Clarkson PLC · LSE:CKN
Clarkson — FY2017 Earnings Presentation
58 slides from Clarkson's earnings presentation, Mar 12, 2018
Slide 1: Results Presentation
Results Presentation 1 2 T H M A R C H 2 0 1 8
Slide 2: Agenda
Agenda Financial Results Markets Outlook Andi Case Jeff Woyda CEO COO/CFO 12th March 2018 2017 Annual Results 2
Slide 3: Results summary
Results summary 2017 2016 Increase £m £m % Revenue 324.0 306.1 +5.8% Underlying profit before taxation (Before acquisition related costs) 50.2 44.8 +12.0% Exceptional items - 11.1 Acquisition related costs (4.8) (8.6) Profit before taxation (After acquisition related costs) 45.4 47.3 +25.1% Underlyi
Slide 4: Results summary
Results summary 2017 2016 Increase £m £m % Revenue 324.0 306.1 +5.8% Underlying profit before taxation (Before acquisition related costs) 50.2 44.8 +12.0% Exceptional items - 11.1 Acquisition related costs (4.8) (8.6) Profit before taxation (After acquisition related costs) 45.4 47.3 Underlying earn
Slide 5: Segmental margin
Segmental margin Revenue Revenue Profit Profit Margin Margin 2017 2016 2017 2016 2017 2016 £m £m £m £m Broking 238.9 233.6 43.9 40.2 18.4% 17.2% Financial 52.0 41.0 10.1 6.8 19.4% 16.6% Support 18.5 17.8 2.1 2.1 11.4% 11.8% Research 14.6 13.7 4.8 4.9 32.9% 35.8% 12th March 2018 2017 Annual Results 5
Slide 6: Acquisition related costs
Acquisition related costs Acquisition related costs* 2017 2016 £m £m Cash and share-based payment charges 0.9 1.1 Loan note interest 0.3 0.9 Amortisation: Platou 3.6 6.6 4.8 8.6 *Assuming no further acquisitions, this should amount to a further £2.5m in 2018 12th March 2018 2017 Annual Results 6
Slide 7: Balance sheet
Balance sheet Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016 Dec 2017 £m £m £m £m £m £m Tangible fixed assets 8.8 9.4 8.4 33.1 33.0 33.3 Investments 1.9 1.8 1.9 1.9 4.1 4.9 10.7 11.2 10.3 35.0 37.1 38.2 Working capital (2.8) 3.1 (1.8) (7.1) (15.1) (0.4) Net available funds 75.2 75.0 115.7 91.6 98.4 79
Slide 8: Forward Order Book for invoicing in the following year
Forward Order Book (“FOB”) for invoicing in the following year 2017 2016 For 2018 For 2017 US$m US$m Directors’ best estimate of deliverable FOB 93 112 12th March 2018 2017 Annual Results 8
Slide 9: Net available funds
Net available funds 2017 2016 £m £m Cash and cash equivalents 161.7 154.0 Current investment deposits 5.5 29.4 Net cash equivalents 167.2 183.4 Reserved for bonus (full cost) (88.1) (85.0) Loan notes outstanding - (23.6) Net available funds after loan notes 79.1 74.8 Held by regulatory businesses (2
Slide 10: Movement in net available funds and free cash resources
Movement in net available funds and free cash resources (after bonus & loan notes) 49.6 (0.2) (20.1) (11.2) (6.9) (5.4) (1.5) 79.1 (25.0) 74.8 54.1 Net available funds Operating profit Other Dividends Working capital Taxation Capex Capitalised Net available funds Cash held by Free cash resources Dec
Slide 11: Dividend history
Dividend history Interim Final 80 15 18 25 32 36 40 42 43 47 50 51 56 60 62 65 73 70 60 50 50 40 43 40 39 37 32 33 30 30 26 27 26 24 20 22 16 11 22 22 23 10 9 18 18 19 21 14 16 16 17 9 10 12 6 7 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 12th March 2018 2017 An
Slide 12: The Markets
The Markets 1 2 T H M A R C H 2 0 1 8
Slide 13: Where were we in Freight/Earnings Shipping Cycles in 2017?
