TIDMCKN
RNS Number : 8448N
Clarkson PLC
14 August 2017
14 August 2017
Clarkson PLC (Clarksons) is the world's leading shipping
services Group.
From offices in 21 countries on six continents, we play a vital
intermediary role in the movement of the majority of commodities
around the world.
Unaudited interim results for the six months ended 30 June
2017
Clarkson PLC today announces interim results for the six months
ended 30 June 2017.
Overview
-- Strong financial performance compared to the same period last year
-- Revenue of GBP156.8m (2016: GBP147.2m)
-- Underlying profit before taxation(1) increased by 12% to GBP24.5m (2016: GBP21.8m)
-- Profit before taxation 25% higher at GBP21.9m (2016: GBP17.5m)
-- Underlying earnings per share(1) rose 9% to 57.5p (2016: 52.9p)
-- Earnings per share increased by 22% to 50.8p (2016: 41.7p)
-- Interim dividend increased to 23p per share (2016: 22p per share)
-- Robust balance sheet, with GBP71.4m of net funds(2) (30 June 2016: GBP46.7m)
-- Debt-free following repayment of loan notes in June 2017
(1) Before acquisition related costs
(2) Net funds are cash and cash equivalents and current
investment deposits, after deducting amounts accrued for
performance-related bonuses
Andi Case, Chief Executive Officer, commented:
"We are pleased with our performance so far in 2017, increasing
revenue and volumes in difficult shipping and offshore markets. As
we see signs of a rebalancing across some of the shipping markets,
we are optimistic in our ability to capitalise on the upturn in the
markets when it occurs, whilst maintaining the strength of the
underlying business. Nevertheless, in the short-term, low activity
in the newbuilding market and a predominance of spot over
longer-term period business continues to limit forward visibility
of revenues.
"Our solid cash position means that irrespective of market
conditions, we are able to invest in the business for future
growth, deliver increasing returns to shareholders and take
advantage of strategic opportunities as they arise.
"We have invested in hiring key people and believe our
market-leading technology and best in class client service
positions us strongly as we enter the second half of the year."
Enquiries:
Clarkson PLC 020 7334 0000
Andi Case, Chief Executive Officer
Jeff Woyda, Chief Financial Officer and
Chief Operating Officer
020 3757 4983
Camarco / 4994
Billy Clegg
Jennifer Renwick
Alternative performance measures (APMs)
Clarksons uses APMs as key financial indicators to assess the
underlying performance of the Group. Management considers the APMs
used by the Group to better reflect business performance and
provide useful information. Our APMs include underlying profit
before taxation and underlying earnings per share. Explanations of
the term 'underlying' and related calculations are included within
the Chief Executive Officer's review.
About Clarkson PLC
Clarkson PLC is the world's leading provider of integrated
services and investment banking capabilities to the shipping and
offshore markets, facilitating global trade.
Founded in 1852, Clarksons offers its diverse and growing client
base an unrivalled range of shipbroking services, sector research,
on-hand logistical support and full investment banking capabilities
in all key shipping and offshore sectors. Clarksons continues to
drive innovation across its business, developing digital solutions
which underpin the Company's unrivalled expertise and knowledge
with leading technology.
The Group employs 1,427 people in 46 different offices across
its four divisions and is number one or two in all its market
segments.
The Company has delivered 14 years of consecutive dividend
growth. The highly cash generative nature of the business,
supported by a strong balance sheet, has enabled Clarksons to
continue to invest to position the business to capitalise on the
upturn in its markets.
Clarksons is listed on the main market of the London Stock
Exchange under the ticker CKN and is a member of the FTSE 250
Index.
For more information, visit www.clarksons.com.
Chairman's review
The shipping sector is naturally both cyclical and volatile, and
although we have continued to experience some challenging market
conditions in the first half of 2017, very early signs of recovery
in some of the major shipping markets are emerging. Our unique
position at the heart of the industry and the hard work that the
Clarksons team continues to deliver has ensured that the Group has
once again produced robust results.
During the first six months of 2017, underlying profit before
taxation was up 12% to GBP24.5m (2016: GBP21.8m) and reported
profit before taxation was up 25% to GBP21.9m (2016: GBP17.5m). In
June 2017, Clarksons repaid the final tranche of outstanding loan
notes, repaying all debt and simplifying our balance sheet, which
remains very healthy.
We have maintained our investment in our people during the
period and are continuously developing and expanding our offering
to clients to ensure that they receive an unrivalled product
breadth and global insights that enable them to make the
best-informed decisions. This commitment to innovation and client
service has ensured that our clients continue to turn to Clarksons
during this challenging time for the sector.
Whilst we do not expect a major upturn across the sector in the
near term, our robust performance in the first six months of the
year gives us confidence that we are best positioned for the upturn
when it occurs and to take advantage of any increased activity in
the capital markets.
James Hughes-Hallett
Chairman
11 August 2017
Chief Executive Officer's review
By keeping to its strategy, Clarksons has delivered a strong
first half performance despite continued headwinds in the global
shipping markets and broader global macro-economic environment. The
Company's transactional flow has increased once again, reinforcing
its position as the market leader.
Although ongoing low freight rate levels remain across our
markets, evidenced by the ClarkSea Index where the average for the
first half of 2017 of 10,081 is only up 2% compared to the same
period in 2016, indications of a recalibration in some areas are
appearing, with the Baltic Dry Index averaging 979 across the first
half of 2017, up 100% on the 2016 level. Both indicators, however,
remain significantly below even the average since the events of
2009.
Through continued investment in tools for trade, we have
successfully positioned the business at the heart of the shipping
and offshore markets and we have continued to increase
transactional volume whilst remaining cash generative and highly
profitable.
We remain focused on our long-term strategy for growth of
delivering best in class service to our clients and diversifying
within our core markets to offer a unique product breadth, deep
sector knowledge and global reach.
The first half of the year has seen a significant increase in
spot broking revenues following an uptick in transaction volumes
and a rise in dry cargo rates. This increase has gone some way to
offset the lower revenues from the forward order book brought
forward from previous years, as highlighted in the annual report.
The financial division has also performed strongly, following its
successful second half of 2016. Growth has continued in the
research division as Clarksons Research builds on its
market-leading position. The port services division traded flat as
market activity remains depressed.
Our investment in technology to drive innovation across the
business is also transforming the way we service clients. Our
proprietary, market-leading technology platforms manage workflow
efficiency and collate an immense volume of data to better inform
our brokers and clients and uniquely position us amongst our peers.
In challenging markets and during periods of uncertainty, the
analysis our platforms can deliver is invaluable as clients turn to
us for our unrivalled insights and in-depth understanding of global
shipping market dynamics.
Results
The Group's underlying results exclude the impact of acquisition
related costs, which are shown separately on the face of the income
statement due to their nature and size, as management believes this
provides further useful information, in addition to statutory
measures, to assist users of the interim report to understand the
results for the period. First half revenues increased by 7% to
GBP156.8m (2016: GBP147.2m) and administrative expenses increased
by 6% to GBP128.2m (2016: GBP121.5m). Underlying profit before
taxation was GBP24.5m (2016: GBP21.8m), which, after acquisition
related costs of GBP2.6m (2016: GBP4.3m), resulted in a reported
profit before taxation of GBP21.9m (2016: GBP17.5m). Underlying
earnings per share, before acquisition related costs, was 57.5p
(2016: 52.9p). Basic reported earnings per share was 50.8p (2016:
41.7p).
