TIDMCKN
RNS Number : 3344H
Clarkson PLC
12 March 2018
12 March 2018
Clarkson PLC (Clarksons) is the world's leading provider of
integrated shipping services. From offices in 22 countries on six
continents, we play a vital intermediary role in the movement of
the majority of commodities around the world.
Preliminary results
Clarkson PLC today announces preliminary results for the 12
months ended 31 December 2017.
Summary
-- Strong performance aided by early signs of recovery across shipping markets
-- Underlying profit before taxation increased 12% to GBP50.2m (2016: GBP44.8m)
-- Underlying earnings per share up 11% to 116.8p (2016: 105.2p)
-- Robust balance sheet, including a 14% increase in free cash
resources(1) to GBP54.1m (2016: GBP47.3m)
-- Dividend increased by 12% to 73p; 15 years of consecutive dividend increases
(1) Free cash resources are cash and cash equivalents and
current investment deposits, after deducting amounts accrued for
performance-related bonuses, outstanding loan notes and monies held
by regulated entities.
Year ended Year ended
31 December 31 December
2017 2016
Revenue GBP324.0m GBP306.1m
Underlying profit before taxation* GBP50.2m GBP44.8m
Reported profit before taxation GBP45.4m GBP47.3m
Underlying earnings per share* 116.8p 105.2p
Reported earnings per share 104.4p 119.7p
Dividend per share 73p 65p
* Before acquisition related costs of GBP4.8m (2016: exceptional
income of GBP11.1m and acquisition related costs of GBP8.6m)
Andi Case, Chief Executive Officer, commented:
"I am pleased to report another year of strong growth as we have
consolidated our market-leading position and continue to innovate
and expand our offering to keep Clarksons at the forefront of the
shipping industry.
"The business continues to generate significant cash flows to
fund investment and drive shareholder returns, reflected in our
15(th) year of consecutive increased dividend pay-out. We believe
2018 will be a year of continued growth as early indicators of
recovery are showing across our core markets. With our broad, 'best
in class' offering across the shipping sector, Clarksons is well
positioned to capitalise on the opportunities this presents."
Enquiries:
Clarkson PLC:
Andi Case, Chief Executive Officer
Jeff Woyda, Chief Financial Officer
and Chief Operating Officer 020 7334 0000
Camarco:
Billy Clegg 020 3757 4983
Jennifer Renwick / 4994
Alternative performance measures (APMs)
Clarksons uses APMs as key financial indicators to assess the
underlying performance of the Group. Management considers the APMs
used by the Group to better reflect business performance and
provide useful information. Our APMs include underlying profit
before taxation and underlying earnings per share. An explanation
of the term 'underlying' and related calculations are included
within the financial review.
About Clarkson PLC
Clarkson PLC is the world's leading provider of integrated
services and investment banking capabilities to the shipping and
offshore markets, facilitating global trade.
Founded in 1852, Clarksons offers its diverse and growing client
base an unrivalled range of shipbroking services, sector research,
on-hand logistical support and full investment banking capabilities
in all key shipping and offshore sectors. Clarksons continues to
drive innovation across its business, developing digital solutions
which underpin the Company's unrivalled expertise and knowledge
with leading technology.
The Group employs 1,546 people in 48 different offices across
its four divisions and is number one or two in all its market
segments.
The Company has delivered 15 years of consecutive dividend
growth. The highly cash-generative nature of the business,
supported by a strong balance sheet, has enabled Clarksons to
continue to invest to position the business to capitalise on the
upturn in its markets.
Clarksons is listed on the main market of the London Stock
Exchange under the ticker CKN and is a member of the FTSE 250
Index.
For more information, visit www.clarksons.com.
Chair's review
Overview
This year the shipping market has displayed some early signs of
a recovery following a sustained period of challenging trading
conditions for the industry. Despite ongoing headwinds in certain
sectors, the strengthening of the broader global economy during
2017 has boosted the shipping market, highlighted within dry cargo
where the Baltic Dry Index ended the year 42% higher than it
started. Whilst we remain cautious about the near-term direction of
the industry, we are pleased to report that Clarksons has once
again delivered a confident performance on the back of this wider
macro-economic improvement and continues to deliver substantial
value to our shareholders. Improvements across a number of
divisions over the past year have been particularly pleasing,
notably in the dry cargo freight market and container sector, as
well as the strong performance in investment banking and project
finance.
Against this backdrop, we have consolidated our position as
market leader, increasing our market activity through a mixture of
innovation, investment and a continued commitment to providing a
'best in class' offering. We have made significant investments in
technology over the past 12 months, ensuring that Clarksons not
only remains at the forefront of the shipping industry, but
continues to innovate and develop new services for our clients.
Our position at the heart of the shipping industry has been
built over 166 years, based on a fundamental dedication to our
clients, and providing them with a unique, tailored service that
offers an unrivalled understanding of the sector.
As market leaders, we have an opportunity to set new benchmarks
for best practice in the sector and to create and shape the next
generation of broking, banking, market analysis and technology.
This has been a key area of focus for Clarksons in 2017 and we are
very pleased with the progress we have made during the year.
Clarksons continues to pioneer new ways of doing business in the
shipping industry and is well positioned to capitalise on this
investment in 2018 and beyond.
Results
Underlying profit before taxation was GBP50.2m (2016: GBP44.8m).
Reported profit before taxation was GBP45.4m (2016:
GBP47.3m).Underlying earnings per share was 116.8p (2016: 105.2p).
Reported earnings per share was 104.4p (2016: 119.7p).
As explained in the financial review, free cash resources at 31
December 2017 were GBP54.1m (2016: GBP47.3m).
Dividend
Clarksons has maintained its impressive dividend record this
year, having increased it every year since 2002. In line with this
progressive dividend policy, the Board is recommending a final
dividend of 50p (2016: 43p). Coupled with the interim dividend of
23p (2016: 22p), the resulting full year dividend is up 12% to 73p
(2016: 65p), making it the 15th consecutive year of dividend
growth.
The dividend will be payable on 1 June 2018 to shareholders on
the register at 18 May 2018, subject to shareholder approval.
Clarksons remains a highly cash-generative business and,
following the repayment of the outstanding loan notes during 2017,
is now debt-free with a strong balance sheet. The current state of
our markets means that there are a number of exciting opportunities
for growth and the creation of shareholder value, which remains our
primary goal. The Board intends to capitalise on these
opportunities as a priority, whilst continuing to hold firm to our
progressive dividend policy.
People
Our colleagues and their hard work and expertise are at the
centre of Clarksons' continued success, and underpin our commitment
to providing a 'best in class' global offering. We have continued
to invest in and develop talent throughout 2017, as seen by the
opening of new offices in Tokyo and Seoul, the hiring of a number
of key individuals globally across many business lines and the
extension of banking activities into convertible bonds and broking
activities into wet FFAs. We take our position as the leading
sector employer very seriously, and are committed to continually
setting new industry benchmarks of excellence. I would like to
thank all our colleagues for their hard work and dedication in
2017.
Board
Peter Backhouse, Senior Independent Director, and I have been
interviewing prospective successors for Ed Warner on the Board and
as Chair of the remuneration committee, and expect to be able to
announce a new appointment to the Board this year. When a suitable
candidate is found, Ed will retire from the Board and as Chair of
the remuneration committee, having served nine years as an
independent Non-Executive Director.
Outlook
The near-term future for the shipping markets remains mixed, but
we have seen improvements in a number of our markets and are
beginning to see the first signs of a broader industry turnaround.
Clarksons remains well positioned for an industry upturn given our
strong financial position, unrivalled sector expertise and the
continual development of innovative client offerings across the
sector.
James Hughes-Hallett
Chair
9 March 2018
Chief Executive Officer's review
I am pleased to report another strong performance from Clarksons
in 2017 as the business achieved revenue of GBP324.0m, representing
growth of 6%.
Through our commitment to differentiate our offering by
innovating and constantly developing our capabilities, we have
reinforced our position at the forefront of the shipping industry
and delivered another year of profitable growth, resulting in a
15th consecutive year of dividend growth for our shareholders.
The continued overall recalibration of the shipping markets is a
positive sign to the markets. However, movement in sectoral
demand/supply balances have once again shown how reactive the
individual markets are to such balances. The rising cost of steel
and currency movements have led to the continued slowing of fleet
growth through lower levels of newbuildings. This, together with
reasonable levels of end of life recycling enabled by high scrap
steel prices, are key factors in changing the demand/supply
imbalance, which in turn supports an improvement in rates and asset
values in a number of sectors.
The sector showing most improvement was the dry cargo market,
evidenced by the strong recovery in the Baltic Dry Index, although
some of these gains were tempered by other sectors such as deep sea
tankers and LPG which saw continued deliveries into already fully
supplied markets. Overall in 2017, the average of the ClarkSea
Index, which measures earnings for most of the main vessels in bulk
shipping, was 14% higher than last year.
As shipping represents in the order of 85% of world trade, we
must always remain cautious of geo-political and macro-economic
factors. We start 2018, as we did 2017, with lower forward
visibility of earnings from a lower forward order book. This
reflects both the reduced levels of newbuilding orders and lower
period business done in the market in recent times, as highlighted
last year. Nevertheless, spot volumes and rates have been
improving, which during 2017 more than offset the lower forward
order book brought forward, and produced increased revenue across
the business.
We continue to place great emphasis on ensuring we are the
advisors of choice across all of our divisions. This strategy of
diversification and being 'best in class' in all verticals has
served us well and should be a driver for growth as more of our
markets see better times.
Overall, the broking teams enjoyed a successful year as,
generally, market conditions improved. Dry cargo performed
significantly better during 2017, with spot earnings reaching the
highest level in five years, and following a protracted downturn,
the offshore markets started to see some signs of renewed interest
following the sustained strengthening of the oil price during the
second half. There were also improvements seen in the specialised
products and futures markets, with the secondhand sale and purchase
team having a particularly strong year.
Clarksons Research had another year of strong revenue growth as
it continues to establish itself as the market-leading provider of
intelligence and data across the shipping, trade, offshore and
energy markets. 2017 was a period of focused investment in new
products and technologies, which muted profit growth, but will
provide an improved platform for the future. Our clients recognise
the invaluable contribution that Clarksons' trusted intelligence
can provide in both helping them to set strategy and enabling fast
and effective short-term decision-making.
The financial division performed strongly during the year.
Clarksons Platou Securities completed an increased number of
corporate transactions, including high profile activity in the
equity and debt capital markets, continued activity in
restructurings and a number of M&A transactions. The successful
roll out of our metals and mining business during 2017 and the
recent addition of a convertible bond team further adds to the
extensive services we are able to deliver to our clients. The
project finance market has also seen increased activity,
particularly in the real estate sector, where our team in Oslo have
been both busy and effective, and the dry cargo and container
sectors, where clients are looking to benefit from the long awaited
upturn.
The port services team has had another profitable year, having
benefited as the year unfolded from the upturn in activity in the
oil and gas industry. The team has continued to expand into new
markets and has made several hires, strengthening its offering.