Where were we in Freight/Earnings Shipping Cycles in 2017? Timeline of each cycle not defined and varies Weakening market Strong market Recovering market Dry Bulk Weak market LNG Offshore Containers Chemical/Specialised tankers LPG Product tankers Crude tankers 12th March 2018 2017 Annual Results 13
Slide 14: ClarkSea Shipping Index
ClarkSea Shipping Index Average Maximum Minimum 55 50 45 40 35 $’000/day 30 25 20 15 10 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Average 16,879 15,316 10,679 19,125 30,980 27,569 24,622 33,061 32,660 11,331 15,491 12,315 9,577 10,263 11,743 14,410
Slide 15: World Seaborne Trade - historic
World Seaborne Trade - historic major dry bulk minor dry bulk crude oil oil products chemicals liquefied gas containers other dry cargo World Population 12 12 11 11 10 10 9 9 8 8 Billion tonnes Billion people 7 7 6 6 5 5 4 4 3 3 2 2 1 1 0 0 1994 1998 2002 2007 2011 2015 1990 1991 1992 1993 1995 1996
Slide 16: World Seaborne Trade per Capita
World Seaborne Trade per Capita Trade per Capita 2018-2030 Extrapolated Based on Average Absolute Growth Rate 1990-2017 1.8 1.6 1.4 1.2 Tonnes per capita 1 0.8 0.6 0.4 0.2 0 1990 1994 1998 2002 2005 2009 2013 2017 1991 1992 1993 1995 1996 1997 1999 2000 2001 2003 2004 2006 2007 2008 2010 2011 2012 2
Slide 17: World Seaborne Trade & Population Growth – the future
World Seaborne Trade & Population Growth – the future major dry bulk minor dry bulk crude oil oil products chemicals liquefied gas containers other dry cargo World Population 18 18 16 16 14 14 12 12 Billion tonnes Billion people 10 10 8 8 6 6 4 4 2 2 0 0 1990 1991 1997 1998 2004 2010 2011 2017 2018
Slide 18: World & U.S. Economic Growth
% change (year on year) 0 2 4 6 -4 -2 1985 1986 1987 Data Source: IMF 1988 1989 1990 1991 1992 1993 12th March 2018 1994 1995 1996 World GDP 1997 1998 1999 2000 World & U.S. Economic Growth 2001 2002 2003 2004 2017 Annual Results 2005 2006 2007 US GDP 2008 2009 2010 2011 2012 2013 2014 2015 2016 201
Slide 19: Distribution of World Economic Growth vs Seaborne Trade Growth
Distribution of World Economic Growth vs Seaborne Trade Growth World GDP US GDP EU GDP China GDP India GDP World Seaborne Trade 16 14 12 % change (year on year) 10 8 6 4 2 0 -2 -4 -6 1986 1987 1988 1989 1990 2006 2007 2008 2009 1984 1985 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 20
Slide 20: World Seaborne Trade vs. GDP
World Seaborne Trade vs. GDP World Seaborne Trade Trade trend volume GDP Current Prices GDP trend volume Linear (World Seaborne Trade) Linear (GDP Current Prices) 16 160 14 140 World Seaborne Trade (Billion tonnes) GDP Current Prices (Trillion Dollars) 12 120 10 100 8 80 6 60 4 40 2 20 0 0 1987 1989
Slide 21: Growing Investor Confidence That The Commodity Rally Will Continue
Growing Investor Confidence That The Commodity Rally Will Continue Brent Net Longs WTI Net Longs Combined 1.2 1.0 Futures & Options (millions) 0.8 0.6 0.4 0.2 0.0 Source: Bloomberg, ICE, CFTC 12th March 2018 2017 Annual Results 21
Slide 22: China's One-Belt-One-Road
China’s “One-Belt-One-Road” Silk Road Economic Belt and 21st Century Maritime Silk Road • Main goal: Boosting economic growth and trade through infrastructure development. • Infrastructure such as roads, ports, railways and airports have been built and funded by Chinese state-backed firms, but priva
Slide 23: AIIB's Global Investments in Approved Power Plants, Rail and Port projects
AIIB’s Global Investments in Approved Power Plants, Rail and Port projects • The Asian Infrastructure Investment Bank (AIIB) has contracted 24 projects worth about US$4.23 billion, in its two years since inception in 2016. • Projects range from power plants to rail and port facilities, currently mos
Slide 24: Infrastructure investment drive the demand for construction related materials
