Final Results
Clarkson PLC
17 March 2008
CLARKSON PLC
17 March 2008
Preliminary results
Clarkson PLC ('Clarksons') the world's largest shipbroker and shipping services
group, today announces unaudited preliminary results for the twelve months ended
31 December 2007.
Results for 2007 Year ended Year ended
31 December 31 December Year on year
2007 2006 % change
Revenue+ £173.4m £116.6m +49%
Profit before taxation and
exceptional item+ £31.6m £22.1m +43%
Profit before taxation+* £25.6m £22.1m +16%
Earnings per share* 101.9p 86.6p +18%
Dividends per share* 40.0p 36.0p +11%
+Continuing operations
*Other than as noted, figures are after exceptional item
HIGHLIGHTS
• Record organic growth in profits driven primarily by dry cargo, futures
broking and sale and purchase businesses.
• Strategic acquisitions during the year totalling £4m broadening services
in dry cargo, LNG and offshore broking.
• Continued growth and innovation in financial services
o Hedge fund: US$191m under management (2006: US$47m); investment
returns for the year ended 31 December 2007, net of fees, of 26.7%
o Investment services: creation of a new group to provide advisory and
research services to investors and corporates
Tim Harris CBE, Chairman of Clarkson PLC, commented:
'The business has delivered another good performance, with revenue and margin
growth across the group. During the year, we continued to innovate and build on
our unrivalled intelligence in shipping, establishing an investment services
business and delivering 26.7% returns, net of fees, to the investors in our
hedge fund.
'Given a strong start to 2008 and a record forward order book, we remain
confident about the prospects for our business and believe the platform we have
established leaves us well positioned to deliver another year of growth in
2008.'
Enquiries:
Clarkson PLC: 020 7334 0000
Richard Fulford-Smith, Chief Executive
Jeff Woyda, Finance Director
Hudson Sandler: 020 7796 4133
Jessica Rouleau
Fran Read
CHAIRMAN'S STATEMENT
Results
Revenue has increased by 49% to £173.4m (2006: £116.6m), driven primarily by
strong performances in the dry bulk, futures and sale and purchase broking
businesses.
Operating profit on continuing operations before the exceptional item was
£26.4m, a 47% increase on the £18.0m reported in 2006. This result was achieved
despite the impact of a weak US dollar, one-off administrative expenses
resulting from the initial acquisition cost of new teams (£2.4m) and the legal
costs incurred in defending the Russian litigation (£3.2m).
Profit before taxation on continuing operations before the exceptional item
increased by 43% to £31.6m (2006: £22.1m). As announced in January 2008, the
Board has decided, without any admission of liability, to make a provision of
£6.0m against the existing claims totalling US$67m from Sovcomflot and Novoship,
the Russian state-owned shipping companies. This provision has been treated as
an exceptional item. Consequently, profit before taxation reported amounted to
£25.6m (2006: £22.1m).
Basic earnings per share on continuing operations was 96.4p (2006: 87.2p).
Dividend
Clarksons is committed to maintaining a progressive dividend policy and the
Board is recommending a final dividend of 26p per share (2006: 24p per share).
The interim dividend was 14p per share, giving a total dividend for the year of
40p per share (2006: 36p per share), an increase of over 11%. This increase is a
reflection of our continued confidence in the prospects for the business going
forward.
The dividend will be payable on 6 June 2008 to shareholders on the register as
at 23 May 2008.
Litigation
The group has received notification of a further potential claim by Sovcomflot,
relating to a routine year end valuation performed by H Clarkson & Company
Limited as at 31 December 2003. The total amount claimed under this notification
is US$71m. The Board has reviewed all documentation available to it, and
discussed the matter at length with its advisors. Consequently, it is the
Board's strongly held view that this claim should not have been brought, is
without foundation and should not succeed.
Accordingly, no provision has been made against this claim, which will be
strenuously defended in court, should it reach this stage.
Outlook
Given the strong start to 2008 and a record forward order book, we remain
confident about the prospects for our business. Although the potential impact of
uncertainty in global economic conditions cannot be ignored, we believe that the
platform we have established across a broad base of shipping services leaves us
well positioned to deliver another year of growth.
Tim Harris CBE
CHAIRMAN
17 March 2008
REVIEW OF STRATEGY
Clarksons is a great people business.
At a time when our industry increasingly seeks expert and informed input we are
better placed than ever to meet these needs with teams of exceptionally talented
individuals. It is they who enable us to grow our diverse shipping services
business, a strategy to which we remain committed. I am proud of their unified
determination to maintain the company's focus whilst growing and despite the
potential distraction of our legal challenges. With strong roots in shipping,
many loyal clients and our unequalled research base, the group is well equipped
to continue to be the pre-eminent industry provider through organic growth,
consolidation and the successful integration of people currently in private
heritage shipbroking businesses. Our strategy is to continue this process in
each of our global products.
Our expansion during 2007 has been principally organic, as we continued to
maximise the integration and development of both businesses and teams acquired
over the previous 24 months. We have maintained and extended our position as the
global leader in shipping services and the core shipping competitor to the new
breed of commodity and financial services groups lured by the increasing
commoditisation of the freight process. We possess the ability to provide full
client coverage to all markets in physical and synthetic bulk product and that
is unparalleled. Clarksons' research and market knowledge enable us to form
views based upon detailed analysis, extensive historical data and experience
which we share with most in the industry as the demand for decision-making based
upon sound analysis and benchmarking is ever increasing. We intend to broaden
our client offering with increasing brokerage of the products, minerals and
commodities that we ship.
The recognition that freight is a commodity and should be traded as such is
largely responsible for our confidence that revenue growth is sustainable. The
massive expansion of world trade and strong freight markets have justified our
significant global growth and fuel our ability to fund new value-added
initiatives. Our ongoing investment in IT enables us to provide and extend
global support to all our valued clients through our extensive network of
regional offices. We shall continue to grow regional presence, particularly in
Asia but also with an eye to provide local representation. Globally we shall
look to currently under represented areas including, for example, South America.
Growing revenues stem from increased market share in traditional shipbroking
services plus the added complementary business units which have served to
broaden our base. Our next significant financial services unit will be Clarkson
Investment Services where we have assembled a team of leading investment
bankers. This unit will fill the gap that exists from the very limited informed
coverage currently on offer to the investment community. We aim to provide a
better understanding of our industry to new investors in shipping and a greater
comprehension of the significance of shipping through our enlarged team of
sector and equity analysts. This newly-formed unit which follows our successful
entry into fund management will further spread our income base. We shall focus
on taking companies to the public markets, innovative funding and equity
placement and mergers and acquisitions.
