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Leading shipbroker Clarkson PLC reports strong 2013 results despite challenging market conditions

Clarkson PLC (Clarksons) yesterday announced preliminary results for the twelve months ended 31 December 2013.

Andi Case, Chief Executive, commented:
“Despite a turbulent market backdrop, Clarksons has been consistently profitable and cash generative. This has enabled us to continue to invest in the business during these challenging times, thus ensuring that we are positioned for growth as activity in our markets resumes.
“In 2013 we grew head count to more than 1,000 people and our office network to 42 locations. One area of particular focus in 2013 was to continue the progress within Clarkson Capital Markets, where, following significant increases in revenue and cost rationalisation, the second six months showed a profit and the platform is now proving the strategy for combining financing with transactional execution.

“Our strong balance sheet has enabled us to continue to make selective acquisitions where appropriate to further strengthen our product breadth and we will continue to look to invest organically and acquisitively where appropriate.

“We remain focused on shareholder returns and are delighted to have increased dividends each year for the past 11 years.”

Chairman’s review
Overview
I am delighted to report that Clarksons has delivered a strong result for the year. Whilst the last quarter of 2013 saw significant improvement in the trading conditions of some of our markets, the year as a whole was not without its challenges, following an extended period where markets reached historic lows.

This good performance demonstrates that despite the ongoing challenges of recent years, Clarksons has remained focused on the future. Andi and the management team have refined the group’s strategy and carefully invested in the business. This investment in technology, tools and, most importantly, people, will ensure that as the markets start to improve we will continue to be able to take full advantage by being at the forefront of market activity.
Results
Underlying profit before taxation of £25.1m (2012: £20.0m) was 26% higher than the prior year. This was ahead of expectations,
reflecting improved trading conditions in the fourth quarter, with activity levels across the group during December being particularly
strong.
Underlying earnings per share were 98.0p (2012: 74.8p) and basic earnings per share, after the exceptional item and acquisition
costs were 82.2p (2012: 85.2p).

Dividend
Once again, for the eleventh consecutive year, Clarksons intends to raise the dividend paid to our shareholders. The board is recommending a final dividend of 37p (2012: 33p). The interim dividend was 19p (2012: 18p), giving a total dividend for the year of 56p (2012: 51p).
The dividend will be payable on 6 June 2014 to shareholders on the register as at 23 May 2014, subject to shareholder approval.

Acquisitions
During the year, Clarkson Port Services (CPS) acquired the Aberdeen-based specialist tool supplier Gibb Tools Limited. In line with our clear business goal to further strengthen and improve our unique product service breadth, this acquisition provides an important step change in CPS’s client offer, complementing its existing port & agency and supply services with Gibb Tools’ leading tool supply offer.

People
One of the characteristics that has struck me most during my time as chairman is the expertise and dedication of the Clarksons team and the ‘can–do’ cultural approach. Management are committed to not only recruiting and retaining the best people, but ensuring they have the right tools to do their job, investing in training and technology to enable them to offer the market-leading service our clients have come to expect from Clarksons.
These results are testament to the hard work of ‘Team Clarksons’ and on behalf of the board I would like to thank each and every member of the team.

Chairman
As previously announced, Philip Green stepped down as chairman on 6 March 2014 and will be leaving the board from the AGM on 9 May 2014. Consequently, as requested by the board, I have resumed the role of chairman until a new chairman is firmly in place. On behalf of the board, I thank Philip for his valuable contribution over the past year and wish him well with his new endeavours. Peter Backhouse, the senior independent director, will lead the search process for a new chairman.

The future / current trading
An increased forward order book within broking, momentum in revenue growth from both the financial and research divisions, and an enlarged support team incorporating Gibb Tools, means that we begin 2014 with a degree of optimism. The shipping markets have begun to show signs of improvement and, with that, increased interest in shipping within the capital markets. We are confident that our strategy to provide the best service to our clients should in turn provide enhanced shareholder return in the future.

The market
Since the credit crunch of 2009 we have witnessed some of the worst market conditions ever seen in shipping, with rates in the first half of 2013 often below operating costs and asset values reaching all-time lows in some sectors. This has led to significant distress within the industry. Nevertheless, demand for seaborne trade, the ultimate driver of any shipping cycle, has continued its increase, with 10bn tonnes (1990: 4bn tonnes) of cargo now being moved around the globe, representing approximately 1.4 tonnes per person on the planet (1990: 0.8 tonnes); this at a time following a period of reduced availability of credit, a fall in newbuildings contracted and increased scrapping. When last year we spoke about the signs of recalibration in the shipping markets, with demand and supply getting closer, we saw the potential for 2013 and more specifically the second half, entering the ‘spike zone’ where localised demand/supply imbalances could lead to significant rate improvements, albeit not necessarily sustained, showing that markets are tighter, fast to react and hence much closer to a more sustained recovery.

Although volatile, the second half of 2013 did indeed bring with it some tentative signs of that recovery. The year ended with the ClarkSea index up 79% (from an all-time low) and seaborne trade, growing by a healthy 3.8%, close to the 50-year average. Changes to the fundamental supply/demand balance and rate spikes have caused renewed interest to both acquire secondhand vessels and order new more efficient tonnage. Although many despair at new tonnage being ordered when the markets are already over supplied, the necessity to address bunker consumption has been a real driver and in many cases orders were placed at prices below the cost of building. As new more fuel efficient designs start to deliver they will begin to put pressure on older tonnage. The overall improvement in shipping rates has resulted in additional interest and activity in the capital markets. Clarksons’ performance over the period shows once again the strength of our strategy and understanding of the markets.

Our strategy
Clarksons’ history dates back to 1852 and whilst 162 years of marine broking heritage are ingrained throughout our business, our strategy and business model are now more than ever focused on the needs of our clients, both today and for the future, and are aligned to the long-term fundamental growth drivers behind our markets.

Clarksons offers the ‘best in class’ service to an increasingly diverse client base across all sectors of the shipping and offshore industry by providing those clients with unrivalled professionalism and support in all the markets where they operate. There are also many opportunities to assist clients and investors who are in multiple markets.

Whilst our world-class broking operation remains core to our business, we have enhanced our client offer in recent years, pre-empting clients’ needs and global market trends, to develop an integrated maritime financial services and risk management business as well as a comprehensive support function all underpinned by our market-leading research and analysis. We are the only truly global operator, able to offer clients breadth and depth of service on an international scale, placing us at the heart of global trade. To maintain and extend our industry position, we work towards a clear strategy, based on six key objectives; Global reach, Strength in depth, Validation, People, Client focus and Growth.

Source: Clarkson PLC