Interim Results
Clarkson PLC
05 September 2007
5 September 2007
CLARKSON PLC
UNAUDITED INTERIM RESULTS FOR THE 6 MONTHS ENDED 30 JUNE 2007
Clarkson PLC ('Clarksons') is the world's leading shipping services group. It
has 15 offices on five continents whose services and expertise facilitate the
efficient functioning of global seaborne trade.
Highlights
• Revenue up 53% to US$144.7 million (2006: US$94.7 million); sterling
equivalent reported revenue up 39% to £73.2 million (2006: £52.6 million);
• Operating profit on continuing operations up 41% to £9.6 million (2006:
£6.8 million) despite the legal costs associated with defending the Russian
legal cases of £1.4 million;
• Profit before taxation on continuing operations up 32% to £12.3 million
(2006: £9.3 million);
• Earnings per share on continuing operations up 26% to 47.3p (2006: 37.5p);
• Interim dividend up 17% to 14.0p (2006: 12.0p);
• Integration of businesses and teams acquired in 2006 complete and
delivering strong results;
• Three acquisitions completed to expand and strengthen specific areas of
the business: Cofimar SA (France), LNG Shipping Solutions (UK) and
Normarine Offshore Consultants (US).
Tim Harris, Chairman said: 'The result for the first half was encouraging and
reflected both a strong shipping market and the benefits which are now coming
through from the acquisition of businesses and teams in key business lines.
This solid first half result establishes a good platform for the full year.'
Richard Fulford-Smith, Chief Executive Officer of Clarksons commented: 'We are
optimistic that 2007 will prove to be a strong year for Clarksons. As a result
of our strategy to increase the spread of our global businesses and the strength
of our forward order book, we are confident that despite turbulence in financial
markets in August, we should produce full year profits in line with management
expectations and continue to grow our position as the world's leading shipping
services group.'
Enquiries:
Clarkson PLC 020 7334 0000
Richard Fulford-Smith, Chief Executive
Jeff Woyda, Finance Director
Hudson Sandler 020 7796 4133
Jessica Rouleau
Chairman's statement
The result for the first half was encouraging and reflected both a strong
shipping market and the benefits which are now coming through from the
acquisition of businesses and teams in key business lines. This solid first
half result establishes a good platform for the full year.
Particularly good results were achieved across the board in shipbroking and we
are enthused by the growth and performance of our fund management business.
Improved profitability was achieved despite a weak dollar and the costs
of Russian legal suits.
As the world's leading shipping services group, our increasing spread of global
activities will enable us to maximise future benefits from the massive and fast
growing business that world shipping is today.
Tim Harris
Chairman
5 September 2007
Chief Executive's report
Results
Underlying US dollar revenue increased 53% to US$144.7 million (2006: US$94.7
million). The average sterling exchange rate in the first half of 2007 was
US$1.98 compared to US$1.80 for the corresponding period of 2006. Therefore,
sterling equivalent revenue reported increased 39% to £73.2 million (2006: £52.6
million).
Operating profit on continuing operations has improved 41% to £9.6 million
(2006: £6.8 million) despite a £2.6 million increase in one-off expenses and the
effects of further weakening of the US dollar. The additional expenses relate
to the initial acquisition costs of new teams (£1.2 million) and legal costs
incurred during the period on the Russian shipping cases (£1.4 million). During
the second half, we will incur the remainder of the one-off consideration for
team acquisitions (£1.2 million) and we will continue to incur legal costs at a
similar level. Clarksons will continue to defend its position strongly in both
the Sovcomflot and Novoship cases. Our view of these proceedings is that both
cases are about litigation between powerful Russian factions in which Clarksons
and others have been caught up as a third party.
Profit before taxation on continuing operations improved by 32% to £12.3 million
(2006: £9.3 million). Basic earnings per share on continuing operations were
47.3 pence per share (2006: 37.5 pence per share).
Cash and dividends
The business continues to be strongly cash generative and ended the first half
with cash balances of £62.6 million (2006: £37.2 million). The Board is
recommending an interim dividend of 14.0 pence per share (2006: 12.0 pence per
share), an increase of over 16%. This is covered three times by diluted
earnings and is consistent with our progressive dividend policy. The dividend
will be paid on 28 September to shareholders on the register at the close of
business on 14 September.
Operational review
The shipping industry has delivered stellar performance over the last few years,
richly rewarding shipowners with unprecedented, largely Asian-sponsored, growth.