Our clear ambition is to be a one-stop shop for the broadest audience in
shipping, always concentrating on higher margin businesses which will be
accretive to shareholder returns. We continually review all areas of our
business and have clearly outlined our future core activities. Consequently, we
shall cease our shipowning business, Clarksons Logistics and dispose of the
remaining assets - a process started in 2007 with the sale of the CFF Seine. We
will also continue modernising and updating our business plan to embrace and
lead the significant structural changes in our industry.
Team Clarkson has grown significantly over the last 12 months. The addition of
new key employees attracted by our transparent incentive packages, and the
unrivalled ability to deliver a global service to clients, has increased
revenues and market share in the key areas of freight physicals and derivatives,
sale and purchase and newbuilding. Clarksons research, data and ideas are at the
heart of this growth delivered to an enlarged, better-informed and enthusiastic
audience. We shall grow our analyst team during 2008, both in the UK and
globally, to provide our clients with full market commentary.
Growth in shipping has been inevitable as it provides the core arteries to world
trade which has been growing at a significant pace. Increased demand for
delivery of raw materials and energy products over long distances is largely
attributable to the Asian industrial boom. Correspondingly inflated commodity
prices have not hindered the belief that higher freight levels can be justified
for high quality service. Strategically it makes sense for us to deliver quality
with an expanded service base which will reward shareholders and staff alike.
Richard Fulford-Smith
CHIEF EXECUTIVE
17 March 2008
BUSINESS REVIEW: OPERATIONS
Broking
Dry bulk chartering
Revenue: US$102.9m (2006: US$53.1m)
Result: £14.6m (2006: £6.0m)
Forward order book for 2008: US$63m (At 31 December 2006 for 2007: US$27m)
In 2007 rates for dry bulk carriers earnings set new records. Our chartering
department performed significantly ahead of expectation, with success in both
spot and term business throughout the year. The division started 2008 with a
record forward order book.
Bulk carrier earnings prospered from the continued surge in raw material demand
as Chinese steel production reached record levels. Port infrastructure
constraints and a relative shortage of available ships resulted in a tight
supply and demand balance which led to exceptionally high freight levels. Rate
volatility increased with frequent changes in sentiment and derivative trading
prospered as a result. Given the attractive yields of the shipping markets,
speculative trading increased, also assisting the upward push.
Newbuilding contracts reached record levels in 2007, driven by the wealth
reinvested back into the dry bulk sector. Delivery over the next few years,
combined with the sale of single-hull tankers for conversion to dry bulk ships
and reduction in scrapping, contribute to a market consensus of opinion
forecasting a declining freight market in the longer term, despite our bullish
expectations for 2008.
Clarksons dry bulk clientele comprises ship owners, cargo owners, charterers,
traders and any other entity interested in trading seaborne freight. On the
physical side freight cover is organised through contracts of affreightment,
spot market deals or longer term period deals. Clarksons dry bulk teams are
mainly organised in capesize, panamax, handymax and handysize.
Our dry bulk chartering vision is to apply a disciplined culture where our
global capability creates the greatest value. Together with our extensive IT
investments, Clarksons global dry bulk chartering team aims to maximise the
value of a network of operations extending to local and regional markets in 13
different countries. Brokers are able to monitor real-time data and the dynamic
moves of the market as presented in the derivative market, forging a comparative
advantage in the highly competitive and dynamic shipping market.
Container chartering
Revenue: US$7.0m (2006: US$5.4m)
Result: £1.0m (2006: £0.6m)
Forward order book for 2008: US$4m (At 31 December 2006 for 2007: US$5m)
Despite concerns at the beginning of 2007 that the container market would fail
to absorb the global newbuilding order book, trade expansion of approximately
10% ensured that boxship rates steadied and firmed during the year. In fact, Far
East / Europe trade was particularly buoyant.
The container market is rapidly expanding and is the largest gross earner of
freight across all sectors. Very large post panamax vessels (8,000 teu plus) are
entering the market over the next few years in increasing numbers. Whilst these
big ships are dominated by the major liner companies, who have their own
marketing teams, the interaction between owners and the majors is significant
and our teams will be built up to provide the same global coverage as we have
elsewhere.
Clarksons has yet to fulfil its market share ambitions and the team is focusing
on expansion in 2008. This is an area in which we can achieve significant
growth. Our offices are in London, Shanghai, Singapore and Sydney and we expect
to expand this further, particularly with the development of derivative products
and the expansion of our sale and purchase and longer term chartering
activities.
Deep sea chartering
Revenue: US$46.3m (2006: US$45.1m)
Result: £5.9m (2006: £5.7m)
Forward order book for 2008: US$8m (At 31 December 2006 for 2007: US$7m)
Revenue, in US dollar terms, increased in 2007. This resulted from further gains
in market share and, on average, a reasonable deep sea freight market. The
exception was VLCCs, where rates were soft throughout the year. Although product
rates were robust west of Suez in the first six months of the year, east of Suez
they did not fair so well. Consequently, to have increased revenues exhibits
just how strongly our spot teams performed. We also made significant advances on
the timecharter and projects desk which bodes well for future years.
One cannot underestimate the positive impact that the commoditisation of freight
has had on the tanker market. Further consolidation combined with rapid growth
in the freight futures market is set to continue in 2008. Clarksons remains
fully equipped to assist the global tanker industry adapt to the many changes
that are now sweeping through the market.
Clarksons' deep sea business has grown to have a significant presence in London,
Singapore, Houston, Geneva, New Delhi and Dubai. This global coverage, combined
with our extensive portfolio of clients including all oil company majors, oil
traders and shipowners gives Clarksons an unparalleled position in the deep sea
market.
As we enter 2008 the trend to trade freight in a more sophisticated way may
provide a backdrop of increased volatility for charterers. Clarksons remains
well placed in all deep sea tankers sections, from refined clean petroleum and
dirty petroleum products, plus all crude oil markets up to VLCC, to leverage its
position as the world's largest shipping services provider.
Finally the unfortunate incident on the Hebei Spirit remains a source of
discussion in certain sectors of the tanker industry and it will be interesting
to see if the 2010 phase out of single skin vessels is brought forward on a
significant scale.
Specialised products
Revenue: US$27.1m (2006: US$19.5m)
Result: £2.6m (2006: £1.9m)
Forward order book for 2008: US$9m (At 31 December 2006 for 2007: US$9m)
The integration of businesses acquired in 2006, together with further expansion
of our global activities continues to underscore Clarksons major commitment to
this market segment.
Global coverage within this sector provides us with the ability to maintain
genuine root contact with our rapidly expanding multinational client base of
important oil and energy groups, chemical companies and niche customers within
the specialised products sector.
There are specialised products teams in Singapore, London and Houston, and we
are establishing new operations in Geneva and Hamburg. Our ability to provide
global coverage to an increasing charterer and ship owner clientele is
recognised and with their encouragement we will continue to maintain the drive
towards regional and centralised growth.
