TIDMCKN
RNS Number : 4228I
Clarkson PLC
07 August 2023
7 August 2023
Clarkson PLC ('Clarksons') is the world's leading provider of
integrated shipping services. From offices in 24 countries on six
continents, we play a vital intermediary role in the movement of
the majority of commodities around the world.
Interim results
Clarkson PLC today announces unaudited Interim results for the
six months ended 30 June 2023.
Summary
-- Underlying profit before taxation* of GBP53.1m (2022: GBP42.2m), an increase of 25.8%
-- Underlying earnings per share* increased by 35.0% to 133.5p (2022: 98.9p)
-- Particularly strong performance in Broking segment
-- Robust balance sheet, with GBP128.2m of free cash resources* (31 December 2022: GBP130.9m)
-- Increased interim dividend of 30p per share (2022: 29p per share)
-- Board's expectations for the year unchanged with continued
confidence in the medium-term outlook
Six months Six months
ended ended
30 June 2023 30 June 2022
Revenue GBP321.1m GBP266.7m
Underlying profit before taxation* GBP53.1m GBP42.2m
Reported profit before taxation GBP52.2m GBP42.0m
Underlying earnings per share* 133.5p 98.9p
Reported earnings per share 130.5p 98.5p
Interim dividend per share 30p 29p
* Classed as an Alternative Performance Measure ('APM'). See
'Other information' on pages 31-32 of this announcement for further
information.
Andi Case, Chief Executive Officer, commented:
"I am pleased to report an outstanding result for Clarksons in
the first half of 2023, which reflects the continued momentum in
the business and effective execution of our strategy as we help
clients navigate the changing markets.
"I have great confidence in the outlook for Clarksons, which has
been built to maximise value from the global mega-trends of the
green transition, digitalisation and ever more complex global trade
dynamics."
Enquiries:
Clarkson PLC 020 7334 0000
Andi Case, Chief Executive Officer
Jeff Woyda, Chief Financial Officer & Chief Operating
Officer
020 3757 4983
Camarco / 4994
Billy Clegg
Jennifer Renwick
Forward-looking statements
Certain statements in this interim report are forward-looking.
Although the Group believes that the expectations reflected in
these forward-looking statements are reasonable, it can give no
assurance that these expectations will prove to have been correct.
Because these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward-looking statements. The Group undertakes no
obligation to update any forward-looking statements whether as a
result of new information, future events or otherwise.
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 on
pages 31-32 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 1,800 people in 63 different offices
across its four divisions and is number one or two in all its
market segments.
The Company has delivered 20 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
opportunities 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 for the purposes
of Article 7 of EU Regulation 596/2014 as it forms part of domestic
law of the United Kingdom by virtue of the European Union
(Withdrawal) Act 2018, as amended (together, 'MAR'). Upon the
publication of this announcement, this inside information is now
considered to be in the public domain.
Chair's review
Following a record year in 2022, Clarksons entered 2023 in a
strong position, and I am pleased to report that the business has
maintained momentum through the first half of 2023, delivering
another outstanding performance in terms of revenue and
profits.
In an uncertain geo-political and global macroeconomic
environment, we are now starting to see the softening of rates in
some sectors, much of which was anticipated post-COVID-19.
Nevertheless, the strategy set out by the Board, and implemented
over many years, has put Clarksons in a strong position, with the
breadth and depth of the business proving its effectiveness.
Clarksons' market-leading position and continued investment in
tools for trade, market intelligence, outstanding people and global
presence means that we are now positioned with scale in all the key
areas for growth and are actively helping our clients navigate the
changing markets and take advantage of opportunities wherever they
arise.
Our Broking team remains the biggest driver to profit, and we
remain keen to hire and develop good people across all areas of
this business. Our global training programme has produced some of
the best talent in the industry, many rising through the ranks of
Clarksons, and others taking leadership positions within clients
across the globe. I am delighted that we have now started to roll
out an enhanced programme across all offices to ensure that talent
continues to come through over the next few years.
The Board remains dedicated to our progressive dividend policy,
which is now in its 21(st) year, and I am delighted that due to the
continued strength of the business, the Board has declared an
increased interim dividend of 30p per share (2022: 29p per
share).
I would like to extend my sincere thanks to the teams throughout
Clarksons who have made this result possible through their
commitment, drive and significant achievements. We also thank our
shareholders for their continued support, which is much
appreciated.
Laurence Hollingworth
Chair
4 August 2023
Chief Executive Officer's review
I am pleased to report an outstanding result for Clarksons in
the first half of 2023, where we have benefited from the strategy
and investment of the last decade, which established our extensive
global footprint across 24 countries, a market-leading position
across marine, both shipping and offshore, and a platform for
growth across broking, research and analysis, support services,
finance and technology.
Our customer-focused integrated business model has served us
well in the recent past, dealing with the pandemic, geo-political
tensions, changes in trade patterns, congestion and its impact on
the supply chain, increased regulation and compliance. In addition,
it has positioned us well to benefit from the significant evolution
within both the green transition in shipping and the change in
energy mix impacting both offshore oil and renewables. Against this
backdrop, our teams have sought to meet the extensive needs of our
clients in market intelligence, expertise, global presence and
high-quality service.
I am immensely proud to work with the best teams in every sector
and, together with the whole Board, thank each and every member of
Clarksons for their continued hard work and diligence.
Market backdrop
Conditions during the first half of 2023 were generally
positive, with vessel freight earnings in most segments exceeding
the 10-year average. Energy-related markets have been the key
performers as complexity, geo-politics and energy security remain
the major trade themes, whilst softer conditions have become
prevalent within both the container market, where rates have again
normalised, and the dry bulk market, where headwinds have been felt
from the unwinding of congestion and lower demand, particularly in
the smaller ship sizes.
After contracting marginally in 2022, overall global trade
during the year to date has reverted to growth, with help from
China's reopening, although the macroeconomic backdrop remains
fragile. Nevertheless, 2023 should see annualised growth in trade
volumes with further support for demand and freight rates coming
from the increased tonne-mile impact of changing trade patterns
arising from geo-political tension.
Fleet supply growth remains relatively constrained, with the
newbuilding orderbook focused on containers and gas carriers,
leaving the tanker and dry bulk orderbooks at historically low
levels. The green transition remains a central underlying driver
for the shipping markets, accentuated by the introduction of the
IMO's EEXI and CII measures and evidenced by 44% of newbuild
tonnage in the first half being alternate-fuelled vessels.
Broking
The Broking teams delivered a very strong first half, with
standout performances from the tanker, specialised product, gas,
offshore and sale and purchase sectors.
Tankers had a very strong start to 2023 as strength in tanker
earnings reflected the changed trading patterns from the
Russia-Ukraine conflict and a rebound in crude imports to China.
Supply/demand fundamentals continue to look encouraging for the
coming years irrespective of current seasonality and OPEC cuts. The
offshore markets have improved significantly, incorporating an
increase in rates within the offshore energy market and increased
investment in offshore renewables, where we continue to build our
team. Our gas teams have also experienced a very strong start to
2023, driven by increased tonne-mile demand, congestion around the
Panama Canal and slower vessel speeds due to environmental
regulations. The sale and purchase team has been very active,
concluding a strong flow of business in a market that saw a
continuation of momentum built in 2022, and the newbuilding team
was also very busy working on major fleet renewal programmes. The
strength across all of these areas was in part offset by easing of
results in the container and dry bulk markets, as highlighted
above, and consequently, margin has remained very similar to the
same period last year.
Divisional profit from Broking in the first six months of the
year amounted to GBP58.2m (2022: GBP47.0m), reflecting a margin of
22.6% (2022: 22.3%).
Financial
Our Financial division performed broadly in line with the same
period in 2022. However, within the division we saw an increase in
profits from banking and shipping project finance, reflecting an
increase in transaction flow and value from our core markets, and a
reduction in profits from real estate project finance as the
changing economic backdrop and increase in interest rates reduced
activity. Despite volatile capital markets, our banking team
executed transactions in the first half in all verticals, with
particularly strong activity in the energy services space,
underpinned by a supportive M&A environment, where the pipeline
remains strong.
The Financial division reported a profit of GBP5.0m on revenue
of GBP26.5m in the first half compared with a profit of GBP5.7m on
revenue of GBP27.6m in the same period last year.
Support
Our Support division performed particularly well, with excellent
results both from the Gibb Group, which has grown its product
offering in particular within the safety and survival business, and
other Clarksons Port Services ('CPS') activities comprising agency,
project forwarding and stevedoring in both the dry bulk and
offshore energy and renewables sectors. During the period, we also
completed the acquisition of DHSS, a renewables-focused port
services business based in mainland Europe. With a presence across
a number of ports in the Netherlands, DHSS acts as a gateway to
offshore wind farms, with services spanning the lifecycle of
turbine installation, day-to-day operation and ongoing maintenance
with sector-specialist coordination of port logistics, warehousing
and helicopter movements from strategically located marshalling
ports. Bringing together the client bases and spread of activity of
DHSS and CPS in the renewables sector gives a significant knowledge
base from which to grow, and we are excited by the opportunities
this brings.
The Support division reported GBP3.4m profit and a 12.5% margin
in the first half of 2023 (2022: GBP2.0m and 10.9% margin).
Research
Our Research division, which provides trusted and insightful
intelligence to support the workflows and decision-making of
thousands of organisations across the increasingly complex and
dynamic maritime industry, continued to perform well with increased
revenues and profits in the first half of 2023. Our continually
evolving intelligence and analysis of the green transition, changes
in trade patterns, fleet productivity and offshore renewables,
makes us a market-leading provider of independent data,
intelligence and analysis across shipping, trade, offshore and
energy. The team is actively enhancing all products and services to
meet the changing needs of our customers.
The Research division reported a profit of GBP3.7m on revenue of
GBP10.2m in the first half compared with a profit of GBP3.4m on
revenue of GBP9.6m in the same period last year.