It seems unlikely that the overall growth trend will end in the next year,
albeit freight rates can be vulnerable where demand for ships fails to match
fleet build-up, causing an imbalance in demand and supply. Although not severe,
the tanker and gas sectors were weaker in the first half, as predicted by our
research analysts, who are also concerned over the build-up of shipbuilding
capacity by 2011.
Against this backdrop, Clarksons has consistently invested in the development of
its base of business. The company is committed to further growth and enhancement
in the provision of both corporate and sector research through Clarkson Research
Services, which has long been a market leader in the provision of shipping data
and related publications. The knowledge, data and market intelligence
accumulated through our Research Services underscores our pre-qualification to
operate in investor advisory services where we plan to have an increased
presence through acquisition and organic growth.
Your company remains committed to manageably growing in line with the increased
scale of the industry and the resultant matching growth in demand for our
knowledge-based global services across all segments. Diversification has
started to spread our earnings base to ensure that we are not over-reliant on
any one segment.
Exceptionally strong and continuously growing dry bulk freight markets combined
with expanded market share in weaker gas/tanker segments created very decent
margins across our diverse physical and derivative freight broking activities.
First half revenues in dry cargo chartering rose to US$39.9 million / £20.2
million (2006: US$23.0 million / £12.8 million), with profit before tax
increasing by 145% to £4.9 million (2006: £2.0 million). This uplift was largely
attributed to a very strong freight market which also assisted our derivatives
desk which reported record revenue of US$9.5 million / £4.8 million (2006:
US$6.5 million / £3.6 million) with a profit before tax of £1.2 million (2006:
£0.8 million). With tanker and gas markets weaker, but our market share
stronger, our revenues were steady in both tankers at US$23.7 million / £12.0
million (2006: US$21.6 million / £12.0 million) and gas chartering at US$5.1
million / £2.6 million (2006: US$4.7 million / £2.6 million).
Our investment in fund management and our acquisition of leading Sale and
Purchase specialists and legal and technical services staff are already bearing
fruit. Sale and Purchase/New Building revenues were significantly up in the
first half of 2007 to US$29.7 million / £15.0 million (2006: US$17.3 million /
£9.6 million) and profit before tax has more than doubled to £3.5 million (2006:
£1.7 million) as a consequence.
As at 31 July there was US$83.6 million under management in the Clarkson
Shipping Hedge Fund (31 December 2006: US$40.2 million). Investors in our hedge
fund have been rewarded with significant returns of 16% in the first six
calendar months of 2007 and the fund's performance remains ahead of where it was
at the end of June.
Acquisitions
During the half, we continued to make acquisitions that expand and strengthen
specific areas of our business. In May, we announced the acquisitions of
the remaining 51% interest in Cofimar SA, a dry cargo broker based in Paris, and
the remaining 50% interest in LNG Shipping Solutions. The total combined
consideration for these businesses, which are now both 100% owned by Clarksons,
was US$4.5 million, of which US$2.5 million was payable in shares. Having now
fully integrated these businesses with our broking teams in London, we are
already beginning to benefit from the strength of the combined teams.
In July, we announced the merger of our Houston operation with Normarine
Offshore Consultants, which acts as a broker in the sale and purchase,
newbuilding, and charter of mobile offshore drilling units. The total
consideration of £2.7 million has been satisfied by the issue of shares,
admitted to trading on 10 July. Whilst it is still early days, we are confident
that this acquisition will also benefit the group in the second half.
Outlook
We are optimistic that 2007 will prove to be a strong year for Clarksons. As a
result of our strategy to increase the spread of our global businesses and the
strength of our forward order book, we are confident that despite turbulence in
financial markets in August, we should produce full year profits in line with
management expectations and continue to grow our position as the world's leading
shipping services group.
