Annual Report • Dec 31, 2016
Annual Report
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Clarkson PLC Annual Report 2016
Through our 'best in class' service offer we bring unique industry connections and expertise to our ever-wider and increasingly diverse client base across all sectors of the shipping and offshore industries, providing unrivalled professionalism and support in the markets in which they operate.
Please visit www.clarksons.com for more information
Going beyond is more than a strap line.
It's our ethos.
It's our culture.
It's the way we do things at Clarksons.
From 49 offices, every one of our 1,398 employees making up Team Clarksons goes beyond for our clients every hour of every day.
Never standing still, always pushing boundaries and challenging ourselves to add value.
We share understanding, culture and ideas to deliver a truly local service worldwide to all our clients.
Interim
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
We gave five exceptional photographers access to our business in January 2017, and in this report you can see the result; a 24/7 business that never stops 'going beyond' for our clients, our colleagues and the diverse communities in which we work.
Strategic report Group at a glance
As the world's leading provider of integrated shipping services, we work with our clients to achieve their business objectives across all aspects of this complex and dynamic industry.
Broking
4 Clarkson PLC Annual Report 2016
2013 2014 2015 2016 91.9 68.2 119.7
The strategic report on pages 1 to 48 was approved by the Board and signed on its behalf by:
Chief Financial Officer and Chief Operating Officer
Strategic report
Governance
Financial statements
Other information
Clarksons is the world's leading provider of integrated shipping services, bringing relationships, expertise, experience and information to a global client base.
The complex dynamics and multi-cyclical nature of the shipping and offshore markets means that Clarksons' leadership position across each and every sector, and its integrated model of consultancy and execution, linked to financing and analytics, provides a unique resilience throughout the economic cycles…
Freight rates
Asset prices
US\$1.2tn
Value of shipping and offshore assets
1.5mt of cargo per person
globally
11.1bn Metric tonnes of trade
CLARKSONS SERVICES
LNG
Cruise
Agricultural
Clarksons is the world's leading provider of integrated shipping services, bringing relationships, expertise, experience and information to a global client base.
The complex dynamics and multicyclical nature of the shipping and offshore markets means that Clarksons' leadership position across each and every sector, and its integrated model of consultancy and execution, linked to financing and analytics, provides a unique resilience throughout the economic cycles…
James Hughes-Hallett Chairman
In these difficult market conditions, we are pleased Clarksons has delivered a strong performance and once again delivered significant value for our shareholders.
2016 has been another challenging year for shipping markets, characterised by continued difficult trading conditions and tonnage oversupply. Freight rates have seen historic lows in some sectors during the year whilst in the second half volatility has been added, on the upside, by the strengthening of the US dollar (the currency of the great majority of our revenues) and, less positively, by the weakness of the pound sterling against several of the currencies in which our overhead costs are incurred. Against this uncertain backdrop, we are pleased Clarksons has delivered a robust performance and, once again, value for our shareholders. We have remained focused on our core strategy of delivering continuous service enhancement, thus offering Clarksons' clients the unique breadth of product and global reach that has enabled us to maintain, and in many cases extend, our leading position in our markets. One significant and virtuous outcome of this has been the actual growth of our broking transaction volumes in 2016, as has the healthy cash generation underlying our profit performance.
We have continued to invest in the technology to drive innovation across our business and we regard our focus in this area to be a key differentiator and source of even greater competitive advantage for the future; our research capability already underpins our full client service offering, and in 2017 we intend to offer further knowledge and data based initiatives to our clients. Our position at the heart of the shipping and offshore markets has ensured that in these difficult times, clients have turned to Clarksons for our deep sector knowledge and tailored ability to service their requirements; our capacity to offer both broking and a range of financial market solutions creates synergies and outcomes that are not available elsewhere.
Integration of the Platou business is now complete, with anticipated synergies realised and the complementary expertise of the combined businesses proven. The acquisition has broadened our service offering to clients and puts us in a strong position for when markets recover.
Our ability to continue to grow and gain share in more difficult markets has given us considerable confidence in the business. Clarksons is significantly more diverse in terms of product offering, reach and balance sheet strength than we were before the last upturn in the sector; we are well placed to continue the solid performance delivered in 2016 and are leveraged to benefit strongly from growth when the shipping cycle turns.
Underlying profit before taxation was £44.8m (2015: £50.5m). Reported profit before taxation was £47.3m (2015: £31.8m).
Underlying earnings per share was 105.2p (2015: 121.9p). Reported earnings per share was 119.7p (2015: 68.2p).
Clarksons continues to maintain its remarkable dividend record, having increased the dividend paid every year since 2002. In line with this progressive dividend policy, Clarksons again intends to raise the dividend paid to its shareholders. The Board is recommending a final dividend of 43p (2015: 40p). The interim dividend was 22p (2015: 22p), resulting in a 5% increase in the total dividend for the year to 65p (2015: 62p).
The dividend will be payable on 2 June 2017 to shareholders on the register at 19 May 2017, subject to shareholder approval.
Our people are the heart of our business and are the key to our success. This year we have continued to hire and invest across our business divisions to ensure we always have the best people delivering the best advice and the best transactional execution. We have a position to protect as the leading employer and operator in the sector and remain determined to do so.
As previously announced, James Morley will be retiring from the Board following the AGM on 12 May 2017. I would like to thank James for the always wise guidance he has given Clarksons over the last nine years as a Board member and Chair of the audit committee.
I am delighted to have welcomed Marie-Louise Clayton to the Board at the beginning of 2017. Marie-Louise brings a wealth of board experience to the role and we look forward to her taking over as Chair of the audit committee.
In the short-term at least, shipping markets seem most likely to remain challenging whilst current difficult market conditions and an unusually opaque global macro-economic environment persist, but there are now a number of indicators of improvement in the industry via measurable, if as yet relatively modest, demand growth and a slowing in the new capacity reaching the market.
Chairman
10 March 2017
Strategic report
10
We are constantly looking at how we can increase shareholder value by re-investing in our business – whether this is in broadening our range of services, growing our global reach, attracting and retaining the best staff or the unique range of technological solutions we offer. All of this is a direct benefit to our clients, who know that Clarksons will always go beyond what is expected to ensure that they have access to the highest quality information and bespoke service available in the markets and locations where they operate.
| Clarksons is the global market leader and is 'best in class' in every market segment |
Clarksons' management teams, in each market sector and geography, are widely regarded as the best in the industry, and have a track record of delivering a proven growth strategy |
Clarksons' diversified offering allows business expansion and market share growth, despite the cyclicality of the shipping industry |
|---|---|---|
| Clarksons has a clear strategy to grow its business profitably through innovation, consolidation, data & technology and further expansion of our integrated business model |
Please see our business model on pages 12 and 13. |
Clarksons continually invests in people, data, technology and tools for trade, professionalising the shipbroking industry and thus improving the service to our clients |
| Clarksons' expansion into investment banking and oil services will provide significant growth opportunities as the cycle improves |
Clarksons is asset light, has a strong balance sheet and a history of significant free cash flow generation |
Clarksons has a track record of increasing dividends every year for the last 14 years |
Underpinned by our values, our integrated business model provides the platform for an unrivalled level of service and information that enables trade and creates long-term value.
We are listed on the London Stock Exchange. We have a strong balance sheet, no bank borrowings and net cash available to fund the growth of the business.
Our research and analysis teams produce and validate data, analysis, key insights and valuations across all sectors of shipping and offshore and are acknowledged as market leaders.
Our in-house developed technology assists our clients to make informed and timely commercial decisions and allows them to interact better with our broking teams, whilst improving operational efficiencies. Our teams' access to the most up-to-date information shared seamlessly with our clients and extensive toolkit and information platforms ensure that they remain 'best in class'.
Our people are our most important asset across all parts of the business and we aim to recruit and retain the best in the industry.
We work ethically and build strong client relationships where our knowledge builds trust.
We aim always to act with integrity, excellence, fairness and transparency – key values for our clients, our staff and the market as a whole.
For more information see economics of maritime markets on pages 6 and 7.
We continue to provide shareholders with increasing dividends whilst maintaining a good financial standing and strong balance sheet.
65p
By ensuring that our clients receive the best information through a range of innovative technological solutions, we provide them with the tools they need to make key business decisions.
We encourage a responsible approach to business and foster close, long-term, mutually beneficial relationships with our customers.
15,000
Our skills and knowledge ensure that world trade continues to flow in the most effective manner, that countries receive the raw materials to build and develop and people have the food and goods they need.
1,398
employees
We enable global trade, benefiting both commodity providers and companies who provide goods and services.
An essential part of the global supply chain, we have the necessary skills and information at our fingertips to ensure we know what commodities need moving to where and when and the best solutions for this.
135,000+ vessels in the world fleet
Andi Case Chief Executive Officer
At Clarksons, our long-standing strategic focus on developing 'best in class' client service, coupled with our unique product breadth and global reach, has allowed us to face these headwinds again and continue to invest in our business, ensuring we are positioned for future opportunity.
2016 has been a year of growth, consolidation and delivery for Clarksons, despite the shipping market undergoing one of the most challenging periods in living memory, as highlighted by the lowest level for the ClarkSea Index since 1990, and the offshore market facing challenges as a result of the depressed oil price. To have once again increased market share shows we have a stronger, more diverse business that remains cash generative and highly profitable and has enabled us to deliver a 14th consecutive year of dividend growth for investors.
We had anticipated that 2016 would be another tough year, with oversupply, volatile commodity prices and global macro-economic uncertainty creating significant challenges for the sector as a whole. It is testament to the calibre of our teams and the breadth and depth of our client offering that, even in the most difficult of times, we have maintained or improved upon our market leading position across all of our divisions.
Despite the headwinds, we have focused on our long-term strategy for growth, delivering 'best in class' client service, investing in tools for trade and positioning the business to capitalise when the upturn in our markets comes.