Green Transition
The green transition continues to be a major driver for the
industry, and there is increasing demand from our customers for
strategic advice to help them navigate this journey as regulation
continues to evolve. The Green Transition team at Clarksons
provides decarbonisation strategies, guidance on operational
emissions reduction, and insight to inform fleet renewal,
collaborating closely with the Broking division.
We were delighted to announce the further strengthening of our
Green Transition team in May with the appointment of industry
veteran Johan Tutturen as a Senior Technical Adviser, increasing
the depth of advisory services offered by Clarksons by providing
greater technical insight on the complexity of transporting CO(2) ,
and the use of alternative fuels such as ammonia and hydrogen.
Digitalisation
We remain encouraged by the interest in and increasing adoption
of the Sea platform among our clients. This continues to be an area
of strategic focus for Clarksons as we roll out Sea across the dry
bulk and other market areas. The integration of Chinsay, a contract
management platform particularly focused on the dry bulk sector,
into the Sea platform has progressed smoothly. We are pleased to
report that sales are progressing and Sea revenues are up.
Results
Total revenue in the first half was GBP321.1m (2022: GBP266.7m)
with underlying administrative expenses* of GBP256.7m (2022:
GBP213.7m). Underlying profit before taxation* was GBP53.1m (2022:
GBP42.2m), resulting in reported profit before taxation of GBP52.2m
(2022: 42.0m). Underlying earnings per share* were 133.5p (2022:
98.9p). Reported earnings per share were 130.5p (2022: 98.5p).
The arithmetic average GBP/USD rate was 1.24 in the first half
of 2023 compared to 1.29 for the same period last year. Current
comparative strength in sterling outlook for the second half,
compared to a much weaker sterling performance in the second half
of 2022, is likely to be a headwind for the second half of
2023.
Cash and dividends
Clarksons has reported cash balances at 30 June 2023 of
GBP275.7m (31 December 2022: GBP384.4m). Net cash and available
funds*, after deducting amounts accrued for performance-related
bonuses but including short-term investments, amounted to GBP148.9m
(31 December 2022: GBP161.7m). Free cash resources*, after
deducting monies held by regulated entities, amounted to GBP128.2m
(31 December 2022: GBP130.9m).
Our balance sheet remains strong, alongside our solid business
performance, leaving us well positioned to take advantage of
current market conditions to make accretive acquisitions where
opportunities arise and to continue to maintain our highly skilled
teams, building further on our market advantage.
Due to our confidence in the strength of our business and
continuing our 20-year progressive dividend policy, the Board has
declared an interim dividend of 30p per share (2022: 29p per share)
which will be paid on 15 September 2023 to shareholders on the
register at the close of business on 1 September 2023.
Outlook
We have benefited from the breadth of Clarksons' offering
through the first half with demand/supply balance and the impact of
other external factors being very different in each of the
verticals within shipping and offshore.
While mindful of the currency headwinds and softening rate
environment, which are expected to result in a more balanced split
between the first and second half, our expectations for the full
year are unchanged.
The Board has great confidence in the outlook for Clarksons,
which has been built to maximise value from the global mega-trends
of the green transition, digitalisation and ever more complex
global trade dynamics.
Andi Case
Chief Executive Officer
4 August 2023
Business Review
Broking
Revenue: GBP257.2m (2022: GBP211.2m)
Segmental split of underlying profit before taxation*: GBP58.2m
(2022: GBP47.0m)
Dry cargo
Supporting a range of important global industries including
construction, energy and agriculture, the dry cargo sector moves
over 5 billion tonnes of cargo per year across a range of dry bulk
commodities, including metals and minerals, agricultural products
and some semi-processed goods.
Despite relatively firm cargo volumes, the bulkcarrier shipping
market experienced softer conditions as 'inefficiencies' (notably
port congestion) unwound, boosting available vessel supply. The
overall Clarksons bulkcarrier earnings index averaged US$10,768 per
day, down 56% year on year and 14% below the 10-year average.
Typical seasonal demand weakness impacted earnings in the first
quarter and, despite some gains materialising into the second
quarter, rates generally remained subdued compared to the highs
seen in 2021-22.
The Capesize sector (average earnings US$12,390 per day, down 6%
year on year) saw slightly firmer trends than the smaller sectors,
with Chinese iron ore and coal imports exceeding expectations. Iron
ore trade is estimated to have increased by 3% year on year in the
first half, with only minor weather-related disruption, while
Chinese seaborne coal imports increased by circa 80% year on year
across the first half of the year. Earnings in the sub-Cape sectors
saw a more pronounced softening compared to 2022 (when earnings
outperformed the Capesize sector) as congestion unwound and
economic headwinds dragged on demand for many of the key minor bulk
commodities. Continuing disruption to Ukrainian seaborne grain
exports and drought in Argentina also impacted sub-Cape vessels,
although there was support from firm Russian and Australian exports
and a bumper Brazilian soybean crop. Panamax spot earnings fell 54%
year on year to average US$10,312 per day in the first half of
2023.
Looking ahead to the second half of the year, macroeconomic
headwinds are expected to continue to place pressure on rates at
times. The more positive demand trends from China should continue
to lend some support and the supply backdrop remains supportive,
with the orderbook at close to record lows at just 7% of fleet
capacity. New emissions regulations should continue to limit
operating speeds and could contribute to increased demolition.
Across the segments, earnings premiums for 'eco' and
scrubber-fitted vessels remain.
Containers
The container shipping sector facilitates transportation of a
wide spectrum of manufactures, often high-value and including
consumer and industrial goods, foodstuff, chemicals and other
goods.
Having seen a normalisation across the second half of 2022,
container shipping markets remained weak amid continued trade
headwinds, accelerating vessel supply growth and pre-COVID-19 port
congestion levels. Containership charter rate levels, although well
down from last year's highs, remain above pre-COVID-19 levels,
whilst spot box freight rates, despite some volatility, continued
to soften and have broadly returned to pre-pandemic levels.
Weaker container trade volumes continued in early 2023, with
first quarter volumes down 7% year on year, as macroeconomic
headwinds, inflationary pressures, higher interest rates and excess
retail inventories impacted. By the second quarter, global
container trade volumes had begun to see improvements, though some
key trades remained very weak (peak-leg Transpacific volumes were
down 21% year on year across January through to May). The
containership fleet grew by 3.5% across the first half amid a clear
pick-up in deliveries. Slower vessel operating speeds absorbed some
excess supply; average speeds were circa 3% down on 2022. Fleet
removals picked up slightly from the limited levels of 2022.
Continued pressures on container shipping markets are expected
in the second half of the year. Accelerating fleet capacity growth
of 7% of the fleet is forecast for the full year and, whilst
another year of declining trade volumes may be avoided as
inventories normalise and the world economy bottoms out, overall
seaborne container trade growth is projected to remain limited.
Despite these pressures, some vessel sizes could experience
resilience in the charter market where immediate liner requirements
do not match newbuilding deliveries. Most shipping companies in the
container sector retain strong balance sheets and fleet renewal
investment continues to be a focus in response to decarbonisation
priorities.
Tankers
The tanker sector plays a crucial role in global energy supply
chains, moving crude oil and refined oil products to facilitate
their eventual use as transportation fuels, for heating and
electricity generation, and as industrial feedstocks.
The tanker market saw a very strong start to 2023, with the
Clarksons average tanker earnings index averaging US$46,024 per day
in the first half of 2023, up 79% year on year. Much of the market
strength has been driven by changes to trading patterns resulting
from the Russia-Ukraine conflict, although rebounding crude oil
imports into China following the lifting of COVID-19 restrictions
have also had a significant impact on the VLCC market.
VLCC earnings, which had been very weak in first half 2022, rose
to much healthier levels, some 34% above the 10-year trend, albeit
with considerable volatility. Monthly fluctuations in the volume of
crude oil imported into China and the volume of liftings in the
Atlantic Basin contributed to the volatility. The Suezmax and
Aframax markets remained extremely strong, buoyed by longer
transport distances for European crude oil imports and Russian
crude oil exports. Suezmax earnings in in the first half rose by
165% year on year and by 1% versus the second half of 2022, while
Aframax earnings were up 71% year on year, though were marginally
below the exceptionally high levels seen in the second half of
2022. Products tanker earnings also remained at historically high
levels, as the longer transport distances for European oil products
imports and Russian oil products exports similarly impacted these
markets. Average earnings for non-eco, non-scrubber fitted MRs in
first half of 2023 were up 23% year on year, more than double the
long-term average level.
Global oil demand and supply are projected to continue to
rebound in the second half of 2023 and increase overall volumes.
When combined with an extremely limited orderbook, and potential
seasonal support in the fourth quarter, this is expected to
continue to lend support to the tanker market. 2024 is expected to
see further growth in oil demand and supply and refinery
throughput, alongside a further reduction in tanker newbuilding
deliveries. The ongoing impacts of emissions regulations could also
further tighten fleet supply.
Specialised products
The chemical tanker fleet consists of vessels able to transport
a wide range of specialised liquid chemicals, contributing to a
diverse range of sectors, including manufacturing and
agriculture.
2023 started on a very strong note for chemical tanker markets,
albeit with expectations that levels might weaken against a
backdrop of slightly softer trends in clean oil products markets.
Indeed, this did materialise, with macroeconomic headwinds, lower
oil prices and softening chemicals demand adding to a softening of
sentiment. Nonetheless, market conditions remained historically
firm, with a 22% year-on-year decline still leaving the Clarksons
Bulk Chemical Index at levels above those seen in the 2008 boom.
Generally, support continues to be provided by increased 'swing'
tonnage trading in the strong petroleum products markets rather
than in the chemicals sector. While there was a slower feel to the
market going into the summer, improvements are expected to be seen
towards the fourth quarter.
