TIDMCKN
RNS Number : 9215H
Clarkson PLC
09 August 2021
9 August 2021
Clarkson PLC (Clarksons) is the world's leading provider of
integrated shipping services. From offices in 23 countries on six
continents, we play a vital intermediary role in the movement of
the majority of commodities around the world.
Interim results
Clarkson PLC today announces unaudited Interim results for the
six months ended 30 June 2021.
Summary
-- Strong trading across all areas of the business
-- Underlying profit before taxation of GBP27.5m (2020: GBP21.1m), an increase of 30.3%
-- Underlying earnings per share increased by 24.5% to 64.0p (2020: 51.4p)
-- Robust balance sheet, with GBP73.9m of free cash resources(1) (31 December 2020: GBP81.1m)
-- Increased interim dividend of 27p per share (2020: 25p per share)
(1) Free cash resources are cash and cash equivalents and
current investment deposits, after deducting amounts accrued for
performance-related bonuses, outstanding loans and monies held by
regulated entities.
Six months Six months
ended ended
30 June 2021 30 June 2020
Revenue GBP190.1m GBP180.4m
Underlying profit before taxation* GBP27.5m GBP21.1m
Reported profit before taxation GBP27.3m GBP20.9m
Underlying earnings per share* 64.0p 51.4p
Reported earnings per share 63.5p 50.6p
Interim dividend per share 27p 25p
* Before acquisition-related costs of GBP0.2m (2020:
GBP0.2m).
Andi Case, Chief Executive Officer, commented:
"I am delighted by the performance of Clarksons over the first
half of the year. We have built a diverse, market-leading business
and the strategy continues to deliver shareholder value.
"The Company generated significantly increased profits in the
first half of the year, aided by a robust performance in our
Broking division and a strong recovery from our Financial division.
I am also excited by the progress and momentum that our Sea/
platform is building.
"A huge thanks goes to all my colleagues for their hard work and
commitment throughout what has been a challenging period for us
all. We are confident in the outlook for Clarksons, which is well
placed to capitalise on an improving demand/supply dynamic within
shipping, offshore and renewables and from the wider global
economic recovery."
Enquiries:
Clarkson PLC 020 7334 0000
Andi Case, Chief Executive Officer
Jeff Woyda, Chief Financial Officer & Chief Operating
Officer
020 3757 4983 /
Camarco 4994
Billy Clegg
Jennifer Renwick
Forward-looking statements
Certain statements in this interim report are forward-looking.
Although the Group believes that the expectations reflected in
these forward-looking statements are reasonable, it can give no
assurance that these expectations will prove to have been correct.
Because these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward-looking statements. The Group undertakes no
obligation to update any forward-looking statements whether as a
result of new information, future events or otherwise.
Alternative performance measures (APMs)
Clarksons uses APMs as key financial indicators to assess the
underlying performance of the Group. Management considers the APMs
used by the Group to better reflect business performance and
provide useful information. Our APMs include underlying profit
before taxation and underlying earnings per share. An explanation
and reconciliation of the term 'underlying' and related
calculations are included within the Chief Executive Officer's
review.
About Clarkson PLC
Clarkson PLC is the world's leading provider of integrated
services and investment banking capabilities to the shipping and
offshore markets, facilitating global trade.
Founded in 1852, Clarksons offers its diverse and growing client
base an unrivalled range of shipbroking services, sector research,
on-hand logistical support and full investment banking capabilities
in all key shipping and offshore sectors. Clarksons continues to
drive innovation across its business, developing digital solutions
which underpin the Group's unrivalled expertise and knowledge with
leading technology.
The Group employs over 1,600 people in 54 different offices
across its four divisions and is number one or two in all its
market segments.
The Company has delivered 18 years of consecutive dividend
growth. The highly cash-generative nature of the business,
supported by a strong balance sheet, has enabled Clarksons to
continue to invest to position the business to capitalise on
opportunities in its markets.
Clarksons is listed on the main market of the London Stock
Exchange under the ticker CKN and is a member of the FTSE 250
Index.
For more information, visit www.clarksons.com .
This announcement contains inside information as defined in
Article 7 of the retained EU law version of the Market Abuse
Regulation No 596/2014 ("UK MAR") and has been announced in
accordance with the Company's obligations under Article 17 of UK
MAR.
Chair's review
As highlighted at the end of 2020, we went into 2021 with an
improving demand/supply balance, which has provided the backdrop to
more positive shipping markets. The ClarkSea Index, reflecting the
weighted average of earnings for all main vessel types, averaged
US$20,717 per day in the first half, an increase of 27%
year-on-year, the benefit of which was in part offset by the
stronger sterling/US dollar exchange rate.
The quality of the Clarksons business and its market-leading
position has meant that it has weathered the global crisis caused
by the COVID-19 pandemic as it did the credit crisis of 2008 and
2009 when it continued to grow, generate cash flow, and increase
its dividend. Clarksons is a robust, cash-generative business which
has delivered increasing Total Shareholder Return and 18
consecutive years of dividend growth, despite a decade long malaise
in freight rates.
I am delighted to report the Group's strong financial
performance over the first half of 2021, with underlying profit
before tax of GBP27.5m, an increase compared to the same period
last year, of GBP6.4m or 30.3%. This Group performance was driven
by our market-leading Broking teams, significantly increasing both
spot and forward business, a strong performance from our Financial
division following a return in capital markets activity, and steady
performance from both Research and Support. Our innovative
technology platform Sea/, which offers interoperable modules which
together provide an end-to-end solution to support the freight
supply chain, also progressed well in the first half of the year.
During these challenging times I would like to thank the Clarksons
team for the extraordinary efforts that they have delivered in
these half year results.
We have a diverse business model and multiple market-leading
positions in nearly all the verticals in which we operate, and our
sector teams have the best in-depth market knowledge and
intelligence, which is a key differentiator for our clients. It is
this diversity alongside a focused strategy that is the strength of
the business.
We were pleased to welcome Martine Bond as an independent
Non-Executive Director to the Board, and a member of the Audit and
Risk Committee, during the first half. Martine has extensive
experience in the financial services industry and her skills and
expertise in electronic trading and technical solutions complement
the existing skills of the Board. As previously announced,
Marie-Louise Clayton stepped down from the Board with effect from
31 January 2021 and I would like to thank her for her contribution
to Clarksons.
The outlook for Clarksons as a Group is strong and the Board
believes we are in the early stages of a recovery in the shipping
markets after a decade of unfavourable demand/supply dynamics.
Sir Bill Thomas
Chair
6 August 2021
Chief Executive Officer's review
As we have been predicting for some years now, the demand/supply
dynamics of the shipping market have turned positive, aided by the
green transition, its impact on the global shipping fleet and the
beginnings of economic recovery from the pandemic. The Group's
first half performance reflected the early days of these changing
trends and we have positioned the business to capitalise on these
dynamics.
The results that the business continues to deliver are a
testament to our strategy which has consistently delivered
shareholder value. We have built a diverse business, which is
market-leading in nearly all its verticals and we have developed a
positive culture which puts our clients and their needs first.
I would like to thank all my colleagues for their immense
dedication and the hard work they have shown over the period.
Despite the ever-changing requirements and restrictions around
COVID-19, their skill has enabled the business to thrive and
deliver an excellent performance over the first half.
Market backdrop
Shipping markets entered 2021 with the supply side reflecting
the lowest order book of new ships for 30 years, significant
structural reduction in shipbuilding capacity globally compared to
2008, material cost increases, continued challenges in the
availability of finance and a change in regulation around emissions
impacting the world fleet and the need for alternative fuelling. On
the demand side, following a COVID-19 induced fall in seaborne
trade in 2020 of some 0.5bn tonnes, we have started to see the
beginnings of the anticipated upswing in demand from Government
stimulus, investment in infrastructure and a rebound in consumer
spending. This recovery of demand should mean that in 2021 seaborne
trade will exceed 12bn tonnes.
Broking
During the first six months of the year, the improvement in
freight rates and market outlook gave rise to a buoyant sale and
purchase market. Asset prices started to recover while secondhand
sales volumes increased by more than 100% compared to the first
half of 2020. Regulation concerning GHG emissions and the green
transition continued to play a large part in decision-making around
investment in newbuildings and longer-term projects. Nevertheless,
the order book remains at only approximately 4% of the fleet as the
market is deliberating suitable fuel choices for the green
transition. Clarksons has built a cross disciplinary green
transition team in order to play an important role in the global
shipping fleet's evolution and de-carbonisation, through research
and analytics, consultancy and execution in broking and financing
through the Financial division.
The recovery in freight rates within the dry cargo and container
markets, initially seen in the latter part of 2020, continued
apace. The container market was buoyant as demand increased due to
both restocking and consumers buying physical goods in place of
spending their disposable income on foreign travel and other
leisure activities. Disruption from the Ever Given in the Suez
Canal impacted most shipping markets, and we saw rates in the
container market being pushed up further by congestion in ports due
to COVID-19 and a physical shortage of containers due to market
dislocation.
The dry bulk market was strong in the first half of 2021,
reflecting the beginning of what many predict to be a commodity
boom as previously highlighted government stimuli focuses spend on
infrastructure. There was also significant activity in the gas
markets where the Clarksons team covers both the freight and the
underlying product.