Large tranches of the specialised products business are controlled by
significant operators for whom we aim to provide a bespoke service. We provide
dedicated and specialist advice coupled with logistics input. Contracts of
affreightment, time charters or indeed spot fixtures arising from such advice
are efficiently serviced by a dedicated team of operators and analysts.
The specialised products business involves a high level of operational support.
Increasingly we are acting as the outsourcer to much of our existing client base
regardless of whether they are large or small. The structure of our global
operation and the ability to provide full analytical and logistic support places
us in a position whereby consolidation and growth can be achieved in tandem.
Petrochemical gas
The petrochemical gas chartering business complements the activities of our
specialised products and gas chartering divisions. The team provides
comprehensive brokerage services to the same producers and traders active in all
three market places.
The petrochemical gas team is based in London and Singapore and has just
completed its first full year of trading as a separate entity. During the year,
it has secured a significant share of this exciting and expanding sector of the
bulk shipping market. The wealth of experience within the team ensures it is
well placed to take full advantage of growth opportunities in different parts of
the globe.
Gas
Revenue: US$13.4m (2006: US$10.2m)
Result: £1.3m (2006: £1.3m)
Forward order book for 2008: US$7m (At 31 December 2006 for 2007: US$4m)
The gas market in 2007 was very challenging. Generally, tight LPG supplies in
the Middle East, together with the delayed start-up of a number of major new LPG
projects, and accelerating deliveries of newbuildings, resulted in a weak market
for the largest vessels (VLGCs). In other sizes, a combination of high levels of
term cover and generally unexciting conditions in spot markets led to diminished
transaction volumes. Against this difficult background, our excellent team of
brokers has significantly increased its market share and also booked a number of
sale and purchase deals, producing very good spot revenues and forward business.
Our well equipped team of dedicated specialists, who are particularly strong in
LPG, ammonia and petrochemical gases, continues to extend their influence and,
with the support of our analysts, will further grow our product brokerage
activities in 2008.
LPG and LNG are sourced from oil and gas fields which are typically located
outside the principal import markets, whilst smaller quantities are produced in
the oil refining process. Over the next couple of years there will be a
significant increase in the number of new gas fields to serve the market,
including those associated with new LNG projects as they come on stream. LPG
trade is set to grow significantly but the market is already equipped with a
large number of newbuildings to meet the increased demand. This rapid rate of
newbuilding deliveries, unfortunately in advance of the start-up of the new
volumes, is having an impact on freight rates for the largest LPG carriers. As a
result, significant action would appear to be required from owners to reduce the
current oversupply of tonnage.
The successful acquisition of the remaining 50% of LNG Shipping Solutions was
concluded in 2007. Our activity is focused in London which remains the principal
centre for the trading of the product, although we also have an increasing
presence in Houston. Our freight coverage is enhanced by the presence of product
brokers working in both our centres on the LPG side, and this is something that
we intend to develop further. Indeed Clarksons recognises the advantages of
freight and commodities brokerage businesses sitting side-by-side. Going
forward, we believe, some of our future competition will stem from the
inter-dealer broking community which has been particularly focused on trading
physical and derivative products in energy businesses.
Sale and purchase broking
Revenue: US$74.8m (2006: US$38.2m)
Result: £6.2m (2006: £3.5m)
Forward order book for 2008: US$40m (At 31 December 2006 for 2007: US$21m)
In 2007, secondhand sales were up 30% in volume and 50% in value with total
global revenue exceeding US$53bn. Newbuilding activity continued at an
incredible pace and the number of deals surpassed all expectations.
The stellar performer was the dry bulk market where values increased by 77%,
resulting in a comparable increase in the stock price of quoted dry bulk
companies. This drew attention to shipping in the public markets and our sale
and purchase brokers were able to benefit from this development to grow market
share. At the same time we took a lead position in the tanker sale and purchase
segment.
Clarksons has for a number of years been recognised as an organisation capable
of uniquely placing blocs of ships. With the establishment of the Investment
Services team our activity in mergers and acquisitions is anticipated to
increase significantly. Clarksons operate in every single freight market sector
and this sets us aside from all of our competitors and allows us to leverage off
our research and consultancy base. This should see our income in sale and
purchase broking and investment banking further propel revenues.
Sale and purchase broking activities extend to our Asian offices of Hong Kong,
Shanghai and Singapore. However, we are also unique in having a very significant
and profitable operation in Greece. Our Piraeus and Asian offices have greatly
enhanced our global coverage and our team in Greece have been particularly
successful in demonstrating the advantages to the local community of the
Clarksons presence and the extension of our global reach.
Our newbuilding desk acts as an intermediary in the placing of contracts by ship
owners for new vessels with shipyards. The scale of our involvement in
shipbuilding places us in a position of great relevance to the ship building
community with whom we undertake a lot of research and consultancy in addition
to our broking business. In conjunction with our research department we provide
our clients with ideas and initiatives to enhance their business plans. We also
operate the 'Shipbuilding Club' which analyses future demand trends for ship
builders, sub-contractors and sub-suppliers.
Through our Shanghai newbuilding desk we provide an important service to the
emerging Chinese shipbuilding community as well as leading our shipowner clients
through the process of doing business in China. Our broader client base is well
demonstrated by our placement of orders in China for local, domestic clients.
The majority of newbuilding revenue is invoiced on a 'forward order book' basis.
As 2007 was a particularly active year for our newbuilding department, the
benefit will be seen over the coming years as ships are delivered.
Research
Research services
Revenue: £6.0m (2006: £5.2m)
Result: £1.2m (2006: £1.0m)
Clarkson Research Services Limited continued to perform strongly, with sales up
15% on the previous year. Digital product sales grew rapidly, but it was also a
successful year for hard copy products. The customer services and consultancy
sections also performed well, benefiting from the high level of activity of
shipping companies in the financial markets. The business continues to widen its
base as an information provider and by developing its sales and marketing
capability. During the year, the integration of the offshore structures database
was completed, as was the new database of public shipping companies, covering
maritime companies listed on 39 different exchanges. In the merchant shipping
area our fleet coverage was extended to include ferries and cruise ships.
Clarkson Research Services Limited provides the shipping and offshore industries
with a wide range of market information from its extensive proprietary
databases. Its income derives from subscriptions to periodical reports,
directories, digital and online data provision, maps and from services and
consultancy provided to external clients and within the group.
The scope of information provided is encapsulated in the market-leading service
Shipping Intelligence Network, which supplies on-line information about all the
major shipping segments including ships, shipbuilding and commercial markets.
Clarkson Research provides a range of digital publications and an extensive time
series database. The time series database is now widely used across the shipping
industry.
