Clarkson Plc · LSE:CKN
Clarkson — FY2022 Earnings Presentation
44 slides from Clarkson's earnings presentation, Mar 6, 2023
Slide 1: Results Presentation
Results Presentation 31 December 2022 Andi Case & Jeff Woyda 6th March 2023
Slide 2: Financial results
Financial results Another record financial performance Strong cash generation enables our progressive dividend policy which is now in its 20th year. Jeff Woyda Chief Operating Officer & Chief Financial Officer
Slide 3: Results summary
Results summary To 31 December 2022 2021 £m £m Revenue 603.8 443.3 +36.2% Underlying profit before taxation 100.9 69.4 +45.4% (Before acquisition related costs) Acquisition related costs (0.8) (0.3) Profit before taxation 100.1 69.1 +44.9% (after acquisition related costs) Underlying earnings per sh
Slide 4: Segmental performance
Segmental performance Revenue, profit and margin Revenue Revenue Profit Profit Margin Margin 2022 2021 2022 2021 2022 2021 £m £m £m £m Broking 495.5 340.0 117.6 73.6 23.7% 21.6% Financial 49.8 56.0 7.8 13.3 15.7% 23.8% Support 39.0 29.6 5.0 3.3 12.8% 11.1% Research 19.5 17.7 7.0 6.1 35.9% 34.5% Resu
Slide 5: USD v GBP Exchange Rate
USD v GBP Exchange Rate GBP 1 is worth the following in USD 2022 2021 Arithmetic average for the year 1.2300 1.3760 Spot rate at year end 1.2057 1.3496 Results Presentation|31 December 2022 5 Andi Case & Jeff Woyda|6th March 2023
Slide 6: Sea/ related IT costs
Sea/ related IT costs To 31 December 2022 2021 £m £m Items taken to income statement Non capitalized items (Sea/ only) (9.2) (8.5) Amortisation (4.0) (1.4) 2022 2021 £m £m Software-related intangible assets as at 1 January 17.1 15.6 Additions 2.0 2.9 Amortisation (4.0) (1.4) Software-related intangi
Slide 7: The intelligent marketplace for fixing freight
The intelligent marketplace for fixing freight Key areas of progress 2022 • Experienced management team in place • Global presence – UK, Singapore, Denmark, Sweden, UAE, USA & Poland • 30% of estimated fixture volume in Dry & Wet recaps & CP’s • Over 37,000 fixtures annually • Over 500 broker client
Slide 8: Balance sheet
Balance sheet At 31 December 2018 2019 2020 2021 2022 £m £m £m £m £m Tangible fixed assets 29.3 28.9 28.6 24.7 29.1 Intangible fixed assets (software only) 5.4 9.9 15.6 17.1 15.1 Investments (relating to convertible bonds) 6.7 6.7 5.5 0.7 0.4 Investments (other) 4.8 4.8 2.9 1.0 1.2 46.2 50.3 52.6 43
Slide 9: Net available funds and free cash resource
Net available funds and free cash resource 31 December 31 December 2022 2021 £m £m Cash and cash equivalents 384.4 261.6 Interest-bearing loans and borrowing - - Current investment deposits 3.1 9.6 Net cash equivalents 387.5 271.2 Reserved for bonus (full cost) (225.8) (148.9) Net available funds 16
Slide 10: Movement in free cash resources
Movement in free cash resources 1 January 2022 to 31 December 2022 Results Presentation|31 December 2022 10 Andi Case & Jeff Woyda|6th March 2023
Slide 11: Forward Order Book (FOB)
Forward Order Book (FOB) For invoicing in the following year only 2022 for 2023 2021 for 2022 US $m US $m Directors’ best estimate of deliverable FOB 216 165 Results Presentation|31 December 2022 11 Andi Case & Jeff Woyda|6th March 2023
Slide 12: Dividend history
Dividend history 20 years of progressive dividend 64 57 53 54 50 51 40 43 39 37 32 33 30 26 27 26 24 22 16 11 25 25 27 29 9 21 22 22 23 24 16 16 17 18 18 19 10 12 14 6 7 9 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Interim Final Deferred
Slide 13: Our markets