The tanker market was weak due to low demand for oil which is
still 10% below pre-COVID-19 levels. A reduction in international
travel has dented demand for oil, causing an excess of supply of
tankers, a stark difference to the first quarter of 2020 which
benefited from cheap oil and the tanker market's role in the
contango trade. Whilst tanker earnings averaged their lowest half
year period for over 30 years, the medium-term outlook is better as
stockpiles of oil have now fallen to pre-pandemic levels and we are
beginning to see some increases in both spot and longer-term
business.
The offshore energy market is improving as activity picks up and
the offshore wind market continues to grow rapidly. Continued
momentum in this renewables market is fundamentally important if
global emissions targets are to be met and we see this as a
long-term driver of our business.
Overall, divisional profit from Broking of GBP30.3m was up
GBP0.9m on the same period last year, reflecting a margin of 21.2%.
This result was negatively impacted by the movement in the GBP/USD
exchange rate from an average of 1.2615 in the first half of 2020
to 1.3911 in the first half of 2021. On a constant currency basis,
profit would have been GBP35.0m, up GBP5.6m on reported first half
2020. Broking has continued to grow its significant forward order
book as spot business concluded in the first half is invoiced on
delivery, or end of voyage, in the second half and beyond.
Financial
In the Financial division, activity within Clarksons Platou
Securities has improved significantly following several years of
restricted opportunity for shipping and offshore in the capital
markets. The first half of 2021 has seen increased ECM, DCM and
M&A activity and the pipeline remains strong. The project
finance markets were also buoyant, with our real estate team
continuing the growth seen in the second half of 2020. Overall, our
Financial division produced a profit of GBP5.3m on revenues of
GBP24.7m in the first half compared with a loss of GBP1.6m on
revenue of GBP13.3m in the same period last year.
Support
The Support business performed well producing GBP1.5m profit and
a 10.6% margin in the first half of 2021 (2020: GBP0.2m and 1.7%).
Agency, renewables, customs clearance, safety & survival and
supplies activities continued in the recovery phase following the
significant reduction in activity in the first half of 2020 due to
COVID-19 and the changes from Brexit. We now have increased
opportunities for growth from this solid platform.
Research
The Research business i ncreased sales of digital products,
which included the launch of Renewables Intelligence Network, to go
alongside our market-leading products, Shipping Intelligence
Network and Offshore Intelligence Network. However, this increase
was in part offset by the US dollar-based valuations business
suffering in translation from a stronger sterling. Nevertheless,
the division made a solid profit of GBP3.1m (2020: GBP3.1m) and the
timing of subscription renewals should provide additional reported
revenue growth in the second half.
Digitalisation
Our Sea/ platform has seen continued m omentum. Client adoption
is growing, as c lients seek to increase risk control, audit,
compliance, efficiency, communication and data integrity, together
with enhanced analytics and validation to enable better
decision-making. The trajectory of new customer uptake is positive,
and we are seeing both very encouraging retention rates on client
renewals and clients broadening their product uptake once invested
in the platform. We have a promising pipeline of new customers with
Sea/fix proving to be a significant value proposition for our
clients.
Results
Total revenue in the first half was GBP190.1m (2020: GBP180.4m)
and underlying administrative expenses were GBP153.9m (2020:
GBP151.2m). Underlying profit before taxation was GBP27.5m (2020:
GBP21.1m), which, after acquisition-related costs of GBP0.2m (2020:
GBP0.2m), resulted in a reported profit before taxation of GBP27.3m
(2020: GBP20.9m). Underlying earnings per share, before
acquisition-related costs, were 64.0p (2020: 51.4p). Reported
earnings per share were 63.5p (2020: 50.6p).
2021 2020
GBPm GBPm
Underlying profit before taxation 27.5 21.1
Acquisition-related costs (0.2) (0.2)
====== ------
Reported profit before taxation 27.3 20.9
====== ------
Cash and dividends
Clarksons has generated strong levels of cash in the period and
maintains a healthy balance sheet, with cash balances at 30 June
2021 of GBP152.9m (31 December 2020: GBP173.4m) and a further
GBP2.8m (31 December 2020: GBP22.8m) in short-term deposit
accounts, classified as current investments on the balance sheet.
Net cash and available funds, after deducting amounts accrued for
performance-related bonuses but including these short-term
investments, amounted to GBP87.3m (31 December 2020: GBP95.4m).
This is lower, partly due to the payment of the 2020 final dividend
in May, and also because the second quarter was particularly busy
with much of the increased revenue reflected in trade debtors.
These debtors should be converted into cash in the third quarter.
Free cash resources, after deducting monies held by regulated
entities, amounted to GBP73.9m (31 December 2020: GBP81.1m).
Due to confidence in the current year business outlook and
continuing its 18 consecutive year progressive dividend policy, the
Board has declared an increased interim dividend of 27p per share
(2020: 25p per share) which will be paid on 17 September 2021 to
shareholders on the register at the close of business on 3
September 2021.
Outlook
The outlook for the business is strong. Improving demand/supply
dynamics is positive to the rate environment across shipping,
offshore and renewables markets, driven by the green transition,
increasing demand for bulk commodities and the global economic
recovery after the COVID-19 induced recession. We have made a
strong start to the second half, there is increasing momentum
across the business and we believe that Clarksons will continue to
benefit from its leading market position and diverse offering.
Andi Case
Chief Executive Officer
6 August 2021
Business Review
Broking
Revenue: GBP142.7m (2020: GBP147.1m)
Segment underlying profit: GBP30.3m (2020: GBP29.4m)
Dry cargo
Asia-led demand drove record levels of seaborne trade volumes
whilst COVID-19 related bottlenecks ensured fleet supply remained
tight. An unusually strong first quarter set the basis for further
improvement in freight rates to multi-year highs. Clarksons
weighted average bulk carrier earnings index reached a 13-year high
at the end of June.
Capesize rates increased by nearly 300% year-on-year and
increased by over 125% since the start of the year. A mild rainy
season in Australia and Brazil ensured higher export volumes
further supported by record iron ore prices. However, COVID-19
related mining protocols restricted the expansion of mining
capacity within the first half of the year.
Smaller vessels found support in China's buoyant grain buying
programme, particularly oilseeds and corn, as part of the first
phase of the US/China trade deal. Coal demand bounced back with
increased energy demand as industries reopened and greener energy
supplies were unable to meet the pent-up demand. Construction
industries in Asia have been benefiting from infrastructure-led
economic stimuli. Seaborne volumes in the smaller vessels sectors
set a record first half, resulting in a 7.5% year-on-year
increase.
Meanwhile, fleet growth has moderated while fleet inefficiency
increased due to heightened COVID-19 related protocols as the third
wave sweeps through. The additional sailing and port days further
tightened the fleet supply and kept the market tightly
balanced.
Market fundamentals remain supportive of continued strength in
the freight market. However, any delays in infrastructure spending
or measures taken to slow inflation could slow demand.
Containers
Both box freight and containership charter markets saw record
conditions in the first half of 2021 as the container shipping
market experienced strongly recovering box trade volumes combined
with port congestion on the West Coast US and in Southern China,
and logistical issues including a shortage of box availability in
Asia. By the end of May, the containership charter market had
reached a new all-time high, surpassing the previous record levels
seen in 2005, whilst the spot container freight market saw its
strongest six month period on record in the first half.
Box spot freight rates have surged globally; the SCFI Index
achieved new record levels on a number of occasions in the first
half of 2021, reaching the highest level on record of 3,785 at end
June 2021, and averaging 3,019, up more than 230% year-on-year.
Liner companies have reported record operating margins.
Containership charter rates have seen equally extraordinary gains,
with the 'basket' index standing at an all-time high of 218 points
at the end of June 2021, up more than 130% since the start of the
year, and by more than 400% year-on-year. Multi-year vessel charter
periods have become the norm. The containership sale and purchase
market saw record volumes.
Capacity availability has tightened significantly, and the
supply side continues to provide underlying support; containership
fleet capacity grew by 2.2% in the first six months of 2021,
according to Clarksons Research, following 2.9% in full year 2020.
However, the vastly improved market conditions and sentiment have
seen boxship newbuild investment surge, much of it focused on 2023
delivery. The order book has risen to 20% of fleet capacity.
Operating speeds have continued to increase and were 4% higher
year-on-year in June, though still 25% below 2008 levels.
The near-term outlook remains positive, with trade expected to
remain firm with global box trade projected to grow by a firm 6.3%
in TEU terms in full year 2021 and disruption continuing for a
prolonged period. Uncertainties clearly remain, and while moderate
supply growth in 2022 could provide further support, fresh capacity
due for 2023 delivery may subsequently exert material pressure.
Tankers
Tanker markets saw generally low levels of earnings in the first
half of 2021. Low levels of oil demand and refinery runs and
ongoing crude oil production cuts from the 'OPEC+' group of
countries were the key drivers of reduced tanker demand and
earnings. Global oil demand in the first half of the year was
assessed to be 5% lower than the average level in 2019, prior to
the COVID-19 related disruption, while global oil supply was
assessed to be some 7% lower than the average level in 2019.
Clarksons' assessed average earnings for VLCCs were 96% lower
than in the very strong first half of 2020 and 83% lower than in
the second half of 2020. Clarksons' assessed average suezmax and
aframax earnings fell by 86% and 76% respectively year-on-year
compared to the first half of 2020.
The products tanker market also witnessed similar weakness in
earnings. Assessed earnings for LR2s on the benchmark Middle East
to Far East route fell by 86% year-on-year in the first half of
2021 when compared to the first half of 2020. Assessed earnings for
LR1s on the same route fell by 80% year-on-year in comparison to
the first half 2020. Meanwhile, assessed average clean MR earnings
declined by 71% in the first half of 2021 compared to the first
half of 2020.
