was another year with extraordinary
numbers in terms of megawatts announced and capital employed and
invested in renewables. It was a good year for our renewables team
with multiple transactions completed across hydropower, carbon
capture, biocarbon and cleantech. For 2022 we expect to continue to
see robust investor demand for ESG projects and companies and, as
we expect increased interest for more mature companies, we
anticipate a higher level of M&A across technologies.
In 2021, the fixed income group team completed eight
transactions with total capital of US$1.1bn raised. Straight bonds
accounted for most of this, but we also placed several sale and
leaseback transactions and convertible debt. Our primary deals were
aided by historically low interest rates and issuers took advantage
of the favourable terms available. The outlook for 2022 is somewhat
mixed as interest rates have already started to increase, and we
expect this to continue, although this does create opportunities,
with many companies keen to utilise the credit markets before terms
deteriorate. Equities are still exhibiting record levels of
volatility and with rising interest rates and inflation fears we
expect this trend to persist, benefitting the convertible bond
primary market. There is currently a market rotation from IT and
healthcare into energy, materials and financials, which should give
a tailwind to our core sectors going forward.
Currently, worries about rising inflation, monetary policies and
the Ukraine situation continue to dominate the world's financial
markets. With the conflict in Ukraine, and the extensive economic
sanctions from the US and the EU, the already high energy prices
could rise further. With high energy prices, companies will see
rising costs, increasing the cost of manufactured goods, which
would decrease household purchasing power and have a negative
effect on growth. As in 2021, proper planning and solid execution
will continue to be important ingredients for our continued
success.
Project finance
Shipping
In 2021 there was a welcome increase in rates for container
ships and dry bulk vessels, with multipurpose ('MPP')/heavylift
carriers leading the way.
The strong momentum on the earnings side and lagging ship values
created interesting opportunities to acquire vessels at
historically low asset prices with good time charters and
historically low residual value risk that generate a strong cash
yield to investors.
2021 has been our most active year since 2008, structuring and
placing a total of 27 vessels with a transaction volume of US$0.4bn
through asset plays, joint ventures and leasing structures.
Transactions comprised 15 drybulk vessels, six MPP/heavylift
vessels, three container ships, two emergency rescue and response
vessels and one exploration cruise ship. During the year, we also
successfully sold 14 vessels from existing projects, returning
capital and profits to our investors.
In 2022 we are optimistic that our projects will continue to
perform well backed by strong market fundamentals including record
low order books, high newbuilding prices, limited global yard
capacity and a healthy demand outlook.
Real estate
2021 was an extraordinary year for the Norwegian property market
which reached an all-time high with a total transaction volume of
more than NOK155bn, 54% higher than in 2020 and by far the highest
volume recorded for a single year in Norway. December's volume of
NOK45bn comprising 71 transactions ended the record year. The
previous all-time high for the Norwegian property market was
NOK105bn in 2019.
We also had record total transactions for the year. This
comprised both acquisitions and divestments, amounting to NOK13bn.
During 2021 we arranged for 24 new real estate projects totalling
NOK8bn, whilst in the same period securing solid returns for our
investors by selling 11 projects totalling NOK5bn. Our dedicated
sales desk facilitated secondhand trading in our projects worth
NOK1bn.
We expect high activity to continue into 2022 with an attractive
transaction market in Norwegian property.
Our investment management operation continues its positive
development. Our first fund Oslo Opportunity 1 is in the process of
realising its last investments, while our second fund Oslo
Opportunity 2 was fully subscribed with NOK0.8bn in equity in the
first quarter of 2021. Approximately one third of this capital has
now been deployed. We plan to raise further capital and establish
new funds in the coming year.
In recent years the real estate sector has made a significant
leap towards the technological and environmental trends driven by
authorities, entities, tenants and ultimately investors. The demand
for technologically advanced, energy efficient and sustainable
buildings are ever increasing, along with the ability to create
engaging buildings and neighbourhood environments which are
enjoyable places to live, work and socialise. Our project
development business was further strengthened in 2021, bringing in
further professional expertise and capacity to this ever-increasing
complex development environment in-house.
Structured asset finance
In the first half of 2021 activity in the asset finance market
was high. A general stabilisation in the financing markets, buoyed
by positive demand and increased vessel earnings, provided the
backdrop for a raft of financings especially for newbuildings as
buyers sought to commit orders ahead of the increased pricing
implemented by the shipyards. Mainstream shipping banks and Export
Credit Agencies ('ECAs') continued to provide most of the
newbuilding finance for the blue-chip names that are financing
green projects. Leasing companies, notably some of the larger
Chinese leasing companies, secured some of this financing but had
to reduce margins to compete. Their successes in newbuilding
finance were largely limited to the few deals requiring higher
leverage or residual risk transfer.