The development of offshore information continues with a successful new shipping
diary range and advertising sales. Our Shanghai office continues to expand, and
in addition to China Intelligence Monthly maintains a comprehensive database and
market intelligence system about the Chinese shipbuilding industry.
Financial
Futures broking
Revenue: US$32.9m (2006: US$16.7m)
Result: £5.5m (2006: £2.5m)
Forward order book for 2008: US$26m (At 31 December 2006 for 2007: US$7m)
In 2007, futures broking trade volumes exceeded expectations, with revenues up
by 97% and profit more than doubling. As a result we grew our team, which is
focused now in London and Hong Kong.
Clarksons remains the world's foremost arranger of Forward Freight Agreement
(FFA) trades, having formulated the concept almost 20 years ago. The FFA is a
principal to principal, cash settled contract for difference based upon
standardised cargo routes or timecharter indices. Settlement of these contracts
is against indices generated by the Baltic Exchange.
Much of this business was historically undertaken over the counter with the
principals bearing counter party risk, although several institutions including
LCH/Clearnet, SGX and NOS now offer clearing facilities which has enhanced the
usability of the products. We have seen the development of an options market,
which trades alongside the well established swap activities. The market is
divided into two core elements of dry and wet and Clarksons has significant
teams in both products.
Clarkson Securities Limited, through which all futures activity is arranged, is
regulated by the UK Financial Services Authority (FSA).
Fund management
Revenue: US$5.2m (2006: US$0.9m)
Result: £0.6m (2006: £0.0m)
Funds under management at 31 December 2007: US$168m (2006: US$47m at 31 December
2006)
The hedge fund, for which Clarksons operates as discretionary manager, generated
a return to investors for the year of 26.7% net of all fees. This puts the fund
into the top 10% of the 1,356 performers listed in the Eurohedge database during
2007. Funds under management increased significantly and have now reached a
level where the underlying costs of the operation are covered by management
fees.
Investing in the shipping hedge fund enables institutional investors who have no
direct experience of the complex market of shipping to have exposure to this
sector. Clarkson Fund Management Limited (CFML), a wholly owned London based
subsidiary of Clarkson PLC, is authorised and regulated by the FSA to undertake
discretionary investment management activities for the Cayman Island based
Clarkson Shipping Hedge Fund.
The fund invests in shares of shipping and shipping related companies and in
freight derivatives taking long and /or short positions based on a combination
of fundamental, technical and tactical analysis.
Financial and investment services
Revenue: US$2.6m (2006: US$4.3m)
Loss: £0.3m (2006: profit £0.7m)
The financial services team, whose results are linked to success with major
financing projects, was unable to generate the same return as in 2006.
Investment services
Towards the end of 2007 we started to create an investment services team. This
team will be developed over the coming year, with centres in the UK, US and
Middle East. The establishment of the new investment services team cost £0.5m in
2007.
Financial services
Clarkson Financial Services (CFS) concentrates on three major areas of business:
• Structuring and arrangement of shipping-related projects;
• Advisory work for financial institutions;
• Ship operation.
CFS works alongside Clarkson Fund Management Limited, concentrating on investors
keen to invest in physical assets, rather than shares in shipping companies, as
well as developing a range of other shipping services.
Our experienced team, which is based in London, has a good track record and
long-standing relationships with various financial institutions, particularly in
Germany.
Support
Port and agency services
Revenue: £3.8m (2006: £1.9m)
Result: £0.2m (2006: £0.2m)
2007 saw a full year's revenue and result for port and agency services,
originally acquired in 2006 from Genchem. The business recorded increased
numbers of ships' agency attendances and significantly higher grain exports and
animal feed imports.
Ships' agency
The ships' agency activity is concentrated in five locations in the UK:
Avonmouth, Birkenhead, Great Yarmouth, Ipswich and Southampton.
We earn fee income from attending to all the needs of a ship in port, from
arranging pilots, boatmen and cargo handlers to procuring the services of tugs,
chandlers and the like.
Stevedoring and warehousing
The stevedoring and warehousing unit operates from sites within the ports of
Ipswich and Great Yarmouth. Operating principally as bulk agricultural dry goods
warehouses and stevedoring terminals there are two main income streams. These
are from the export and import of grains, animal feeds and similar commodities
to and from the near continent, Europe and North Africa.
Revenue is generated from exports in the form of vessel loading of ex-farm
commodity, transit from store to vessel, cargo analysis, and weighbridge
charges. Import operations attract revenue from vessel discharging, transit to
store, re-delivery from store and rental income.
Property services
Revenue: £6.5m (2006: £6.2m)
Result: £1.0m (2006: £0.9m)
Clarkson PLC acquired the head lease of St Magnus House, in Lower Thames Street,
London EC3, with an unexpired term of 11 years, from HSBC Bank in December 2004.
Clarksons occupies 40,000 square feet of the building out of a total of 136,000
square feet, representing approximately 30% of the available space. All the
available space in the building is let.
Logistics and technical services
Revenue: US$7.8m (2006: US$2.4m)
Loss: £2.1m (2006: loss £0.3m)
Logistics
Logistics remains a non-core activity of the group.
The Pacific Dhow was purchased in September 2005 to service a four year contract
the group had secured to transport jet fuel to Hong Kong International Airport
from a local refinery. The original contract was terminated by the charterer in
January 2008. We are evaluating the best options available now that the vessel
is free of the original contract.
In May 2007, a further vessel, the Jet Express, was acquired as a possible
replacement for the Pacific Dhow given it was more suited to undertake the
original jet fuel transport contract. Following the termination of the jet fuel
contract after the year end, we are reviewing how best to utilise this asset.
The wholly owned freight ferry CFF Seine was sold in November 2007.
Technical services
The technical services operation generated gross revenues of £2.8m in its first
year of trading. Various joining incentive arrangements, which are expensed in
full in the period, resulted in a small loss. This situation should not recur in
2008.
The technical services team concentrates on:
• Provision of skilled riding squads ex-shipyard. Worldwide availability
for logistic reasons and with US visas performing repairs at sea as an
alternative to costly dry-dock repairs;
• Project management with turnkey solutions including dealing with class
and plan approvals, vessel modernisation, new installations, conversions,
compliance with new regulations, boiler renewals/repairs, steel renewals,
main engine and diesel generator overhauls, turbocharger overhauls,
hydraulic systems, cargo pumps and systems.
All work performed with our skilled labour and under full guarantee;
• Ship inspections, class record inspections;
• Ultrasonic thickness measurement/steel specifications;
• Dry-dock and newbuilding supervision;
• Superintendent services;
• Blasting and coatings works - hydro / sand blasting of decks and tanks.
Technical services are provided from London, Dubai, Fujairah and Singapore.
KEY PERFORMANCE INDICATORS
The performance of the group's business is analysed by desk, division and
business segment.