Key energy agencies expect global oil demand to rise sharply in
the second half of the year, projecting a rise of 4-5% on average
compared to the first half of the year, due to rebounding economic
growth and lifting of restrictions on travel. If this increase in
demand materialises, refinery runs and oil supply are also expected
to increase sharply and drive a strong rebound in tanker demand.
However, many uncertainties remain about the timing and magnitude
of any rebound in oil demand and increases in oil supply.
Tanker earnings may remain subject to potential volatility, not
only due to the ongoing uncertainties regarding the outlook for oil
demand and supply, but also geo-political developments, weather
events and possible unexpected oil or tanker industry events that
have been particularly prevalent over the past two years.
Specialised products
It has been a challenging six months for the specialised
products markets, with spot freight rates depressed across the
board. The weakness of the petroleum products market led to an
oversupply of part-capable IMO MR tonnage which competed with
traditional chemical carriers in both the edible oils and bulk
chemicals sectors. However, underlying chemical and edible oil
demand remained robust with high Contract of Affreightment (CoA)
coverage providing a floor to freight rates. Overall seaborne trade
performance showed a much lower decrease than was expected at the
outset of the COVID-19 pandemic underlying the resilience of the
specialised products market compared to other shipping sectors
where demand destruction was more evident.
The spot freight rates on some trade lanes have improved
slightly as the year has progressed. This has been driven by higher
bunker prices, trade flow disruption caused by severe weather in
Houston in February and to a lesser extent the blockage of the Suez
Canal. The Clarksons Platou Specialised Products Bulk Chemical
Index recorded an 8.1% rise in the year, whilst the Clarksons
Platou Specialised Products Edible Oils Index has seen a 13%
increase. However, spot freight rates remain below the long run
average of the last 12 years.
The order book still remains at its lowest level in 20 years at
5.9% of the in-service tonnage. This is not expected to change in
the medium term, with financing difficult to source and yard
availability tightening due to investment by other sectors.
CoA nominations are healthy which suggests underlying demand is
increasing. Seaborne trade is expected to recover this year by
about 3.6% as pent-up consumer demand and large fiscal stimuli,
particularly for infrastructure projects, drives economies and
manufacturing supply chains. When combined with the limited
additional supply, this suggests a firming sentiment in the market.
The degree to which, and when, this occurs will be heavily
influenced by the recovery in the petroleum products markets. We
expect that towards the end of the year there will be some
improvements, but until that occurs the freight rate environment in
the short term will remain challenging.
Gas
VLGC rates increasingly came under pressure as the first quarter
progressed, largely as a result of the dip in weather-related US
exports. Nevertheless, they rebounded through April and May with
the benchmark Arabian Gulf-Japan rate averaging US$50 per metric
tonne (pmt) in April and just shy of US$60 pmt in May. With demand
in the East buoyant, waiting time through Panama continued to take
its toll as containerships, LNG and dry bulk carriers competed for
booking slots. In the first half, nine vessels were delivered with
a balance of 11 units to be absorbed into the fleet by the year
end.
To date, no vessels have been removed from the fleet, although
we have seen units taken out for drydocking and also for dual fuel
retrofitting. Despite continued growth in North American exports,
which have risen 15% in the first half of this year, recent
strengthening of LPG prices over the course of the last month have
placed pressure on arbitrage margins, and spot rates have fallen to
below US$35 pmt Arabian Gulf-Japan as of mid-July.
The size sectors below have not followed the upward directional
movement noted in the VLGCs from March onwards. The
Clarksons-assessed 12-month time charter rate on a 38,000 cbm
midsize unit remained relatively flat until the end of the first
quarter and into the start of the second quarter before dropping to
US$830,000 pcm in June. Likewise, the assessed rates on the 20,500
cbm semi-refrigerated vessels have hovered around US$670,000 pcm
before softening a little towards the end of the period. The
handysizes have suffered from the downturn in petrochemical volumes
out of the US and, although volumes have recovered thereafter,
there has been no discernible impact on freight rates.
Once again, the fortunes of the smaller sized units fared less
favourably than the larger units over the first half of 2021.
Freight rates across most of the size categories below 15,000 cbm
have at best remained the same due to unscheduled outages at a
number of petrochemical facilities and downtime at coastal
refineries and although there are very few new vessels on order,
there is expected to be limited change in the near term. However, a
deteriorating age profile in the smaller semi-refrigerated sector
may start to result in some upward pressure on freight rate
levels.
The interest in newbuilding contracting has continued apace over
the last six months, but the impact will not be felt until 2023 and
will, to some extent, be mitigated by the removal of older vessels
and the impact of EEXI on the demand/supply balances. Additionally,
the more recent recovery in oil and gas prices may help to
stimulate a recovery in LPG production levels and continued
bottlenecks through Panama could continue to extend
tonne-miles.
LNG
LNG freight rates surged in the first half of 2021, on the back
of strong heating and restocking demand in Asia and Europe, several
LNG exports plants outages in the Pacific and Middle East
backfilled by US LNG export cargoes and severe delays for LNG
carriers via the Panama Canal, especially in the first quarter.
The spot headline rates for conventional 160,000 cbm Tri-Fuel
Diesel Electric (TFDE) tonnage climbed 45.9% year-on-year averaging
US$71,800 per day in the first half of 2021. However, the trading
environment was particularly volatile, with spot freight rates
rallying to an all-time high of US$262,000 per day on a round trip
basis in early January, then plummeting to less than US$20,000 per
day in early March before recovering to US$75,000 per day during
the second quarter, driven by long haul US LNG exports to the Far
East, widening gas spreads and limited vessels availability, amid
strong multi-month activity.
LNG tonnage demand continued to grow in the first half of 2021
by 14.7%. The average laden distance sailed by LNG carriers was up
9.2% to 4,495 nm in the first half of 2021, compare to 4,115 nm a
year ago, driven by LNG shipments from US to
Japan-Korea-Taiwan-China area.
Global LNG trade volumes rose by 5% to 194.0m mt in the first
half of 2021, as higher volumes from US and Egypt were partially
offset by losses from Norway, Trinidad & Tobago, Nigeria and
Angola.
On the demand side, Japan-Korea-Taiwan remained the largest
demand area with 72.2m mt of imports, but China overtook Japan as
the world's biggest LNG importer at 39.6m mt against Japan's LNG
imports of 39.4m mt.
29 conventional LNG carriers and two FSRUs were delivered in the
first half of 2021, 16 more than the 13 LNG carriers delivered in
the first half of 2020, when one FSRU was also delivered. 19
conventional LNG carriers were ordered in the first half of 2021,
with three ordered in the first half of 2020. Newbuild ordering is
expected to continue into 2021, supported by several liquefaction
projects which anticipate reaching final investment decision this
year, by portfolio players holding long-term FOB supply contracts
from projects under construction and by players looking at renewing
existing tonnage with more efficient LNG carriers.
Sale and purchase
Secondhand
A year ago the sale and purchase (S&P) markets were
struggling with huge COVID-19 economic uncertainty and the wide
ranging logistical challenges of delivering a ship. While
difficulties remain (especially around crew transfer), sales
volumes have picked up to record levels with over 84m dwt of
tonnage bought and sold in the first half and, in some segments,
significant asset value increases.
After the early disruption in 2020, S&P volumes rebounded in
the second half of that year and achieved a record 84m dwt (worth
more than US$22bn) in the first half of 2021. Improving charter
markets (tankers aside) and optimism around economic recovery,
relatively low newbuilding order books and the potential impact of
emissions regulation have all helped. On the operational side,
COVID-19 clauses are now embedded in most sales forms; inspections
are often more streamlined but challenges around crew transfer
remain.
A quarter of sales during the first half (representing 256
vessels of 0.9m TEU and worth in excess of US$5bn) were in the
container market. The biggest uplift across all our price indices
was for a 4,500 TEU ten-year-old panamax, up by 200% from US$19m to
US$60m; two years ago such a design was selling for US$10m. The
largest number of sales were in the traditional volume market of
bulkers (with more than 525 sales of 36m dwt with value of US$8bn).
The Clarksons Research 5 Year Old Price Index increased by 38%.
Tanker activity (reporting 282 sales of 35m dwt and worth more
than US$6bn) and pricing for a five-year-old vessel was 12% higher
at the end of the first half compared to the year-end, in sharp
contrast to the struggling spot markets. Cash generated from the
two relatively recent 'spikes' in late 2019 (sanctions) and the
second quarter of 2020 (floating storage driven) alongside buyers
seeking counter-cyclical opportunities (including owners that
operate 'mixed' fleets across dry and wet) have helped support
pricing. Additionally, escalating newbuild pricing (driven by
improved demand, especially in containers, but also escalating
steel prices and exchange rates) and surging scrap prices (VLCC
scrap values have risen from US$17m to US$24m) have also provided
support. Greek companies led both the buyers' and sellers' charts,
reinforcing their asset player tradition, closely followed by China
on the buying side and Japan on the selling side.
Newbuilding
Global newbuild activity picked up significantly in the first
half, with orders surpassing full year 2020 volumes and reaching
24m CGT valued at US$55bn. This represents the strongest level of
orders since the first half of 2014 and was supported by improved
economic outlook and strong conditions in a number of shipping
markets. There was particularly strong newbuild investment in the
containership segment, with orders totalling 2.9m TEU worth
US$26bn. Newbuild prices have also increased, impacted by increased
demand and rising steel prices and exchange rate movements.
