REG - Clarkson PLC - Preliminary results
06/03/2023 07:00
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RNS Number : 9223R Clarkson PLC 06 March 2023
6 March 2023
Clarkson PLC ('Clarksons') is the world's leading provider of integrated
shipping services. From offices in 24 countries on six continents, we play a
vital intermediary role in the movement of the majority of commodities around
the world.
Preliminary results
Clarkson PLC today announces preliminary results for the 12 months ended 31
December 2022.
Summary
· Record underlying profit before taxation(*) of £100.9m (2021:
£69.4m), an increase of 45.4%
· Underlying earnings per share* increased 51.1% to 250.3p (2021:
165.6p)
· Particularly strong performance in the Broking segment
· Full year dividend of 93p, giving rise to a 20(th) consecutive
year of dividend growth
· Forward order book for invoicing in 2023 was US$216m (2022:
US$165m), an increase of 30.9%
· Strong balance sheet with free cash resources(*) of £130.9m
(2021: £92.3m) available for future investment
Year ended Year ended
31 December 2022 31 December 2021
Revenue £603.8m £443.3m
Underlying profit before taxation* £100.9m £69.4m
Reported profit before taxation £100.1m £69.1m
Underlying basic earnings per share* 250.3p 165.6p
Reported basic earnings per share 247.9p 164.6p
Dividend per share 93p 84p
* Classed as an Alternative Performance Measure ('APM'). See 'Other
information' at the end of this announcement for further information.
Andi Case, Chief Executive Officer, commented:
"2022 was a record year for Clarksons, and I thank all my colleagues across
every area of the business for their hard work, dedication and commitment.
This performance, driven by our client-focused culture and consistent strategy
of investing in the best teams across all global segments, data, intelligence,
analytics, and the best tools for trade, has enabled us to deliver a 20(th)
consecutive year of dividend growth for our shareholders.
"Whilst the global geo-political outlook for 2023 and beyond remains
uncertain, the green transition is driving significant activity in our
industry. This, coupled with a supply and demand balance that will create
meaningful supply-side constraints supporting the market, and our strong
forward order book, gives us confidence in the outlook for Clarksons."
Enquiries:
Clarkson PLC: 020 7334 0000
Andi Case, Chief Executive Officer
Jeff Woyda, Chief Financial Officer & Chief Operating Officer
Camarco: 020 3757 4983 / 4994
Billy Clegg
Jennifer Renwick
Alternative performance measures ('APMs')
Clarksons uses APMs as key financial indicators to assess the underlying
performance of the Group. Management considers the APMs used by the Group to
better reflect business performance and provide useful information. Our APMs
include underlying profit before taxation and underlying earnings per share.
An explanation and reconciliation of the term 'underlying' and related
calculations are included within the 'Other information' section at the end of
this announcement. All APMs used within this announcement are denoted by an
asterisk (*).
About Clarkson PLC
Clarkson PLC is the world's leading provider of integrated services and
investment banking capabilities to the shipping and offshore markets,
facilitating global trade.
Founded in 1852, Clarksons offers its diverse and growing client base an
unrivalled range of shipbroking services, sector research, on-hand logistical
support and full investment banking capabilities in all key shipping and
offshore sectors. Clarksons continues to drive innovation across its business,
developing digital solutions which underpin the Group's unrivalled expertise
and knowledge with leading technology.
The Group employs over 1,800 people in 56 different offices across its four
divisions and is number one or two in all its market segments.
The Company has delivered 20 years of consecutive dividend growth. The highly
cash-generative nature of the business, supported by a strong balance sheet,
has enabled Clarksons to continue to invest to position the business to
capitalise on opportunities in its markets.
Clarksons is listed on the main market of the London Stock Exchange under the
ticker CKN and is a member of the FTSE 250 Index.
For more information, visit www.clarksons.com
This announcement contains inside information for the purposes of Article 7 of
EU Regulation 596/2014 as it forms part of domestic law of the United Kingdom
by virtue of the European Union (Withdrawal) Act 2018, as amended (together,
'MAR'). Upon the publication of this announcement, this inside information is
now considered to be in the public domain.
Chair's review
Overview
As I reflect at the end of my first year as Chair, various observations spring
to mind as to what makes Clarksons such an exceptional business. First is the
quality, energy and focus of all of our employees worldwide, without whom the
record results for 2022 we have delivered would not have been possible. Second
is our culture and values, which underpin the way we operate and behave and
which are reflected in our many strong and enduring client relationships.
Finally, and crucially, is our relentless focus on investing in the future of
our Company, be that through, for example, the green transition, our continued
investment in Sea/ and the training of our people to ensure best-in-class
service to our clients.
2022 was a remarkable year for the shipping industry driven by a number of
significant "x" factors. As countries were at differing stages of recovery
from COVID-19 and China experienced a second lockdown, congestion and
disruption were already the key issues in shipping. Then Russia's invasion of
Ukraine caused another wave of wide-reaching consequences, including sanctions
and significant changes in both commodity flow and availability, issues not
just for shipping but for the wider economy as well. The energy and cost of
living crises, combined with inflation and higher interest rates, added
further challenges to the global economy, and to the asset-heavy shipping
industry.
Against this backdrop, the Group continued to thrive, a testament to both the
strategy and the teams within Clarksons. The decarbonisation journey, which is
both complex and important for shipping, is now well underway but will take
time to complete. Transition will require a number of different solutions,
significant investment and the provision of finance to the industry. Clarksons
is focused on ensuring we can add value within this process.
We believe our long-term strategic commitment to continuing to invest in our
teams, products and services will continue to reap dividends as the market
evolves. In addition to extending the depth and breadth of our broking teams,
we continue to invest in high-quality data within Clarksons Research, Sea/ -
our maritime technology platform, Support covering ports services and
supplies, and the Financial division sourcing financing across shipping,
offshore, renewables and real estate.
Results
I am delighted to report that underlying profit before taxation* was £100.9m
(2021: £69.4m) with underlying basic earnings per share* of 250.3p (2021:
165.6p). Reported profit before taxation was £100.1m (2021: £69.1m) with
reported basic earnings per share of 247.9p (2021: 164.6p).
Free cash resources* as at 31 December 2022 were £130.9m (2021: £92.3m).
Dividend
We are extremely proud to confirm that this will be our 20th consecutive year
of dividend increases. The Board is recommending a final dividend for 2022 of
64p (2021: 57p). Combined with the interim dividend in respect of 2022 of 29p
(2021: 27p), the resulting full year dividend in respect of 2022 results is
93p (2021: 84p). The dividend will be payable on 26 May 2023 to shareholders
on the register on 12 May 2023, subject to shareholder approval.
People
I was delighted to take up the role of Chair on 2 March 2022 and I greatly
appreciate the generosity of my colleagues, who have committed significant
time and energy to immerse me in all aspects of Clarksons' business. I have
been hugely impressed by the energy, agility and future-focused strategic
activity across all departments.
The enthusiasm and commitment to co-ordinated support of our clients across
all sectors and at all levels is what I believe makes Clarksons so highly
regarded by clients looking for market-leading intelligence and insights
across the industry. Our continued focus is on expanding our global footprint
and service offering, and adding to what is the very best talent in the sector
across all divisions. I thank all our colleagues for their exceptional efforts
this year.
Giving back
It is of the utmost importance to us that Clarksons is a force for good across
our global community, and we ensure that both our colleagues and the
communities we are part of around the world are valued, respected and
supported. To that end, this year we have extended the activities of our Green
Transition team in every area of the business, helping our clients to reduce
the impact of shipping on the environment, and reinforced our commitment to
the activities of The Clarkson Foundation to create positive change for those
in need around the world. The Clarkson Foundation has, for example, made a
tangible difference by donating to charities that provided clean water
facilities and hygiene education to five schools in Kenya and funded hot meals
over the Christmas period to some experiencing homelessness in London.
Board
Peter Backhouse retired from the Board this year following the completion of
his nine-year tenure as an independent Non-Executive Director. I would like to
thank Peter for his outstanding service to Clarksons. His perspective,
insights and counsel have been greatly valued as Clarksons has steered a
successful course through a period of considerable volatility, and we wish him
the very best for the future.
Outlook
We start 2023 confident in the outlook for Clarksons. The successful execution
of our long-term strategy to be best-in-class across all segments of shipping,
offshore and renewables means that we are optimally positioned for what we
believe will be a sustained period of growth in the industry.
Whilst there are considerable uncertainties in the geo-political landscape, we
are confident that supply-side constraints brought about by years of
underinvestment and the pressure on shipowners and charterers to decarbonise,
will provide significant opportunities for Clarksons long into the future.
We will continue our strategy of investing in the best people and
opportunities across the globe to ensure that we remain at the very forefront
of the industry, delivering growth for all stakeholders.
Finally, I would like to thank every employee in every office of the Group for
their commitment and hard work during the past year. It is truly appreciated.
Laurence Hollingworth
Chair
3 March 2023
Chief Executive Officer's review
2022 was a record year for Clarksons, and I thank all my colleagues across
every area of the business for their hard work, dedication and commitment. Our
performance this year is the result of our consistent strategy, (i) to be
best-in-class across each and every vertical within shipping and offshore,
(ii) to be best-in-class in each geographic region globally, (iii) to have the
best data, intelligence and analysis, (iv) to invest in our teams and the best
tools for trade, (v) to have an integrated business model meeting all the
needs of our extensive client base, and most importantly (vi) to add value to
our clients and put their needs at the heart of all that we do. This strategy
has of course been underpinned by our growing team of professionals and
experts, and I am proud to work alongside the very best in the industry.
We have for some time been signalling the evolution in maritime, which we are
now seeing and benefiting from. Demand and supply are in constant motion;
there is uncertainty of technology for the green transition; fleet profiles
are the oldest for over a decade; the order book of new ships is historically
low compared to the overall fleet in most of the larger commodity verticals;
financing availability is tight; and interest rate rises together with
inflation are impacting on the cost of building. It is clear to see there are
still significant constraints on the scale of ship building.
But without question, the green transition is the biggest change in shipping
and the drivers for change in our industry are significant. Regulators,
charterers, industry lobby groups and the consumers of products shipped are
demanding change in the greenhouse gas emissions of shipping. The needs of
participants to predict, record and analyse emissions data in order to reduce
their footprint on an ongoing basis has never been higher, which means that
the services offered by our broking, research and technology teams are in high
demand. Importantly, our Green Transition consultancy, linked with the
intelligence offered by our execution capability in newbuildings, is helping
our clients drive change. This activity will significantly alter the
specifications of vessels on the water and the value drivers in vessel
chartering, where emissions are becoming a key metric as to which vessel to
select.
The order book is increasingly comprised of alternate-fuelled ships with
evolving designs. A full understanding of all elements of this transition is a
key component of our service in helping clients meet the needs of the
industry. Nevertheless, overall the newbuild order book is flat, with most of
the activity in 2022 in containerships, car carriers and gas carriers.
Elevated newbuilding prices, limited berth availability and uncertainty around
fuelling technology contributed to relatively lower order volumes, increasing
the likelihood of meaningful supply side constraints over the coming years in
many verticals. Further constraints arise from environmental pressures, which
are creating more scrutiny and control over the existing fleet, impacting and
constraining speed and emissions.