Outside the newbuilding market, there was plenty of activity in
refinancing existing senior debt with the source of capital spread
between the second-tier shipping banks, leasing companies and the
myriad of alternative lenders including those using green
funds.
In the second half of 2021, we saw a decrease in newbuilding
finance activity and a corresponding increase in de-leveraging and
refinancing at lower cost, especially in the container sector.
Chinese leasing companies received a large number of early
repurchase option requests as the liner companies sought to use
their substantial cash resources to repay or lock in lower finance
rates. Furthermore, some of the mainstream shipping banks and ECAs
began to expand their customer base as high earnings improved
borrower credit ratings and balance sheets. For the very best
financing deals with green credentials, competition is increasing
and margins are reducing.
In 2022 we expect that the general higher earnings environment
will result in fewer highly leveraged deals, with the mainstream
shipping banks and ECAs continuing to be the lenders of choice,
especially for green projects. We believe that leasing companies
will generally need to offer lower margins and take more residual
risk if they wish to secure financing for this type of project.
Cheaper refinancing, balance sheet optimisation and de-leveraging
is expected to provide the majority of opportunities for lenders
and lessors alike in the coming months.
We concluded a number of vessel financings for newbuildings and
secondhand acquisitions and are currently closing a number of
mandates. We remain positive for 2022, albeit we anticipate it to
be more challenging to find good newbuilding financing
projects.
Support
Revenue: GBP29.6m (2020: GBP24.9m)
Segmental split of underlying profit before taxation: GBP3.3m
(2020: GBP1.7m)
A strong performance in the year
Agency
Gibb Group
Gibb continued to grow quickly. This was mostly due to the
expansion of the new Safety and Survival business which benefitted
from the growth of offshore renewables. Our Mavric in-house product
was well received and saw positive growth and market penetration.
We also started to hire out safety and survival equipment.
The new operation in Ijmuiden, Netherlands opened and has
started to find traction as it acquires stock.
Stevedoring
2021 was a weak year, owing to a poor harvest in 2020 which was
compounded by Brexit-prompted export volumes prior to the end of
2020. The 2021 harvest proved little better, with UK grain exports
remaining weak. Imports have remained strong and much above prior
years levels, but the additional import volumes are less than the
decreased export volumes. We have therefore returned warehousing
capacity to our landlord.
The immediate outlook for 2022 is similar.
Short sea broking
High freight rates have made it tough for short sea charterers
to accept. Despite this, commissions earned set new records.
Agency and freight forwarding/customs clearance
2021 saw the reintroduction of customs borders for European
Community origin and destination cargoes for the first time since
1992. Accordingly, albeit relatively slowly at first, Belfast saw a
huge growth in turnover in this sector. 2022 will see further
tightening of border rules and customs procedures which will help
this operation.
Agri bulks, aggregates and scrap had a good year, with
underlying growth in the construction sector. As with stevedoring,
grain exports had a weak year. This was hindered further by the
closure of the Southampton export terminal for 10 months and the
rebuilding of a major part of the Tilbury terminal following an
explosion in 2020 which demolished 40% of the port capacity. Grain
imports were strong throughout the year.
Offshore renewables had a strong year seeing projects finished
in Moray East, Hornsea and Triton Knoll. We had greater than
expected support from dredging vessels preparing the Hinkley Point
power station inlet and outlet pipes. We won Seaway 7's support
contract for cabling work on Seagreen, which is positive for the
future.
Egypt agency
Agency business in Egypt performed robustly in 2021.
As the global economy started to recover and bunker prices rose,
our agency business improved particularly for Suez Canal transit
volumes, which increased by 21% year on year.
The liner business continued to provide an excellent service to
clients and we expanded our offering to continue to provide clients
with the best possible service.
Research
Revenue: GBP17.7m (2020: GBP16.8m)
Segmental split of underlying profit before taxation: GBP6.1m
(2020: GBP5.6m)
Our uniquely powerful data and intelligence underpins the
workflows and decision-making of many organisations across the
complex and dynamic maritime industry
Research, the data and analytics arm of Clarksons, performed
robustly during 2021, continuing its long-term growth
trajectory.
Our unique flow of powerful and highly relevant research and
data, during a period of market complexity and volatility, has been
extremely well received by our clients and achieved an excellent
profile for the Group. The use of innovative technology and
algorithms has continued to expand the depth and quality of our
proprietary database, supporting a strong pipeline of product
development and an encouraging flow of sales enquiries. Data and
research synergies supporting the Broking, Financial and Support
divisions were also strengthened during the year, alongside
enhanced data provision to the end-to-end freight Sea/
platform.