Shipping markets are multi-cyclical, and our strategy of diversifying within our core markets has given us a unique product breadth and global reach and an ability to grow consistently, even in downturns. In these difficult times, we have continued to benefit from a 'flight to quality', in which clients are choosing Clarksons as their service provider.
Overall our broking teams have performed well, even though in offshore the operators continue to focus on cost cutting, with limited sanctioning of new field developments and moderated maintenance activities. The dry cargo market, which started the year with the weakest rates in recorded history, was also depressed, though there were some more encouraging signs towards the end of the year. However, the tankers, specialised products, gas and sale and purchase markets performed particularly well. Clarksons' teams have again increased broking volumes.
Our research offering has grown significantly this year, particularly in digital and valuations income, as our clients continued to value the importance of authoritative intelligence.
The port services teams remained profitable in some of the toughest markets ever seen for this type of business; the reduced spending by the oil and gas sector in the North Sea affected our supplies activities.
We are also particularly encouraged with the performance of our financial division, in its first 12 months as a fully-integrated division. The solutions and expertise of the financial team has greatly enhanced our client offering, uniquely positioned our business amongst its peers and places us well to deliver a service, with deep industrial understanding, to debt and equity providers alike. The team has achieved a leading position in the market, participating as sole or joint lead on a number of capital-raising transactions throughout shipping and offshore, whilst also leading restructuring mandates and generating a strong pipeline for future business.
Clarksons is a highly cash generative business and our strong balance sheet ensures that we have been able to invest strategically and react quickly to take advantage of opportunities as they arise. Our cash position gives us great comfort that, regardless of market conditions, we can position the Group for upturns in each of our markets when they come, invest in growth (tools for trade) and deliver shareholders a growing cash return. We have also looked hard at the structure of the business and focused on efficiencies where necessary to ensure our model is fit for purpose and best placed for the current market conditions.
With seaborne transportation accounting for around 85% of the world's international trade, shipping is an essential part of the global economy. The increasing industrialisation and liberalisation of economies has fuelled free trade and a growing demand for consumer products, positively impacting a myriad of cargo sectors.
To put this in context, world seaborne trade by volume across all sectors was estimated at 11.1bn tonnes in 2016, almost twice the size than at the turn of the millennium, and over three times the size than the mid-1980s. At the same time, the world's population has continued to expand at a phenomenal rate, caused predominantly by increasing life expectancy and major improvements in fertility rates. This, combined with human aspiration, has led to rapid urbanisation and accelerating migration which in itself also fuels further population growth.
In addition to these underlying mega-trends, seaborne trade per capita is also on the rise and essentially compounds the upward shifts. To put this in perspective, in 1990 every person on the planet required 0.7 tonnes of cargo to be shipped; in 2016 this figure stands at more than double at 1.5 tonnes of cargo shipped per person.
With population growth momentum expected to continue for decades and emerging economies likely increasing their requirements for goods and raw materials that shipping transports so safely and efficiently, Clarksons are well placed to take advantage of these underlying long-term market fundamentals.
Seaborne trade as a % of global trade
85%
Cargo transported per person globally
We are seeing significant benefits from our investment in our market-leading technology platform, which is changing the way our brokers are able to access and use information, increasing knowledge and improving the communication of vast amounts of data across the business. The sheer scale of the market activity in which Clarksons is involved means that we are able to leverage our deep understanding of activity across the market by interpreting this data, and thus delivering the best advice to our clients.
We constantly strive to deliver 'best in class' client service, and the quality, knowledge and experience of our employees are central to Clarksons' continued outperformance across all sectors and geographies. We are a truly international and culturally diverse business, employing the best people from 65 nationalities across 21 countries to deliver first rate advice and expertise to our clients. The security of a robust balance sheet gives us the ability to hire and retain the best candidates and we have also made a number of extremely experienced hires across all of our divisions this year. As a team, we share the same goals and ambitions and I would like to thank all of our employees for their hard work and dedication over the course of the year.
Whilst we anticipate that the market will remain challenging in the near-term, we believe the mediumterm outlook for the sector is more positive. Demand continues to progress and the recalibration of the demand/supply balance is improving following lower levels of ordering and continued scrapping assisted by the impact of environmental regulation. Seaborne trade continues to increase and further positives for growth include the prospect of higher infrastructure spending from the world's two largest economies. We have also seen a change in investor appetite from the fourth quarter. All of this gives us encouragement that the shipping and offshore markets are recalibrating. Accordingly, we are well positioned to benefit from any improvement.
The diverse nature of our business has enabled Clarksons to deliver healthy profits and continued dividend growth despite challenging shipping markets. As the markets progress, we believe we are well positioned to capitalise on the opportunities that 2017 will provide and look forward to the year ahead. We remain focused on executing our proven strategy of delivering 'best in class' service and offering a unique product breadth across our globally connected business.
Chief Executive Officer 10 March 2017
is to maintain and extend our industry leadership.
is to grow value for our shareholders, building on our strong financial performance and supporting our progressive dividend policy by maintaining and developing our position as the world's leading shipping services Group.
With an industry-leading range of products and services that span the maritime and financial markets, we are uniquely placed to deliver the best, bespoke commercial solutions to all our clients – large or small.
We are the 'best in class' intermediary across every sector of maritime trade – and no single company is our lead competitor in more than one market.
Ours is a global presence, enabling us to meet client needs wherever and whenever they arise. With 49 offices in 21 countries, we share understanding, culture, IT platforms and high standards of corporate governance across our business – a fine example of how joined-up thinking can deliver a truly local service, worldwide.
From oil majors, raw material producers and other multinationals to long-established shipowning families, our client base is second to none. We have worked with many of these clients for generations, building a deep understanding of their businesses and providing the services that have helped them to prosper.
Empowering People to fulfil their potential
We want Clarksons to be recognised as the place where the best people are empowered to do their best work. We hire the brightest talents and give them the tools to shine – including leading-edge IT systems, high quality training and development as well as financial reward.
As the industry's leading provider of data and market intelligence on the shipping and offshore industries, our research team is the largest commercially-led unit in the maritime world. Our databases track over 135,000 ships and 6,000 offshore fields and our Shipping Intelligence Network is viewed more than four million times per year.
Consistently profitable and cash generative, our financial performance bears comparison with any business, not only in the shipping sector but across the FTSE. Our total shareholder return has been consistently strong and includes a progressive dividend policy that has been maintained for the last 14 years.
– 2016 has seen more internal training seminars and attendees at training weeks than in any previous year.
– Our industry-leading AIS platform, SeaNet, together with other support tools, are now used daily by 850 staff throughout all activities within the Group.
The breadth of our products and services, supported by our people and our 'can-do' culture, means we are sector leaders in both performance and service. Our aim is to continuously work with our clients to navigate challenges and identify opportunities together.
The breadth of our fully integrated client offer combined with our geographic reach has enabled us to grow significantly volumes in our broking division during the year.
Revenue (US\$)
2015: US\$365.3m
Revenue (£ equivalent)
2015: £239.5m
Segment underlying profit
£40.2m 2015: £49.1m
Forward order book for 2017
US\$112m* At 31 December 2015 for 2016: US\$151m*
*Directors' best estimate of deliverable forward order book (FOB)
2016 was an extraordinary year in the dry cargo sector, which started with the weakest rates in recorded history as the Baltic Dry Index (BDI) bottomed out at 290 in February. Vessels moved into various stages of idleness and lay-up and older tonnage rushed to demolition yards, witnessing the third highest level of demolition on record. Cash flow pressures led many owners to cancel or defer newbuilds, resulting in less than half of the 2016 order book being delivered on time.
After two years of lacklustre industrial production and a decline in new housing starts, China eased monetary policy which resulted in higher public investments and a recovery in the property market. New housing starts grew for the first time in two years, driving the demand for construction and thereby steelmaking raw materials. Thermal power demand has also surged and, together with Chinese coal mining cuts, created a rise in imports in what had previously been thought of as a defunct trade.
Commodity prices reached multi-year lows in February, before rebounding to significantly higher rates by the end of the year. The new record high rates were reinforced by the newly elected US President's infrastructure investment promises and the continuation of the multi-billion dollar infrastructure investment in the Chinese "One-Belt, One-Road" initiative. The positivity sent the BDI above 1,000 in November to a year high of 1,257 on 18 November, followed by the unwinding towards the traditional weaker first quarter.
Although the demand outlook remains positive for 2017, there is still more to contend with. Relatively firmer rates are likely to slow down demolition activity, whilst the still
2016 global trade in iron ore
1.55bn mt
substantial amounts of newbuilds yet to deliver will likely push net fleet growth higher and therefore likely result in uninspiring earnings.
However, due to the market weakness in 2016, newbuild contracting slipped to the lowest levels since 2001. A more positive rates scenario could act as a catalyst for additional ordering, however, for this to happen the newbuild price premium over the secondhand market will need to narrow considerably.
Looking ahead, our base case is for seaborne trade to increase by 3.4% and fleet growth to be slightly lower than this at 3.1% in 2017. As a result, freight rates could improve depending on the promptness of the fleet to adjust to the seasonal demand increases. Sudden acceleration in new deliveries will be less responsive than in demolition and thereby should act as a catalyst to volatility which should favour a more positive rate environment in 2017.
We have increased transaction volumes across all continents in the world and have continued to strengthen our presence by recruiting and relocating key staff as appropriate. In the final quarter we also benefited from the opening of a new office in Japan.
2016 saw the container shipping sector remain, as many expected, under severe pressure. Box freight rates in general remained weak, although by late in the year it did appear that they might be bottoming out on some trade lanes. Against this backdrop, charter market vessel earnings remained extremely challenged, at bottom of the cycle levels. The one year rate for a 2,750 TEU ship averaged US\$6,000 per day in 2016, 27% lower than the average since the start of 2009. Old panamax types fared even worse, averaging US\$4,979 per day in 2016, 56% down on the same basis, with the opening of the new locks at the Panama Canal impacting vessel deployment patterns.