Over the last few years there has been an increased need to focus on Know Your
Client ('KYC') and compliance with global sanctions. We have invested in this
area and we believe that this has become increasingly important to clients
following the onset of the Russia-Ukraine conflict, which has created complex
challenges as businesses need to protect their reputations while complying
with sanctions. Our clients want to understand the implications of dealing
with all parties within their entire network, and their recognition that
wilful ignorance is not acceptable means that they value Clarksons'
market-leading systems and commitment to transparency.
Broking
The maritime industry experienced a diversity of trends across its major
segments during the year. Major global disruption, including the dislocation
of trade brought about by the onset of the Russia-Ukraine conflict and the
continued impact from the COVID-19 pandemic, tightened markets and impacted,
not only seaborne cargos, but also pipelines. This led the ClarkSea index to
increase 30% to an all-time high, before coming off in Q4 on the back of a
slowing world economy, inflation and an easing of COVID-19-related port
congestion. Indeed, these global economic and geo-political stresses have put
immense pressure on the shipping industry to rapidly change, to ensure food
and energy reach people in need, irrespective of the changes in supply chains
and sanctions which have massively changed shipping routes and participants
able to transact with each other. Our ability to understand the changing
situation and react quickly has stood us in very good stead during the period.
Against this backdrop, the Broking division, which has a market-leading
position in all key shipping sectors, had a particularly strong year as volume
and market share gains aligned with high utilisation rates, driving higher
freight rates. Despite the rate environment not reaching record levels, the
broking teams broke all previous highs, giving us significant confidence for
the sector as supply-side constraints and inflationary pressures support
higher prices going forward.
The offshore oil, gas and renewables market also had a year of change
resulting in a notably stronger year, driven by increased demand for energy in
the short term and the drive towards energy security. The team is seeing
significant opportunities for assets as nations and businesses seek to reduce
their dependence on Russian natural resources. Moreover, the long-term trend
towards renewable energy and its importance in the energy basket is driving
our continued investment in renewables across all areas of the business.
Tankers, specialised products and gas markets, covering LNG, LPG and other
petrochemical gases, have had a strong year and continue to perform well with
good market fundamentals for the future. The dry bulk market was also strong
for much of the year, but freight rates have come off more recently due to
short-term factors which we believe will reverse as the year progresses. The
container sector started off the year at record levels, but faced a sharp
decline in the second half due to a decrease in trade volumes and congestion
unravelling.
The S&P team had a very successful year as demand for vessels was high,
despite there being a significant volume of transactions with respect to the
much talked about shadow fleet which was off limits to our teams.
Overall, segmental profit before taxation from Broking was £117.6m, up
£44.0m over the year, with a margin of 23.7%.
Financial
The Financial division faced tougher conditions in 2022 with an adverse
macro-economic and geo-political environment leading to a pause in capital
raising. Several transactions which were due to be completed in the second
half of 2022 are now expected to close in the first half of 2023, and indeed
many have already been completed, or are close to being completed, at the time
of writing.
Our areas of focus in shipping, metals and mining, offshore oil services and
renewables means that our pipeline remains strong. Whilst the macro-economic
outlook for 2023 remains uncertain, we expect to benefit as a number of large
banks and other competitors have left these markets and there remains pent-up
demand for capital.
Our project finance teams across shipping, offshore and real estate have also
continued to perform well.
Overall, our Financial division produced a segmental profit before taxation of
£7.8m in 2022 compared with £13.3m in 2021.
Support
The Support division had a very strong 2022 as our agency, supplies, customs
clearance and freight forwarding businesses all benefited from the increasing
focus on offshore renewables, as well as increased activity through ports as
COVID-19 congestion has eased. We have, since the year-end, continued our
investment in this growth segment and I was delighted to recently announce
investment in DHSS, a renewables-focused port services business based in
mainland Europe.
The Support division produced a segmental profit before taxation of £5.0m and
a 12.8% margin in 2022 (2021: £3.3m and 11.1%).
Research
The performance of the Research division is testament to the depth and quality
of Clarksons' research and the high regard in which it is held by clients. Its
products have seen significant growth from increased breadth and depth,
particularly extensive evolution in data and intelligence relating to the
green transition in shipping and the overall energy transition.
The division increased segmental profit before taxation by 14.8% to £7.0m
(2021: £6.1m).
Sea/
We welcomed Peter Schrøder as CEO of Maritech in April 2022 and are delighted
with client interest in, and adoption of, Sea/, the intelligent platform for
fixing freight. During the last year we have evolved the management team,
increased sales and client adoption and acquired two businesses - Setapp, a
business expert in maritime software product development, and Chinsay, a
contract management platform particularly focused on the dry bulk sector which
integrates well into Sea/ and creates scale alongside Sea/contracts. This
business remains a key area of strategic focus with 2023 being a pivotal year
in rolling out Sea/ across all areas of the dry bulk market and into other
sectors as well.
Outlook
Whilst the global geo-political outlook for 2023 and beyond remains uncertain,
the strength of business and balance between supply and demand, supported by
our record level of forward order book, gives us confidence in the outlook for
Clarksons.
The green transition is an area of key importance for Clarksons as clients
recognise the significant steps they need to take towards decarbonisation.
Increased environmental regulation and societal pressures will create
opportunities across all our divisions for many years to come.
We will continue to invest in our people, technology and businesses across all
segments, to ensure we have the expertise and insights to provide the best
advice, execution, data and technology in the industry.
Regardless of the challenges of the global markets in recent years, we have
not deviated from our strategy of investing for growth, ensuring that the
breadth, depth and quality of our ever-expanding offering maintains us at the
forefront as we enter this new phase of shipping.
Andi Case
Chief Executive Officer
3 March 2023
Financial review
Revenue: £603.8m (2021: £443.3m)
Underlying profit before taxation*: £100.9m (2021: £69.4m)
Reported profit before taxation: £100.1m (2021: £69.1m)
Dividend per share: 93p (2021: 84p)
Financial performance
2022 was another record year for the Group. Revenue increased 36.2% to
£603.8m (2021: £443.3m) and underlying profit before taxation* increased by
45.4% to £100.9m (2021: £69.4m).
The Broking division has been the main driver for this growth, continuing to
benefit from the long-term strategy to increase our global footprint and be
best-in-class across every segment of shipping and offshore. As we went into
2022, the low level of order book as a percentage of the world fleet combined
with the high utilisation highlighted last year, created the backdrop for
stronger freight rates and asset prices in many verticals. Overall, Broking
generated a segmental profit before taxation of £117.6m in the year (2021:
£73.6m), with an increased margin of 23.7% (2021: 21.6%) driven by strong
performances in dry bulk, specialised and offshore, together with a
much-improved performance in tanker markets.
The Financial division experienced tougher markets compared to 2021,
generating a segmental profit before taxation of £7.8m and margin of 15.7%
(2021: £13.3m and 23.8%), reflecting more muted activity in capital markets
across shipping, metals and minerals and renewables, and more sporadic deal
flow in shipping, offshore and real estate project finance, particularly in
the second half of the year. The Support and Research divisions experienced
good revenue and profit growth, with our port services business continuing its
steady improvement following the COVID-19 pandemic, and Clarksons Research
benefiting from the investment in enhancing its digital products.
The Group incurred underlying administrative expenses* of £481.2m (2021:
£355.7m) in the year, an increase of 35.3%, largely due to an increase in
variable remuneration as a result of the improved business performance. Within
these expenses, central costs unallocated to business segments increased to
£36.6m (2021: £25.2m), reflecting an increase in variable remuneration from
higher profits, further investment into central IT systems, website, branding
and people, and increased Sea/ technology amortisation costs as the platform
increases maturity of use. Sea/ costs on a cash basis have also increased
slightly from 2021 with additional investment in management and sales
capabilities to support the growing business and fewer costs being capitalised
in 2022 than in previous years.
Acquisitions
During the first half of the year, the Gibb Group acquired PPE Suppliers
Limited for £0.2m, broadening the reach of our tools and supplies offering
within the Support segment. The Group completed two acquisitions under the
Maritech brand during the second half of the year: Chinsay, a business which
enhances our capabilities and client base within the dry cargo contract
management space, and Setapp, a business expert in maritime software
development, with a view to further growing and developing Sea/. Chinsay was
acquired for a total consideration of US$3.2m and Setapp for €3.0m.
Acquisition-related costs include £0.2m (2021: £0.2m) relating to
amortisation of intangibles and £0.3m (2021: £0.1m) of cash and share-based
payments spread over employee service periods. A further £0.3m (2021: nil) is
included relating to the Chinsay and Setapp acquisitions. We estimate
acquisition-related costs for 2023 to be £0.5m assuming no further
acquisitions are made.
Taxation
The Group's underlying effective tax rate* was 20.4% (2021: 21.2%), slightly
lower than the prior year as a result of a one-off tax credit in the US,
though still reflecting the broad international operations of the Group. The
Group's reported effective tax rate was 20.5% (2021: 21.2%).
Earnings per share
Underlying basic earnings per share* increased by 51.1% to 250.3p (2021:
165.6p) and is calculated as underlying profit after taxation* attributable to
equity holders of the Parent Company divided by the weighted average number of
ordinary shares in issue during the year. The reported basic earnings per
share was 247.9p (2021: 164.6p).
Forward order book ('FOB')
The Group earns some of its commissions on contracts where the duration
extends beyond the current year. Where this is the case, amounts that are able
to be invoiced during the current financial year are recognised as revenue
accordingly. Those amounts which are not yet invoiced, and therefore not
recognised as revenue, are held in the FOB. In challenging markets, such
amounts may be cancelled or deferred into later periods.
The Directors review the FOB at the year-end and only publish the FOB items
which will, in their view, be invoiced in the following 12 months. At 31
December 2022, this estimate was 30.9% higher than the prior year at US$216m
(31 December 2021: US$165m).
Dividend
The Board is recommending a final dividend in respect of 2022 of 64p (2021:
57p) which, subject to shareholder approval, will be paid on 26 May 2023 to
shareholders on the register at the close of business on 12 May 2023.
Together with the interim dividend in respect of 2022 of 29p (2021: 27p), this
would give a total dividend of 93p for 2022, an increase of 10.7% on 2021
(2021: 84p). In taking its decision, the Board took into consideration the
Group's 2022 performance, balance sheet strength, ability to generate cash and
FOB.
This increased dividend represents the 20th consecutive year that the Board
has raised the dividend.
Foreign exchange
The average sterling exchange rate during 2022 was US$1.23 (2021: US$1.38). At
31 December 2022, the spot rate was US$1.21 (2021: US$1.35).
Cash and borrowings
The Group ended the year with cash balances of £384.4m (2021: £261.6m) and a
further £3.1m (2021: £9.6m) held in short-term deposit accounts and
government bonds, classified as current investments on the balance sheet.