We remain market leaders in the provision of independent data,
intelligence and analysis around shipping, trade, offshore and
energy. Millions of data points are processed and analysed each day
to provide trusted and insightful intelligence to a global client
base, typically via recurring revenue agreements. This uniquely
powerful data and intelligence underpins the workflows and
decision-making of many organisations across the complex and
dynamic global maritime industry, including shipowners, financiers,
shipyards, suppliers, charterers, class societies, insurers,
universities and governments. Our team in London, Shanghai and
Singapore have grown, supporting a constant flow of data expansion,
innovation, digital platform development and market relevant
content. During 2021, specific investments were made in both our
data analytics team, which specialises in developing proprietary
algorithms and expanding the depth and quality of our database and
indices, and our market research team, which provides expert
analysis and content. We also expanded our sales capacity and our
investment focus in Asia Pacific continued, with the region
contributing strongly and now responsible for 26% of headcount.
In 2021, we continued to pursue our long-term strategy to focus
on data, intelligence and insights around the energy transition and
green transition. We released updates to our Energy Transition
Model, providing decarbonisation scenarios with specific maritime
relevant segmentation, and successfully launched Renewables
Intelligence Network, our offering focused on the offshore wind
sector. There has also been a very positive reaction from our
clients to the further expansion of our wide-ranging research and
data around the fuelling transition, including the profiling of the
2.4% of global CO(2) emitted by the shipping industry and the
tracking of uptake of alternative fuels. During the year, Research
supported the Group-wide initiatives to partner clients through
their decarbonisation pathways, contributing to internal awareness
initiatives and providing emissions benchmarking data and vessel
intelligence used within the carbon module of the Sea/ suite.
Digital
Research's world-leading digital platform provides immediate
access to our powerful data, analysis, forecasts and insights. In
2021, the number of users of our single access integrated platform
reached 10,000 and there was encouraging growth in digital sales,
up 19% across the year. There are specific development plans for
each of our digital products to ensure data, research content and
functionality remain market-leading.
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
shipping market supply and demand, freight, vessel earnings,
indices, asset values and macro-economic data around trade flows
and global economic developments. Sales of SIN grew strongly in
2021, benefitting from our detailed tracking of freight and
earnings recovery (the cross segment ClarkSea Index averaged a
post-2008 high of $28,700 per day), rebounding trade volumes
(already above pre-pandemic levels at 12bn tonnes) and widespread
congestion (our newly launched Container Congestion Index peaked at
37.5% compared to a pre-COVID-19 average of 31.3%). The
introduction of expanded near-term data, including port calling,
congestion and vessel activity indices, was particularly well
received by our clients, as was our COVID-19 impact assessment
insights and reporting. Further improvements to SIN are planned for
the first half of 2022.
World Fleet Register ('WFR')
Sales of our WFR, which provides comprehensive tracking of the
world fleet and shipbuilding industry, grew an encouraging 24%.
Growth has benefitted from a focus on the fuelling transition,
supporting stakeholders across maritime with understanding the
market impact of complex emissions regulations and their tracking
of technology uptake across the world fleet (alternative fuelled
order book share is now 35%).
Renewables Intelligence Network ('RIN')
Launched in 2021, RIN provides data, intelligence and analysis
around offshore renewables, including the fast-growing offshore
wind market. Offshore wind is a hugely exciting growth market,
expected to play a vital role in energy transition. Our data
suggests that global capacity increased by over 50% in 2021 to 51
GW whilst our modelling suggests it could reach 229 GW by 2030 and
up to 9% of global energy supply by 2050. Whilst this is a
competitive research area, we are already gaining good traction,
and feedback from clients and the other divisions has been very
positive.
World Offshore Register ('WOR')
Our comprehensive offshore register provides detailed
intelligence on offshore oil and gas field infrastructure and the
offshore fleet. Offshore oil and gas remain an important element of
the energy mix, accounting for 17% of global energy supply (24.5m
bpd of offshore oil production, 123bn cufd of offshore gas
production in 2021). Research is the market leader in data
provision to the insurance industry, where our data is used as the
core reference in identifying rigs and platforms.
Offshore Intelligence Network ('OIN')
Offshore oil and gas markets are showing signs of recovery, with
our index of earnings across the offshore fleet up 23% in 2021 to
reach its highest level since 2015 by year-end. Our data and
analysis of utilisation, dayrates and market supply and demand for
the offshore fleet including rigs, OSVs, subsea and floating
production continues to be well received by clients.
Sea/net
Developed in conjunction with the Group's technology business
(Maritech), our vessel movement system Sea/net blends satellite and
land-based AIS data with our leading database of vessels, ports and
berths. We continue to improve the depth of our underlying movement
and deployment data. Despite strong competition there has been good
sales growth across 2021, supported by the roll-out of new
features
Services
Our dedicated services and consultancy activities, including the
development and management of important long-term relationships
with key corporates across the maritime sector, performed
particularly well during the year. Interest in tailored data, which
often becomes embedded into client systems and includes API
delivery via our platform, remained high while our provision of
specialist insights, forecasting and scenario modelling to key
partners also expanded. We were actively engaged in consultancy
during the year, including industry sections for capital market
documents, studies for governments and policymakers and several
consultancy projects for owners and financiers that collaborated
with the Broking and Financial divisions.