Segmental performance is reviewed on revenue, overhead and operating margin.
Owing to the nature of shipbroking, estimates of new business concluded are
analysed between 'spot' revenue, which is invoiced during the current financial
year, and the forward order book which will be invoiced in future years. The
forward order book relating to billable revenues in the following financial year
is summarised as follows:
At At
31 December 31 December
2007 for 2006 for
invoicing invoicing Increase / Increase /
In 2008 in 2007 (decrease) (decrease)
US$m US$m US$m %
Dry bulk chartering 63 27 36 133
Container chartering 4 5 (1) (20)
Deep sea chartering 8 7 1 14
Specialised products
chartering 9 9 - -
Gas chartering 7 4 3 75
Sale and purchase
broking 40 21 19 90
Futures broking 26 7 19 271
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157 80 77 96
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The group monitors the level of outstanding commissions on a regular basis and
believes that the amount of working capital tied up in such balances can be
significantly reduced over the coming year.
Richard Fulford-Smith
CHIEF EXECUTIVE
17 March 2008
BUSINESS REVIEW: FINANCE
Income statement
Results
Following a very buoyant year, the group reports a record profit of £31.6m on
continuing operations before the exceptional item and taxation; an increase of
43% over the prior year. After the exceptional item, profit before taxation was
£25.6m for the year ended 31 December 2007 (2006: £22.1m), an increase of 15%.
Earnings per share on continuing activities were 96.4p per share (2006: 87.2p
per share), an 11% increase.
When combined with the 5.5p per share from discontinued activities (2006: loss
of 0.6p per share), total basic earnings per share on profit for the year
amounted to 101.9p (2006: 86.6p)
Revenue
Revenues from continuing operations increased 49% to £173.4m from £116.6m.
Segmental revenue is fully explained in note 3 below. Revenues increased in all
business segments other than financial and investment services and deep sea
chartering (although in dollar terms revenue for this segment has increased).
The most significant increase in revenues derived from the dry bulk chartering,
futures broking and sale and purchase divisions. This increase was a reflection
of the buoyant market, growth in our market share, increasingly sophisticated
users of hedging instruments and the successful integration of new teams
acquired during 2006.
29% of revenues and 32% of profits arise from overseas, where the group has
continued to invest in meeting both the local and global needs of our clients.
Administrative expenses
As the group has grown over the past 12 months, both organically and by
acquisition, staff costs have increased by £35.4m. The company continues to
attempt to keep fixed remuneration increases to a minimum, with a key element of
remuneration being performance related bonuses. Included within administrative
expenses are the following:
• A £6.0m exceptional item, representing a provision in relation to the
outstanding litigation from two recently merged Russian shipping companies.
This amount has been determined by the directors, after taking advice and
without any admission of liability, based upon a detailed review of all the
information available to them.
• £3.2m for legal costs of defending the claims set out above, as
indicated to the market at the half year.
• £2.4m of acquisition costs of new teams, particularly within the Sale &
Purchase department. These costs will not recur in 2008, however up front
costs to employ new staff and teams are used where appropriate and
necessary.
Foreign exchange
The majority of Clarkson's revenue is US dollar denominated and therefore its
results are heavily impacted by the sterling/US dollar exchange rate. At 31
December 2007 the sterling exchange rate was US$1.99, a slight weakening since
31 December 2006 when the rate was US$1.96. During the year the sterling
exchange rate moved from a trough of US$1.93 to a peak of US$2.11. The group
used spot currency contracts to convert cash collected into local currency to
meet operating costs, resulting in an average sterling exchange rate for the
period of US$2.01 (2006: US$1.86). No forward contracts were used during 2007.
Exchange losses amounted to £0.4m (2006: loss £2.2m).
Finance revenue and costs
The group initially invested US$20m seed capital in the hedge fund in May 2006.
As of 1 January 2007 this had increased to US$21.3m invested. During the year to
31 December 2007, the fund made investment returns, net of fees, of 26.7% or
£2.7m (2006: £0.7m). The group rebased seed capital back to the initial US$20m,
from the beginning of 2008.
Although borrowings remained constant throughout 2007 at £51.8m, finance costs
increased as a result of the higher level of average borrowings compared to
2006, during which borrowings increased by £43.6m. Of the £51.8m borrowings at
the year end (2006: £51.8m), £23.7m remained in cash and cash equivalents at the
year end (2006: £16.0m).
Other finance revenue, which relates to the impact of pension accounting,
reflects the expected returns on the assets of the schemes less the interest
cost on the liabilities of the schemes. The 2007 profit of £1.1m (2006: £1.1m)
reflects the matched assets and liabilities but with a greater expected return
than interest cost. 2008 will show a lower profit, given the underlying net
asset position and the smaller difference between expected rates of return and
discount rates.
Taxation
The effective tax rate on continuing operations was 32.8% (2006: 32.6%). The
overall effective tax rate on continuing and discontinued operations was 32.6%
(2006: 31.2%).
The overall tax rate is higher than the standard rate of UK tax of 30.0% due to
the impact of disallowable trading expenses and impairment adjustments which are
not eligible for income tax relief.
Dividends
The directors are recommending that, in line with our progressive dividend
policy and reflecting our confidence in the business plan, the total dividend
for the year increases to 40p per share (2006: 36p per share). The final
dividend of 26p per share will be paid to shareholders on 6 June 2008. In
accordance with International Financial Reporting Standards, the amount of the
final dividend is not provided in the 2007 financial statements as it will be
paid in the following year.
Statement of recognised income and expense
The major movements in the statement of recognised income and expense relate, as
in 2006, to the actuarial gains of £0.9m on the defined benefit pension schemes
(2006: £4.3m) and exchange gains of £0.3m (2006: £2.4m loss) on the translation
of overseas operations' results.
Balance sheet
Non-current assets
The significant increases in non-current assets are:
• Intangibles arising on acquisition of £4.7m - all goodwill;
• The gain on the seed capital invested in the hedge fund (£2.7m);
• The presentation of the £9.9m asset relating to the combined defined
benefit schemes.
Current assets
Trade and other receivables have increased due to the high level of income
generated and invoiced in the latter part of the year. During 2007, the group
has increased resources dedicated to managing debtor balances, and has achieved
a significant reduction in the ageing of these debts. Consequently, the increase
is lower than expected from the volume of activity.
Cash balances include amounts set aside for the payment of bonuses after the
year end relating to the results of the year and amounts due to trade creditors.
Current liabilities
In common with previous years, bonuses are accrued at the end of the year, for
payment after the year end. At 31 December 2007 this amounted to £47.7m (2006:
£23.2m). There is also an amount of £4.2m relating to deferred consideration on
acquisitions.