Following correspondence this year with the Corporate Reporting Review Team of
the Financial Reporting Council, we agreed to restate certain cash flows
relating to equity-settled liabilities within the Consolidated Cash Flow
Statement both within 'net cash flow from operating activities' and 'financing
activities'. We have restated the Consolidated Cash Flow Statement for the
year ended 31 December 2021 to add back £11.3m of equity-settled liabilities
as 'operating activities' and deduct £11.3m of shares acquired by our
Employee Benefit Trust ('EBT') as 'financing activities'. This presentation
has also been adopted for the year ended 31 December 2022.
Net cash and available funds*, being cash balances after the deduction of
accrued bonuses, at 31 December 2022 were £161.7m (2021: £122.3m). The Board
uses this figure as a better representation of the net cash available to the
business since bonuses are typically paid after the year-end, hence an element
of the year-end cash balance is earmarked for this purpose. It should be noted
that accrued bonuses include amounts relating to the current year and amounts
held back from previous years which will be payable in the future.
A further measure used by the Board in taking decisions over capital
allocation is free cash resources*, which deducts monies held by regulated
entities from the net cash and available funds* figure. Free cash resources at
31 December 2022 were £130.9m (2021: £92.3m).
In addition to these free cash resources*, the Group has a strong balance
sheet and has consistently generated an underlying operating profit and good
cash inflow. Management has stress tested a range of scenarios, modelling
different assumptions with respect to the Group's cash resources and, as a
result, continues to adopt the going concern basis in preparing the financial
statements.
Balance sheet
Net assets at 31 December 2022 were £413.2m (2021: £361.6m). The balance
sheet remains strong, with net current assets and investments exceeding
non-current liabilities (excluding pension provisions and lease liabilities as
accounted for under IFRS 16) by £163.6m (2021: £120.2m).
The overall loss allowance for trade receivables was £19.6m (2021: £12.9m).
The Group's pension schemes had a combined surplus before deferred tax of
£15.4m (2021: £22.0m).
Jeff Woyda
Chief Financial Officer & Chief Operating Officer
3 March 2023
Business review
Broking
Revenue: £495.5m (2021: £340.0m)
Segmental split of underlying profit before taxation: £117.6m (2021: £73.6m)
Forward order book for 2023: US$216m^ (At 31 December 2021 for 2022: US$165m^)
^ Directors' best estimate of deliverable forward order book ('FOB')
Dry cargo
Supporting a range of important global industries including construction,
energy and agriculture, the dry cargo sector moved more than five billion
tonnes of cargo in 2022 across a range of dry bulk commodities, including
metals and minerals, agricultural products and some semi-processed goods. The
bulkcarrier shipping market experienced a mixed 2022. Earnings remained strong
in the first half of the year, before easing back in the balance of the year
as trade volumes began to soften with weaker economic trends globally and in
China (where dry bulk imports fell 4% in 2022). The overall Clarksons
bulkcarrier earnings index averaged US$20,478 per day across the year, 23%
down year on year but remaining double the 10-year average. The market
experienced a range of complexities and impacts from global events, including
post-COVID-19 demand rebound, impacts from the Russia-Ukraine conflict, US
monetary tightening and a weaker Chinese economy. The sub-Capesize sectors
generally performed more strongly, with broadly supportive demand trends in
the first half of the year and logistical disruption related to the
Russia-Ukraine conflict and sanctions on Russia. Capesize earnings of owners
(down 58% year on year to US$11,877 per day, below the long-term trend) were
impacted by disruption from heavy rainfall in key iron ore and coal exporting
countries while pressures from weaker Chinese steel demand due to the
structural problems in the property sector also impacted. The easing of port
congestion improved fleet availability and the easing of COVID-19 quarantine
protocols in China also reduced disruption on the key West Australia-China
route. The UN-led grain corridor facilitated the restart of Ukraine Black Sea
grain exports, although at lower-than-normal levels.
Bulkcarrier markets are expected to experience some periods of lower rates in
2023, with impacts from slower world economic growth continuing. However,
improvements are also expected through the year supported by a range of
factors including increases in grain trade volumes and an anticipated
post-COVID-19 rebound in China, including impacts from stimulus on steel
demand. Easing inflation may also support improved dry bulk demand in Europe
as the year progresses, on top of ongoing longer-haul coal imports into the
region following embargos on Russian cargoes. Port congestion may increase
again as demand improves. On the supply side, deliveries appear moderate;
newbuild orderbooks are close to record lows at 7% of the fleet; and new
emissions regulations could lead to both limits to vessel speeds and early
retirements. Tiering of freight and charter markets is expected with more
efficient ships commanding a premium. Our market-leading dry cargo team
invested in further headcount across its global team in 2022, supporting our
client base and achieving good growth in transactions.
Tankers
The tanker sector plays a crucial role in global energy supply chains, moving
crude oil and refined oil products to facilitate their eventual use as
transportation fuels, for heating and electricity generation, and as
industrial feedstocks. Overall, the tanker shipping market saw a significant
improvement in 2022 to historically strong conditions, supported by
post-COVID-19 improvements in global oil demand and supply and the impacts
from the Russia-Ukraine conflict, which included disruption of vessel
availability and trading patterns. The Clarksons average tanker earnings index
rose five-fold in 2022 to US$40,766 per day, the highest level since 2008. The
VLCC segment took longer to recover than other sectors amid COVID-19-related
disruption in China in the first half. However, improved Chinese demand later
in the year, higher OPEC+ oil supply and increased long-haul US exports all
supported gains in the second half. The Suezmax and Aframax segments were
heavily impacted by the Russia-Ukraine conflict due to shifts in trade
patterns, including the supportive impact of longer transport distances for
European crude imports and Russian exports, with Suezmax earnings rising
significantly above long-run averages and Aframax earnings reaching the
highest levels on record. Product tanker earnings also strengthened
considerably after the start of the conflict due to higher refinery margins
and output, as well as shifts in trade patterns, which exacerbated longer-term
structural changes in the global refining industry. These changes were already
expected to support products' tonne-mile trade in 2022 (closures of older
refineries in established demand centres, while newer capacity has opened up
elsewhere, predominantly in the Middle East and Asia). LR2 and LR1 earnings
rose to well above long-run averages, while MR earnings increased to record
highs.
The tanker sector is expected to see generally strong market conditions in
2023 with continued volatility this year, although the VLCC sector may see
some short-term headwinds from OPEC+ production cuts implemented in late 2022
and the ending of large-scale releases from the US Strategic Petroleum
Reserve. There remain uncertainties around the exact impact of EU and G7
measures affecting Russian trade. A lengthening of average oil trade distances
appears likely although a decline in Russian export volumes is also possible.
Improved Chinese oil demand seems likely to support tanker demand in 2023.
Meanwhile, the rapidly thinning tanker orderbook (now only 5% of fleet
capacity) points to limited fleet growth ahead. Active fleet supply is
expected to be further constrained by new emissions regulations which appear
likely to restrain the ability of the fleet to speed up significantly, whilst
the early retirement of some tonnage is possible as the decade progresses.
Considerations around lower emission vessel designs may also lead to continued
restraint in newbuild orders.
Our shipbroking team play a vital role in the freight supply chain and has
deep long-term relationships with all major oil companies, traders and
shipowners. Supported by our scale, regional breadth, expert analysis and
technology tools, our tanker team performed exceptionally in 2022 as we
supported our clients through disrupted and volatile markets.
Containers
The container shipping sector facilitates transportation of a wide spectrum of
manufactured goods, often high-value, and includes consumer and industrial
goods, foodstuffs and chemicals. 2022 was a year with two distinctly different
phases for the container shipping markets. The first half saw continued
extraordinary market conditions amid severe port congestion following a robust
trade rebound in 2021. However, a major market softening occurred throughout
the second half as box trade came under increased pressure alongside easing of
congestion, leaving spot box freight rates and containership time charter
earnings back in 'normalised' territory by the end of 2022 after a sharp
correction. Indices of spot box freight rates closed 2022 down approximately
80% from the start-year record and close to the start-2020 level, whilst
average containership charter earnings reached around US$27,000 per day by the
end of 2022, down 70% from the April 2022 peak but still almost double the
start of the 2020 level.
Container trade fell by 3% in TEU terms in 2022, amid broad macro-economic
headwinds and impacts on consumer activity from inflation and a cost of living
crisis, as well as pressure from excess retail inventories. Port congestion
remained severe in the first half, reflecting impacts from labour strikes,
COVID-19 lockdowns in China, the Russia-Ukraine conflict and liner network
recalibration to avoid prior disruption hotspots. The level of containership
capacity at port rose to a peak of 38% of the fleet in July 2022 (2016-19
average: 32%), before falling to approximately 33% by the end of 2022 as
faltering demand allowed logistical bottlenecks to ease. On the supply side,
fleet capacity growth stood at 4% in 2022, whilst containership speeds began
to trend lower in the second half. Newbuild contracting fell from the 2021
record but remained firm at 2.7m TEU, with a record 69% of capacity ordered
accounted for by alternative fuel capable vessels. In 2023, container shipping
markets look set to see continued softening from strong supply expansion,
continuing pressure on box trade and reduced port congestion. New emissions
regulations may have some supply side impacts (eg speed adjustments, retrofit
time and support to demolition), although appear unlikely to transform soft
markets alone.
In 2022, our containership broking teams executed major transactions with a
wide range of operators and owners across chartering, newbuilding and
secondhand. Our multi-national global broking resources have been in strong
demand, backed by unprecedented requirements for analysis and research. We
continue to support our clients in navigating the decarbonisation of our
industry, with these efforts likely to become an increasingly important
feature of our offering.
Gas
The LPG carrier fleet ships liquified petroleum and petrochemical gases,
supporting a wide range of industries, from plastics and rubber production to
industrial and domestic energy markets. The LPG carrier fleet transported
circa 120m tonnes of LPG in 2022, as well as smaller quantities of ethane,
ammonia and petrochemical gases. 2022 was generally a strong year for the
larger-sized LPG carriers, with spot VLGC earnings on the benchmark AG-Japan
route averaging US$1,649,000 per month across the year, the highest annual
average since 2015. Market strength was due partly to growth in seaborne
trade, which rose by an estimated 5% year on year globally. Increased market
inefficiencies, notably Panama Canal delays, also supported rates, while a
slight reduction in speed was also noted. Divergent trends emerged in other
vessel sizes. In the Midsizes (25-45,000 cbm), TC earnings started 2023 at
US$890,000 per month, up from US$830,000 per month at the start of 2022.
Support was received from an influx of tonnage into ammonia trades as the
market adjusted to the absence of volumes from the Baltic and Black Sea (amid
the Russia-Ukraine conflict). Additionally, the Handysize (15-25,000 cbm)
market continued to receive support from growth in Ethylene exports out of the
US, which breached the one million tonne mark in 2022. Consequently, 12-month
timecharter rates rose from just over US$590,000 per month over 2021 to
US$730,000 per month at the start of 2023. In the smaller segments, a limited
orderbook and ageing fleet continue to support freight rates, which also rose
across 2022.
Looking ahead, 46 VLGCs newbuilds are expected to be delivered this year,
alongside 20 MGCs, which may generate some market pressure in the larger
sizes, although continued trade growth and an expected slowdown in vessel
speeds (following the introduction of IMO carbon regulations in January 2023)
should provide support. The outlook for the smaller segments appears more
positive, with continued growth in US ethylene exports expected in conjunction
with limited fleet growth.