Although the newbuilding order book has edged up during the
first half to 80.9m CGT and US$245bn, it remains a relatively low
8% of the world fleet. Shipyard output remained relatively stable
year on year, with deliveries reaching 17m CGT according to
Clarksons Research; Chinese yards delivered 40% of tonnage,
followed by South Korea (35%) and Japan (17%).
The focus on emissions reduction and the green transition
continues to accelerate, with significant announcements from the
IMO, in relation to ship efficiency and reduced emissions (EEXI and
CII), and by the EU, including the extension of shipping to the
Emissions Trading Scheme (ETS). There is increased focus across our
client base on de-carbonisation and underlying trends towards
alternative fuels and fuel-efficient ships with Energy Saving
Technologies (ESTs) continue, with nearly 30% of the newbuild order
book by tonnage now alternative fuelled. The global Clarksons
Platou newbuilding teams had a very active first half, including
supporting a number of major clients with fleet renewal and
alternative fuelled projects.
Offshore
General
The first half of 2021 saw slightly improved sentiment across
the offshore oil and gas sector. Overall, the global offshore rig
count seems to have bottomed out and we currently expect a slight
increase throughout the remainder of 2021. Several restructurings
have completed with, for example, some of the drillers emerging
from Chapter 11 proceedings. The offshore renewables (wind) sector
continues to see high activity levels and a steady stream of new
development projects being sanctioned.
Drilling rig market
At the end of June 2021, global rig demand stood at 465 units,
split between 116 floaters and 349 jackups - similar levels to
those seen at the end of 2020. We see signals indicating that
global rig activity has bottomed out and likely will start to
increase slightly throughout the rest of the year. Several regions
see increasing tender activity currently and oil companies are
re-initiating activities that were stalled last year. Industry-wide
utilisation however remains challenging, and there is limited
change to contracted day rates.
Going forward, we expect more consolidation in the rig sector as
more drilling contractors complete restructuring processes. Further
consolidation is likely to lead to gradually improving bidding
discipline and day rates. Even though this will take time, we
expect it to result in more sustainable earnings for the drilling
contractors.
Subsea and field development market
Leading contractors in 2021 have continued to build backlog,
albeit moderately. Major contractors, however, continue to face low
fleet utilisation and declining revenues and earnings due to
lag-effects. Consequently, several contractors have released
chartered vessels back to the market and announced cost reduction
efforts. This has had an adverse impact on subsea vessel owners who
have continued to struggle to secure utilisation for their vessels.
There is also so far limited improvement in the market for subsea
inspections, maintenance and repairs (IMR), something which has
further contributed to depressed fleet utilisation. Continued
strong activity in the offshore wind segment has helped, but this
is far from sufficient to cover the shortfall in subsea EPC/project
work and IMR.
Following backlog-build for the major contractors, more offshore
field development work is expected to be executed in 2022 and
beyond. This is likely to coincide with increased IMR activities
within oil and gas and continued high activity in wind. Combined,
this should improve prospects for fleet utilisation and day
rates.
Offshore support vessels (OSVs)
The market for OSVs generally remains challenging and is still
characterised by significant vessel overcapacity. Current day rates
are generally in line with, or slightly above, vessel operating
expenses. All regions are seeing weak rates and low utilisation,
which leads to significant financial stress for owners. Multiple
owners have been, or are still, going through financial
restructuring, and the S&P market has been particularly
challenging with few industrial owners left with capacity to
transact. Chartering volumes are however currently indicating a
pickup, but we likely need to see higher activity levels
particularly in the drilling market to see a more meaningful
recovery for the OSV segment.
Renewables (wind)
The offshore renewables market continued apace in the first half
of 2021. The pipeline of projects until 2025-26 is starting to firm
up, with good visibility on projects and timing. The level of Final
Investment Decisions (FIDs) started off at a good pace in the first
quarter, but slowed down somewhat in the second quarter. FID
levels, usually tilted towards the second half of the year, are
expected to increase and reach similar record levels to those seen
in 2020.
The globalisation of the offshore wind market continues apace.
Several offtake agreements have been awarded during the first half
of the year. The Polish Energy Regulatory Office (ERO) has awarded
several contracts for 5.9GW of Polish offshore wind projects, to
both local and foreign energy companies. The first commercial US
project, Vineyard Wind, has seen positive regulatory feedback and
is starting to move forward, with major contracts awarded in the
first quarter.
As highlighted previously, investor focus on ESG and
infrastructure investments is on the rise. As an example, just
after the end of the first quarter, Norway's sovereign wealth fund
(NBIM) made its first direct investment in renewable energy, paying
more than US$1.6bn. Copenhagen Infrastructure Partners also closed
its global greenfield renewable energy fund after commitments from
investors across the Nordics, Europe, North America, Asia, and
Australia. The fund was oversubscribed and closed at EUR7bn.
The first half has also seen increased investments in offshore
wind vessels. With the upsizing trend of key equipment needed to
build and operate a windfarm, such as the wind turbine, the current
vessel fleet is not capable of building and supporting the planned
industry growth in the years post 2024. In the first half of 2021,
we have seen several orders in both the CSOV, CTV and WTIV space,
from both incumbents and newcomers.
Futures
Dry FFAs
Dry FFA rates have seen a solid first half with increases in
Chinese demand along with suitable weather factors playing a major
role in sustaining rates at levels not seen in the last 10 years.
The returns have been even more pronounced for smaller size ships.
Average FFA earnings in the first half of 2021 for various sectors
were: capesize US$24,487 per day, panamax US$22,126 per day,
supramax US$21,957 per day and handysize US$20,657 per day. Dry
options have also seen increased volumes similar to swaps.
The forward curve remains strong and, with newbuilds focusing on
containers, the dry bulk sector should remain positive into
2022.
Wet FFAs
Wet FFA rates are low and volumes are down 23% year-on-year
across both clean and dirty. The TD3 fourth quarter 2021 rate is
currently pricing lower than the settlement of any fourth quarter
in the last 20 years although the options market has picked up.
Financial
Revenue: GBP24.7m (2020: GBP13.3m)
Segment underlying profit: GBP5.3m (2020: GBP1.6m loss)
Securities
The first half of 2021 witnessed an impressive recovery for the
global financial markets. Stock markets have consistently performed
well throughout the period, supported by historically low interest
rates, stimulus packages and record high household savings
allocated into capital markets. Deal activity in the capital
markets has reached record levels during the first half; initial
public offerings in the US have already broken 2020's record levels
with six months to go. Global indices have seen all time high
levels during the first six months of 2021, despite delayed
re-openings, fears of rising bond yields and fears of high
structural inflation.
Clarksons Platou Securities has had a strong start to 2021 in
all the four core sectors we cover and in total raised
approximately US$2bn for clients.
The shipping market started well in 2021, especially within the
container and dry bulk markets. As the container market continues
to set new records, Clarksons Platou Securities has supported
clients in M&A transactions amounting to more than US$600m. In
addition, Clarksons Platou Securities was retained as joint
bookrunner in the IPO on NYSE of Zim Integrated Services in January
2021.
Within the renewable energy space, optimism and deal activity
remained high with several transactions completed during the first
half of 2021.
The high deal activity also applies for the metals and minerals
team, which completed a total of six transactions during the first
half raising a total of US$1bn through both ECM and DCM
transactions. Fiscal policy continues to drive iron ore demand from
infrastructure investments and has contributed to the record levels
seen in the iron ore spot market. The continued transition to
electrical vehicles and battery components also helps the metals
and minerals team.
Within the offshore segment, deal activity has been quite soft
with continued oversupply within oil service segments. US drillers
emerging from Chapter 11 with leaner balance sheets, may create
solid platforms for industry consolidation. As oil prices gain firm
footing, trading at over US$70/bbl and over 40% higher than at the
end of 2020, the outlook keeps on improving. Despite the soft deal
activity, Clarksons Platou Securities has still been active in the
offshore segment, including the first at the market transaction in
the US for Borr Drilling, starting in July 2021.
Project finance
Shipping
Following more than a decade of investors focusing on real
estate investments, a booming container market and a strong dry
bulk market in the first half has generated interest from investors
and shipowners for diversification back into shipping. Both banks
and alternative sources of finance are offering higher leverage
finance at lower margins, making project finance structured
shipping deals more competitive.
In the first half of 2021 we have structured shipping deals with
a total project price above US$300m. The majority of these deals
have been for 11 dry bulk vessels. We have also arranged the
financing of a cruise vessel with seven years' time charter, three
newbuilding container vessels with eight years' time charter and
two offshore supply vessels with five years' bareboat charter. In
addition to new acquisition projects, we have sold three container
vessels and one chemical tanker from existing projects, generating
a good return for the investors.
The total fleet under our corporate management is now above 60
vessels, including tankers, bulkers, container vessels, heavy lift,
cruise and offshore vessels. The total value of the fleet is
considerably higher than at the start of the year and secondary
trading in shares in many projects was concluded at prices which
generated a good return to the sellers.
Real estate
In the Norwegian real estate market, nothing is normal. In a
period where a number of commentators have predicted the death of
office working, we have seen record high prices for the purchase
and sale of office buildings, and record high rents achieved. In
the most attractive and central areas it is expected there will be
almost full occupancy.