Our markets 2022 was a year of massive change and complexity. Clarksons rose to the challenge whilst also positioning itself well for the near and mid term. Andi Case Chief Executive Officer
Slide 14: Key market Dynamics 2022
Key market Dynamics 2022 • Covid – congestion and unravelling • Russian / Ukraine – trade flows and energy security • Green Transition and regulation
Slide 15: Congestion Easing
Congestion Easing Containership port congestion back to pre-Covid levels, bulker and PCC congestion 4% below peak Containership Congestion Index*, % TEU Bulkcarrier Congestion Index^, % dwt Car Carrier Congestion Index”, % CEU 40% Jul-22 peak: 38% Feb-22 peak: 30% Apr-22 peak: Hundreds Hundreds Hund
Slide 16: Container Shipping Market Trends
Container Shipping Market Trends Major softening in freight and charter rates, back into ‘normal’ territory from previously extraordinary (record) levels Containership Charter Rate Index Spot Container Freight Rate Index (SCFI) 500 6,000 NB many ships are fixed out long term at higher rates 450 in t
Slide 17: Baltic Dry Market impacted by macro factors
Baltic Dry Market impacted by macro factors Pandemic, War in Ukraine, Energy crunch & inflation……. Baltic Dry Bulk Index (BDI) vs Dry Bulk Seaborne Trade China’s 7,000 energy crunch weighted 6,000 on industrial Q1 production Weakness 5,000 amplified Post Covid Russia/Ukraine by rebound war - China’s
Slide 18: China's economic rebound to underpin growth in the dry bulk sector
China’s economic rebound to underpin growth in the dry bulk sector Beijing’s commitment to growth will drive Asian industrial demand recovery while contraction in EU & USA slows GDP Growth & Dry Bulk Seaborne Trade Growth Manufacturing PMI’s in 4 Big Economies & ASEAN 12% 12% 70 70 10% 10% 65 65 Exp
Slide 19: Chinese Economy & Seaborne Trade: Covid Disruption & 'Re-Opening'
Chinese Economy & Seaborne Trade: Covid Disruption & ‘Re-Opening’ Significant impacts from Covid on economy and trade in 2022, end to ‘zero-Covid’ policy may now provide support Chinese GDP Growth Slowed Sharply In Challenges From Ongoing Property Chinese Seaborne Imports Fell In 2022 For 2022 On Co
Slide 20: Tanker Earnings
Tanker Earnings 120,000 Average VLCC Earnings Significantly stronger Average Suezmax Earnings tanker market influenced 100,000 Average Aframax Earnings by: Clean LR2 Middle East - Far East Earnings 80,000 - re-arrangement of oil Clean LR1 Middle East - Far East Earnings trade patterns Average Clean
Slide 21: Ukraine Conflict: Improvements In Tanker Demand Driving Strong Markets
Ukraine Conflict: Improvements In Tanker Demand Driving Strong Markets Support from trade flow shifts from Rus-Ukr conflict, rebounding OPEC/US exports and refinery capacity trends Average tanker earnings reach second Rebounding OPEC production and record Upwards trend in products average haul highe
Slide 22: Offshore market improving strongly and likely to continue strengthening
Offshore market improving strongly and likely to continue strengthening Global Offshore capex increasing strongly (USDbn) Rates improving across asset categories (Clarksons Offshore Index) 329 333 120 350 290 110 300 276 100 246 250 218 216 90 197 200 175 163 165 182 195 80 160 70 137 137 150 60 100
Slide 23: Global rig activity recovering both for floaters and jackups
Global rig activity recovering both for floaters and jackups Offshore rigs working, global 700 662 655 640 • There has been a significant pick-up in chartering activity 600 both for floaters and jackups and global active offshore 566 rigcount is improving strongly 505 505 515 • Tendering activity re