With the continued drive towards decarbonisation, both on the shipping and
production side, the gas team has been active in supporting initiatives
towards the production and transportation of green ammonia and CO(2). This is
expected to shape developments in the market over the next decade.
LNG
The LNG carrier sector shipped over 400m tonnes of liquified natural gas in
2022, a record high, on a fleet of highly specialised vessels. This sector is
critical to both energy transition and energy security, particularly in the
wake of the Russia-Ukraine conflict and subsequent diminishing Russia-Europe
gas pipeline trade.
The LNG shipping market saw very strong rates in 2022 with our index of spot
rates for a 160,000 cbm TFDE unit averaging a record US$131,500 per day, up
47% year on year. The market became exceptional as the year developed with
spot rates surging through the third and fourth quarters, supported by tight
spot tonnage availability as European demand for transportation, storage and
regasification escalated. In the fourth quarter, short-term day rates averaged
all-time highs of US$330,300 per day. Global LNG trade volumes rose by 4.8% to
407.7m tonnes in 2022, largely on the back of an increase in export volumes
from the US. On the importer side, elevated European demand shaped the market,
as the continent looked to rapidly substitute away from Russian pipeline gas.
Imports into Europe surged by 62% to 130m tonnes in 2022, a record high.
Meanwhile, imports into Asia dropped by 7% to 257m tonnes, on the back of
elevated competition from Europe and a shift in trade flows. LNG carrier
newbuild orders reached a record 182 vessels and overall fleet capacity grew
at 4.3%.
Another generally strong rate environment is expected in 2023, with support
from tight relet tonnage availability, robust trade growth and reduced average
vessel speeds following the implementation of IMO carbon regulations from
January 2023. Relatively strong newbuild investment is also expected,
supported by project requirements and fleet renewal.
Clarksons has remained central to a number of newbuilding contracts whilst the
chartering team has restructured to provide solutions on both short and
medium-term charters to their expanding client base.
Specialised products
The chemical tanker fleet consists of vessels able to transport a wide range
of specialised liquid chemicals, contributing to a diverse range of sectors,
including manufacturing and agriculture. 2022 marked an extraordinary year for
the chemical tanker sector, with the freight market breaking through previous
records and posting consistently strong month-on-month highs. A combination of
factors including an exceptional deep sea CPP market, elevated levels of port
congestion in China and increased biofuels trade were key in supporting the
freight environment.
Such was the strength of these drivers, the Clarksons Bulk Chemical Spot Rate
Index recorded an average increase of 67% compared to 2021, whilst the
Clarksons Edible Oils Spot Rate Index saw an equally impressive 81% average
increase over the same period. Depending on trade lane and tonnage
requirements, we have seen upward revisions to contract of affreightment rates
of anything from 10% to 15% to in excess of 100%.
Looking ahead, limited growth in the chemical tanker fleet is expected to
provide significant support to the freight market. Across 2022, annual fleet
growth stood at around 2%, and there is potential for the fleet to contract in
coming years. A lack of yard space, high newbuilding prices and softer
earnings historically means that securing financing and support for new
projects is scarce. That said, we do expect volume requirement growth to
remain very modest considering macro-economic pressures in 2023, with overall
seaborne trade expected to grow by 1.8% and by a further 3.3% in 2024.
The extensive capability of our specialised products broking business has
helped our clients navigate through today's complex and volatile marketplace,
supported by a global network of offices. With the rapidly accelerating
decarbonisation agenda, our unique depth and breadth of knowledge, supported
by our carbon broking desk, Green Transition team and Research division, has
allowed us to partner stakeholders in developing their decarbonisation
pathways.
Sale and purchase
Secondhand
The global secondhand vessel sale and purchase ('S&P') markets remained
very active in 2022, with sales volumes standing at the second highest level
on record after 2021 (over 134m dwt and US$57bn in 2022). Strong levels of
activity were supported by positive underlying shipping and charter markets,
whilst firm asset prices supported overall sales figures in value terms.
Transaction volumes notably increased in the tanker sector amid strong
underlying markets and firming asset values, with a record US$18bn of sales
(more than 700 ships) reported and over 10% of fleet capacity changing hands.
Activity in the containership S&P market remained firm in the first half
of 2022 following a very strong 2021. Although activity slowed through the
second half of the year in line with a softening rate environment, total
transaction volumes still reached more than 220 ships selling for an aggregate
of US$8bn. The bulkcarrier S&P market generally saw continued strong
activity, especially in the first half, though total volumes were down on the
2021 record at more than 740 ships (US$15bn).
Asset values remained generally firm in 2022, with the cross-sector Clarksons
Secondhand Price Index reaching 213 points in July, the highest level since
2008, although this has since eased back with containership and bulkcarrier
pricing softening in the second half. Tanker values rose sharply through 2022
(our 10-year-old Aframax index increased from US$27m to US$50m) as tanker
earnings rose, with ice class tonnage especially in demand. Recent S&P
trends amongst the major shipowning countries continued, with Greek owners
still the biggest buyers and sellers of tonnage in 2022, although Chinese
entities were also active in acquiring vessels.
Across all offices we were able to benefit from the high volumes of secondhand
vessel transactions with our teams experiencing another successful year
overall.
Newbuilding
The newbuilding market remained active in 2022, with ordering volumes easing
(down 20% from 2021 to 45m CGT) but remaining above 2015-20 levels. Total
newbuild investment reached US$128bn, the highest level since 2013.
Contracting in 2022 was led by the LNG carrier sector amid record earnings and
an increased focus on energy security, with 182 units (US$39.1bn) ordered
during the year, more than any other shipping sector in terms of CGT and
newbuild value. There was also strong activity in the containership sector,
especially in the first half of the year, with 367 orders (US$35bn) placed. We
also saw strong ordering in the car carrier sector amid an exceptional
earnings environment and a focus on fleet renewal. Contracting in other
sectors was limited by high newbuild prices, reduced slot availability at
yards, and continued uncertainty over fuelling technologies. However, our
continued breadth of service to our industrial client base enabled our
participation in a healthy level of contracting activity and validation across
the markets, in spite of such challenges.
Newbuild prices stood at firm levels in 2022, supported by global inflationary
pressures, rising commodity prices and increasing forward cover at yards. Our
Newbuilding Price Index ended 2022 at 162 points, up from 154 points at the
start of the year and the highest level since 2008. Despite healthy ordering
volumes, the global orderbook remains relatively low in historic terms at 10%
of fleet capacity in dwt terms. Shipyard output remained relatively steady
year on year, totalling 31m CGT, with Chinese yards (47% market share) and
South Korean yards (25% market share) delivering the majority of tonnage.
Our global newbuilding team delivered market-leading performances across
multiple asset sectors in 2022 and we remain well positioned as a service
provider and partner to our client base in a continually evolving macro
newbuilding environment. There were significant market-leading transactions,
particularly for the car carriers team, arranged by our Oslo desk, as well as
major industrial-backed projects in tankers and gas vessels. Our scale and
depth of transactional activity continues to give us real-time information and
insights as the industry evolves against regulatory pressure and environmental
compliance. We remain well positioned going into 2023 to continue to leverage
this knowledge.
Offshore
The offshore sector supports the development, production and support of
offshore oil and gas fields and renewables, with over 13,000 mobile assets
playing a vital role in supporting operations across the lifecycle of offshore
energy projects. Overall, 2022 was a year of positive progress for the
offshore markets, with the offshore oil and gas business recovering strongly
amid a backdrop of generally high oil and gas prices, whilst the offshore
renewables (wind) sector continued to expand rapidly. Although the increase in
underlying E&P spending was relatively moderate, activity levels increased
across all offshore sub-sectors and most geographical regions, and further
improvements in activity, fleet utilisation and day rates are expected in
2023. Our offshore broking teams have continued to utilise their extensive
industry relationships and technical expertise to support our client base
through evolving markets.
Drilling market
Mobile drilling units (comprising jack-ups, semisubmersible units and
drillships) drill wells in the sea floor to locate and facilitate extraction
of oil and gas. Rig markets tightened materially in 2022, with an increasing
number of rigs on contract, higher utilisation and rising day rates. The
floater segment, particularly for ultradeepwater/deepwater high-end units, is
now generally tight, whilst the jack-up segment has continued to strengthen,
particularly in the Middle East, resulting in global active utilisation
closing in on 90%. Prospects for 2023 and beyond for the drilling market
appear positive amid increasing offshore activity.
Subsea field development market
The subsea sector involves the usage of a range of assets, with capabilities
in lifting, pipelay, cable lay, diving and ROV support, to install and
maintain subsea production infrastructure. The subsea field development market
continued to improve through 2022, with an increasing backlog for the major
EPC contractors. The subsea vessel market also saw significant improvement
with rates and contract durations generally increasing. This has been driven
by both improved subsea oil and gas demand, as well as requirements for many
of the same vessels from the offshore wind sector. Prospects for 2023 appear
positive, with increased activity generating project opportunities, including
for smaller contractors, and supporting vessel demand.
Offshore support vessels
The OSV sector provides towage and support duties to drilling rigs, mobile
production units and fixed production platforms. The OSV market strengthened
significantly in 2022 amid increasing drilling and field development activity.
Demand increased across most regions, and with limited availability, vessels
are increasingly likely to start migrating between regions. There has been
virtually no ordering activity since 2014, and rates are expected to continue
to increase with capacity availability limited and continued firm demand.
Offshore renewables
The offshore renewables industry is continuing its rapid growth phase, and
going forward is expected to account for a growing share of the global energy
mix supported by the increased focus on decarbonisation and energy security.
The offshore wind market continued to grow in 2022. More projects reached the
FID stage and investment flowed into the sector. Construction activity in key
European markets is firm, and globalisation of the industry continues to
develop, with new markets such as Poland, the US and South Korea emerging.
Several countries strengthened renewables targets after the onset of the
Russia-Ukraine conflict enhanced focus on energy security, whilst investor
focus on ESG and infrastructure investments continues to increase. The outlook
remains positive with significant growth expected in the coming years.
Although uncertainty remains around cost inflation, supply chain issues and
delays, and FID activity was slower in 2022, projects will continue to develop
through the phases in the coming years. Offshore wind remains competitive,
secured offtake development is still strong and 2022 was a record year for
European project awards. The pipeline of projects until 2025-26 is starting to
firm up, providing good visibility on future offshore demand.
Our offshore and renewables team has been at the forefront of market
developments, completing several initiatives during the year to help the
sector support decarbonisation targets. We have been instrumental in adding
wind support vessels to the market and have been involved in several
large-scale wind projects. We continue to look for ways to improve and
innovate, with clients choosing to work with us for our reputation as a
leading player, our commitment to decarbonisation and our ability to deliver
high-quality solutions. 2022 was a busy year for our specialised renewables
consultancy, AIR, led by experienced industry professionals, and delivering
several projects across a range of clients. It is well positioned for further
growth in 2023.
Futures
Our Futures business is the leading provider of freight derivative products,
helping shipping companies, banks, investment houses and other institutions
seeking to manage freight exposure by increasing or reducing risk. It
leverages the expertise and market understanding of the wider Group to offer
best-in-class execution services to derivatives markets across freight, iron
ore and carbon. Against the backdrop of increased regulatory requirements,
Futures has, with support from the wider Group, positioned itself at the
forefront of the sector. 2022 was a positive year for the Futures business.