Much of the increase in property prices can be explained by both
the low interest rates and the lack of alternative investments.
Three month NIBOR bottomed out at an all-time low of 0.2% compared
with 1.9% in March 2020. Even with three month NIBOR just below
2.0%, there was an active transaction market with record low
yields. The Norwegian Bank currently forecasts three month NIBOR
will increase to approximately 0.8% before the end of the year.
In the first half of 2021, eight new projects have been
structured and four existing projects have been sold with good
returns for investors. The largest single project was the purchase
of Strandveien 4-8 and 10 with a property value of just over
NOK1bn.
The general investor appetite for commercial real estate is
still expected to be high, where an associated active transaction
market constantly offers interesting investment opportunities. Real
estate is cyclical, where the consensus is that it will be more
challenging to create returns for investors in the future only on
the basis of declining yields and return requirements in the
financial market. With expected higher interest rates in the next
six months and beyond, this is also unlikely. We expect some
investors might want to reallocate risk by weighting themselves
from cash flow projects over to more actively-managed
operational/development-oriented projects.
We are specifically looking at these actively-managed projects
for our new fund - Oslo Opportunity II AS (OO2). OO2 was fully
subscribed with NOK750m in equity during the first half of the
year. We already have some of these projects in the portfolio, and
here the development work is with assistance from our development
company Clarksons Platou Project Development.
In addition to launching our new fund OO2, which is already in
the process of making its first two investments, there has been
high activity in Oslo Opportunity AS (OO1), which is now in an exit
phase. The fund sold three of its properties in the first half of
2021 and is in bid acceptance with two more properties.
Our technical manager and due diligence advisor, Vaxa Property,
has also grown strongly in the past year and now covers property
management, fire protection, project management and due diligence.
The company's management portfolio has reached approximately
300,000m(2) with several projects in the pipeline.
Structured asset finance
In the first half of 2021, for the right deal, there was plenty
of availability of funds from the traditional banks, often backed
by ECA facilities. The number of shipping finance banks remains
relatively stable with CBA being the only high-profile name to exit
ship finance this year, however there were also no new significant
entrants to the segment.
Overall, the key drivers for credit approvals remain the same,
that is, debt service visibility, residual value exposure
(increasingly apparent as S&P valuations continue to rise) and
the 'green credentials' of the borrower, the project and the
asset.
Chinese leasing companies were substantially more active in the
first half of 2021 with some being able to offer terms directly
comparable with banking facilities on pricing, yet on greater
volumes, higher advance ratios, more residual risk appetite and
better structural flexibility. The emergence of a 'two-tier' market
in Chinese leasing is apparent: as leading lessors are improving
their terms, smaller leasing companies are unable to compete.
The Japanese leasing market continues to seek quality projects
in shipping either via Japanese owner financing or directly
financing blue chip owners and end-users.
Alternative finance providers (now called 'the direct
financiers') have firmly established their positions and are
providing funding to mid-tier owners. While the deals are smaller
and pricier than in the "mainstream" financing, they can also be
more flexible in their solutions, deploy capital faster and may
consider older tonnage.
For the long-term project finance-type transactions, for example
for offshore wind vessels, we are seeing the traditional banks and
insurance companies being the most competitive, with their ability
to write long tenors at very low margins based on top credit
utility as the ultimate counterpart.
We maintain good relationships with key players in all shipping
finance segments described above and managed to conclude a number
of transactions in the first half of this year covering a variety
of financial sources.
Support
Revenue: GBP14.1m (2020: GBP11.5m)
Segment underlying profit: GBP1.5m (2020: GBP0.2m)
Overall, especially relative to the challenged trading period in
the first half of 2020, the Support segment has performed well.
Agency - UK
The Agency business in the UK was profitable in the first half
of 2021; in the equivalent period in 2020 it was loss making.
The stevedoring business had a tough six months; export volumes
were always likely to be weak following the worst harvest in 40
years in 2020, but the effect was compounded by Brexit which saw
much of the exportable volume moved before the end of 2020 meaning
little left to go in the first half of 2021. The 2021 harvest is
expected to give rise to better trading conditions and volumes in
the second half.
Our agency offices faced different challenges. Where offices
have offshore or windfarm work, core import accounts or support
from dry bulk operators, they have performed well. Those offices
focusing on grain exports or facing terminal issues or a lack of
project work, fared less well. Overall agency operations were ahead
of expectations.
The short sea broking division performed well in very strong
market conditions. We expect the market to ease somewhat as it
remains stronger than the balance between the fundamental cargo
volume demand and ship fleet tonnage supply would suggest.
Customs clearance work after 31 December 2020 generated good
returns and the expectation is that the amount of work in the
clearance sector will continue to grow as the UK steadily erects
its borders post-Brexit.
Gibb Group
The Gibb business has performed ahead of expectations despite it
being in a sustained period of refocusing away from a reliance on
the oil and gas sector. Gibb Group, through its tooling and
supplies, safety and survival and hire divisions, continues to
grow, securing key customer accounts in offshore renewable and
other sectors. The business expects to expand in the second half
with a new operation in Ijmuiden in the Netherlands opened in July.
This is the first of a number of initiatives to develop the company
in line with its strategic plan over the next three to five
years.
Agency and Liners - Egypt
Port call numbers have increased by 56% in the first half of
2021 compared with the same period in 2020. Transit operations have
declined as established clients changed their routings but recent
agreements with new clients should help build volumes. The liner
business, which offers operational services, continues to generate
stable returns.
Research
Revenue: GBP8.6m (2020: GBP8.5m)
Segment underlying profit: GBP3.1m (2020: GBP3.1m)
Research performed robustly during the first half, with revenue
increasing to GBP8.6m (2020: GBP8.5m) and profits of GBP3.1m (2020:
GBP3.1m). A strong pipeline of product development and sales
enquiry, alongside an increase in pre-booked revenues, is also in
place for the second half of 2021. Our flow of high quality and
market-relevant research output, including our green transition and
COVID-19 impact focus, has continued with excellent client
feedback. Data and research support to the Broking, Financial and
Port Services segments of the Clarksons Group also continues
alongside enhanced support to the Maritech technology business.
There was encouraging growth across our digital product range
during the first half, with underlying sales up 13% year-on-year
and continued growth of the subscriber base. Sales of our
market-leading Shipping Intelligence Network (SIN) have benefited
from our excellent research around shipping market supply and
demand and the introduction of expanded near-term data, including
port calling and vessel activity indices generated by our Data
Analytics team. During May, we published our latest COVID-19
Shipping Market Impact Assessment documenting that a year on from
peak disruption to maritime trade, volumes have now returned to
pre-pandemic levels while our ClarkSea Index averaged its best half
year period since 2008 at US$20,717 per day, supported by all-time
high charter rates across the containership market.
Although 'green' data and analysis has already been embedded
across our offering, a specific Green module has now been developed
and launched for SIN and the World Fleet Register (WFR). Sales of
our WFR grew 20% year-on-year during the first half, continuing the
strong growth of recent years and benefiting from the platform's
environmental regulation, green technology and emissions tracking
content. We have also consolidated individual intelligence report
access into our digital platform during the first half.
Our long-term strategy to focus on data, intelligence and
insights around the green transition continued in the first half
with increasing client appetite as stakeholders across maritime
look to embed 'green' and 'tech' in their 'build back better' post
COVID-19 planning. There has been a positive reaction from our
clients to the wide-ranging research and data already developed and
published and in April we issued a further update of our Fuelling
Transition report series, profiling the 2.4% of global CO(2)
emitted by the shipping industry and tracking the take up of
alternative fuels and Energy Saving Technologies (ESTs) to date.
Research has also been supporting Clarksons' group-wide initiatives
to partner clients through their de-carbonisation pathways,
contributing to internal training initiatives and to emissions
benchmarking data supporting the carbon module within the Sea/
suite.
The development of our new offering, Renewables Intelligence
Network (RIN), a specific data and intelligence website focused on
renewables within the maritime setting, has successfully continued
during the first half. This offering includes both macro and
granular data, intelligence and forecasts around: long term Energy
Transition modelling; project tracking of offshore wind farms;
detailed country briefs and forecasts; profiles of all developers;
the offshore 'wind' fleet and the vessels, owners and yards
involved; green technology across this fleet; dashboard analytics;
dynamic mapping and deployment analysis; port analysis; tidal,
hydrogen and carbon capture projects; and a comprehensive
intelligence report series. While this is a competitive research
area, initial marketing has been successful and feedback from
clients and the Broking, Financial and Port Services teams has been
positive. Our overall offshore digital sales, including oil and gas
data and analysis, were up an encouraging 21% year-on-year during
the first half.
Our data services and consultancy teams performed well in the
first half. Interest in data contracts, including API delivery,
remains high and our services team continues to secure a flow of
new sales. We completed several successful consultancy projects
during the first half, including industry sections for capital
market documents, studies for governments and policy makers and
several consultancy projects working closely with the Broking and
Financial teams. Our global sales and business development team
also have a good pipeline of enquiry across our standard products.