Non-current liabilities
The company maintained its £50.0m three year revolving facility from Barclays
Bank PLC. As at the year end £48.6m (2006: £47.7m) was drawn down. A further
£3.2m (2006: £4.1m) was borrowed from DVB Bank in Singapore secured on the MV
Pacific Dhow.
Capital and reserves
The company issued further shares during the year to meet current and future
obligations arising on the various acquisitions. A total of 513,087 shares were
issued for a consideration of £4.9m.
Cash flow
Cash generation remains a key strength of the group.
During the year the group accumulated cash as profit linked bonus entitlements
were accrued; bonuses are paid in February and May following the end of the
financial year.
At the end of the financial year the aggregate cash balance had increased to
£115.3m (2006: £74.8m).
Subsequent to the year end a number of significant payments will be made
totalling £52.6m (2006: £27.5m). These include £47.7m in staff bonuses relating
to 2007 (2007 in relation to 2006: £23.2m) and a £4.9m final dividend payment
relating to 2007 (2007 in relation to 2006: £4.3m).
Acquisitions
In May 2007 the group announced the acquisition of the remaining 51% in Cofimar
SA for a further consideration of £1.5m satisfied in cash and shares.
Also in May 2007 we acquired the remaining 50% of LNG Shipping Solutions for a
consideration of £1.1m, satisfied in cash.
In July 2007 we announced the acquisition of Normarine Offshore Consultants for
a consideration of £1.4m satisfied in shares.
Discontinued activities
In November 2007, Clarkson Ferries sold its only remaining asset, the CFF Seine
and ceased operations.
Segmental reporting
The financial statements continue to provide a detailed analysis of the
operating performance of the full range of business activities undertaken by the
Clarkson group, to provide shareholders with a fuller understanding of the
spread of business activity.
Pensions
The company now operates two defined benefit schemes: the Clarkson PLC pension
scheme and the Plowrights defined benefit scheme.
Defined benefit pension arrangements give rise to open ended commitments and
liabilities for the sponsoring company. As a consequence the company closed the
original defined benefit section of the Clarkson PLC scheme to new entrants on
31 March 2004 and closed this section for further accrual to all existing
members as from 31 March 2006. The Plowrights scheme was closed to new entrants
and to further accrual with effect from 1 January 2006. From 1 April 2006 all
pension benefits accrued in the UK arise in defined contribution schemes.
The Clarkson PLC defined benefit pension scheme surplus at the end of 2007 was
£9.9m. The Plowrights scheme also has a small surplus of £0.4m but the company
is unable to recognise this as an asset in its balance sheet.
The group also operates a variety of pension arrangements throughout the world,
all of which are either provided by the state or are defined contribution
schemes.
Risk management
The identification, control and monitoring of risks facing the business remains
a management priority and steps continue to be taken to improve further our risk
management procedures. The risks monitored include operational, market,
treasury, credit, legal and reputational risk.
Liquidity risk
The group's policy is to maintain borrowings and facilities at a level such that
they provide access to funds sufficient to meet all of its foreseeable
requirements. At the end of the year the company had short- and medium-term
borrowing facilities of £50.0m (2006: £55.0m) of which £48.6m was drawn down
(2006: £47.7m). Taking the group's bank facilities and strong operating cash
flow generation, the group is well placed to fund future developments of its
global business.
Interest rate risk
The majority of the group's borrowings are at variable rates of interest. We
keep under constant review the appropriateness of this exposure to interest rate
movements.
Foreign exchange risk
As stated, the US dollar is the major trading currency of the group. Movements
in the US dollar relative to other currencies, particularly sterling, have the
potential to impact the results of the group as was evident in 2007 both in
terms of the operating results and the revaluation of the balance sheet.
Credit risk
In common with most other companies, the group is exposed to credit-related
losses in the event of non-payment of invoices. The group mitigates this risk by
closely monitoring amounts outstanding from all sources and by adopting a
conservative approach to accounting for bad debt.
Share price
The share price at 31 December 2007 was £10.20. During 2007 the share price
ranged from a low of £7.96 in January to a high of £11.12 in October.
Compliance and regulation
Clarksons has two subsidiaries which are authorised and regulated by the UK
Financial Services Authority (FSA).
Clarkson Securities Limited provides futures broking services and Clarkson Fund
Management Limited provides investment management services to the Clarkson
Shipping Hedge Fund.
Both companies have strong balance sheets to comply with regulatory capital
adequacy requirements.
Jeff Woyda
FINANCE DIRECTOR
17 March 2008
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2007
2007
Before After
exceptional Exceptional exceptional
item item item 2006
£m £m £m £m
Revenue - continuing operations 173.4 - 173.4 116.6
Cost of sales (3.3) - (3.3) -
_________________________________________________
Trading profit 170.1 - 170.1 116.6
Administrative expenses (143.7) (6.0) (149.7) (98.6)
_________________________________________________
Operating profit - continuing 26.4 (6.0) 20.4 18.0
operations
Share of profits of associates
and joint 0.4 - 0.4 0.4
ventures
Finance revenue 6.9 - 6.9 4.2
Finance costs (3.2) - (3.2) (1.6)
Other finance revenue - pensions 1.1 - 1.1 1.1
_________________________________________________
Profit before taxation -
continuing 31.6 (6.0) 25.6 22.1
operations
Taxation (10.2) 1.8 (8.4) (7.2)
_________________________________________________
Profit for the year - continuing
operations 21.4 (4.2) 17.2 14.9
Profit / (loss) for the year
from 1.0 - 1.0 (0.1)
discontinued operations _________________________________________________
Profit for the year 22.4 (4.2) 18.2 14.8
_________________________________________________
Attributable to:
Equity holders of the parent 22.4 (4.2) 18.2 14.8
_________________________________________________
Earnings per share
Basic - continuing operations 119.9p 96.4p 87.2p
_________________________________________________
Diluted - continuing operations 118.6p 95.3p 86.9p
_________________________________________________
Basic - profit for the year 125.4p 101.9p 86.6p
_________________________________________________
Diluted - profit for the year 124.1p 100.8p 86.3p
_________________________________________________
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the year ended 31 December 2007
2007 2006
£m £m
Actuarial gain on employee benefits - net of tax 0.9 4.3
Foreign exchange differences on retranslation of foreign
