Final Results

RNS Number : 6617C

Clarkson PLC

10 March 2011

 



     10 MARCH 2011

CLARKSON PLC

PRELIMINARY RESULTS FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2010

Clarkson PLC ('Clarksons') is the world's leading shipping services group.  From offices in 17 countries on five continents, we play a vital intermediary role in the movement of the majority of commodities around the world.

Preliminary results

Clarkson PLC ('Clarksons') today announces preliminary results for the twelve months ended 31 December 2010.

Results for 2010	Year ended	Year ended
	31 December 2010	31 December 2009
Revenue	£202.6m	£176.7m	+14.7%
Profit before taxation	£32.4m	£22.5m	+44.0%
Earnings per share	125.4p	90.0p	+39.3%
Dividend per share	47p	43p	+9.3%

SUMMARY

·      Excellent performance delivered by the Clarksons team enabled the group to exceed financial expectations over the course of 2010

·      Continued growth in market share across all broking divisions, consolidating Clarksons' positions as market leader, despite uncertain shipping markets

·      Significant new hires in 2010 across global network to further strengthen the group's best in class teams

·      Strong balance sheet, with all bank borrowings repaid since the year-end

Andi Case, Chief Executive, commented:

"The dedication, commitment and professionalism of every one of the Clarksons' teams has once again been exceptional, matched only by their performance in terms of results achieved.

Clarksons continues to gain from increased trading volumes against a backdrop of volatile freight rates in the first few weeks of 2011.  I firmly believe our business is now in excellent shape, supported by a strong balance sheet, to take advantage as market conditions evolve and opportunities arise."

Enquiries:
Clarkson PLC: Andi Case, Chief Executive Jeff Woyda, Finance Director		020 7334 0000
Hudson Sandler: Charlie Jack Kate Hough		020 7796 4133

CHAIRMAN'S REVIEW

Overview

The group has delivered an excellent performance over 2010.  The slow but emerging recovery in global trade throughout the year led to some improvement in the markets, with Asian demand for commodities being the key driver behind growth during the year. Through the breadth of Clarksons' offer, with unparalleled research and analysis at its heart, we have continued to strive to be the leader in all of the markets in which we trade and remained the leading broker in the majority of shipping markets.

We have continued to leverage our experience and reach to further develop our products and services to maximise opportunities in both existing and new markets. Our global, integrated offering has allowed Clarksons to maintain its absolute focus on optimising the service it delivers to its clients and meet their evolving needs.

Our commitment to employing the best in class has ensured that our expanded teams across the world have continued to grow market share and through increased trading volumes have enabled the group to exceed financial expectations throughout the year.

Results

Revenue was up 14.7% to £202.6m (2009: £176.7m), reflecting the strong performance of our teams, particularly our broking division which benefited from continued improvement in the global shipping markets. Total administrative expenses increased by £14.3m to £160.1m, reflecting increased staff numbers and the profit-related bonus scheme. Operating profit was £34.5m (2009: £22.6m) and profit before tax was £32.4m (2009: £22.5m).

Dividends

The board is recommending a final dividend of 30p (2009: 27p). The interim dividend was 17p (2009: 16p) giving a total dividend of 47p (2009: 43p). This dividend is covered 2.7 times.

The dividend will be payable on 10 June 2011 to shareholders on the register as at 27 May 2011, subject to shareholder approval.

Colleagues

On behalf of the entire board I would like to thank all our employees, throughout the 17 countries in which Clarksons operate, for their continued hard work and commitment to meeting the needs of our growing number of clients.

The future

Whilst uncertainty remains over the pace of global economic recovery in 2011 we are confident that Clarksons is well positioned and structurally aligned to maximise opportunities in shipping and its related markets.

Our leading global market position and financial strength will allow us to continue to develop opportunities to further serviceclients and their needs and we therefore look to 2011 with confidence.

Bob Benton

CHAIRMAN

CHIEF EXECUTIVE'S STRATEGIC REVIEW

Over the last three years Clarksons has seen a significant evolution in its strategy. We have refocused our business around its core market-leading client service offering, building on our heritage and leveraging our strong global presence, leading technology and market research.  Against an unprecedented and turbulent macro-economic backdrop we have continued to grow volume year-on-year and take market share, consolidating our position as leader in the vast majority of markets in which we operate. During 2010, both the shipping and commodity markets have seen historic levels of volatility with a challenging freight environment impacting rates. However we have navigated through these conditions to our advantage, demonstrating the strengths of our strategy.

Once again the dedication, commitment and professionalism of every one of the Clarksons' teams has been exceptional, matched only by their performance in terms of results achieved. I congratulate the whole team for their strong performance during 2010. Today, we are the leading broker in almost all key shipping markets across the world. The combination of our market expertise and local presence is vital to the best in class service we provide to our clients. Wherever they are, our clients and teams have access to our market-leading research which underpins everything we do and we have continued to make significant investment in our internal and external technology platforms over the course of the year to further strengthen and support our offer.

More of our brokers are now based abroad than in the UK, close to our diverse local client base and centred in all major shipping hubs, enabling a truly global service to our international clients, large or small. Given our focus on client relationships it is critical that we continue to attract, retain and develop the best people in the industry. Throughout the year our international offices have made a number of significant new hires and we have already started to see the benefit of these appointments.