Overall, sentiment in the medium term remains optimistic with
the supply/demand outlook favourable. Vessel demand looks set to be
supported by growing volumes from the Middle East and US to Asia,
while European import demand for bulk chemicals and biofuels is
also projected to continue to grow. At the same time, supply-side
constraints may also develop with the potential for the fleet to
start to decline in the next few years.
LPG
The LPG carrier fleet ships liquefied petroleum and
petrochemical gases, supporting a wide range of sectors, from
plastics and rubber production to industrial and domestic energy
markets. The LPG carrier fleet transports over 120m mt per year of
LPG, as well as smaller quantities of ethane, ammonia and
petrochemical gases.
The first half of 2023 saw generally strong LPG carrier market
conditions, with VLGC earnings on the key MEG-Asia route averaging
circa US$73,000 per day, up 92% year on year and 66% above the
10-year average. This strength has been supported by firm Middle
Eastern LPG exports and record exports from the US, of which an
increasing share has been shipped on long-haul routes to Asia. SE
Asian and Indian demand has also been supportive, while Chinese
imports in the second quarter were impacted by the start-up of new
petrochemical capacity.
In the Midsize sector, the assessed one-year timecharter rate
for a 38,000 cbm vessel continued to improve, reaching US$30,750
per day by mid-year, despite a substantial influx of newbuildings
this year. Market gains have been more gradual than in 2022 though,
with the return of some European ammonia production (after
prohibitively high gas prices in 2022) somewhat dampening long-haul
Asia-West ammonia trade volumes. In the petrochemical gas sector,
ethylene exports from the US to Asia have continued to be the key
driver of the market, supporting tonne-mile demand.
Overall, despite ongoing macroeconomic headwinds, it is expected
that growth in LPG tonne-mile demand, slower vessel speeds due to
environmental regulations and other factors including delays at the
Panama Canal could continue to offset the market impacts of a
significant newbuilding programme, particularly in the VLGC sector.
Further ahead, the sector's role in the energy transition may help
to drive future trends, including for example interest in Very
Large Ammonia Carriers ('VLACs') to meet new 'green' and 'blue'
ammonia trade flows.
LNG
This LNG sector has become increasingly critical to both global
energy transition and energy security, particularly in the wake of
the Russia-Ukraine conflict and the subsequent reduction of
Russia-Europe pipeline gas flows, and market conditions remained
strong across the first half.
Term charter rates for LNG carriers remain at very strong
levels, with the one-year timecharter rate for a 160,000 cbm DFDE
unit estimated at $130,000 per day in mid-June, having stood above
US$100,000 per day throughout the past 12 months as the market
enjoys a period of sustained strength. LNG carrier fixing activity
has shifted towards the term market as charterers look to secure
tonnage amid broader energy security concerns and to manage the
risk of a repeat of extremely high spot rates during peak winter
demand. The spot market, which has become dominated by relet
tonnage, has been generally weaker by comparison.
LNG trade volumes are estimated to have risen by circa 2% year
on year across the first half, supported by increased exports from
Norway, the US and Mozambique. Investment in liquefaction projects
continues, with four projects reaching Final Investment Decision
('FID') in the first half, and a significant pick up in LNG trade
is expected from the middle of the decade when there will be a
pick-up in export project start-ups.
Newbuild ordering has slowed from the 2022 record but remains
active, with the orderbook now at a record high to support trade
volume growth and fleet renewal needs.
Sale and purchase
Secondhand
The global secondhand vessel sale and purchase ('S&P')
markets remained active in the first half, following two very
strong volume years in 2021 and 2022. Over 64m dwt and US$25bn of
tonnage was transacted in the first half of the year, generally in
line with the levels of 2022. Tanker sales volumes remained at
record levels on the back of strong market conditions and a
positive sector outlook: 30m dwt worth US$9.4bn (full year 2022:
66m dwt worth US$18bn; an annual record). Meanwhile, transaction
volumes in the bulker and containership sector have risen slightly
following some easing in 2022 and remain at historically firm
levels. Asset pricing generally remains firm, despite some softness
in bulker pricing and a fall in containership values amid the
correction in container freight and charter shipping markets.
Newbuilding
Steady volumes of newbuild contracting continued across the
first half of the year, with global orders representing over 17m
CGT and US$48bn placed (full year 2022: 47m CGT, US$133bn).
Ordering has been concentrated in the product tanker,
containership, LNG carrier and car carrier sectors, segments of
traditional strength for Clarksons' newbuilding teams. Newbuild
prices continued to increase across the first half; our Newbuilding
Price Index now stands at 172 points, its highest level since early
2009. Shipping's fuelling transition remains a key focus: 44% of
tonnage ordered in the first half of 2023 is set to be alternative
fuel capable (2022: circa 60% of Gross Tonnage, an annual record).
LNG remains the most popular alternative fuel choice, though
methanol gained significant traction in the first half of the year.
Meanwhile, some owners are pursuing fuel optionality by ordering
vessels with 'ready' notation.
Offshore
The offshore sector supports the development, production and
support of offshore oil and gas fields and renewables, with over
10,000 mobile assets playing a vital role in supporting operations
across the lifecycle of offshore energy projects. Across the first
half, offshore markets saw continued strengthening, amidst a
supportive project investment environment and ongoing supply-side
constraints, including limited newbuilding orders and ageing fleet
dynamics. Global offshore Exploration and Production spending has
continued to increase, supporting activity levels, whilst ongoing
growth in offshore renewables (wind), utilising several of the same
vessel categories, is also tightening the market. With demand
continuing to strengthen, the market outlook appears optimistic in
the coming years. The Clarksons offshore day rate index reached 99
by mid-year, its highest level since 2014.
There has also been a clear increase in demand for specialised
green offshore vessels. We are actively engaging in discussions
with end-user clients regarding technical green solutions and
initiatives. By leveraging our expertise and forging partnerships,
we are confident in our ability to help stakeholders navigate the
evolving landscape and contribute to the successful green
transition in the offshore sector.
Drilling
Mobile drilling units (comprising jack-ups, semisubmersible
units and drillships) drill wells in the sea floor to locate and
facilitate extraction of oil and gas. The rig market enjoyed a
strong first half. The floater segment, particularly for
ultradeepwater/deepwater units, is generally tight, whilst the
jack-up segment has also continued to strengthen, particularly due
to significant activity in the Middle East last year, resulting in
active utilisation rising above 90%. Prospects for the second half
of the year and beyond for the drilling market appear positive,
with high offshore activity levels supporting demand, whilst across
both floaters and jack-ups idle capacity is limited, there are
almost no remaining stranded assets at yards, and stacked pools are
largely exhausted.
Subsea
The subsea sector involves the usage of a range of assets, with
capabilities in lifting, pipe lay, cable lay, diving and ROV
support, to install and maintain subsea production infrastructure.
The subsea field development market continued to improve through
the first half of 2023, with further increases in the backlog for
the major EPC contractors. The subsea vessel market has also
improved further, with rates and contract durations generally
increasing, reflecting improving subsea oil and gas demand, and
competition for many of the same units from the offshore wind
sector. Prospects for the second half of 2023 appear positive.
Offshore support vessels
The OSV sector provides towage and support duties to drilling
rigs, mobile production units and fixed production platforms. The
OSV market has strengthened significantly with improvements across
regions, in line with increasing drilling activity and improvements
in the field development market. Active utilisation levels
currently stand around 90% in most segments and regions, whilst the
stacked pool is about to become exhausted and there are very few
newbuilds remaining at shipyards. The rate outlook appears positive
due to a lack of available capacity (ordering has remained
extremely limited) and improved demand. Against this backdrop there
has also been a sharp increase in sale and purchase activity and
increased asset values.
Offshore renewables
The offshore renewables industry is continuing its rapid growth
phase, and is expected to account for a growing share of the global
energy mix, supported by the increased focus on decarbonisation and
energy security (especially recently in Europe). The offshore wind
market saw strong fixing activity and rate increases have been
notable in most segments, whilst construction activity has also
been firm. Uncertainty related to inflation, supply chain issues
and delays is still prevailing, though the offshore wind sector is
not expected to be negatively affected relative to other renewable
energy sources. After slower FID activity in 2022, it was positive
to see projects sanctioned in the first half of 2023. While some
industry stakeholders are concerned about increasing costs and
supply chain disruption, the outlook is generally positive. Efforts
by developers to improve project economics are ongoing. In the
vessel markets, owners are becoming more confident, with developers
now approaching vessel owners in a more proactive manner than
previously, whilst owners who ordered on speculation are finding
end-users are fixing earlier and for longer. In the CSOV sector, a
limited number of expected deliveries in 2024 is leading to more
interest from charterers, with potential to support rates in the
coming years.
Futures
Our Futures business remains the leading provider of freight
derivative products, helping shipping companies, banks, investment
houses and other institutions seeking to manage freight exposure by
increasing or reducing risk.
The tanker FFA desk saw an increase in volumes and revenue in
the first half compared to last year, as overall market volumes
were up and we maintained a strong market share. Volumes were
helped by a number of new entrants, and a substantial increase in
volumes on the Aframax USG route, gaining interest from a number of
oil players globally. The swaps market was extremely busy. In dry
FFA, it was a solid start to the year in the swaps business despite
significantly lower underlying rates, with increased participation
from financial players adding liquidity to the market and
supporting firm volume growth. Meanwhile, the options business also
saw a significant increase in volume.
Financial
Revenue: GBP26.5m (2022: GBP27.6m)
Segmental split of underlying profit before taxation*: GBP5.0m
(2022: GBP5.7m)
Securities
Clarksons Securities is a sector-focused investment bank for the
shipping, offshore energy, renewables and minerals industries, with
deep sector knowledge and global reach driven by research and
relationships. In the first half of 2023, despite wider financial
market volatility and uncertainty, Clarksons Securities experienced
a high level of activity in its core sectors, successfully
executing transactions across all sectors and products. In
particular, there was increased investor interest in the offshore
energy services sector amidst ongoing concerns around energy
security.