2017 2016
GBPm GBPm
Underlying profit before taxation 24.5 21.8
Acquisition related costs (2.6) (4.3)
====== ------
Reported profit before taxation 21.9 17.5
====== ------
Cash and dividends
Clarksons has a strong balance sheet with cash balances at 30
June 2017 of GBP117.4m (30 June 2016: GBP106.3m) and a further
GBP5.4m (30 June 2016: GBP5.4m) in short-term deposit accounts,
classified as current investments on the balance sheet. These
balances are struck following payment of the final dividend
relating to 2016 and the final repayment of loan notes of GBP23.9m,
both having occurred during June 2017. Net cash and available
funds, after deducting amounts accrued for performance-related
bonuses but including short-term investments, amounted to GBP71.4m
(30 June 2016: GBP46.7m).
The Board has declared an increased interim dividend of 23p per
share (2016: 22p per share) which will be paid on 22 September 2017
to shareholders on the register at the close of business on 8
September 2017.
Outlook
As we see signs of a rebalancing across some of the shipping
markets, we are optimistic in our ability to capitalise on the
upturn in the markets when it occurs, whilst maintaining the
strength of the underlying business. Nevertheless, in the
short-term, low activity in the newbuilding market and a
predominance of spot over longer-term period business continues to
limit forward visibility of revenues.
Our solid cash position means that irrespective of market
conditions, we are able to invest in the business for future
growth, deliver increasing returns to shareholders and take
advantage of strategic opportunities as they arise.
We have invested in hiring key people and believe our
market-leading technology and best in class client service
positions us strongly as we enter the second half of the year. We
are pleased with our performance so far in 2017.
Andi Case
Chief Executive Officer
11 August 2017
Business Review
Broking
Revenue: GBP118.0m (2016: GBP115.5m)
Segment underlying profit: GBP21.0m (2016: GBP19.3m)
Dry cargo
The first half of 2017 saw a 100% year-on-year improvement in
the Baltic Dry Index (BDI) and an increase in seaborne volumes as
manufacturing industries in China, the US, Japan and Eurozone
continued their expansion. The re-emergence of expansion in Chinese
manufacturing led the demand for steelmaking raw materials, energy
and feedstocks. Expanding housing starts and construction demanded
more materials domestically, leaving the export market short which
resulted in new highs for commodity prices. China's internal
restructuring and decommissioning of uneconomic mining and steel
activity further enhanced imports, with coal imports increasing by
24% and iron ore by 9% year-on-year during the first half of the
year and soybean imports continued its upward long-term trajectory
increasing by 16% year-on-year. The Eurozone seaborne imports
reversed its downward trend and increased by 8% in the first
quarter year-on-year, while US seaborne imports reached 15%
year-on-year growth.
Emerging Asia and specifically those economies benefiting from
China's 'One Belt One Road' trade initiative have experienced
growth in construction-related materials and coal specifically.
Freight rates peaked in April before unexpected supply
disruption led to force majeure declarations by some mining
companies resulting in lower vessel demand. Australian coal exports
were interrupted by Cyclone Debbie, Brazilian iron ore exports by a
breakdown of loading equipment and Guinea bauxite exports by labour
strikes. Although rates have softened since April, the BDI ended
the half year 37% higher than a year earlier.
Fleet capacity continues to expand, albeit slower year-on-year,
however demolition activity reduced substantially as earnings
improved, resulting in fleet expansion of 4% year-on-year.
Nevertheless, healthy seaborne trade demand and even higher
tonne-day demand led the rebalancing of the dry cargo market and
thereby freight earnings.
In spite of the recent softening of the rates, the freight
forward curve points to a typical seasonal strengthening in rates
during the second half of the year.
Containers
The first six months of 2017 saw some improvement in the
container shipping sector, following the severely pressurised
conditions of 2016. Box freight rates appeared to have bottomed out
last year, and although rates on most trade lanes have remained
volatile, they remain significantly above 2016 average levels.
Against this backdrop, charter market vessel earnings eventually
received a boost late in the first quarter of 2017, picking up from
bottom of the cycle levels. In the second quarter, their general
direction proved to be sideways, though there were some differences
across the ship size sectors. The one year rate for a 2,750 TEU
ship stood at US$9,000 per day at the end of June 2017, 49% above
the level at the end of 2016, and the charter market 'basket' index
rose by 23% on the same basis.
Demand side conditions appeared to continue to improve during
the early months of 2017, and global volumes are currently expected
to expand by around 4.8% in the full year to 190m TEU. Transpacific
and intra-Asian volumes saw notable growth in the first part of the
year, and Far East-Europe volumes have also made steady progress.
Containership capacity growth remains limited, with an expansion of
1.2% in total fleet TEU capacity in the first six months of the
year. Deliveries totalled 0.52m TEU in that period whilst
demolitions hit 0.28m TEU, with January seeing the largest monthly
total on record.
Some surplus capacity still remains having built up in recent
years, in particular with the ongoing delivery of new 'megaships',
but by the end of June 2017 the share of fleet capacity standing
idle had dropped to around 2.7%, and additional fundamental
rebalancing could gradually support further improvement in market
conditions. However, it should be remembered that against an
improved freight market environment, liner companies still face
capacity management challenges and only recently have charter
market conditions started to make positive progress.
Nevertheless, sector fundamentals look set to continue to
improve following a robust 2017 to date. Volume growth continues to
accelerate, and supply growth is projected to remain in 2-3% range
in full year 2017. Meanwhile, the ordering of newbuild capacity
remains limited; with just 0.3m TEU ordered since the start of
2016, the order book now stands at 14% of fleet capacity. Moreover,
further significant steps in the consolidation of the sector
continue to be taken in the form of merger, acquisition and joint
operation activity involving major operators concluding this year
and next, with one major acquisition concluded in the second
quarter and another announced early in the third quarter of
2017.
Tankers
The crude tanker market softened further in the first half of
2017, as was expected. Average rates in the first six months of the
year for VLCCs, suezmaxes and aframaxes were each down by between
30% and 46% versus the full year average levels seen in 2016, as
strong fleet growth and oil production cuts took their toll.
Products tanker rates have generally remained at the softer
levels seen in the second half of 2016. Earnings for LR2s and LR1s
on the benchmark Middle East to Far East route were 47% and 40%
lower respectively than the full year averages for 2016, while
earnings for MRs performed somewhat better, with average rates down
by 15% versus 2016's average level.
The crude tanker fleet grew by 4% in the first half of the year.
Rapid fleet growth and strong compliance with OPEC production cuts
meant that earnings softened, as anticipated. This was in spite of
a 13% year-on-year rise in Chinese crude imports in the first five
months of the year and increased long-haul shipments to Asia from
sources West of Suez, including the US.
Supply side pressure looks set to continue in the crude tanker
sector in the second half of the year, although the pace of fleet
growth is expected to be more moderate. OPEC and a number of
non-OPEC countries have decided to extend production cuts for a
further nine months through to the end of March 2018, which will
restrain growth in crude oil trade for the time being.
Nevertheless, additional exports may be seen from Nigeria and
Libya, which are currently exempt from the output cuts, depending
on the security situation in those countries. Increases in US and
Brazilian crude exports and Chinese and Indian imports should also
support crude tanker demand growth. The potential for lower fleet
growth and a reversal in OPEC production cuts in 2018 imply that
the market may start to tighten once again from next year.
The products tanker fleet increased by 2% in the first half of
2017. The pace of deliveries may slow somewhat in the second half
of 2017, but supply side pressure is also expected to remain on the
products tanker sector for the rest of the year. However, growing
product demand and higher levels of refining runs in the second
half may start to assist some recovery in earnings. In 2018, growth
in the products tanker fleet is expected to fall to much lower
levels, which may help to underpin a more sustained rise in vessel
earnings.
