Clarkson PLC announces unaudited Interim results for the six months ended 30 June 2023.
Summary
· Underlying profit before taxation* of £53.1m (2022: £42.2m), an increase of 25.8%
· Underlying earnings per share* increased by 35.0% to 133.5p (2022: 98.9p)
· Particularly strong performance in Broking segment
· Robust balance sheet, with £128.2m of free cash resources* (31 December 2022: £130.9m)
· Increased interim dividend of 30p per share (2022: 29p per share)
· Board's expectations for the year unchanged with continued confidence in the medium-term outlook
Andi Case, Chief Executive Officer, commented:
"I am pleased to report an outstanding result for Clarksons in the first half of 2023, which reflects the continued momentum in the business and effective execution of our strategy as we help clients navigate the changing markets.
"I have great confidence in the outlook for Clarksons, which has been built to maximise value from the global mega-trends of the green transition, digitalisation and ever more complex global trade dynamics."
Chair's review
Following a record year in 2022, Clarksons entered 2023 in a strong position, and I am pleased to report that the business has maintained momentum through the first half of 2023, delivering another outstanding performance in terms of revenue and profits.
In an uncertain geo-political and global macroeconomic environment, we are now starting to see the softening of rates in some sectors, much of which was anticipated post-COVID-19. Nevertheless, the strategy set out by the Board, and implemented over many years, has put Clarksons in a strong position, with the breadth and depth of the business proving its effectiveness. Clarksons' market-leading position and continued investment in tools for trade, market intelligence, outstanding people and global presence means that we are now positioned with scale in all the key areas for growth and are actively helping our clients navigate the changing markets and take advantage of opportunities wherever they arise.
Our Broking team remains the biggest driver to profit, and we remain keen to hire and develop good people across all areas of this business. Our global training programme has produced some of the best talent in the industry, many rising through the ranks of Clarksons, and others taking leadership positions within clients across the globe. I am delighted that we have now started to roll out an enhanced programme across all offices to ensure that talent continues to come through over the next few years.
The Board remains dedicated to our progressive dividend policy, which is now in its 21st year, and I am delighted that due to the continued strength of the business, the Board has declared an increased interim dividend of 30p per share (2022: 29p per share).
I would like to extend my sincere thanks to the teams throughout Clarksons who have made this result possible through their commitment, drive and significant achievements. We also thank our shareholders for their continued support, which is much appreciated.
I am pleased to report an outstanding result for Clarksons in the first half of 2023, where we have benefited from the strategy and investment of the last decade, which established our extensive global footprint across 24 countries, a market-leading position across marine, both shipping and offshore, and a platform for growth across broking, research and analysis, support services, finance and technology.
Our customer-focused integrated business model has served us well in the recent past, dealing with the pandemic, geo-political tensions, changes in trade patterns, congestion and its impact on the supply chain, increased regulation and compliance. In addition, it has positioned us well to benefit from the significant evolution within both the green transition in shipping and the change in energy mix impacting both offshore oil and renewables. Against this backdrop, our teams have sought to meet the extensive needs of our clients in market intelligence, expertise, global presence and high-quality service.
I am immensely proud to work with the best teams in every sector and, together with the whole Board, thank each and every member of Clarksons for their continued hard work and diligence.
Market backdrop
Conditions during the first half of 2023 were generally positive, with vessel freight earnings in most segments exceeding the 10-year average. Energy-related markets have been the key performers as complexity, geo-politics and energy security remain the major trade themes, whilst softer conditions have become prevalent within both the container market, where rates have again normalised, and the dry bulk market, where headwinds have been felt from the unwinding of congestion and lower demand, particularly in the smaller ship sizes.
After contracting marginally in 2022, overall global trade during the year to date has reverted to growth, with help from China's reopening, although the macroeconomic backdrop remains fragile. Nevertheless, 2023 should see annualised growth in trade volumes with further support for demand and freight rates coming from the increased tonne-mile impact of changing trade patterns arising from geo-political tension.
Fleet supply growth remains relatively constrained, with the newbuilding orderbook focused on containers and gas carriers, leaving the tanker and dry bulk orderbooks at historically low levels. The green transition remains a central underlying driver for the shipping markets, accentuated by the introduction of the IMO's EEXI and CII measures and evidenced by 44% of newbuild tonnage in the first half being alternate-fuelled vessels.
Broking
The Broking teams delivered a very strong first half, with standout performances from the tanker, specialised product, gas, offshore and sale and purchase sectors.
Tankers had a very strong start to 2023 as strength in tanker earnings reflected the changed trading patterns from the Russia-Ukraine conflict and a rebound in crude imports to China. Supply/demand fundamentals continue to look encouraging for the coming years irrespective of current seasonality and OPEC cuts. The offshore markets have improved significantly, incorporating an increase in rates within the offshore energy market and increased investment in offshore renewables, where we continue to build our team. Our gas teams have also experienced a very strong start to 2023, driven by increased tonne-mile demand, congestion around the Panama Canal and slower vessel speeds due to environmental regulations. The sale and purchase team has been very active, concluding a strong flow of business in a market that saw a continuation of momentum built in 2022, and the newbuilding team was also very busy working on major fleet renewal programmes. The strength across all of these areas was in part offset by easing of results in the container and dry bulk markets, as highlighted above, and consequently, margin has remained very similar to the same period last year.