Tanker FFA revenue rose strongly. Efforts continue to bring new participants
to the market as well as service existing clients to the highest standard. In
the dry futures business, it was another busy year with new offices
established in Dubai, focusing on Far East activity, and in Oslo, providing
access to EU business. The swaps business, in a highly competitive space, saw
revenue down from a particularly strong 2021 but still well above 2019/20
levels. The options business maintained its market-leading position and had
another excellent year overall, remaining the lead broker for most of the
major accounts. Work continues in developing wet FFA options.
Financial
Revenue: £49.8m (2021: £56.0m)
Segmental split of underlying profit before taxation: £7.8m (2021: £13.3m)
Securities
Clarksons Securities is a sector-focused investment bank for the shipping,
offshore energy, renewables and minerals industries, with deep sector
knowledge and global reach driven by research and relationships. In 2022,
against a backdrop of a difficult year for capital markets with volatility
resulting from global events and macro-economic headwinds and deal volume
slowing, activity in Clarksons Securities' core sectors was positive in
relative terms, with risk sentiment and capital markets activity appearing to
improve moving into 2023. Despite volatile and uncertain markets, secondary
trading activity was strong with equities especially active, private equity
realising positions and creditors selling equity in restructured oil services
companies.
Shipping
In 2022, strong cashflow and upward pressure on asset pricing drove shipping
stock performance and trading liquidity in several equities increased
significantly throughout the year. Capital markets activity remained in line
with historical trends in the first half of 2022, but issuance activity in the
second half of 2022 was muted due to equity market volatility. Clarksons
Securities participated in several capital markets transactions, including
initial public offerings of Cool Company and Gram Car Carriers and follow-on
offerings in Hafnia, Cool Company and American Shipping Company. Although
shipping bond issuance activity remained muted, Clarksons Securities acted as
financial advisor in several bilateral loan and leasing transactions.
Energy
Oil services stocks saw positive trends in 2022 on the back of increased
offshore E&P investments, and improved utilisation and day rates across
most offshore segments. Capital markets activity within the energy services
space picked up during the year as investors sought exposure to the sector.
Clarksons Securities placed several equity raises, including a private
placement for Borr Drilling.
Metals and minerals
2022 started strongly for metals and mining stocks but the challenging
macro-economic backdrop led to significant pressure by the end of the year.
Clarksons Securities participated in multiple transactions within the metals
and minerals space in 2022, among them equity raisings in Nordic Mining,
Canada Nickel Company and Piedmont Lithium and a bond issuance for Nordic
Mining. Continued firm activity is anticipated and Clarksons Securities
remains well positioned to assist clients in meeting demand for commodities
driven by the green transition.
Renewables
The renewable energy sector continues to see impressive expansion across the
board with traditional technologies such as wind and solar continuing to grow
while emerging technologies such as hydrogen and carbon capture and storage
have developed significantly. Market sentiment in the offshore wind sector
remains strong, driven by continued strong growth in installed capacity,
despite some supply chain bottlenecks. The expansion of the dedicated offshore
wind fleet requires substantial capital funding. Nonetheless, 2022 was a
challenging year for stocks related to renewable energies, against a backdrop
of inflationary pressures, increasing interest rates and geo-political
instability. Capital markets activity slowed, with some companies turning
towards private markets which have shown willingness to support energy
transition-related companies. Clarksons Securities has been particularly
active around hydrogen, carbon capture and various e-fuels, offering synergies
across the Group, including acting as advisor in the raising of equity by
Ocean Geoloop and Liquid Wind.
Debt capital markets
With markets broadly closed for significant periods of 2022, and investors
demanding considerably higher returns to take on risk, primary issuance across
the Nordics, Europe and the US fell by 70-80% compared to 2021. Despite this,
Clarksons saw pockets of funds available for select public and private debt
activity and completed several transactions.
Project finance
Our project finance business is a leading Nordic player within shipping and
real estate project finance, which has in recent years offered investment
opportunities in modern fuel (and carbon) efficient shipping and offshore
assets, with an overall focus on assisting the shipping and offshore industry
in transitioning to more sustainable and less carbon-intensive transportation.
2022 was an active year in the Norwegian project finance market with our team
concluding new projects in the dry bulk, tanker and offshore sectors, and
establishing a good pipeline of projects including zero emission shipping
investments.
The first half of 2022 saw positive trends in the real estate market in
Norway, but with increasing interest rates and general macro-economic
headwinds the second half of 2022 proved turbulent. Although the decline in
commercial property values has so far been limited, as interest rates
increased banks became stricter on financing terms, contributing to fewer
transactions. That said, the first half of 2022 was one of the busiest ever
periods for our real estate team. Activity included the establishment of a new
industrial real estate company focussing on properties near the centres of the
largest cities in Norway and several exciting development projects in
co-operation with reputable partners. Our business continues to expand its
operational platform by strengthening the property management and project
development teams.
Our real estate funds continued to expand with the launch of a new fund with a
special focus on environmental improvements to existing buildings.
Structured asset finance
Our structured asset finance business maintains relationships with asset
financiers globally including around their activities and headline terms, with
a view to helping our broking clients understand the sources of finance
available to them and providing introductions where relevant. It acts as an
exclusive mandated financial advisor, structurer and arranger working closely
with the newbuilding, strategy and structuring teams on large long-term
strategic procurement projects for end-users and cargo interests.
The shipping asset finance landscape continues to evolve and by the close of
2022, there were few signs of any additional stress amongst lending
portfolios, although many lenders exposed to the container shipping sector are
seeing an increased risk profile. The 'Poseidon Principles' group of banks,
aligning their portfolios to key emissions targets, has seen additional
signatories, and appetite from these banks remains almost exclusively focused
on new 'green' vessels and/or sustainability-focussed projects. Outside of
this group, other large banks together with the smaller regional shipping
banks, especially those in Cyprus, Greece and Scandinavia, continue to grow in
terms of capital deployed and to see opportunities to finance or refinance
tonnage, especially for slightly older vessels and/ or for projects with less
'green' credentials. Chinese leasing remains an additional source of capital
to the industry, though there appears to be a two-tier market developing. The
leading providers are able to reduce margins for the right projects closer to
those being offered by the shipping banks. The remainder is mostly either
inactive internationally or trying to compete with the smaller shipping banks
and alternative lenders with only limited degrees of success. Japanese leasing
continued to offer an attractive alternative for those able to access this
market, albeit with limited flexibility. The alternative lender landscape
remains largely unchanged. There is plenty of capital available to be
deployed, although there remains no real emergence of insurance companies and
pension funds at an asset level, with participation generally limited to
investments in alternative funds platforms.
The business concluded further mandates in 2022 and continues to fulfil a
specific highly value-adding role, particularly post-IFRS 16, with an
excellent reputation and track record. A strong commitment to decarbonisation
is a central part of our clients' strategies and their long-term investment in
newbuilding projects is at the forefront of their efforts and respective
commitments in this regard.
Support
Revenue: £39.0m (2021: £29.6m)
Segmental split of underlying profit before taxation: £5.0m (2021: £3.3m)
Stevedoring
In 2022, our stevedoring business, highly experienced in loading and
discharging bulk cargoes, performed strongly. Export volumes increased by
148,000 tonnes to 284,000 tonnes, and although total imports were down by
39,000 tonnes, half of this decrease was made up by low margin biomass
imports. This increase in tonnage handled directly bolstered performance with
higher ancillary income as rental income, handling charges and other revenues
expanded in line with additional volumes. Our grain elevators in Portsmouth
also made a notable contribution. The cost base remained controlled although
fuel costs for machinery increased, caused by a change in government taxation
policy; and property costs were lower than normal due to the timing of local
government COVID-19 relief.
Short sea broking
2022 was a strong year for the short sea broking business which, with
specialist skills, in-depth knowledge and strong relationships, is
market-leading in brokerage services for short sea dry cargo shipping. The
business continued to grow its chartering base and handle larger parcel sizes
than previously. This performance was supported by exceptional freight rates
for much of the year, in addition to exchange rate trends, although freight
rates are generally expected to ease down going forward. The business plans to
expand further, including leveraging agency activity to broaden the charterer
client base.
Gibb Group
Gibb Group is the industry's leading provider of PPE, MRO products and
services as well as one of the offshore renewable energy sector's most
experienced, qualified suppliers. In 2022, the business achieved growth in the
face of significant headwinds, including the cost of container freight,
exchange rate trends and supply chain issues hampering the ability to get
product in a timely manner. In recent years the business has been reshaped
with the addition of the Safety and Survival business, first in Great Yarmouth
and subsequently in Aberdeen and Middlesbrough. The growing hire and service
centre business is continuing to meet evolving client demand patterns. The
traditional core oil and gas business saw a boost in volumes following the
onset of the Russia-Ukraine conflict, which saw countries increase their focus
on security of energy supply and ramp up local oil and gas production. Supply
chain issues have impacted Gibb Netherlands but a local service centre and new
premises should provide the opportunity for growth from early 2023. Offshore
wind activity through Ijmuiden grew as the port began to support new offshore
wind farms. Further overall expansion is planned for 2023.
Agency
Through exceptional port agency and first-class logistics services, our
business provides a range of solutions for clients in the marine and energy
sectors. Although the UK saw limited construction traffic in 2022 (expected to
return in 2023), the building of large offshore wind farms is providing
growing opportunities. Our customs clearance business supports clients
globally with our comprehensive compliance capabilities, and performed
strongly in 2022. The year also saw gains from bunker supply activity.
Following a weaker 2021, our bulks business experienced improvement in 2022,
with our Ipswich and Southampton locations in particular seeing a firm
increase in activity, the latter also expanding its profile across offshore
energy, coastline protection and scrap. Our North East England presence grew
markedly with a new office in Middlesbrough servicing a rapidly expanding
client base in bulk and offshore renewal energy.
In early February 2023, we were delighted to announce the acquisition of DHSS.
DHSS has built an enviable reputation for world-leading service levels in the
Netherlands and further afield with a particular focus on offshore wind
energy. Combined with our port services business' existing 20-year history in
this sector, we offer best-in-class service to our growing customer base in
the UK, mainland Europe and further afield. 2023 will see strong growth in
this area as there will be considerable investment in offshore wind in the UK,
Dutch and German sectors. We expect to see this capability expand beyond the
current geography.
Egypt agency
The Suez Canal provides a vital trade route between Europe and Asia, and our
regional experts in Egypt deliver on-the-ground expertise around transit. Our
Egypt agency business proved successful in 2022 in the face of challenges
impacting local port activity from general macro-economic headwinds,
disruption to regional imports from the Russia-Ukraine conflict (grain,
fertilizer volumes), increased commodity prices and exchange rate trends.
Transit agency business saw increased volumes in 2022 and continues to
progress whilst liner business remained positive. The Egypt agency business
continues to explore increasing opportunities in Egypt and around the Suez
Canal region related to green energy and shipping's green transition.