Clarksons' leading position in the market creates an obligation for ongoing investment to ensure that the best, young talent available pursue successful careers within the maritime sector. We have significantly enhanced our internal and graduate recruitment schemes with great success during 2010, improving links with leading academic institutions around the world.  We have also hired a dedicated training officer and launched an ongoing training programme underpinned by the Jon Marshall lectures.

The strength of Clarksons' balance sheet has improved dramatically over the past few years, giving us unparalleled resilience in the shipbroking sector, which can support the business in more challenging market conditions. This strong financial position is, in part, testament to the highly cash generative nature of our business but also to the success of the strategy we have in place. The year has seen us exit areas that do not support our client service focus including shipowning activities and logistics. Additionally, since the year-end, we have withdrawn from our fund management activities of the shipping hedge funds due to the difficulty of raising assets under management in the current market conditions for specialist niche funds.

In turn, we have focused on leveraging our position as the market leader in shipping services to broaden our core client offer. We have built traction through innovative products launched around the group. Clarkson Securities has continued the development of container futures through the Container Freight Swap Agreement (CFSA), which allows clients to take positions in the shipping markets either to fulfil trading or risk management strategies. Important milestones during the year have included the execution of both the first bilateral and cleared CFSA contracts as well as the launch of an on-line pricing screen (www.clarksonboxclever.com) which is targeted at small- to medium-sized companies in the container sector.  Clarkson Research has launched a major new range of products, led by Offshore Intelligence Monthly, the new leading source of information to the offshore sector, and is increasingly publishing data to clients using new technologies and applications. Clarkson Investment Services has also started to generate revenues. Since the year-end the team has already signed deals that, when finalised, should make a meaningful contribution to 2011 revenues.

Current trading and outlook

Since the year-end we have repaid all bank borrowings and redeemed the seed capital of £11.4m from the two hedge funds. We now enter 2011 with strong net funds and have negotiated a £25m committed but undrawn credit facility with our bankers to enable us to take advantage of opportunities quickly, when and where they arise.

Looking forward we are focusing all our efforts on strengthening and developing our best in class, client service offer. The relationship between economic recovery and each of the shipping markets is different today than in the past, as demand is improving but the demand/supply imbalance is often the key determinant of freight rates. In the past, vessel supply and utilisation was clear and predictable but in the aftermath of the financial crisis this is increasingly grey and evolves on a daily basis. Clarksons' ability to capture and interpret these changes is an important part of adding value to our clients. Recent unforeseeable events have shown the world to be uncertain and have led to increased volatility across markets but particularly in commodities. Rates in shipping and offshore markets have started to reflect this but the full effects will only be seen as the future unfolds.

Nevertheless, Clarksons continues to gain from increased trading volumes against a backdrop of volatile freight rates in the first few weeks of 2011 and I firmly believe our business is now in excellent shape for the future.

Andi Case

CHIEF EXECUTIVE

BUSINESS REVIEW

Clarksons is the world's leading shipping services group. From offices in 17 countries on five continents, we play a vital role in the movement of the majority of commodities around the world.

We are the market leader in the majority of the broking markets in which we operate and over the course of the year our teams have worked hard to leverage this position by building transaction volumes and growing market share in our core broking markets. This has been achieved against a market backdrop which, whilst showing signs of recovery, continued to be uncertain with freight rates exhibiting volatility. The lack of broader market confidence was also evidenced by the continued prevalence of spot market trading.

However, the breadth of Clarksons' offer has enabled the group to benefit where freight rates have improved. Furthermore we have continued to grow our headcount through employing best in class individuals and increasing our physical presence in established and emerging shipping hubs throughout the world. Accordingly we have been able to maximise opportunities in certain territories and markets by meeting our client needs at every stage.

We continue to utilise both our knowledge and understanding of the shipping markets to broaden the services we can provide to our clients with our market-leading research underpinning everything we do. We have leveraged our expertise to assist shipowners worldwide through all stages of a vessel's life cycle from newbuild through to secondhand and demolition. Our growing financial services division continues to build traction in both futures broking and investment services ensuring that Clarksons remains the dominant leader in shipping and its related markets.

Broking

Revenue: US$261.7m (2009: US$218.2m)

Segment result: £41.3m (2009: £26.7m)

Forward order book for 2011: US$92m*(At 31 December 2009 for 2010: US$108m*)

    * Directors' best estimates of deliverable FOB

Dry bulk

The recovery seen in the dry bulk markets in 2009 continued into 2010 with international dry bulk seaborne trade exceeding three billion tons over the course of the year. Chinese demand for raw materials continued to drive this growth, with a resurgence in demand for dry goods from the Western World further underpinning activity in the first half of the year. Coal trade was particularly strong with trade growth in excess of 13% or 110 mt year-on-year as Asian demand for coal far exceeded the reduced requirements of Western economies.

Regional consolidation in dry bulk markets has enabled us to further strengthen our global presence in key territories, particularly Europe, Africa, India and Asia.  The market has continued its trend toward spot fixtures, which has benefited our 'cargo' based teams. Overall, period time charter and spot trip activity were not compromised in our effort to deliver year-on-year growth in performance.

We anticipate coal and iron ore to remain the major growth commodities in 2011, albeit capped by mining expansion capacity. Total dry bulk demand is forecast to grow by 6% in 2011. However port congestion, changing trade patterns and an imbalance in global trade means that the required vessel tonnage to move those volumes needs to increase at 8%.  Inefficiencies in the fleet could also give rise to short-term positional and freight rate volatility. Fleet growth, which is currently forecast to exceed 16%, will dominate short-term sentiment and put increasing pressure on vessel rates.