Infrastructure investment drive the demand for construction related materials Construction Related Seaborne Trade Growth • China and Russia are discussing to extend Eurasian Economic Union (EEU) membership to 18% 16% include Russia, Belarus, Kazakhstan, Armenia and 16% 15% Kyrgyzstan. 13% 11% 10% •
Slide 25: World Steel Consumption
World Steel Consumption Per Capita Steel Consumption Evolution 2016 Per Capita Steel Consumption (finished steel prod.) 1,400 South Korea 1,130 Taiwan 782 1,200 South Korea Germany Kg Crude Steel equivalent per person (from 1973) 500 China 493 1,000 Japan 493 Turkey 428 800 EU-28 311 USA 283 Japan (
Slide 26: Manufacturing PMI's increased across many countries
Manufacturing PMI’s increased across many countries Global Purchasing Managers’ Indices Selected Asia Purchasing Managers’ Indices 62 62 60 60 58 58 56 56 54 54 52 52 50 50 48 48 46 46 44 44 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 US Japan Eurozone China I
Slide 27: Rises in Global Manufacturing send Commodity Prices Higher
Rises in Global Manufacturing send Commodity Prices Higher Global Manufacturing Index Trending Up… …Demand Surge for Commodities 56 400 55 380 54 360 53 340 52 320 51 300 50 280 49 260 48 240 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Global Manufactur
Slide 28: Global Container Trade Growth
Global Container Trade Growth Global Container Trade (TEU), Growth In Terms of Additional TEU, 1980-2017 m. TEU 25 2010-17 Average : 8.7m TEU pa 20 2000s Average : 6.2m TEU pa 15 1990s Average : 3.5m TEU pa 10 1980s Average : 1.5m TEU pa 5 0 In 2005 growth of 10.4% added -5 9.9m TEU to global trade;
Slide 29: Oil Consumption per Capita
Oil Consumption per Capita per capita oil cons World oil cons per capita OECD oil cons per capita 9,000 8,049 8,000 7,000 OECD= 4.0 x China Per capita oil cons (litre) OECD = 10.4 x India 6,000 5,000 World Av. = 1.5 x China 3,988 4,000 World Av. = 3.8 x India 3,526 3,149 3,000 2,000 1,828 1,671 832
Slide 30: The oil market rebalancing is well in progress
The oil market rebalancing is well in progress Global Oil Supply and Demand balance 102 • The oil market was largely balanced during 100 H2/17 with commercial inventories coming down rapidly as a result 98 96 • The IEA currently forecasts slight oversupply through 2018 on average. The 94 IEA’s deman
Slide 31: Oil Production Developments
Oil Production Developments 2,000 11 10 Breakeven prices of new offshore projects have fallen materially US Crude Oil Production Oil Rig Count 9 1,500 8 No. of Rigs 7 Million bpd 6 1,000 5 4 500 3 2 1 0 0 Jan-10 Jan-11 Jan-18 Jan-09 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jul-13 Jul-14 Jul-09 Jul-
Slide 32: Offshore drilling rigs: Fixing activity is improving
Offshore drilling rigs: Fixing activity is improving, both for jackups and floaters Jackup fixing activity 2009-2017 Floater fixing activity 2009-2017 Jack-ups, #rig years Floaters, #rig years 450 350 402 400 385 369 300 290 350 246 250 294 295 300 250 240 200 184 231 217 150 200 174 150 150 100 100
Slide 33: Rig fixing back to growth mode
Rig fixing back to growth mode YoY growth in rig fixing activity, last 12M 40% 36% 32% 31% 30% 27% 19% 20% 17% 10% 8% 10% 4% YoY growth 0% -7% -7% -9% -10% -11% -10% -14% -14% -16% -16% -18% -19% -19% -19% -20% -21% -20% -24% -26% -27% -28% -30% -40% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1
Slide 34: Rig fleet supply side adjustment progressing
Rig fleet supply side adjustment progressing. More than 100 floaters scrapped since the downturn started late-14 – seen utilisation and fixing improve Floaters Scrapped – 34% of peak fleet Jack-ups Scrapped – 13% of peak fleet 20 120 12 70 63 18 102 60 100 10 16 50 14 80 8 Scrapping/quarter Scrappin
Slide 35: Offshore Service Vessels: utilization levels have bottomed out
Offshore Service Vessels: Active utilization levels for the large vessels seems to have bottomed out and starts displaying slight improvement Global AHTS utilization, vessels > 10,000 BHP Global PSV utilization, vessels > 2,000 DWT 700 100 % 130 0 100 % 120 0 90% 600 90% 110 0 80% 100 0 80% 500 900