Demand conditions did however improve in 2016, with global volumes projected to expand by around 3% in the full year to 181m TEU. Volumes on the key Far East-Europe trade returned to positive growth and the rate of growth on the intra-Asian trades accelerated back to more robust levels. However, North-South volumes and trade into the Middle East remained under severe pressure from the impact of diminished commodity prices, though volumes into the Indian Sub-Continent grew strongly.
Containership capacity growth did slow significantly in 2016, reaching not much more than 1% in the full year. Deliveries slowed dramatically to 0.9m TEU and demolition accelerated rapidly to a new annual record of 0.7m TEU. However, given the level of surplus built up in the sector in recent years, and in particular the impact of the delivery of substantial capacity, much of it in the form of new 'megaships', the improved fundamental balance seen in 2016 was not enough to generate an improvement in conditions. At the end of the year, 7% of total fleet capacity stood idle. The financial collapse of a major Korean operator was a further illustration of the acute distress facing the sector.
Looking ahead, further improvements in fundamentals still appear necessary to generate improved market conditions. However, pressurised earnings, financial distress and regulatory requirements are all expected to drive further recycling, and the ordering of newbuild capacity dropped to just 0.2m TEU in 2016, a dramatic slowdown compared to recent years; the order book fell to 16% of fleet capacity. Moreover, further significant steps in the consolidation of the sector have been taken in the form of merger and acquisition activity involving major operators.
We have made considerable progress in the last 12 months with a number of key clients and, as a result of the consolidation within the sector, significantly increased volumes.
As expected, the tanker market was somewhat weaker in 2016 after the very strong market seen in 2015, as fleet growth took its toll. Earnings for VLCCs, suezmaxes and aframaxes were each down by some 40% on 2015's levels, however VLCC spot market earnings nevertheless averaged a relatively healthy US\$41,000 per day, in line with long-run averages. Earnings in the products tanker sector were also lower in 2016, with returns on key routes down by between 35% and 50% on average from the high levels seen in 2015.
Rising Middle Eastern crude oil exports, coupled with very strong growth in Chinese and Indian crude imports, led to further increases in crude tanker demand. However the market suffered from disrupted Nigerian exports in the third quarter, leading to a deeper than anticipated seasonal downturn. In the products tanker sector trade growth continued, albeit at a slower pace, as an overhang of products inventory weighed on the market.
Seaborne crude oil and oil products trade in 2016
3bn mt
Both the crude and products tanker fleets grew by some 6% in 2016. The crude tanker fleet is expected to grow by a further 5.1% in 2017, maintaining supply side pressure on earnings. Products tanker fleet growth is expected to fall to 3.7% in 2017. However, following strong fleet growth in 2015 and 2016, supply side pressure will likely remain in this sector. Extremely low levels of tanker ordering in 2016 point to reduced deliveries from 2018 and recent regulatory developments may accelerate removals of older tonnage.
Oil production cuts from both OPEC and non-OPEC countries seem likely to compound the strong crude tanker fleet growth in 2017. The cuts may be partially offset by additional cargo from Nigeria and Libya, which are exempt from OPEC's agreement, and Brazil may also raise exports. Uncertainty over compliance with production cuts and instability in some producing countries means there is potential for unexpected increases or decreases in crude tanker demand through 2017. In the US, higher oil prices resulting from the production cuts and potentially less stringent regulation, following the presidential election, point to a possible rebound in production. The derestriction of US crude exports now means that exports will likely increase as output grows and reductions in imports may be more muted. New refining capacity and strategic stock building should drive further growth in Chinese and Indian crude imports.
Re-balancing of the global oil market resulting from production cuts may eventually assist products' tanker demand, as inventories become depleted and trading opportunities re-emerge. Above average oil demand growth is still projected for 2017 by the major forecasting agencies, despite an expectation of somewhat higher prices.
We continue to increase volumes with the addition of new clients.
4,500
Despite limited signs of an increase on certain arterial trade lanes towards the end of 2016, the chemical tanker spot markets have softened considerably. The Clarksons Platou Spot Chemical Index has seen a 6.9% decline year-on-year whilst the Edible Oils Index is 20.7% lower year-on-year. Earnings continue to remain under pressure and are significantly lower than seen in 2015. The delta between owners' and charterers' ideas has grown considerably into the second half of 2016, and, as such, deal volume on the period charter and asset markets has been lacklustre for the latter part of the year.
Overall trade volume growth in specialised products has been robust throughout 2016. That said, sentiment has been weak for the second half due primarily to petroleum products' market dynamics and also the hangover from the El Nino weather phenomenon and its impact on palm oil trade. Overall seaborne trade is estimated to have gained 2.3% year-on-year in 2016, to 283m mts.
China's imports of specialised products drove the market in 2015 with a gain of 8%, but during the first 11 months of 2016 Chinese import growth slowed to 3.2% year-on-year. India, now the world's fastest growing major economy, saw seaborne specialised products import growth of 16% for the first half of 2016 compared to the first half of 2015.
We estimate that the other part of the tonne-mile factor, distance growth, continued its increase in 2016 with chemical tankers on average travelling 1.8% further per voyage. US-China seaborne trade of specialised products gained 67% for January-August 2016 when compared to the same period in 2015.
Average annual growth for the total chemical tanker fleet accelerated in 2016 due to a number of stainless steel vessels being delivered throughout the year. From 2017 onward, we believe deliveries will slow down at a faster rate, with net fleet growth reducing from high 4% in 2016 to high 3% in 2017.
Our base case points to expected volumes at approximately 1.1x world GDP growth or around 3.5% per year, for the next few years. With average annual fleet growth in 2016 above these levels, we believe that steady utilisation continues to depend on both economic growth and longer trading distances contributing as expected.
Despite the persistence of weak market sentiment in the second half of 2016, and for the most part a lack of seasonality, based purely on fundamentals the mediumlong term outlook for the sector remains encouraging.
Increase in Indian imports of specialised products in 2016
16%
As expected, the LPG carrier market has succumbed to a softer freight environment during 2016 as fleet supply continued to expand, most notably in the VLGC sector. VLGC freight rates continued to be placed under downward pressure with time charter earnings for an 84,000 cbm unit averaging 74% lower compared to 2015 levels. Spot freights have fallen by a similar magnitude, though the reduction has been slightly less marked with a 67% reduction.
Seaborne trade growth of LPG has continued during 2016, though export volumes from the US were dealt a blow over the summer months as price margins with Asia narrowed. This adversely impacted tonne-mile demand and an increase in export volumes from the Middle East placed additional downward pressure on average voyage time. The prospects for ammonia trade growth offer minimal respite in the near term, although growth in tonne-mile demand is expected to improve as Caribbean volumes are displaced into the North African and Asian markets. If US oil and gas production is encouraged by the new Trump administration, this should only prove positive for NGL availability.
There has been a significant volume of newbuilding tonnage delivered, with still more vessels to be absorbed in 2017 as an additional 27 units look set to hit the water. The order book begins to thin out from 2018 onwards, slowing the pace of fleet growth, which suggests that we may then start to see some tightening of the supply/demand balances.
Following a weak start to the year, the market for the smaller LPG carriers improved in the final months of 2016.
This uptick helped to slow the scale of the decline in freight rates year-on-year. Benchmark 12 month time charter levels for the small 3,500 cbm pressure vessels ended the year 6% down on 2015 at around US\$170,000 pcm whilst the rates for the 3,200 cbm semi-refs fell by a more modest 2%.
Sluggish coastal LPG trade combined with reduced propylene import demand into China were the key factors behind the softer freight sentiment, as in the smaller segments there has been minimal change in fleet supply.
With no newbuildings currently on the order book, any increase in demand may shift the fundamental balance in the market.
The general feeling in the smaller sizes is that we may have reached the bottom of the market. That said, the size sector 8,000 cbm and above remains long, due to upsizing, plus newbuildings have still to deliver in the larger pressure segment.
Time charter levels for the 8,250 cbm ethylene units have fallen by 5% year-on-year whilst the assessed rates for the 12,000 cbm ethylene units dropped almost 9% on the back of fleet growth through 2015/16. Within the size segment 5-14,999 cbm there is still 7% of the fleet left to deliver in the pressure sector and 6% in the ethylene capable sector. Therefore, this diverging trend amongst the smaller and larger units is expected to continue through 2017.
The Clarksons Platou gas teams in London, Oslo, Singapore and Houston have all increased volumes in 2016.
The LNG shipping market fundamentals improved from June onward, after going through a challenging first half. The freight rate assessment for modern dual fuelled ships was at US\$45,000 per day in late December, whilst averaging US\$33,500 per day for the full year, around US\$3,000 less than a year earlier. Shipping demand is estimated to have grown by 2% while the net fleet expanded by 7% during the year. The spot chartering activity continued to grow as over 210 fixtures were concluded in 2016, compared with circa 180 in 2015.
The 'wave' of new LNG production capacity started to reach the markets and after four stagnant years the seaborne trade increased by 7%, reaching circa 265m tonnes. Australia was the main contributor with five new liquefaction trains commissioned, lifting the nation's exports by 50% to 43m tonnes. Qatar, the world's biggest LNG exporter, also increased its exports by 3m tonnes and for the first time utilised its entire production capacity. The long-awaited LNG from US shale also started to reach the markets with the commissioning of two trains in the Sabine Pass.
Asian markets absorbed most of the incremental volumes in 2016. Flows into the world's two largest markets, Japan and Korea, remained relatively flat whilst China's appetite for LNG increased significantly with a 30% hike in imports. India experienced encouraging import growth on the back of lower gas prices, government subsidies and high economic activity.
85m mt
43m mt
Middle East LNG imports were also strong, up by 50%, and the region formed a new significant market for spot trading and shipping. Low gas prices combined with an uptick in coal prices also proved an important factor for a 10% increase in European LNG imports.