Specialised products
The specialised products markets began 2017 in a state of
uncertainty, following a lack of tonnage demand across arterial
trade routes in both the chemicals and edible oils sectors at the
end of 2016. However, the opening quarter performed quite well with
firming in benchmark spot rates of 3.6% recorded in the Clarksons
Platou Spot Chemicals Index. The uptick noted during the first
quarter was driven by the increase in ex-US transpacific spot
volumes, repeating the trend seen during the same period of last
year, but as we moved into the spring months, tonnage demand levels
ex-US to Asia decreased in line with other regions.
Meanwhile, the edible oils sector began the year quite well,
despite the lingering effects of El Nino, with freight rates in the
first quarter recording a rise. This was mostly due to the buoyancy
in the CPP west market rather than a sustained revival in edible
oil volumes. It seems that this was short-lived, with the sector
closing out the first six months of the year with a 2.9% fall in
benchmark freight rates. A sedate Asian CPP market, plus a
continued delay in a palm oil market revival, has contributed to a
plethora of units, particularly in Asia, struggling to find
business.
In the chemicals markets, the overall trend throughout 2017 has
been one of lacklustre spot activity set against steady CoA
requirements. Due to an increase in chemical production capacity as
a result of the ongoing shale gas production revolution in the US,
export volumes - particularly for methanol - increased considerably
at the start of the year with the majority heading to Asia. This
did dissipate as we moved into April and May, but as May drew to a
close the transpacific market to Asia showed a renewed drive which
seems to have some longevity and continued throughout June.
Unfortunately, this was not enough to bring up the global
performance of the Clarksons Platou Spot Chemicals Index with
overall spot chemical rates falling by 3.3% for the first six
months of the year. It should be noted that by the end of June,
ex-Asia eastbound, and more recently westbound, have both undergone
a revival which if sustained may contribute to a more optimistic
sentiment in the global chemicals markets.
Time charter levels for benchmark vessel types are mostly
unchanged throughout the first six months of the year, with
earnings still under pressure and continuing to eat into owners'
returns. By the end of June, one year time charter rates for the
benchmark 19,900 DWT IMO II stainless steel units have remained
steady at US$13,000 per day, after their earlier US$500 per day
fall recorded in May.
Based on our current expectations we believe that seaborne trade
will grow by 3.2% this year, driven predominantly by continued
Middle East and US chemical capacity additions, and a renewal in
palm oil exports in the second half of the year (a trend that
already seems to be developing). This will be supported by
continued Indian and Chinese import growth which, on an annual
basis, recorded year-on-year growth levels of 5.2% and 4.0%
respectively in 2016. Ordering activity has been very limited
throughout the first half to specific segments of the fleet, and
net fleet growth of around 3.4% is expected in 2017, before
reducing significantly in future years. Overall, whilst short-term
visibility is translucent, the medium to long-term outlook of the
specialised products market remains positive.
Gas
Freights remained under pressure through the first half of 2017
as a result of the scale of fleet supply growth seen during the
course of 2016 added to the growth seen in the first half of 2017.
A total of 11 VLGC newbuildings have delivered so far this year,
but the volume year to date has been less dramatic than the pace of
newbuilding deliveries witnessed over the same period last year,
albeit there are a further 14 still to deliver before year-end.
Tonne-miles continued to grow as US export volumes built in the
first quarter and as Asian imports increased in the second quarter.
However, the reduction in export volumes from the Middle East due
to production cuts and maintenance in the first quarter, combined
with increased cancellations of US cargoes over May and June,
served to dampen the overall effects of this. The shift in trade
flows and a slowdown in the pace of fleet growth resulted in some
improvement in VLGC freight levels during the first half of 2017
compared with the last 6 months of 2016. As a result, average time
charter earnings rose to an average of US$530,000 pcm from
US$390,000 pcm. Whilst this recovery was in part down to owners
working to help support rates, occasionally at the expense of idle
time, these numbers were nevertheless 47% down on the first half of
2016.
Seaborne LPG trade has continued to increase this year, despite
the reduction in volumes from the Middle East, weather-related
disruptions to North African exports at the start of the year and
the aforementioned cancellation of US liftings in May and June. In
the year to June, global LPG export volumes were up by close to 4%
on the same period last year. Volumes are expected to receive a
further boost in the last quarter of 2017 as the Mariner East II
terminal expansion on the East Coast of the US starts exporting.
Additionally, the pace of growth in the fleet starts to slow from
next year as the order book remaining for delivery falls off, which
should help to rebalance the market.
In the mid and handysize sectors, we are seeing the bulk of the
newbuilding orders deliver this year and the effect of this,
together with the weaker larger vessel market, has already been
reflected in lower freight levels. In the year to date, 12 month
time charter rates have averaged US$460,000 pcm on the midsizes,
compared with US$570,000 pcm six months earlier, whilst the
assessed 12 month time charter rate on the handysizes has fallen
from around US$540,000 pcm to US$430,000 pcm. In the latter
segment, a larger proportion of the fleet is also now trading in
petrochemicals, as a lacklustre market in the ammonia sector and
competition for LPG cargoes from the larger units has exerted
downward market pressure. This, in turn, has had implications for
the smaller units in the size category below.
The ethylene sector (8,000 cbm to 22,000 cbm) started 2017 on a
much more balanced note as import demand into Asia started to slow
and Middle Eastern export volumes fell away. This was compounded by
a heavy spring cracker turnaround season in Europe which resulted
in a strong level of idle time notably in the 12's, with owners in
the large handy sector undercutting owners in smaller sectors, even
on part cargoes. As a result, we have seen assessed freights for
the 17,000 cbm ethylene units fall back from a level of US$670,000
pcm at the start of this year to a level of US$615,000 during
June.
As anticipated, the smaller ship market appears to have reached
the bottom and freights have shown some modest signs of recovery
over the last few months which has been largely in response to a
slowdown in fleet growth.
With no newbuildings currently on the order book in the smallest
size sector of the semi-refrigerated and pressure carrier fleets,
the prospects for the demand/supply fundamentals to further improve
appear encouraging, particularly given the ageing fleet profile of
the sector.
LNG
Global LNG trade is expanding rapidly. Backed by the
commissioning of new production capacity, late 2016 saw a surge in
LNG supply which continues through 2017 and is expected to persist
into 2018. China remains the global demand driver. So far in 2017
its imports are up by approximately 22% year-on-year, which is in
addition to approximately 34% growth the previous year. Driven by a
number of policy incentives, natural gas consumption is rising
strongly. The key markets of Japan and Korea are also importing
more than in the same period of 2016.
Despite healthy levels of chartering activity from the second
half of 2016 onwards, the spot market rates remain suppressed,
undermined by a number of factors including thin demand for tonnage
in the Atlantic Basin; redelivery of certain vessels on multi-month
charters; and short average duration of charters (nevertheless
slightly improved on 2016 averages).
Fundamentals point to a tightening of the short-term shipping
market, as new projects are commissioned and some facilities
restarted, removing re-let tonnage owned/controlled by producers or
gas majors.
The 'wave' of new supply has already started to hit the market:
expanding the trade and increasing the number of LNG liftings.
Around 29 mt per annum of new capacity will be commissioned in 2017
which could see the global LNG trade approach 300m tonnes in 2017.
Similar rapid growth is expected through 2018 as a number of large
projects in the US and Russia will be brought online.
Sale and purchase
Secondhand
The year to date has been a story of two contrasting quarters in
dry cargo sale and purchase. The optimism reported at our 2016
year-end continued to gather pace throughout the first quarter and
belief that the worst was behind us filtered through to the capital
markets, allowing funds to be raised for fleet expansion through
vessel acquisitions. Consequently, there was strong buying activity
resulting in a surge of concluded transactions and a rise in values
across the board. At the high point in April, dry cargo values had
strengthened by approximately 20% from year-end levels.