Containers

The start of 2010 saw a period of unexpected activity across the container markets, primarily a result of improved cargo volumes as international trade continued to improve. Container trade growth resumed over the course of the year and is now close to the historical sector average of 12% p.a., having seen a 9% contraction in 2009.

There was strong interest in the secondhand market from new buyers and vessel values improved by as much as 60% during the year. Charter rates also improved and moved quickly off the historical lows of 2009. Consequently, owners were once again able to start covering their costs of operation after two difficult years, although there is still a long way to go before rate levels can be expected to reach previous highs. Whilst approximately 11% of the fleet was laid up in January 2010, most of this tonnage was reactivated throughout the year, such that now only approximately 3% of the fleet remains unemployed.

We firmly believe that over the medium-term the container market offers good opportunities for future growth. During the latter part of 2010, we strengthened the container broking team with the addition of several new experienced brokers and we have already seen the benefits of these hires as we continue to build market share. With the re-opening of the period market, Clarksons is well placed through both the strength of our teams and client relationships to benefit as the market improves further.

Deep sea

The crude market made a slight recovery in 2010 with average Very Large Crude Carrier (VLCC) rates increasing by 17%. Whilst earnings from Suezmaxes and Aframaxes rallied from the lows of 2009, the refined products market remained sluggish during 2010. Overall average earnings increased by 17%. Against this background, Clarksons' deep sea broking teams continue to grow market share and perform strongly.

Our undoubted global strength in both crude and refined products broking, together with our enhanced capability in market analysis, positions us well to overcome the challenging market conditions anticipated in 2011 and further grow our market share. The freight market remains susceptible to market spikes, particularly where there is disruption in the availability of vessels, and continued growth in China and India may also alleviate some of the downward pressure created by the delivery of new buildings in 2011. As the world economy recovers, and with it the demand for crude and refined oil products, we believe we are ideally placed to take full advantage.

Specialised products

During 2010 there was new found optimism in the specialised products market, though this was based more on sentiment than fundamentals, as freight markets saw little recovery throughout 2010. The oversupply of vessels in the market, as a result of the boom period from 2003 to 2008, presented a notable headwind to a full recovery. Key market players continued to seek a re-distribution of their order book via cancellations and renegotiations of new delivery contracts.  Throughout the year a significant proportion of owners operated at a loss resulting from challenging trading conditions, high operating costs and an increase in bunker prices.

Clarksons' specialised products team, with its far reaching customer base and global structure was able to maintain growth across its broad areas of activity through 2010. Accessing an enviable clientele via our seven regional offices, we provided an unequalled level of service to all segments within the sector. Volume of new business concluded exceeded historical highs, providing a counter balance to the weakened freight trends. Our highly driven and active presence within the spot market, coupled with a long-term time charter and contract of affreightment portfolio has created encouraging foundations for future consolidation and growth. We deliver ever higher value to our clients and will work together with them to create new initiatives through the unique product range that only Clarksons can offer.

We do not envisage a sustained increase in freight rates throughout much of 2011 with the majority of contracts of affreightment already renegotiated at decreased freight levels. However, we anticipate a more optimistic and positive sentiment to return to the market thereafter.

Petrochemical gases and small LPG

Market conditions were generally weak across this part of the bulk shipping market until the middle of 2010. The resulting idle time and additional ballast legs accelerated scrapping and record levels of scrappage were witnessed in the early part of the year. However, trade levels recovered in the second half of 2010 as new production and downstream problems in the Middle East gave way to export opportunities. This provided welcome employment to the semi-refrigerated, pressure and ethylene tonnage which was followed by an upturn in freight rates.

Whilst the weaker market environment at the start of the year impacted period business and proved challenging in terms of new spot fixtures, Clarksons' client base and market share have grown during this period, gathering pace as the market recovered during the latter part of 2010. It is encouraging to see the improvement in market conditions has continued into 2011 with rates showing a sharp increase.

Gas

At the start of 2010 we were reasonably confident of a modest upturn in freight rates across the gas markets as LPG trade volumes finally started to edge upwards and ammonia trade recovered. Nevertheless, the improvement in freight levels was muted as the amount by which the surplus in ship supply shrank during 2010 did not reach the levels required.

The Clarksons gas broking team continued to strengthen with more consistent activity across the size categories of trades and the number of trades brokered. Brokerage in the trading market showed good results despite unprecedented difficulties in the market which saw some traders exit the business and others struggle for survival. Derivative brokerage expanded. The sale and purchase market was largely inactive; however some liquidity returned to the market in the second half of 2010 which allowed us to conclude newbuildings and secondhand sales. Using our strong emphasis on research and analysis the team has continued to diversify our gas-related activities, growing market share in all areas of the business and increasing the number of transactions over previous years.

In 2011 we expect freight rates to be stronger, at least for VLGCs. Term shipping business may be difficult however as, generally speaking, charterers are seeking to minimise their term exposure, making period business more difficult to  write. With seaborne trade expected to expand generally we hope that commodity brokerage will increase. We also expect some liquidity to return on the derivative trades which should boost revenues. On the asset side we anticipate the market to be more active as older units are traded or scrapped and recent entrants to the business explore ways of consolidating or exiting the business.