As the industry standard source in the provision of
authoritative, consistent, independent and well documented
valuations delivered through a dedicated team, Clarksons Valuations
remain market leaders in providing valuation services to shipowners
and financiers. Despite the reducing portfolio size and valuation
requirements of some of our long-term European banking clients,
there was increased marketing to ship finance and leasing
institutions across the year, including in Asia, with several
successful multi-year portfolio agreements secured. A review of new
European Banking Authority guidelines issued to financiers around
property and maritime valuations has been carried out with
additional documentation produced and enhancements to the Clarksons
Valuations digital technology platform rolled out. A number of
valuation clients have been provided with emissions benchmarks and
analysis alongside their traditional asset valuations, with the
valuation team increasingly analysing the impact of alternative
fuels and ESTs on fleet value as the fuelling transition gathers
pace. The valuations team has actively supported the sale and
purchase broking teams in the active market during the year.
Sea/
Enhancing the way shipping professionals work
Sea/ has performed well in 2021 with continued adoption of the
whole product suite. We have launched the industry's first
end-to-end freight trade negotiation and management platform, which
was well received by clients. Customer satisfaction and product
delivery has been at the forefront of our technology offering and
this has been strengthened by successive roll-outs of features and
enhancements across Seafix/ products.
Sea/trade , one of the key products in the Seafix/ suite, was
launched in early 2021 and enables clients to collaborate,
negotiate and capture the complex world of maritime freight
transactions. With the successful signing of four key mining
majors, Maritech continued to gain significant traction in the
shipping market in the second half of 2021.
The Seafix/ product suite has been further enhanced by the
delivery of a series of integrations with third-party software
solutions including the Veson IMOS Platform, Rightship Safety
Score, GHG rating and inspection status, and Windward AI's sanction
product. Together, these ensure that information key to a freight
transaction is available earlier in the fixture process.
Sea/net continues to benefit from expanded product functionality
resulting in increased in adoption. Supported by the expansion of
our intelligence module Sea/analytics, clients are provided access
to key information and data focusing on commodity flow and marine
analytics helping, for example, to understand the impact of vessel
supply and port congestion. These modules represent a cornerstone
of the Sea/ suite with powerful and clear insights amidst the noise
of information overload.
We continue to see significant market adoption for Sea/
contracts and Recap Manager, the Maritech contract management
modules. Sea/contracts has benefitted from enhancements resulting
in better change control across clauses, improved access to clause
libraries, and simplified linking. In 2021 we achieved a 62% growth
in fixture volume and the pipeline of new customers in all market
sectors remains strong for 2022.
In the offshore industry, Sea/response, which delivers an
essential service in providing critical information on the location
and equipment onboard vessels in the proximity of an emergency,
enjoyed a third-generation release in collaboration with Oil Spill
Response. This has further enhanced an already strong product
offering.
There continues to be industry focus on international shipping's
decarbonisation and we are delighted to demonstrate our commitment
to this objective by collaborating with our clients and providing
the next generation of industry solutions. In the second half of
2021, Maritech launched SeaCarbon/, a complete CO(2) shipping
toolkit for the maritime industry. So far, we've tracked more than
1,400 voyages equating to 9.9m nautical miles resulting in the
saving of 4.2m tonnes of CO(2) . We're excited to continue to
innovate and expand our SeaCarbon/ offering in 2022.
There remains an increasing demand for digital solutions across
maritime sectors. Due to the strong adaptability demonstrated by
our sales, customer success and support teams, together with
collaboration with clients, our global client base has continued to
expand significantly, and we expect this to continue.