In May however, the freight market started to soften and, since
then, we have seen just how fragile this confidence was as buyers
held back, waiting to see how markets developed and sale and
purchase transactions stopped in their tracks. The early arrival of
the summer slowdown might also mean an early end, but for the
moment concluding meaningful business within the dry cargo markets
is proving challenging.
The wet side has been extremely flat by comparison but, as
confidence starts to return and people recognise that values are
unlikely to get much lower, now may be the time to buy.
Consequently, we have concluded a number of fairly high value
transactions during the second quarter which were simply not
possible during the first. The sheer lack of quality tonnage
available for sale has enabled a floor on values to remain in
place, so those who want to buy find themselves competing and
inevitably the price never falls quite as far as buyers would
like.
On the container side, the failure of Hanjin Lines and the lack
of market recovery meant that various lenders were forced to take
back control of tonnage, thus becoming sellers themselves in
auction-type conditions. This created an upsurge in activity, with
opportunistic shipowners willing to offer discounted prices. We
handled a number of these transactions for banks, as the size and
transparency of our business meet their compliance
requirements.
Newbuilding
The first quarter of 2017 was certainly a more active period
relative to the minimal newbuilding activity over the second half
of 2016.
Activity has been driven by shipyards taking commercial
decisions against the pressure of imminent vacant capacity,
translating into historically competitive pricing which, in turn,
roused speculators to take positions. We also saw an uptick in
secondhand dry values which again had the impact of making
competitively priced newbuilding opportunities a more compelling
proposition.
The second quarter of 2017 continued momentum, with a number of
sizeable transactions being concluded in both the tanker and dry
segments.
However, prices are starting to firm against yards now filling
their capacity exposure. This, coupled with regulatory shifts and
increased scrutiny from major creditor banks for many of the yards,
continues to create upward pressure from a cost perspective. As
contracts, in many cases, having been concluded at loss-making
levels, there is little room for shipyards to be in a position to
maintain existing pricing - and the likely outcome of firming
numbers is that new contracting may slow down in the third quarter
as the opportunity for speculators diminishes. Financing remains an
issue, and will be a key dictator in driving transactional activity
also.
With an overhang of discussions that may materialise within the
second half of the year, and pending optional contracts being
considered for declaration, it is not to say that we will see an
inactive third quarter. However, buyers will need some time to
digest recent activity and shipyards will continue to battle market
expectations relative to cost considerations.
Offshore
General
Market conditions in the offshore segment remain challenging,
but we have started to see some positive signals, most notably a
steady increase in fixing activity for jackup rigs and a strong
increase in the number of contracts for floating production units.
The latter corresponds with sanctioning of new field developments.
Albeit still at a low level, this has picked up notably from levels
seen in 2015 and 2016. Finally, there has been some improvement in
the secondhand transaction market with a few notable jackup and
floater transactions. Even though these are positive signals that
could indicate the segment is about to bottom out in terms of
activity, overcapacity in the asset-heavy segments of offshore oil
services remains significant. As a consequence, utilisation and
rates remain at depressed levels. Going forward, we expect a
continued gradual improvement in offshore activity, but it will
most likely take significant time to rebalance the asset segments
in order to see more sustainable utilisation and rate levels.
Drilling market
The jackup market has seen improvement in fixing activity
through the first half of the year, and we have also seen some
considerable long-term contracts awarded. Most notably, North
Atlantic Drilling was awarded two ten-year market rate indexed
contracts with ConocoPhillips for work in the Greater Ekofisk Area
in Norway, the West Elara and the West Linus. The West Elara is
currently on contract with Statoil Norway, and was originally
available from this summer onwards. The West Linus already had a
contract with COP ending in May 2019. Although some downward day
rate adjustments were made for the current contract for West Linus,
North Atlantic Drilling estimates that the full backlog addition of
the contract is around US$1.4bn. These two contracts will keep the
rigs working until the end of 2027 and 2028 respectively. As of the
end of June, jackup fleet utilisation stood at 66% and we have
witnessed four consecutive months of improving demand.
In the floater market, utilisation is currently 67% and active
demand is at 136 units. Fixing activity in the floater market is
still considerably slower than in the jackup market, but over the
last weeks we have seen some positive signals, including new
long-term contracts entered into between Shell and Ensco in
Nigeria. Downside risk, however, clearly remains in the floater
market with significant impending contract rollovers due.
Active utilisation levels are still exceptionally low in a
historical context. Overcapacity remains a significant issue in the
offshore drilling market, as for the other segments. As a
consequence, day rates for new contracts in general remain at
unsustainable levels, broadly hovering around the level of
operating expenses for the assets and providing limited or no
contribution to capital. Significant attrition is still required
before we could start to see more sustainable utilisation and day
rate levels for owners again.
The subsea and field development markets
Sanctioning of new offshore field developments has seen a
notable uptick so far in 2017 compared to 2015 and 2016. Provided
oil prices remain relatively stable going forward, we expect this
trend to continue. Subsea equipment awards to the industry likely
bottomed in 2016 with a low level of 83 Christmas trees awarded
(each subsea well requires a subsea Christmas tree). This compares
to an annual average level of 351 since 2000 and 153 trees in 2015.
Some 65-70 Christmas trees had been awarded to the subsea equipment
industry, marking a notable improvement from 2016 levels. A
corresponding picture can be observed in terms of contracts for new
Floating Production Units, where we have seen seven firm contracts
so far in 2017, compared to zero contracts in 2016 and four
contracts in 2015. Equipment manufacturing lead times imply that
this equipment will be installed offshore from 2019 and beyond,
which is when the majority of actual offshore/subsea activity will
take place. This implies that fleet utilisation across the subsea
segment is likely to remain subdued at least through 2017 and 2018.
Subsea maintenance work could, however, pick up in the nearer term
future, supporting some higher vessel activity in the sector.
Offshore support vessels (PSV and AHTS)
The market for offshore support vessels (OSVs) remains highly
challenging, characterised by significant vessel overcapacity, low
utilisation and day rates around the level of operating expenses
for the vessels. Broadly speaking, this applies to all regions and
all vessel categories with minor nuances. Global fleet utilisation
(also taking into account stacked vessels) for large OSVs is
currently around 40%, while active utilisation levels in some
regions naturally remain somewhat higher. In these severe market
conditions, most or all vessel operators are struggling
significantly, and we have continued to witness high corporate
activity in terms of refinancing, restructuring and consolidation.
Increased consolidation and significant vessel attrition bodes well
for the longer term rebalancing of the market, but on the back of
the substantial overcapacity in the sector, we anticipate a
recovery to more sustainable day rate levels is still several years
ahead. Partially as a result of the challenging market conditions,
we have noticed some increased interest from financial players to
pursue secondhand transactions, and the number of vessel
transactions was marginally higher in 2016 compared to 2015 (71
versus 65). We have seen 36 vessel transactions.
Futures
Dry FFA volumes have shown an improvement over the first half of
2017 with 625,810 lots traded compared to 547,689 lots for the same
period last year. The more noticeable change has been the higher
notional values with Cape 5TC averaging US$11,596 this year
compared to US$4,717 in the first half of 2016 (panamax notionals
US$3,990 first half of 2016 versus US$8,536 first half of 2017 and
supramax notionals US$4,805 first half of 2016 versus US$8,381
first half of 2017). These two factors combined have enabled the
desk to perform well. One noteworthy change in the market has been
the broad adoption of the 5TC cape contract which took a long time
to be accepted.
Options volumes have fallen with volumes in the first half of
2017 of 101,480 lots compared with 168,249 lots over the same
period last year. Nevertheless, our significant position in this
market remains, albeit the lower volumes have constrained our
revenues.