operations 0.3 (2.4)
______________________
Total recognised directly in equity 1.2 1.9
Profit for the year 18.2 14.8
______________________
Total recognised income and expense for the year 19.4 16.7
______________________
Attributable to:
Equity holders of the parent 19.4 16.7
______________________
CONSOLIDATED BALANCE SHEET
As at 31 December 2007
2007 2006
£m £m
Non-current assets
Property, plant and equipment 18.6 20.1
Investment property 0.4 0.4
Intangible assets 47.2 42.4
Investments in associates and joint ventures 1.1 2.6
Trade and other receivables 2.0 0.4
Investments 16.4 14.0
Employee benefits 9.9 7.1
Deferred tax asset 3.3 3.7
______________________
98.9 90.7
______________________
Current assets
Trade and other receivables 43.4 30.5
Cash and short-term deposits 115.3 74.8
Income tax receivable 0.8 0.6
______________________
159.5 105.9
______________________
Current liabilities
Interest-bearing loans and borrowings (0.8) (0.9)
Trade and other payables (101.4) (66.6)
Provisions (0.3) (0.6)
Income tax payable (3.8) (2.0)
______________________
(106.3) (70.1)
______________________
Net current assets 53.2 35.8
______________________
Non-current liabilities
Interest-bearing loans and borrowings (51.0) (50.9)
Trade and other payables (3.1) (5.0)
Provisions (6.7) (0.5)
Deferred tax liability (7.3) (4.7)
______________________
(68.1) (61.1)
______________________
Net assets 84.0 65.4
______________________
Capital and reserves
Issued capital 4.7 4.5
Share premium 25.4 20.7
ESOP reserve (3.5) (3.7)
Deferred share consideration 0.9 1.1
Employee benefits reserve 0.8 -
Capital redemption reserve 2.0 2.0
Profit and loss 54.7 42.1
Currency translation reserve (1.0) (1.3)
______________________
Clarkson PLC group shareholders' equity 84.0 65.4
______________________
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2007
2007 2006
£m £m
Cash flows from operating activities
Profit before tax from continuing operations 25.6 22.1
Profit / (loss) before tax from discontinued operations 1.4 (0.6)
______________________
Profit before tax 27.0 21.5
Adjustments for:
Depreciation 2.5 2.6
Profit on sale of property, plant and equipment (1.9) -
Profit on sale of investments (0.1) -
Amortisation and impairment of intangibles 1.4 0.5
Provision for investments in associates and joint ventures 0.5 -
Difference between ordinary pension contributions paid and
amount (0.5) (0.4)
recognised in the income statement
Share of profits of associates and joint ventures (0.4) (0.4)
Finance revenue (6.9) (4.2)
Other finance revenue - pensions (1.1) (1.1)
Finance costs 3.2 1.6
Increase in trade and other receivables (12.5) (2.4)
Increase / (decrease) in bonus accrual 18.4 (9.4)
Increase in trade and other payables 21.8 13.0
Increase / (decrease) in provisions 5.9 (3.0)
______________________
Cash generated from operations 57.3 18.3
Income tax paid (4.9) (8.3)
Interest paid (3.2) (1.6)
______________________
Net cash flow from operating activities 49.2 8.4
______________________
Cash flows from investing activities
Interest received 3.5 1.7
Purchase of property, plant and equipment (3.3) (2.2)
Proceeds from sale of investments 0.3 -
Proceeds from sale of property, plant and equipment 4.0 0.1
Purchase of investments - (11.2)
Special contribution to pension scheme - (6.7)
Investment in associates and joint ventures (0.8) (0.7)
Disposal of associate 0.2 -
Acquisition of subsidiaries and businesses, including (3.1) (8.8)
deferred
consideration
Cash acquired on acquisitions 1.7 3.3
Dividends received from associates and joint ventures 0.6 0.3
Dividends received from investments 0.5 1.8
______________________
Net cash flow from investing activities 3.6 (22.4)
______________________
Cash flows from financing activities
Dividends paid (6.7) (5.7)
Proceeds from borrowings 0.9 44.8
Repayments of borrowings (0.9) (1.2)
ESOP shares acquired (6.1) (3.1)
______________________
Net cash flow from financing activities (12.8) 34.8
______________________
Net increase in cash and cash equivalents 40.0 20.8
Cash and cash equivalents at 1 January 74.8 55.1
Net foreign exchange differences 0.5 (1.1)
______________________
Cash and cash equivalents at 31 December 115.3 74.8
______________________
NOTES TO THE PRELIMINARY FINANCIAL STATEMENTS
1 General information
The preliminary announcement of results for the year ended 31 December 2007 is
an extract from the forthcoming 2007 annual report and does not constitute the
group's statutory financial statements for 2007 nor 2006. Statutory financial
statements for 2006 have been delivered to the Registrar of Companies, and those
for 2007 will be delivered following the company's annual general meeting. The
auditors have reported on the 2006 financial statements; their report was
unqualified and did not contain statements under Sections 237(2) or (3) of the
Companies Act 1985.
2 Accounting policies
Whilst the financial information included in this preliminary announcement has
been prepared in accordance with International Financial Reporting Standards
(IFRSs) adopted for use in the European Union, this announcement does not itself
contain sufficient information to comply with IFRSs. The company expects to
publish full financial statements that comply with IFRSs on 9 April 2008.
3 Segmental analysis
Segmental information on continuing operations for revenue and results is as
follows:
Business segments Revenue Results
________________________________________
2007 2006 2007 2006
£m £m £m £m
Dry bulk chartering 51.3 28.6 14.6 6.0
Container chartering 3.5 2.9 1.0 0.6
Deep sea chartering 23.1 24.3 5.9 5.7
Specialised products chartering 13.5 10.5 2.6 1.9
Gas chartering 6.7 5.5 1.3 1.3
Sale and purchase broking 37.3 20.6 6.2 3.5
Research services 6.0 5.2 1.2 1.0
Futures broking 16.4 9.0 5.5 2.5
Fund management 2.6 0.5 0.6 -
Financial and investment services 1.3 2.3 (0.3) 0.7
Port and agency services 3.8 1.9 0.2 0.2
Property services 6.5 6.2 1.0 0.9
Logistics and technical services 3.9 1.3 (2.1) (0.3)
________________________________________
175.9 118.8
Less property services revenue arising
within (2.5) (2.2)
the group ____________________
Segment revenue/results 173.4 116.6 37.7 24.0
____________________
Unallocated other costs (5.9) -
Head office costs (5.7) (4.0)
Unallocated foreign exchange differences 0.3 (2.0)
___________________
Operating profit before exceptional item 26.4 18.0
Exceptional item (6.0) -
___________________
Operating profit after exceptional item 20.4 18.0
Share of profits of associates and joint
ventures 0.4 0.4
Finance revenue 6.9 4.2
Finance costs (3.2) (1.6)
Other finance revenue - pensions 1.1 1.1
___________________
Profit before taxation 25.6 22.1
Taxation (8.4) (7.2)
___________________
Profit after taxation 17.2 14.9
___________________
4 Exceptional item
The Board has decided, without any admission of liability, to make a provision
of £6.0m against the existing claims from Sovcomflot and Novoship, the Russian
state-owned shipping companies. Further details are provided in note 11.