The relatively low increase in shipping demand was attributed to the decline in average LNG transport distance as trade has become increasingly intra-basin. 29 new vessels entered the fleet in 2016, adding 4.9m cbm of carrying capacity, of which two ships were FSRUs. Meanwhile, two vessels were sold for scrapping and six carriers, one FSRU and one LNG bunkering vessel were ordered.
The tightening in the shipping market witnessed through the second half of 2016 is expected to carry through 2017 as significant new volumes from new plants commissioned through 2016 and 2017 will be lifted. These cargoes, coupled with an increase in short-term trading, will result in an alteration of the shipping balance as the growth in fleet supply, despite remaining strong, will still be below the growth in demand for required LNG tonnage.
On the LNG projects side, we could finally see an FID in Mozambique as well as potentially more decisions taken on US brownfield terminals where the new administration may provide favourable conditions for oil and gas industry and LNG export growth.
As mentioned in our half year commentary, 2016 continued to be an extremely challenging year across all sectors so it is with some degree of pride that we can report an increase in the number of second hand sale and purchase transactions we concluded year-on-year against 2015. Of course, with values under the pressures they were then, it was not possible to maintain the same levels of income but considering that we had the Baltic Indices at all-time lows in the early part of the year, the difference is not too negative, and when combined with our newbuilding desk overall we were up when compared to last year.
Looking forward into 2017, we have reason to be confident that for dry cargo the worst may well be behind us and that the oversupply of tonnage that the sector as a whole has been suffering for the past few years has started to work its way through, resulting in a level of confidence which we have not seen for some time. Sub-opex level charter rates are a thing of the past and the period time charter markets have even started to
return, allowing asset values at least to stabilise if not yet start to rise. We are by no means out of the woods but with newbuilding business remaining very quiet, it is reasonable to assume that negative fleet growth might even start to happen come 2018 as the new ballast water treatment regulations accelerate demolition of the older vessels.
On the tanker side, having generally enjoyed a better than expected 2016 as far as earnings are concerned, there is a rather more pessimistic view, at least in the short-term, and this continues to hamper the volume of business we are able to conclude. In general, values have yet to fall to the levels that buyers feel they need to be at in order for them to invest whilst sellers remain under little pressure to reduce their price expectations, having enjoyed the good earnings of 2016. For those who need to transact, the buying market is quite thin and as brokers we are not sure that this will change in the near term.
Having said that, our ability to continue to act for more corporate clients with their own ongoing requirements regardless of market cycles should shelter us somewhat from this. Additionally, we would hope to be able to continue to replicate some high value project type transactions in conjunction with our project finance and structured asset finance teams as some clients look to re-finance away from traditional bank debt more towards sale and leaseback type structures.
In 2016 the shipping industry saw significant supply side adjustments in reaction to continued market pressures. Historically low levels of newbuild demand, higher levels of delivery slippage and strong demolition saw fleet growth fall to its lowest level in over a decade.
Bulk carrier tonnage sold in 2016 – an all-time record
44m dwt
Total containership demolition in 2016
26 Clarkson PLC Annual Report 2016 736,000 teu
2016 was an extremely challenging year for the shipbuilding industry. Contracting activity fell to its lowest level in over 20 years with just 480 orders reported, down 71% year-on-year. Domestic ordering proved important for many builder nations and 68% of orders in dwt terms reported at the top three shipbuilding nations were placed by domestic owners last year. Despite a 6% decline in newbuild price levels over 2016, few owners were tempted to order new ships, especially with the secondhand market offering 'attractive' opportunities. Only 48 bulkers and 46 offshore units were reported contracted globally last year, both record lows, and tanker and boxship ordering was limited. As a result, just 126 yards were reported to have won an order (1,000+ GT) in 2016, more than 100 yards fewer than in 2015.
However, a record level of cruise ship and ferry ordering provided some positivity in 2016. Combined, these ship sectors accounted for 52% of last year's US\$33.5bn estimated contract investment and, whilst such segments had not been a traditional focus for the Group, the addition of the newbuilding team in Oslo enabled us to take advantage of these more industrially routed opportunities, with contracting in these segments accounting for a significant proportion of Clarksons Platou newbuilding contracting activity in 2016.
European shipyards were clear beneficiaries, taking 3.4m CGT of orders in 2016, the second largest volume of orders behind Chinese shipbuilders' 4.0m CGT. Year-on-year, contracting at European yards increased 31% in 2016 in terms of CGT while yards in China, Korea and Japan saw contract volumes fall by up to 90% year-on-year.
In light of such weak ordering activity, the global order book declined by 29% over the course of 2016, reaching a 12 year low of 223.3m dwt at the start of January 2017. This is equivalent to 12% of the current world fleet. The number of yards reported to have a vessel of 1,000 GT or above on order has fallen from 931 yards back at the start of 2009 to a current total of 372 shipbuilders.
Looking forward, 2017 will continue to be a challenging proposition for shipbuilders and volumes are likely to remain tempered against the backdrop of prevailing fragility in the freight markets and a continued disconnect between secondhand values and newbuilding prices. Nevertheless, with the shipbuilding market having now endured a substantial period of inactivity, there is the potential for builders to consider making some strategic decisions in order to incentivise buyers and maintain levels of production and this in turn may deliver a little more activity into 2017.
General
In spite of continued oil price strengthening in the last quarter of 2016, market conditions in general in the offshore segment remain highly challenging. Operators continue to focus on cost cutting, implying limited sanctioning of new field developments and moderated maintenance activities. This, combined with continued substantial overcapacity in the asset-heavy segments of offshore oil services, supported persistent low utilisation and rates. Looking to 2017, we expect activity to increase somewhat in certain offshore segments, but it will generally take time to work through overcapacity, suggesting adverse market conditions for most contractors. Operators have also signalled further investment reductions in 2017. Previous downturns have demonstrated that rebasing supply-chain costs usually takes 12-24 months. Even though costs have already come down significantly, we believe operators will seek further expenditure reductions and also require higher oil prices and visibility on the anticipated sustainability of prices before increasing investments again.
The Clarksons Platou offshore team continued to build market share in chartering, sale and purchase and restructuring, strengthening the team in anticipation of the recovery.
Reduced spending by operators has put severe downwards pressure on rig fixing activity which has declined by more than 65% since 2012-13. At the same time, legacy contracts have expired rapidly, and as a result active rig utilisation has dropped to 66% and 63% for jackups and floaters respectively. Day rates have followed and are close to operating expenses on both categories in all regions of the world. Rig owners are naturally aware of the situation and, due to the age of the existing fleet, scrapping/removals have started to come to fruition, especially on the floater side. There has also been considerable movement in the order book, where units have been delayed and cancelled. In spite of this, a rebalancing of the MODU-market is likely to take some time, mainly due to the overhang of supply.
For the subsea industry low sanctioning activity will have a great impact on demand for construction/installation and SURF subsea services. 2015 represented the lowest level of subsea tree awards since 2000, reflecting operators' reduced E&P spending and re-bidding of contracts to obtain the lowest possible pricing. The end
Newbuilding deliveries in 2016
100m dwt
Barrels per day of oil produced offshore
25m
result for 2016 was an even lower level of subsea equipment awards. On the back of the oil price strengthening, sanctioning of new projects could increase with more subsea equipment awards during 2017. This is important for SURF work, which is largely driven by new field developments. Subsea maintenance activity has also now largely been deferred for about two years, implying potential demand could be pent up. We are starting to see increasing tendering activity within the subsea maintenance sector, and we expect awards in this segment to increase through 2017. This should lead to a gradual improvement of subsea fleet utilisation, which was around 50% on a global basis in December 2016, naturally with significant variations per sub-segment.
The North Sea PSV market has remained challenging for owners in 2016, with spot rates ranging between £2,740 and £14,826 per day for 499-900m² deck PSVs and between £2,410 and £13,994 per day for 900m² PSVs. Term rates have bottomed out between £4,750-£6,000 per day for the different categories and year to date numbers are down 21-22% vs last year. Utilisation has been falling steadily since the middle of 2014, and the 900m² PSVs have obtained an average utilisation of 75% in the first 11 months of the year, compared to 88% for the same period last year. The current utilisation for the largest vessel category is 68%. Approximately 130 PSVs have been laid up in the North Sea, compared to 97 at the beginning of the year. As term contracts are at operating expense levels, and laid up vessels are still being bid for longer-term contracts, we expect rates to remain steady through 2017. Globally, rates have still decreased further both year-on-year and versus the second quarter of 2016. PSV rates across the vessel categories declined by an average of 13%, 20% and 1% versus the second quarter of 2016 in GoM, Brazil and West Africa. Figures for the first 11 months are down 35%, 28% and 32% versus the same period from 2015. Vessel lay ups have also increased in all regions of the world and around 30% of the global fleet is currently laid up.
As for the PSVs, the North Sea AHTS market has remained challenging in 2016 with spot rates ranging between £4,750 and £52,920 per day for 16-20,000 BHP AHTS and between £5,997 and £62,705 per day for the largest class of AHTSs. The market for long-term AHTS contracts, historically a very small market, is almost non-existent. Around 56 vessels are currently laid up in the North Sea, representing 62% of the fleet. Utilisation has been falling steadily since mid-2014, and the 20,000 BHP category has obtained an average utilisation of 35% in the first 11 months of the year, compared to 51% for the same period last year. The current utilisation for the largest vessels is 29%. At the same time, we are seeing reduced demand for large AHTS vessels in certain regions. Globally, rates have still decreased further both year-on-year and versus the second quarter of 2015. Term rates across the AHTS vessel categories declined by an average of 7%, 10%
and 1% versus the second quarter of 2016 in GoM, Brazil and West Africa, and year to date figures are down 26%, 23% and 26% versus year to date 2015 for the same regions.
With more vessels coming off contracts internationally (especially in Brazil), an increasing number of vessels will likely find their way to the North Sea spot market. Owners have few other places to trade large AHTS units, but many of these units will likely go straight into lay-up.