As global trade evolves, we recognise the need to constantly
innovate and improve to strengthen further our leading position in
the sector. During the year, Clarksons has focused particularly on
driving digital change, investing in developing digital solutions
and pioneering innovative technology to shape the shipping industry
and complement our existing business. Whilst it is early days, I am
delighted to report increasing adoption of the Clarksons Cloud
platform, both internally, where our teams are benefiting hugely
from improved information flows and tools to help decision-making
and improved connectivity to clients, and externally, where a
number of high profile clients have adopted our tools, particularly
through our collaboration in launching Recap Manager with the
London Tanker Brokers' Panel, and more generally through our
operations platform, Gateway.
Despite industry-leading technology investment, in the second
half of the year, as announced to the market, Clarksons was subject
to a cyber security incident. The team responded rapidly and
decisively and whilst the eventual impact on the business was
minimal, and at no time was the Clarksons Cloud impacted, we have
put in place extensive additional security measures to best prevent
a similar incident happening in the future.
A leading edge offering across finance, broking, research,
support and technology must be delivered by a first class team, and
we have continued to invest in the best talent globally as we
strive to deliver 'best in class' service to all our clients. Our
office network has grown further to include offices in Japan and
Korea as we continue to supplement our global capabilities with
local expert knowledge. In addition, we have made a number of key
hires in dry cargo, securities, structured asset finance, futures,
port services, IT, data collection and operations. I would like to
thank all of our employees for their hard work and dedication to
Clarksons' success during 2017.
We are encouraged by the rebalancing of supply and demand we are
seeing across the shipping industry, with activity levels picking
up across a number of our key markets. The strengthening of the oil
price in the second half of 2017 has been particularly beneficial
to the offshore markets, whilst our financial teams have also
profited from an improved economic outlook in both shipping and
offshore. Increasing levels of industrial production and continued
infrastructure spend in some of the world's major economies provide
further momentum for growth in the medium-term.
Clarksons remains at the forefront of the shipping industry and
our investment in cutting edge digital solutions will enable us to
offer our clients a unique and innovative platform to support their
business needs. Our commitment to providing 'best in class'
service, combined with our global reach and unrivalled market
insights, has enabled us to deliver another year of profitable
growth and market share gains and positions us well for the coming
year.
Andi Case
Chief Executive Officer
9 March 2018
Business review
Broking
Revenue: GBP238.9m (2016: GBP233.6m)
Segment underlying profit: GBP43.9m (2016: GBP40.2m)
Forward order book for 2018: US$93m* (At 31 December 2016 for
2017: US$112m*)
* Directors' best estimate of deliverable forward order book
(FOB)
In a year when the Baltic Dry Index increased by 42% and the
container sector continued to make gains on 2016, our broking
division delivered meaningful growth in both revenues and
margins.
Dry cargo
The dry cargo freight market performed significantly better in
2017 as seaborne trade continued to absorb excess fleet capacity.
The average Baltic Dry Index was 53% higher in 2017 than in 2016,
with spot earnings reaching the highest level in five years. The
capesize sector rates doubled on last year's average, while the
panamax sector increased by 76%, the supramax sector by 52% and the
handysize sector by 46%. The stronger rates environment led the
path for an increase in period rates and asset prices, particularly
in secondhand values.
Newbuild deliveries slowed to a nine-year low, following a
period of depressed contracting, yet a slowdown in demolition
resulted in fleet expansion of 3% year-on-year. The improved
earnings and market sentiment throughout 2017 led to an increase in
new orders for delivery from late 2019 onwards; nevertheless the
order book to fleet ratio remains at a 15-year low.
After a ten-year recessionary period following the financial
crisis, world economic growth exceeded expectations in 2017. China
was once again a key player during a year of economic and
supply-side reforms. Its industrial production has expanded
significantly since its about-turn in mid-2016, steered by the
longest upturn in housing sales in more than two years. In
addition, dry cargo demand was furthered by robust economic growth
and strong industrial production in the majority of other
nations.
Higher economic growth led to increased energy demand which
outpaced the addition of new greener energies and thereby the
ongoing reliance on coal. Emerging economies also continue to rely
on coal as the cheapest energy form to propel economic growth.
Pollution control has been a high priority, particularly in China,
which focused on quality over quantity in industrial production,
shifting the raw material demand to high quality minerals, which
are most economical from Australia and Brazil.
The demand for grains grew alongside world GDP growth and 2017
witnessed a year of plentiful supply with record crops in most
exporting countries.
The demand outlook for 2018 is more conservative with
uncertainties such as China's housing market, geo-politics, adverse
weather conditions and stricter environmental regulations. At the
same time, the slowing pace of fleet growth still indicates that
the supply/demand balance will tighten by a further 1.4%,
signifying a continued general improvement in rates, earnings and
asset values.
The Clarksons Platou dry cargo team has expanded its global
presence in 2017, with our offices strengthening on the back of
growing young teams and improving quality of business concluded.
Our Japan office is now established with its first full year of
trading. We continue to look at key strategic hires to grow and
improve our business, as all markets are giving a positive
sentiment against the strong fundamentals.
Containers
2017 saw improvements in the container shipping sector,
following the severely pressurised conditions of 2016. Box freight
rates made further gains into 2017, having bottomed out in 2016.
Although rates on some trade lanes have more recently lost some
ground, 2017 saw freight rate levels on a global basis average
around 20% above 2016 full year average levels, with the SCFI
composite index average up 27%. Against this backdrop, charter
market vessel earnings picked up from bottom of the cycle levels at
the end of the first quarter. Although there has been some
variation across ship sizes, in the main, the charter market held
onto its gains or saw further gradual upward movements in the
remainder of the year. The one-year rate for a 2,750 TEU ship stood
at US$9,350 per day at the end of 2017, 55% above the level at the
end of 2016, whilst the charter market 'basket' index rose by 35%
on the same basis.
Demand side conditions improved further in 2017, with global
trade volumes estimated to have expanded by around 5% in the full
year to 191m TEU. The rate of expansion on intra-Asian trades
accelerated further, growth on North-South trades bounced back more
quickly than expected, and volumes on the key Transpacific and Far
East-Europe trades also turned in a robust performance.
Containership fleet capacity growth remained moderate, despite
ongoing deliveries of 'mega-ships', with an expansion of 3.7% in
2017. Whilst some surplus remains in the sector, it appears to be
much reduced, with 2% of the fleet standing idle at the end of 2017
compared to around 7% a year earlier.
Sector fundamentals look set to continue improving in 2018 with
volume growth levels likely to be sustained and supply growth
projected in the 4% range. Despite the first contracts for very
large boxships in two years being signed in the autumn, the
ordering of newbuild capacity remained relatively limited at 0.7m
TEU in 2017; the order book now stands at 13% of fleet capacity.
Meanwhile, record levels of containership sale and purchase
activity were seen last year and consolidation of the sector
remains ongoing with further merger and joint operation activity
involving major operators to be concluded this year. Liner
companies still face capacity management challenges and risks
remain on the demand side, but in 2018 additional fundamental
re-balancing could well support further market improvements.
The Clarksons Platou containers team has benefited from both a
rise in sale and purchase and time charter rates, whilst at the
same time adding to market share throughout our global network. Our
chartering team is busy providing on and off market solutions to
the liner industry as they navigate through a new and consolidated
environment. The sale and purchase team has concluded significant
marquee business and has provided strong support to
institutional-backed sales where validation and execution are
paramount. Our team continues to add to its footprint with an
operational presence now in Seoul to add to our Singapore,
Shanghai, Tokyo, London, Hamburg and Oslo bases.
Tankers
As was anticipated, the tanker market weakened further in 2017.
Clarksons' published assessments of average earnings for VLCCs,
suezmaxes and aframaxes fell by 57%, 43% and 40% respectively
year-on-year, to levels well below long run averages. Products
tanker earnings also fell further, with Clarksons' earnings
assessments for LR2s and LR1s on the key Middle East-Far East route
falling by 39% and 36% respectively year-on-year, to very weak
levels historically. MRs fared somewhat better; nevertheless
Clarksons' published assessment of average earnings for 2017 was
16% lower year-on-year.
Crude tanker demand growth was restrained by OPEC and non-OPEC
production cuts that took effect from the start of 2017. However,
vessel demand did continue to grow, driven by an increase of 0.8m
barrels per day in Chinese crude imports and rising crude exports
from the US, Brazil and Kazakhstan, as well as Nigeria and Libya
which were exempt from the cuts. The OPEC cuts meant that growing
crude oil requirements in Asia were met by increased long-haul
shipments from West of Suez. Products tanker demand also continued
to grow, but growth was restrained by the high levels of products
inventories that had built up previously and competition between
naphtha and LPG in the petrochemicals sector.
The crude tanker fleet size increased sharply for a second
successive year, registering growth of 5.2%, following growth of
6.0% in 2016. Deliveries of new crude tanker tonnage rose to 27.8m
dwt in 2017 versus 21.0m dwt in 2016, however the weaker freight
market and higher prices on offer for selling vessels for
demolition meant that scrapping rose substantially to 9.2m dwt,
compared to 1.6m dwt in 2016. Products tanker net fleet growth fell
to 3.9% in 2017, from 6.2% in 2016 and 5.4% in 2015. However, the
overhang of tonnage that had built up in the previous two years,
combined with slightly below average growth in trade, meant that
the market weakened further. Products tanker demolition also
increased, with 2.1m dwt removed from the market, compared to 0.8m
dwt in 2016. Deliveries in the MR sector were reduced from previous
years' levels, but deliveries of LR products tankers rose
slightly.
In 2018, crude tanker fleet growth is projected to fall to 3.4%
with deliveries declining somewhat and removals expected to
increase further. OPEC and non-OPEC production cuts are due to
continue to the end of the year, therefore vessel demand growth is
expected to be driven once again by large increases in crude
imports into Asia and growth in exports from predominantly the US,
Brazil and Kazakhstan. The crude tanker sector seems likely to
remain challenging in 2018, with the market expected to recover
from 2019 when production cuts are due to end and fleet growth is
expected to reduce further. There appears to be more upside
potential in 2018 for products tankers. Fleet growth is projected
to fall to 2.2%, which is below long-run levels of trade growth.
Robust growth in global oil demand is projected and a further
running down of oil products inventories may stimulate greater
growth in volumes of trade and vessel demand.
We are now well established in every major tanker chartering
hub, further proof that our global approach has been successful. We
remain focused on increasing our volumes with Chinese accounts.
Our Clarksons Platou tankers team were successful during the
year in commencing a working relationship with two target accounts,
proving that opportunities still exist to enhance our client
portfolio. Our pioneering IT applications, a key part of our
overall IT strategy, are at the forefront of the tankers industry
and provide us with confidence that we can further differentiate
ourselves from our competitors going forward.