Secondary trading
Against the backdrop of volatile financial markets, secondary
trading activity has been volatile and slowed into the second
quarter. However, investor interest remains strong within the core
segments of shipping and oil services due to appealing underlying
fundamentals, supporting healthy overall levels of secondary
revenue. We also remain focused on higher margin activity around
special situations and block trading.
Shipping
Stocks in the shipping industry experienced a modest performance
in the first half. In terms of capital market activity, listed
shipping companies have remained disciplined and focused on
returning capital to shareholders and deleveraging their balance
sheets. Clarksons Securities has participated in the initial public
offerings of Stainless Tankers and Himalaya Shipping as well as a
primary and secondary offering in Klaveness Combination Carriers.
For shipping bonds, primary issuance activity remained muted,
though Clarksons Securities acted as financial advisor in a leasing
transaction.
Energy services
Capital markets activity within the energy services space was
high, especially for oil services and drilling, as equity and
credit investors continue to seek exposure to the sector. Clarksons
Securities has been highly active in the capital markets, executing
several transactions including bonds for Borr Drilling, Vantage
Drilling and Tidewater, and equity raises for Integrated Wind
Solutions and Shelf Drilling. From an M&A perspective,
consolidation is still a key theme, and there are several ongoing
processes in the market, with Clarksons Securities actively
involved as an advisor in such activity.
Metals and minerals
The first half started strongly for the metals and minerals
transaction market, though most companies postponed financings
after the announcement of the US Inflation Reduction Act until
impacts became clearer. Clarksons Securities was active in the
restructuring of Copper Mountain bond, equity and debt financing
for Nordic Mining and ongoing M&A projects.
Renewable energies
The first half saw some challenges for renewable energy-related
stocks in the capital markets, in part reflecting cost pressures.
While underlying markets continue to grow rapidly, renewables
capital markets activity has been slow so far this year. In June
2023, Clarksons Securities led a capital increase and transfer of
listing to Euronext Growth Paris of heat pump company Groupe
Airwell - a testament to our global reach and sector-focused
approach. Private markets are seeing increased activity, and
Clarksons Securities has been active in transactions across solar,
wind, hydrogen and electric vehicle charging.
Debt capital markets
Investors have exhibited improved risk appetite, supported by
the availability of ample cash positions among investors, aided by
a light primary issuance in the previous year, fund inflows, coupon
payments and several bonds being tendered or called. As a result,
there was increased activity in the high yield primary market in
early 2023. The transactions carried out attracted strong interest,
especially towards quality issuers, whilst investor appetite for
offshore investments returned. Market sentiment was negatively
impacted in March 2023 by broader banking sector turmoil, but later
settled as wider risks appeared more limited. The first half of the
year saw Clarksons Securities complete several notable transactions
in the offshore sector.
Project finance
Our project finance business is a leading Nordic player within
shipping and real estate project finance, which has in recent years
offered investment opportunities in modern fuel (and carbon)
efficient shipping and offshore assets, with an overall focus on
assisting the shipping and offshore industry in transitioning to
more sustainable and less carbon-intensive transportation.
The first half of the year was an active period in the Norwegian
project finance market, with deal activity across the key sectors.
A two-tier market is apparent between eco and non-eco ship values,
especially in dry bulk. Feeder containership values have returned
to more investable levels, whilst in the tanker market, amid
historically high values, we have assisted in selling a number of
tankers in existing projects. There is a good pipeline of projects,
although given higher interest rates and market volatility,
investors have been more selective in their approach to the market.
There is a growing interest for project finance structures from
shipowners abroad who find the Norwegian partnership model an
interesting way to renew their fleet. We also see good availability
of bank finance for non-recourse projects, and terms are becoming
more competitive.
Market sentiment in the commercial real estate market in Norway
remained cool, continuing the downward trend seen since last summer
with sellers and buyers struggling to agree prices amid increasing
interest rates and volatile economic sentiment. While other
investment assets may offer significant competition to real estate
in the short term, development projects remain popular, perhaps an
indication that investors feel confident about real estate in the
medium- to long-term. Market activity may pick up to more moderate
levels in the second half if interest rates peak and uncertainty
begins to fade. Despite the slow market, Clarksons Project Finance
completed several deals, and we continue to establish a leading
position in sustainability with funds committed to invest in
greener real estate and environmental improvements to existing
properties.
Structured asset finance
Our structured asset finance business maintains relationships
with asset financiers globally including around their activities
and headline terms, with a view to helping our broking clients
understand the sources of finance available to them and providing
introductions where relevant. It acts as an exclusive mandated
financial advisor, structurer and arranger working closely with the
newbuilding, strategy and structuring teams on large long-term
strategic procurement projects for end-users and cargo
interests.
Overall market activity picked up in the second quarter after a
more subdued first quarter. For the large traditional shipping
banks, the transition from LIBOR to SOFR has largely been
completed. USD funding costs have continued to rise, and European
banks with more limited availability of USD are facing reduced
margin income from increased liquidity costs, in some instances
significantly limiting new business. Whilst this is putting upwards
pressure on margins, shipping companies have tended to counter by
reducing leverage (making deals more attractive to a wider range of
banks) and maintaining margins rather than increasing them. Earlier
re-financing of existing deals is also a noticeable trend. Outside
of the major shipping banks, deals are being done by the Greek and
Cypriot shipping banks, some of the Chinese leasing companies and
some of the alternative credit funds, but generally these are lower
leverage re-financings of older tonnage. Recent changes to the
JOLCO legislation have seen less aggressive marketing by some of
the arrangers for now, likely as they focus on closing as many
'grandfathered' deals as possible.
Clarksons Structured Asset Finance had a very successful first
half, closing a significant mandate and finalising deliveries for a
number of vessels. The pipeline is building with a number of
significant projects underway.
Support
Revenue: GBP27.2 m (2022: GBP18.3m)
Segmental split of underlying profit before taxation*: GBP3.4m
(2022: GBP2.0m)
Stevedoring
Our stevedoring business, highly experienced in loading and
discharging bulk cargoes, saw a strong first half. Expectations are
that the 2023 UK grain harvest will be at least as good as 2022
with a similar exportable surplus. Given Ipswich's location and our
wide customer base, we are well placed to see a significant market
share over the next 12 months. The outlook for imports appears
quiet for now.
Short sea broking
The short sea shipbroking business has seen lower income,
largely on the back of softer freight rates compared to the record
highs last year. Benefits are being seen from the greater synergies
with London-based deep sea dry broking desks for shared client
business where our expertise in the short sea segment is
relevant.
Gibb Group
Gibb Group is the industry's leading provider of PPE, MRO
products and services as well as one of the offshore renewable
energy sector's most experienced, qualified suppliers. The first
half of 2023 has been a positive period for the business, with
support from some very large one-off orders. Product development
has been in focus, as well as plans to expand the team and volume
of business in Middlesbrough.
Agency - UK
Through exceptional port agency and first-class logistics
services, our business provides a range of solutions for clients in
the marine and energy sectors. Pure agency revenue increased
markedly. Our customs clearance business supports clients globally
with our comprehensive compliance capabilities and performed in
line with expectations. We have generated consultancy income, with
good potential for further growth in this area. Bunker commissions
have been lower than expected amid fewer larger stems, whilst fuel
prices are now markedly off their 2022 highs. Results for DHSS,
acquired in February 2023, were in line with the Board's
expectations and we are pleased with how it is integrating with the
Group.
Agency - Egypt
The Suez Canal provides a vital trade route between Europe and
Asia, and our regional experts in Egypt deliver on-the-ground
expertise around transit. Our Egypt agency business performed
strongly, improving our market position among other agencies.
Transit agency business also saw a robust performance amid
increased overall transit volumes, particularly by crude tankers
and bulkcarriers, while the liner business saw steady performance
with some impacts from the Egyptian pound devaluation. The Egypt
agency business continues to explore opportunities in Egypt and the
Suez Canal region related to green energy.
Research
Revenue: GBP10.2m (2022: GBP9.6m)
Segmental split of underlying profit before taxation*: GBP3.7m
(2022: GBP3.4m)
Research performed well across the first half of the year, with
sales up 6% year on year and profits increasing by 9%. Continuing
its long-term growth trajectory, Clarksons Research has
strengthened its position as the market-leading provider of
maritime data and intelligence while also providing key support to
Clarksons' Broking, Financial, Support and Technology businesses
with research and profile.
Sales across our digital platform grew by an encouraging 24% in
the first half, supporting increasing levels of recurring revenue
and expanding platform user numbers. Sales are being supported by
our strong product investments of recent years, a constant flow of
high-quality and market relevant analysis and an expansion of the
depth and breadth of our wide-ranging proprietary database. New
daily speed indices (generated by our Data Analytics team) have
been released onto Shipping Intelligence Network ('SIN'), helping
to track fleet productivity as market conditions change and
emissions policies are introduced (an all-time slow speed for the
container fleet was reported in February). Our reporting has also
profiled the increasing complexity in the 12bn tonnes of trade
moved by sea (including the impact of the Russia-Ukraine conflict
and lingering COVID-19 impacts on supply chains) and a shipping
supply-side experiencing low orderbooks and limitations in
shipbuilding capacity.
Our strategy to provide leading data, intelligence and insights
around the energy transition and the green transition continues. A
market impact assessment of new and complex global CO(2) emissions
regulations (EEXI/CII) was released to our World Fleet Register
('WFR') during the first half of the year followed by an update of
our fuelling transition (we project shipping industry emissions
will drop to a 2.2% global contribution this year) and energy
transition insights. Our tracking of green technology uptake across
the shipping fleet continues to be well received by our client base
as the most authoritative data on the vital investments needed to
meet decarbonisation targets. The benefits of our offshore
transition strategy, investing in both our offshore oil and gas
research (our Offshore Intelligence Network ('OIN') is now tracking
nine-year high day rates and utilisation while offshore oil and gas
still contributes 16% of global energy supply) and our offshore
wind research (our Renewables Intelligence Network ('RIN') projects
growth from 12,000 turbines offshore today to 30,000 by 2030), are
being realised in strong sales and client uptake. Progress
continues towards the release of new modules on green investments
at ports and vessel activity analytics dashboards.