Sale and purchase

Secondhand

Following the turmoil and difficulties of 2009, secondhand markets stabilised in 2010 and vessel values across all sectors recovered to varying degrees; average secondhand tanker values increased by 10% and bulkers by 6%. As a result the volume of business concluded returned to some sort of normality, enabling us to concentrate on continuing to grow our market share.

We were once again at the forefront of the market as larger corporate clients capable of very large capital transactions have recognised the depth of knowledge available to them from our team. Indeed, we were successful in concluding a number of transactions with gross values in excess of US$500m, illustrating the trust that our clients are willing to place with us.

Offshore

The dip in the offshore chartering market experienced in 2010 was the result of the lingering effects of the 2008 financial slump, coupled with the Macondo incident in the Gulf of Mexico. The latter had a significant impact on exploration and construction across all aspects of the offshore sector during the second half of 2010.

Even though the chartering market remained weak throughout 2010 the perception from owners is that they expect to see an upturn going into 2011 and 2012 and as such we have been able to take advantage of this in the newbuild market.  Our rig team in Houston was particularly successful. On the supply vessel side, which is predominantly based in Aberdeen and Singapore, we had some success making in-roads into the chartering market and have been appointed as sole brokers for a number of oil companies. On the secondhand and newbuilding side of the supply boat market, 2010 was relatively quiet although we did manage to both order and sell a number of ships, between our London and Singapore desks. We are also active in the offshore wind industry.

As a result of the Macondo incident, a number of projects in the Gulf of Mexico have experienced delays, although this work is expected to pick up once more in 2011 and into 2012. This has resulted in a high number of planned projects in the pipeline for 2011, particularly subsea based developments. While projected figures for offshore activity in 2011 are optimistic, we certainly expect 2011 to be a better year than 2010 in terms of chartering activity and in turn this should lead to further investment in new vessels and structures, especially as post-2011 is looking even stronger.

Newbuilding

2010 turned out much better in terms of newbuilding volumes than expected.  Newbuilding costs, on average, were the lowest we have seen over the last five years, with an average newbuilding in 2010 costing in the region of US$45m compared to a high in 2007 of approximately US$70m per ship. European owners - with the exception of the Greeks - were relatively inactive in 2010, but more than 50% of the new orders came from Chinese owners into Chinese shipyards.

Total new business concluded by both our London and Shanghai teams had a gross value of US$2.7bn, excluding offshore.  This was our best year ever in terms of total share of the newbuilding orderbook.

For 2011, we believe that buyers remain, but are very conscious of costs across all asset classes as charter rates are not there in the near term to support higher newbuilding pricing. An appreciating domestic currency against the dollar coupled with no positive movement on steel price, continues to limit the yards' ability to drive pricing down. With the yards having filled capacity in most cases through to 2013, there is also a lack of immediate pressure to force the market down.

Financial

Revenue: US$17.3m (2009: US$23.4m)

Segment result: £4.3m loss (2009: £0.5m loss)

Forward order book for 2011: US$3m* (At 31 December 2009 for 2010: US$5m*)

    * Directors' best estimates of deliverable FOB

Futures broking

In 2010 Clarkson Securities Ltd (CSL) once again had a profitable year and expanded its activities from dry bulk and wet freight into LPG, iron ore and container futures. All of these activities are logical additions to the core activity but are, for the most part, markets in their infancy. Container futures and the index they are settled on have been pioneered by CSL and 2010 saw CSL in the headlines regularly as milestones of "first container swap" and "first container cleared swap" were passed.

2011 shows signs of being a tough one in terms of dry bulk values but with some key hires and reorganisation, we expect to grow our market share. We anticipate slow but steady growth in the container sector where we currently have over 85% of the cleared market share, although we anticipate this percentage will diminish as the volume of container swaps trade grows. We have launched an online pricing screen (ClarksonBoxClever) which is targeted at the small- to medium-sized companies in the container sector. This will complement our existing offering on Bloomberg where we differentiate ourselves with the richest product offering in dry bulk, container and iron ore futures.

Fund management

Following a period of change in the hedge fund market, with the focus moving away from smaller niche specialist funds and the reduced influence of fund of funds as a source of capital, we decided to close the Clarkson Freight Fund and the Clarkson Shipping Hedge Fund after the year-end, and withdraw our £11.4m of seed capital from both hedge funds. Whilst we continue to seek suitable opportunities to enable us to re-enter this market, there will be no costs associated with this activity in the year ahead.

Financial services

Given the current inactivity of KG financing in Germany, the Clarkson Financial Services team has concentrated its activities on financial brokerage, bank advisory and the arrangement of structured finance.

To meet this new challenge, the team has been strengthened with the appointment of senior banking professionals with many years of experience in the shipping and offshore market.

As a result, the company has managed to secure a number of high-profile debt financing mandates which are expected to generate significant income in 2011.

Investment services

Clarkson Investment Services (CIS) is now regulated in Dubai, London and Houston. The team offers investment services around the globe and can now provide investment service advice and research to clients in the Middle East and the US. During the year CIS has started to generate revenues, including one completed project advising on a US$105m investment into a Middle East oilfield services business. The team continues to secure and work on a number of mandates.