Iron ore market volumes have reduced for the first time since
the development of this market with 600,849,800 lots compared to
729,427,900 in the same period in 2016. It has proved a very
volatile year so far with prices ranging from a high of nearly
US$95 to a recent low of US$53. A number of larger market
participants have scaled back their activities after being on the
wrong side of these aggressive moves. Our teams both in London and
Singapore continue to perform well and we are making slow but
steady inroads in market share.
Financial
Revenue: GBP23.2m (2016: GBP16.7m)
Segment underlying profit: GBP5.0m (2016: GBP2.4m)
Securities
The first half of 2017 has been very good with a globally strong
investor appetite within the shipping and offshore segments due to
optimism over the strengthening global economy. Investors have
benefited from healthy returns over the last six months despite the
retrenchment of oil prices since the end of 2016.
Clarksons Platou Securities' earnings are dependent on
favourable market conditions within our core sectors in order to
perform investment banking transactions in the global market, which
is the largest contributor to our revenue flow. Our strong pipeline
resulted in 18 equity market transactions raising approximately
US$1.7bn, three debt capital market transactions raising over
US$600m and the completion of four M&A
transactions/restructurings during the first half of 2017. In
addition, our new core sector, metals and mining, has participated
in two IPOs on the NYSE for US mining companies and one capital
raise during the period.
We continue to hire new employees, mainly to strengthen our
investment banking and equity and credit sales teams.
Despite the strong fundamentals, we expect that some sort of
correction is due, however, how material it will be and when it
will come is difficult to predict. We still benefit from strength
in our pipeline, reputation and execution capabilities, and aim to
close more transactions after the summer.
Project finance
Shipping
In the first half of 2017, shipping project finance activity has
continued to improve with most new projects focused on the
distressed market opportunity in the dry cargo, container and
offshore segments. During this period, we completed two handysize
bulk carrier projects, a kamsarmax newbuilding project and a larger
offshore transaction including three ice-class PSVs.
There is limited debt finance available from traditional
shipping banks, but we have seen an emergence of new project banks
who are keen to support the Norwegian project finance market. An
increasing number of shipowners have traditional bank loans that
are maturing and we expect that a significant portion will be
refinanced with alternative finance structures.
The outlook for the second half of 2017 is positive as there are
several new opportunities developing within the tanker, container
and dry cargo segments.
Real estate
The strong momentum from the last quarter of 2016 has continued
throughout the first half of 2017. With the Norwegian real estate
market attractive for investors searching for opportunities and
steady dividends, Clarksons Platou Real Estate concluded 10 (six
buys/four sales) transactions in the first half.
Structured asset finance
Shipping and offshore financing markets remain largely unchanged
with traditional lenders being very targeted in their provision of
liquidity towards specific and existing top tier clients.
Meanwhile, the current disconnect between asset values and
earnings means that leasing and infrastructure-based financing
continues to grow as an effective source of capital, stretching
both tenure and profile, while offering increased leverage to
deliver competitive day rates. Chinese leasing companies are at the
forefront of long-term vessel financing, but are becoming
increasingly selective, now largely targeting investment grade
borrowers in the form of oil majors, trading houses and commodity
majors.
We continue to work closely with target clients, advising on and
arranging the optimal financing structures available for their
respective projects.
Support
Revenue: GBP8.3m (2016: GBP8.3m)
Segment underlying profit: GBP0.7m (2016: GBP0.8m)
Agency
The first half of 2017 was generally quiet for our offices
handling bulk grain shipments due to the lower exportable surplus
available in the UK. Predictions for the 2017 harvest, however,
currently look reasonably optimistic.
The aggregates sector has seen improved activity in our Great
Yarmouth, Hull, Tyne and Belfast offices. Biomass continues to be a
major activity through Liverpool and Newcastle, and we have won new
customers for coal in Newcastle and Hull.
An area of increased growth this year has been offshore wind,
with projects occupying all our East Coast offices. With new
projects being awarded, these higher levels of activity look set to
continue in 2018.
2017 has seen some uplift in the oil and gas sector, but
activity remains markedly down on the levels prior to the collapse
in oil prices.
Gibb Industrial Supplies
As with our agency business, our supply business is also seeing
increased activity in the oil and gas sector. This increase in
activity, combined with new contracts being awarded and stress in a
number of our competitors, should mean the more recent recovery in
results in this area will continue for the rest of the year.
Stevedoring
Although our stevedoring operation in Ipswich has been affected
by the lower grain exports, we have benefited from vastly increased
imports. We now hold a record amount of product in store and have
taken additional storage space from the port authority. It is
anticipated we will have to take further space in the port to
accommodate the grain from this year's harvest.
Freight forwarding and logistics
Due to the downturn in oil and gas, forwarding continues to
struggle.
We have now employed a specialist to head this area of our
business and are confident his knowledge and contacts will lead to
improved results in the near future.
Research
Revenue: GBP7.3m (2016: GBP6.7m)
Segment underlying profit: GBP2.4m (2016: GBP2.3m)
The research business continued to grow during the first half,
with sales up 9% to GBP7.3m (2016: GBP6.7m). In challenging market
conditions, Clarksons Research has continued to grow its position
as a market leader in the provision of authoritative intelligence
and data across shipping and trade and offshore and energy.
Sales from our digital platforms grew an encouraging 12% in the
first half. In addition to a good contribution from our flagship
shipping and trade digital products, Shipping Intelligence Network
and World Fleet Register, our vessel tracking system, Clarksons
SeaNet, is beginning to gain traction with our client base.
Clarksons SeaNet blends satellite and land based AIS data with our
proprietary database of vessels and infrastructure, utilising
latest technology developed in-house. Digital offshore and energy
sales have also performed well in the first half, supported by
sales of World Offshore Register and Offshore Intelligence
Network.
There was also a strong performance from our retainer services
and consultancy team, who manage bespoke product, seminar, data and
service packages for our larger corporate clients, with sales up
21%. Clarksons Valuations delivered a good result while
consolidating its position as the market-leading provider to
private and public listed shipping companies and financial
institutions.
Overall, around 75% of sales were annuity-based across a broad
and diversified client base with excellent penetration into key
target client sectors and geographic regions.
Strong investment into the research business continues. There
remains a drive to expand our large proprietary database, including
a recent focus on shipping infrastructure and renewables, and to
derive further aggregated data, analysis and time series. Our
comprehensive database includes coverage of the international
shipping fleet, ship movements, world trade, ports, refineries, LNG
plants, yards and fabricators, environmental equipment, offshore
oil and gas infrastructure, offshore drilling rigs, renewables,
shipping related companies, capital market activity and wide
ranging commercial data on prices and earnings of ships - all
stored and processed in a highly structured format.
We continue to deliver further product innovations utilising
latest technology and during the first half a number of our digital
platforms were enhanced, with further releases planned during the
second half. Research has expanded its wide ranging data provision
to the Clarksons Platou broking and financial teams and continues
to enhance the global profile of Clarksons across the shipping
industry. Clarkson Research Services' head count has reached 108,
with further hires into our sales, data analytics and IT teams,
along with expansion of operations in Shanghai and Singapore to
support our Asian growth strategy.
Directors' responsibilities statement
The Directors confirm that:
-- these interim financial statements have been prepared in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting' as adopted by the European Union; and
-- the interim report includes a fair review of the information required by:
(a) DTR 4.2.7, being an indication of important events that have
occurred during the first six months of the financial year ending
31 December 2017, 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 4.2.8, being material related party transactions that
have taken place in the first six months of the financial year
ending 31 December 2017, and any material changes in the related
party transactions described in the 2016 annual report.
The Directors of Clarkson PLC are listed in the Clarkson PLC
annual report for 31 December 2016. A list of current Directors is
maintained on the Clarkson PLC website: www.clarksons.com.
