Clarkson Regulatory News (CKN)

30 Aug 2006 07:00

Clarkson PLC30 August 2006 CLARKSONS Interim results for the six months ended 30 June 2006 Clarkson PLC ('Clarksons'), the world's leading shipping services group, today announces unaudited interim results for the six months ended 30 June 2006. • Revenue £52.6 million (2005: £53.9 million). • Profit before taxation £9.3 million (2005: £13.2 million). • Earnings per share - continuing operations 37.5p (2005: 49.4p). • Interim dividend increased to 12.0p (2005: 10.0p). Tim Harris, Chairman of Clarkson PLC, commented: "I am pleased to announce another strong interim result. "The company is well placed to produce another excellent result in 2006." 30 August 2006 For further information please contact: Richard Fulford-Smith, Chief Executive, Clarkson PLC: 0774 704 3139 Rob Ward, Finance Director, Clarkson PLC: 020 7334 0000 Overview The company has generated an interim pre-tax profit of £9.3 million fromcontinuing operations. In addition a further £1.1 million of profit resultedfrom the release of provisions which are no longer required. Earnings per share,in aggregate, were 44.2 pence per share. Revenue was £52.6 million. These results reflect the continuing growth of our underlying business despite adecline in freight rates and related shipping markets in the first half of theyear. During the first half of 2006 the company acquired three more businesses - aspecialised products broker team with the acquisition of Plowrights, a financialservices team and a sale and purchase team. The company has also commencedmanagement of a shipping hedge fund. These moves are intended to broaden theearnings base of the company in activities which are related to our core skills. The company's strategy remains the continuing development of its shippingservices activities. Clarkson's brand combined with the competitive advantageprovided by its market intelligence, gives it an edge. Review of operations Dry bulk chartering Dry bulk markets in the first half of 2006 were significantly weaker than thecomparable period in 2005, however recent improvements suggest that our globaldry bulk team will generate better results in the second half. In particular, weare encouraged by the level of forward order book business being written acrossall vessel size categories. There is growing confidence in dry bulk marketsgoing forward with minerals demand from China and India being the major driverson the demand side. Container chartering We continue to reorganise our container broking operations around the three centres of London, Singapore and Shanghai. In addition we are developing Global Slot Network. This new system will enableocean carriers, container ship owners, shipping and leasing companies toexchange slot capacity through a neutral platform. It is anticipated that thisplatform will be launched during the second half of 2006. Deep sea chartering Our tanker teams globally continue to increase their market share. We areparticularly pleased to have established ourselves on the panels of all of themajor oil companies and traders which provides us with a broad spread ofbusiness across all sectors. Specialised products chartering The Plowrights acquisition was completed in January 2006 and the integrationinto the London broking team has been successfully achieved. There is asubstantial increase in revenues in this business sector and although we havenot yet determined how best to deal with our 25% interest in Panasia we areresolved to continue to grow in this market sector. In August we completed the acquisition of Genchem for an initial considerationof £8.6 million which will further enhance the results of this activity in thesecond half. Gas chartering The team of LPG specialists, recruited in 2005, are helping to deliver improvedrevenues and results, thereby improving operating margins. Sale and purchase broking We have encountered a significant lull in activity on the secondhand side withno substantial transactions (unlike in the first half of 2005) to support ourotherwise steady stream of income. The newbuilding market, however, has continued to surprise with unexpectedlyhigh levels of contracting. As