Clarkson Regulatory News (CKN)

12 Nov 2008 07:00



12 November 2008

Clarkson PLC

("Clarksons" or "the Group")

Interim Management Statement

Clarkson PLC, the world's leading integrated shipping services group, is today providing the following interim management statement published in accordance with the UK Listing Authority's Disclosure and Transparency Rules, covering the period from 1 July to 11 November 2008.

Underlying Trading for 2008

Following the onset of the financial and credit crisis, trading has been more challenging in certain shipping markets. Nonetheless, since we reported interim results on 28 August, performance across each of our broking businesses has remained ahead of the prior year. The Board is confident, therefore, that the Group will meet expectations for the full year and deliver another year of record growth in 2008.

Outlook for 2009

The exceptional conditions in the financial and credit markets over the last couple of months, combined with the risk of a global economic downturn, have created uncertainty in some shipping markets, reflected in the decline in freight rates.  Although it is too early to anticipate how each of the markets in which we operate will react in 2009, the Board currently anticipates a rather more challenging trading environment in 2009 than 2008.

Sale and Purchase (S&P): The recent restrictions on the availability of credit in this capital intensive business, combined with lower operating returns in some markets has already put pressure on activity and values in the sale and contracting of vessels and we expect this will continue into 2009. However, the speed and extent of the market correction in some sectors is likely to accelerate scrapping, which when combined with the anticipated delays and/or cancellations in newbuilding deliveries, should mitigate to some extent current pressures and create the conditions for a renewed improvement in volumes to the S&P markets as 2009 progresses.

Furthermore, we anticipate that there will be a period of consolidation in most shipping markets. The investment Clarkson has made in the past couple of years in growing its S&P and Investor Services teams means that we are well positioned to take advantage of this period of consolidation going forward.

Dry cargo: Freight rates have experienced large declines in recent weeks. Whilst it is difficult to anticipate when this situation might be reversed, we do not believe that current levels will remain.  Once credit markets ease, particularly through the renewed availability of letters of credit for regular business, we believe a new equilibrium in rates will be reached, leading to a renewal of activity in this market.  

Deep Sea Chartering:  Global volumes shipped have held steady to date, although rates in crude and refined markets appear to be coming under pressure.  However, given the likelihood of an acceleration in the scrapping of single hull tonnage, we expect satisfactory returns from this business in 2009. 

Despite the challenging conditions of the past couple of years, our Gas chartering business has made good progress by expanding its market share and customer base and we currently anticipate further progress in 2009.  Furthermore, we believe our growing Specialised Products business is likely to remain relatively unaffected by the current situation in credit markets due to the longer term contractual nature of this business.

Futures:  We currently predict that the lower timecharter levels currently being experienced in the dry cargo market will linger into early 2009.  This is expected to result in a shift in forward freight agreement (FFA) volumes from financial institutions and "technical" traders to shipping and "fundamental" traders. Cleared FFA swap and options contracts are, however, likely to remain the most reliable methods for owners, operators and charterers to manage their freight risk.  For this reason, we expect volumes will continue to grow over the longer term.

Prospects

Notwithstanding the severity of the short-term effects of the credit crisis and the global economic outlook, Clarkson's market leadership both geographically and across a broad range of shipping services leaves the Group well placed to deal with the challenges ahead.  2009 is not expected to provide the same level of revenue generation as recently, although this will to some extent be mitigated by our forward order book and US$ exchange rates, should these rates remain at current levels. In addition, our proven ability to expand into new segments of the shipping market, sound financial position, market leading teams and unrivalled research, provide us with the opportunity to grow market share further and capitalise on the opportunities that we believe these trading conditions will create.