Clarkson Expects Strong Shipping Balance of Demand/Supply to Continue

Clarkson PLC today announces unaudited Interim results for the six months ended 30 June 2024.

Summary

·      Underlying profit before taxation* of £51.5m (2023: £53.1m)
·      Underlying earnings per share* of 129.1p (2023: 133.5p)
·      Both spot and forward business transacted in H1 ahead of the same period last year in the Broking division
·      Robust balance sheet, with £178.4m of free cash resources* (31 December 2023: £175.4m)
·      Interim dividend of 32p per share (2023: 30p per share) – 22nd consecutive year of dividend increases
·      As previously announced, second half weighting expected given invoicing profile of the forward order book (‘FOB’)
·      Board’s expectations for the year unchanged with continued confidence in the outlook

Andi Case, Chief Executive Officer, commented:

“I am immensely proud of everyone within the Clarksons team for delivering this strong set of results for the first half of 2024. The profile and further development of the forward order book, level of new business being transacted and pipeline for the second half, means that we have confidence that we will be second half weighted and deliver full year results in line with the Board’s expectations. This confidence has enabled the Board to increase the interim dividend by 2p to 32p, continuing the progressive dividend policy into the 22nd year.”

Chair’s review

2024 has started strongly with momentum building in the business. We are benefiting from the strategic decisions made over the last 20 years which have created a broad and deep market-leading business with a global footprint. The Group continues to invest in the best people, technology and market intelligence to provide all of our teams with best-in-class tools for trade to service our clients’ needs.

Against a complex geo-political and economic backdrop in the first half of the year, the encouraging fundamentals of shipping markets have endured. Seaborne trade continues to grow, driven by both economic consumption and an increase in tonne-miles caused by disruption to key shipping routes. At the same time, the supply side of the industry is not keeping pace with this demand dynamic.

The green transition continues to be a long-term trend which drives the business as our clients look to us for insight and advice to navigate the complex regulatory changes ahead. We continue to leverage our expertise in this area and are proud to be playing a proactive role in the decarbonisation of the industry.
The Board is committed to the Group’s long-term progressive dividend policy, which is now in its 22nd year. I am pleased to announce that the Group’s strong financial position, and view on the outlook for the business, has enabled the Board to declare an increased interim dividend of 32p per share (2023: 30p per share).

We are delighted to announce the appointment of Constantin Cotzias as an independent Non-Executive Director. Constantin is European Director at Bloomberg LP where he is the Global Head of External Affairs, the Chair of Bloomberg Tradebook and a Director of Bloomberg Multilateral Trading Facility. I would like to again take this opportunity to thank Birger Nergaard, who stepped down from the Board earlier this year following the Company’s Annual General Meeting, for his nine years of contribution to the Group.

Clarksons is a unique UK success story. Over the past 20 years, our strategy has propelled us to become a global market leader in our industry. I would like to thank everyone throughout the Clarksons Group for their hard work and dedication, which has enabled our business to thrive and positioned us well for the future.

With favourable supply/demand dynamics and Clarksons’ strong market position, the Board looks ahead with confidence.

Laurence Hollingworth

Chair

2 August 2024

Chief Executive Officer’s review

I am pleased to report a strong set of results for Clarksons in the first half of 2024. Underpinned by the breadth of talent in our teams, the depth of our innovation and the power of our market-leading data, analysis and insights, Clarksons remains best placed to help our clients navigate the ever-increasing complexities of the global shipping market.

During the last 12 months we have made significant investment in new hires to further enhance our market-leading teams, expand the products that we broker and strengthen our global presence. Key hires include both revenue-generating staff and operational and support roles, all of which will enable us to further scale the business and better service our clients. The impact of these hires will evolve in the coming months as many join from senior positions following long periods of notice and garden leave.

The green transition remains a key focus for our business as we support the industry across all verticals in its drive towards decarbonisation, providing clients with the support, services and information required to make the best decisions for their business.

I am extremely proud to work alongside the best people in our industry and, on behalf of the Board, I would like to thank every member of the team for their dedication, contribution, unstinting hard work and commitment to Clarksons’ success.

Market backdrop

Against a challenging geo-political backdrop and global economic uncertainty, the encouraging fundamentals of the shipping markets continue with global supply and demand dynamics remaining positive. Supply-side constraints have resulted in relatively low order books in many sectors, most notably bulkers and tankers. Limited berth availability at shipyards creating long lead times for new orders, high newbuild prices from increased commodity and labour costs and uncertainty around fuelling technologies, all continue to constrain the building of new vessels.

On the demand side, growth in trade and economic consumption has led to a projected 2.3% underlying increase in seaborne trade compared to 2023. Disruptions to shipping routes and other complexities mean that the tonne-mile impact of this enhanced demand is forecast to increase by 5.4% as ships travel further to avoid challenges such as the disruption in the Red Sea and lower water levels in the Panama Canal.

Against this backdrop, freight rates have exceeded the 10-year average during the first half of the year across many segments, which in turn has limited the recycling of older vessels despite an ageing global fleet.