much of this revenue is collectable over the lifeof the contract, this has little impact on our 2006 earnings, althoughsignificantly enhances our forward order book. This sector of the market is particularly important for our business. In May2006 we recruited a team of sale and purchase brokers from our competitors whowill bring a wealth of knowledge and experience to the sale and purchasedivision. The full benefit of this acquisition will only become apparent asmembers of the team commence their employment with the company. Futures broking Despite adverse market conditions our futures desk is performing well. The drydesk is maintaining its position but the wet desk is striving to move into morespecialised areas of its business. During the first half we reduced the fixedlevel of overheads, the full effect of which will emerge in the second half. CIF (a platform for trading forward freight agreements) is expected to belaunched for live trading in September. Research and IT services Research continues to develop into a global integrated research operation and ismoving forward rapidly on the globalisation of our IT systems. Many of the Research publications are released in the first half of the yearwhich has an impact on the timing of revenues. Logistics The Pacific Dhow continues to operate profitably though we continue to seek efficiencies and improved volumes. The CFF Seine, after its time in dry dock earlier in the year, has now found profitable employment. At the end of 2005 significant provisions were established to cover the likelyclosure costs of Channel Freight Ferries. Extensive negotiations on many of thepotential liabilities have been successfully concluded with the result thatthere are provisions we no longer require. These provisions have been releasedas profit on discontinued activities. Fund management The Clarkson Shipping Fund was launched in the first half with US$20 million ofinvestment from the company. A further US$10 million has been subscribed byexternal investors. The Clarkson Shipping Fund has started well with a good result on its portfolioof shipping equity and derivative investments, compared with the generalperformance of the hedge fund industry during May and June 2006, and performanceremains positive in the period to date. Property services Since February 2006, St Magnus House has been fully let and is generating a useful return from our many sub-tenants. Financial services In January 2006 we recruited a financial services team. The team have achievedconsiderable success in structuring a shipping project, completing varioustimecharters and operating a vessel in the first half. The majority of thisincome, however, will only arise in the second half of 2006. Finance Tax We estimate that the overall effective tax rate for the whole of 2006 will be32.5% (2005 full year: 33.2%) and have applied this rate for the first half ofthe year. The tax rate reflects the impact of disallowable trading expenses. Dividend The board has decided to increase the interim dividend by 2.0p per share from 10.0p to 12.0p per share. The interim dividend will be paid on Friday 22 September 2006 to shareholders on the register at close of business on Friday 8 September 2006. Foreign exchange The US dollar is the major trading currency of the group. The average sterling exchange rate for the six month period was US$1.80. At 30 June 2006 the sterling exchange rate was US$1.85. Cash flow Cash generation remains a key strength of the group. However, net funds fell from £46.9 million at 31 December 2005 to £4.1 millionat 30 June 2006 reflecting the payment of £32.6 million of bonus relating to theyear 2005; £7.5 million relating to the acquisition of Plowrights and a US$20.0million (£10.8 million) investment in the newly launched shipping hedge fund. Directors At the annual general meeting in May 2006, Rob Ward indicated his intention toretire in December 2006 after being with the company for some 16 years. Outlook It is never easy to predict the timing or balance of supply and demand in theshipping market. However, trading in the first six months of 2006 has not beenquite as difficult as originally anticipated and we are