The maintenance and integrity of the Clarkson PLC website is the
responsibility of the Directors; the work carried out by the
Auditors does not involve consideration of these matters and,
accordingly, the Auditors accept no responsibility for any changes
that may have occurred to the 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
James Hughes-Hallett
Chairman
11 August 2017
Independent review report to Clarkson PLC
Report on the interim financial statements
Our conclusion
We have reviewed Clarkson PLC's interim financial statements
(the interim financial statements) in the interim report of
Clarkson PLC for the six month period ended 30 June 2017. Based on
our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in
all material respects, in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the consolidated balance sheet as at 30 June 2017;
-- the consolidated income statement and consolidated statement
of comprehensive income for the period then ended;
-- the consolidated statement of cash flows 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 report
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the Directors
The interim report, including the interim financial statements,
is the responsibility of, and has been approved by, the Directors.
The Directors are responsible for preparing the interim report in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the interim report based on our review.
This report, including the conclusion, has been prepared for and
only for the Company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
11 August 2017
Consolidated income statement
for the half year to 30 June
2017 2016
========================================= ------------------------------------------
Before Acquisition After Before Acquisition After
acquisition related acquisition acquisition related acquisition
related costs related related costs related
costs (note 4) costs costs (note 4) costs
Notes GBPm* GBPm* GBPm* GBPm* GBPm* GBPm*
------------ ------------- ------------ ------------ ------------- -------------
Revenue 3 156.8 - 156.8 147.2 - 147.2
Cost of sales (4.5) - (4.5) (4.3) - (4.3)
============ ============= ============ ------------ ------------- -------------
Trading profit 152.3 - 152.3 142.9 - 142.9
Administrative
expenses (128.2) (2.3) (130.5) (121.5) (3.7) (125.2)
============ ============= ============ ------------ ------------- -------------
Operating profit 3 24.1 (2.3) 21.8 21.4 (3.7) 17.7
Finance revenue 0.5 - 0.5 0.6 - 0.6
Finance costs (0.1) (0.3) (0.4) (0.2) (0.6) (0.8)
============ ============= ============
Profit before
taxation 24.5 (2.6) 21.9 21.8 (4.3) 17.5
Taxation 5 (6.2) 0.6 (5.6) (5.4) 0.9 (4.5)
============ ============= ============ ------------ ------------- -------------
Profit for the
period 18.3 (2.0) 16.3 16.4 (3.4) 13.0
============ ============= ============ ------------ ------------- -------------
Attributable to:
Equity holders
of the Parent
Company 17.2 (2.0) 15.2 15.9 (3.4) 12.5
Non-controlling
interests 1.1 - 1.1 0.5 - 0.5
============ ============= ============ ------------ ------------- -------------
Profit for the
period 18.3 (2.0) 16.3 16.4 (3.4) 13.0
============ ============= ============ ------------ ------------- -------------
Earnings per
share
Basic 6 57.5p 50.8p 52.9p 41.7p
Diluted 6 57.4p 50.7p 52.3p 41.3p
============ ============= ============ ------------ ------------- -------------
* Unaudited
Consolidated statement of comprehensive income
for the half year to 30 June
2017 2016
GBPm* GBPm*
======= -------
Profit for the period 16.3 13.0
Other comprehensive (loss)/income:
Items that will not be reclassified to profit or loss:
Actuarial gain/(loss) on employee benefit schemes - net of tax 2.3 (3.3)
Items that may be reclassified subsequently to profit or loss:
Foreign exchange differences on retranslation of foreign operations (7.4) 36.7
Foreign currency hedge - net of tax 3.5 (3.7)
======= -------
Other comprehensive (loss)/income (1.6) 29.7
======= -------
Total comprehensive income for the period 14.7 42.7
======= -------
Attributable to:
Equity holders of the Parent Company 13.7 41.8
Non-controlling interests 1.0 0.9
======= -------
Total comprehensive income for the period 14.7 42.7
======= -------
* Unaudited
Consolidated balance sheet
as at 30 June
Notes
2017 2016 31 December 2016
GBPm* GBPm* GBPm+
======== -------- -----------------
Non-current assets
Property, plant and equipment 28.9 30.2 30.0
Investment property 1.2 1.2 1.2
Intangible assets 8 293.7 292.9 300.5
Trade and other receivables 1.8 1.6 1.8
Investments 4.3 1.9 4.1
Employee benefits 12 10.2 - 7.5
Deferred tax asset 10.6 12.6 12.8
======== -------- -----------------
350.7 340.4 357.9
======== -------- -----------------
Current assets
Inventories 0.6 0.8 0.7
Trade and other receivables 58.2 73.2 56.7
Income tax receivable 1.0 3.5 2.3
Investments 9 5.4 5.7 29.8
Cash and cash equivalents 10 117.4 106.3 154.0
======== -------- -----------------
182.6 189.5 243.5
======== -------- -----------------
Current liabilities
Interest-bearing loans and borrowings 11 - (23.3) (23.6)
Trade and other payables (97.3) (111.2) (142.3)
Income tax payable (6.3) (6.6) (6.5)
========
(103.6) (141.1) (172.4)
======== -------- -----------------
Net current assets 79.0 48.4 71.1
======== -------- -----------------
Non-current liabilities
Trade and other payables (10.8) (10.3) (11.3)
Provisions (0.1) - (0.1)
Employee benefits 12 (4.7) (7.2) (5.2)
Deferred tax liability (5.7) (3.5) (5.7)
======== -------- -----------------
(21.3) (21.0) (22.3)
======== -------- -----------------
Net assets 408.4 367.8 406.7
======== -------- -----------------
Capital and reserves
Share capital 13 7.6 7.6 7.6
Other reserves 236.9 223.3 240.1
Retained earnings 162.0 134.5 155.8
======== -------- -----------------
Equity attributable to shareholders of the Parent Company 406.5 365.4 403.5
Non-controlling interests 1.9 2.4 3.2
======== -------- -----------------
Total equity 408.4 367.8 406.7
======== -------- -----------------
* Unaudited
+ Audited
Consolidated statement of changes in equity
for the half year to 30 June
Attributable to equity holders of the Parent Company
============================================================
Notes Total
Share capital Other reserves Retained earnings Total Non-controlling equity
GBPm* GBPm* GBPm* GBPm* interests GBPm* GBPm*
============== =============== ================== ======= ================== ========
Balance at 1
January 2017 7.6 240.1 155.8 403.5 3.2 406.7
============== =============== ================== ======= ================== ========
Profit for the
period - - 15.2 15.2 1.1 16.3
Other
comprehensive
income:
Actuarial gain
on employee
benefit
schemes
- net of tax - - 2.3 2.3 - 2.3
Foreign
exchange
differences on
retranslation
of foreign
operations - (7.3) - (7.3) (0.1) (7.4)
Foreign
currency hedge
- net of tax - 3.5 - 3.5 - 3.5
============== =============== ================== ======= ================== ========
Total
comprehensive
(loss)/income
for the period - (3.8) 17.5 13.7 1.0 14.7
============== =============== ================== ======= ================== ========
Transactions with
owners:
Employee share
schemes - 0.6 1.1 1.7 - 1.7
Tax on other
employee
benefits - - 0.6 0.6 - 0.6
Tax on other
items in
equity - - 0.1 0.1 - 0.1
Dividend paid 7 - - (13.1) (13.1) (2.3) (15.4)
============== =============== ================== ======= ================== ========
- 0.6 (11.3) (10.7) (2.3) (13.0)
============== =============== ================== ======= ================== ========
Balance at 30
June 2017 7.6 236.9 162.0 406.5 1.9 408.4
============== =============== ================== ======= ================== ========
Attributable to equity holders of the Parent Company
------------------------------------------------------------
Notes Total
Share capital Other reserves Retained earnings Total Non-controlling equity
GBPm* GBPm* GBPm* GBPm* interests GBPm* GBPm*
-------------- --------------- ------------------ ------- ------------------ --------
Balance at 1