Our dedicated services and consultancy activities concluded
multiple new data API contracts and we worked successfully on
several IPO industry sections. There was strong client attendance
at our shipping and offshore forecasting forum events in late March
2023. Clarksons Valuations, our market-leading provider of
valuation services to shipowners and financiers, is successfully
investing in analysis and technology to support financial
institutions, including additional analytics to meet new European
Banking Authority guidelines and to support understanding of the
emissions profile of debt portfolios.
Recurring revenue has reached 89% of total sales with
consistently high renewal rates and an expanding global client
base. Targeted headcount growth in our key teams and across our
global network continues to be executed with our strong profile and
presence in Asian markets strengthened by the expansion of our new
operations in Delhi.
Clarksons Research, the data and analytics arm of Clarksons, is
a market-leading provider of independent data, intelligence and
analysis around shipping, trade, offshore and energy transition in
the maritime context. Millions of data points are processed and
analysed each day to provide trusted and insightful intelligence to
support the workflows and decision-making of thousands of
organisations across the increasingly complex and dynamic maritime
industry.
Sea
Enhancing the way shipping professionals work
Throughout the first half of 2023, our technology software
business, Maritech, saw continued strong Annual Recurring Revenue
('ARR') growth. This was driven by continued fixture volume growth
on the Sea platform, strong sales of our intelligence solutions and
a further uplift from existing and new clients to our carbon
solution.
By the end of June 2023, our Sea platform had achieved a 40%
year-on-year fixture volume growth, equating to an annualised
volume of 45,000 fixtures. This was achieved through notable growth
of new customers joining the platform, through the acquisition of
MarDocs from Marcura, and with the termination of the licence
agreement for Recap Manager with the London Tanker Broker Panel
(bringing the commercial management of the service back into
Sea).
We have continued the development and expansion of Sea Fix in
the iron ore market, reaching the key milestone of 0.5b mt of cargo
and US$7bn of gross freight negotiated through the platform since
its launch in 2021. To support the digitalisation of workflows for
charterers, in the second quarter Sea launched a new "Freight
Planner" tool, enabling the optimisation of management of cargoes
and vessels in one simple user interface. Initial feedback from our
client base has been very positive.
Across the first half of the year, our Sea Carbon module tracked
2,500 fixtures, covering 13m nautical miles, vessels carrying 230m
mt of cargo and equating to 5m mt of carbon. Working with our
customers, we support their decarbonisation strategies and
facilitate their internal and external climate reporting. Sea
Carbon enables efficient Sea Cargo Charter reporting, allowing our
customers to build insights on the actual carbon emissions from
their freight. In the second half of the year, Sea will launch
Carbon Exposure, to help enable any charter, broker or owner to
estimate and manage freight decisions from a carbon perspective
before the freight decision is made.
The development of the Sea platform is guided by our purpose of
powering better decisions that enable sustainable shipping. Our
committed team understands this broader mission while we develop
the intelligent marketplace for fixing freight.
To support our strategy, we implemented a major redesign of our
brand and website in May (see www.sea.live ).
Risk management
Full details of our principal risks and how we manage them are
included in the risk management section of the 2022 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
The risk factors associated with the above have not changed
since the year end.
Whilst not a principal risk for the Group at this time, we
consider climate change to be a thematic risk which potentially
impacts a number of our principal risks.
There are no significant known emerging risks which could
materially impact on the achievement of the Group's strategic
objectives in the near term.
Directors' responsibilities statement
The Directors confirm that:
-- these condensed consolidated interim financial statements
(the 'interim financial statements') have been prepared in
accordance with UK-adopted International Accounting Standard 34,
'Interim Financial Reporting' and give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Group as required by DTR 4.2.4R; and
-- the interim financial statements include a fair review of the information required by:
(a) DTR 4.2.7R, being an indication of important events that
have occurred during the first six months of the financial year
ending 31 December 2023, and their impact on the interim financial
statements; and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
(b) DTR 4.2.8R, being material related party transactions that
have taken place in the first six months of the financial year
ending 31 December 2023, and any material changes in the related
party transactions described in the 2022 Annual Report.
A list of the current Directors is maintained on the Clarkson
PLC website: www.clarksons.com.
The maintenance and integrity of the Clarkson PLC website is the
responsibility of the Directors; the work carried out by the
Auditors does not involve consideration of these matters and,
accordingly, the Auditors accept no responsibility for any changes
that may have occurred to the interim financial statements since
they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
On behalf of the Board
Laurence Hollingworth
Chair
4 August 2023
Independent review report to Clarkson PLC
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Clarkson PLC's condensed consolidated interim
financial statements (the "interim financial statements") in the
Interim results of Clarkson PLC for the six-month period ended 30
June 2023 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
The interim financial statements comprise:
-- the Consolidated balance sheet as at 30 June 2023;
-- the Consolidated income statement and Consolidated statement
of comprehensive income for the period then ended;
-- the Consolidated cash flow statement for the period then ended;
-- the Consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim results
of Clarkson PLC have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Interim
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the Directors have inappropriately
adopted the going concern basis of accounting or that the Directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with ISRE (UK) 2410.
However, future events or conditions may cause the Group to cease
to continue as a going concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the Directors
The Interim results, including the interim financial statements,
is the responsibility of, and has been approved by the Directors.
The Directors are responsible for preparing the Interim results in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority. In
preparing the Interim results, including the interim financial
statements, the Directors are responsible for assessing the Group's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the
Group or to cease operations, or have no realistic alternative but
to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the Interim results based on our review.
Our conclusion, including our Conclusions relating to going
concern, is based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report. This report, including the conclusion, has been
prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
4 August 2023
Consolidated income statement
for the half year to 30 June
2023 2022
============================================== ----------------------------------------------
Before Acquisition- After Before Acquisition- After
acquisition- related costs acquisition- acquisition- related costs acquisition-
related costs (note 4) related costs related costs (note 4) related costs
Note GBPm(+) GBPm(+) GBPm(+) GBPm(+) GBPm(+) GBPm(+)
-------------- -------------- -------------- -------------- -------------- --------------
Revenue 3 321.1 - 321.1 266.7 - 266.7
Cost of sales (14.8) - (14.8) (10.4) - (10.4)
============== ============== ============== ============== ============== ==============
Trading profit 306.3 - 306.3 256.3 - 256.3
Administrative
expenses (256.7) (0.9) (257.6) (213.7) (0.2) (213.9)
============== ============== ============== ============== ============== ==============
Operating profit 3 49.6 (0.9) 48.7 42.6 (0.2) 42.4
Finance income 3.9 - 3.9 0.6 - 0.6
Finance costs (0.8) - (0.8) (1.2) - (1.2)
Other finance
income -
pensions 9 0.4 - 0.4 0.2 - 0.2
============== ============== ============== ============== ============== ==============
Profit before
taxation 53.1 (0.9) 52.2 42.2 (0.2) 42.0
Taxation 5 (11.4) - (11.4) (9.0) - (9.0)
============== ============== ============== ============== ============== ==============
Profit for the
period 41.7 (0.9) 40.8 33.2 (0.2) 33.0
============== ============== ============== ============== ============== ==============
Attributable to:
Equity holders of
the Parent
Company 40.6 (0.9) 39.7 30.2 (0.2) 30.0
Non-controlling
interests 1.1 - 1.1 3.0 - 3.0
============== ============== ============== ============== ============== ==============
Profit for the
period 41.7 (0.9) 40.8 33.2 (0.2) 33.0
============== ============== ============== ============== ============== ==============
Earnings per
share
Basic 6 133.5p 130.5p 98.9p 98.5p
Diluted 6 132.8p 129.8p 98.2p 97.8p
-------------- -------------- -------------- -------------- -------------- --------------
(+) Unaudited
Included in the Consolidated Income Statement are net impairment
losses on financial assets amounting to GBP3.9m (2022: GBP4.7m)
Consolidated statement of comprehensive income
for the half year to 30 June
2023 2022
GBPm (+) GBPm(+)
========== ---------
Profit for the period 40.8 33.0
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Actuarial (loss)/gain on employee benefit schemes - net of tax (1.5) 2.8
Items that may be reclassified subsequently to profit or loss:
Foreign exchange differences on retranslation of foreign operations (23.3) 10.6
Foreign currency hedges recycled to profit or loss - net of tax 0.3 0.7
Foreign currency hedge revaluations - net of tax 3.5 (7.0)
========== =========
Other comprehensive (loss)/income (21.0) 7.1
========== =========
Total comprehensive income for the period 19.8 40.1
========== =========
Attributable to:
Equity holders of the Parent Company 19.1 37.1
Non-controlling interests 0.7 3.0