The first quarter of 2016 produced new lows for the Cape 4TC 172 with a record index of US\$485 posted on 17 March. Panamax and supramax markets fared little better with first quarter averages of US\$3,067 and US\$3,800 respectively. By late April the same index had risen to US\$8,374, proving once again the intrinsic volatility in the dry freight market. Despite a lacklustre summer, September saw a further rise and a period of increased volatility from a higher base, with capes peaking at US\$20,063 on 17 November. The cape index for the year averaged US\$6,373 (2015: US\$6,996) whilst panamax averaged US\$5,562 (2015: US\$5,560) and supramax US\$6,268 (2015: US\$6,965). Market volumes on cape futures fell 14.3%, whilst the smaller panamax and supramax sectors showed minor volume improvements.
The promising start in freight options volumes witnessed in the first quarter was not sustained and the market volume ultimately shrank 10% year-on-year. Despite this we performed well.
The iron ore growth story continues with a 56% rise in market volumes to 1.34bn tonnes. Once again, we have increased our market share in this growing sector.
Reflecting the diminished volume in freight swaps, our team has reduced in size but renewed vigour has resulted in improved performance. At the same time, we have increased our staffing in the growing iron ore sector both in London and Singapore, where our volumes remain on a growth trajectory.
The adoption of the cape 180,000 5TC contract seems likely to take place early in 2017, removing some of the trader uncertainty and immediately providing an uplift in values of approximately US\$1,000.
Supramax/handymax futures volumes increase in 2016
18%
The solutions and expertise provided by the financial team have greatly enhanced our client offering and uniquely positions our business amongst its peers and places us well, as some of the major banks step back from lending to the shipping market.
Revenue (US\$)
Revenue (£ equivalent)
£41.0m 2015: £28.7m
£6.8m 2015: £1.2m
2016 will be remembered as the year the UK voted to leave the European Union and the year Donald Trump was elected the incoming US President. Although these issues were predicted to impact the financial markets significantly, the capital markets have been relatively stable and resilient and have throughout the year survived relatively untroubled as a whole.
2016 started as 2015 left off; namely with a continuing downward spiral in the stock markets whereby major indices took a 10% haircut the first few weeks into 2016. The downward spiral was fuelled by concerns of China's slowing economy and the ever-falling oil prices. At the worst the oil price was below US\$30 but at the end of the year was back above US\$50. Our corporate finance revenues, however, increased approximately 40% compared to the same period in 2015. Similar to 2015, the first quarter of 2016 saw very strong secondary trading in bonds, mainly relating to trading in distressed offshore bonds, however activity came down in March and continued into April. Corporate finance revenues in the first quarter of 2016 were driven by equity capital markets transactions which kicked off in February with Golden Ocean (raising US\$200m) followed by Scorpio Bulkers (raising US\$63m) in March.
In the second quarter of 2016, the markets again took a hit as the UK voted to leave the EU, causing mass confusion about the future of European financial markets and the value of the British pound. Despite the difficult markets, we led a US\$192m equity offering for Scorpio Bulkers Inc. in June, and advised Golar LNG in the establishment and private placement of US\$500m of Golar Power in July, in addition to being retained as advisor for several Norwegian and international companies.
In the third quarter of 2016, markets were somewhat shut down within our core sectors despite our strong pipeline. Despite the still difficult market conditions we led the US\$51.5m equity issue in Star Bulk Carriers Corp. completed in September 2016. In addition, we were retained for performing valuations and submitting fairness opinions to two US listed companies, one of which was a new client.
Equity capital raised for our clients in 2016 US\$1.5bn
In the fourth quarter of 2016 markets recovered from the initial shocks following the Brexit vote and the soothing of China's stimulus that stabilised the global economy. The election of Donald Trump as the new President of the United States shook the markets in the minutes that followed, but ultimately resulted in a rally. Major indices added between 6% and 12% through the end of the year as investors bid up stocks in anticipation of deregulation, lower taxes, inflation and infrastructure spending. For Clarksons Platou Securities (CPS), markets opened up, and we completed six equity offerings raising in total approximately US\$545m for, amongst others, Golar LNG, Maritime & Merchant Bank, Songa Bulk and Standard Drilling, in addition to being a part of the syndicate raising US\$150m in senior notes for Rowan Industries, a new client of CPS, and a US\$225m offering of convertible senior notes for Ship Finance International.
Looking into 2017, we believe it will likely be a more positive capital markets environment as we see improvement in both commodity prices and increasing investor risk appetite. Hence we remain cautiously optimistic for the year to come.
At the beginning of the year and until the end of the second quarter of 2016, we experienced lower transaction activity and fewer projects being placed in the Norwegian project finance market compared to earlier years. One major reason for this is clearly the lack of finance, due to the fact that banks have enough shipping exposure, and earnings in most segments are not sufficient to provide a cash flow that covers interest, amortisation and a return on equity. Another reason has been that the low charter levels and decline in ship values have had a negative effect on liquidity and balance sheets of shipowners, which has affected their creditworthiness and hence their access to finance.
In 2016, we have seen that the project finance market has been split into two categories: opportunistic asset play projects and long-term leasing deals. The asset play segments have been mostly dry cargo, offshore and containers, while we have seen leasing activity on the tanker side being quite active. The investors in the asset play deals have been mostly European investors with the deals arranged and syndicated in the Norwegian project finance market. On the leasing side, the Chinese leasing banks have been very active, and a few other private equity funds specifically targeting the offshore industry have also concluded a couple of transactions.
In the second half of the year we focused on financing projects with 100% equity. The activity picked up significantly after the summer, and in the second half of the year, we structured and placed three PSV projects (seven vessels), one handysize bulker project (one vessel) and one feeder containership project (two vessels). The total equity raised in these transactions amounted to close to US\$65m.
In addition to this, our project sales team has successfully worked together with Clarksons Platou Securities on the placement of three private placement transactions.
The outlook for 2017 is positive, as we have several projects in the pipeline and the momentum going forward is strong.
Debt capital raised for our clients in 2016
US\$0.9bn
Total KS market transaction volumes in 2016
US\$2.1bn
The Nordic real estate market continued the strong path in 2016 with strong growth in Sweden, Finland and Denmark compared to 2015. The Norwegian market however dropped from NOK118bn to an estimate of NOK70bn in 2016 mainly due to fewer large transactions than we experienced in 2015. Across the entire Nordic market, yields on prime assets and long leases compressed as institutional funds and family offices sought yielding assets with stable dividends in stable macro-economies like the Nordic. Foreign investors have had an increasing appetite for the Norwegian market over recent years but this was significantly down in 2016. The major reason is the continuous drop in CBD Oslo Yields with 3.75% as a new all-time-low record. This makes Oslo one of the most expensive commercial real estate markets in Europe. Domestic property companies and property funds (listed and unlisted) accounted for 63% of the volume. Even though yields on prime assets have declined, the yield gap (difference between real estate yield and interest rate level) is still attractive. The vacancy rate in the Oslo office market is expected to decline over the next two years as a result of conversion and demolition of older office buildings to residential properties combined with few new office buildings.
Whilst total transaction values have declined in 2016 compared to 2015 we still see strong demand from the equity side and expect this to continue.
During the course of 2016, it was evident that traditional shipping finance (particularly from financial institutions in Europe) had become much harder to obtain. This was largely driven by more stringent capital regulations, ongoing legacy portfolio losses and a more cautious approach to credit risk towards the sector. Whilst a number of smaller banks began to increase exposure to the sector, this in no way made up for the flight to quality and reduced syndicated lending from the major shipping banks.
The continuing emergence of global leasing companies (notably in China and Japan) has provided some of the much needed additional financing support for the sector but again, whilst these leasing companies are in expansionary mode and are actively looking for sound business opportunities beyond their national borders, they alone do not fill the void. Insurance companies, pension and wealth funds, incentivised by regulation to match medium-term liabilities with assets, remain hungry for volume and yield but continue to have limited risk appetite for the sector and this pool of capital, aside from a few notable recent US Private Placement transactions, remains largely untapped by the industry.
In summary, shipping financing is still available for the right transactions but liquidity is very tight and unlikely to improve in the next 12 months.
NOK 3.5bn
Total global syndicated marine finance loan volume in 2016
US\$50.3bn
It has been a very strong year for most areas of our business handling dry cargoes, but, as expected, 2016 was a struggle for those areas in the oil and gas sector. We have concentrated, therefore, on controlling overheads whilst providing a market-leading level of service.
Revenue
£17.8m 2015: £22.5m
Segment underlying profit
£2.1m
2015: £3.3m
As far as grain exports are concerned, 2016 has been an excellent year for the agency business. Ipswich, Tilbury and Southampton have seen high shipping volumes, and the smaller coastal ports such as Poole and Boston have remained busy too.
Additional grain export business has been won which has not only increased our activity in our traditional grain ports, but also has seen us handling grain in Sheerness and on the Tyne.
The indications from the trade are that volumes will fall off in the early part of 2017 as much of the UK exportable surplus has already been shipped, but levels should pick up again after July's harvest.
After a steady start to 2016, animal feed imports picked up significantly in the last few months of the year, with Liverpool and Avonmouth seeing much increased volumes.
Coal imports have now largely been replaced by biomass as power stations are either converted or closed.
The switch of fuel type alone has not affected Clarkson Port Services (CPS) but we have seen an overall reduction in activity as customers reduce volumes due to both planned maintenance on their burners and teething problems with new port side handling facilities. In 2017 we expect to return to more normal import volumes.
Although in 2016 CPS handled a small number of liquid calls, mainly based around Harwich, Fawley, Thames and the Mersey, the agency fees offered by the tanker owners remain very low.
This has been much the hardest part of our business in 2016. We have seen volumes more than halved because of the downturn, forcing us to restructure our offices and decrease overheads, whilst ensuring we remain in a strong position to react to our customers' requirements both now and in the future.
A slight upturn was seen in the lower fee-earning PSV market towards the end of 2016, and we are starting to receive enquiries for a number of projects scheduled for early 2017. We hope that this is a sign of a slow market improvement, although it will be some time until it returns to previous levels.