optimistic about thecompany's performance in the second half of the year. With fund management, financial services and property services all now fullyestablished our revenue base has broadened and should provide additionalconsistency to our earnings. Your company is well placed to produce another excellent result in 2006 and tocontinue to generate increased returns for shareholders. Tim Harris CHAIRMAN Richard Fulford-Smith CHIEF EXECUTIVE 30 August 2006 Consolidated income statement Half year to Half year to Year to 30 June 30 June 31 December 2006 2005 2005 £m £m £mRevenue - continuing operations 52.6 53.9 115.9Administrative expenses (45.8) (42.0) (92.2)Operating profit - continuing operations 6.8 11.9 23.7Share of profits of associates and joint venture 0.2 0.2 0.5Finance revenue 2.2 0.9 1.6Finance costs (0.5) - (0.1)Other finance revenue - pensions 0.6 0.2 1.1Profit before taxation - continuing operations 9.3 13.2 26.8Taxation (3.0) (5.1) (8.9)Profit for the period - continuing operations 6.3 8.1 17.9Profit for the period from discontinued operations 1.1 8.0 5.7Profit for the period 7.4 16.1 23.6Attributable to:Equity holders of the parent 7.4 12.7 19.1Minority interests - 3.4 4.5 7.4 16.1 23.6 Earnings per shareBasic - continuing operations 37.5p 49.4p 108.9pDiluted - continuing operations 37.2p 49.4p 107.7pBasic - profit for the period 44.2p 77.5p 116.8pDiluted - profit for the period 43.8p 77.5p 115.5p Consolidated statement of recognised income and expense Half year to Half year to Year to 30 June 30 June 31 December 2006 2005 2005 £m £m £mActuarial gain/(loss) on employee benefit schemes - net of tax 5.9 (2.7) (2.6)Foreign exchange differences on retranslation of foreign (1.4) 1.0 1.5operationsTotal recognised directly in equity 4.5 (1.7) (1.1)Profit for the period 7.4 16.1 23.6Recognised income and expense for the period 11.9 14.4 22.5Restatement for the effects of adopting IAS 39 - - 0.5Settlement of forward currency contracts - - (0.1)Total recognised income and expense 11.9 14.4 22.9Attributable to:Equity holders of the parent 11.9 11.0 18.4Minority interests - 3.4 4.5 11.9 14.4 22.9 Consolidated balance sheet 30 June 30 June 31 December 2006 2005 2005 £m £m £mNon-current assetsProperty, plant and equipment 20.7 13.7 21.3Investment property 0.4 - 0.4Intangible assets 35.3 11.6 17.7Investments in associates and joint venture 1.0 1.0 1.0Trade and other receivables 0.7 - 0.5Investments 15.7 0.8 2.1Employee benefits 8.7 - -Deferred tax asset 2.5 3.5 3.3 85.0 30.6 46.3Current assetsTrade and other receivables 26.8 22.5 25.7Cash and short-term deposits 37.2 37.6 55.1 64.0 60.1 80.8Current liabilitiesInterest-bearing loans and borrowings (0.7) (4.3) (3.4)Trade and other payables (39.6) (31.2) (55.6)Provisions (1.7) - (3.9)Income tax payable (3.0) (9.9) (4.8) (45.0) (45.4) (67.7)Net current assets 19.0 14.7 13.1Non-current liabilitiesInterest-bearing loans and borrowings (32.4) - (4.8)Trade and other payables (5.0) (1.6) (4.4)Provisions (0.3) - (0.2)Employee benefits - (1.5) (0.4)Deferred tax liability (4.7) - (1.8) (42.4) (3.1) (11.6)Net assets 61.6 42.2 47.8Capital and reservesIssued capital 4.5 4.3 4.3Share premium 17.5 11.1 11.1ESOP reserve (1.4) (2.6) (0.5)Deferred share consideration 1.1 1.9 1.9Capital redemption reserve 2.0 2.0 2.0Profit and loss 38.2 22.6 27.9Currency translation reserve (0.3) 0.7 1.1Clarkson PLC group shareholders' and total equity 61.6 40.0 47.8Minority interests - 2.2 -Total equity 61.6 42.2 47.8 Consolidated cash flow statement Half year to Half year to Year to 30 June 30 June 31 December 2006 2005 2005 £m £m £mCash flows from operating activitiesOperating profit 6.8 11.9 23.7Adjustments for:Profit before tax from discontinued operations 1.1 9.8 5.6Depreciation 1.3 1.0 2.4Profit on sale of property, plant and equipment - (11.0) (11.4)Profit on sale of investments - - (0.6)Difference between ordinary pension contributions paid (0.1) - (0.1) and amount recognised in the income statement 9.1 11.7 19.6Decrease/(increase) in trade and other receivables 1.7 (5.2) (7.0)Prior year related bonus payments (32.6) (21.9) (21.9)Increase in trade and other payables 14.1 22.6 43.1(Decrease)/increase in