Support

Revenue: £14.8m (2009: £16.0m)

Segment result: £0.5m (2009: £0.4m loss)

Port services

Clarkson Port Services, which comprises agency and stevedoring at English ports, short sea broking and support to the offshore wind energy sector, has delivered a record year.

The stevedoring business enjoyed record grain export volumes in 2010 mainly due to market conditions favouring the early export of much of the 2010 harvest exportable surplus. The extra tonnages also led to additional agency income and other volume related revenues.  Coal imports remained weak through Liverpool where it was only at the very end of the year that monthly volumes returned to pre-recession levels. Supporting offshore wind energy projects provided a large increase in revenue, although this was in part offset by a bad debt from Subocean's passage into administration.

Property services

Also included within the support segment are the revenues and profits derived from property services. Clarkson PLC holds the head lease of St. Magnus House in Lower Thames Street, London EC3, with an unexpired term of four years. Clarksons occupies 30% of the available space, with the remainder sublet on full commercial rents. Clarkson PLC also owns the freehold of Hamilton Barr House in Godalming, which is also let on a full commercial rent.

Technical services

Clarkson Technical Services (CTS) operates from London, Fujairah and Singapore. The business offers ship repairs, maintenance, project management skills and spare parts to vessel owners, managers and the offshore industry.

2010 was a difficult year for the ship repair market worldwide. Many owners were making losses during 2010 and accordingly reduced their repair spend to the minimum necessary. Reduced volumes and lower margins resulted in CTS generating a trading loss. The general outlook for the repairs and spares market for 2011 remains challenging.

Logistics

Logistics was non-core and during the period we were pleased to complete the sale of MT Hermien to Panre Agility Corporation for a total cash consideration of US$7.3m. In line with the previously outlined strategy, this sale represents the final stage in the exit of Clarksons from shipowning activities.

Research

Revenue: £7.0m (2009: £6.7m)

Segment result: £1.5m (2009: £1.1m)

Research remains at the very core of Clarksons and revenue increased further during 2010 to £7.0m (2009: £6.7m) reflecting the considerable importance our clients place on access to the best data and information in continually changing markets.

The Clarkson Research Services Ltd (CRSL) team of 72 across collection, validation, analysis and management of data, consultancy services and sales and marketing, is the largest within a commercial broking group. We continued to build analyst and sales teams in the Asian markets where we currently have 10 people already in place.

CRSL derives its income from the following principal sources of data and publications:

Ship register

These specialist reference books cover the full scope of the shipping and offshore markets.

Periodicals

CRSL publishes a number of weekly, monthly and quarterly publications which are available both in print and online. These are renowned throughout the market as the key source of data for anyone wishing to review changes in shipping markets as they happen. Shipping Intelligence Weekly remains the leading weekly source of data in shipping. We launched the World Fleet Register in the first half of 2010 which further enhanced our offering.

Customer services

A specialist team concentrates on bespoke research projects for banks, shipyards, engineering companies, insurers and other corporates. Revenues grew 34% in this area in 2010.

Digital sales

Sales in 2010 grew for the tenth consecutive year since the 2000 launch of CRSL's flagship database, Shipping Intelligence Network with revenues being 21% ahead of the previous year. A significantly upgraded product was fully launched during the first half of the year.

Offshore

Now that a full data integration process is complete, a number of updated offshore market-related products were released at the start of 2011 to enable the best decisions across the whole spectrum of shipping, oilfields and offshore. Revenues from other offshore publications were slightly ahead in 2010.

Valuations

Clarkson Valuations Ltd has a fully independent team providing services to clients ranging from banks and credit providers to owners and fleet operators.  In 2010 we continued to provide bespoke detailed valuations for all our clients and increased the volume of business and revenues from valuations. This illustrates the importance the market places on informed, independent and high quality services in this area.

FINANCIAL REVIEW

Profit before tax: £32.4m (2009: £22.5m)

Basic EPS: 125.4p (2009: 90.0p)

Overview

The group remains strongly cash generative and there has been a substantial improvement in the quality of the balance sheet. Revenue increased by 14.7% during 2010, leading to an increase in profit before tax of 44.0% to £32.4m (2009: £22.5m). Total administrative expenses increased by £14.3m to £160.1m, reflecting the impact of exchange rates on costs incurred overseas, increased staff numbers and the results of bonus schemes being linked to profits. There was a one-off release of a £2.0m remuneration provision in our US business.

Amortisation and impairment of assets

A detailed review of our businesses has demonstrated no need for an impairment charge in 2010.

Taxation

The group's effective tax rate was 27.5% (2009: 24.9%). This overall effective tax rate is lower than the standard UK rate of tax, due to impact of profits generated in lower tax rate jurisdictions and reduced non-deductible losses. In 2009 the impact of releasing deferred tax provisions previously held against overseas retained profits, following the changes in UK legislation relating to the treatment of foreign dividends, resulted in a one-off reduction in the effective rate; this has not been repeated in 2010. The group continues to incur a significant level of disallowable trading expenses, in keeping with its peers, which increases the overall effective tax rate.

Earnings per share (EPS)

Basic EPS was 125.4p per share (2009: 90.0p per share).

Dividends

The board is recommending a final dividend of 30p (2009: 27p). The interim dividend was 17p (2009: 16p) which, subject to shareholder approval, would give a total dividend of 47p (2009: 43p). In taking its decision, the board took into consideration the 2010 performance, the strength of the group's balance sheet and its ability to generate cash and the forward order book.  The dividend is covered 2.7 times by basic EPS.