January 2016 7.6 194.2 136.2 338.0 2.9 340.9
-------------- --------------- ------------------ ------- ------------------ --------
Profit for the
period - - 12.5 12.5 0.5 13.0
Other
comprehensive
income:
Actuarial loss
on employee
benefit
schemes
- net of tax - - (3.3) (3.3) - (3.3)
Foreign
exchange
differences on
retranslation
of foreign
operations - 36.3 - 36.3 0.4 36.7
Foreign
currency hedge
- net of tax - (3.7) - (3.7) - (3.7)
-------------- --------------- ------------------ ------- ------------------ --------
Total
comprehensive
income for the
period - 32.6 9.2 41.8 0.9 42.7
-------------- --------------- ------------------ ------- ------------------ --------
Transactions with
owners:
Employee share
schemes - (3.5) 1.0 (2.5) - (2.5)
Tax on other
employee
benefits - - 0.1 0.1 - 0.1
Tax on other
items in
equity - - (0.1) (0.1) - (0.1)
Dividend paid 7 - - (11.9) (11.9) (1.4) (13.3)
-------------- --------------- ------------------ ------- ------------------ --------
- (3.5) (10.9) (14.4) (1.4) (15.8)
-------------- --------------- ------------------ ------- ------------------ --------
Balance at 30
June 2016 7.6 223.3 134.5 365.4 2.4 367.8
-------------- --------------- ------------------ ------- ------------------ --------
* Unaudited
Consolidated cash flow statement
for the half year to 30 June
Notes 2017 2016
GBPm* GBPm*
Cash flows from operating activities
Profit before taxation 21.9 17.5
Adjustments for:
Foreign exchange differences 4.5 (4.2)
Depreciation of property, plant and equipment 2.4 2.5
Share-based payment expense 0.8 0.9
Profit on sale of property, plant and equipment (0.1) -
Amortisation of intangibles 1.8 3.2
Difference between pension contributions paid
and amount recognised in the income statement (0.6) (1.1)
Finance revenue (0.5) (0.6)
Finance costs 0.4 0.8
Decrease in inventories 0.1 0.1
Increase in trade and other receivables (4.2) (13.0)
Decrease in bonus accrual (32.0) (38.6)
(Decrease)/increase in trade and other payables (5.9) 8.4
Decrease in provisions - (0.1)
======= -------
Cash utilised from operations (11.4) (24.2)
Income tax paid (3.2) (4.9)
======= -------
Net cash flow from operating activities (14.6) (29.1)
======= -------
Cash flows from investing activities
Interest received 0.4 0.4
Purchase of property, plant and equipment (1.6) (1.1)
Proceeds from sale of property, plant and equipment 0.1 0.1
Transfer from current investments (funds on deposit) 24.1 -
Acquisition of subsidiaries, including settlement of deferred consideration (24.4) (23.7)
Dividends received from investments 0.1 0.1
======= -------
Net cash flow from investing activities (1.3) (24.2)
======= -------
Cash flows from financing activities
Interest paid (0.1) (0.2)
Dividend paid 7 (13.1) (11.9)
Dividend paid to non-controlling interests (2.3) (1.4)
ESOP shares acquired - (4.8)
======= -------
Net cash flow from financing activities (15.5) (18.3)
======= -------
Net decrease in cash and cash equivalents (31.4) (71.6)
Cash and cash equivalents at 1 January 154.0 168.4
Net foreign exchange differences (5.2) 9.5
======= -------
Cash and cash equivalents at 30 June 10 117.4 106.3
======= -------
* Unaudited
Notes to the interim financial statements
1 Corporate information
The interim financial statements of Clarkson PLC for the six
months ended 30 June 2017 were authorised for issue in accordance
with a resolution of the Directors on 11 August 2017. Clarkson PLC
is a Public Limited Company, listed on the London Stock Exchange,
incorporated and registered in England and Wales and domiciled in
the UK.
The interim financial statements do not comprise statutory
accounts within the meaning of section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2016 were
approved by the Board of Directors on 10 March 2017 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.
Copies of the interim report will be circulated to all
shareholders and will also be available from the registered office
of the Company at Commodity Quay, St. Katharine Docks, London E1W
1BF and on www.clarksons.com.
2 Statement of accounting policies
2.1 Basis of preparation
The interim financial statements for the six months ended 30
June 2017 have been prepared in accordance with the Disclosure
Guidance and Transparency Rules sourcebook of the Financial Conduct
Authority and with IAS 34 'Interim Financial Reporting' as adopted
by the European Union.
The interim financial statements do not include all the
information and disclosures required in the annual financial
statements, and should be read in conjunction with the Group's
annual financial statements for the year ended 31 December 2016,
which were prepared in accordance with IFRSs as adopted by the
European Union.
The Group has considerable financial resources available and a
strong balance sheet. As a result of this, the Directors believe
that the Group is well placed to manage its business risks
successfully, despite the challenging market backdrop. The
Directors have a reasonable expectation that the Group has
sufficient resources to continue in operation for at least the next
12 months. For this reason, they continue to adopt the going
concern basis in preparing the financial statements.
The interim consolidated income statement is shown in columnar
format to assist with understanding the Group's results by
presenting profit for the period before acquisition related costs;
this is referred to as underlying profit. The column 'acquisition
related costs' includes the amortisation of intangible assets
acquired through business combinations, the expensing of the cash
and share-based elements of consideration linked to ongoing
employment obligations on acquisitions and interest on the loan
note obligations.
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 2016, 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
-- Amendment to IAS 19, 'Employee benefits' regarding defined benefit plans
-- Amendment to IFRS 10, 'Consolidated financial statements' and
IAS 28, 'Investments in associates and joint ventures'
-- Amendment to IFRS 11, 'Joint arrangements'
-- Amendments to IAS 1, 'Presentation of financial statements'
There were no other new IFRSs or interpretations issued by the
IFRS Interpretation Committee (IFRS IC) that had to be implemented
during the period that significantly affects these interim
financial statements.
As at the date of authorisation of these interim financial
statements, the following standards and interpretations were in
issue but not yet effective (and in some cases had not yet been
adopted by the EU). The Group has not applied these standards and
interpretations in the preparation of these financial
statements.
-- IFRIC 23 'Uncertainty over income tax treatments', effective
from 1 January 2019 and not yet endorsed by the EU.
-- Amendment to IAS 7, 'Statement of cash flows' regarding the
disclosure initiative is not yet EU endorsed.
-- Amendment to IAS 12, 'Income taxes' regarding recognition of
deferred tax assets for unrealised losses is not yet EU
endorsed.
-- Annual improvements to IFRSs: 2014-2016 is not yet EU endorsed.
-- IFRS 9, 'Financial instruments', effective from 1 January 2018. The standard applies to the classification and measurement of financial assets and financial liabilities, impairment provisioning and hedge accounting.
-- IFRS 15, 'Revenue from contracts with customers', effective
from 1 January 2018. This standard deals with revenue recognition
and establishes principles for reporting useful information to
users of financial statements about the nature, amount, timing and
uncertainty of revenue and cash flows arising from an entity's
contracts with customers.
-- IFRS 16, 'Leases', effective from 1 January 2019. This
standard requires lessees to recognise a lease liability reflecting
future lease payments and a 'right-of-use asset' for virtually all
lease contracts.
The impact on the Group's financial statements of the future
adoption of these and other new standards and interpretations is
still under review and disclosure will be provided in the annual
report for the year ended 31 December 2017.
