# Clarkson PLC reports record underlying profit before taxation of £100.9m

- Link: https://www.directorstalkinterviews.com/clarkson-plc-reports-record-underlying-profit-before-taxation-of-100.9m/4121108735
- Published: 2023-03-06T08:36:04+00:00
- Author: Ethan Davis

**Clarkson PLC** (LON:CKN) today announced preliminary results for the 12 months
ended 31 December 2022.

**Summary**

·       Record underlying profit before taxation^(*) of £100.9m (2021: £69.4m), 
an increase of 45.4%

·       Underlying earnings per share* increased 51.1% to 250.3p (2021: 165.6p)

·       Particularly strong performance in the Broking segment

·       Full year dividend of 93p, giving rise to a 20^(th) consecutive year of 
dividend growth

·       Forward order book for invoicing in 2023 was US$216m (2022: US$165m), an
increase of 30.9%

·       Strong balance sheet with free cash resources^(*) of £130.9m (2021: £92.3m)
available for future investment

| ** ** | **Year ended** | Year ended | 
|  | **31 December 2022** | 31 December 2021 | 
|    Revenue | **£603.8m** | £443.3m | 
|    Underlying profit before taxation* | **£100.9m** | £69.4m | 
|    Reported profit before taxation | **£100.1m** | £69.1m | 
|    Underlying basic earnings per share* | **250.3p** | 165.6p | 
|    Reported basic earnings per share | **247.9p** | 164.6p | 
|    Dividend per share | **93p** | 84p |

* Classed as an Alternative Performance Measure (‘APM’). See ‘Other information’
at the end of this announcement for further information.

> **Andi Case, Clarkson PLC** **Chief Executive Officer, commented:**
> _“2022 was a record year for Clarksons, and I thank all my colleagues across every
> area of the business for their hard work, dedication and commitment. This performance,
> driven by our client-focused culture and consistent strategy of investing in the
> best teams across all global segments, data, intelligence, analytics, and the 
> best tools for trade, has enabled us to deliver a 20^(th) consecutive year of 
> dividend growth for our shareholders._
> _“Whilst the global geo-political outlook for 2023 and beyond remains uncertain,
> the green transition is driving significant activity in our industry. This, coupled
> with a supply and demand balance that will create meaningful supply-side constraints
> supporting the market, and our strong forward order book, gives us confidence 
> in the outlook for Clarksons.”_

**Chair’s review**

**Overview**

As I reflect at the end of my first year as Chair, various observations spring to
mind as to what makes Clarksons such an exceptional business. First is the quality,
energy and focus of all of our employees worldwide, without whom the record results
for 2022 we have delivered would not have been possible. Second is our culture and
values, which underpin the way we operate and behave and which are reflected in 
our many strong and enduring client relationships. Finally, and crucially, is our
relentless focus on investing in the future of our Company, be that through, for
example, the green transition, our continued investment in **Sea/** and the training
of our people to ensure best-in-class service to our clients.

2022 was a remarkable year for the shipping industry driven by a number of significant“
x” factors.  As countries were at differing stages of recovery from COVID-19 and
China experienced a second lockdown, congestion and disruption were already the 
key issues in shipping. Then Russia’s invasion of Ukraine caused another wave of
wide-reaching consequences, including sanctions and significant changes in both 
commodity flow and availability, issues not just for shipping but for the wider 
economy as well. The energy and cost of living crises, combined with inflation and
higher interest rates, added further challenges to the global economy, and to the
asset-heavy shipping industry.

Against this backdrop, the Group continued to thrive, a testament to both the strategy
and the teams within Clarksons. The decarbonisation journey, which is both complex
and important for shipping, is now well underway but will take time to complete.
Transition will require a number of different solutions, significant investment 
and the provision of finance to the industry. Clarksons is focused on ensuring we
can add value within this process.