Richard Fulford-Smith
Chief Executive
5 September 2007
Consolidated income statement
Half year to Half year to Year to
30 June 30 June 31 December
2007 2006 2006
£m £m £m
Revenue - continuing operations 73.2 52.6 117.7
Cost of sales (1.2) - -
Trading profit 72.0 52.6 117.7
Administrative expenses (62.4) (45.8) (100.6)
Operating profit - continuing operations 9.6 6.8 17.1
Share of profits of associates and joint ventures 0.3 0.2 0.4
Finance revenue 3.5 2.2 4.2
Finance costs (1.7) (0.5) (1.7)
Other finance revenue - pensions 0.6 0.6 1.1
Profit before taxation - continuing operations 12.3 9.3 21.1
Taxation (4.0) (3.0) (6.9)
Profit for the period - continuing operations 8.3 6.3 14.2
Profit for the period from discontinued operations 0.1 1.1 0.6
Profit for the period 8.4 7.4 14.8
Attributable to:
Equity holders of the parent 8.4 7.4 14.8
Earnings per share
Basic - continuing operations 47.3p 37.5p 83.1p
Diluted - continuing operations 45.2p 37.2p 80.0p
Basic - profit for the period 47.7p 44.2p 86.6p
Diluted - profit for the period 45.6p 43.8p 83.4p
Consolidated statement of recognised income and expense
Half year to Half year to Year to
30 June 30 June 31 December
2007 2006 2006
£m £m £m
Actuarial gain on employee benefit schemes - net of tax 3.4 5.9 4.3
Foreign exchange differences on retranslation of foreign operations (0.4) (1.4) (2.4)
Total recognised directly in equity 3.0 4.5 1.9
Profit for the period 8.4 7.4 14.8
Total recognised income and expense 11.4 11.9 16.7
Attributable to:
Equity holders of the parent 11.4 11.9 16.7
Consolidated balance sheet
30 June 30 June 31 December
2007 2006 2006
£m £m £m
Non-current assets
Property, plant and equipment 19.1 20.7 20.1
Investment property 0.4 0.4 0.4
Intangible assets 45.1 35.3 42.4
Investments in associates and joint ventures 1.5 1.0 2.6
Trade and other receivables 0.5 0.7 0.4
Investments 15.8 15.7 14.0
Employee benefits 12.9 8.7 7.1
Deferred tax asset 3.4 2.5 3.7
98.7 85.0 90.7
Current assets
Trade and other receivables 35.6 26.8 30.5
Cash and short-term deposits 62.6 37.2 74.8
Income tax receivable 0.5 - 0.6
98.7 64.0 105.9
Current liabilities
Interest-bearing loans and borrowings (0.8) (0.7) (0.9)
Trade and other payables (55.1) (39.6) (66.6)
Provisions (0.3) (1.7) (0.6)
Income tax payable (2.4) (3.0) (2.0)
(58.6) (45.0) (70.1)
Net current assets 40.1 19.0 35.8
Non-current liabilities
Interest-bearing loans and borrowings (51.1) (32.4) (50.9)
Trade and other payables (4.8) (5.0) (5.0)
Provisions (0.6) (0.3) (0.5)
Deferred tax liability (6.9) (4.7) (4.7)
(63.4) (42.4) (61.1)
Net assets 75.4 61.6 65.4
Issued share capital 4.6 4.5 4.5
Share premium 21.9 17.5 20.7
ESOP reserve (2.1) (1.4) (3.7)
Deferred share consideration 0.9 1.1 1.1
Capital redemption reserve 2.0 2.0 2.0
Profit and loss 49.8 38.2 42.1
Currency translation reserve (1.7) (0.3) (1.3)
Clarkson PLC group shareholders' equity 75.4 61.6 65.4
Consolidated cash flow statement
Half year to Half year to Year to
30 June 30 June 31 December
2007 2006 2006
£m £m £m
Cash flows from operating activities
Operating profit 9.6 6.8 17.1
Adjustments for:
Profit before tax from discontinued operations 0.1 1.1 0.4
Depreciation and amortisation 2.0 1.3 2.6
Profit on sale of investments (0.2) - -
Impairment of goodwill - - 0.5
Difference between ordinary pension contributions paid and amount recognised (0.2) (0.1) (0.4)
in the income statement
11.3 9.1 20.2
(Increase) / decrease in trade and other receivables (5.0) 1.7 (2.4)
Decrease in bonus accrual (5.7) (22.3) (9.4)
(Decrease)/increase in trade and other payables (0.7) 3.8 13.0
Decrease in provisions (0.2) (2.1) (3.0)
Cash (utilised) / generated from operations (0.3) (9.8) 18.4
Income tax paid (3.0) (4.9) (8.3)
Interest paid (1.7) (0.5) (1.7)
Net cash flow from operating activities (5.0) (15.2) 8.4