Much of 2016 was spent laying the groundwork to ensure that CPS is involved in the various offshore wind projects commencing around the UK.
In the third quarter of 2016, we began handling projects in Belfast and East Coast UK, which will continue well into 2017. During the coming year we expect this activity to increase significantly and currently have sight of projects that we should be involved with at least until 2020.
As with our other businesses involved in the oil and gas sector, 2016 was a tough year. Orders from the sector reduced significantly as clients reined in their spending and, consequently, we cut overhead in order to ensure we remain in a healthy position when the market improves.
The second half of the year showed signs of improvement but we continue to focus on promoting our supply business in other sectors. In addition, in 2016 we completed the implementation of an electronic stock system that will not only improve the service we are able to offer our clients, but should also help us control overheads.
Our stevedoring operation in Ipswich has perhaps been the most successful area of our business in 2016, benefiting from an increased client base, a good harvest year and a widening of products handled. We continue to benefit from being one of the few facilities in the UK not directly connected to just a single major grain house.
With the cooperation of Associated British Ports we have been able to increase our storage facilities in the port, and are in discussions to take on additional space in 2017.
Although the prediction is that grain volumes will decrease in the first half of 2017, we are already seeing our customers switching their attention away from grain export and focusing on imported products such as animal feed and rice.
We continue to look for other stevedoring opportunities outside Ipswich.
In 2016, we concentrated on expanding our focus to new sectors including renewables, but the market remains challenging.
Total tonnage handled at Ipswich stevedoring operation in 2016
Our 2016 performance builds on a consistent long-term growth profile, supported by ongoing investment into this important area of our business.
Segment underlying profit
£4.9m 2015: £3.4m
Research revenues and results grew strongly in 2016, with sales reaching £13.7m (2015: £11.1m). Despite the challenging markets, underlying sales grew by an encouraging 19% during the year, as our clients continued to value the importance of authoritative intelligence. This performance builds on a consistent long-term growth profile, supported by ongoing investment into this important area of our business.
Clarksons Research is respected and trusted worldwide as the market-leading provider of authoritative intelligence and data across shipping, trade, offshore and energy. We continue to invest heavily to expand our wide ranging proprietary database, to develop and enhance our digital product offering and to promote the Clarksons' profile across the global shipping and offshore industries. Research also continues to be a core data provider to the broking, financial and support teams of Clarksons.
The research focus on the collection, validation, management, processing and analysis of integrated data about the shipping and offshore markets continues. Our fully integrated and relational database continues to expand in breadth and depth, with our shipping and trade database now providing coverage on over 135,000 vessels totalling 1.9bn dwt, over 40,000 companies, over 25,000 machinery models, over 600 active shipyards and fabricators, over 600,000 fixtures and over 100,000 commercial and trade time series, including coverage of 11bn tonnes of seaborne trade. The offshore and energy database provides comprehensive coverage of all offshore fields, projects, production platforms, subsea infrastructure, rigs, support vessels and construction vessels, all integrated within a Geographical Information System (GIS). The development of new proprietary data remains important, including the utilisation of AIS data, trade and commodity flows, the tracking of capital market activity and shipping loan data, machinery and environmental packages on board ships, offshore renewables, ports and terminals, ship repair yards and other shore side infrastructure relating to trade and energy.
Over 75% of research sales are annuity based and there is excellent customer retention. A broad and diversified client base includes good market penetration across the financial, shipowning, insurance, supplier, governmental, private equity, energy, commodity, shipyard, fabrication and oil service sectors. There is also broad global client spread, including across Asia Pacific. Total research headcount is now over 100, with a continued broadening of geographic footprint, involving expansion of operations in both Shanghai and Singapore during 2016.
Shipping Intelligence Weekly has been produced for
Research derived its income from the following principal areas:
Sales from digital products performed very well in 2016, growing by 19%. We continue to invest heavily in our digital product offering, utilising our growing proprietary database, IT and data analytics to remain both market leading and to develop new digital products to add to our offer.
Sales from our flagship maritime commercial database, Shipping Intelligence Network, continue to grow, while a major upgrade to our online vessel register, World Fleet Register, during the year was very well received by clients and helped support robust sales growth of 27%. Our relaunched register offers a range of new and powerful functionality including owner and yard profiles, alert functions and expanded data on equipment, incidents and additional fleet sectors. Sales of our digital offering across offshore continue to expand and a further product enhancement to World Offshore Register is planned for early 2017.
Our launch of a new ship tracking system in late 2016, Clarksons SeaNet, blends satellite and land based AIS data with our proprietary database of vessel characteristics and infrastructure. It tracks global vessel movements for over 60,000 ships, with a combined fleet tonnage of 1.2bn gt, across over 5,000 ports and zones. This is a very positive development and is fully complementary to both the research digital offer and broader technology strategy across broking and financial. Further new digital products and product enhancement are expected to come on line in 2017.
Clarksons Research continues to expand its provision of bespoke service contracts to a range of large corporate and institutional clients in both the shipping and offshore industries. A specialist team concentrates on managing retainers and providing bespoke data, consultancy and valuations for banks, shipyards, fabricators, engineering companies, insurers, governments, asset owners and other corporates. These bespoke services often become embedded within our clients' workflows, supporting client retention.
Clarksons Valuations performed particularly strongly in 2016, growing its position as the leading provider of valuation services to the ship finance sector. The valuations team work closely with all major ship finance banks and leading owners, as the value our clients place on authoritative and comprehensive support increases with the challenging market conditions. The valuation team headcount has been expanded in 2016, along with investment in their operating support tools.
Market intelligence reports remain an important aspect of the Clarksons Research overall offering, generating provenance and profile. Research publishes weekly, monthly, quarterly and annual reports, publications, registers and maps, available both in print and within our digital offering, continuing a 50 year heritage. Our flagship shipping report, Shipping Intelligence Weekly, remains market-leading while our comprehensive offshore offering, including Offshore Drilling Rig Monthly and Offshore Support Vessel Monthly, continues to gain traction.
4,000,000
Number of valuations provided by Clarksons Valuations in 2016
30,000
Jeff Woyda Chief Financial Officer and Chief Operating Officer
The proposed total dividend for the year is 65p, representing the 14th consecutive year of increased dividends.
The Group made revenue of £306.1m (2015: £301.8m) and incurred administrative expenses of £253.0m (2015: £242.0m). The majority of revenue, and a significant proportion of expenses, are earned in foreign currency. Following the Brexit vote in 2016, sterling has fallen against most currencies.
Underlying profit before taxation was £44.8m (2015: £50.5m). The term 'underlying' excludes the impact of exceptional items and acquisition related costs, which are shown separately on the face of the income statement. Management separates these items due to their nature and size and believe this provides further useful information, in addition to statutory measures, to assist users of the annual report to understand the results for the year.
| 2016 £m |
2015 £m |
|
|---|---|---|
| Underlying profit before taxation | 44.8 | 50.5 |
| Exceptional items | 11.1 | (2.5) |
| Acquisition related costs | (8.6) | (16.2) |
| Reported profit before taxation | 47.3 | 31.8 |
Exceptional items include the gain on the sale of shares in The Baltic Exchange to SGX. A special final dividend from The Baltic Exchange, which was closely linked to the sale, was also treated as an exceptional item in 2016, although the £1.4m special dividend received in 2015 was included in underlying income in keeping with the treatment in previous years.
Acquisition related costs includes £6.6m of amortisation of intangibles, £1.1m of cash and sharebased payments spread over employee service periods and £0.9m of interest on loan notes, half of which were repaid in June 2016 and the last of which will be repaid in June 2017. Estimated acquisition related costs for 2017, assuming no other acquisitions are made, would be £4.9m.
The Group's effective tax rate, before exceptional items and acquisition related costs, was 25.0% (2015: 24.9%), reflecting the broad international operations of the Group and the disallowable nature of many incurred costs, particularly entertaining. After exceptional items and acquisition related costs, the rate was 19.8% (2015: 29.8%).
Underlying basic EPS was 105.2p (2015: 121.9p), calculated as underlying profit after taxation divided by the weighted average number of ordinary shares in issue during the year. The reported basic EPS was 119.7p (2015: 68.2p).
The Group earns some of its commissions on contracts where the duration extends beyond the current year.
Where this is the case, amounts that are able to be invoiced and collected during the current financial year are recognised as revenue accordingly. However, those amounts which are not yet invoiced and recognised as revenue are held in the FOB. In challenging markets, such amounts may be cancelled or deferred into later periods. Consequently, the Directors review the FOB at the end of the year, and only publish the total of those items that are in the FOB which will, in their view, be invoiced in the following 12 months. At 31 December 2016, this estimate was US\$112m (at 31 December 2015: US\$151m). The reduction in forward visibility of earnings reflects the low levels of newbuilding contracting and the prevalence of spot business arising from the highly challenged rate environment, as highlighted in the interim statement.
The Board is recommending a final dividend of 43p (2015: 40p), which will be paid on 2 June 2017 to shareholders on the register at the close of business on 19 May 2017. The interim dividend was 22p (2015: 22p) which, subject to shareholder approval, would give a total dividend of 65p (2015: 62p). In taking its decision, the Board took into consideration the 2016 performance, the strength of the Group's balance sheet and its ability to generate cash and the FOB. The dividend is covered 1.8 times by basic EPS (2015: 1.1 times). This increased dividend represents the 14th consecutive year that the Board has raised the dividend.
The average sterling exchange rate during 2016 was US\$1.35 (2015: US\$1.53). At 31 December 2016 the spot rate was US\$1.24 (2015: US\$1.47).