We believe our long-term strategic commitment to continuing to invest in our teams,
products and services will continue to reap dividends as the market evolves. In 
addition to extending the depth and breadth of our broking teams, we continue to
invest in high-quality data within Clarksons Research, **Sea/** – our maritime technology
platform, Support covering ports services and supplies, and the Financial division
sourcing financing across shipping, offshore, renewables and real estate.

**Results**

I am delighted to report that underlying profit before taxation* was £100.9m (2021:
£69.4m) with underlying basic earnings per share* of 250.3p (2021: 165.6p). Reported
profit before taxation was £100.1m (2021: £69.1m) with reported basic earnings per
share of 247.9p (2021: 164.6p).

Free cash resources* as at 31 December 2022 were £130.9m (2021: £92.3m).

**Dividend**

We are extremely proud to confirm that this will be our 20th consecutive year of
dividend increases. The Board is recommending a final dividend for 2022 of 64p (
2021: 57p). Combined with the interim dividend in respect of 2022 of 29p (2021: 
27p), the resulting full year dividend in respect of 2022 results is 93p (2021: 
84p). The dividend will be payable on 26 May 2023 to shareholders on the register
on 12 May 2023, subject to shareholder approval.

**People**

I was delighted to take up the role of Chair on 2 March 2022 and I greatly appreciate
the generosity of my colleagues, who have committed significant time and energy 
to immerse me in all aspects of Clarksons’ business. I have been hugely impressed
by the energy, agility and future-focused strategic activity across all departments.

The enthusiasm and commitment to co-ordinated support of our clients across all 
sectors and at all levels is what I believe makes Clarksons so highly regarded by
clients looking for market-leading intelligence and insights across the industry.
Our continued focus is on expanding our global footprint and service offering, and
adding to what is the very best talent in the sector across all divisions. I thank
all our colleagues for their exceptional efforts this year.

**Giving back**

It is of the utmost importance to us that Clarksons is a force for good across our
global community, and we ensure that both our colleagues and the communities we 
are part of around the world are valued, respected and supported. To that end, this
year we have extended the activities of our Green Transition team in every area 
of the business, helping our clients to reduce the impact of shipping on the environment,
and reinforced our commitment to the activities of The Clarkson Foundation to create
positive change for those in need around the world. The Clarkson Foundation has,
for example, made a tangible difference by donating to charities that provided clean
water facilities and hygiene education to five schools in Kenya and funded hot meals
over the Christmas period to some experiencing homelessness in London.

**Board**

Peter Backhouse retired from the Board this year following the completion of his
nine-year tenure as an independent Non-Executive Director. I would like to thank
Peter for his outstanding service to Clarksons. His perspective, insights and counsel
have been greatly valued as Clarksons has steered a successful course through a 
period of considerable volatility, and we wish him the very best for the future.

**Outlook**

We start 2023 confident in the outlook for Clarksons. The successful execution of
our long-term strategy to be best-in-class across all segments of shipping, offshore
and renewables means that we are optimally positioned for what we believe will be
a sustained period of growth in the industry.

Whilst there are considerable uncertainties in the geo-political landscape, we are
confident that supply-side constraints brought about by years of underinvestment
and the pressure on shipowners and charterers to decarbonise, will provide significant
opportunities for Clarksons long into the future.

We will continue our strategy of investing in the best people and opportunities 
across the globe to ensure that we remain at the very forefront of the industry,
delivering growth for all stakeholders.

Finally, I would like to thank every employee in every office of the Group for their
commitment and hard work during the past year. It is truly appreciated.

**Laurence Hollingworth**

Chair

3 March 2023

**Chief Executive Officer’s review**

2022 was a record year for Clarksons, and I thank all my colleagues across every
area of the business for their hard work, dedication and commitment. Our performance
this year is the result of our consistent strategy, (i) to be best-in-class across
each and every vertical within shipping and offshore, (ii) to be best-in-class in
each geographic region globally, (iii) to have the best data, intelligence and analysis,(
iv) to invest in our teams and the best tools for trade, (v) to have an integrated
business model meeting all the needs of our extensive client base, and most importantly(
vi) to add value to our clients and put their needs at the heart of all that we 
do. This strategy has of course been underpinned by our growing team of professionals
and experts, and I am proud to work alongside the very best in the industry.