Specialised products
Key trade lanes throughout the chemical tanker market spent most
of 2017 in a state of flux. However, in a reversal from the trend
in 2016, the second half of the year experienced more buoyant spot
markets than the first half. The Clarksons Platou Specialised Spot
Chemical Index recorded a 6.7% increase throughout the year, whilst
the Edible Oils Spot Index posted an increase to finish the year
5.3% up compared to where it began. Spot chemical freight rates
finished the year on par with the long-run average; a result that
was driven once again by a more active ex-US transpacific
market.
Period charter and asset deal volume for much of 2017 was
lacklustre due to the delta between charterers' and owners' ideas,
however activity increased in the fourth quarter. The stainless
steel sector has seen a two-tier market develop, with the gap
between older and more modern 'eco' tonnage increasing.
Overall trade volume growth in the specialised products market
was robust once again in 2017. Seaborne trade in 2017 is expected
to reach nearly 300m mts, a year-on-year increase of nearly 5%. A
combination of vast infrastructure spending, urbanisation rates,
growing populations and increasing social mobility are positive
mega-trends which continue to drive specialised products trade.
China and India remain two of the key end-user growth countries
in our markets. Based on the first ten months of 2017, China
recorded a 5.4% year-on-year rise in specialised products imports,
while India showed import growth of 5.8% year-on-year for the first
eight months of 2017. Elsewhere, the development of liquid shale
gas based projects in the US and continued Middle East investment
are clear signals that both of these regions will continue to
strive to meet the chemical demand of these, and other, developing
economies. A renewal in palm oil volumes seen towards the latter
end of the summer, as well as a reinvigorated Asian petroleum
products market, combined with resilient contract of affreightment
nominations, also helped to push volumes upward.
Turning to the other part of the tonne-mile factor, distance
growth, we note that this continued to build on gains realised in
2016. Chemical tankers on average have travelled 0.5% further per
voyage in 2017.
As expected, average annual growth for the chemical tanker fleet
in 2017 decreased. Net fleet growth in 2017 was approximately 3%,
and we believe that in the medium-term this will reduce further due
to a meagre order book and continued scrapping. The total chemical
tanker order book is now less than 7% of the fleet, representing
the lowest level for more than ten years in the sector and the
lowest across all major shipping markets.
Overall, set against a backdrop of a global economy seemingly
firing on most cylinders, continued import demand growth driven by
China and India, as well as positive indications from the US and
Middle East in terms of new liquid capacity, we believe that
seaborne volumes will continue to grow on an annual basis. Rapidly
reducing net fleet growth in the medium-term, longer trading
distances and continued issues with fleet productivity remain key
determinants for freight rates in the future. Taking this into
account, and based purely on fundamentals, we believe that the
medium to long-term outlook for the sector remains encouraging.
The Clarksons Platou specialised products team had a busy year
and 2017 once again saw us develop the breadth and depth of our
offer in this market. Despite the stagnant market backdrop, we have
grown volume across both spot, contract of affreightment and period
charter markets. Our investment in broking throughout the supply
chain from production to end-user has continued, with an approach
focused on both expertise and scale. Over the course of the year,
we have also strengthened our service level through deeper market
insight and investment in technology.
Gas
The second half of 2017 saw little change from the first half of
the year as freights remained under pressure across most segments
of the gas carrier market. Newbuilding deliveries, in conjunction
with a slowdown in the pace of seaborne LPG trade growth, failed to
lift freights and the averages for the year slipped below 2016
levels. In the VLGC sector, a total of 20 units were delivered
following the slippage of some units into 2018 and two older units
were removed from the fleet.
Tonne-miles continued to hold up as arbitrage volumes from the
US into Asia grew again on the back of strong import demand, mainly
in China, and as a result of strong growth in US export volumes
which rose by almost 17%, despite cargo cancellations throughout
the year and the delayed start-up of the Mariner East II terminal
on the East Coast. However, globally, the annual pace of LPG trade
growth slowed to 4.7% year-on-year mainly owing to a reduction in
exports from the Middle East due to maintenance and OPEC cuts.
As a result of this and the expansion of the fleet, we saw the
benchmark ME Gulf-Japan assessed rate fall 8% to a time charter
equivalent just below US$15,000 per day. The weakness in the VLGC
sector continued to weigh on the size sectors below, as did further
growth in fleet supply in both the mid and handysize sectors. In
each of these segments, we saw the fleet grow by 20% and 4%
respectively. Although we saw some recovery in ammonia trade, which
grew by 1.9% and accounts for a significant proportion of midsize
trade, the slowdown in the pace of LPG trade growth and increased
availability of tonnage saw the assessed 12 month time charter rate
fall by 37% on a 35,000 cbm unit to US$450,000 per calendar month.
This downward correction was also mirrored in the handysize sector,
with the time charter rate falling 40% to an average of just under
US$410,000 per calendar month on a 20,500 cbm semi-ref unit.
Given the growing competition for market share with the
midsizes, we increasingly saw the handysizes competing with the
smaller 12,000 and even 8,000 cbm semi-ref units for petrochemical
gas parcels, occasionally even fixing part cargoes at lower numbers
to secure employment. Volume-wise, there was little fundamental
change last year compared with 2016, and with this added
competition from the larger units, we saw rates for the 12,000 cbm
and 8,250 cbm ethylene carriers drop by 7% and 2% respectively,
despite a negligible change in fleet supply. In the smaller
semi-ref and pressure sectors sub-6,000 cbm, relatively static
fleet supply has seen freight levels bottom out and, in combination
with more positive coastal LPG and shorter haul petrochemical gas
trade, we have seen average East and West trading freight levels
for the 3,500 cbm pressure units rebound 21% to almost US$210,000
per calendar month.
Looking ahead, we are expecting continued growth in seaborne LPG
volumes albeit at a slower pace than 2017. Much will depend upon
the utilisation levels through the existing terminals in the US, as
there is only one new terminal expected to start up, and the timing
of this remains uncertain. Regarding growth from other regions, new
volumes from South Pars should add to the Middle Eastern balances,
although last year these were slow to find their way into the
international market. Ammonia trade is expected to contract
slightly next year and there is limited fundamental growth in
petrochemical export volumes, although tonne-miles for both should
grow. The main challenge for the larger vessels remains deliveries
and the overhang of surplus tonnage which was apparent through
2017. In the smallest sectors of the fleet, it would appear that
freights have started to turn a corner and with no tonnage on order
and an ageing fleet, we may see further upside from this
segment.
On the assets, the number of secondhand transactions went up in
2017 but this figure was inflated by more financial transactions,
like sale and leasebacks between private and public companies. The
total volume of contracting newbuildings was relatively steady,
although significant interest in VLGCs resurfaced from mid-year.
Given the age profile of the fleet, the expectation is that we will
see a number of overage VLGCs finally hit the beaches, which will
have a significant impact on supply/demand balances.
On the product side, given the increase in production over the
last few years, 2017 was expected to see a noticeable surplus for
the whole year. However, balances for large parts of the year were
tighter than expected as lower than predicted exports from the
Middle East Gulf added to price constricted arbitrage flows. The
market adapted to the new supply capacity, the weaker freight
market and the impact of neo Panama on timing and, towards the end
of the year, the surplus had started to kick in, dampening the
market somewhat. So far, the expected winter surge in pricing and
demand has been lower than many expected and some question the
direction the market will take in the coming months.
Our growing investment in commodity brokerage, not only in terms
of volume of trades but also geographical areas, has started to
show gains. We have made inroads into markets which, until now,
were the domain of other 'heritage' brokers who have dominated
those areas, the Mediterranean Basin for example. We also saw
growth in the number of commodity trades done out of the US and a
number of new companies added to our client list. During the year,
we took our first steps towards expanding our activity into China,
now the major LPG importer in Asia. New hires are under training
with a view to transferring to our Shanghai office within the next
one to two years, the first time we will have local staff based in
China and a move we expect to bring positive results.
LNG
The near-term LNG shipping market recovered through 2017 with a
particular strong finish to the year. The spot freight rate
assessment for modern dual-fuelled vessels averaged US$54,400 per
day for the second half of the year compared with US$37,700 per day
in the first half of 2017 and US$33,500 per day for 2016. From
July, rates more than doubled to US$82,000 per day by the end of
2017 basis round trip economics.
Strong Asian LNG demand, particularly in China, resulted in a
sustained West-East arbitrage and consequently firmer rates.
Chinese year-on-year imports were up by 47% to 38m mts in 2017 and
the country overtook South Korea as the second largest LNG
importer. Demand growth was driven by Chinese environmental
concerns, including a nationwide scheme to switch around two
million boilers to use gas and discard coal. South Korean LNG
demand was also higher for power generation due to lower nuclear
power availability.
Overall, northeast Asian demand was up 11% in the year to 174.6m
mts. This offset flat to lower imports in other regions including
the Middle East and South America. High northeast Asian LNG spot
prices towards the latter part of the year were a catalyst for an
active spot European reload market supplementing increased Atlantic
basin LNG production which was also targeting Asian buyers. US and
Angolan LNG output both rose over 300% to nearly 13m mts per annum
and 3.8m mts per annum respectively. New Atlantic basin production
increased the average distance travelled globally by each cargo in
2017 by 3% to around 3,928 nautical miles, compared with last
year's average of 3,809 nautical miles. Overall, global LNG exports
grew by 9.3% to 292m mts per annum in 2017.
Some 26 conventional LNG carriers and FSRUs were delivered in
2017 with 52 scheduled to be delivered in 2018. However, roughly
28m mts per annum of additional supply capacity is expected to come
online in 2018 and most of the order book is already committed to
projects. Additional LNG production includes the ramp up of
Australian, US and Russian projects started in the latter half of
last year, as well as new projects. This includes the US Cove Point
and Freeport projects, Australia's Ichthys, Equatorial Guinea's
Fortuna FLNG and Russia's Yamal LNG second train, amongst
others.
Two other floating liquefaction projects are scheduled to start
in 2018. Australia's large-scale Prelude FLNG is the largest vessel
ever constructed and will have 3.6m mts per annum liquefaction
capacity. Cameroon's Perenco FLNG is a conversion project with 1.2m
mts per annum capacity. A number of new liquefaction projects may
also take final investment decisions in 2018, including the US
Golden Pass, Driftwood and Rio Grande projects, and the onshore
Mozambique facility.
Qatar also indicated it would build more liquefaction capacity
after lifting the moratorium on North Field, which would provide
more gas for export. It would also debottleneck its existing
liquefaction facilities, which in total would add roughly 23m mts
per annum by 2024. Two FSRUs were installed in 2017 in Turkey and
Pakistan and FSRU import projects in Bangladesh, India, Ghana, and
the Ivory Coast are said to be scheduled to start up in 2018.