Despite some challenges around currency movements and the reduction
of European bank ship finance portfolios, Clarksons Valuations
remain market leaders and further strengthened their team during
the first half. There was also increased marketing to ship finance
and leasing institutions, including in Asia. A review of new
European Banking Authority (EBA) guidelines issued to financiers
around property and maritime valuations has been carried out with
additional documentation produced and enhancements to the Clarksons
Valuations digital delivery tool in progress. As the
industry standard source in the provision of authoritative,
consistent, independent and well documented valuations delivered
through a dedicated team, Clarksons Valuations continue to be well
placed to support financial institutions. A number of valuation
clients have now also been provided with emissions benchmarks
alongside their traditional asset valuations, with the valuation
team increasingly analysing the impact of alternative fuels and
Energy Saving Technologies (ESTs) on fleet value as the Fuelling
Transition gathers pace. The Clarksons Valuations team has been
actively supporting the sale and purchase broking teams of
Clarksons Platou.
Clarksons Research remain market leaders in the provision of
data, intelligence and analysis around shipping, trade, offshore
and energy having strengthened their position during the
challenging COVID-19 period with highly market relevant content and
insights. Supported by an innovative and dedicated global team with
a strong Asian presence, together with important investments into
underlying data, our digital offering and research content has good
momentum.
Directors' responsibilities statement
The Directors confirm that:
-- these interim financial statements have been prepared in
accordance with UK-adopted International Accounting Standard 34,
'Interim Financial Reporting', as adopted in the United Kingdom;
and
-- the interim report includes a fair review of the information required by:
(a) DTR 4.2.7R, being an indication of important events that
have occurred during the first six months of the financial year
ending 31 December 2021, and their impact on the interim financial
statements; and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
(b) DTR 4.2.8R, being material related party transactions that
have taken place in the first six months of the financial year
ending 31 December 2021, and any material changes in the related
party transactions described in the 2020 annual report.
A list of the current Directors is maintained on the Clarkson
PLC website: www.clarksons.com.
The maintenance and integrity of the Clarkson PLC website is the
responsibility of the Directors; the work carried out by the
Auditors does not involve consideration of these matters and,
accordingly, the Auditors accept no responsibility for any changes
that may have occurred to the interim financial statements since
they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
On behalf of the Board
Sir Bill Thomas
Chair
6 August 2021
Independent review report to Clarkson PLC
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Clarkson PLC's condensed consolidated interim
financial statements (the "interim financial statements") in the
Interim results of Clarkson PLC for the six month period ended 30
June 2021 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK-adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Consolidated balance sheet as at 30 June 2021;
-- the Consolidated income statement and Consolidated statement
of comprehensive income for the period then ended;
-- the Consolidated statement of changes in equity for the period then ended;
-- the Consolidated cash flow statement for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim results
of Clarkson PLC have been prepared in accordance with UK-adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the Directors
The Interim results, including the interim financial statements,
is the responsibility of, and has been approved by, the Directors.
The Directors are responsible for preparing the Interim results in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the Interim results based on our review.
This report, including the conclusion, has been prepared for and
only for the Company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Interim
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
6 August 2021
Consolidated income statement
for the half year to 30 June
2021 2020
============================================== ----------------------------------------------
Before Acquisition- After Before Acquisition- After
acquisition- related costs acquisition- acquisition- related costs acquisition-
related costs (note 4) related costs related costs (note 4) related costs
Notes GBPm* GBPm* GBPm* GBPm* GBPm* GBPm*
-------------- -------------- -------------- -------------- -------------- --------------
Revenue 3 190.1 - 190.1 180.4 - 180.4
Cost of sales (7.9) - (7.9) (6.2) - (6.2)
============== ============== ============== -------------- -------------- --------------
Trading profit 182.2 - 182.2 174.2 - 174.2
Administrative
expenses (153.9) (0.2) (154.1) (151.2) (0.2) (151.4)
============== ============== ============== -------------- -------------- --------------
Operating profit 3 28.3 (0.2) 28.1 23.0 (0.2) 22.8
Finance income 1.2 - 1.2 0.5 - 0.5
Finance costs (2.1) - (2.1) (2.5) - (2.5)
Other finance
income -
pensions 9 0.1 - 0.1 0.1 - 0.1
============== ============== ==============
Profit before
taxation 27.5 (0.2) 27.3 21.1 (0.2) 20.9
Taxation 5 (5.9) - (5.9) (4.9) - (4.9)
============== ============== ============== -------------- -------------- --------------
Profit for the
period 21.6 (0.2) 21.4 16.2 (0.2) 16.0
============== ============== ============== -------------- -------------- --------------
Attributable to:
Equity holders of
the Parent
Company 19.5 (0.2) 19.3 15.6 (0.2) 15.4
Non-controlling
interests 2.1 - 2.1 0.6 - 0.6
============== ============== ============== -------------- -------------- --------------
Profit for the
period 21.6 (0.2) 21.4 16.2 (0.2) 16.0
============== ============== ============== -------------- -------------- --------------
Earnings per
share
Basic 6 64.0p 63.5p 51.4p 50.6p
Diluted 6 63.8 p 63.3 p 51.3p 50.6p
-------------- -------------- -------------- -------------- -------------- --------------
* Unaudited
Consolidated statement of comprehensive income
for the half year to 30 June
2021 2020
GBPm* GBPm*
======= -------
Profit for the period 21.4 16.0
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Actuarial gain on employee benefit schemes - net of tax 6.8 0.9
Changes in the fair value of equity instruments at fair value through other (1.7) -
comprehensive income
Items that may be reclassified subsequently to profit or loss:
Foreign exchange differences on retranslation of foreign operations (3.0) 1.5
Foreign currency hedges recycled to profit or loss - net of tax (1.2) 1.5
Foreign currency hedge revaluations - net of tax 0.7 (2.7)
======= -------
Other comprehensive income 1.6 1.2
======= -------
Total comprehensive income for the period 23.0 17.2
======= -------
Attributable to:
Equity holders of the Parent Company 20.9 16.7
Non-controlling interests 2.1 0.5
======= -------
Total comprehensive income for the period 23.0 17.2
======= -------
* Unaudited
Consolidated balance sheet
as at 30 June
Notes
2021 2020 31 December 2020
GBPm* GBPm* GBPm#
======== -------- -----------------
Non-current assets
Property, plant and equipment 23.1 25.4 24.3
Investment properties 1.1 1.2 1.2
Right-of-use assets 42.5 52.5 47.0
Intangible assets 8 182.8 238.4 182.9
Trade and other receivables 2.5 2.1 3.1
Investments 1.3 4.7 2.9
Employee benefits 9 24.7 18.4 18.1
Deferred tax assets 9.4 8.6 10.6
======== -------- -----------------
287.4 351.3 290.1
======== -------- -----------------
Current assets
Inventories 1.4 1.3 1.3
Trade and other receivables 95.2 76.1 76.6
Income tax receivable 0.8 0.3 0.2
Investments 10 4.0 14.4 31.1
Cash and cash equivalents 11 152.9 158.9 173.4
======== -------- -----------------
254.3 251.0 282.6
======== -------- -----------------
Current liabilities
Interest-bearing loans and borrowings - (3.3) -
Trade and other payables (126.1) (117.1) (160.6)
Lease liabilities (8.2) (9.2) (8.4)
Income tax payable (6.5) (7.8) (7.9)
Provisions (0.5) (0.5) (0.5)
========
(141.3) (137.9) (177.4)
======== -------- -----------------
Net current assets 113.0 113.1 105.2
======== -------- -----------------
Non-current liabilities
Interest-bearing loans and borrowings - (0.1) (0.1)
Trade and other payables (3.0) (3.1) (2.7)
Lease liabilities (42.6) (52.0) (47.7)
Provisions (1.6) (1.5) (1.5)
Employee benefits 9 (3.8) (6.4) (6.1)
Deferred tax liabilities (12.0) (7.2) (8.8)
======== -------- -----------------
(63.0) (70.3) (66.9)
======== -------- -----------------
Net assets 337.4 394.1 328.4
======== -------- -----------------
Capital and reserves
Share capital 12 7.6 7.6 7.6
Other reserves 104.0 157.8 104.6
Retained earnings 222.0 226.9 211.9
======== -------- -----------------
Equity attributable to shareholders of the Parent Company 333.6 392.3 324.1
Non-controlling interests 3.8 1.8 4.3
======== -------- -----------------
Total equity 337.4 394.1 328.4
======== -------- -----------------
* Unaudited # Audited
Consolidated statement of changes in equity
for the half year to 30 June
Attributable to equity holders of the Parent Company
============================================================
Notes Total
Share capital Other reserves Retained earnings Total Non-controlling equity
GBPm* GBPm* GBPm* GBPm* interests GBPm* GBPm*
============== =============== ================== ======= ================== ========
Balance at 1
January 2021 7.6 104.6 211.9 324.1 4.3 328.4
Profit for the
period - - 19.3 19.3 2.1 21.4
Other
comprehensive
income - (3.5) 5.1 1.6 - 1.6
Total
comprehensive
income for the
period - (3.5) 24.4 20.9 2.1 23.0
============== =============== ================== ======= ================== ========
Transactions with
owners:
Share issues - 0.6 - 0.6 - 0.6
Employee share
schemes - 2.3 1.0 3.3 - 3.3
Tax on other
employee
benefits - - 0.9 0.9 - 0.9
Tax on other
items in
equity - - 0.1 0.1 - 0.1
Dividend paid 7 - - (16.3) (16.3) (2.6) (18.9)
Total
transactions
with owners - 2.9 (14.3) (11.4) (2.6) (14.0)
============== =============== ================== ======= ================== ========
Balance at 30
June 2021 7.6 104.0 222.0 333.6 3.8 337.4
============== =============== ================== ======= ================== ========