========== =========
Total comprehensive income for the period 19.8 40.1
========== =========
(+) Unaudited
Consolidated balance sheet
as at 30 June
Notes
2023 2022 31 December 2022
GBPm (+) GBPm(+) GBPm(#)
=========== ---------- -----------------
Non-current assets
Property, plant and equipment 26.3 22.2 25.5
Investment properties 1.0 1.0 1.0
Right-of-use assets 37.0 42.6 39.3
Intangible assets 8 177.8 182.3 188.9
Trade and other receivables 2.7 0.9 2.6
Investments 1.1 1.2 1.2
Employee benefits 9 14.1 26.3 15.8
Deferred tax assets 12.6 8.1 14.6
=========== ========== -----------------
272.6 284.6 288.9
=========== ========== -----------------
Current assets
Inventories 2.9 2.0 2.4
Trade and other receivables 10 164.1 133.1 150.1
Income tax receivable 1.0 2.8 3.0
Investments 11 10.1 6.1 3.5
Cash and cash equivalents 12 275.7 231.6 384.4
=========== ========== -----------------
453.8 375.6 543.4
=========== ========== -----------------
Current liabilities
Trade and other payables (245.9) (196.1) (335.9)
Lease liabilities (9.9) (8.8) (9.9)
Income tax payable (16.0) (15.0) (19.8)
Provisions (0.6) (0.6) (0.6)
=========== ==========
(272.4) (220.5) (366.2)
=========== ========== -----------------
Net current assets 181.4 155.1 177.2
=========== ========== -----------------
Non-current liabilities
Trade and other payables (2.6) (7.0) (5.8)
Lease liabilities (34.9) (41.2) (37.7)
Provisions (1.8) (1.8) (1.9)
Employee benefits 9 (0.5) (0.8) (0.4)
Deferred tax liabilities (5.7) (10.2) (7.1)
=========== ========== -----------------
(45.5) (61.0) (52.9)
=========== ========== -----------------
Net assets 408.5 378.7 413.2
=========== ========== -----------------
Capital and reserves
Share capital 13 7.7 7.6 7.7
Other reserves 93.3 107.1 114.8
Retained earnings 304.0 259.1 287.2
=========== ========== -----------------
Equity attributable to shareholders of the Parent Company 405.0 373.8 409.7
Non-controlling interests 3.5 4.9 3.5
=========== ========== -----------------
Total equity 408.5 378.7 413.2
=========== ========== -----------------
(+) Unaudited (#) Audited
Consolidated statement of changes in equity
for the half year to 30 June
Attributable to equity holders of the Parent Company
=============================================================
Notes Retained Non-controlling Total
Share capital Other reserves earnings Total interests GBPm equity
GBPm (+) GBPm (+) GBPm (+) GBPm (+) (+) GBPm (+)
============== =============== ================ ========== ================ ==========
Balance at 1
January 2023 7.7 114.8 287.2 409.7 3.5 413.2
Profit for the
period - - 39.7 39.7 1.1 40.8
Other
comprehensive
loss - (19.1) (1.5) (20.6) (0.4) (21.0)
Total
comprehensive
(loss)/income
for the period - (19.1) 38.2 19.1 0.7 19.8
============== =============== ================ ========== ================ ==========
Transactions
with owners:
Share issues - 0.7 - 0.7 - 0.7
Employee share
schemes - (3.1) (1.5) (4.6) - (4.6)
Tax on other
employee
benefits - - (0.5) (0.5) - (0.5)
Dividend paid 7 - - (19.4) (19.4) (0.7) (20.1)
Total
transactions
with owners - (2.4) (21.4) (23.8) (0.7) (24.5)
============== =============== ================ ========== ================ ==========
Balance at 30
June 2023 7.7 93.3 304.0 405.0 3.5 408.5
============== =============== ================ ========== ================ ==========
Attributable to equity holders of the Parent Company
-------------------------------------------------------------
Notes Retained Non-controlling Total
Share capital Other reserves earnings Total interests equity
GBPm (+) GBPm (+) GBPm (+) GBPm (+) GBPm (+) GBPm (+)
-------------- --------------- ---------------- ---------- ---------------- ----------
Balance at 1
January 2022 7.6 104.0 245.3 356.9 4.7 361.6
Profit for the
period - - 30.0 30.0 3.0 33.0
Other
comprehensive
income - 4.3 2.8 7.1 - 7.1
Total
comprehensive
income for the
period - 4.3 32.8 37.1 3.0 40.1
============== =============== ================ ========== ================ ==========
Transactions
with owners:
Share issues - 0.3 - 0.3 - 0.3
Employee share
schemes - (1.5) 0.1 (1.4) - (1.4)
Tax on other
employee
benefits - - (1.6) (1.6) - (1.6)
Tax on other
items in
equity - - (0.3) (0.3) - (0.3)
Dividend paid 7 - - (17.2) (17.2) (2.8) (20.0)
Total
transactions
with owners - (1.2) (19.0) (20.2) (2.8) (23.0)
============== =============== ================ ========== ================ ==========
Balance at 30
June 2022 7.6 107.1 259.1 373.8 4.9 378.7
============== =============== ================ ========== ================ ==========
(+) Unaudited
Consolidated cash flow statement
for the half year to 30 June
Notes 2022
2023 Restated
GBPm (+) GBPm(+^)
Cash flows from operating activities
Profit before taxation 52.2 42.0
Adjustments for:
Foreign exchange differences 1.2 (5.2)
Depreciation 7.2 6.5
Share-based payment expense 1.0 1.0
Loss on sale of property, plant and equipment - 1.5
Amortisation of intangibles 2.2 2.0
Difference between pension contributions paid and
amount recognised in the income statement 0.3 0.4
Finance income (3.9) (0.6)
Finance costs 0.8 1.2
Other finance income - pensions (0.4) (0.2)
Increase in inventories (0.5) (0.4)
Increase in trade and other receivables (11.9) (8.1)
Decrease in bonus accrual (54.4) (27.0)
Increase/(decrease) in trade and other payables 0.3 (7.6)
Increase in provisions - 0.3
========== ==========
Cash utilised from operations (5.9) 5.8
Income tax paid (14.4) (7.2)
========== ==========
Net cash flow from operating activities (20.3) (1.4)
========== ==========
Cash flows from investing activities
Interest received 3.8 0.2
Purchase of property, plant and equipment (2.5) (1.6)
Purchase of intangible assets (1.1) (1.2)
Proceeds from sale of investments 0.4 0.1
Proceeds from sale of property, plant and equipment - 0.2
Purchase of investments - (0.2)
Transfer from current investments (cash on deposit and government bonds) 1.2 4.7
Transfer to current investments (cash on deposit and government bonds) (8.0) (0.4)
Acquisition of subsidiaries, net of cash acquired 14 (4.8) (0.2)
Dividends received from investments 0.2 0.3
Net cash flow from investing activities (10.8) 1.9
========== ==========
Cash flows from financing activities
Interest paid and other charges (0.9) (1.2)
Dividend paid 7 (19.4) (17.2)
Dividend paid to non-controlling interests (0.7) (2.8)
Repayment of borrowings (0.5) -
Principal elements of lease liabilities (5.1) (6.1)
Proceeds from shares issued 0.7 0.4
ESOP shares acquired (38.5) (16.4)
Net cash flow from financing activities (64.4) (43.3)
========== ==========
Net decrease in cash and cash equivalents (95.5) (42.8)
Cash and cash equivalents at 1 January 384.4 261.6
Net foreign exchange differences (13.2) 12.8
========== ==========
Cash and cash equivalents at 30 June 12 275.7 231.6
========== ==========
(+) Unaudited
^ Restatement in relation to equity-settled liabilities, see
note 2.1 for further details
Notes to the interim financial statements
1 Corporate information
The condensed consolidated interim financial statements (the
'interim financial statements') of Clarkson PLC for the six months
ended 30 June 2023 were authorised for issue in accordance with a
resolution of the Directors on 4 August 2023. 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 term 'Parent Company' refers to Clarkson PLC and 'Group'
refers to the Company, its consolidated subsidiaries and the
relevant assets and liabilities of the share purchase trusts.
The interim financial statements do not comprise statutory
accounts within the meaning of section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2022 were
approved by the Board of Directors on 3 March 2023 and delivered to
the Registrar of Companies. The Auditors' report on those accounts
was unqualified, did not contain an emphasis of matter paragraph
and did not contain any statement under section 498 of the
Companies Act 2006. The interim financial statements have been
reviewed, not audited.
2 Statement of accounting policies
2.1 Basis of preparation
The interim financial statements for the six months ended 30
June 2023 have been prepared in accordance with the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority and with UK-adopted International
Accounting Standard 34 'Interim Financial Reporting' ('IAS
34').
The interim financial statements do not include all the
information and disclosures required in the annual financial
statements and should be read in conjunction with the Group's
annual financial statements for the year ended 31 December 2022,
which were prepared in accordance with UK-adopted International
Accounting Standards and with the requirements of the Companies Act
2006 as applicable to companies reporting under those
standards.
The annual financial statements for the year ending 31 December
2023 will be prepared in accordance with UK-adopted International
Accounting Standards.
The Group has considerable financial resources available to it,
a strong balance sheet and has consistently generated an underlying
profit. As a result of this, the Directors believe that the Group
is well placed to manage its business risks successfully,
notwithstanding global macroeconomic challenges ahead. 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.
-- Management assessed the impact of a significant reduction in
world seaborne trade similar to that experienced in the global
financial crisis in 2008, the pandemic in 2020 and the
Russia-Ukraine conflict in 2022: seaborne trade recovered in 2009,
2021 and 2023 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 30 June 2023, 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 throughout the next 12 months. 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 interim consolidated income statement is shown in columnar
format to assist with understanding the Group's results by
presenting profit for the period before acquisition-related costs;
this is referred to as 'underlying profit'*. The column
'acquisition-related costs' includes amortisation of acquired
intangible assets and the expensing of the cash elements of
consideration linked to ongoing employment obligations on
acquisitions.
Presentation of cash flow statement
Following correspondence in 2022 with the Corporate Reporting
Review Team of the Financial Reporting Council ('FRC'), we agreed
to restate the cash flows relating to certain equity-settled
liabilities within the Consolidated Cash Flow Statement both within
'net cash flow from operating activities' and 'financing
activities'. We have restated the Consolidated Cash Flow Statement
for the period ended 30 June 2022 to add back GBP14.4m of
equity-settled liabilities payments as 'operating activities' in
the line 'decrease in bonus accrual' and deduct GBP14.4m of shares
acquired by the ESOP as 'financing activities'.