The Clarksons Platou LNG team was buoyed by the re-establishment
of its presence in Singapore and early in the year, the team
achieved a significant milestone by embarking on a successful FSRU
newbuilding programme. However, it has been another challenging
year with projects slowly materialising, re-negotiated or simply
deferred. We remain bullish on the market's fundamentals despite
this prolonged lull and we look forward to 2018 and beyond. We are
engaged in interesting projects, pursuing new opportunities and
strengthening our position in the marketplace. Our focus remains on
conventional tonnage, FSRU/FSU and small scale and we continue to
work closely with other Clarkson Platou teams to promote our range
of services and bespoke solutions to clients.
Sale and purchase
Secondhand
The year as a whole was extremely successful for the sale and
purchase department with every desk throughout the Group improving
their revenues on a like-for-like basis when compared with 2016 -
the second half of the year was particularly pleasing in terms of
market share across all sectors. It helped of course that positive
sentiment was returning to both the dry cargo and container markets
whilst at the same time we had a continued stream of committed
sales candidates from major banks across the world looking to
reduce their exposure to bad debt. So, with shipowners seeing
reasons to be optimistic, and lenders committed to disposing of bad
assets, we had the perfect ingredients with which to transact. As
such, we were able to conclude a relatively high volume of business
whilst asset values continued to steadily rise.
On the tanker side, activity levels were not so high as the
freight market weakened in the second half of the year and there
were not the same levels of distressed sellers. Nevertheless, we
concluded a number of reasonably-sized transactions which gave us a
higher market share over our competitors than we might reasonably
expect to be able to achieve. If the freight market continues with
its current negative trend then we would expect increased
demolition activity within this sector, especially amongst the
larger crude tonnage, and that in itself should help to turn the
markets around during 2018.
The challenge is to continue with these increased activity
levels through 2018 and, whilst this will undoubtedly not be easy,
we feel reasonably confident that there will be a sufficient flow
of sales candidates from the contraction of the European lending
market and that we remain well placed to be involved.
Newbuilding
Whilst 2017 showed an uptick from a notably subdued 2016 market,
it still remained a challenging year for the shipbuilding
industry.
Just 902 orders of 72.8m dwt were reported globally, only the
third year in the past 20 in which fewer than 1,000 new orders were
reported. Of the major sectors, bulk carrier orders saw the biggest
uptick, with 286 vessels contracted last year, although this
remained subdued compared to historical levels. Driven by large
crude units, tanker contracting increased to 271 vessels, but fell
well below the level of ordering in 2015. Meanwhile, the boxship
newbuilding market showed fewer signs of improvement and just 108
units were ordered. Gas carrier and 'ship-shaped' offshore ordering
was also limited, with just 39 and 37 contracts reported
respectively in 2017.
Chinese builders won the largest share of orders last year,
picking up the majority of bulker orders and taking 9.2m cgt in
total. Ordering at Korean yards improved on record low 2016 levels,
but remained limited at 6.4m cgt, while reported contracting
reached 2.0m cgt at Japanese yards. The strength of cruise
newbuilding continued to benefit European shipbuilders, which
accounted for 38% of global estimated contract investment in 2017
in value terms, though many yards operating outside the cruise
sector struggled.
Although contracting improved year-on-year, it remained a
challenging environment for active shipbuilders. Input costs
continued to appreciate and freight market fundamentals presented
real challenges in owners' willingness to accommodate any upward
movement in asset pricing to allow the yards to pass this through.
It therefore remained speculative demand that drove activity and
this in turn made for a fragile and highly price sensitive
environment.
Although contracting remained limited in 2017, shipbuilders
continued to deliver a steady volume of tonnage. Total shipyard
output reached 97.0m dwt, although 'non-delivery' of the scheduled
start year order book was still significant at 30% in dwt terms.
However, given the smaller order book, deliveries are currently
projected to decline by around 20% in tonnage terms in 2018. After
a strong start to the year, total demolition activity in 2017
declined by 21% in tonnage terms to total 35.2m dwt. This left
overall fleet growth relatively steady at 3.3%, slightly faster
than the previous year but well below pre-2015 levels. The total
world fleet stood at 1,924.0m dwt at the end of the year, with
fleet growth remaining firm in the gas carrier and tanker
sectors.
With output set to decline following multiple years of weak
contracting, shipbuilders will be hoping that the moderate upward
trend in orders in 2017 accelerates in 2018. Capacity reductions
remain ongoing, but many shipyards are still hungry for new orders.
Although contracting activity has picked up slightly, conditions
remain difficult, and shipbuilders will be hoping for further signs
of market improvement in the coming year.
In spite of such challenges, we remained active across all key
markets. Our market share in Korea continues to grow, with the team
placing over a third of the total number of contracts placed with
Korean yards in 2017. We also grew value through some notable
transactions in the passenger/cruise space leveraging from our
expertise in Sweden and Oslo together with the team in Shanghai.
Corporate transactions that have also delivered large volumes to
our business activity over the last few years continue to develop
and we placed significant volume orders for such industrial
business in Korea again this year.
2018 will again present its own challenges and shipbuilders are
yet to see the light at the end of the tunnel. However, our breadth
of service continues to ensure that we are well placed to
capitalise on all opportunities that arise and we are well placed
to continue to grow and deliver volumes across all key markets.
Offshore
General
Oil prices strengthened significantly during the second half of
2017, painting a more positive backdrop for the offshore oil
services sector in general. Improving oil prices and significant
cost reductions amongst most oil companies have enabled significant
cash flow improvement in the upstream E&P sector. Most of the
major international oil companies have reported significant
positive free cash flow during 2017, enabling them to gradually
increase investment levels again, should they decide to do so.
Activity in most offshore segments is thought to have bottomed out
during 2017 and underlying activity drivers have in general turned
to the more positive. This is noteworthy both within offshore
drilling, field development and subsea services.
During the year, the Clarksons Platou offshore team grew global
OSV chartering volumes, gained proper foothold within the offshore
renewable/wind sector by expanding into Hamburg and won exclusive
brokerage. We anticipate these factors will increase our market
share in 2018, notably in the North Sea.
Despite sale and purchase volumes remaining low, the Clarksons
Platou offshore team managed to maintain market share and completed
key sales to new clients and key important OSV owners.
Our focus and footprint within offshore analysis increased in
the year, with key hires in Oslo. We now have the strongest
dedicated offshore analysis team in the brokerage business.
Drilling market
As of December 2017, global jackup fleet utilisation stood at
around 66%, while floater utilisation was around 62%. While these
utilisation levels are exceptionally low, there were some positive
developments in the offshore drilling sector during 2017. Jackup
utilisation bottomed and stabilised before climbing slightly
throughout the year, and both rig segments saw a notable increase
in rig fixing activity. In spite of improving fixing activity,
active floater utilisation drifted lower as rigs rolling off
existing contracts still outpaced new rig contracts and extensions
in terms of rig years. Other positive developments included a
tightening of the North Sea harsh environment market, particularly
for floaters, with an increased number of contracts entered into
and future rates climbing slightly. Furthermore, the segment saw an
increase in both asset and corporate transactions. Secondhand asset
values for certain rig categories (for example stranded harsh
semi-submersible newbuilds) also showed noteworthy increases.
The subsea and field development market
Lead times in the segments for field development and subsea
services are significant. 2017, however, demonstrated a clear
uptick in equipment awards, marking a clear turning point, and the
oil companies increased sanctioning activity compared to 2015 and
2016. For floating production units, ten new contracts were entered
into during 2017. This compares to zero new awards in 2016 and four
awards in 2015. Correspondingly, awards for subsea Christmas trees
(well control units) likely totalled 160-170 in 2017, up from 83 in
2016. These equipment awards relate to fields planned to come on
stream mainly from 2020 onwards, implying the majority of
SURF/subsea installation work offshore will take place from 2019
onwards. As a consequence of low sanctioning activity since late
2014, most leading subsea contractors currently have substantially
reduced order backlogs and we witnessed a notable drop in fleet
utilisation for the leading players during 2017. This will likely
continue through 2018, until field development work should pick up
again from 2019/2020. Reduced fleet utilisation puts pressure on
the leading players, which again will provide knock-on effects to
smaller industry players and vessel owners. An anticipated recovery
in subsea maintenance work may compensate somewhat for reduced
field development activity in 2018 and into 2019 but, so far, we
have not observed a meaningful uptick in inspection and
maintenance-related contracts.
Offshore support vessels (PSV and AHTS)
The offshore support vessel (OSV) market generally remained
highly challenging throughout 2017 both for the PSV and AHTS
segments. Though there are naturally some regional variances, all
or most regional markets continued to face very low utilisation
levels and depressed day rates. Currently, we estimate that around
32% of the global PSV fleet is in lay-up, while the corresponding
number for the global AHTS fleet is around 34%. The North Sea is
the region with best data and visibility in this segment, and, as
such, is usually a good proxy for other regions. Utilisation for
large PSVs (900+ m(2) deck) in the North Sea averaged 75%, equal to
2016 levels, while utilisation for large AHTSs (20,000+ BHP)
averaged around 32%, compared to 35% for 2016. North Sea PSV term
rates seem to have bottomed out between GBP5,500 - 6,750 per day
for the different categories, slightly up from 2016 levels, but
nevertheless levels that provide no meaningful return for vessel
owners. There are no representative term rates for AHTSs. Spot
rates fluctuated substantially throughout the year, as usual, but
in general, averages were marginally higher in 2017 compared to
2016, supported by a relatively strong summer season. Going
forward, we anticipate offshore rig activity to increase somewhat
in the North Sea, in line with improved fixing activity observed
through 2017. This, combined with increasing field development
activity post 2018, should support gradually higher demand for OSVs
in the region. Overcapacity, however, still remains a significant
issue, and we see limited room for substantially higher utilisation
and rates near-term. Most other regions remain somewhat behind the
North Sea in terms of activity, implying utilisation and day rate
levels remained very low throughout 2017. We also continue to
expect recovery for these regions to be slow in terms of OSV
utilisation and day rates.
Futures
2017 was a year of improved notional values across all ship
sizes in the dry market. Capes averaged US$15,128 for the year
(US$7,388 in 2016) having finally made the conversion from the
older ship size of 172,000dwt to the new 180,000dwt 5TC average.
Panamaxes averaged US$9,766 (US$5,562 in 2016) and supramaxes
averaged US$9,168 (US$6,235 in 2016). A shift in the supramax
liquidity from the 52,000dwt 6TC average to the new 58,000dwt 10TC
average has yet to take place and a change of ship type on panamax
to the 82,500dwt is some way off.
Whilst volumes for the year were up as a whole, the dispersal
was more mixed. Capes had a strong start in the first quarter
before deteriorating over the course of the year to come in
slightly down; 501,511 lots in 2017 versus 521,161 in 2016 (a
decrease of 3.7%) despite the removal of uncertainty over the ship
size. Panamaxes conversely improved from 460,829 lots in 2016 to
519,387 lots in 2017 (an increase of 12.7%) whilst supramaxes
showed the greatest improvement from 123,688 lots in 2016 to
150,297 lots in 2017 (an increase of 21.5%).
The combined improvement in notional values and volumes resulted
in a better year for the division with stronger revenues.