Slide 24: Subsea Oil & Gas market strengthening; offshore wind activity very high
The Subsea Oil & Gas market is strengthening significantly, and offshore wind activity remains at very high levels Subsea EPC: Backlog development for the leading three contractors Offshore wind (bottom-fixed): Cumulative GW development Subsea EPC backlog (SUBC + TEC Subsea + SPM E&C Offshore) 350 4
Slide 25: OSV market is already tight, as reflected in rates across regions (I)
OSV market is already tight, as reflected in rates across regions (I) North Sea West Africa Mediterranean North Sea Term Rates - PSV (£/day) WAFR Term Rates - PSV ($/day) Med Term Rates - PSV ($/day) 25,000 40,000 29,000 35,000 20,000 24,000 30,000 25,000 15,000 19,000 20,000 10,000 14,000 15,000 10
Slide 26: OSV market is already tight, as reflected in rates across regions (II)
OSV market is already tight, as reflected in rates across regions (II) SE Asia Brazil US Gulf South East Asia Term Rates - PSV ($/day) Brazil Term Rates - PSV ($/day) US Gulf Term Rates - PSV ($/day) 30,000 40,000 45,000 40,000 35,000 25,000 35,000 30,000 20,000 30,000 25,000 25,000 15,000 20,000 20
Slide 27: LNG trade at all-time high in 2022 and expected to grow further
LNG trade at all-time high in 2022 and expected to grow further through 2030 Strong Europe LNG imports and rising import in China and rest of Asia are expected to lift global LNG demand LNG trade flows were up 4.8% y-o-y to 407.7MT in 2022 • LNG export facilities are expected to produce at virtually
Slide 28: LPG Trade continues to rise
LPG Trade continues to rise …with growth ex M.East, tonne-mile effect from North America not felt in ’22 but expected 23/24 LPG Exports U.S Natural Gas Processing LPG Production raised for ’23 & ‘24 60 54.5 53.6 7 2.5 55 47.0 50 2020 2021 2022 6 42.3 45 2 36.2 40 5 34.9 35 2.61 2.58 1.5 2.41 Mil. MT
Slide 29: Chemical Tankers Seasonality
Chemical Tankers Seasonality Spot freight rates now at highest level in last 13 years, driven by higher bunker pricing, a tight Asia market and buoyant CPP sector 175 170 165 160 ~61% Increase 155 Since The Start of 2022 Clarksons Spot Chemicals Index 150 145 140 135 130 125 120 115 110 105 100 95 9
Slide 30: Decarbonisation Scenarios - Shipping's CO2 Emissions In Context
Decarbonisation Scenarios - Shipping’s CO2 Emissions In Context International shipping CO2 output up in 2022, plateauing in 2023? Still c.2.3% of global in 2023(f), <2% of global GHG, Global CO2 Emissions By Sector (2019), tonnes CO2 1050 Other, 2% Global CO2 = Power Generation, c.37.0bn t in 2023(f
Slide 31: Environmental Regulation Accelerating
Environmental Regulation Accelerating Regulatory timeline accelerating and remains key industry focus, IMO currently targets 50% GHG reduction by 2050 but under pressure for net-zero; policy ramping up with new GHG regulation in effect; technology uncertain 70% CO2 Intensity Lower EEDI Ratification
Slide 32: IMO Short-Term Measures: EEXI & CII Impact Analysis - Provisional
IMO Short-Term Measures: EEXI & CII Impact Analysis - Provisional How might EEXI & CII regulations impact the major cargo fleets? Deep Sea Cargo Fleet Capacity By Theoretical Compliance Level Deep Sea Cargo Fleet Capacity Split By Theoretical CII with 2023 EEXI Requirements At Current Speeds*, dwt R
Slide 33: Vessel Speed Trends: Emissions Policy May Impact
Vessel Speed Trends: Emissions Policy May Impact Speeds continuing to trend down; some uptick in tanker speeds amid firm market conditions Crude Tanker Speeds, knots Bulkcarrier Speeds, knots Containership Speeds, knots 13.0 12.4 16.5 12.2 16.0 12.5 12.0 11.8 15.5 12.0 11.6 15.0 11.5 11.4 14.5 11.2