Cash and borrowings

The group remains strongly cash generative and ended the year with cash balances of £176.3m (2009: £143.2m) after reducing bank borrowings to £44.0m.  After the year-end, cash payments will be made including the final dividend and performance-related bonuses.  After deducting these items, net cash amounted to £100.8m (2009: £81.4m) which, after borrowings, left net available funds of £56.8m (2009: £33.1m). Due to the high levels of cash generation in the business over the past year, all outstanding bank borrowings were repaid in full in February 2011.  We also reduced the multicurrency revolving credit facility from £50m to £25m, and renewed it for a term of three years. There are no current plans to draw down on this facility. Part of the funds used to repay the bank borrowings were derived from the redemption of the hedge fund investment.

Balance sheet

Net assets at 31 December 2010 were £116.4m (2009: £96.8m). There has been a substantial improvement in the quality of the balance sheet whereby, before pension provisions and current asset investments, the group had £49.7m of net current assets less non-current liabilities as at the end of 2010 (2009: £28.9m).  In addition, the group had invested seed capital in the Clarkson hedge funds of £11.4m (2009: £12.6m) which was redeemed after the year-end.

The group's pension schemes have, in the second half of 2010, shown a significant recovery in their funding position. At the time of our interim announcement, the balance sheet reflected a deficit of £12.8m.  However, significant increases in pension investment returns more than offset the effects on the liabilities of reduced discount rates during the second half of the year and as at 31 December 2010 the combined deficit had reduced to £0.8m (2009: deficit £6.9m). Provisional triennial valuations for both schemes were prepared based on the position as at 31 March 2010; the combined results as at that date showed a deficit of £8.8m.

RISK MANAGEMENT

Credit risk

The group has an extensive client base, across all regions of the world, and is exposed to credit-related losses from the non-payment of invoices by these clients.  The group mitigates this risk by closely monitoring outstanding amounts, both locally and globally, and by adopting a conservative approach to accounting for bad debt. Uncertainty in freight markets continues to affect the amount of debt that may be irrecoverable.

Liquidity risk

The group's policy is to maintain facilities at such a level that they provide access to funds sufficient to meet all of its foreseeable requirements. The strong generation of cash flow in the business, combined with the available facilities and cash available in the balance sheet, means that the group is well placed to fund future developments of its global business.

Foreign exchange risk

The major trading currency of the group is the US dollar. Movements in the US dollar relative to other currencies, particularly sterling, have the potential to impact the results of the group both in terms of operating results and the revaluation of the balance sheet. Where there were borrowings taken that specifically relate to assets held in foreign currencies, the borrowings were taken in the same currency as the assets.

The group assesses the rate of exchange and non-sterling balances held continually, and has predominantly sold in the spot market during 2010, though some forward cover for 2011 and 2012 has been taken.

Interest rate risk

The group's borrowings are, to the extent that they are drawn down, at variable rates of interest. Since the year-end, all drawn down facilities were repaid and consequently, there is at the date of this report no requirement to cover interest costs.

Reputational risk

The group has built an enviable reputation in the market over the past 159 years, and relies upon this to attract business from all major participants in its markets. Clarksons protects against reputational risks by promoting an ethical work environment and providing training programmes where appropriate; indeed training is now of such a focus, that during the year, a dedicated training officer has been appointed. The investment in compliance, quality assurance and legal functions also act to ensure that best practices are put in place throughout the group.

Operational risk

Operational risks are where the group may suffer direct or indirect losses from people, systems, external influences or failed processes. The group continually reviews the systems in place to mitigate against operational risk, and puts in place plans to protect against such risks wherever they are significant and practicable. Examples include Business Continuity Plans, Staff Contracts and IT security arrangements. The group also keeps in place and under review appropriate levels of insurance cover.

Jeff Woyda

FINANCE DIRECTOR

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The statement of Directors' Responsibilities below has been prepared in connection with the company's full Annual Report for the year ending 31 December 2010.  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 to the best of our knowledge:

• the consolidated financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union and in accordance with rule 4.1.12(3)(a) of the Disclosure and Transparency Rules, have been prepared in accordance with the applicable set of accounting standards and give a true and fair view of the assets, liabilities, financial position and profit of the group and the undertakings included in the consolidation taken as a whole; and

• the business review has been prepared in accordance with rule 4.1.12(3)(b) of the Disclosure and Transparency Rules, and includes a fair review of the development and performance of the business and the position of the group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that the group faces.

This responsibility statement was approved by the board of directors on 9 March 2011 and is signed on its behalf by:

Bob Benton

CHAIRMAN

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December

Continuing operations	2010 £m	2009 £m
Revenue	202.6	176.7
Cost of sales	(8.0)	(8.3)
Trading profit	194.6	168.4
Administrative expenses	(160.1)	(145.8)
Operating profit	34.5	22.6
Finance revenue	0.8	1.6
Finance costs	(3.3)	(1.8)
Other finance revenue - pensions	0.4	0.1
Profit before taxation	32.4	22.5
Taxation	(8.9)	(5.6)
Profit for the year	23.5	16.9
Attributable to:
Equity holders of the parent	23.5	16.9
Earnings per share
Basic	125.4p	90.0p
Diluted	124.7p	88.9p