Options volumes on dry FFAs were down 27% from 264,879 lots in
2016 to 192,779 lots in 2017, but the value of these was
significantly higher. Given our strong position in the options
market which we continue to hold, we have seen a strong performance
from this area over the year.
The meteoric rise in annual iron ore volumes slowed to a trickle
last year with growth of 1.5% compared to over 50% growth the
previous year. This, coupled with a drop in the general commission
levels in the sector and the increased activity of the SGX trading
screen, made for a difficult year. Despite this, our teams in
Singapore and London grew market share in both futures and options
and established a stronger position in the market.
With fundamental personnel changes in 2017, our Clarksons Platou
futures team held their resolve and positioned themselves with
expertise for 2018 by establishing a stronger, leaner desk. We
maintained our market share in the options and FFA markets in 2017
and we hope to gain market share in 2018 on the back of the
strength of the new team.
The outlook for 2018 is positive and the goal is for Clarksons
Platou futures to lead the futures and options space across all
commodities.
Financial
Revenue: GBP52.0m (2016: GBP41.0m)
Segment underlying profit: GBP10.1m (2016: GBP6.8m)
2017 was a year of landmark transactions, with the financial
division involved in record levels of activity across the equity
and M&A markets.
Securities
2017 has been a tumultuous year marked by natural disasters,
geo-political tensions and deep political divisions in many
countries. For Europe in particular, the effect of the new and
revised regulations like the Market Abuse Regulations and Markets
in Financial Instruments Directives (MiFID II) has undoubtedly left
the financial community in a state of resignation and confusion.
Despite this, the markets have looked at other positives as growth
has increased and equity valuations have continued to climb and are
near record highs due to low interest rates, an improved economic
outlook and increased risk appetite.
Markets have received a double boost from low interest rates and
tax cuts this year, stimulating demand for shares. Global stock
markets have ended 2017 at record highs and the MSCI all country
world index gained 22% to finish the year at an all-time high. The
US market was again the big winner. Investors continued to invest
in US equities in the wake of the presidential election in the hope
of getting fiscal stimulus on top of monetary stimulus, believing
that the Federal Reserve has risk assets back-stopped.
The general bond markets were relatively calm in 2017 and US and
European bonds traded horizontally. The Norwegian bond market,
however, saw increasing activity. Last year, several companies took
advantage of the low yields and strong bond market to issue
approximately US$2bn of new bonds on Norwegian documentation. Many
of the new issues have been secured debt at similar LTVs to bank
financing, but without amortisation. Hence, offering reduced debt
service and thus more cash flow flexibility for shipowners.
Metal and fuel prices were supported by stronger momentum in
global demand as well as supply restraints in the energy sector,
including hurricane-related stoppages in the US, financial
disruptions in Venezuela and security problems in regions of
Iraq.
At the same time, rapidly advancing technology allows companies
and individuals to do business in new ways. Technology is
redefining the financial markets in the EU's goal of transparency,
investor protection and reporting obligations, however it comes at
a steep price.
During 2017, our industry has focused on implementing processes
and technology in order to be at the forefront of all the new
regulations. However, the financial markets in Norway went into
shock when the Norwegian authorities, without warning, on 10
December 2017 announced that the EU regulations will come into
force on 1 January 2018 in Norway, instead of late 2018 as earlier
announced.
Clarksons Platou Securities has been very busy throughout 2017,
however, at times the markets were difficult and windows short. Our
strong pipeline resulted in approximately 35 equity and debt
capital market transactions raising approximately US$4.3bn and the
completion of nine M&A transactions/restructurings during 2017.
We are also pleased to announce the addition of a convertible bond
team in Oslo and New York, which will be fully operational during
the second quarter of 2018, and which we expect will make a
contribution from day one.
After a year like 2017, it is hard to predict how global
equities in general, and US equities in particular, will perform
during 2018. The backdrop for our core sectors (shipping, offshore
and metals and mining) is however supported by some very
interesting fundamentals. Since the commodity cycle turned negative
in 2011, we have seen a continued disappointment and downward
adjustment to world GDP growth forecasts. In 2017, however, we
finally saw upward revisions. This has come on the back of broad
and synchronised growth in Asia, the US and Europe. We are seeing
healthy world GDP growth supported by rising commodity prices.
Shipping order books are touching lows and fleet growth is slowing.
Asset prices in both shipping and offshore are at very low levels
from a historical perspective. Banks are reducing their exposure to
the sector, limiting the capital available for more speculative
orders, which is good for the industry longer-term. Internally, we
will continue to add resources within support functions and front
office personnel. We have a strong pipeline into 2018, but we need
to remember that good times are most likely temporary and our
priority is to remain focused in order to continue successfully
adding revenue.
Project finance
Shipping
2017 has been an active year in the project finance market with
increased activity from the different project houses. The flavour
of the year in the Norwegian market has been dry cargo and
containerships.
The dry cargo market has continued to improve, and a more stable
charter market now generates a healthy cash flow to cover operating
expenses, debt financing and a decent return on equity for
secondhand acquisitions.
In the containership sector, the beginning of the year was an
interesting period, when German banks were selling off assets at
very low levels in order to clear their books. Many of the
investors and funds were already in asset play mode from seeing
recent opportunities in the dry cargo market, and this appetite
spilled over on containerships which, at the time, were priced at
scrap value or slightly above. Since then, the earnings and market
values of the vessels have recovered significantly.
The total transaction volume in the Norwegian project finance
market was approximately US$1.65bn. Clarksons Platou Project
Finance completed eight transactions in 2017 involving five bulk
carriers, three OSVs, two containerships, a chemical carrier and a
cruise vessel, with a total project volume of US$164m.
We expect an active 2018 with both asset play and structured
projects, as cash flows are starting to return in the various
segments.
Real estate
The Nordic real estate market continued to perform strongly in
2017 with growth in all the Nordic countries. The final count for
the Norwegian market is not yet complete, but consensus from the
main analysts estimate a total transaction market of NOK85bn, an
increase of 20% from 2016. The growth in the number of transactions
in 2017 compared to 2016 is more than 30%. Across the entire Nordic
market, yields on prime assets and long leases compressed as
institutional funds, private equity funds, family offices and other
investors sought yielding assets with stable dividends in stable
macro-economies like the Nordic. At the beginning of
2018, prime yields in Stockholm and Oslo are almost the same as
in major European cities. Foreign investors are still present in
the Nordic markets, but their share of the transaction market in
Norway dropped to an estimated 19% in 2017 from almost 40% in 2016.
Even though yields on prime assets have declined, the yield gap
(the difference between real estate yield and interest rate level)
is still attractive. And, as long as the rates stay low, the
consensus is that 2018 will at least be at the same levels as 2017.
The vacancy rate in the Oslo office market is expected to decline
over the coming years as a result of conversion and demolition of
older office buildings to residential properties combined with few
new office buildings. The growth in rent levels was 10.5% even
though the CPI only reached 1.1% for 2017. Clarksons Platou Real
Estate reached an all-time high turnover in 2017 with a growth of
27%
compared to 2016. The transaction team completed 27 transactions
with a total market value of NOK7.8bn. Seven of these were sales of
older projects, giving our investors a weighted yearly internal
rate of return of 62% based on all projects actually realised from
2010 until today.
Structured asset finance
While we see renewed enthusiasm around the shipping markets as a
result of an improved supply/demand balance across many sectors,
the asset-based financing backdrop remains challenging with an
overall reduction in the number of active debt and leasing
providers.
Ship finance volumes continue to decline with 2017 syndicated
marine finance volumes, which includes shipping and offshore,
falling to US$45.9bn in 156 transactions compared to US$50.3bn a
year earlier spread over 189 transactions according to statistics
produced by Dealogic. Credit losses, coupled with tighter
regulations, have hampered traditional banks' appetite for new
business/risk and there is a clear focus among remaining active
lenders to support top-tier, stronger credits while reducing
exposure to weaker credits.
Activity levels amongst the alternative capital providers and
leasing houses, particularly those in China and Japan, have
increased and we have also seen increased support from the export
credit agencies with respect to newbuilding orders and to a lesser
extent modification costs.
Notwithstanding this, we expect that overall asset-based
financing levels for 2017 will be below 2016, which itself was one
of the lowest lending years in recent times.
In addition, access to asset-based finance is not universal,
there is a real flight to quality and a two tier market exists. Top
tier borrowers continue to enjoy attractive terms and pricing, but
for others, options are far more limited with terms and pricing far
more lender-friendly. For some, any offer of finance is a good
offer.
With significant re-financing requirements over the next few
years, in addition to the capital expenditure required to satisfy
impending regulatory requirements, the outlook for 2018 is a
continued lack of asset-based financing liquidity which we expect
to continue to increase pressure on borrowers to commit/raise
equity to fund the gap. Data from the Oslo Stock Exchange supports
this view with equity issues in 2017 surpassing those of 2016 and
with some large high profile new issues in the wings for 2018.
Support
Revenue: GBP18.5m (2016: GBP17.8m)
Segment underlying profit: GBP2.1m (2016: GBP2.1m)
Support has seen an upturn in general market activity over the
last year, with a notable growth in confidence returning to the
offshore and gas sectors.
Agency
Following a challenging grain harvest in 2017, both in quality
and quantity, our agency operations experienced reduced export
volumes across the UK. However, we did start to see some movement
predominantly in the short sea market driven by increased malting
barley shipments towards the end of 2017. This increase looks to
continue into early 2018, and we anticipate starting to see some
wheat exports as merchants look to clear storage prior to the 2018
harvest.
The flip side to the poor grain export has been an increase in
milling wheat imports, most noticeably from the US and Canada,
which has also benefited our short sea broking division. We hope
this will continue in the spring of 2018 when the seasonal
restrictions for shipping from the US and Canadian Great Lakes are
past.
In 2017, we experienced a marked upturn in our aggregate
business with significant contracts being awarded on the Thames,
Humber, Tyne and Great Yarmouth. We anticipate this area of our
business will grow into 2018 as tonnages are brought into the UK to
meet the demand of major construction projects.
Throughout 2017, animal feed imports remained constant into the
UK, with a slight uplift towards the end of the year. It is
anticipated that this will remain one of our core businesses
throughout 2018.
The offshore oil and gas industry has shown marked improvement
during 2017, with increased activity in the second half. Although
not nearly at the levels we were experiencing in 2014, confidence
is definitely growing, and we expect to see this trend continue
into 2018. We now have a much larger customer base in this sector
which will give us the platform to take maximum advantage of the
improving market. We have also been successful in handling major
projects outside the UK and will continue to target this area using
our dedicated project team.
Offshore wind became a major activity for us during 2017, with
contracts awarded throughout the UK as the renewable energy
industry continues to grow. We have become the preferred partner
for many of the offshore installation and maintenance companies. We
already have projects in place for 2018 and are confident that this
will continue well into 2019.