provisions (2.1) - 3.2Cash (utilised)/generated from operations (9.8) 7.2 37.0Income tax paid (4.9) (5.6) (6.5)Interest paid (0.5) - (0.1)Net cash flow from operating activities (15.2) 1.6 30.4Cash flows from investing activitiesInterest received 0.9 0.6 1.3Purchase of property, plant and equipment (1.5) (11.2) (20.7)Proceeds from sale of investments - - 0.8Proceeds from sale of property, plant and equipment 0.1 14.5 15.2Purchase of investments (16.5) (0.1) (1.2)Special contributions to pension schemes (6.7) (10.0) (10.0)Investment in an associate (0.1) - -Acquisition of a subsidiary, net of cash acquired (0.9) (2.6) (3.2)Dividends received from associates and joint venture 0.3 - 0.3Dividends received 1.3 0.2 0.3Net cash flow from investing activities (23.1) (8.6) (17.2)Cash flows from financing activitiesPayments to minority interests - - (5.7)Dividends paid (3.8) (2.6) (4.2)Proceeds from borrowings 25.5 2.6 6.5Net cash flow from financing activities 21.7 - (3.4)Net (decrease)/increase in cash and cash equivalents (16.6) (7.0) 9.8Cash and cash equivalents at start of period 55.1 44.0 44.0Net foreign exchange difference (1.3) 0.6 1.3Cash and cash equivalents at end of period 37.2 37.6 55.1 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 2005. 2 Segmental information Revenue Results Half Half year Year to Half year Half year Year to year to to 30 31 to 30 to 30 31 30 June June December June June DecemberContinuing operations 2006 2005 2005 2006 2005 2005 £m £m £m £m £m £mDry bulk chartering 12.8 16.7 31.9 2.0 4.1 7.1Container chartering 1.4 1.1 2.4 0.3 0.2 0.5Deep sea chartering 12.0 9.8 20.2 2.8 2.2 4.8Specialised products chartering 4.3 1.5 4.0 0.6 0.1 0.6Gas chartering 2.6 1.1 3.4 0.6 0.1 0.2Sale and purchase broking 9.6 12.4 32.4 1.7 3.8 9.4Futures broking 3.6 6.1 12.3 0.8 1.8 3.6Research services 2.9 2.4 4.5 0.8 0.3 0.8Logistics 1.2 1.1 1.1 (0.4) 0.6 (0.4)Fund management 0.1 - - (0.6) - (0.4)Financial services - - - (0.2) - -Property services 3.1 2.6 5.5 0.3 (0.1) 0.3 53.6 54.8 117.7Less property services revenue arising (1.0) (0.9) (1.8)within the groupSegment revenue/results 52.6 53.9 115.9 8.7 13.1 26.5Head office costs and foreign exchange (1.9) (1.2) (2.8)differencesShare of profits of associates and 0.2 0.2 0.5joint ventureFinance revenue 2.2 0.9 1.6Finance costs (0.5) - (0.1)Other finance revenue - pensions 0.6 0.2 1.1Profit before taxation 9.3 13.2 26.8Taxation (3.0) (5.1) (8.9)Profit after taxation 6.3 8.1 17.9 The share of profit of associates and joint Half year Half year Year toventure is as follows: to 30 to 30 31 June June December 2006 2005 2005 £m £m £mDry bulk chartering - 0.2 0.2Sale and purchase broking 0.2 - 0.3 0.2 0.2 0.5 3 Taxation The taxation charge is calculated by applying the directors' best estimate ofthe 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 thefollowing data: Half year to Half year Year to 31 to 30 June 30 June December 2006 2005 2005 £m £m £mEarnings - continuing operations 6.3 8.1 17.9Profit for the period 7.4 12.7 19.1 Million Million MillionWeighted average number of ordinary shares 16.8 16.4 16.4Diluted weighted average number of ordinary shares 16.9 16.4 16.6 5 Intangible assets In January 2006 the group completed the acquisition of J O Plowright & Co (Holdings) Limited ('Plowrights'). Plowrightshas 26 staff predominantly serving the petrochemical, products, lubricant, gas, vegetable oil and molasses freightmarkets. During 2006 the group acquired a financial services business and a sale and purchase brokerage business. The book and provisional fair values of the identifiable assets and liabilities of Plowrights, the financial servicesbusiness and the sale and purchase brokerage business at the date of acquisition were as follows: Plowrights Financial services Sale and purchase Book Fair Book value Fair Book Fair value value value value value £m £m £m £m £m £mTrade receivables 0.4 0.4 - - - -Other receivables 1.0 1.0 - - - -Cash and short-term deposits 1.0 1.0 - - - - 2.4 2.4 - - - -Trade and other payables (1.4) (1.5) - - - -Taxation (0.9) (0.9) - - - -Employee benefits (6.3) (6.7) - - - - (8.6) (9.1) - - - - (6.2) - -Fair value of net assets (6.7) - -Goodwill