Attributable to equity holders of the Parent Company
------------------------------------------------------------
Notes Non-controlling Total
Share capital Other reserves Retained earnings Total interests equity
GBPm* GBPm* GBPm* GBPm* GBPm* GBPm*
-------------- --------------- ------------------ ------- ----------------- --------
Balance at 1
January 2020 7.6 158.4 211.5 377.5 3.1 380.6
Profit for the
period - - 15.4 15.4 0.6 16.0
Other
comprehensive
income - 0.4 0.9 1.3 (0.1) 1.2
Total
comprehensive
income for the
period - 0.4 16.3 16.7 0.5 17.2
-------------- --------------- ------------------ ------- ----------------- --------
Transactions with
owners:
Employee share
schemes - (1.0) (0.3) (1.3) - (1.3)
Tax on other
employee
benefits - - (0.6) (0.6) - (0.6)
Dividend paid 7 - - - - (1.7) (1.7)
Acquisition of
non-controlling
interest - - - - (0.1) (0.1)
-------------- --------------- ------------------ ------- ----------------- --------
Total transactions
with owners - (1.0) (0.9) (1.9) (1.8) (3.7)
-------------- --------------- ------------------ ------- ----------------- --------
Balance at 30 June
2020 7.6 157.8 226.9 392.3 1.8 394.1
-------------- --------------- ------------------ ------- ----------------- --------
* Unaudited
Consolidated cash flow statement
for the half year to 30 June
Notes 2021 2020
GBPm* GBPm*
Cash flows from operating activities
Profit before taxation 27.3 20.9
Adjustments for:
Foreign exchange differences (1.8) (0.6)
Depreciation 6.3 7.1
Share-based payment expense 0.9 0.8
Gain on sale of property, plant and equipment (0.1) -
Loss on sale of investments - 0.1
Amortisation of intangibles 0.4 0.2
Difference between pension contributions paid and (0.1) -
amount recognised in the income statement
Finance income (1.2) (0.5)
Finance costs 2.1 2.5
Other finance income - pensions (0.1) (0.1)
Increase in inventories (0.1) (0.2)
(Increase)/decrease in trade and other receivables (17.4) 4.1
Decrease in bonus accrual (31.3) (36.8)
Increase/(decrease) in trade and other payables 2.8 (0.5)
Increase in provisions 0.1 0.1
======= -------
Cash utilised from operations (12.2) (2.9)
Income tax paid (4.1) (5.3)
======= -------
Net cash flow from operating activities (16.3) (8.2)
======= -------
Cash flows from investing activities
Interest received 0.1 0.5
Purchase of property, plant and equipment (1.3) (1.8)
Purchase of intangible assets (1.7) (3.1)
Proceeds from sale of investments 6.8 7.6
Proceeds from sale of property, plant and equipment 0.2 0.2
Purchase of investments (1.2) (10.9)
Transfer from current investments (funds on deposit) 20.0 -
Acquisition of subsidiaries - (1.2)
Cash acquired on acquisitions - 0.7
Net cash flow from investing activities 22.9 (8.0)
======= -------
Cash flows from financing activities
Interest paid and other charges (2.1) (1.6)
Dividend paid 7 (16.3) -
Dividend paid to non-controlling interests (2.6) (1.7)
Proceeds from borrowings - 2.1
Payments of lease liabilities (4.3) (4.5)
Proceeds from shares issued 0.6 0.1
Acquisition of non-controlling interests - (0.1)
ESOP shares acquired (0.1) (0.1)
Net cash flow from financing activities (24.8) (5.8)
======= -------
Net decrease in cash and cash equivalents (18.2) (22.0)
Cash and cash equivalents at 1 January 173.4 175.7
Net foreign exchange differences (2.3) 5.2
======= -------
Cash and cash equivalents at 30 June 11 152.9 158.9
======= -------
* Unaudited
Notes to the interim financial statements
1 Corporate information
The interim financial statements of Clarkson PLC for the six
months ended 30 June 2021 were authorised for issue in accordance
with a resolution of the Directors on 6 August 2021. Clarkson PLC
is a public limited company, listed on the London Stock Exchange,
incorporated and registered in England and Wales and domiciled in
the UK.
The interim financial statements do not comprise statutory
accounts within the meaning of section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2020 were
approved by the Board of Directors on 5 March 2021 and delivered to
the Registrar of Companies. The Auditors' report on those accounts
was unqualified, did not contain an emphasis of matter paragraph
and did not contain any statement under section 498 of the
Companies Act 2006. The interim financial statements have been
reviewed, not audited.
2 Statement of accounting policies
2.1 Basis of preparation
The interim financial statements for the six months ended 30
June 2021 have been prepared in accordance with the Disclosure
Guidance and Transparency Rules sourcebook of the Financial Conduct
Authority and with IAS 34 'Interim Financial Reporting' as
contained in UK-adopted International Accounting Standards ('IAS
34').
The interim financial statements do not include all the
information and disclosures required in the annual financial
statements and should be read in conjunction with the Group's
annual financial statements for the year ended 31 December 2020,
which were prepared in accordance with International Financial
Reporting Standards (IFRS) and IFRS Interpretations Committee
interpretations in conformity with the Companies Act 2006 and
pursuant to Regulation (EC) No 1606/2002 as it applies to the
European Union. In respect of accounting standards applicable to
the Group in the current period, there is no difference between
IFRS in conformity with the Companies Act 2006, the UK-adopted IFRS
and International Accounting Standards Board (IASB)-adopted
IFRS.
The annual financial statements for the year ending 31 December
2021 will be prepared in accordance with IFRS as adopted by the UK
Endorsement Board. This change in basis of preparation is required
by UK company law for the purposes of financial reporting as a
result of the UK's exit from the EU on 31 January 2020 and the
cessation of the transition period on 31 December 2020. This change
does not constitute a change in accounting policy but rather a
change in framework which is required to ground the use of IFRS in
company law. There is no impact on recognition, measurement or
disclosure between the two frameworks in the period reported.
The Group has considerable financial resources available to it,
a strong balance sheet and has consistently generated an underlying
operating profit and good cash inflow. As a result of this, the
Directors believe that the Group is well placed to manage its
business risks successfully, despite the challenging market
backdrop created by COVID-19. Management has stress tested a range
of scenarios, modelling different assumptions with respect to the
Group's cash resources. Areas considered include varying levels of
profit and cash generation to reflect a significant impact on world
seaborne trade similar to that experienced in the global financial
crisis in 2008 and the period thereafter. Under all these
scenarios, the Group is able to generate profits and cash, and has
positive net funds available to it. Accordingly, the Directors have
a reasonable expectation that the Group has sufficient resources to
continue in operation for at least the next 12 months. For this
reason, they continue to adopt the going concern basis in preparing
the financial statements.
The interim consolidated income statement is shown in columnar
format to assist with understanding the Group's results by
presenting profit for the period before acquisition-related costs;
this is referred to as 'underlying profit'. The column
'acquisition-related costs' includes the amortisation of acquired
intangible assets and the expensing of the cash and share-based
elements of consideration linked to ongoing employment obligations
on acquisitions.
2.2 Accounting policies
The accounting policies adopted in the preparation of the
interim financial statements are consistent with those followed in
the preparation of the Group's annual financial statements for the
year ended 31 December 2020, except as described below:
-- Taxes on income in the interim period are accrued using the
tax rate that would be applicable to expected total annual profit
or loss.
A number of amended standards are effective for the current
reporting period. The Group did not have to change its accounting
policies or make retrospective adjustments as a result of adopting
these standards.
As at the date of authorisation of these interim financial
statements, a number of amendments to standards and interpretations
were in issue but not yet effective. The Group has not applied
these standards and interpretations in the preparation of these
financial statements and does not expect these to have a material
impact on the Group.
2.3 Accounting judgements and estimates
The preparation of the interim financial statements requires
management to make judgements, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingent liabilities at the
reporting date. However, uncertainty about these assumptions and
estimates could result in outcomes that could require a material
adjustment to the carrying amount of the asset or liability
affected in the future.
In preparing these interim financial statements, the significant
judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the
same as those that applied to the consolidated financial statements
for the year ended 31 December 2020 , with the exception of changes
in estimates that are required in determining the provision for
income taxes.
2.4 Seasonality
The Group's activities are not subject to significant seasonal
variation.
3 Segmental information
Revenue Results
====== -------- ======= --------
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
====== -------- ======= --------
Broking 142.7 147.1 30.3 29.4
Financial 24.7 13.3 5.3 (1.6)
Support 14.1 11.5 1.5 0.2
Research 8.6 8.5 3.1 3.1
====== -------- ======= --------
Segment revenue / underlying profit 190.1 180.4 40.2 31.1
====== --------
Head office costs (11.9) (8.1)
======= --------
Operating profit before acquisition-related costs 28.3 23.0
Acquisition-related costs (0.2) (0.2)
======= --------
Operating profit after acquisition-related costs 28.1 22.8
Finance income 1.2 0.5
Finance costs (2.1) (2.5)
Other finance income - pensions 0.1 0.1
=======
Profit before taxation 27.3 20.9
Taxation (5.9) (4.9)
======= --------
Profit for the period 21.4 16.0
======= --------
All revenue is generated externally.
4 Acquisition-related costs
Included in acquisition-related costs are cash and share-based
payment charges and amortisation of intangible assets of GBP0.2m
(2020: GBP0.1m) relating to the Martankers acquisition and GBPnil
(2020: GBP0.1m) relating to previous acquisitions. These are
contingent on employees remaining in service and are therefore
spread over the service period.