Research
Revenue: £19.5m (2021: £17.7m)
Segmental split of underlying profit before taxation: £7.0m (2021: £6.1m)
Research provides a unique flow of powerful, highly relevant and wide-ranging
research and data to clients, as well as to the Broking, Financial, Support
and technology businesses in the Group. Our market-leading content was again
extremely well received by clients across 2022 and achieved excellent profile
for the Group. Furthermore, data provision and synergies were enhanced,
including support to the end-to-end freight Sea/ platform developed by
Maritech, the Clarksons technology business. Continuing its long-term growth,
our Research division performed robustly during the year.
Clarksons Research, the Group's data and analytics arm, remains market leader
in the provision of independent data, intelligence and analysis around
shipping, trade, offshore and energy. Millions of data points are processed
and analysed each day to provide trusted and insightful intelligence to a
global client base, typically via recurring revenue agreements. This uniquely
powerful data and intelligence underpins the workflows and decision-making of
thousands of organisations across the complex and dynamic global maritime
industry, including shipowners, financiers, shipyards, suppliers, charterers,
class societies, insurers, universities and governments. The use of innovative
technology and algorithms has continued to expand the depth and quality of our
proprietary database, supporting a strong pipeline of product development and
a firm flow of sales enquiries. Targeted headcount growth and
internationalisation continues, with the successful start-up of a data team in
New Delhi during 2022, leveraging local maritime expertise and helping take
our Asian share of headcount to 30%.
Our long-term strategy to focus and invest in data, intelligence and insights
around the vital maritime energy transition continues. Firstly, we are focused
on the fuelling transition that will be fundamental to reducing shipping's
2.3% contribution to global CO(2) emissions. Our offering provides detailed
tracking of emissions policies, alternative fuel adoption, fleet renewal, the
speed of ships and the uptake of Energy Saving Technologies. Across 2022 we
also released a series of market impact assessments around the IMO's new 2030
policy measures to reduce emissions, a hugely significant milestone in
shipping's decarbonisation pathway (as will be the EU's Emissions Trading
Scheme from 2024). New modules on green investments at ports and vessel
activity analytics dashboards are under development for release in the first
half of 2023. Secondly, we continue to analyse the impacts of energy
transition on the cargo base for maritime, and during 2022 we released a
further update of our maritime energy transition model, providing
decarbonisation scenarios with specific maritime relevant segmentation.
Thirdly, we have invested in research around the offshore transition,
including the development of new data and analysis around the offshore wind
industry through our Renewables Intelligence Network. Much of our energy
transition work has also supported the Group-wide Green Transition initiatives
to partner clients through their decarbonisation pathways, contributed to
internal awareness initiatives and provided emissions benchmarking data and
vessel intelligence used within the carbon module of the Sea/ suite.
Digital
Our single-access integrated digital platform provides immediate access to our
powerful data, analysis, forecasts and insights to over 4,000 maritime
companies and over 12,000 individual users. During 2022, we released a
successful rebrand and executed several major product releases aligned with
individual product development investment plans for each of our systems. Our
major digital products include:
Shipping Intelligence Network ('SIN')
Our market-leading commercial shipping database SIN, provides wide-ranging
data and analysis tracking and projects shipping market supply and demand,
freight, vessel earnings, indices, asset values and macroeconomic data around
trade flows and global economic developments. During the third quarter of
2022, SIN benefited from a major upgrade in content and visualisation tools
that has been very positively received by clients. Through the year, the
platform tracked an all-time annual high for the cross segment ClarkSea Index
(up 30% to US$37,253 per day), the disruption impacts of COVID-19 and the
Russia-Ukraine conflict, positive trends in energy shipping including record
LNG charter rates, the correction in the container markets and slowing growth
in China, the global economy and world trade (seaborne trade was flat year on
year at 12 billion tonnes). Our continued investments in near-term data, were
particularly well received by our clients, as were our Russia-Ukraine conflict
market impact assessment insights and reporting.
World Fleet Register ('WFR')
The WFR provides data and intelligence around the world fleet, vessel
equipment and technology, companies, shipbuilding, emissions regulation,
fuelling transition and alternative fuels. The focus on emissions regulation
and fuelling transition has helped support encouraging sales growth of 20%.
After a record share of newbuild order volumes in 2022, a total of 44% of the
global newbuild orderbook backlog by tonnage is now alternative fuelled.
Renewables Intelligence Network ('RIN')
Offshore wind contributes 0.4% of global energy supply but our long-term
projections profile huge growth potential, suggesting that this could reach
between 7% and 9% by 2050. RIN provides comprehensive data, intelligence and
analysis around every offshore wind farm in the world and the fleet of vessels
that support development and maintenance. Since its launch in 2021, RIN has
grown very strongly, gained good traction with market participants and is
widely used across the Group.
Offshore Intelligence Network ('OIN')
Offshore oil and gas markets improved markedly over 2022, with our index of
day rates across the offshore fleet up 32% to reach its highest level since
2014. OIN provides data and analysis of utilisation, day rates and market
supply and demand of the offshore fleet including rigs, OSVs, subsea and
floating production. A major upgrade to OIN was released in late 2022 and good
sales growth is expected in 2023.
World Offshore Register ('WOR')
The WOR system provides detailed data and intelligence on all offshore oil and
gas fields, investment projects, production platforms, offshore support
vessels and rigs. Offshore oil and gas accounts for 16% of total global energy
supply with a renewed focus on energy security supporting investment.
Clarksons Research is the market leader in data provision to the insurance
industry, where our data is used as the core reference in identifying rigs and
platforms.
Sea/net
Developed in conjunction with the Clarksons technology business Maritech, the
vessel movement system Sea/net blends satellite and land-based AIS data with
the Clarksons Research leading database of vessels, ports and berths. Working
with Maritech, Research continues to improve the depth of our underlying
movement and deployment data.
Services
Our dedicated services and consultancy activities, including the development
and management of long-term and recurring revenue relationships with key
corporates across maritime, has performed well with several major data API
contracts concluded. Interest in tailored data, that often becomes embedded
into client systems and typically includes API delivery via our platform,
remained high while our provision of specialist insights, forecasting and
scenario modelling to key partners also expanded. During September 2022 we
hosted our industry leading Shipping and Shipbuilding Forecast Forum and
Offshore Energy Forecast Forum on an in-person basis. Our dedicated business
development team is performing well, arranged a successful offsite in December
2022 and has a strong sales pipeline. Clarksons Valuations is the
market-leading provider of authoritative, consistent and independent valuation
services to shipowners and financiers. It is investing in analysis and
technology to support financial institutions, including to meet new European
Banking Authority guidelines on valuations and to understand the emissions
profile of their debt portfolios and the impact of technology and emissions
policies on value. The valuations team is also active in supporting the
Group's S&P broking teams.
Sea/
The technology arm of Clarksons, Maritech, has developed the Sea/ platform to
bring transformative digital solutions to the freight transaction process,
enabling the industry to meet the demands created by growth in complexity,
regulation and innovation. Building on the considerable success enjoyed by
Sea/ tools in 2021, scaling of the business through 2022 has been both dynamic
and significant, with the enhancement of products, growth in clients and
further development of Maritech. A new leadership team with a wealth of
experience was established in 2022. During the year, important work was
undertaken involving the whole business to define a clear, cogent strategy and
ensure that the products being built and enhanced reflect what the market
truly wants and values. Critically, the description of the business has been
more clearly defined as "The Intelligent Marketplace for Fixing Freight", and
this will be more clearly articulated in a new website and other materials.
Following success in 2021, particularly in the iron ore sector, the SeaFix/
solution grew further in 2022 to the point that the client base now represents
over 80% of the world's seaborne iron ore trade. Sea/ is now looking to
replicate this success in other markets and has been working to enhance the
tools to be able to cope with the greater complexity of other commodities. In
2023, Sea/ will be targeting coal, grains and other dry bulk commodities as
well as initial steps into the wet market.
Sea/contracts and Recap Manager continue to attract adoption amongst some of
the largest chartering groups in the world with substantial additional
signings in 2022. This was further augmented by the acquisition of Chinsay in
October 2022, such that the annualised volume has now risen to 37,000 fixtures
and is anticipated to grow further in 2023.
The Sea/intelligence solution, which includes Sea/net and Sea/analytics, has
similarly experienced strong sales growth, with new features and a significant
volume of new clients resulting in over 120% year-on-year growth. The
Russia-Ukraine conflict resulted in an urgent need from news reporting
agencies for factual information on shipping in the region, with a range of
leading publications regularly using and referencing Sea/net as their source.
The intelligence products have been adopted by a range of companies and
institutions, which has triggered further recognition of the value that Sea/
is providing with this solution.
Clients have increasingly looked to Sea/ to support them in their efforts to
reduce GHG emissions and achieve decarbonisation targets. In the crowded
digital space of voyage optimisation and vessel categorisation, the Sea/carbon
offering plays a vital role and has grown incrementally with a number of new
clients now using the carbon accounting tools. In 2022, Sea/ captured 8.5m
tonnes of carbon emissions from 470m tonnes of cargo transported. The service
gathers the essential data at the end of each voyage undertaken to enable
customers to record the carbon emitted, continuously monitors emissions in a
dashboard and generates the necessary reports for internal and external
audiences. The same data can be used to provide essential insights on optimal
vessel selection at the point of fixture. This tool helps to reduce fuel
consumption, improve energy efficiency and support the adoption of alternative
and clean technologies.
In November 2022, Maritech acquired Setapp in Poznan, Poland - a technology
provider to the maritime sector. Through the acquisition of Setapp, Sea/ will
enable technology experts with a strong foundation in maritime software to
focus on the issues faced by the industry and further grow their knowledge
through the experience of building high-quality, sustainable teams and
solutions. Sea/ is excited by the prospect of growing this centre of maritime
technology excellence.
Risk management
Full details of our principal risks and how we manage them are included in the
risk management section of the 2022 Annual Report, together with our viability
and going concern statements.
Our principal risks are:
· Loss of key personnel - Board members
· Economic factors
· Cyber risk and data security
· Loss of key personnel - normal course of business
· Adverse movements in foreign exchange
· Financial loss arising from failure of a client to meet its
obligations
· Breaches in rules and regulations
· Changes in the broking industry
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
2022. Certain parts of the Annual Report have not been included in this
announcement as set out in note 1 of the financial information.
We confirm that:
• to the best of our knowledge, the consolidated financial statements, which
have been prepared in accordance with UK-adopted international accounting
standards, give a true and fair view of the assets, liabilities and financial
position of the Group; and
• to the best of our knowledge, the Strategic Report includes a fair review
of the development and performance of the business and the position of the
Group, together with a description of the principal risks and uncertainties
that it faces; and
• we consider the Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to
assess the Company's performance, business model and strategy.