We have for some time been signalling the evolution in maritime, which we are now
seeing and benefiting from. Demand and supply are in constant motion; there is uncertainty
of technology for the green transition; fleet profiles are the oldest for over a
decade; the order book of new ships is historically low compared to the overall 
fleet in most of the larger commodity verticals; financing availability is tight;
and interest rate rises together with inflation are impacting on the cost of building.
It is clear to see there are still significant constraints on the scale of ship 
building.

But without question, the green transition is the biggest change in shipping and
the drivers for change in our industry are significant. Regulators, charterers, 
industry lobby groups and the consumers of products shipped are demanding change
in the greenhouse gas emissions of shipping. The needs of participants to predict,
record and analyse emissions data in order to reduce their footprint on an ongoing
basis has never been higher, which means that the services offered by our broking,
research and technology teams are in high demand. Importantly, our Green Transition
consultancy, linked with the intelligence offered by our execution capability in
newbuildings, is helping our clients drive change. This activity will significantly
alter the specifications of vessels on the water and the value drivers in vessel
chartering, where emissions are becoming a key metric as to which vessel to select.

The order book is increasingly comprised of alternate-fuelled ships with evolving
designs. A full understanding of all elements of this transition is a key component
of our service in helping clients meet the needs of the industry. Nevertheless, 
overall the newbuild order book is flat, with most of the activity in 2022 in containerships,
car carriers and gas carriers. Elevated newbuilding prices, limited berth availability
and uncertainty around fuelling technology contributed to relatively lower order
volumes, increasing the likelihood of meaningful supply side constraints over the
coming years in many verticals. Further constraints arise from environmental pressures,
which are creating more scrutiny and control over the existing fleet, impacting 
and constraining speed and emissions.

Over the last few years there has been an increased need to focus on Know Your Client(‘
KYC’) and compliance with global sanctions. We have invested in this area and we
believe that this has become increasingly important to clients following the onset
of the Russia-Ukraine conflict, which has created complex challenges as businesses
need to protect their reputations while complying with sanctions. Our clients want
to understand the implications of dealing with all parties within their entire network,
and their recognition that wilful ignorance is not acceptable means that they value
Clarksons’ market-leading systems and commitment to transparency.

**Broking**

The maritime industry experienced a diversity of trends across its major segments
during the year. Major global disruption, including the dislocation of trade brought
about by the onset of the Russia-Ukraine conflict and the continued impact from 
the COVID-19 pandemic, tightened markets and impacted, not only seaborne cargos,
but also pipelines. This led the ClarkSea index to increase 30% to an all-time high,
before coming off in Q4 on the back of a slowing world economy, inflation and an
easing of COVID-19-related port congestion. Indeed, these global economic and geo-
political stresses have put immense pressure on the shipping industry to rapidly
change, to ensure food and energy reach people in need, irrespective of the changes
in supply chains and sanctions which have massively changed shipping routes and 
participants able to transact with each other. Our ability to understand the changing
situation and react quickly has stood us in very good stead during the period.

Against this backdrop, the Broking division, which has a market-leading position
in all key shipping sectors, had a particularly strong year as volume and market
share gains aligned with high utilisation rates, driving higher freight rates. Despite
the rate environment not reaching record levels, the broking teams broke all previous
highs, giving us significant confidence for the sector as supply-side constraints
and inflationary pressures support higher prices going forward.

The offshore oil, gas and renewables market also had a year of change resulting 
in a notably stronger year, driven by increased demand for energy in the short term
and the drive towards energy security. The team is seeing significant opportunities
for assets as nations and businesses seek to reduce their dependence on Russian 
natural resources. Moreover, the long-term trend towards renewable energy and its
importance in the energy basket is driving our continued investment in renewables
across all areas of the business.