Gibb Industrial Supplies
As with agency, our supply businesses in Aberdeen and Great
Yarmouth are benefiting from a slight upturn in the oil and gas
industry. The business performed better than expected in 2017 and
again we anticipate this trend continuing into 2018.
We are encouraged to see many of our customers renewing
agreements into 2018 and beyond, which reflects the confidence we
are seeing in the offshore oil and gas market elsewhere.
We continue to explore markets away from oil and gas, with
offshore wind being one of our key targets.
Stevedoring
Whilst our stevedoring business has suffered due to the reduced
grain exports in 2017, we have markedly increased our import
activity with the stores in Ipswich being almost at capacity for
the majority of the year.
We continue to enjoy a large customer base, and remain one of
the few operations in the UK not controlled by one of the major
grain houses.
We have continued to diversify in the products that we handle in
order to meet customers' expectations.
Freight forwarding and logistics
In 2017 we recruited a new Head of Forwarding who is working to
expand this area of our business, both by commodity and
geographically. His experience in this area of our business is
enabling us to challenge some of our larger competitors whilst
still offering a bespoke service to our customers. Traditionally,
our freight forwarding business has been very much linked to our
agency activity and the business it has generated, but we are now
able to offer freight forwarding as a standalone service, which we
intend to expand.
Again we see the improvement in the oil and gas sector
benefiting this area of our business.
Egypt agency
With seven offices in 2017 relative to three offices during
2016, Clarksons Shipping Agency is capable of providing full
agency, husbandry and protective agency services around the clock
for a fast and efficient vessels turnaround at all Egyptian
ports.
Despite the decrease in the volume of port calls handled by
agency all over Egypt due to current market conditions, 2017 was a
good year in terms of Suez Canal transits, as the number of
transits increased by about 16%, as well as serving new market
segments such as LPG and LNG.
Clarksons Shipping Agency handled the Suez Canal transit of the
world's largest towed crude oil floating storage BW Catcher, with
no delay and by her own tugs for the first time in the history of
the Suez Canal.
Research
Revenue: GBP14.6m (2016: GBP13.7m)
Segment underlying profit: GBP4.8m (2016: GBP4.9m)
Revenues continued to rise whilst we maintained our commitment
to investing in growth, consolidating Clarksons Research's position
as the market-leading provider of intelligence and data.
Research revenues continued their long-term growth projectory,
with sales up 7% to GBP14.6m (2016: GBP13.7m). Clarksons Research
is respected and trusted worldwide as the market-leading provider
of authoritative intelligence and data across shipping, trade,
offshore and energy. Research successfully enhances the Clarksons'
profile across the global shipping and offshore industries and
continues to be the core data provider to the broking, financial
and support teams of Clarksons.
Research focuses on the collection, validation, management,
processing and analysis of data about the shipping and offshore
markets. Significant investments into our proprietary database and
intelligence management tools have helped support the further
enhancement of our integrated digital platform in 2017. Our fully
relational database continues to expand in breadth and depth, with
our shipping and trade database now providing coverage on over
140,000 vessels totalling 1.9bn dwt, over 40,000 companies, over
25,000 machinery models, over 600 active shipyards and fabricators,
over 600,000 fixtures and over 100,000 commercial and trade time
series, including coverage of 11.6bn tonnes of seaborne trade.
Our offshore and energy database provides comprehensive coverage
of 7,000 offshore fields, over 2,000 projects, 8,000 production
platforms, 8,000 subsea trees, 1,000 offshore rigs, 5,000 support
vessels and construction vessels, all integrated within a
Geographical Information System platform. Further data development
has focused on the utilisation of AIS data, trade and commodity
flows, the tracking of capital market activity and shipping loan
data, machinery and environmental packages on board ships, offshore
renewables, ports and terminals, ship repair yards and other shore
side infrastructure relating to trade and energy, including
refineries and LNG processing plants.
Research maintains a regionally broad and diversified client
base, including good market penetration across the financial,
shipowning, insurance, supplier, governmental, private equity,
energy, commodity, shipyard, fabrication and oil service sectors.
Over 75% of research sales are annuity-based and there is high
customer retention. Total research headcount is now over 120, with
expansion of global operations, including Asia Pacific, during
2017. Expansion has also focused on our IT development, data
analytics and business development teams.
Digital
Sales from digital products across shipping and offshore grew by
an encouraging 16% (2016: 19%). Our digital product range,
consolidated within a single access portal, continues to expand and
benefit from significant investment, utilising our growing
proprietary database, in-house developed IT technology and our
expanded data analytics team to remain market-leading. Further new
digital products and product enhancements are expected to come on
line in 2018.
Major shipping digital products include:
Shipping Intelligence Network. Sales from our flagship
commercial shipping database continued to grow, consolidating our
market-leading position, particularly within the financial sector.
The scope of data and analysis available has expanded and further
product enhancements are planned for 2018.
World Fleet Register. Our authoritative online vessel register
benefited from a significant upgrade that focused on comprehensive
fleet intelligence, environmental regulation, the tracking of new
technology on board ships and market trends in the shipbuilding
market. The register now offers a range of powerful functionality
including owner and yard profiles, alert functions, customisation
tools and interactive data visualisation.
SeaNet. Following its launch in late 2016, our vessel tracking
system, SeaNet, successfully expanded its user base across 2017.
SeaNet blends satellite and land-based AIS data with our
proprietary database of vessels and ports, utilising latest
technology developed in-house. It tracks global vessel movements
for over 60,000 ships, with a combined fleet tonnage of 1.2bn gt,
across over 5,000 ports and zones. The completion of a major data
project to enhance our global port and infrastructure coverage will
significantly enhance the SeaNet offer besides supporting a wide
range of broking technology platforms. SeaNet is fully
complementary to both the research digital offer and broader
technology strategy across broking and financial. Further
enhancements to SeaNet are planned for 2018.
Major offshore digital products include:
Offshore Intelligence Network. Significant product enhancements
have been rolled out. This includes database-driven intelligence
alerts, rig availability charting, enhanced commercial data and
life cycle project tracking.
World Offshore Register. Our comprehensive offshore register
provides detailed intelligence on all offshore oil and gas fields,
the infrastructure involved and related support vessels. During
2017, the platform benefited from expanded data coverage and
functionality, including data on the renewables sector, dynamic
utilisation analysis, enhanced data visualisation tools and
improved mapping functionality.
Sales across our combined offshore digital product range grew by
25% as we continued to gain traction with the client base and the
quality and breadth of our offering increased. We have retained our
market-leading position in the insurance market while expanding
further into the financial and oil service sector.
Services
Clarksons Valuations performed well in 2017, consolidating its
position as the leading provider of valuation services to the ship
finance sector. A project to digitalise workflows, supported by
significant investment into the team's operating platform, has
improved workflow efficiency. The valuations team work closely with
all major ship finance banks, leasing companies and asset owners,
and are recognised as the market leader in the provision of
authoritative valuations.
Our services business continues to grow, with underlying sales
up 16%. We have added further headcount to our specialist team
which concentrates on managing retainers and providing bespoke
data, consultancy and seminars for a range of corporate clients
including banks, shipyards, fabricators, engineering companies,
insurers, governments, asset owners and other corporates. These
bespoke services often become embedded within our clients'
workflows, supporting client retention.
Reports
Market intelligence reports remain an important aspect of the
Clarksons Research overall offering, generating provenance and
profile across the industry. Our flagship shipping reports,
including Shipping Intelligence Weekly and Shipping Review and
Outlook, are well established across the industry while our
comprehensive offshore offering, including Offshore Review and
Outlook, Offshore Drilling Rig Monthly and Offshore Support Vessel
Monthly, continue to expand their footprint. We publish weekly,
monthly, quarterly and annual reports, registers and maps,
available individually and embedded within our digital offering,
continuing a 50-year heritage.
Financial review
Dividend per share: 73p (2016: 65p)
Underlying profit before taxation*: GBP50.2m (2016:
GBP44.8m)
Underlying earnings per share*: 116.8p (2016: 105.2p)
* Before acquisition related costs (2016: before exceptional
items and acquisition related costs)
Results
The Group made revenue of GBP324.0m (2016: GBP306.1m) and
incurred administrative expenses of GBP264.8m (2016: GBP253.0m).
The majority of revenue and a significant proportion of expenses
are earned in foreign currency.
Underlying profit before taxation was GBP50.2m (2016: GBP44.8m).
The term 'underlying' excludes the impact of exceptional items and
acquisition related costs, which are shown separately on the face
of the income statement. Management separates these items due to
their nature and size and believe this provides further useful
information, in addition to statutory measures, to assist users of
the annual report to understand the results for the year.
2017 2016
GBPm GBPm
Underlying profit before taxation 50.2 44.8
Exceptional items - 11.1
Acquisition related costs (4.8) (8.6)
====== ------
Reported profit before taxation 45.4 47.3
====== ------
Exceptional items
There were no exceptional items in 2017. In 2016, both the gain
on the sale of The Baltic Exchange shares and a special final
dividend closely linked to that sale were included as exceptional
items.
Acquisition related costs
Acquisition related costs includes GBP3.6m of amortisation of
intangibles, GBP0.9m of cash and share-based payments spread over
employee service periods and GBP0.3m of interest on the remaining
loan notes, which were repaid in full in June 2017. Estimated
acquisition related costs for 2018, assuming no other acquisitions
are made, would be GBP2.5m.
Taxation
The Group's effective tax rate, before acquisition related
costs, was 24.0% (2016: 25.0% before exceptional items and
acquisition related costs), reflecting the broad international
operations of the Group and the disallowable nature of many
incurred costs, particularly entertaining. After acquisition
related costs, the rate was 24.3% (2016: 19.8% after exceptional
items and acquisition related costs).
Earnings per share (EPS)
Underlying basic EPS was 116.8p (2016: 105.2p), calculated as
underlying profit after taxation divided by the weighted average
number of ordinary shares in issue during the year. The reported
basic EPS was 104.4p (2016: 119.7p).
Forward order book (FOB)
The Group earns some of its commissions on contracts where the
duration extends beyond the current year. Where this is the case,
amounts that are able to be invoiced and collected during the
current financial year are recognised as revenue accordingly.
However, those amounts which are not yet invoiced and recognised as
revenue are held in the FOB. In challenging markets, such amounts
may be cancelled or deferred into later periods. Consequently, the
Directors review the FOB at the end of the year, and only publish
the total of those items that are in the FOB which will, in their
view, be invoiced in the following 12 months. At 31 December 2017,
this estimate was US$93m (at 31 December 2016: US$112m). The
reduction in forward visibility of earnings reflects the low levels
of newbuilding contracting for delivery in 2018 and the prevalence
of spot business arising from the still challenging rate
environment, as highlighted in the interim statement.
Dividend
The Board is recommending a final dividend of 50p (2016: 43p),
which, subject to shareholder approval, will be paid on 1 June 2018
to shareholders on the register at the close of business on 18 May
2018. Together with the interim dividend of 23p (2016: 22p), this
would give a total dividend of 73p (2016: 65p). In taking its
decision, the Board took into consideration the 2017 performance,
the repayment of all outstanding loan notes during the year, the
strength of the Group's balance sheet and its ability to generate
cash and the FOB. The dividend is covered 1.4 times by basic EPS
(2016: 1.8 times). This increased dividend represents the 15th
consecutive year that the Board has raised the dividend.