Slide 34: EU Emissions Trading System (ETS)
EU Emissions Trading System (ETS) Inclusion of shipping in ETS could generate potentially significant additional voyage costs European Climate Exchange EUA Nearest Potential Additional Costs ‘in EU’, $/day % Sector Port Calls In EU*, GT, 2022 December Futures Price, Weekly Avg $/tonne 130 End Jan 20
Slide 35: Tanker Fleet Age Profiles
Tanker Fleet Age Profiles Tanker fleet supply constrained by extremely low newbuilding orderbooks Crude 25-125k dwt Products 35 16 LR2 Panamax/LR1 MR Handy VLCC Suezmax Uncoated Aframax 14 30 Existing Fleet: 177.8m Existing Fleet: 450.5m Orderbook: 9.2m (5.2%) Orderbook: 16.4m (3.6%) 15yr+ old Fleet
Slide 36: Year-on-Year Fleet Growth
Year-on-Year Fleet Growth 10% 15% 20% 30% 35% 25% 0% 5% Source: Clarksons 2005 2006 2007 2008 2009 2010 2011 Dry Bulk 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Containers 2022 2023f 2024f Fleet Growth across the Sectors Results Presentation|31 December 2022 10% 15% 20% 25% 30% 35% -5% 0% 5%
Slide 37: Alternative Fuels: Current Uptake By Sector
Alternative Fuels: Current Uptake By Sector LNG fuel continuing to gain traction, though increased interest in methanol; first methanol capable bulkers ordered Fleet (100+ GT) Using Alternative Fuels 200 200 c.317 LNG c.50 methanol LNG (839) c.506 LNG LNG (873) capable capable capable containerships
Slide 38: Tracking 'Green' Technology Uptake
Tracking “Green” Technology Uptake Timing & Technology? Our 8th Update of Fuelling Transition is now available on World Fleet Register SOx Scrubber Fitted Fleet, %GT LNG Capable Fleet & Orderbook, %GT Other Alternative Fuel Capable Fleet & Orderbook*, %GT 30% 50% 7.0% 6.6% of current orderbook Fleet
Slide 39: Significant Containership Fleet Renewal Requirements
Significant Containership Fleet Renewal Requirements “Green Transition” & decarbonisation regulations will increasingly impact containership supply/demand balance Age Profile Will Drive Renewal Requirement Alternative Fuels “Ramping Up” Decarbonisation To Drive Supply Disruption Containership Fleet
Slide 40: Where are we in the cycle?
Where are we in the cycle? Timeline of each cycle not defined and varies Chemical/Specialised Tankers Weakening market Offshore renewables (wind) Strong market Offshore Crude and LNG Products Tankers Containers Recovering market LPG Weak market Dry Bulk Results Presentation|31 December 2022 40 Andi
Slide 41: Outlook
Outlook 2023 starts with many geo political issues impacting our markets Against this backdrop, Clarksons is well positioned for the year ahead. A real endorsement to our continuing strategy and investment Andi Case Chief Executive Officer
Slide 42: Outlook: Tailwinds vs Headwinds
Outlook Tailwinds vs Headwinds Headwinds / global factors Sentiment Geopolitical Exchange rate Global GDP War – how USD vs contraction? long and how GBP,NOK… deep? Headwind or Inflation? tailwind ? Tailwinds Markets Company Supply side Regulation & Renewables & Forward order Cash generation Progress
Slide 43: World Seaborne Trade & Population Growth – The Future
World Seaborne Trade & Population Growth – The Future Trade per Capita 2023–2030 Extrapolated Based on Average Absolute Growth Rate 1990–2022 15 15 14 14 13 13 12 12 11 11 10 10 Billion tonnes Billion people 9 9 8 8 7 7 6 6 5 5 4 4 3 3 2 2 1 1 0 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 20
Slide 44: Thank you
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