Risk management
Full details of our principal risks and how we manage them are
included in the risk management section of the 2021 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 2021. 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 UK-adopted
international accounting standards, give a true and fair view of
the assets, liabilities and financial position of the Group;
and
-- 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 4 March 2022 and is signed on its behalf by:
Laurence Hollingworth
Chair
4 March 2022
Consolidated income statement
for the year ended 31 December
2021 2020
-------------- -------------- -------------- ------------- ------------- -------------- -------------
Before After
exceptional exceptional
Before After items and items and
acquisition- Acquisition- acquisition- acquisition- Acquisition- acquisition-
related related related related Exceptional related related
costs costs costs costs items costs costs
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============== ============== ============== ------------- ------------- -------------- -------------
Revenue 443.3 - 443.3 358.2 - - 358.2
Cost of sales (16.5) - (16.5) (13.3) - - (13.3)
============== ============== ============== ------------- ------------- -------------- -------------
Trading profit 426.8 - 426.8 344.9 - - 344.9
Administrative
expenses (355.7) (0.3) (356.0) (298.5) (60.6) (0.5) (359.6)
============== ============== ============== ------------- ------------- -------------- -------------
Operating
profit/(loss) 71.1 (0.3) 70.8 46.4 (60.6) (0.5) (14.7)
Finance income 1.3 - 1.3 1.2 - - 1.2
Finance costs (3.1) - (3.1) (3.1) - - (3.1)
Other finance
income -
pensions 0.1 - 0.1 0.2 - - 0.2
============== ============== ============== ------------- ------------- -------------- -------------
Profit/(loss)
before taxation 69.4 (0.3) 69.1 44.7 (60.6) (0.5) (16.4)
Taxation (14.7) - (14.7) (9.5) - 0.1 (9.4)
============== ============== ============== ------------- ------------- -------------- -------------
Profit/(loss)
for the year 54.7 (0.3) 54.4 35.2 (60.6) (0.4) (25.8)
============== ============== ============== ------------- ------------- -------------- -------------
Attributable to:
Equity holders
of the Parent
Company 50.4 (0.3) 50.1 32.1 (60.6) (0.4) (28.9)
Non-controlling
interests 4.3 - 4.3 3.1 - - 3.1
============== ============== ============== ------------- ------------- -------------- -------------
Profit/(loss)
for the year 54.7 (0.3) 54.4 35.2 (60.6) (0.4) (25.8)
============== ============== ============== ------------- ------------- -------------- -------------
Earnings/(loss)
per share
Basic 165.6p 164.6p 106.0p (95.2p)
Diluted 164.2p 163.2p 105.8p (95.2p)
============== ============== ============== ------------- ------------- -------------- -------------
Consolidated statement of comprehensive income
for the year ended 31 December
2021 2020
GBPm GBPm
====== -------
Profit/(loss) for the year 54.4 (25.8)
Other comprehensive income/(loss):
Items that will not be reclassified to
profit or loss:
Actuarial gain on employee benefit schemes
- net of tax 7.2 1.0
Changes in the fair value of equity instruments
at fair value through other comprehensive
income - net of tax (1.7) (2.1)
Items that may be reclassified subsequently
to profit or loss:
Foreign exchange differences on retranslation
of foreign operations 0.5 (2.9)
Foreign currency hedges recycled to profit
or loss - net of tax (2.4) 1.5
Foreign currency hedge revaluations -
net of tax (0.8) 1.6
Other comprehensive income/(loss) 2.8 (0.9)
------ -------
Total comprehensive income/(loss) for
the year 57.2 (26.7)
====== -------
Attributable to:
Equity holders of the Parent Company 52.9 (29.8)
Non-controlling interests 4.3 3.1
------ -------
Total comprehensive income/(loss) for
the year 57.2 (26.7)
------ -------
Consolidated balance sheet
as at 31 December
2021 2020
GBPm GBPm
======== --------
Non-current assets
Property, plant and equipment 22.5 24.3
Investment properties 1.2 1.2
Right-of-use assets 45.1 47.0
Intangible assets 183.2 182.9
Trade and other receivables 1.0 3.1
Investments 1.0 2.9
Employee benefits 25.8 18.1
Deferred tax assets 10.5 10.6
======== --------
290.3 290.1
======== --------
Current assets
Inventories 1.5 1.3
Trade and other receivables 117.4 76.6
Income tax receivable 1.0 0.2
Investments 10.3 31.1
Cash and cash equivalents 261.6 173.4
======== --------
391.8 282.6
======== --------
Current liabilities
Trade and other payables (235.4) (160.6)
Lease liabilities (9.7) (8.4)
Income tax payable (11.6) (7.9)
Provisions (0.6) (0.5)
======== --------
(257.3) (177.4)
======== --------
Net current assets 134.5 105.2
======== --------
Non-current liabilities
Interest-bearing loans and borrowings - (0.1)
Trade and other payables (2.7) (2.7)
Lease liabilities (44.1) (47.7)
Provisions (1.6) (1.5)
Employee benefits (3.8) (6.1)
Deferred tax liabilities (11.0) (8.8)
======== --------
(63.2) (66.9)
======== --------
Net assets 361.6 328.4
======== --------
Capital and reserves
Share capital 7.6 7.6
Other reserves 104.0 104.6
Retained earnings 245.3 211.9
======== --------
Equity attributable to shareholders
of the Parent Company 356.9 324.1
Non-controlling interests 4.7 4.3
-------- --------
Total equity 361.6 328.4
======== --------
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
capital reserves earnings Total GBPm Total
GBPm GBPm GBPm GBPm equity
GBPm
========== =========== =========== ======== ================ =========