Cash flow statement for the period ended 30 June 2022 As previously presented Adjustment Restated
GBPm GBPm GBPm
======================== ----------- ---------
Net cash flow from operating activities (15.8) 14.4 (1.4)
Net cash flow from financing activities (28.9) (14.4) (43.3)
------------------------ ----------- ---------
This presentation was adopted for the year ended 31 December
2022 and the period ended 30 June 2023 has been restated
accordingly. There is no net impact upon the cash flow statement
overall and there is no impact on any balance sheet or income
statement figures. The review conducted by the FRC was based solely
on the Group's published 2021 Annual Report and does not provide
any assurance that the report is correct in all material
respects.
2.2 Accounting policies
The accounting policies adopted in the preparation of the
interim financial statements are consistent with those followed in
the preparation of the Group's annual financial statements for the
year ended 31 December 2022, except as described below:
-- Taxes on income in the interim period are accrued using the
tax rate that would be applicable to expected total annual profit
or loss.
A number of amended standards were in issue or effective for the
current reporting period. 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 interim financial statements requires
management to make judgements, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities at the
reporting date. However, uncertainty about these assumptions and
estimates could result in outcomes that could require a material
adjustment to the carrying amount of the asset or liability
affected in the future.
In preparing these interim financial statements, the significant
judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the
same as those that applied to the consolidated financial statements
for the year ended 31 December 2022 , with the exception of changes
in estimates that are required in determining the provision for
income taxes.
2.4 Seasonality
The Group's activities are not subject to significant seasonal
variation.
2.5 Forward-looking statements
Certain statements in this 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
Revenue Results
====== -------- ======= --------
2023 2022 2023 2022
GBPm GBPm GBPm GBPm
====== -------- ======= --------
Broking 257.2 211.2 58.2 47.0
Financial 26.5 27.6 5.0 5.7
Support 27.2 18.3 3.4 2.0
Research 10.2 9.6 3.7 3.4
====== ======== ======= ========
Segment revenue / Segment operating profit 321.1 266.7 70.3 58.1
====== ========
Head office costs (20.7) (15.5)
======= ========
Underlying operating profit 49.6 42.6
Acquisition-related costs (0.9) (0.2)
======= ========
Operating profit after acquisition-related costs 48.7 42.4
Finance income 3.9 0.6
Finance costs (0.8) (1.2)
Other finance income - pensions 0.4 0.2
======= ========
Profit before taxation 52.2 42.0
Taxation (11.4) (9.0)
======= ========
Profit for the period 40.8 33.0
======= ========
All revenue is generated externally.
4 Acquisition-related costs
Acquisition-related costs of GBP0.9m, comprise direct costs of
GBP0.2m incurred on the acquisition of the DHSS group of companies
(see note 14), contingent considerations of GBP0.6m and GBP0.1m
relating to the DHSS and previous acquisitions respectively and a
residual amount for the amortisation of intangibles arising on
acquisitions.
5 Taxation
Income tax expense is recognised based on management's best
estimate of the weighted average annual income tax rate expected
for the full financial year. The estimated annual tax rate,
excluding acquisition-related costs, used for the year to 31
December 2023 is 21.5% (the estimated annual tax rate used for the
six months ended 30 June 2022 was 21.5%). The effective tax rate,
after acquisition-related costs, is 21.8%.
6 Earnings per share
Basic earnings per share amounts are calculated by dividing
profit for the period attributable to ordinary equity holders of
the Parent Company by the weighted average number of ordinary
shares in issue during the period.
Diluted earnings per share amounts are calculated by dividing
profit for the period attributable to ordinary equity holders of
the Parent Company by the weighted average number of ordinary
shares in issue during the period, plus the weighted average number
of ordinary shares that would be issued on the conversion of all
the dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
2023 2022
GBPm GBPm
Underlying profit for the period attributable to equity holders of the Parent Company* 40.6 30.2
Reported profit for the period attributable to equity holders of the Parent Company 39.7 30.0
============= ---------
2023 Million 2022
Million
Weighted average number of ordinary shares - basic 30.4 30.5
Weighted average number of ordinary shares - diluted 30.5 30.7
============= ---------
7 Dividends
2023 2022
GBPm GBPm
====== ------
Declared and paid during the period:
Final dividend for 2022 of 64 p per share (Final dividend for 2021 of 57p per share) 19.4 17.2
====== ======
Payable (not recognised as a liability at 30 June):
Interim dividend for 2023 of 30 p per share (2022: 29p per share) 9.2 8.8
====== ======
8 Intangible assets
The movement in the net book value of intangible assets is as
follows:
Goodwill Development costs Other intangible assets Total
GBPm GBPm GBPm GBPm
--------- ------------------ ------------------------ -------
At 1 January 2023 171.6 15.1 2.2 188.9
Additions - 1.1 - 1.1
Arising on acquisitions 3.3 - - 3.3
Amortisation charge - (2.1) (0.1) (2.2)
Foreign exchange differences (13.2) - (0.1) (13.3)
--------- ------------------ ------------------------ -------
At 30 June 2023 161.7 14.1 2.0 177.8
--------- ------------------ ------------------------ -------
At 1 January 2022 165.9 17.1 0.2 183.2
Additions 0.2 1.2 - 1.4
Amortisation charge - (1.9) (0.1) (2.0)
Foreign exchange differences (0.4) - 0.1 (0.3)
--------- ------------------ ------------------------ -------
At 30 June 2022 165.7 16.4 0.2 182.3
--------- ------------------ ------------------------ -------
At 1 January 2022 165.9 17.1 0.2 183.2
Additions - 2.0 - 2.0
Arising on acquisitions 5.4 - 2.1 7.5
Amortisation charge - (4.0) (0.1) (4.1)
Other (reclassification) (0.1) - 0.1 -
Foreign exchange differences 0.4 - (0.1) 0.3
--------- ------------------ ------------------------ -------
At 31 December 2022 171.6 15.1 2.2 188.9
--------- ------------------ ------------------------ -------
In light of continuing macroeconomic and geo-political
uncertainty, the Board keeps the carrying value of goodwill under
constant review. The Board has considered and not identified any
indication of impairment of these assets at 30 June 2023 . However,
in the event that any of the markets in which we operate has a
sustained downturn, an impairment of the relevant Cash-Generating
Unit's ('CGU') goodwill may be required. See note 13 on page 176 of
the 2022 Annual Report for specific sensitivity disclosures , in
particular in relation to the Offshore broking and Securities
CGUs.
9 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
30 June 30 June
2023 2022 31 Dec 2022
GBPm GBPm GBPm
======== -------- ------------
Fair value of schemes' assets 126.5 156.8 134.7
Present value of funded defined benefit obligations (110.3) (124.8) (115.2)
-------- -------- ------------
16.2 32.0 19.5
Effect of asset ceiling in relation to the Plowrights scheme (2.6) (6.5) (4.1)
-------- -------- ------------
Net benefit asset recognised in the balance sheet 13.6 25.5 15.4
-------- -------- ------------
The above is recognised on the balance sheet as an asset of
GBP14.1m (31 December 2022: GBP15.8m; 30 June 2022: GBP26.3m) and a
liability of GBP0.5m (31 December 2022: GBP0.4m; 30 June 2022:
GBP0.8m).
A deferred tax asset on the benefit liability amounting to
GBP0.1m (31 December 2022: GBP0.1m; 30 June 2022: GBP0.2m) and a
deferred tax liability on the benefit asset of GBP3.5m (31 December
2022: GBP3.9m; 30 June 2022: GBP6.6m) is also recognised on the
balance sheet. Pension scheme administrative expenses for the
six-month period to 30 June 2023 are GBP0.5m (31 December 2022:
GBP0.8m; 30 June 2022: GBP0.6m).
Recognised in the income statement
2023 2022
GBPm GBPm
====== ------
Recognised in other finance income - pensions:
Expected return on schemes' assets 3.3 1.8
Interest cost on benefit obligation and asset ceiling (2.9) (1.6)
Recognised in administrative expenses:
Scheme administrative expenses (0.5) (0.6)
====== ======
Net pension charge recognised in the income statement (0.1) (0.4)
====== ======
10 Trade and other receivables
Trade receivables are non-interest bearing and are generally on
terms payable within 90 days. As at 30 June 2023, the allowance for
impairment of trade receivables was GBP22.2m (31 December 2022:
GBP19.6 m; 30 June 2022: GBP18.9m). The allowance is based on
experience and ongoing market information about the
creditworthiness of specific counterparties and expected credit
losses in respect of the remaining balances and has increased
during the period due to the increase in trading. Included within
the movements in the loss allowance were amounts which were
provided at the time of invoicing for which no revenue has been
recognised, because collectability was not considered probable.
11 Investments
Included within current investments are deposits totalling
GBP1.9m (31 December 2022: GBP3.1m; 30 June 2022: GBP3.3m) with
maturity periods greater than three months and United States
treasury bonds of GBP8.0m, maturing in August 2023 (31 December
2022: nil; 30 June 2022 GBP2.1m).
12 Cash and cash equivalents
30 June 30 June
2023 2022 31 Dec 2022
GBPm GBPm GBPm
======== -------- ------------
Cash at bank and in hand 242.5 230.8 320.1
Short-term deposits 33.2 0.8 64.3
======== -------- ------------
275.7 231.6 384.4
======== -------- ------------
Net cash and available funds*, after deducting amounts accrued
for performance-related bonuses but including current investments,
amounted to GBP148.9m (31 December 2022: GBP161.7m; 30 June 2022:
GBP125.8m). Free cash resources*, being net available funds less
monies held by regulated entities, at 30 June 2023 were GBP128.2m
(31 December 2022: GBP130.9m; 30 June 2022: GBP102.5m).