This responsibilities statement was approved by the Board of Directors on 3
March 2023 and is signed on its behalf by:
Laurence Hollingworth
Chair
3 March 2023
Consolidated income statement
for the year ended 31 December
2022 2021
Before After Before After
acquisition- Acquisition-related acquisition- acquisition- Acquisition- acquisition-
related costs related related related related
costs £m costs costs costs costs
£m £m £m £m £m
Revenue 603.8 - 603.8 443.3 - 443.3
Cost of sales (21.8) - (21.8) (16.5) - (16.5)
Trading profit 582.0 - 582.0 426.8 - 426.8
Administrative expenses (481.2) (0.8) (482.0) (355.7) (0.3) (356.0)
Operating profit/(loss) 100.8 (0.8) 100.0 71.1 (0.3) 70.8
Finance income 1.9 - 1.9 1.3 - 1.3
Finance costs (2.2) - (2.2) (3.1) - (3.1)
Other finance income - pensions 0.4 - 0.4 0.1 - 0.1
Profit/(loss) before taxation 100.9 (0.8) 100.1 69.4 (0.3) 69.1
Taxation (20.6) 0.1 (20.5) (14.7) - (14.7)
Profit/(loss) for the year 80.3 (0.7) 79.6 54.7 (0.3) 54.4
Attributable to:
Equity holders of the Parent Company 76.3 (0.7) 75.6 50.4 (0.3) 50.1
Non-controlling interests 4.0 - 4.0 4.3 - 4.3
Profit/(loss) for the year 80.3 (0.7) 79.6 54.7 (0.3) 54.4
Earnings per share
Basic 250.3p 247.9p 165.6p 164.6p
Diluted 248.5p 246.1p 164.2p 163.2p
Included in the Consolidated Income Statement are net impairment losses on
financial assets amounting to £5.8m (2021: £2.6m)
Consolidated statement of comprehensive income
for the year ended 31 December
2022 2021
£m £m
Profit for the year 79.6 54.4
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Actuarial (loss)/gain on employee benefit schemes - net of tax (5.5) 7.2
Changes in the fair value of equity instruments at fair value - (1.7)
through other comprehensive income - net of tax
Items that may be reclassified subsequently to profit or loss:
Foreign exchange differences on retranslation of foreign 13.5 0.5
operations
Foreign currency hedges recycled to profit or loss - net of tax 3.3 (2.4)
Foreign currency hedge revaluations - net of tax (8.9) (0.8)
Other comprehensive income 2.4 2.8
Total comprehensive income for the year 82.0 57.2
Attributable to:
Equity holders of the Parent Company 78.0 52.9
Non-controlling interests 4.0 4.3
Total comprehensive income for the year 82.0 57.2
Consolidated balance sheet
as at 31 December
2022 2021
£m £m
Non-current assets
Property, plant and equipment 25.5 22.5
Investment properties 1.0 1.2
Right-of-use assets 39.3 45.1
Intangible assets 188.9 183.2
Trade and other receivables 2.6 1.0
Investments 1.2 1.0
Employee benefits 15.8 25.8
Deferred tax assets 14.6 10.5
288.9 290.3
Current assets
Inventories 2.4 1.5
Trade and other receivables 150.1 117.4
Income tax receivable 3.0 1.0
Investments 3.5 10.3
Cash and cash equivalents 384.4 261.6
543.4 391.8
Current liabilities
Trade and other payables (335.9) (235.4)
Lease liabilities (9.9) (9.7)
Income tax payable (19.8) (11.6)
Provisions (0.6) (0.6)
(366.2) (257.3)
Net current assets 177.2 134.5
Non-current liabilities
Trade and other payables (5.8) (2.7)
Lease liabilities (37.7) (44.1)
Provisions (1.9) (1.6)
Employee benefits (0.4) (3.8)
Deferred tax liabilities (7.1) (11.0)
(52.9) (63.2)
Net assets 413.2 361.6
Capital and reserves
Share capital 7.7 7.6
Other reserves 114.8 104.0
Retained earnings 287.2 245.3
Equity attributable to shareholders of the Parent Company 409.7 356.9
Non-controlling interests 3.5 4.7
Total equity 413.2 361.6
Consolidated statement of changes in equity
for the year ended 31 December
Attributable to equity holders of the Parent Company
Non-controlling interests
Share Other reserves Retained earnings £m Total
capital £m £m Total equity
£m £m £m
Balance at 1 January 2022 7.6 104.0 245.3 356.9 4.7 361.6
Profit for the year - - 75.6 75.6 4.0 79.6
Other comprehensive income/(loss) - 7.9 (5.5) 2.4 - 2.4
Total comprehensive income for the year - 7.9 70.1 78.0 4.0 82.0
Transactions with owners:
Share issues 0.1 2.6 - 2.7 - 2.7
Employee share schemes - 0.3 (1.3) (1.0) - (1.0)
Tax on other employee benefits - - (0.2) (0.2) - (0.2)
Tax on other items in equity - - (0.4) (0.4) - (0.4)
Dividend paid - - (25.9) (25.9) (4.3) (30.2)
Contributions to non-controlling - - (0.4) (0.4) (0.9) (1.3)
interests
Total transactions with owners 0.1 2.9 (28.2) (25.2) (5.2) (30.4)
Balance at 31 December 2022 7.7 114.8 287.2 409.7 3.5 413.2
Attributable to equity holders of the Parent Company
Non-controlling interests
Share capital Other reserves Retained earnings £m
£m £m £m Total Total equity
£m £m
Balance at 1 January 2021 7.6 104.6 211.9 324.1 4.3 328.4
Profit for the year - - 50.1 50.1 4.3 54.4
Other comprehensive (loss)/income - (2.7) 5.5 2.8 - 2.8
Total comprehensive (loss)/income for the year - (2.7) 55.6 52.9 4.3 57.2
Transactions with owners:
Share issues - 1.8 - 1.8 - 1.8
Employee share schemes - 0.3 (0.1) 0.2 - 0.2
Tax on other employee benefits - - 2.3 2.3 - 2.3
Dividend paid - - (24.4) (24.4) (3.9) (28.3)
Total transactions with owners - 2.1 (22.2) (20.1) (3.9) (24.0)
Balance at 31 December 2021 7.6 104.0 245.3 356.9 4.7 361.6
Consolidated cash flow statement
for the year ended 31 December
2022 Restated*
£m 2021
£m
Cash flows from operating activities
Profit before taxation 100.1 69.1
Adjustments for:
Foreign exchange differences (0.5) (3.2)
Depreciation 13.7 13.3
Share-based payment expense 1.8 1.8
Loss/(gain) on sale of property, plant and equipment 1.5 (0.6)
Amortisation of intangibles 4.1 1.6
Difference between pension contributions paid and amount recognised in the
income statement
0.4 (0.1)
Finance income (1.9) (1.3)
Finance costs 2.2 3.1
Other finance income - pensions (0.4) (0.1)
Increase in inventories (0.9) (0.2)
Increase in trade and other receivables (26.1) (38.7)
Increase in bonus accrual 88.8 60.4
Increase in trade and other payables 16.2 29.1
Increase in provisions 0.5 0.1
Cash generated from operations 199.5 134.3
Income tax paid (20.6) (9.2)
Net cash flow from operating activities 178.9 125.1
Cash flows from investing activities
Interest received 1.3 0.2
Purchase of property, plant and equipment (7.6) (3.7)
Purchase of intangible assets (2.0) (2.9)
Purchase of investments (0.6) (3.5)
Proceeds from sale of investments 1.0 9.4
Proceeds from sale of property, plant and equipment 0.7 1.6
Transfer from current investments (cash on deposit and government bonds) 6.8 20.0
Transfer to current investments (cash on deposit and government bonds) (0.3) (6.8)
Acquisition of subsidiaries, net of cash acquired (4.9) -
Dividends received from investments 0.2 -
Net cash flow from investing activities (5.4) 14.3
Cash flows from financing activities
Interest paid and other charges (2.2) (2.3)
Dividend paid (25.9) (24.4)
Dividend paid to non-controlling interests (4.3) (3.9)
Repayment of borrowings (0.6) (0.1)
Principal elements of lease payments (11.2) (9.1)
Proceeds from shares issued 2.7 1.8
Contributions to non-controlling interests (1.3) -
ESOP shares acquired (20.4) (13.2)
Net cash flow from financing activities (63.2) (51.2)
Net increase in cash and cash equivalents 110.3 88.2
Cash and cash equivalents at 1 January 261.6 173.4
Net foreign exchange differences 12.5 -
Cash and cash equivalents at 31 December 384.4 261.6
*Restatement in relation to equity-settled liabilities, see note 2.1 for
further details.
Notes to the preliminary financial statements
1 Corporate information
The preliminary financial statements of Clarkson PLC for the year ended 31
December 2022 were authorised for issue in accordance with a resolution of the
Directors on 3 March 2023. Clarkson PLC is a public limited company, listed on
the London Stock Exchange, incorporated and registered in England and Wales
and domiciled in the UK.
The preliminary financial information ('financial information') set out in
this announcement does not constitute the consolidated statutory financial
statements for the years ended 31 December 2021 and 2022, but is derived from
those financial statements. Statutory financial statements for 2021 have
been delivered to the Registrar of Companies and those for 2022 will be
delivered following the Company's Annual General Meeting. The External Auditor
has reported on the financial statements for 2021 and 2022; their reports were
unqualified, did not draw attention to any matters by way of emphasis without
qualifying their report and did not contain statements under s498(2) or (3)
Companies Act 2006.
2 Statement of accounting policies
2.1 Basis of preparation
The financial information set out in this announcement is based on the
consolidated financial statements, which are prepared in accordance with UK
adopted international accounting standards in conformity with the requirements
of the Companies Act 2006 and the Disclosure Guidance and Transparency Rules
Sourcebook of the United Kingdom's Financial Conduct Authority.
The Group has considerable financial resources available to it, a strong
balance sheet and has consistently generated an underlying profit and good
cash inflow. As a result of this, the Directors believe that the Group is well
placed to manage its business risks successfully, despite the challenging
market backdrop and geo-political tensions. Management has stress tested a
range of scenarios, modelling different assumptions with respect to the
Group's cash resources. Three different scenarios were considered:
· Management modelled the impact of a reduction in profitability to £30m (a
level of profit the Group has exceeded in every year since 2013), whilst
taking no mitigating actions: the Group remained cash generative before
dividends.
· Management assessed the impact of a significant reduction in world seaborne
trade similar to that experienced in the global financial crisis in 2008 and
the pandemic in 2020: seaborne trade recovered in 2009 and 2021 along with the
profitability of the Group. Since 1990 no two consecutive years have seen
reductions in world seaborne trade.
· Management undertook a reverse stress test over a period of three years to
determine what it might take for the Group to encounter financial
difficulties. This test was based on current levels of overheads, the net
cash and available funds* position at 31 December 2022, the collection of
debts and the invoicing and collection of the forward order book. This test
determined that, in the absence of any mitigating action which would be
applied in these circumstances, no new business would be required to remain
cash positive for at least the next 12 months.
Under the first two scenarios, the Group is able to generate profits and cash,
and has positive net cash and available funds* available to it. In the third
scenario, current net cash and available funds* together with the collection
of debts and the forward order book would leave sufficient cash resources to
cover at least the next 12 months without any new business.
Accordingly, the Directors have a reasonable expectation that the Group has
sufficient resources to continue in operation for at least the next 12 months.
For this reason, they continue to adopt the going concern basis in preparing
the financial statements.