Foreign exchange
The average sterling exchange rate during 2017 was US$1.30
(2016: US$1.35). At 31 December 2017 the spot rate was US$1.35
(2016: US$1.24).
Cash and borrowings
The Group continues to be cash-generative, ending the year with
cash balances of GBP161.7m (2016: GBP154.0m) and a further GBP5.5m
(2016: GBP29.4m) held in short-term deposit accounts, classified as
current investments on the balance sheet.
The Board has previously used net cash and available funds,
being cash balances after the deduction of accrued bonuses and all
loans outstanding, as a better representation of the net cash
available to the business, since bonuses are typically only paid
once a year after the year-end, and thus an element of the cash
held at the year-end is earmarked for this purpose. On this basis,
net cash and available funds ended the year at GBP79.1m (2016:
GBP74.8m).
Given the increasing regulatory nature of our business however,
an alternative measure used by the Board in taking decisions over
capital allocation is free cash resources, which deducts both
monies held by regulated entities and Board-approved future capital
commitments from the net cash and available funds figure. Free cash
resources, as defined, at 31 December 2017 were GBP54.1m (2016:
GBP47.3m).
Following the repayment of the final tranche of loan notes
amounting to GBP23.9m in June 2017, the Group is now debt-free.
Balance sheet
Net assets at 31 December 2017 were GBP423.4m (2016: GBP406.7m).
The balance sheet remains strong, with net current assets and
investments exceeding non-current liabilities (excluding pension
provisions) by GBP77.1m (2016: GBP58.1m). The overall provision for
impairment of trade receivables was GBP13.3m (2016: GBP15.5m). The
Group's pension schemes have a combined surplus before deferred tax
of GBP12.3m (2016: GBP2.3m). In light of this surplus, the pension
trustees have been taking advice on de-risking schemes, where
appropriate.
Key performance indicators (KPIs)
1. Financial KPIs used in the management of the business include
revenue, profit before taxation, earnings per share and the
FOB.
2. The business also aims to generate long-term shareholder
value, as reflected by a review of total shareholder return.
Jeff Woyda
Chief Financial Officer and Chief Operating Officer
9 March 2018
Risk management
Full details of our principal risks and how we manage them are
included in the risk management section of the 2017 annual report,
together with our viability and going concern statements.
Our principal risks are:
-- Failure to achieve strategic objectives
-- Changes in the broking industry
-- Employee misuse of confidential information
-- Cyber risk and data security
-- Economic factors
-- Loss of key personnel
-- Adverse movements in foreign exchange
-- Financial loss arising from failure of a client to meet its obligations
Directors' remuneration
The following is an extract from the remuneration committee (the
committee) Chair's statement, which will be included in the 2017
annual report.
2017 AGM vote
Although the resolutions to approve the Directors' remuneration
report and the remuneration policy were passed with the requisite
majority, around 26% of votes were cast against both resolutions,
which clearly needed to be addressed.
Shareholder feedback
At the time of the 2017 AGM and later in autumn 2017, we engaged
with the Company's major shareholders covering approximately 52% of
our shareholder register and the major UK proxy voting agencies in
order to fully understand their concerns.
Undertakings over the life of the remuneration policy
The committee takes shareholder views and developments in
corporate governance seriously and, following the feedback received
last year and taking account of good practice developments, we
undertake to operate the 2017 remuneration policy within the
following additional parameters for any new Executive Director
appointments:
-- a capped annual bonus scheme will apply and, furthermore, any
bonus would only be payable to the extent there is sufficient value
to do so in the profit-based bonus pool;
-- bonus measures will depend on the strategic priorities at the
time but it is expected that profit performance and strategic
objectives will apply. The inclusion of strategic measures will
result in a more rounded assessment of performance;
-- a greater proportion of any bonus payable will be deferred in shares; and
-- any pay in lieu of notice and change of control provisions will conform to good practice.
In addition, the committee has made the following changes with
immediate effect for current and future Directors:
-- a 200% of salary share ownership guideline will apply
(increased from 150% of salary for Executive Directors other than
the Chief Executive Officer); and
-- a two-year post-vesting holding period will apply to
long-term incentive plan (LTIP) awards granted from 2018.
The committee recognises the current remuneration structure does
not accord with best market practice for existing Directors but has
actively taken steps to pave the way for a more typical structure
as and when new Directors join the Board.
Directors' responsibilities statement
The statement of Directors' responsibilities below has been
prepared in connection with the Group's full annual report for the
year ended 31 December 2017. Certain parts of the annual report
have not been included in this announcement as set out in note 1 of
the financial information.
We confirm that:
-- to the best of our knowledge, the consolidated financial
statements, which have been prepared in accordance with IFRSs as
adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit of the
Group;
-- to the best of our knowledge, the strategic report includes a
fair review of the development and performance of the business and
the position of the Group, together with a description of the
principal risks and uncertainties that it faces; and
-- we consider the annual report, taken as a whole, is fair,
balanced and understandable and provides the information necessary
for shareholders to assess the Company's performance, business
model and strategy.
This responsibility statement was approved by the Board of
Directors on 9 March 2018 and is signed on its behalf by:
James Hughes-Hallett
Chair
9 March 2018
Consolidated income statement
for the year ended 31 December
2017 2016
Before After
Before After exceptional exceptional
acquisition Acquisition acquisition items and items and
related related related acquisition Exceptional Acquisition acquisition
costs costs costs related items related related
GBPm GBPm GBPm costs GBPm costs costs
GBPm GBPm GBPm
Revenue 324.0 - 324.0 306.1 - - 306.1
Cost of sales (9.7) - (9.7) (8.9) - - (8.9)
============= ============= ============ ------------- ------------- ------------- ------------
Trading profit 314.3 - 314.3 297.2 - - 297.2
Other income - - - - 9.7 - 9.7
Administrative
expenses (264.8) (4.5) (269.3) (253.0) - (7.7) (260.7)
============= ============= ============ ------------- ------------- ------------- ------------
Operating profit 49.5 (4.5) 45.0 44.2 9.7 (7.7) 46.2
Finance revenue 1.0 - 1.0 0.8 1.4 - 2.2
Finance costs (0.3) (0.3) (0.6) (0.1) - (0.9) (1.0)
Other finance
costs -
pensions - - - (0.1) - - (0.1)
============= ============= ============ ------------- ------------- ------------- ------------
Profit before
taxation 50.2 (4.8) 45.4 44.8 11.1 (8.6) 47.3
Taxation (12.0) 1.0 (11.0) (11.2) - 1.8 (9.4)
============= ============= ============ ------------- ------------- ------------- ------------
Profit for the
year 38.2 (3.8) 34.4 33.6 11.1 (6.8) 37.9
============= ============= ============ ------------- ------------- ------------- ------------
Attributable to:
Equity holders
of the Parent
Company 35.2 (3.8) 31.4 31.4 11.1 (6.8) 35.7
Non-controlling
interests 3.0 - 3.0 2.2 - - 2.2
============= ============= ============ ------------- ------------- ------------- ------------
Profit for the
year 38.2 (3.8) 34.4 33.6 11.1 (6.8) 37.9
============= ============= ============ ------------- ------------- ------------- ------------
Earnings per
share
Basic 116.8p 104.4p 105.2p 119.7p
Diluted 116.4p 104.0p 104.2p 118.6p
============= ============= ============ ------------- ------------- ------------- ------------
Consolidated statement of comprehensive income
for the year ended 31 December
2017 2016
GBPm GBPm
Profit for the year 34.4 37.9
Other comprehensive (loss)/income:
Items that will not be reclassified
to profit or loss:
Actuarial gain on employee benefit
schemes - net of tax 7.6 4.0
Items that may be reclassified
subsequently to profit or loss:
Foreign exchange differences on
retranslation of foreign operations (14.0) 50.5
Foreign currency hedge - net of
tax 6.0 (3.9)
------- ------
Other comprehensive (loss)/income (0.4) 50.6
------- ------
Total comprehensive income for
the year 34.0 88.5
======= ------
Attributable to:
Equity holders of the Parent Company 31.1 85.8
Non-controlling interests 2.9 2.7
------- ------
Total comprehensive income for
the year 34.0 88.5
------- ------
Consolidated balance sheet
as at 31 December
2017 2016
GBPm GBPm
Non-current assets
Property, plant and equipment 29.7 30.0
Investment property 1.1 1.2
Intangible assets 289.6 300.5
Trade and other receivables 2.5 1.8
Investments 4.9 4.1
Employee benefits 16.7 7.5
Deferred tax asset 11.1 12.8
======== --------
355.6 357.9
======== --------
Current assets
Inventories 0.7 0.7
Trade and other receivables 60.2 56.7
Income tax receivable 1.3 2.3
Investments 5.8 29.8
Cash and cash equivalents 161.7 154.0
======== --------
229.7 243.5
======== --------
Current liabilities
Interest-bearing loans and borrowings - (23.6)
Trade and other payables (132.0) (142.3)
Income tax payable (8.2) (6.5)
Provisions (0.1) -
======== --------
(140.3) (172.4)
======== --------
Net current assets 89.4 71.1
======== --------
Non-current liabilities
Trade and other payables (10.6) (11.3)
Provisions (0.1) (0.1)
Employee benefits (4.4) (5.2)
Deferred tax liability (6.5) (5.7)
======== --------
(21.6) (22.3)
======== --------
Net assets 423.4 406.7
======== --------
Capital and reserves
Share capital 7.6 7.6
Other reserves 234.7 240.1
Retained earnings 177.4 155.8
======== --------
Equity attributable to shareholders
of the Parent Company 419.7 403.5
Non-controlling interests 3.7 3.2
-------- --------
Total equity 423.4 406.7
======== --------
Consolidated statement of changes in equity
for the year ended 31 December
Attributable to equity
holders of the Parent Company
------------------------------------------
Share Other Retained Non-controlling Total
capital reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 1 January
2017 7.6 240.1 155.8 403.5 3.2 406.7
========= ========== ========== ======= ================ ========
Profit for the
year - - 31.4 31.4 3.0 34.4
Other comprehensive
(loss)/income:
Actuarial gain
on employee benefit
schemes - net
of tax - - 7.6 7.6 - 7.6
Foreign exchange
differences on
retranslation
of foreign operations - (13.9) - (13.9) (0.1) (14.0)
Foreign currency
hedge - net of
tax - 6.0 - 6.0 - 6.0
========= ========== ========== ======= ================ ========
Total comprehensive
(loss)/income for
the year - (7.9) 39.0 31.1 2.9 34.0