Divisional profit from Broking in the first six months of the year amounted to £58.2m (2022: £47.0m), reflecting a margin of 22.6% (2022: 22.3%).
Financial
Our Financial division performed broadly in line with the same period in 2022. However, within the division we saw an increase in profits from banking and shipping project finance, reflecting an increase in transaction flow and value from our core markets, and a reduction in profits from real estate project finance as the changing economic backdrop and increase in interest rates reduced activity. Despite volatile capital markets, our banking team executed transactions in the first half in all verticals, with particularly strong activity in the energy services space, underpinned by a supportive M&A environment, where the pipeline remains strong.
The Financial division reported a profit of £5.0m on revenue of £26.5m in the first half compared with a profit of £5.7m on revenue of £27.6m in the same period last year.
Support
Our Support division performed particularly well, with excellent results both from the Gibb Group, which has grown its product offering in particular within the safety and survival business, and other Clarksons Port Services ('CPS') activities comprising agency, project forwarding and stevedoring in both the dry bulk and offshore energy and renewables sectors. During the period, we also completed the acquisition of DHSS, a renewables-focused port services business based in mainland Europe. With a presence across a number of ports in the Netherlands, DHSS acts as a gateway to offshore wind farms, with services spanning the lifecycle of turbine installation, day-to-day operation and ongoing maintenance with sector-specialist coordination of port logistics, warehousing and helicopter movements from strategically located marshalling ports. Bringing together the client bases and spread of activity of DHSS and CPS in the renewables sector gives a significant knowledge base from which to grow, and we are excited by the opportunities this brings.
The Support division reported £3.4m profit and a 12.5% margin in the first half of 2023 (2022: £2.0m and 10.9% margin).
Research
Our Research division, which provides trusted and insightful intelligence to support the workflows and decision-making of thousands of organisations across the increasingly complex and dynamic maritime industry, continued to perform well with increased revenues and profits in the first half of 2023. Our continually evolving intelligence and analysis of the green transition, changes in trade patterns, fleet productivity and offshore renewables, makes us a market-leading provider of independent data, intelligence and analysis across shipping, trade, offshore and energy. The team is actively enhancing all products and services to meet the changing needs of our customers.
The Research division reported a profit of £3.7m on revenue of £10.2m in the first half compared with a profit of £3.4m on revenue of £9.6m in the same period last year.
Green Transition
The green transition continues to be a major driver for the industry, and there is increasing demand from our customers for strategic advice to help them navigate this journey as regulation continues to evolve. The Green Transition team at Clarksons provides decarbonisation strategies, guidance on operational emissions reduction, and insight to inform fleet renewal, collaborating closely with the Broking division.
We were delighted to announce the further strengthening of our Green Transition team in May with the appointment of industry veteran Johan Tutturen as a Senior Technical Adviser, increasing the depth of advisory services offered by Clarksons by providing greater technical insight on the complexity of transporting CO2, and the use of alternative fuels such as ammonia and hydrogen.
Digitalisation
We remain encouraged by the interest in and increasing adoption of the Sea platform among our clients. This continues to be an area of strategic focus for Clarksons as we roll out Sea across the dry bulk and other market areas. The integration of Chinsay, a contract management platform particularly focused on the dry bulk sector, into the Sea platform has progressed smoothly. We are pleased to report that sales are progressing and Sea revenues are up.
Results
Total revenue in the first half was £321.1m (2022: £266.7m) with underlying administrative expenses* of £256.7m (2022: £213.7m). Underlying profit before taxation* was £53.1m (2022: £42.2m), resulting in reported profit before taxation of £52.2m (2022: 42.0m). Underlying earnings per share* were 133.5p (2022: 98.9p). Reported earnings per share were 130.5p (2022: 98.5p).
The arithmetic average GBP/USD rate was 1.24 in the first half of 2023 compared to 1.29 for the same period last year. Current comparative strength in sterling outlook for the second half, compared to a much weaker sterling performance in the second half of 2022, is likely to be a headwind for the second half of 2023.
Cash and dividends
Clarksons has reported cash balances at 30 June 2023 of £275.7m (31 December 2022: £384.4m). Net cash and available funds*, after deducting amounts accrued for performance-related bonuses but including short-term investments, amounted to £148.9m (31 December 2022: £161.7m). Free cash resources*, after deducting monies held by regulated entities, amounted to £128.2m (31 December 2022: £130.9m).
Our balance sheet remains strong, alongside our solid business performance, leaving us well positioned to take advantage of current market conditions to make accretive acquisitions where opportunities arise and to continue to maintain our highly skilled teams, building further on our market advantage.
Due to our confidence in the strength of our business and continuing our 20-year progressive dividend policy, the Board has declared an interim dividend of 30p per share (2022: 29p per share) which will be paid on 15 September 2023 to shareholders on the register at the close of business on 1 September 2023.
Outlook
We have benefited from the breadth of Clarksons' offering through the first half with demand/supply balance and the impact of other external factors being very different in each of the verticals within shipping and offshore.
While mindful of the currency headwinds and softening rate environment, which are expected to result in a more balanced split between the first and second half, our expectations for the full year are unchanged.
The Board has great confidence in the outlook for Clarksons, which has been built to maximise value from the global mega-trends of the green transition, digitalisation and ever more complex global trade dynamics.