The Group continues to be cash generative, ending the year with cash balances of £154.0m (2015: £168.4m), after the repayment of the first tranche of loan notes amounting to £23.3m in June 2016. A further £29.4m (2015: £5.4m) was held in short-term deposit accounts, classified as current investments on the balance sheet. The Board believes that deducting accrued bonuses before striking a total of net cash and available funds is a better representation of the net cash available to
www.clarksons.com 37
the business, as bonuses are typically only paid once a year after the year-end, and thus an element of the cash held at the year-end is earmarked for this purpose. Consequently, after deducting all outstanding loan notes and amounts accrued for performance-related bonuses, net cash and available funds amounted to £74.8m (2015: £45.5m). This significant increase arises as a result of profits, the proceeds from the sale of The Baltic Exchange, currency gains from holding nonsterling denominated funds and improved working capital management.
Net assets at 31 December 2016 were £406.7m (2015: £340.9m). The balance sheet remains strong, with net current assets and investments exceeding non-current liabilities (excluding pension provisions) by £58.1m (2015: £36.2m). The overall provision for impairment of trade receivables was £15.5m (2015: £12.3m) and the underlying US dollar balance increased by US\$1.0m, reflecting the continued challenging trading conditions in the shipping and offshore markets. The Group's pension schemes have a combined surplus before deferred tax of £2.3m (2015: £4.1m deficit). This improvement is a result of positive investment performances and updated actuarial assumptions more than offsetting the impact of the significantly lower year-end discount rate.
Chief Financial Officer and Chief Operating Officer
10 March 2017
As with all businesses, Clarksons faces a number of risks and uncertainties in the course of its day-to-day operations. The balance of identifying and managing risks and embracing opportunities enables us to deliver our strategic objective: enhancing shareholder value by maintaining and extending our industry leadership.
As the world's leading provider of integrated shipping services, Clarksons' brand underpins the successful delivery of our strategy. It is imperative that the integrity and reputation of the Clarksons brand is preserved through effective risk management. The breadth of products and services that we offer to our global clients span the shipping, offshore, broking, banking, research and support markets and has the potential to expose us to a number of business specific risks.
The principle of individual accountability and responsibility for risk awareness, monitoring and management is a key feature of our culture. Overall responsibility for ensuring risk is effectively managed across the Group lies with the Board. The audit committee reviews the effectiveness of the Group's risk management process on behalf of the Board.
– Carrying out an annual review of the effectiveness of the system of internal control and risk management and confirming that the ongoing process for identifying, evaluating and managing the Group's principal risks has operated throughout the year. The Board performs this role with advice from the audit committee.
The Board is responsible for the amount and type of risk the Group is willing to accept to achieve our strategic and operational objectives. It performs this function by setting the business strategy and approving the Group's policies and procedures, enabling, where possible, a reduction in risks to the tolerance levels set by the Board. The Board further considers the inherent risk attributes of our business when identifying its appetite and tolerances for risk and opportunities.
Oversight, identification, assessment and mitigation of risk at corporate level
Overall responsibility for the Group's risk management and internal control systems
Sets strategic objectives and defines risk appetite
Monitors the nature and extent of risk exposure against risk appetite for our principal risks
Provides direction on the importance of risk management
Supports the Board in monitoring risk exposure against risk appetite
Risk management process and internal controls embedded across divisions and functional areas
Reviews the effectiveness of our risk management and internal controls systems
Identification, assessment and mitigation of risk at entity and divisional level
Risk identification, assessment and mitigation performed across the business
Risk awareness and safety culture embedded across the business
Inherent risk attributes of Clarksons' business include the following principles:
Risk appetite is at the heart of our risk management processes, since it is integral both to our consideration of strategy and to our medium-term planning process. Risk appetite is a key consideration in decision-making across the Group and helps us define the criteria for assessing the potential impact of risks and their mitigation.
The Group's risk appetite is formally reviewed and approved by the Board annually.
Our risk management and internal control framework defines the procedures that manage and mitigate risks facing the business. This framework cannot eliminate risk entirely, and can only provide reasonable, not absolute, assurance against material misstatement or loss.
Our risk assessment is formed in stages:
The Board recognises that whilst it has limited control over many of the external risks it faces, including, for example, the macro-economic environment, it nevertheless reviews the potential impact of such risks on the business and actively considers them in its decision-making. The Board also actively monitors internal risks and ensures that appropriate controls are in place to manage them.
Every year, through an integration of culture and compliance, we make further progress embedding our risk management approach with all employees. Our objectives and values are clearly communicated and our training, systems, processes and internal controls are developed in accordance with our risk management
model. This is, of course, an ongoing process and we continue to work hard to improve risk awareness and embed controls and procedures to mitigate risks.
The Board and senior management take a forwardlooking approach to risk to ensure early identification, timely assessment and, where necessary, mitigation of new and emerging risks, such that they can be evaluated alongside known and continuing risks.
In addition to our regular risk management activities, the priority for 2017 is to continue promoting a 'monitoring environment' which consists of validating, monitoring and reviewing the effectiveness of our current controls in order to support the Board in its responsibilities.
In November 2016, the audit committee carried out its annual formal assessment of risk which was communicated in full to the Board, which subsequently agreed the key risks, risk appetite, controls and risk management processes in place within the Group.
In accordance with provision C.2.2 of the revised 2014 UK Corporate Governance Code, the Board has assessed the prospects of the Group over a longer period than the 12 months required by the 'going concern' provision.
In carrying out their assessment, the Directors have considered the resilience of the Group (with reference to its current position, prospects and strategy), the Board's risk appetite, the Group's principal risks and the effectiveness of mitigating actions. This robust assessment considers the potential impact of the Group's principal risks on its strategy, business model, future operational and financial performance, solvency and liquidity over the period.
In determining the period over which to provide its viability statement, the Board took into consideration revenues, cash flows, funding requirements, profits, long-term time charters, the average construction period of newbuilding contracts, triennial valuations of pension schemes and the duration of the majority of the forward order book. The Board concluded that a period of three years was appropriate.
Based on their assessment of prospects and viability, the Directors confirm that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three year period ending 31 December 2019. In doing so, it is recognised that such future assessments are subject to a level of uncertainty that increases with time and, therefore, future outcomes cannot be guaranteed or predicted with certainty.
The Directors also considered it appropriate to prepare the financial statements on the going concern basis, as explained in note 2.1.
The principal risks which may impact the Group's ability to execute its business strategy have not fundamentally changed since 2015, however, the likelihood of the risk occurring and mitigation in place have evolved.
The following risks, whilst not exhaustive, are a summary of the principal risks which we believe could have the greatest impact on our business. These risks have been the subject of debate at Board and audit committee meetings. The Board regularly reviews these risks in the knowledge that currently unknown, non-existent or immaterial risks could turn out to be significant in the future.
| Risk description | Mitigation | Progress in 2016 |
|---|---|---|
| People – our people are the assets of our business and are essential to our success | ||
| Loss of key personnel Our success depends on the experience and |
– We offer competitive remuneration and an excellent working environment to help us to retain staff. |
– We have not lost a key team during 2016. |
| performance of our specialist teams, which in turn maintains our excellent reputation. Losing key personnel may impair our coverage of a particular line of business. S People |
– Our employment contracts include restrictive covenants, appropriate notice periods and gardening leave provisions to prevent the loss of key information. – We encourage teamwork across the Group, which is also reflected in our remuneration schemes. – We invest in our teams through training and promote further learning through lectures and encouraging personal study. – Succession-planning and documentation of key procedures help to minimise any impact of losing personnel. – We provide career development throughout the Group, irrespective of geography. |
– We continue to make significant hires. – We monitor staff turnover and absenteeism and strive to understand the reasons behind such activity. – A number of employees have transferred locations within the Clarksons Group; accommodating both the employees and the Group's needs. – We have hired a dedicated recruitment resource in London. |
| Financial – we target the strengthening of our balance sheet and improvement of our results | ||
| Adverse movements in foreign exchange The Group's revenue is mainly denominated in US dollars and the majority of expenses are denominated in local currencies. The Group can therefore be exposed to adverse movements in foreign exchange. S Growth See note 26 for financial risk management |
– The Group hedges currency exposure through forward sales of US dollar revenues. We also sell US dollars on the spot market to meet local currency expenditure requirements. – We continually assess rates of exchange, non-sterling balances and asset exposures by currency. |
– We continue to apply our hedging policy consistently and we have forward sold a proportion of US dollar anticipated revenues into 2019. – Following the Brexit vote, sterling declined significantly. If sustained, the fair value of existing hedges will decline, although sterling weakness would still be a net favourable movement for the Group. |
| Adverse financial commitments relating to pensions The Group operates three defined benefit schemes which are funded by the payment of contributions to separately administered funds. There are circumstances under which a pension obligation can crystallise and a principal employer be forced to settle the scheme, thereby creating a substantial financial obligation. S Growth See note 22 for employee benefits |
– All defined benefit schemes are closed to new entrants. – We have in-house and outsourced global pension experts to manage the schemes in place, including monitoring fund manager performance. – Diversification of the investment funds which hold our schemes' assets reduces the impact of fund performance volatility and investment risk. – Regular review of pension fund liabilities ensures future funding requirements can be planned. |
– Triennial valuations carried out in 2015/2016 and recently finalised by independent actuaries show one scheme had a surplus of £3.6m and the other two schemes had deficits of £1.2m and £2.1m. Contributions into the three schemes have reduced from £2.2m per annum to £1.2m per annum. |
| Financial loss arising from failure of a client to meet its obligations S Understanding See note 14 for trade and other receivables |
– We regularly monitor both local and global client debt levels using information from a range of sources. – Provisions are based on ageing of balances, disputes or doubts over recoverability. |
– Two major far eastern operations have filed for court protection during the year. – We continue to provide for doubtful debts on a prudent basis. – There were no unexpected losses arising from a client failure during the year. |
Governance
Jeff Woyda Corporate social responsibility committee Chairman
In addition to raising money, we have looked beyond today and helped the community gain experience, expertise and a vision for the future. It is with great pride that I write to you as Chairman of the corporate social responsibility committee (CSR committee). Since taking over this role in 2013, Team Clarksons has continued to go BEYOND expectations, generously contributing to charities and working with the community to promote the maritime industry and provide work experience, employment and training opportunities to so many people, of all ages, wishing to find a way into the world of shipping and offshore.