Slide 36: Liquidity rising in the 2nd hand market
Liquidity rising in the 2nd hand market, typically a bullish indicator 2nd hand sales by vessel type and year Commentary 120 • All-time high level of asset sales in 2017 (106), which 100 may indicate rising confidence 80 • Many of the most distressed assets have changed 60 hands 40 • Brokers indicat
Slide 37: Shipping Fleet Development: 1990-2018
Shipping Fleet Development: 1990-20181 Bulkers Tankers Containers Gas Carriers Other Growth 2,500 10% Fleet as at end year. 2018 is a projection. 9% Comprises world merchant 2,000 fleet >100 GT, including 8% ship-shaped offshore units 7% 1,500 6% million dwt 5% 1,000 4% 3% 500 2% Year-on-year fleet
Slide 38: Global Newbuilding Orders at Historic Low
Global Newbuilding Orders at Historic Low… 2010 2011 2012 2013 2014 2015 2016 2017 3,500 Oi l Pri ce $79 $111 $110 $108 $98 $53 $45 $57 Bunker $450 $618 $639 $595 $532 $264 $213 $305 3,000 2,905 Pri ce Orders representative of vessels over 20,000 dwt Eco-Bubble 2,500 2,254 2,046 2,000 1,873 1,835 No
Slide 39: Demolition Trends 2000 – 2017
Demolition Trends 2000 – 2017 Number of vessels demolished Annual Volume of dwt demolished (RH Axis) 1600 80 1,392 1400 70 1200 1,148 1,139 1,165 60 985 1000 940 951 50 No. of Vessels Million dwt 809 798 800 40 617 624 600 595 600 543 574 30 487 441 436 400 315 20 269 278 190 200 10 0 0 1996 1997 19
Slide 40: Shipyard Inflationary Pressure
Shipyard Inflationary Pressure USD/WON Exchange Rate Korean Steel Price Index 1180 $650 1160 $600 1140 USD/WON Exchange Rate $550 US$ per ton 1120 1100 $500 Won has strengthened 1080 6.7% against dollar over the last year $450 1060 1040 $400 May 2015 May 2016 May 2017 Mar Apr May Jun Jul Aug Sep Oct
Slide 41: Orderbook as % of Fleet
Orderbook as % of Fleet Tankers - 10,000+ Dwt (% based on Dwt) Bulk Carriers - 10,000+ Dwt (% based on Dwt) Containerships - 100+ TEU (% based on TEU) LNG Carriers (% based on Cu. M.) LPG Carriers (% based on Cu. M.) Global Fleet - All Vessel Types (% based on No. of Vessels) 90% 80% 70% Orderbook a
Slide 42: Environmental Regulation Timeline
Environmental Regulation Timeline Baltic 1.0% ECA 3.5% Global Lower EEDI Ratification of Ballast Lower EEDI Sea ECA Sulphur ECA Sulphur reference line Water Management reference line in effect Limit Limit (Phase 1) Convention (BWC) (Phase 3) Global Global US Carrib. EU Monitoring, MRV Lower EEDI NOx
Slide 43: Shipping Lending Overview: By Bank & Geography
Shipping Lending Overview: By Bank & Geography Top 40 Banks Lending to Shipping (by year) 2010: $449.8bn 2011: $454.9bn 2012: $422.1bn 2013: $401.0bn 2014: $391.5bn 2015: $397.6bn 2016: $355.3bn Actively seeking to lend to both existing and new clients Geographical Breakdown of Lenders Selective/res
Slide 44: Clarksons Platou Securities: In Brief
Clarksons Platou Securities: In Brief Investment Banking Sales & Trading Research • Equity and Debt • Equity and Debt instruments • Equity and credit research • IPOs and listings • Secondary trading • Company reports • Private and Public Offerings • Block trades • Sector reports • Block trades • For
Slide 45: Shipping Equity Market Activity by Sector
Shipping Equity Market Activity by Sector 2013-2018 YTD Equity Raised by Sector Increasing Investor Focus on Dry and Containers Tanker Gas Dry Containers Other 6,000 Oslo NYC 100% $5,427 $230 $650 $110 $764 $306 90% $4,813 $597 % of Shipping Equity Raised in New York and Oslo 5,000 $735 80% $157 $1,
Slide 46: Leader in raising capital for energy and maritime industries
Leader in raising capital for energy and maritime industries USD 19.0bn ECM capital raised since 2010 USD 15.8bn DCM capital raised since 2010 Equity raised Cumulative billions Debt raised Cumulative billions 6,000 20 4,500 18 4,214 18 4,000 3,830 16 5,000 4,813 16 3,500 14 Equity raised per year (U