Balance at 1 January
2021 7.6 104.6 211.9 324.1 4.3 328.4
========== =========== =========== ======== ================ =========
Profit for the year - - 50.1 50.1 4.3 54.4
Other comprehensive income/(loss) - (2.7) 5.5 2.8 - 2.8
Total comprehensive income/(loss)
for the year - (2.7) 55.6 52.9 4.3 57.2
========== =========== =========== ======== ================ =========
Transactions with owners:
Share issues - 1.8 - 1.8 - 1.8
Employee share schemes - 0.3 (0.1) 0.2 - 0.2
Tax on other employee
benefits - - 2.3 2.3 - 2.3
Dividend paid - - (24.4) (24.4) (3.9) (28.3)
Total transactions with
owners - 2.1 (22.2) (20.1) (3.9) (24.0)
========== =========== =========== ======== ================ =========
Balance at 31 December
2021 7.6 104.0 245.3 356.9 4.7 361.6
========== =========== =========== ======== ================ =========
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
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
---------- ----------------- ----------- -------- ---------------- ---------
Consolidated cash flow statement
for the year ended 31 December
2021 2020
GBPm GBPm
======= --------
Cash flows from operating activities
Profit/(loss) before taxation 69.1 (16.4)
Adjustments for:
Foreign exchange differences (3.2) 2.8
Depreciation 13.3 13.7
Share-based payment expense 1.8 1.4
Gain on sale of property, plant and equipment (0.6) -
Loss on sale of investments - 0.1
Amortisation of intangibles 1.6 0.8
Impairment of intangibles - 60.6
Difference between pension contributions
paid and amount recognised in the income
statement (0.1) 0.3
Finance income (1.3) (1.2)
Finance costs 3.1 3.1
Other finance income - pensions (0.1) (0.2)
Increase in inventories (0.2) (0.2)
(Increase)/decrease in trade and other
receivables (38.7) 0.3
Increase in bonus accrual 49.1 7.9
Increase in trade and other payables 29.1 3.4
Increase in provisions 0.1 0.2
======= --------
Cash generated from operations 123.0 76.6
Income tax paid (9.2) (10.7)
======= --------
Net cash flow from operating activities 113.8 65.9
======= --------
Cash flows from investing activities
Interest received 0.2 0.5
Purchase of property, plant and equipment (3.7) (3.5)
Purchase of intangible assets (2.9) (6.3)
Proceeds from sale of investments 9.4 8.7
Proceeds from sale of property, plant and
equipment 1.6 0.4
Purchase of investments (3.5) (7.9)
Transfer from current investments (cash 20.0 -
on deposit and government bonds)
Transfer to current investments (cash on
deposit and government bonds) (6.8) (20.3)
Proceeds from sale of investments in associates - 0.5
Acquisition of subsidiaries, including deferred
consideration - (1.1)
Cash acquired on acquisitions - 0.7
Dividends received from investments - 0.2
======= --------
Net cash flow from investing activities 14.3 (28.1)
======= --------
Cash flows from financing activities
Interest paid and other charges (2.3) (2.7)
Dividend paid (24.4) (23.7)
Dividend paid to non-controlling interests (3.9) (1.8)
Repayments of borrowings (0.1) (1.2)
Payments of lease liabilities (9.1) (8.9)
Proceeds from shares issued 1.8 0.6
Contributions to non-controlling interests - (0.1)
ESOP shares acquired (1.9) (0.1)
Net cash flow from financing activities (39.9) (37.9)
======= --------
Net increase/(decrease) in cash and cash
equivalents 88.2 (0.1)
Cash and cash equivalents at 1 January 173.4 175.7
Net foreign exchange differences - (2.2)
======= --------
Cash and cash equivalents at 31 December 261.6 173.4
======= --------
Notes to the preliminary financial statements
1 Corporate information
The preliminary financial statements of Clarkson PLC for the
year ended 31 December 2021 were authorised for issue in accordance
with a resolution of the Directors on 4 March 2022. 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 2020
and 2021, but is derived from those financial statements. Statutory
financial statements for 2020 have been delivered to the Registrar
of Companies and those for 2021 will be delivered following the
Company's Annual General Meeting. External Auditors have reported
on the financial statements for 2020 and 2021; 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
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 and emerging
geopolitical tension. Management has stress tested a range of
scenarios, modelling different assumptions with respect to the
Group's cash resources. Three different scenarios were
considered:
- Management modelled the impact of a reduction in profitability
to GBP30m (a level of profit the Group has exceeded in every year
since 2013), whilst taking no mitigating actions: the group
remained cash generative before dividends.
- Management assessed the impact of a significant reduction in
world seaborne trade similar to that experienced in the global
financial crisis in 2008 and the pandemic in 2020: seaborne trade
recovered in 2009 and 2021 along with the profitability of the
Group. Since 1990 no two consecutive years have seen reductions in
world seaborne trade.
- Management undertook a reverse stress test over a period of
three years to determine what it might take for the Group to
encounter financial difficulties. This test was based on current
levels of overhead, the cash position at 31 December 2021, the
collection of debts and the invoicing and collection of the forward
order book. This determined that, in the absence of any management
action which would be applied in these circumstances, no new
business would be required to remain cash positive for at least the
next 12 months.