5 Taxation
Income tax expense is recognised based on management's best
estimate of the weighted average annual income tax rate expected
for the full financial year. The estimated annual tax rate,
excluding acquisition-related costs, used for the year to 31
December 2021 is 21.5% (the estimated annual tax rate used for the
six months ended 30 June 2020 was 23.2%). The effective tax rate,
after acquisition-related costs, is 21.6% (2020: 23.4%).
6 Earnings per share
Basic earnings per share amounts are calculated by dividing
profit for the period attributable to ordinary equity holders of
the Parent Company by the weighted average number of ordinary
shares in issue during the period.
Diluted earnings per share amounts are calculated by dividing
profit for the period attributable to ordinary equity holders of
the Parent Company by the weighted average number of ordinary
shares in issue during the period, plus the weighted average number
of ordinary shares that would be issued on the conversion of all
the dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
2021 2020
GBPm GBPm
Underlying profit for the period attributable to ordinary equity holders of the Parent
Company 19.5 15.6
Reported profit for the period attributable to ordinary equity holders of the Parent
Company 19.3 15.4
============= ---------
2021 Million 2020
Million
Weighted average number of ordinary shares - basic 30.4 30.3
Weighted average number of ordinary shares - diluted 30.5 30.4
============= ---------
7 Dividends
2021 2020
GBPm GBPm
====== ------
Declared and paid during the period:
Final dividend for 2020 of 54p per share 16.3 -
======
Payable (not recognised as a liability at 30 June):
Interim dividend equivalent to deferred 2019 final dividend of 53p per share - 16.1
Interim dividend for 2021 of 27p per share (2020: 25p per share) 8.2 7.6
====== ------
To enable the business to assess the impact of COVID-19, the
2019 final dividend was deferred from May 2020 and subsequently
paid as an interim dividend in September 2020.
8 Intangible assets
Included within Intangible assets is GBP165.4m (31 December
2020: GBP166.8m; 30 June 2020: GBP225.0m) of goodwill, GBP17.0m (31
December 2020: GBP15.6m; 30 June 2020: GBP12.7m) of development
costs and GBP0.4m (31 December 2020: GBP0.5m; 30 June 2020:
GBP0.7m) of other intangible assets. Where these arose on
acquisitions, these are held in the currency of the businesses
acquired and are subject to foreign exchange retranslations to the
closing rate at each period end.
In light of COVID-19 and the resulting global macro-economic
uncertainty, the Board keeps the carrying value of goodwill under
constant review. The Board has considered and not identified any
indication of impairment of these assets at 30 June 2021 . However,
in the event that any of the markets in which we operate has a
sustained downturn, an impairment of the relevant CGU's goodwill
may be required. See note 14 on page 155 of the 2020 annual report
for specific sensitivity disclosures , in particular in relation to
the Offshore broking and Securities CGUs.
9 Employee benefits
The Group operates three final salary defined benefit pension
schemes, being the Clarkson PLC scheme, the Plowrights scheme and
the Stewarts scheme.
The following tables summarise amounts recognised in the
Consolidated balance sheet and the components of the net benefit
charge recognised in the Consolidated income statement.
Recognised in the balance sheet
30 June 30 June
2021 2020 31 Dec 2020
GBPm GBPm GBPm
======== -------- ------------
Fair value of schemes' assets 197.0 201.8 204.5
Present value of funded defined benefit obligations (170.5) (185.1) (188.6)
-------- -------- ------------
26.5 16.7 15.9
Effect of asset ceiling in relation to the Plowrights scheme (5.6) (4.7) (3.9)
-------- -------- ------------
Net benefit asset recognised in the balance sheet 20.9 12.0 12.0
-------- -------- ------------
The above is recognised on the balance sheet as an asset of
GBP24.7m (31 December 2020: GBP18.1m; 30 June 2020: GBP18.4m) and a
liability of GBP3.8m (31 December 2020: GBP6.1m; 30 June 2020:
GBP6.4m). A deferred tax asset on the benefit liability amounting
to GBP1.1m (31 December 2020: GBP1.2m; 30 June 2020: GBP1.2m) and a
deferred tax liability on the benefit asset of GBP6.2m (31 December
2020: GBP3.4m; 30 June 2020: GBP3.5m) is also recognised on the
balance sheet.
Recognised in the income statement
2021 2020
GBPm GBPm
====== ------
Recognised in other finance income - pensions:
Expected return on schemes' assets 1.4 2.0
Interest cost on benefit obligation and asset ceiling (1.3) (1.9)
Recognised in administrative expenses:
Scheme administrative expenses (0.1) (0.2)
====== ------
Net benefit charge recognised in the income statement - (0.1)
====== ------
10 Investments
Included within current investments are deposits totalling
GBP2.8m (31 December 2020: GBP22.8m; 30 June 2020: GBP1.8m) with
maturity periods greater than three months. Also included is
GBP1.2m (31 December 2020: GBP8.3m; 30 June 2020: GBP12.6m)
relating to the convertible bonds business within the Financial
segment. In order to hedge against price movements of the equity
portion of these investments, the Group has short-sold related
equity securities. The GBP0.4m balance as at 30 June 2021 (31
December 2020: GBP2.8m; 30 June 2020: GBP2.8m) is shown under trade
and other payables.
11 Cash and cash equivalents
30 June 30 June
2021 2020 31 Dec 2020
GBPm GBPm GBPm
======== -------- ------------
Cash at bank and in hand 151.9 157.1 172.4
Short-term deposits 1.0 1.8 1.0
======== -------- ------------
152.9 158.9 173.4
======== -------- ------------
Net available funds, after deducting amounts accrued for
performance-related bonuses but including current investments,
amounted to GBP87.3m (31 December 2020: GBP95.4m; 30 June 2020:
GBP100.3m). Free cash resources, being net available funds less
monies held by regulated entities at 30 June 2021 were GBP73.9m (31
December 2020: GBP81.1m; 30 June 2020: GBP88.8m).
12 Share capital
31 Dec
30 June 2021 30 June 2020 31 Dec 2020 30 June 2021 30 June 2020 2020
Million Million Million GBPm GBPm GBPm
------------- ------------- ------------ ------------- ------------- -------
Ordinary shares of 25p each,
issued and fully paid 30.4 30.4 30.4 7.6 7.6 7.6
------------- ------------- ------------ ------------- ------------- -------
13 Contingencies
From time to time, the Group is engaged in litigation in the
ordinary course of business. The Group carries professional
indemnity insurance. There is currently no litigation expected to
have a material adverse financial impact on the Group's
consolidated results or net assets.
14 Principal risks and uncertainties
The Directors consider that the nature of the principal risks
and uncertainties which may have a material effect on the Group's
performance in the second half of the year is little changed from
those identified in the risk management section of the 2020 annual
report on pages 73 to 77 . The principal risks are loss of key
personnel - Board members, economic factors, cyber risk and data
security, loss of key personnel - normal course of business ,
adverse movements in foreign exchange , financial loss arising from
failure of a client to meet its obligations , breaches in rules and
regulations and changes in the broking industry. Note 28 of the
2020 annual report sets out the financial risk management
objectives and policies of the Group. These are also unchanged from
the year-end.
Previous analysis considered climate change as part of the
overall risk assessment, however this is now recognised as a risk
due to increased interest by shareholders and investors. Further
information will be included in the 2021 annual report.
15 Financial instruments
IFRS 13 requires disclosure of fair value measurements by level
of the following fair value measurement hierarchy:
-- quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
-- inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2); and
-- inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level
3).
The following table presents the Group's assets and liabilities
that are measured at fair value.
30 Jun 2021 30 Jun 2020 31 Dec 2020
Assets Liabilities Assets Liabilities Assets Liabilities
GBPm GBPm GBPm GBPm GBPm GBPm
======= ============ ------- ------------ ------- ------------
Investments at fair value
through profit or loss
(FVPL) - Level 1 0.8 - 0.4 - 0.5 -
Investments at fair value
through profit or loss
(FVPL) - Level 2 1.7 - 13.1 - 9.0 -
Investments at fair value
through other comprehensive
income (FVOCI) - Level
3 - - 3.8 - 1.7 -
Foreign currency contracts
- Level 2 4.0 - 0.7 1.5 4.6 -
Other payables - Level
1 - 0.4 - 2.8 - 2.8
======= ============ ------- ------------ ------- ------------
6.5 0.4 18.0 4.3 15.8 2.8
======= ============ ------- ------------ ------- ------------
The method for determining the hierarchy and fair value is
consistent with that used at the year-end, see note 29 on page 170
of the 2020 Annual Report.. The fair values of financial
instruments that are held at amortised cost are not materially
different from their carrying amounts.
Net losses on level 3 instruments, being financial assets at
fair value through other comprehensive income, were GBP1.7m (31
December 2020: GBP2.1m; 30 June 2020: GBPnil). These losses are
recognised in other comprehensive income and are the only movement
between the opening balance of GBP1.7m (31 December 2020: GBP3.8m;
30 June 2020: GBP3.8m) and the closing balance of GBPnil (31
December 2020: GBP1.7m; 30 June 2020: GBP3.8m).
16 Related party disclosures
The Group's significant related parties are as disclosed in the
2020 annual report. There were no material differences in related
parties or related party transactions in the period ended 30 June
2021.
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