Cash flows from investing activities
Interest received 1.6 0.9 1.7
Purchase of property, plant and equipment (0.6) (1.5) (2.2)
Proceeds from sale of investments 0.2 - -
Proceeds from sale of property, plant and equipment 0.1 0.1 0.1
Purchase of investments (0.2) (16.5) (11.2)
Special contributions to pension schemes - (6.7) (6.7)
Investment in associates and joint ventures (0.4) (0.1) (0.7)
Acquisition of subsidiaries and businesses, net of cash acquired 0.4 (0.9) (5.5)
Dividends received from associates and joint ventures 0.5 0.3 0.3
Dividends received from investments 0.2 1.3 1.8
Net cash flow from investing activities 1.8 (23.1) (22.4)
Cash flows from financing activities
Dividends paid (4.3) (3.8) (5.7)
Proceeds from borrowings 0.7 25.5 44.8
Repayment of borrowings (0.6) - (1.2)
ESOP shares acquired (4.6) - (3.1)
Net cash flow from financing activities (8.8) 21.7 34.8
Net (decrease) / increase in cash and cash equivalents (12.0) (16.6) 20.8
Cash and cash equivalents at start of period 74.8 55.1 55.1
Net foreign exchange differences (0.2) (1.3) (1.1)
Cash and cash equivalents at end of period 62.6 37.2 74.8
Notes to the interim financial report
1. Basis of preparation and accounting policies
The interim financial report has been prepared using the same accounting
policies and bases as those followed in the preparation of the group's annual
financial statements for the year ended 31 December 2006. The group has not
applied IAS 34, 'Interim Financial Reporting', which is not mandatory for UK
groups, in the preparation of these interim financial statements.
2. Segmental information
Revenue Results
Half year to Half year to Year to Half year to Half year to Year to
30 June 30 June 31 December 30 June 30 June 31 December
2007 2006 2006 2007 2006 2006
£m £m £m £m £m £m
Continuing operations
Dry bulk chartering 20.2 12.8 28.6 4.9 2.0 6.0
Container chartering 1.8 1.4 2.9 0.4 0.3 0.6
Deep sea chartering 12.0 12.0 24.3 2.8 2.8 5.7
Specialised products chartering 6.3 4.3 10.5 1.0 0.6 1.9
Gas chartering 2.6 2.6 5.5 0.4 0.6 1.3
Sale and purchase broking 15.0 9.6 20.6 3.5 1.7 3.5
Futures broking 4.8 3.6 9.0 1.2 0.8 2.5
Research services 3.0 2.9 5.2 0.8 0.8 1.0
Logistics 1.3 1.2 2.4 (0.6) (0.4) (1.2)
Fund management 1.4 0.1 0.5 0.3 (0.6) -
Financial and technical services 1.2 - 2.3 (0.5) (0.2) 0.7
Property services 3.2 3.1 6.2 0.5 0.3 0.9
Port and agency services 1.7 - 1.9 0.1 - 0.2
74.5 53.6 119.9
Less property services revenue (1.3) (1.0) (2.2)
arising within the group
Segment revenue/results 73.2 52.6 117.7 14.8 8.7 23.1
Head office costs and foreign (5.2) (1.9) (6.0)
exchange differences
Share of profits of associates and 0.3 0.2 0.4
joint ventures
Finance revenue 3.5 2.2 4.2
Finance costs (1.7) (0.5) (1.7)
Other finance revenue - pensions 0.6 0.6 1.1
Profit before taxation 12.3 9.3 21.1
Taxation (4.0) (3.0) (6.9)
Profit after taxation 8.3 6.3 14.2
The share of profit of associates and joint ventures is as follows:
Half year to Half year to Year to
30 June 30 June 31 December
2007 2006 2006
£m £m £m
Dry bulk chartering - - 0.1
Gas chartering 0.1 - -
Sale and purchase broking - 0.2 0.3
Financial and technical services 0.2 - -
0.3 0.2 0.4
3. Taxation
The taxation charge is calculated by applying the directors' best estimate of
the annual effective tax rate to the profit for the period.
4. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
Half year to Half year to Year to 31
30 June 30 June December
2007 2006 2006
£m £m £m
Earnings - continuing operations 8.3 6.3 14.2
Profit for the period 8.4 7.4 14.8
Million Million Million
Weighted average number of ordinary shares 17.6 16.8 17.1
Diluted weighted average number of ordinary shares 18.4 16.9 17.8
5. Intangible assets
In 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.