Slide 47: 43% market share in global shipping equity transactions
43% market share in global shipping equity transactions ~USD 21.3bn global shipping equity issues in the period 2013 – 2018YTD Amount (USDbn) 4,000 CPS (Sole or Joint Lead) Others 3,388 3,500 9.2 3,000 12.1 ~21.3bn 2,713 2,500 691 2,468 1,929 1,851 USDm 2,000 1,715 Market share (%) 1,500 1,323 1,164
Slide 48: 40% market share in global offshore drilling equity transactions
40% market share in global offshore drilling equity transactions ~USD 12.4bn global offshore drilling equity issues in the period 2010 – 2018YTD 3,500 Clarksons Platou Securities Others Amount (USDbn) 3,000 2,500 5.0 ~12.4bn USD million 7.4 2,000 1,500 Market share (%) 1,000 500 40% 0 ~40% 1Q 2Q 3Q
Slide 49: Market leader in USD denominated bonds on Norwegian docs
Market leader in USD denominated bonds on Norwegian docs Market share in # of core sector transactions DCM placing power 20 CPS Others • Clarksons Platou Securities has a sustained 15 market leading position in core segments: 10 ―Offshore drilling # of issues 5 ―OSV 43% 33% 0% ―Shipping 29% 25% 33%
Slide 50: Leading restructuring advisor
Leading restructuring advisor Proven track record Oil service – Selected recapitalization and restructuring credentials • In excess of USD 13.5bn in oil service debt restructured . Banks, Bondholders, and Capital Providers Representation of Board of Directors, Companies, since 2015 September 2017 Ju
Slide 51: Clarksons Platou Securities has consistent transaction flow
Clarksons Platou Securities has consistent transaction flow Representative ECM, DCM, M&A and restructuring transactions (1) February 2018 February 2018 December 2017 December 2017 November 2017 November 2017 November 2017 Advi s or to TechnipFMC i n the 51% a cquisition of CAD 39m USD 110m USD 90m N
Slide 52: Clarksons Platou Securities has consistent transaction flow
Clarksons Platou Securities has consistent transaction flow Representative ECM, DCM, M&A and restructuring transactions (2) Apri l 2017 Ma rch 2017 Ma rch 2017 Ma rch 2017 February 2017 February 2017 February 2017 Songa Bulk USD 317m USD 800m Equi ty NOK 44m Equi ty NOK 38m USD 101m USD 220m Ini tia
Slide 53: Clarksons Platou Securities has consistent transaction flow
Clarksons Platou Securities has consistent transaction flow Representative ECM, DCM, M&A and restructuring transactions (3) November 2016 November 2016 November 2016 November 2016 September 2016 September 2016 Jul y 2016 Songa Bulk USD 52m USD 150m USD 74m USD 52m USD 50m Equi ty Advi s or to Underw
Slide 54: Dry Bulk Market Recovery Anticipated and Invested In
Dry Bulk Market Recovery Anticipated and Invested In From Jan 2016: Dry Bulk Asset Values and BDI with CP Securities Dry Bulk Activity… Capesize 180k dwt Resale Prices Kamsarmax 82k dwt Resale Prices Baltic Exchange Dry Index 50.00 1,800 $82M Follow-on Equity Offering $200m Equity $74m Private Equit
Slide 55: Creating value at the heart of world trade
Creating value at the heart of world trade Underpinned by our values, our integrated business model provides the platform for an unrivalled level of service and information that enables trade and creates long-term value. 12th March 2018 2017 Annual Results 55
Slide 56: Corporate Outlook
Corporate Outlook Cyber security No more debt Markets recalibrating Demand improving Supply side challenged Finance requirement strong Cash generative Progressive dividend policy in 15th year 12th March 2018 2017 Annual Results 56
Slide 57: Thank you
Slide 58: Disclaimer
Disclaimer The material and the information (including, without limitation, any future rates and/or forward looking predictions) contained herein (together, the "Information") are provided by H. Clarkson & Co. Ltd ("Clarksons Platou") for general guidance and not by way of recommendation. The Inform