========= ========== ========== ======= ================ ========
Transactions with
owners:
Employee share
schemes - 2.5 1.4 3.9 - 3.9
Tax on other employee
benefits - - 1.0 1.0 - 1.0
Tax on other items
in equity - - 0.3 0.3 - 0.3
Dividend paid - - (20.1) (20.1) (2.4) (22.5)
========= ========== ========== ======= ================ ========
- 2.5 (17.4) (14.9) (2.4) (17.3)
========= ========== ========== ======= ================ ========
Balance at 31 December
2017 7.6 234.7 177.4 419.7 3.7 423.4
========= ========== ========== ======= ================ ========
Attributable to equity
holders of the Parent Company
------------------------------------------
Non-controlling
Share Other Retained interests Total
capital reserves earnings Total GBPm equity
GBPm GBPm GBPm GBPm GBPm
Balance at 1 January
2016 7.6 194.2 136.2 338.0 2.9 340.9
--------- ---------- ---------- ------- ---------------- ---------
Profit for the
year - - 35.7 35.7 2.2 37.9
Other comprehensive
income:
Actuarial gain
on employee benefit
schemes - net
of tax - - 4.0 4.0 - 4.0
Foreign exchange
differences on
retranslation
of foreign operations - 50.0 - 50.0 0.5 50.5
Foreign currency
hedge - net of
tax - (3.9) - (3.9) - (3.9)
--------- ---------- ---------- ------- ---------------- ---------
Total comprehensive
income for the
year - 46.1 39.7 85.8 2.7 88.5
--------- ---------- ---------- ------- ---------------- ---------
Transactions with
owners:
Share issues - 0.1 - 0.1 - 0.1
Employee share
schemes - (0.3) (1.8) (2.1) - (2.1)
Tax on other employee
benefits - - 0.3 0.3 - 0.3
Tax on other items
in equity - - (0.1) (0.1) - (0.1)
Dividend paid - - (18.5) (18.5) (2.4) (20.9)
--------- ---------- ---------- ------- ---------------- ---------
- (0.2) (20.1) (20.3) (2.4) (22.7)
--------- ---------- ---------- ------- ---------------- ---------
Balance at 31 December
2016 7.6 240.1 155.8 403.5 3.2 406.7
--------- ---------- ---------- ------- ---------------- ---------
Consolidated cash flow statement
for the year ended 31 December
2017 2016
GBPm GBPm
Cash flows from operating activities
Profit before taxation 45.4 47.3
Adjustments for:
Foreign exchange differences 7.3 (3.6)
Depreciation of property, plant
and equipment 5.0 5.0
Share-based payment expense 1.4 1.3
Gain on sale of property, plant
and equipment (0.1) (0.1)
Gain on sale of investments - (9.6)
Amortisation of intangibles 3.6 6.6
Difference between pension contributions
paid and amount recognised in the
income
statement (0.9) (1.9)
Finance revenue (1.0) (2.2)
Finance costs 0.6 1.0
Other finance costs - pensions - 0.1
Decrease in inventories - 0.2
(Increase)/decrease in trade and
other receivables (7.2) 13.9
Increase/(decrease) in bonus accrual 4.6 (3.0)
Decrease in trade and other payables (3.9) (1.9)
Increase/(decrease) in provisions 0.1 (0.1)
======= -------
Cash generated from operations 54.9 53.0
Income tax paid (6.9) (7.4)
======= -------
Net cash flow from operating activities 48.0 45.6
======= -------
Cash flows from investing activities
Interest received 0.6 0.6
Purchase of property, plant and equipment (5.3) (3.1)
Purchase of intangible assets (1.5) -
Proceeds from sale of investments 0.1 11.3
Proceeds from sale of property, plant
and equipment 0.2 0.4
Purchase of investments (0.9) (3.8)
Transfer from/(to) current investments
(funds on deposit) 24.1 (24.0)
Acquisition of subsidiaries, including
settlement of deferred consideration (24.7) (23.7)
Dividends received from investments 0.3 1.5
======= -------
Net cash flow from investing activities (7.1) (40.8)
======= -------
Cash flows from financing activities
Interest paid (0.3) (0.1)
Dividend paid (20.1) (18.5)
Dividend paid to non-controlling
interests (2.4) (2.4)
ESOP shares acquired (0.5) (6.0)
======= -------
Net cash flow from financing activities (23.3) (27.0)
======= -------
Net increase/(decrease) in cash and
cash equivalents 17.6 (22.2)
Cash and cash equivalents at 1 January 154.0 168.4
Net foreign exchange differences (9.9) 7.8
======= -------
Cash and cash equivalents at 31 December 161.7 154.0
======= -------
Notes to the preliminary financial statements
1 General information
The preliminary financial information (financial information)
set out in this announcement does not constitute the consolidated
statutory financial statements for the years ended 31 December 2016
and 2017, but is derived from those financial statements. Statutory
financial statements for 2016 have been delivered to the Registrar
of Companies and those for 2017 will be delivered following the
Company's Annual General Meeting. External Auditors have reported
on the financial statements for 2016 and 2017; their reports were
unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain
statements under s498(2) or (3) Companies Act 2006.
2 Accounting policies and basis of preparation
The financial information set out in this announcement is based
on the consolidated financial statements, which are prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted for use by the European Union, and complies with the
disclosure requirements of the Listing Rules of the UK Financial
Conduct Authority. The financial information is in accordance with
the accounting policies set out in the 2017 financial statements
and have been prepared on a going concern basis.
3 Segmental information
Business segments Revenue Results
2017 2016 2017 2016
GBPm GBPm GBPm GBPm
Broking 238.9 233.6 43.9 40.2
Financial 52.0 41.0 10.1 6.8
Support 18.5 17.8 2.1 2.1
Research 14.6 13.7 4.8 4.9
====== ------ ======= ------
Segment revenue/underlying
profit 324.0 306.1 60.9 54.0
====== ------
Head office costs (11.4) (9.8)
======= ------
Operating profit before exceptional
items and acquisition related
costs 49.5 44.2
Exceptional items - 9.7
Acquisition related costs (4.5) (7.7)
======= ------
Operating profit after exceptional
items and acquisition related
costs 45.0 46.2
Finance revenue 1.0 2.2
Finance costs (0.6) (1.0)
Other finance costs - pensions - (0.1)
======= ------
Profit before taxation 45.4 47.3
Taxation (11.0) (9.4)
======= ------
Profit for the year 34.4 37.9
======= ------
4 Exceptional items
2017
There are no exceptional items in 2017.
2016
Exceptional items included a gain of GBP9.7m on the sale of
shares in The Baltic Exchange to SGX. A special final dividend from
The Baltic Exchange of GBP1.4m, which was closely linked to the
sale, was also treated as an exceptional item in 2016.
5 Acquisition related costs
Included in acquisition related costs are cash and share-based
payment charges of GBP0.3m (2016: GBP0.4m) relating to previous
acquisitions. These are contingent on employees remaining in
service and are therefore spread over the service period. Also
included is GBP0.6m (2016: GBP0.7m) relating to the acquisition of
the remaining non-controlling interest in Clarksons Platou Tankers
AS. The charge consists of cash and share-based payment charges
which are linked to future service of the employees and are
therefore spread over a four year period.
Also included is GBP3.6m (2016: GBP6.6m) relating to
amortisation of intangibles acquired as part of the Platou and
other prior acquisitions. Interest on the loan notes issued as part
of the Platou acquisition totalled GBP0.3m (2016: GBP0.9m).
6 Taxation
The major components of the income tax charge in the
consolidated income statement are:
2017 2016
GBPm GBPm
Profit at UK average standard rate of corporation tax of 19.25% (2016: 20.00%) 8.7 9.5
Expenses not deductible for tax purposes 1.5 1.6
Non-taxable income - (2.3)
Tax losses not recognised 0.7 1.3
Other adjustments 0.1 (0.7)
====== ------
Total tax charge in the income statement 11.0 9.4
====== ------
7 Earnings per share
Basic earnings per share amounts are calculated by dividing
profit for the year attributable to ordinary equity holders of the
Parent Company by the weighted average number of ordinary shares in
issue during the year.
Diluted earnings per share amounts are calculated by dividing
profit for the year attributable to ordinary equity holders of the
Parent Company by the weighted average number of ordinary shares in
issue during the year, plus the weighted average number of ordinary
shares that would be issued on the conversion of all the dilutive
potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
2017 2016
GBPm GBPm
Profit for the year attributable to ordinary
equity holders of the Parent Company 31.4 35.7
========== -----------
2017 2016
Millions Millions
Weighted average number of ordinary shares
- basic 30.1 29.9
Weighted average number of ordinary shares
- diluted 30.2 30.1
---------- -----------
8 Dividends
The Board is recommending a nal dividend of 50p (2016: 43p),
giving a total dividend of 73p (2016: 65p). This final dividend
will be payable on 1 June 2018 to shareholders on the register at
the close of business on 18 May 2018, subject to shareholder
approval.
9 Intangible assets
Additions of GBP1.5m in the year relate to development costs.
Goodwill and other intangible assets are held in the currency of
the businesses acquired and are subject to foreign exchange
retranslations to the closing rate at each year-end, amounting to a
decrease of GBP8.7m in the carrying value of goodwill and GBP0.1m
in the carrying value of other intangible assets in the year.
10 Current investments
The Group held GBP5.5m (2016: GBP19.4m) in a deposit with a 95
day notice period. 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.
Other current investments amount to GBP0.3m (2016: GBP0.4m).
11 Cash and cash equivalents
2017 2016
GBPm GBPm
Cash at bank and in hand 159.6 147.7
Short-term deposits 2.1 6.3
------
161.7 154.0
====== ------
12 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
was repaid on 30 June 2017.
13 Employee benefits
The Group operates three defined benefit pension schemes, being
the Clarkson PLC scheme, the Plowrights scheme and the Stewarts
scheme.
As at 31 December 2017, the combined schemes had a surplus of
GBP12.3m (2016: GBP2.3m). This was after an asset ceiling/minimum
funding commitment adjustment of GBP5.3m (2016: GBP4.1m) in
relation to the Plowrights scheme. As there is no right of set-off
between the schemes, the benefit asset of GBP16.7m (2016: GBP7.5m)
is disclosed separately on the balance sheet from the benefit
liability of GBP4.4m (2016: GBP5.2m). The Group has recognised a
deferred tax asset on the benefit liability amounting to GBP0.8m
(2016: GBP0.8m) and a deferred tax liability on the benefit asset
of GBP2.8m (2016: GBP1.2m). The market value of the assets was
GBP202.7m (2016: GBP200.5m) and independent actuaries have assessed
the present value of funded obligations at GBP185.1m (2016:
GBP194.1m).
14 Share capital
2017 2016
Million GBPm Million GBPm
Ordinary shares of 25p each, issued and fully paid 30.2 7.6 30.2 7.6
========== ------ ---------- ------
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 that is
expected to have a material adverse financial impact on the Group's
consolidated results or net assets.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FKCDKKBKBCNK
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March 12, 2018 03:00 ET (07:00 GMT)
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