Also in 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 for 50% of LNGSS in 2001.
The book and provisional fair values of the identifiable assets and liabilities
of Cofimar and LNGSS at the date of acquisition were as follows:
Cofimar LNGSS
Book value Fair value Book value Fair value
£m £m £m £m
Investments 0.1 0.1 - -
Trade receivables 0.1 0.1 - -
Other receivables - - 0.1 0.1
Cash and short-term deposits 0.3 0.3 1.4 1.4
0.5 0.5 1.5 1.5
Trade and other payables (0.4) (0.4) (0.8) (0.8)
Taxation - - (0.4) (0.4)
(0.4) (0.4) (1.2) (1.2)
0.1 - 0.3 -
Fair value of net assets 0.1 0.3
Share of assets at date of original acquisition 0.3 -
Accumulated share of reserves - (0.1)
Goodwill arising on acquisitions 2.2 0.9
2.6 1.1
Cofimar LNGSS Total
£m £m £m
Discharged by:
Cash - 1.1 1.1
Fair value of shares issued 1.3 - 1.3
Costs associated with acquisition, settled in cash 0.2 - 0.2
Consideration previously paid in 2001 1.1 - 1.1
2.6 1.1 3.7
6. Employee benefits
The company operates two defined benefit schemes: the Clarkson main scheme
('Clarkson scheme') and the JO Plowright scheme ('JOP scheme').
As at 30 June 2007 the Clarkson scheme had a surplus of £12.9 million. This
amount is included in full on the balance sheet as a non-current asset; the
company has provided deferred tax on this surplus amounting to £3.9 million.
The market value of the assets is £107.0 million and independent actuaries have
assessed the present value of funded obligations at £94.1 million.
Also as at 30 June 2007 the JOP scheme had a surplus of £1.4 million. This
surplus is not included in the balance sheet, as the company is unable to derive
any benefit from this surplus. The market value of the assets is £23.0 million
and independent actuaries have assessed the present value of funded obligations
at £21.6 million.
A significant proportion of the improvement in both schemes since the year end
has arisen from the increased discount rate from 5.1% as at 31 December 2006 to
5.8% as at 30 June 2007.
7. Analysis of net funds
Foreign
31 December exchange 30 June
2006 Reallocation Cash flow differences 2007
£m £m £m £m £m
Cash and short-term deposits 74.8 - (12.0) (0.2) 62.6
Current interest-bearing loans and borrowings (0.9) (0.8) 0.9 - (0.8)
Non-current interest-bearing loans and (50.9) 0.8 (1.1) 0.1 (51.1)
borrowings
Net funds 23.0 - (12.2) (0.1) 10.7
8. Profit and loss reserve reconciliation
Half year
to
30 June
2007
£m
Profit and loss reserve at start of period 42.1
Profit for the period 8.4
Actuarial gain on employee benefit schemes - net of tax 3.4
Dividend paid in the period (4.3)
Deferred share consideration 0.2
Profit and loss reserve at end of period 49.8
9. Post balance sheet events
In July 2007 the company acquired Normarine Offshore Consultants (USA)
('Normarine'). Details of the book and fair values of the identifiable assets
and liabilities of Normarine will be provided in the 2007 annual report.
On 2 July 2007, 164,615 ordinary shares were awarded to three directors under
the Clarksons' Long-Term Incentive Plan. These awards vest subject to
continuing employment and the satisfaction of performance conditions set by the
remuneration committee.
10. 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$67
million. H Clarkson & Company Limited acted throughout on the instructions of
the client's senior management at the time on which it relied, and will be
submitting its defence during September 2007. Clarksons will strongly defend its
position in both cases and accordingly no provision has been made in the
financial statements of the group.
11. Accounts
The figures for the six months ended 30 June 2007 and 30 June 2006 are unaudited
and do not constitute full accounts within the meaning of Section 240(5) of the
Companies Act 1985. The statutory audited accounts for the year ended 31
December 2006 have been delivered to the Registrar of Companies in England and
Wales. The Auditors' report on these accounts was unqualified and did not
contain statements under Section 237(2) or (3) of the Companies Act 1985.
Copies of the interim report will be circulated to all shareholders and will
also be available from the registered office of the company at St. Magnus House,
3 Lower Thames Street, London EC3R 6HE.
This information is provided by RNS
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