13 Share capital
31 Dec
30 June 2023 30 June 2022 31 Dec 2022 30 June 2023 30 June 2022 2022
Million Million Million GBPm GBPm GBPm
------------- ------------- ------------ ------------- ------------- -------
Ordinary shares of 25p each,
issued and fully paid 30.7 30.5 30.6 7.7 7.6 7.7
------------- ------------- ------------ ------------- ------------- -------
14 Business Combinations
On 6 February 2023, the Group acquired 100% of the share capital
of DHSS Aviation B.V., DHSS Logistics B.V., DHSS Projects B.V. and
DHSS Services B.V for initial consideration of EUR4.6m (GBP4.0m).
Additional amounts of up to EUR6.3m may also be payable depending
on the achievement of earnings targets. As these are linked to
employees remaining in service these amounts are spread in the
income statement and shown within the column 'Acquisition-related
costs'. The acquisition is expected to enable the Support division
to tender for larger offshore renewable contracts
internationally.
On 28 March 2023, Maritech Services Limited completed an asset
purchase agreement with Marcura Platform Solutions FZE to acquire
the MarDocs digital platform for an initial consideration of US$1m
(GBP0.9). A further US$0.3m (GBP0.3m) of consideration may also be
payable. The Group assessed and concluded that, based on the
substance of the transaction, it meets the criteria to be accounted
for under IFRS3 as a business combination. The intention of the
acquisition is to further facilitate Maritech's provision of a
rationalised, integrated contracts digitalisation solution to the
maritime industry.
On 31 March 2023, Maritech Services Limited acquired 100% of the
share capital of Recap Manager Limited for GBP1. The sole activity
of Recap Manager Limited is the provision of the Recap Manager SaaS
tool, a digital contracts management platform, which is licenced
exclusively to the entity. Maritech Services Limited is the owner
of that software.
The provisional assets and liabilities recognised as a result of
the acquisitions are as follows:
Provisional fair value of identifiable Recap
assets and Manager
liabilities assumed: DHSS Limited MarDocs Total
GBPm GBPm GBPm GBPm
------ --------- -------- ------
Property, plant and equipment 0.4 - - 0.4
Right-of-use assets 3.5 - - 3.5
Trade and other receivables 5.5 0.1 - 5.6
Cash and cash equivalents - 0.1 - 0.1
------ --------- -------- ------
Total assets 9.4 0.2 - 9.6
------ --------- -------- ------
Interest-bearing loans and borrowings (0.5) - - (0.5)
Trade and other payables (3.0) (0.7) - (3.7)
Lease liabilities (3.5) - - (3.5)
------ --------- -------- ------
Total liabilities (7.0) (0.7) - (7.7)
------ --------- -------- ------
Net identifiable assets acquired 2.4 (0.5) - 1.9
Goodwill 1.7 0.5 1.1 3.3
------ --------- -------- ------
Total consideration paid in cash 4.1 -* 1.1 5.2
------ --------- -------- ------
*Cash consideration for Recap Manager was GBP1
2023
Outflow of cash to acquire subsidiaries, net of cash acquired GBPm
DHSS cash consideration 4.0
MarDocs cash consideration 1.2
5.2
Less: cash acquired (0.1)
Less: contingent consideration not yet paid (0.3)
Net outflow of cash - investing activities 4.8
---------------------------------------------------------------- ------
The excess of consideration over the net identifiable assets has
provisionally been attributed to goodwill. Subject to the
completion of a purchase price allocation exercise, some of this
value may be attributed to identifiable intangible assets.
Acquisition-related costs of GBP0.2m are included in
administrative expenses in the income statement and in operational
cash flows in the cash flow statement.
The contingent consideration for MarDocs requires the Group to
pay up to a maximum of US$0.5m (GBP0.4m) based on the successful
migration of key clients to the Recap Manager platform. In the
event there is no migrated customer revenue, no amount would be
payable. The fair value of the contingent consideration at
acquisition was US$0.3m (GBP0.3m) and will be revalued at the end
of each period.
DHSS contributed revenues of GBP3.6m and net profit after tax of
GBP0.4m to the Group for the period from 6 February 2023 to 30 June
2023. If the acquisition had occurred on 1 January 2023,
consolidated pro-forma revenue and reported profit after tax for
the period ended 30 June 2023 would have been GBP321.9m and
GBP40.8m respectively.
Recap Manager contributed revenues of GBP0.2m and net profit
after tax of GBP0.1m to the Group for the period from 31 March 2023
to 30 June 2023. If the acquisition had occurred on 1 January 2023
consolidated pro-forma revenue and reported profit after tax for
the period ended 30 June 2023 would have been GBP321.1m and
GBP40.8m respectively.
The MarDocs asset purchase agreement entitled the Group to all
revenue generated and transferred liability for regular operating
costs of the acquired business from 1 January 2023.Therefore, the
contributed revenue of GBP0.2m and net profit after tax of nil to
the Group for the period from 28 March 2023 to 30 June 2023, would
be no different if the acquisition had occurred on 1 January
2023.
15 Contingencies
From time to time, the Group is engaged in litigation in the
ordinary course of business. The Group carries professional
indemnity insurance. There is currently no litigation expected to
have a material adverse financial impact on the Group's
consolidated results or net assets.
16 Principal risks and uncertainties
The Directors consider that the nature of the principal risks
and uncertainties which may have a material effect on the Group's
performance in the second half of the year have not changed from
those identified in the risk management section of the 2022 Annual
Report on pages 77 to 81 and noted above on page 17.
17 Financial instruments
IFRS 13 requires disclosure of fair value measurements by level
of the following fair value measurement hierarchy:
-- quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
-- inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2); and
-- inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level
3).
The following table presents the Group's assets and liabilities
that are measured at fair value.
30 Jun 2023 30 Jun 2022 31 Dec 2022
========================== -------------------------- --------------------------
Assets GBPm Liabilities Assets GBPm Liabilities Assets GBPm Liabilities
GBPm GBPm GBPm
============ ============ ============ ============ ============ ============
Investments at fair value through
Profit or loss ('FVPL') - Level
1 0.4 - 0.5 - 0.5 -
Investments at fair value through
profit or loss ('FVPL') - Level
2 0.9 - 1.5 - 1.1 -
Foreign currency contracts -
Level 2 0.7 2.4 - 7.4 0.1 7.0
------------ ------------ ------------ ------------ ------------ ------------
2.0 2.4 2.0 7.4 1.7 7.0
------------ ------------ ------------ ------------ ------------ ------------
The method for determining the hierarchy and fair value is
consistent with that used at the year-end (see note 28 on page 191
of the 2022 Annual Report). The fair values of financial
instruments that are held at amortised cost are not materially
different from their carrying amounts.
18 Related party disclosures
The Group's significant related parties are as disclosed in the
2022 Annual Report. There were no material differences in related
parties or material related party transactions in the period ended
30 June 2023.
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 interim financial statements to understand the results for
the period.
Underlying profit before taxation
Reconciliation of reported profit before taxation to underlying
profit before taxation for the six-month period to 30 June.
2023 2022
GBPm GBPm
Reported profit before taxation 52.2 42.0
Add back acquisition-related costs 0.9 0.2
-------------------------------------- ----- -----
Underlying profit before taxation 53.1 42.2
-------------------------------------- ----- -----
Underlying effective tax rate
Reconciliation of reported effective tax rate to underlying
effective tax rate for the six-month period to 30 June.
2023 2022
Reported effective tax rate 21.8% 21.5%
Add back acquisition-related costs (0.3%) -
-------------------------------------- ------- ------
Underlying effective tax rate 21.5% 21.5%
-------------------------------------- ------- ------
Underlying profit attributable to equity holders of the Parent
Company
Reconciliation of reported profit attributable to equity holders
of the Parent Company to underlying profit attributable to equity
holders of the Parent Company for the six-month period to 30
June.
2023 2022
GBPm GBPm
Reported profit attributable to equity
holders of the Parent Company 39.7 30.0
Add back acquisition-related costs 0.9 0.2
-------------------------------------------- ----- -----
Underlying profit attributable to equity
holders of the Parent Company 40.6 30.2
-------------------------------------------- ----- -----
Underlying basic earnings per share
Reconciliation of reported basic earnings per share to
underlying basic earnings per share for the six-month period to 30
June.
2023 2022
Reported basic earnings per share 130.5p 98.5p
Add back acquisition-related costs 3.0p 0.4p
---------------------------------------- ------- ------
Underlying basic earnings per share 133.5p 98.9p
---------------------------------------- ------- ------
Underlying administrative expenses
Reconciliation of reported administrative expenses to underlying
administrative expenses for the six-month period to 30 June.
2023 2022
GBPm GBPm
Reported administrative expenses 257.6 213.9
Less acquisition-related costs (0.9) (0.2)
-------------------------------------- ------ ------
Underlying administrative expenses 256.7 213.7
-------------------------------------- ------ ------
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.
30 Jun 2023 30 Jun 31 Dec 2022
2022
GBPm GBPm GBPm
Cash and cash equivalents as reported 275.7 231.6 384.4
Add cash on deposit and government
bonds included within current investments 9.9 5.4 3.1
Less amounts reserved for bonuses
included within current trade and
other payables (136.7) (111.2) (225.8)
Net cash and available funds 148.9 125.8 161.7
---------------------------------------------- -------- -------- ------------
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.
30 Jun 2023 30 Jun 31 Dec
2022 2022
GBPm GBPm GBPm
Cash and cash equivalents as reported 275.7 231.6 384.4
Add cash on deposit and government
bonds included within current investments 9.9 5.4 3.1
Less amounts reserved for bonuses
included within current trade and
other payables (136.7) (111.2) (225.8)
Less net cash and available funds
held in regulated entities (20.7) (23.3) (30.8)
Free cash resources 128.2 102.5 130.9
---------------------------------------------- -------- -------- --------
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IR GZGGRRDGGFZM
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