Under the first two scenarios, the Group is able to generate
profits and cash, and has positive net cash and available funds*
available to it. In the third scenario, current net cash and
available funds* together with the collection of debts and the
forward order book and no new business would leave sufficient cash
resources to cover at least the next 12 months.
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 2021 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
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
Broking 340.0 282.6 73.6 55.4
Financial 56.0 33.9 13.3 2.5
Support 29.6 24.9 3.3 1.7
Research 17.7 16.8 6.1 5.6
====== ------ ======= -------
Segment revenue/profit 443.3 358.2 96.3 65.2
====== ------
Head office costs (25.2) (18.8)
======= -------
Operating profit before exceptional
items and acquisition-related costs 71.1 46.4
Exceptional items - (60.6)
Acquisition-related costs (0.3) (0.5)
======= -------
Operating profit/(loss) after exceptional
items and acquisition-related costs 70.8 (14.7)
Finance income 1.3 1.2
Finance costs (3.1) (3.1)
Other finance income - pensions 0.1 0.2
======= -------
Profit/(loss) before taxation 69.1 (16.4)
Taxation (14.7) (9.4)
======= -------
Profit/(loss) for the year 54.4 (25.8)
======= -------
4 Exceptional items
As a result of the impairment testing of goodwill, no impairment
charge was recognised in 2021. An impairment was recognised in 2020
of GBP60.6m.
5 Acquisition-related costs
Included in acquisition-related costs is GBP0.2m (2020: GBP0.3m)
relating to amortisation of intangibles acquired as part of the
Martankers acquisition in 2020 and cash charges of GBP0.1m (2020:
GBP0.1m) 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 (2020: GBP0.1m) 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:
2021 2020
GBPm GBPm
Profit/(loss) at UK average standard rate of corporation tax of 19% (2020: 19%) 13.1 (3.1)
Impairment charge not deductible for tax purposes - 11.5
Expenses not deductible for tax purposes 2.1 1.7
Other (0.5) (0.7)
====== ------
Total tax charge in the income statement 14.7 9.4
====== ------
7 Earnings/(loss) per share
Basic earnings/(loss) 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/(loss) 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:
2021 2020
GBPm GBPm
Underlying profit for the year attributable to ordinary
equity holders of the Parent Company * 50.4 32.1
Reported profit/(loss) for the year attributable to ordinary
equity holders of the Parent Company* 50.1 (28.9)
========== ----------
2021 2020
Million Million
Weighted average number of ordinary shares - basic 30.4 30.3
Weighted average number of ordinary shares - diluted 30.7 30.4
---------- ----------
8 Dividends
The Board is recommending a nal dividend of 57p (2020: 54p),
giving a total dividend of 84p (2020: 79p). This final dividend
will be payable on 27 May 2022 to shareholders on the register at
the close of business on 13 May 2022, subject to shareholder
approval.
9 Intangible assets
Additions of GBP2.9m in the year relate in full to development
costs. 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 GBP0.9m in the carrying value of
goodwill and GBP0.1m in the carrying value of other intangible
assets in the year.
In 2020, recognising the challenging trading conditions in the
offshore broking and securities markets, the Directors revised the
estimate of future cash flows expected from these cash-generating
units. Following the revisions, an impairment loss of GBP60.6m was
recognised in 2020.
10 Investments
Included within current investments are deposits totalling
GBP2.8m (2020: GBP22.8m) with maturity periods greater than three
months, in addition to GBP6.8m of government bonds (2020: GBPnil).
Also included is GBP0.7m (2020: GBP8.3m) 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 short-sold related equity securities
amounting to GBPnil (31 December 2020: GBP2.8m). These are shown
under trade and other payables.
11 Cash and cash equivalents
2021 2020
GBPm GBPm
Cash at bank and in hand 260.7 172.4
Short-term deposits 0.9 1.0
------
261.6 173.4
====== ------
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.
The following tables summarise amounts recognised in the
Consolidated balance sheet and the components of the net benefit
charge recognised in the Consolidated income statement.
Recognised in the balance sheet
2021 2020
GBPm GBPm
-------- --------
Fair value of schemes' assets 201.5 204.5
Present value of funded defined benefit obligations (174.2) (188.6)
-------- --------
27.3 15.9
Effect of asset ceiling in relation to the Plowrights scheme (5.3) (3.9)
-------- --------
Net benefit asset recognised in the balance sheet 22.0 12.0
-------- --------
The above is recognised on the balance sheet as an asset of
GBP25.8m (2020: GBP18.1m) and a liability of GBP3.8m (2020:
GBP6.1m). A deferred tax asset on the benefit liability amounting
to GBP0.9m (2020: GBP1.2m) and a deferred tax liability on the
benefit asset of GBP6.5m (2020: GBP3.4m) is also recognised on the
balance sheet.