Broking

The Broking division has had another successful first half, with strong performances across all major segments. Both spot and forward business transacted is ahead of the same period last year. Whilst reported divisional profit is slightly lower compared to the first half of 2023, performance is expected to be second half weighted owing to the invoicing profile of the forward order book (‘FOB’).

Energy-related markets, including tankers, gases and specialised products, continued to perform well, supported by both concerns around energy security and an increase in tonne-miles caused by disruption through key shipping routes. This disruption also supported freight rates in the dry bulk and container segments, as market conditions continued to tighten, despite ongoing fleet supply growth in containers. The sale and purchase team also saw good activity in both newbuilding and secondhand transactions as clients reviewed their fleet requirements. Offshore markets strengthened in the first half of 2024 with both drilling and field development activities increasing further from levels seen during 2023.

Throughout the period, we continued to invest in our people, making significant hires to broaden our teams’ coverage across all areas of the market. Within the financial derivatives segment, we established a new desk focused on broking base and battery metals in the futures and physical markets.

Divisional profit from Broking in the first six months of the year amounted to £53.4m (2023: £58.2m), reflecting a margin of 21.6% (2023: 22.6%).

Financial

Our Financial division continues to face a challenging market backdrop.

Despite these conditions, the investment banking team was busy with enquiries and mandates, and executed a number of deals over the period. Revenue from both commissions on secondary trading and corporate finance, was lower than in the first half of last year, driven mainly by weaker activity in the equity capital markets. There was however strength in the debt capital markets, where revenues on transactions executed increased, and some consistency in the M&A markets. We go into the second half with a solid and encouraging pipeline, which as ever is subject to market conditions.

Within the project finance segment, shipping and offshore activities performed well, although our real estate project finance activities continue to be significantly impacted by the higher interest rate environment.

The Financial division reported a profit of £1.2m on revenue of £18.3m in the first half compared with a profit of £5.0m on revenue of £26.5m in the same period last year.

Support

Our strategy to expand our port services capabilities has maintained positive momentum in the first half of the year. Recent acquisitions have contributed to the positive performance as we evolve our offering and increase our coverage across this segment, maintaining our focus on the offshore renewables sector. In February, we completed the acquisition of Trauma & Resuscitation Services Limited, which expanded the division’s offering to the oil and gas, marine and renewable energy sectors through the provision of market-leading advanced first aid training. The division also reached an agreement with Norway-based Peak Group to combine expertise in port agency logistics, expanding our reach across the expanse of the North Sea.

The Support division reported £4.0m profit and a 12.4% margin in the first half of 2024 (2023: £3.4m and 12.5% margin).

Research

The Research division performed strongly in the first half of 2024. We are constantly innovating and investing in the capabilities of our team, our products and the data and insights we provide. Demand for this expertise continues to grow as clients turn to us for our best-in-class insights to stay informed across the industry, accessing our extensive and market-leading databases across shipping, seaborne trade, offshore oil and gas and offshore renewables, and our high-quality valuation services. 89% of our total sales in Research represents recurring revenue.

The Research division reported a profit of £4.6m on revenue of £11.8m in the first half compared with a profit of £3.7m on revenue of £10.2m in the same period last year.

Green Transition

Shipping has a crucial role to play in the global energy transition. Responsible for transporting over 80% of goods globally, the shipping industry’s ability to adapt is pivotal to the transition. The industry aims to reduce its share of global CO2 emissions by adopting cleaner fuels, improving vessel efficiency and investing in innovative technologies.

In this context, the Green Transition team at Clarksons has had a very active first half of the year, working together with our other divisions to lead positive change, through insights and guidance on decarbonisation strategies, operational emissions reduction, fleet renewal and policy coherence at the heart of our clients’ ability to evaluate and execute strategies to meet their obligations.

Following a significant increase in demand for specialised green offshore vessels, particularly in the offshore wind and renewables sector interest is also increasing in the oil and gas sector. As a result, the team is actively engaging with clients regarding technical green solutions and initiatives.

Digitalisation

Sea’s end-to-end digital solution for sustainable, data-driven decision-making continues to grow. Sea Trade 2.0, our upgraded pre-fixture platform, was delivered to enable us to ensure future developments can be rapid, fully structured, cross multiple markets and delivered as a truly SaaS solution. It is now being rolled out across our existing client base and our focus for the remainder of this year is on the expansion of our markets and the regular and continuous evolution of our ‘at-trade’ and ‘pre-trade’ product sets. We are continuing to see increased adoption of the Sea platform among our clients, and we expect this to continue as we expand our offering and roll out Sea across new products and markets.

Results

Total revenue in the first half was £310.1m (2023: £321.1m) with underlying administrative expenses* of £248.2m (2023: £256.7m). Underlying profit before taxation* was £51.5m (2023: £53.1m), resulting in reported profit before taxation of £50.1m (2023: £52.2m). Underlying earnings per share* were 129.1p (2023: 133.5p). Reported earnings per share were 124.6p (2023: 130.5p).

While our underlying performance remains extremely robust, a stronger pound in the first half of 2024, with an average GBP/USD rate of US$1.26 compared to US$1.24 for the same period last year, has proven a headwind, which is likely to continue into the second half of the year.
Source: Clarkson Plc.