5 Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
2007 2007
Before After
Exceptional Exceptional
item item 2006
£m £m £m
Earnings - continuing operations 21.4 17.2 14.9
Earnings - discontinued operations 1.0 1.0 (0.1)
________________________________________
Profit for the year 22.4 18.2 14.8
________________________________________
2007 2006
Number Number
millions millions
_________________________
Weighted average number of ordinary shares 17.8 17.1
_________________________
Diluted weighted average number of ordinary
shares 18.0 17.2
_________________________
6 Intangible assets
Intangibles Goodwill Total
£m £m £m
Cost
At 1 January 2007 6.8 36.1 42.9
Acquisition of subsidiaries and businesses - 4.7 4.7
Deferred consideration adjustment - 1.3 1.3
Foreign exchange differences - 0.2 0.2
_____________________________________
At 31 December 2007 6.8 42.3 49.1
_____________________________________
Amortisation and impairment
At 1 January 2007 - 0.5 0.5
Amortisation 1.4 - 1.4
_____________________________________
At 31 December 2007 1.4 0.5 1.9
_____________________________________
Net book value at 31 December 2007 5.4 41.8 47.2
_____________________________________
Net book value at 31 December 2006 6.8 35.6 42.4
_____________________________________
On 17 May 2007 the group acquired the controlling 51% interest in Cofimar SA
('Cofimar'). Cofimar provides dry bulk chartering services in Paris. The group
originally acquired 49% of Cofimar in 2001.
On 23 May 2007 the group completed the acquisition of the other 50% shareholding
in LNG Shipping Solutions Limited ('LNGSS'). LNGSS predominantly serves
liquefied natural gas. The group subscribed £25,000 for 50% of LNGSS in 2001.
On 5 July 2007 the group acquired Normarine Offshore Consultants (USA)
('Normarine'). Normarine provides broking services in the off-shore project
markets. No individual assets or liabilities exceeded £50,000. Total net assets
were less than £50,000. There were no separately identifiable intangible assets;
the entire cost of acquisition has been allocated to goodwill.
Cofimar and LNGSS have been accounted for as step acquisitions. The book and
fair values of the identifiable assets and liabilities of Cofimar, LNGSS and
Normarine at each stage of acquisition were as follows:
Acquired in 2007 Cofimar LNGSS Normarine Total
Book Fair Book Fair Book Fair Book Fair
value value value value value value value value
£m £m £m £m £m £m £m £m
Investments 0.1 0.1 - - - - 0.1 0.1
Trade
receivables 0.1 0.1 - - - - 0.1 0.1
Other
receivables - - 0.1 0.1 - - 0.1 0.1
Cash and
short-term
deposits 0.3 0.3 1.4 1.4 - - 1.7 1.7
__________________________________________________________________
0.5 0.5 1.5 1.5 - - 2.0 2.0
__________________________________________________________________
Trade and
other payables (0.5) (0.5) (0.8) (0.8) - - (1.3) (1.3)
Income tax
payable - - (0.5) (0.5) - - (0.5) (0.5)
__________________________________________________________________
(0.5) (0.5) (1.3) (1.3) - - (1.8) (1.8)
__________________________________________________________________
- 0.2 - 0.2
_________ _________ _________ _________
Fair value of
net assets - 0.2 - 0.2
Accumulated
reserves - (0.1) - (0.1)
Goodwill
arising on
acquisitions 1.5 1.0 1.4 3.9
_________ _________ _________ _________
1.5 1.1 1.4 4.0
Previously acquired Cofimar LNGSS Total
£m £m £m
Fair value of net assets 0.3 - 0.3
Goodwill arising on previous acquisition 0.8 - 0.8
____________________________________
Consideration previously paid 1.1 - 1.1
____________________________________
Cofimar was accounted for as an associate in 2006. Goodwill relating to Cofimar
was previously included within investments in associates.
Cofimar LNGSS Normarine Total
£m £m £m £m
Discharged by:
Fair value of shares issued 1.3 - 1.4 2.7
Cash - 1.1 - 1.1
Costs associated with acquisition,
settled in cash 0.2 - - 0.2
Consideration previously paid 1.1 - - 1.1
______________________________________________
2.6 1.1 1.4 5.1
______________________________________________
7 Investments
Investments include US$27m held in the shipping hedge fund. The group rebased
seed capital back to US$20m at the beginning of 2008.
8 Employee benefits
The group operates two defined benefit schemes.
As at 31 December 2007 these schemes had a combined surplus of £10.3m, but the
company was unable to recognise the £0.4m surplus in the Plowrights scheme and
thus shows an employee benefit surplus of £9.9m. The market value of the assets
is £132.6m and independent actuaries have assessed the present value of funded
obligations at £122.3m. The company has provided deferred tax on the £9.9m
reported surplus amounting to £2.8m.
9 Analysis of net funds
31 December Reallocation Cash flow Foreign 31 December
2006 £m £m Exchange 2007
£m Differences £m
£m
Cash and
short-term
deposits 74.8 - 40.0 0.5 115.3
Current
interest-beari
ng loans and
borrowings (0.9) (0.8) 0.9 - (0.8)
Non-current
interest-beari
ng loans and
borrowings (50.9) 0.8 (0.9) - (51.0)
_________________________________________________________________
Net funds 23.0 - 40.0 0.5 63.5
_________________________________________________________________
10 Dividends
The directors will be recommending a final dividend of 26p per share, payable on
6 June 2008 to shareholders on the register at the close of business on 23 May
2008, making a total dividend for the year of 40p (2006: 36p) per share.
11 Contingencies
Two separate legal actions have been commenced against H Clarkson & Company
Limited by the state-owned Russian shipping companies, Sovcomflot and Novoship,
together with their subsidiaries. The actions relate to the payment of third
party commissions on business transacted during the period 2001-2004. The claims
include both the third party commissions paid and payable, and the repayment of
commissions received and receivable by Clarksons which together amount to
US$67m. H Clarkson & Company Limited acted throughout on the instructions of the
clients' senior management at the time on which it relied. Clarksons has, during
the year, submitted its defence, and will continue to strongly defend its
position in both cases.
The Board has reviewed, with its advisors, the litigation above. As a result of
its considerations, the Board has decided, without any admission of liability,
to make a provision against the claims of £6m, which is reflected in the results
for the year.
The group has received notification of a further potential claim by Sovcomflot,
relating to a routine year end valuation performed by H Clarkson & Company
Limited as at 31 December 2003. The total amount claimed under this notification
is US$71m. The Board has reviewed all documentation available to it, and
discussed the matter at length with its advisors. Consequently, it is the
Board's strongly held view that this claim should not have been brought, is
without foundation and should not succeed.
Accordingly, no provision has been made against this claim, which will be
strongly defended in court.
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