Tankers, specialised products and gas markets, covering LNG, LPG and other petrochemical
gases, have had a strong year and continue to perform well with good market fundamentals
for the future. The dry bulk market was also strong for much of the year, but freight
rates have come off more recently due to short-term factors which we believe will
reverse as the year progresses. The container sector started off the year at record
levels, but faced a sharp decline in the second half due to a decrease in trade 
volumes and congestion unravelling.

The S&P team had a very successful year as demand for vessels was high, despite 
there being a significant volume of transactions with respect to the much talked
about shadow fleet which was off limits to our teams.

Overall, segmental profit before taxation from Broking was £117.6m, up £44.0m over
the year, with a margin of 23.7%.

**Financial**

The Financial division faced tougher conditions in 2022 with an adverse macro-economic
and geo-political environment leading to a pause in capital raising. Several transactions
which were due to be completed in the second half of 2022 are now expected to close
in the first half of 2023, and indeed many have already been completed, or are close
to being completed, at the time of writing.

Our areas of focus in shipping, metals and mining, offshore oil services and renewables
means that our pipeline remains strong. Whilst the macro-economic outlook for 2023
remains uncertain, we expect to benefit as a number of large banks and other competitors
have left these markets and there remains pent-up demand for capital.

Our project finance teams across shipping, offshore and real estate have also continued
to perform well.

Overall, our Financial division produced a segmental profit before taxation of £
7.8m in 2022 compared with £13.3m in 2021.

**Support**

The Support division had a very strong 2022 as our agency, supplies, customs clearance
and freight forwarding businesses all benefited from the increasing focus on offshore
renewables, as well as increased activity through ports as COVID-19 congestion has
eased. We have, since the year-end, continued our investment in this growth segment
and I was delighted to recently announce investment in DHSS, a renewables-focused
port services business based in mainland Europe.

The Support division produced a segmental profit before taxation of £5.0m and a 
12.8% margin in 2022 (2021: £3.3m and 11.1%).

**Research**

The performance of the Research division is testament to the depth and quality of
Clarksons’ research and the high regard in which it is held by clients. Its products
have seen significant growth from increased breadth and depth, particularly extensive
evolution in data and intelligence relating to the green transition in shipping 
and the overall energy transition.

The division increased segmental profit before taxation by 14.8% to £7.0m (2021:
£6.1m).

**Sea/**

We welcomed Peter Schrøder as CEO of Maritech in April 2022 and are delighted with
client interest in, and adoption of, **Sea/**, the intelligent platform for fixing
freight. During the last year we have evolved the management team, increased sales
and client adoption and acquired two businesses – Setapp, a business expert in maritime
software product development, and Chinsay, a contract management platform particularly
focused on the dry bulk sector which integrates well into **Sea/** and creates scale
alongside **Sea/contracts**. This business remains a key area of strategic focus
with 2023 being a pivotal year in rolling out **Sea/** across all areas of the dry
bulk market and into other sectors as well.

**Outlook**

Whilst the global geo-political outlook for 2023 and beyond remains uncertain, the
strength of business and balance between supply and demand, supported by our record
level of forward order book, gives us confidence in the outlook for Clarksons.

The green transition is an area of key importance for Clarksons as clients recognise
the significant steps they need to take towards decarbonisation. Increased environmental
regulation and societal pressures will create opportunities across all our divisions
for many years to come.

We will continue to invest in our people, technology and businesses across all segments,
to ensure we have the expertise and insights to provide the best advice, execution,
data and technology in the industry.

Regardless of the challenges of the global markets in recent years, we have not 
deviated from our strategy of investing for growth, ensuring that the breadth, depth
and quality of our ever-expanding offering maintains us at the forefront as we enter
this new phase of shipping.

**Andi Case**

Chief Executive Officer

3 March 2023

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