arising on acquisitions 8.2 0.8 8.6 1.5 0.8 8.6 Plowrights Financial Sale and Total services purchase £m £m £m £mDischarged by:Fair value of shares issued 0.7 0.8 3.3 4.8Costs associated with acquisition, 0.8 - - 0.8settled in cashDeferred consideration - cash and shares - - 5.3 5.3 1.5 0.8 8.6 10.9 6 Employee benefits The company now operates two defined benefit schemes. In January 2006 the company assumed responsibility for the assetsand liabilities of the Plowrights defined benefit pension scheme. Under the terms of the acquisition the accountingdeficit on the Plowrights scheme of £6.7 million was eliminated. As at 30 June 2006 these schemes had a combined surplus of £8.7 million. The market value of the assets is £137.7million and independent actuaries have assessed the present value of funded obligations at £129.0 million. The companyhas provided deferred tax on this surplus amounting to £2.6 million. A significant proportion of the improvement since the year end has arisen from the increased discount rate from 4.7% asat 31 December 2005 to 5.2% as at 30 June 2006. 7 Analysis of net funds 31 Reallocation Cash flow Foreign 30 June December exchange £m £m differences 2006 2005 £m £m £mCash and short-term deposits 55.1 - (16.6) (1.3) 37.2Current interest-bearing loans and borrowings (3.4) (0.9) 3.6 - (0.7)Non-current interest-bearing loans and (4.8) 0.9 (29.1) 0.6 (32.4)borrowingsNet funds 46.9 - (42.1) (0.7) 4.1 8 Profit and loss reserve reconciliation Half year to 30 June 2006 £m Profit and loss reserve at start of period 27.9Profit for the period 7.4Actuarial gain on employee benefit schemes - net of tax 5.9Dividend paid in the period (3.8)Deferred share consideration 0.8Profit and loss reserve at end of period 38.2 9 30 June 2005 reconciliations The effect of reclassifying discontinued activities is a decrease in revenue of £3.8 million, an increase in operatingprofit of £1.1 million, a decrease in disposal of fleet interests of £11.0 million, a decrease in finance costs of £0.1million and a decrease in taxation of £1.8 million. Finance income of £2.7 million and finance costs of £2.5 million have also been reanalysed in respect of employeebenefits with the net revenue being shown as 'Other finance revenue - pensions'. 10 Post balance sheet event In August 2006 the group announced the completion of the acquisition of Genchem Holdings Limited. A copy of thisannouncement is available from www.clarksons.com. 11 Contingencies A subsidiary company, H Clarkson & Company Limited, and six other parties are the defendants in a Commercial Courtaction commenced by a client of the subsidiary. In the proceedings, the client is claiming between US$107 million andUS$144 million in damages. The subsidiary provided market commentary to the client prior to their acquisition of ashipping company which subsequently suffered a financial collapse. The client alleges that it relied on the commentaryprovided negligently by the subsidiary when evaluating this acquisition. The subsidiary has been advised its case isstrongly defensible and, accordingly, no provision has been made in these accounts. A legal action has also been threatened against H Clarkson & Company Limited and various other defendants by a clientin connection with third party commissions on business transacted during the period 2001-2004 totalling approximatelyUS$33 million which the subsidiary is alleged to have improperly paid. The subsidiary acted throughout on instructionsof the client company's senior management at the time on which it relied. As such the subsidiary considers that shouldsuch a claim be brought its case is strongly defensible and, accordingly, no provision has been made in these accounts. 12 Accounts The figures for the six months ended 30 June 2006 and 30 June 2005 are unaudited and do not constitute full accountswithin the meaning of Section 240(5) of the Companies Act 1985. The statutory audited accounts for the year ended 31December 2005, upon which the auditors have given an unqualified report, have been delivered to the Registrar ofCompanies in England & Wales. This information is provided by RNS The company news service from the London Stock Exchange