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December

		2010 £m	2009 £m
Profit for the year		23.5	16.9
Actuarial gain/(loss) on employee benefits - net of tax		2.9	(11.6)
Foreign exchange differences on retranslation of foreign operations		0.3	(5.0)
Foreign currency hedge - net of tax		(1.1)	1.4
Total comprehensive income for the year		25.6	1.7
Total comprehensive income attributable to:
Equity holders of the parent		25.6	1.7

CONSOLIDATED BALANCE SHEET

As at 31 December

		2010 £m	2009 £m
Non-current assets
Property, plant and equipment		8.7	14.6
Investment property		0.4	0.4
Intangible assets		32.7	32.5
Investments in associates and joint ventures		-	0.2
Trade and other receivables		0.5	0.6
Investments		1.8	14.9
Deferred tax asset		12.0	11.6
		56.1	74.8
Current assets
Trade and other receivables		28.4	29.7
Income tax receivable		0.5	0.9
Investments		11.4	-
Cash and short-term deposits		176.3	143.2
		216.6	173.8
Current liabilities
Interest-bearing loans and borrowings		(44.0)	-
Trade and other payables		(100.3)	(86.9)
Income tax payable		(5.3)	(3.3)
Provisions		(0.3)	(0.3)
		(149.9)	(90.5)
Net current assets		66.7	83.3
Non-current liabilities
Interest-bearing loans and borrowings		-	(48.3)
Trade and other payables		(1.1)	(1.0)
Provisions		(1.4)	(1.1)
Employee benefits		(0.8)	(6.9)
Deferred tax liability		(3.1)	(4.0)
		(6.4)	(61.3)
Net assets		116.4	96.8
Capital and reserves
Share capital		4.7	4.7
Other reserves		40.0	40.6
Profit and loss		71.7	51.5
Clarkson PLC group shareholders' equity		116.4	96.8

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December

	Share capital £m	Other reserves £m	Profit and loss £m	Total equity £m
Balance at 1 January 2010	4.7	40.6	51.5	96.8
Profit for the year	-	-	23.5	23.5
Other comprehensive income:
Actuarial gain on employee benefit schemes - net of tax	-	-	2.9	2.9
Foreign exchange differences on retranslation of foreign operations	-	0.3	-	0.3
Foreign currency hedge - net of tax	-	(1.1)	-	(1.1)
Total comprehensive (expense)/income for the year	-	(0.8)	26.4	25.6
Transactions with owners:
ESOP shares utilised	-	1.4	-	1.4
Share-based payments	-	(1.2)	(0.1)	(1.3)
Tax on other employee benefits	-	-	2.2	2.2
Dividend paid	-	-	(8.3)	(8.3)
	-	0.2	(6.2)	(6.0)
Balance at 31 December 2010	4.7	40.0	71.7	116.4

	Share capital £m	Other reserves £m	Profit and loss £m	Total equity £m
Balance at 1 January 2009	4.7	43.7	54.0	102.4
Profit for the year	-	-	16.9	16.9
Other comprehensive income:
Actuarial loss on employee benefit schemes - net of tax	-	-	(11.6)	(11.6)
Transfer of currency translation reserves on closure of company	-	0.1	(0.1)	-
Foreign exchange differences on retranslation of foreign operations	-	(5.0)	-	(5.0)
Foreign currency hedge - net of tax	-	1.4	-	1.4
Total comprehensive (expense)/income for the year	-	(3.5)	5.2	1.7
Transactions with owners:
ESOP shares acquired	-	(1.2)	-	(1.2)
Shares issued	-	0.7	-	0.7
Share-based payments	-	0.9	0.2	1.1
Dividend paid	-	-	(7.9)	(7.9)
	-	0.4	(7.7)	(7.3)
Balance at 31 December 2009	4.7	40.6	51.5	96.8

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December

		2010 £m	2009 £m
Cash flows from operating activities
Profit before tax		32.4	22.5
Adjustments for:
Foreign exchange differences		(1.5)	0.6
Depreciation and impairment of property, plant and equipment		2.9	3.7
Share-based payment expense		1.2	0.9
Loss on sale of investments		-	0.2
Impairment of investments		0.6	0.2
Difference between ordinary pension contributions paid and amount     recognised in the income statement		(1.6)	(0.6)
Finance revenue		(0.8)	(1.6)
Finance costs		3.3	1.8
Other finance revenue - pensions		(0.4)	(0.1)
Decrease in trade and other receivables		0.3	23.8
Increase/(decrease) in bonus accrual		13.6	(38.7)
Decrease in trade and other payables		(1.9)	(17.6)
Increase in provisions		0.3	0.2
Cash generated/(utilised) from operations		48.4	(4.7)
Income tax paid		(6.1)	(13.3)
Net cash flow from operating activities		42.3	(18.0)
Cash flows from investing activities
Interest received		0.4	0.6
Purchase of property, plant and equipment		(1.3)	(1.5)
Proceeds from sale of property, plant and equipment		4.6	0.1
Disposal of associates and joint ventures		-	0.2
Acquisition of subsidiaries and businesses, including deferred consideration		-	(0.6)
Dividends received from associates and joint ventures		0.1	-
Dividends received from investments		0.4	0.2
Net cash flow from investing activities		4.2	(1.0)
Cash flows from financing activities
Interest paid		(1.6)	(1.8)
Dividends paid		(8.3)	(7.9)
Repayments of borrowings		(4.7)	(4.5)
Net cash flow from financing activities		(14.6)	(14.2)
Net increase/(decrease) in cash and cash equivalents		31.9	(33.2)
Cash and cash equivalents at 1 January		143.2	184.4
Net foreign exchange differences		1.2	(8.0)
Cash and cash equivalents at 31 December		176.3	143.2