The consolidated income statement is shown in columnar format to assist with
understanding the Group's results by presenting profit for the year before
acquisition-related costs; this is referred to as 'underlying profit'. The
column 'acquisition-related costs' includes the amortisation of acquired
intangible assets, the costs of acquiring new businesses and the expensing of
the cash and share-based elements of consideration linked to ongoing
employment obligations on acquisitions, see note 4.
The Consolidated Cash Flow Statement for the year ended 31 December 2021 has
been restated to add back £11.3m of equity-settled liabilities as 'operating
activities' and deduct £11.3m of shares acquired by the ESOP as 'financing
activities'. This has the effect of increasing the net cash flow from
operating activities in 2021 from £113.8m to £125.1m with a corresponding
increase in the net cash flow from financing activities from £39.9m to
£51.2m. This presentation has also been adopted for the year ended 31
December 2022. There is no net impact upon the cash flow statement overall and
there is no impact on any balance sheet or income statement figures.
2.2 Accounting policies
The financial information is in accordance with the accounting policies set
out in the 2022 financial statements and has been prepared on a going concern
basis.
The group has applied the following amendments for the first time for their
annual reporting period commencing 1 January 2022:
· Annual Improvements to IFRS Standards
2018-2020; and
· Reference to the Conceptual Framework -
Amendments to IFRS 3.
The amendments listed above did not have any impact on the amounts recognised
in prior periods and are not expected to significantly affect the current or
future periods.
Certain new accounting standards, amendments to accounting standards and
interpretations have been published that are not mandatory for 31 December
2022 reporting periods and have not been early adopted by the Group. These
standards, amendments or interpretations are not expected to have a material
impact on the entity in the current or future reporting periods and on
foreseeable future transactions.
2.3 Accounting judgements and estimates
The preparation of the preliminary financial statements requires management to
make judgements, estimates and assumptions that affect the reported amounts of
revenues, expenses, assets and liabilities and the disclosure of contingent
liabilities at the reporting date. However, uncertainty about these
assumptions and estimates could result in outcomes that could require a
material adjustment to the carrying amount of the asset or liability affected
in the future.
2.4 Forward-looking statements
Certain statements in this announcement are forward-looking. Although the
Group believes that the expectations reflected in these forward-looking
statements are reasonable, it can give no assurance that these expectations
will prove to have been correct. Because these statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by these forward-looking statements. The Group undertakes no
obligation to update any forward-looking statements whether as a result of new
information, future events or otherwise.
3 Segmental information
Business segments Revenue Results
2022 2021 2022 2021
£m £m £m £m
Broking 495.5 340.0 117.6 73.6
Financial 49.8 56.0 7.8 13.3
Support 39.0 29.6 5.0 3.3
Research 19.5 17.7 7.0 6.1
Segment revenue/profit 603.8 443.3 137.4 96.3
Head office costs (36.6) (25.2)
Operating profit before acquisition-related costs 100.8 71.1
Acquisition-related costs (0.8) (0.3)
Operating profit after acquisition-related costs 100.0 70.8
Finance income 1.9 1.3
Finance costs (2.2) (3.1)
Other finance income - pensions 0.4 0.1
Profit before taxation 100.1 69.1
Taxation (20.5) (14.7)
Profit for the year 79.6 54.4
4 Acquisition-related costs
Included in acquisition-related costs is £0.2m (2021: £0.2m) relating to
amortisation of intangibles acquired as part of previous acquisitions, and
cash and share-based payment charges of £0.3m (2021: £0.1m). The cash and
share-based payment charges are contingent on employees remaining in service
and are therefore spread over the service period.
Also included is £0.3m of transaction costs relating to acquisitions in the
current year.
5 Taxation
The major components of the income tax charge in the consolidated income
statement are:
2022 2021
£m £m
Profit at UK average standard rate of corporation tax of 19% (2021: 19%) 19.0 13.1
Expenses not deductible for tax purposes 2.3 2.1
Other (0.8) (0.5)
Total tax charge in the income statement 20.5 14.7
6 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:
2022 2021
£m £m
Underlying profit for the year attributable to ordinary equity holders of the 76.3 50.4
Parent Company*
Reported profit for the year attributable to ordinary equity holders of the 75.6 50.1
Parent Company*
2022 2021
Million
Million
Weighted average number of ordinary shares - basic 30.5 30.4
Weighted average number of ordinary shares - diluted 30.7 30.7
7 Dividends
The Board is recommending a final dividend of 64p (2021: 57p), giving a total
dividend of 93p (2021: 84p).
8 Intangible assets
On 3 October 2022, the Group, through Maritech Holdings Limited, the legal
entity behind Sea/, acquired 100% of the
share capital of Swedish-based technology company Chinsay AB and its 100%
subsidiary Chinsay Pte. Ltd. located in
Singapore (Chinsay). Cash consideration paid was US$3.2m (£2.9m).
On 4 November 2022, a further acquisition was completed by Maritech Holdings
Limited. 100% of the share capital of
Setapp Sp. z.o.o., a Polish technology company, was acquired for cash
consideration of €3.0m (£2.6m).
In 2022, the Group also acquired 100% of the share capital of PPE Suppliers
Limited (PPE) through Gibb Group Ltd for £0.2m.
The above acquisitions resulted in goodwill of £5.4m and other intangible
assets of £2.1m.
9 Investments
Included within current investments are deposits totalling £3.1m (2021:
£2.8m) with maturity periods greater than three months, in addition to £nil
of government bonds (2021: £6.8m). Also included is £0.4m (2021: £0.7m)
relating to the convertible bonds business within the Financial segment.
10 Cash and cash equivalents
2022 2021
£m £m
Cash at bank and in hand 320.1 260.7
Short-term deposits 64.3 0.9
384.4 261.6
11 Employee benefits
The Group operates three final salary defined benefit pension schemes, being
the Clarkson PLC scheme, the Plowrights scheme and the Stewarts scheme.
The following tables summarise amounts recognised in the Consolidated balance
sheet and the components of the net benefit charge recognised in the
Consolidated income statement.
Recognised in the balance sheet
2022 2021
£m
£m
Fair value of schemes' assets 134.7 201.5
Present value of funded defined benefit obligations (115.2) (174.2)
19.5 27.3
Effect of asset ceiling in relation to the Plowrights scheme (4.1) (5.3)
Net benefit asset recognised in the balance sheet 15.4 22.0
The above is recognised on the balance sheet as an asset of £15.8m (2021:
£25.8m) and a liability of £0.4m (2021: £3.8m). A deferred tax asset on the
benefit liability amounting to £0.1m (2021: £0.9m) and a deferred tax
liability on the benefit asset of £3.9m (2021: £6.5m) is also recognised on
the balance sheet.
Recognised in the income statement
2022 2021
£m
£m
Recognised in other finance income - pensions:
Expected return on schemes' assets 3.6 2.8
Interest cost on benefit obligation and asset ceiling (3.2) (2.7)
Recognised in administrative expenses:
Schemes' administrative expenses (0.8) (0.3)
Net benefit charge recognised in the income statement (0.4) (0.2)
12 Share capital
2022 2021
Million £m Million £m
Ordinary shares of 25p each, issued and fully paid 30.6 7.7 30.5 7.6
During the year, the Company issued 141,346 shares (2021: 80,871) in relation
to the ShareSave scheme.
13 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.
14 Related party disclosures
The Group's significant related parties are disclosed in the 2022 Annual
Report. There were no material differences in related parties or related party
transactions in the year, from the year ended December 2021.
15 Events occurring after the reporting period
The Group acquired 100% of the share capital of DHSS Aviation B.V., DHSS
Logistics B.V., DHSS Projects B.V. and DHSS Services B.V. for cash
consideration of €4.0m and additional maximum deferred consideration
(including earn-out) of €6.3m.
Other information
Alternative Performance Measures
The Directors believe that alternative performance measures can provide users
of the financial statements with a better understanding of the Group's
underlying financial performance, if used properly. Directors' judgement is
required as to what items qualify for this classification.
Adjusting items
The Group excludes adjusting items from its underlying earnings metrics with
the aim of removing the impact of one-offs which may distort period-on-period
comparisons.
The term 'underlying' excludes the impact of acquisition-related costs, which
are shown separately on the face of the income statement. Management separates
these items due to their nature and size and believes this provides further
useful information, in addition to statutory measures, to assist readers of
the Annual Report to understand the results for the year.
Underlying profit before taxation
Reconciliation of reported profit before taxation to underlying profit before
taxation for the year.
2022 2021
£m £m
Reported profit before taxation 100.1 69.1
Add back acquisition-related costs 0.8 0.3
Underlying profit before taxation 100.9 69.4
Underlying effective tax rate
Reconciliation of reported effective tax rate to underlying effective tax
rate.
2022 2021
Reported effective tax rate 20.5% 21.3%
Adjustment relating to acquisition-related costs (0.1%) (0.1%)
Underlying effective tax rate 20.4% 21.2%
Underlying profit attributable to equity holders of the Parent Company
Reconciliation of reported profit attributable to equity holders of the Parent
Company to underlying profit attributable to equity holders of the Parent
Company.
2022 2021
£m £m
Reported profit attributable to equity holders of the Parent Company 75.6 50.1
Add back acquisition-related costs 0.7 0.3
Underlying profit attributable to equity holders of the Parent Company 76.3 50.4
Underlying basic earnings per share
Reconciliation of reported basic earnings per share to underlying basic
earnings per share.
2022 2021
Reported basic earnings per share 247.9p 164.6p
Add back acquisition-related costs 2.4p 1.0p
Underlying basic earnings per share 250.3p 165.6p
Underlying administrative expenses
Reconciliation of reported administrative expenses to underlying
administrative expenses for the year.
2022 2021
£m £m
Reported administrative expenses 482.0 356.0
Less acquisition-related costs (0.8) (0.3)
Underlying administrative expenses 481.2 355.7
Operational metrics
The Group monitors its cash and liquidity position by adjusting gross balances
to reflect the payment of obligations to staff and restricted monies held by
regulated entities.
Net cash and available funds
The Board uses net cash and available funds as a better representation of the
net cash available to the business, since bonuses are typically paid after the
year-end, hence an element of the year-end cash balance is earmarked for this
purpose. It should be noted that accrued bonuses include amounts relating to
the current year and amounts held back from previous years which will be
payable in the future.
Reconciliation of reported cash and cash equivalents to net cash and available
funds reported.
2022 2021
£m £m
Cash and cash equivalents as reported 384.4 261.6
Add cash on deposit and government bonds included within current investments 3.1 9.6
Less amounts reserved for bonuses included within current trade and other (225.8) (148.9)
payables
Net cash and available funds 161.7 122.3
Free cash resources
Free cash resources is a further measure used by the Board in taking decisions
over capital allocation. It deducts monies held by regulated entities from the
net cash and available funds figure.
Reconciliation of reported cash and cash equivalents to reported free cash
resources.
2022 2021
£m £m
Cash and cash equivalents as reported 384.4 261.6
Add cash on deposit and government bonds included within current investments 3.1 9.6
Less amounts reserved for bonuses included within current trade and other (225.8) (148.9)
payables
Less net cash and available funds held in regulated entities (30.8) (30.0)
Free cash resources 130.9 92.3
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