There were no other new IFRSs or IFRS IC interpretations that
are not yet effective that would be expected to have a material
impact on the Group.
2.3 Accounting judgements and estimates
The preparation of the interim financial statements requires
management to make judgements, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities at the
reporting date. However, uncertainty about these assumptions and
estimates could result in outcomes that could require a material
adjustment to the carrying amount of the asset or liability
affected in the future.
In preparing these interim financial statements, the significant
judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the
same as those that applied to the consolidated financial statements
for the year ended 31 December 2016, 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 interim report are forward-looking.
Although the Group believes that the expectations reflected in
these forward-looking statements are reasonable, it can give no
assurance that these expectations will prove to have been correct.
Because these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward-looking statements. The Group undertakes no
obligation to update any forward-looking statements whether as a
result of new information, future events or otherwise.
3 Segmental information
For the half year to 30 June
Revenue Results
====== -------- ====== --------
2017 2016 2017 2016
GBPm GBPm GBPm GBPm
====== -------- ====== --------
Broking 118.0 115.5 21.0 19.3
Financial 23.2 16.7 5.0 2.4
Support 8.3 8.3 0.7 0.8
Research 7.3 6.7 2.4 2.3
====== -------- ====== --------
Segment revenue/underlying profit 156.8 147.2 29.1 24.8
====== --------
Head office costs (5.0) (3.4)
====== --------
Operating profit before acquisition related costs 24.1 21.4
Acquisition related costs (2.3) (3.7)
====== --------
Operating profit after acquisition related costs 21.8 17.7
Finance revenue 0.5 0.6
Finance costs (0.4) (0.8)
======
Profit before taxation 21.9 17.5
Taxation (5.6) (4.5)
====== --------
Profit for the period 16.3 13.0
====== --------
All revenue is generated externally.
4 Acquisition related costs
Included in acquisition related costs are cash and share-based
payment charges of GBP0.5m (2016: GBP0.5m) relating to previous
acquisitions. These are contingent on employees remaining in
service and are therefore spread over the service period. Also
included is GBP1.8m (2016: GBP3.2m) relating to amortisation of
intangibles acquired as part of the Platou acquisition. Interest on
the loan notes issued as part of the Platou acquisition totals
GBP0.3m (2016: GBP0.6m).
5 Taxation
Income tax expense is recognised based on management's best
estimate of the weighted average annual income tax rate expected
for the full financial year. The estimated average annual tax rate,
excluding acquisition related costs, used for the year to 31
December 2017 is 25% (the estimated tax rate used for the six
months ended 30 June 2016 was 25%). The effective tax rate, after
acquisition related costs, is 25.4% (2016: 25.9%).
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:
For the half year to 30 June
2017 2016
GBPm GBPm
========= ---------
Profit for the period attributable to ordinary equity holders of the Parent Company 15.2 12.5
========= ---------
2017 2016
Million Million
========= ---------
Weighted average number of ordinary shares - basic 30.1 29.9
Dilutive effect of share options and acquisition related share awards - 0.3
========= ---------
Weighted average number of ordinary shares - diluted 30.1 30.2
========= ---------
7 Dividends
For the half year to 30 June
2017 2016
GBPm GBPm
====== ------
Declared and paid during the period:
Final dividend for 2016 of 43p per share (2015: 40p per share) 13.1 11.9
======
Payable (not recognised as a liability at 30 June):
Interim dividend for 2017 of 23p per share (2016: 22p per share) 7.0 6.6
====== ------
8 Intangible assets
Goodwill and other intangible assets are held in the currency of
the businesses acquired and are subject to foreign exchange
retranslations to the closing rate at each period end. As a result
of this retranslation, at 30 June 2017 the carrying value of
goodwill decreased by GBP4.9m and the carrying value of other
intangible assets decreased by GBP0.1m.
9 Investments
Included within current investments is GBP5.4m held in a deposit
with a 95 day notice period (30 June 2016: GBP5.4m, 31 December
2016: GBP19.4m). At 31 December 2016, the Group also held GBP10.0m
in a deposit with a maturity of six months. These deposits are held
with an A-rated financial institution.
10 Cash and cash equivalents
30 June 30 June
2017 2016 31 December 2016
GBPm GBPm GBPm
======== -------- -----------------
Cash at bank and in hand 110.7 98.7 147.7
Short-term deposits 6.7 7.6 6.3
======== -------- -----------------
117.4 106.3 154.0
======== -------- -----------------
Net cash and available funds, after deducting amounts accrued
for performance-related bonuses but including current investments,
amounted to GBP71.4m (30 June 2016: GBP46.7m, 31 December 2016:
GBP74.8m).
11 Interest-bearing loans and borrowings
Interest-bearing loans and borrowings comprised the vendor loan
notes issued as part of the consideration for the Platou
acquisition. Interest was charged at 12 month sterling LIBOR plus
1.25%. Half the loan notes were repaid on 30 June 2016, the balance
of GBP23.9m was repaid on 30 June 2017.
12 Employee benefits
The Group operates three 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
2017 2016 31 December 2016
GBPm GBPm GBPm
======== -------- -----------------
Fair value of schemes' assets 203.0 184.4 200.5
Present value of funded defined benefit obligations (193.1) (189.3) (194.1)
======== -------- -----------------
9.9 (4.9) 6.4
Minimum funding requirement in relation to the Plowrights scheme (4.4) (2.3) (4.1)
======== -------- -----------------
Net benefit asset/(liability) recognised in the balance sheet 5.5 (7.2) 2.3
======== -------- -----------------
Net deferred tax (liability)/asset on above asset/(liability) (0.9) 1.1 (0.4)
======== -------- -----------------
Recognised in the income statement
2017 2016
GBPm GBPm
====== ------
Recognised in other finance costs - pensions:
Expected return on schemes' assets 2.6 3.2
Interest cost on benefit obligation and minimum funding requirement (2.6) (3.2)
Recognised in administrative expenses:
Scheme administrative expenses (0.1) (0.1)
====== ------
Net benefit charge recognised in the income statement (0.1) (0.1)
====== ------
13 Share capital
30 June 2017 30 June 2016 31 December 2016 30 June 2017 30 June 2016 31 December 2016
Million Million Million GBPm GBPm GBPm
============= ------------- ----------------- ============= ------------- -----------------
Ordinary shares of
25p each,
issued and fully
paid 30.2 30.2 30.2 7.6 7.6 7.6
============= ------------- ----------------- ============= ------------- -----------------
14 Contingencies
From time to time the Group is engaged in litigation in the
ordinary course of business. The Group carries professional
indemnity insurance. There is currently no litigation expected to
have a material adverse financial impact on the Group's
consolidated results or net assets.
15 Principal risks and uncertainties
The Directors consider that the nature of the principal risks
and uncertainties which may have a material effect on the Group's
performance in the second half of the year is unchanged from those
identified in the risk management section of the 2016 annual report
on pages 38 to 41. These include strategic risk, reputational risk,
operational risk, people risk and financial risk. Note 26 of the
2016 annual report sets out the financial risk management
objectives and policies of the Group. These are also unchanged from
the year-end.
16 Related party disclosures
The Group's significant related parties are as disclosed in the
2016 annual report. There were no material differences in related
parties or related party transactions in the period ended 30 June
2017.
17 Financial instruments
Fair value measurements apply to the foreign currency contracts
of GBP1.9m liability at 30 June 2017 (GBP6.2m liability at 31
December 2016). These are classified as level 2. The method for
determining the hierarchy and fair value is consistent with that
used at the year-end, as disclosed on page 115 of the 2016 annual
report. Investments in unlisted ordinary shares are carried at cost
because a fair value cannot be determined reliably.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FMGMRNMRGNZM
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