NOTES TO THE PRELIMINARY FINANCIAL STATEMENTS

1  General information

The preliminary financial information (financial information) set out in this announcement does not constitute the consolidated statutory accounts for the years ended 31 December 2009 and 2010, but is derived from those accounts.  Statutory accounts for 2009 have been delivered to the Registrar of Companies and those for 2010 will be delivered following the company's Annual General Meeting.  External auditors have reported on the accounts for 2009 and 2010; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006.

2  Accounting policies

The financial information set out in this announcement is based on the consolidated financial statements which are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted for use by the European Union and complies with the disclosure requirements of the Listing Rules of the UK Financial Services Authority. The financial information is in accordance with the accounting policies set out in the 2009 financial statements except for adoption of new accounting standards in 2010, none of which had a material impact to the results of the group.

3  Segmental information

Segmental information on continuing operations for revenue and results is as follows:

Business segments	Revenue		Results
	2010 £m	2009 £m	2010 £m	2009 £m
Broking	169.6	139.1	41.3	26.7
Financial	11.2	14.9	(4.3)	(0.5)
Support	18.0	18.8	0.5	(0.4)
Research	7.0	6.7	1.5	1.1
	205.8	179.5
Less property services revenue arising within the group, included under Support	(3.2)	(2.8)
Segment revenue/results	202.6	176.7	39.0	26.9
Head office costs			(4.5)	(4.3)
Operating profit			34.5	22.6
Finance revenue			0.8	1.6
Finance costs			(3.3)	(1.8)
Other finance revenue - pensions			0.4	0.1
Profit before taxation			32.4	22.5
Taxation			(8.9)	(5.6)
Profit after taxation			23.5	16.9

4  Taxation

The major components of the income tax charge in the consolidated income statement are:

	2010 £m	2009 £m
Continuing operations:
Accounting profit at UK average standard rate of corporation tax of 28.0% (2009: 28%)	9.1	6.3
Tax on unremitted earnings of overseas operations	-	(1.6)
Expenses not deductible for tax purposes	1.6	3.2
Other adjustments	(1.8)	(2.3)
Total tax charge in the income statement	8.9	5.6

5  Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares in issue during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent 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:

			2010 £m	2009 £m
Net profit attributable to ordinary equity holders of the parent			23.5	16.9
			2010 Number millions	2009 Number millions
Weighted average number of ordinary shares			18.7	18.7
Diluted weighted average number of ordinary shares			18.8	19.0

6  Dividends

The board is recommending a final dividend of 30p (2009: 27p), giving a total dividend of 47p (2009: 43p). This final dividend will be payable on 10 June 2011 to shareholders on the register at the close of business on 27 May 2011, subject to shareholder approval.

7  Investments

At 31 December 2010 the group had investments in the Clarkson hedge funds of £11.4m (2009: £12.6m).  These were redeemed subsequent to the year-end.  As a result, these have been reclassified to current investments.

8  Employee benefits

The company operates two defined benefit schemes: the Clarkson PLC scheme and the Plowrights scheme.

As at 31 December 2010 the Clarkson PLC scheme and the Plowrights scheme had a combined deficit of £0.8m (2009: £6.9m deficit).  This amount is included in full on the balance sheet as a non-current liability; the company has provided deferred tax on this deficit amounting to £0.2m (2009: £1.9m).  The market value of the combined assets was £131.9m (2009: £121.6m) and independent actuaries have assessed the present value of the combined funded obligations at £132.7m (2009: £128.5m).

The reduction in the deficit is due to increases in the value of plan assets and changes in the actuarial assumptions used for inflation more than offsetting a decrease in discount rate used in calculating scheme obligations.

9  Analysis of net funds

	31 December 2009 £m	Cash flow £m	Foreign exchange differences £m	Reclass-ification £m	31 December 2010 £m
Cash and short-term deposits	143.2	31.9	1.2	-	176.3
Current interest-bearing loans and borrowings	-	-	-	(44.0)	(44.0)
Non-current interest-bearing loans and borrowings	(48.3)	4.7	(0.4)	44.0	-
Net funds	94.9	36.6	0.8	-	132.3

The loans and borrowings represent a multicurrency revolving credit facility with Barclays PLC.  Due to the high level of cash generation in the business over the past year, all outstanding bank borrowings were repaid in full in February 2011.  We also reduced the facility from £50m to £25m, and renewed it for a term of three years.  There are no current plans to draw down on this facility.

10  Contingencies

From time to time the group may be engaged in litigation in the ordinary course of business. The group carries professional indemnity insurance.  There are currently no liabilities expected to have a material adverse financial impact on the group's consolidated results or net assets.

In December 2010 judgement was handed down regarding the long-running litigation relating to commissions derived from Russian based transactions between 2001 and 2004. The judgement was in favour of Clarksons and consequently was in accordance with the board's beliefs. Since the year-end, the claimant against Clarksons has appealed this judgement. The board's views remain unchanged.

 

END

 

 

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