Recognised in the income statement
2021 2020
GBPm GBPm
====== ------
Recognised in other finance income - pensions:
Expected return on schemes' assets 2.8 3.9
Interest cost on benefit obligation and asset ceiling (2.7) (3.7)
Recognised in administrative expenses:
Past service costs - (0.4)
Scheme administrative expenses (0.3) (0.3)
====== ------
Net benefit charge recognised in the income statement (0.2) (0.5)
====== ------
13 Share capital
2021 2020
Million GBPm Million GBPm
Ordinary shares of 25p each, issued and fully paid 30.5 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
2020 annual report. There were no material differences in related
parties or related party transactions in the year ended 31 December
2021.
Other information
Alternative Performance Measures
The Directors believe that alternative performance measures can
provide users of the financial statements with a better
understanding of the Group's underlying financial performance, if
used properly. Directors' judgement is required as to what items
qualify for this classification.
Adjusting items
The Group excludes adjusting items from its underlying earnings
metrics with the aim of removing the impact of one-offs which may
distort period-on-period comparisons.
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 believes this provides further useful
information, in addition to statutory measures, to assist readers
of the Annual Report to understand the results for the year.
Underlying profit before taxation
Reconciliation of reported profit/(loss) before taxation to
underlying profit before taxation for the year.
2021 2020
GBPm GBPm
Reported profit/(loss) before taxation 69.1 (16.4)
Add back exceptional items - 60.6
Add back acquisition-related costs 0.3 0.5
------------------------------------------ ----- -------
Underlying profit before taxation 69.4 44.7
------------------------------------------ ----- -------
Underlying effective tax rate
Reconciliation of reported effective tax rate to underlying
effective tax rate.
2021 2020
Reported effective tax rate 21.3% (57.3%)
Adjustment relating to exceptional items - 78.6%
Adjustment relating to acquisition-related (0.1%) -
costs
---------------------------------------------- ------- --------
Underlying effective tax rate 21.2% 21.3%
---------------------------------------------- ------- --------
Underlying profit attributable to equity holders of the Parent
Company
Reconciliation of reported profit/(loss) attributable to equity
holders of the Parent Company to underlying profit attributable to
equity holders of the Parent Company.
2021 2020
GBPm GBPm
Reported profit/(loss) attributable
to equity holders of the Parent Company 50.1 (28.9)
Add back exceptional items - 60.6
Add back acquisition-related costs 0.3 0.4
-------------------------------------------- ----- -------
Underlying profit attributable to equity
holders of the Parent Company 50.4 32.1
-------------------------------------------- ----- -------
Underlying basic earnings per share
Reconciliation of reported basic earnings/(loss) per share to
underlying basic earnings per share.
2021 2020
Reported basic earnings/(loss) per share 164.6p (95.2p)
Add back exceptional item - 199.9p
Add back acquisition-related costs 1.0p 1.3p
---------------------------------------------- ------- --------
Underlying basic earnings per share 165.6p 106.0p
---------------------------------------------- ------- --------
Underlying administrative expenses
Reconciliation of reported administrative expenses to underlying
administrative expenses for the year.
2021 2020
GBPm GBPm
Reported administrative expenses 356.0 359.6
Less exceptional items - (60.6)
Less acquisition-related costs (0.3) (0.5)
-------------------------------------- ------ -------
Underlying administrative expenses 355.7 298.5
-------------------------------------- ------ -------
Operational metrics
The Group monitors its cash and liquidity position by adjusting
gross balances to reflect the payment of obligations to staff and
restricted monies held by regulated entities.
Net cash and available funds
The Board uses net cash and available funds 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.
Reconciliation of reported cash and cash equivalents to net cash
and available funds reported.
2021 2020
GBPm GBPm
Cash and cash equivalents as reported 261.6 173.4
Less interest-bearing loans and borrowings - (0.1)
Add cash on deposit and government bonds
included within current investments 9.6 22.8
Less amounts reserved for bonuses included
within current trade and other payables (148.9) (100.7)
Net cash and available funds 122.3 95.4
---------------------------------------------- -------- --------
Free cash resources
Free cash resources is a further measure used by the Board in
taking decisions over capital allocation. It deducts monies held by
regulated entities from the net cash and available funds
figure.
Reconciliation of reported cash and cash equivalents to reported
free cash resources.
2021 2020
GBPm GBPm
Cash and cash equivalents as reported 261.6 173.4
Less interest-bearing loans and borrowings - (0.1)
Add cash on deposit and government bonds
included within current investments 9.6 22.8
Less amounts reserved for bonuses included
within current trade and other payables (148.9) (100.7)
Less net cash and available funds held
in regulated entities (30.0) (14.3)
Free cash resources 92.3 81.1
---------------------------------------------- -------- --------
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March 07, 2022 02:00 ET (07:00 GMT)
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