Since 2013, members of Team Clarksons have gone BEYOND their safe zone – they have climbed mountains, conquered the North Pole, cycled hills and roads, completed marathons, triathlons and tough mudders, shaved off their hair and grown moustaches, tackled the 3 peaks and much, much more… all for charity. I am delighted to be able to say that Team Clarksons, during this time, has consequently contributed to over 90 charities, and raised around £1m for good causes around the world. As a committee, we support most charitable endeavours and also highlight each year up to four charities for larger donations and exploits. We also recognise needs in times of major disaster, such as the Philippines typhoon and the Japanese nuclear disaster.
Since the formation of the CSR committee, Clarksons staff globally have supported an incredible 94 worthwhile causes, across maritime, health and childrens' charities. The timeline below shows just a few examples of how our staff have GONE BEYOND.
In addition to raising money, we have looked BEYOND today and helped the community gain experience, expertise and a vision for the future. Students from the UK and overseas have undergone work experience, we have run 48 seminars for over 2,500 trainees, staff, clients and other market professionals and the John Marshall Lectures, one week of training in each of dry cargo and tankers, have taken place every year, training in excess of 200 people – from Clarksons' and the wider industry. We also have close relationships with many universities and business schools around the world specialising in maritime.
We have a dedicated training officer, and have run lectures in a broad range of topics from 'Life at sea' and 'Insights on India's impact on global trade and shipping' to 'Ballast water management' and 'Marine salvage'. We have worked and hosted lectures with the Institute of Chartered Shipbrokers, London Shipping Law Centre and UK Chamber of Shipping to name but a few, and have ensured all staff undergo ABC training on a regular basis. Staff are also supported in their career development, whether that involves qualifications with ICS, CIMA, ACCA or CIPD, MBA study or more practical first aid, health & safety and compliance training.
Over the past year, we are BEYOND proud that 'our Jeff' – the Lord Mountevans has been Lord Mayor of London. Clarksons
were prominent in supporting Jeffrey wherever possible, including the Lord Mayor's parade and appeal during this historic milestone in Clarksons' 164 year history. During his year, he has promoted extensively the maritime theme, and a high point was the bringing together of all Managing Directors, Directors and Divisional Directors in the Egyptian hall of the Mansion House to celebrate Clarksons' unique talent and Jeffrey's appointment.
As a Group, we also go BEYOND the internal and reach out into the industry, with members of Team Clarksons also serving as Directors of the Baltic Exchange, ITIC, the London Tanker Brokers Panel, Dubai Maritime Advisory Council and Emirates Maritime Arbitration Centre.
So we at Clarksons go BEYOND in our social responsibilities in so many ways… in giving back to our staff, society at large, the markets in which we work and those less fortunate than ourselves. We will continue this approach BEYOND the now and into the future.
Corporate social responsibility committee Chairman
10 March 2017
Launching the new safety boat in London's Docklands
Rebuilding after Typhoon Haiyan
Charity beach rugby at Canary Wharf
Clarksons' spinning for Charity Giving Day
Poppy planters volunteering at the Tower of London
Almost at the finish line of the Three Peaks challenge
2017
Supporting the local community and the wider world has always formed an important part of Clarksons' attitude to corporate responsibility, whether in terms of direct donations or supporting our employees as they strive to make a difference to society.
In 2013, as part of this continuing commitment, Clarksons formalised these activities by establishing a new CSR committee, chaired by the Chief Financial Officer and Chief Operating Officer and comprising representatives from different parts of the business. The CSR committee identified three potential areas towards which support should be focused: maritime causes, children's charities and health issues – the latter choice would be influenced by circumstances where a member of staff had been directly affected by a condition or situation requiring help. In the past four years Clarksons globally has supported an incredible 94 worthwhile causes.
Clarksons staff are encouraged to nominate charities that fall under these broad categories and these are regularly reviewed throughout the year by the CSR committee. From time to time, recognising that world events can produce situations of urgent need, the CSR committee has made specific one-off donations.
In 2016 significant donations were made to the Alzheimer's Society to help fund critical research, provide education and resources and raise awareness for a solution to the global Alzheimer's epidemic; the Children's Cancer Hospital Foundation in Egypt which is the largest paediatric oncology hospital in the world in terms of capacity; and the English Speaking Cancer Association in Switzerland which provides emotional support and practical help to those affected by cancer.
The Chain Gang team keeping up the pace at the 2016 Clarksons Charity Giving Day
Our activities reached a peak on 27 September with the first Clarksons Charity Giving Day when teams of six from Clarksons' Houston, London, Oslo, Dubai and Singapore offices competed to cycle 120km in less than four hours. The aim was to raise as much money as possible for two very worthwhile charities: the Juvenile Diabetes Research Foundation (one of the Lord Mayor's selected charities) and the London Sports Trust, which is dedicated to helping young Londoners through sport and works with disadvantaged children to fulfil their potential. In total Clarksons raised more than £50,000 for these two incredible causes.
Our people are our business. Without enthusiastic and engaged employees we simply could not do our job delivering the highest quality service to our clients. Employees are expected to use good judgement and act in the best interests of Clarksons and our clients at all times and each and every member of the team shares our common values and aspirations to conduct our business in an ethical, honest and professional manner wherever we operate.
One of the 26 teams taking part in the 2016 Clarksons Charity Giving Day
Clarksons is an equal opportunities employer which entrusts its reputation and market lead to more than 1,393 highly motivated employees globally. Our business is meritocratic. We seek to appoint the best candidate for each and every vacancy. Candidates are considered against fair and objective criteria which enable all employees, irrespective of gender, race or disability, to advance in their career.
Shipping is an industry that people enter into because they are enthusiastic about world trade. This industry is increasingly becoming an attractive employment option as it offers career opportunities, flexibility and incentives for those who commit themselves.
Of the 1,393 staff within the Group at 31 December 2016, 371 or 27% were female (26% in 2015). There were 251 managers within the Group, of which 44 or 18% were female, which is an increase of 15 or 7% year on year from 2015. From total new hires made in 2016, 27% were female.
Clarksons has undergone significant growth over the last decade, including the acquisition of Platou in 2015, which means that many employees have been employed for less than ten years. Nevertheless, we are proud that 22% of Clarksons employees have been with the organisation for more than ten years as commitment to the Company and its values ensures that there is continuity of practice throughout the organisation and a sophisticated understanding of how the Clarksons business model is maintained.
Participation in the Company's LTIP and other share schemes gives employees the opportunity to become shareholders in the Company and share in its continued growth and success.
Communicating with employees is an important priority. Our flat management structure means that any employee has direct access to the senior management team, with divisional managing directors working side by side with the trainees they recruit. All employees have access to the employee intranet which contains current news, details of employee policies and other relevant information. Employees have opportunities to attend briefings about the Company's business and Clarkson News, the Company's periodic in-house magazine, provides current and former employees with information about the Company's operations and colleagues around the world. Employees also have access to the Company's financial and regulatory publications, which are available on the corporate website.
We are a global business with an international workforce and the combination of languages, cultures and ideas brings a level of diversity and cultural richness that is the envy of our competitors. Clarksons' employees represent 65 nationalities globally and in a reflection of this cultural diversity, our management team represents 23 of those nationalities. Our global presence also means that we can offer our employees the opportunity for international mobility and development throughout the Clarksons Group.
At Clarksons people are empowered to do their best work. We hire the brightest talents, give them the tools to shine including IT systems and high quality training and ensure they are suitably rewarded. Clarksons is committed to investing in talent retention and staff development, ensuring that as we grow (both organically and through acquisition) the right people are identified and developed.
Employees are encouraged to broaden their knowledge of the business where possible. For example, employees in our Commodity Quay office are able to attend regular lunchtime seminars on different topics. These seminars are led by in-house experts and/or external speakers, covering a wide range of topics on either an area of Clarksons' business or an area of personal development. Employees, regardless of department, are encouraged to attend these seminars, which provide a forum for interested individuals to further their knowledge of a subject.
Our training schemes remain unique in our industry, blending the collective skilled counsel and guidance of our staff with the tutelage of external experts from all areas of the shipping, trading and commodity markets.
Our Trainee Broker Scheme is open to school, college and university graduates as Clarksons believes that the qualities of commitment, talent and passion we seek in a trainee require a more diverse approach to recruitment. Trainees can expect a fully rounded education where their individual talents are nurtured and developed into what we hope will enable them to become the future leaders of our business.
Successful development of future leaders requires a talent pool from which to select the best individuals. Clarksons operates a prominent recruitment process which attracts in excess of 2,500 applications annually. Our own analysis has determined that the ratio of male to female applications is circa 70:30. This is almost identical to the gender diversity statistics recorded by Cass Business School at the City University London for shipping-related degrees.
In addition to the Trainee Broker Scheme, we offer a small number of paid internships to students each year and through long-standing relationships with schools and academies we are able to offer regular work experience opportunities in our broking and research divisions.
Clarksons endeavours to create a working culture that is inclusive for all and to maintain our high standards across all sites. We believe that it is vital to look after the health, safety and well-being of our staff. This includes providing a safe and secure workplace. Our policies and procedures are designed to minimise the risk of injury and ill health of all employees as well as any other parties involved in the conduct of our business operations.
The conclusion of the Platou acquisition in 2015 brought new locations and new teams into the Group. In light of this recent growth and following the integration of the new teams, we conducted a review of the health and safety policy statement for Clarksons Group in 2016. Our objective was to establish whether the policy statement remained fit-for-purpose. Following this review, it was determined appropriate to issue a new Group Health and Safety Policy Statement. This new policy statement was approved by the Board in February 2017. Health and safety committees, operating under written terms of reference, will oversee the implementation of the new statement and ongoing management of the underlying policies in the UK.
To support the implementation of these new policies, Clarksons has established a training plan for employees who are responsible for the day-to-day management of health and safety in the UK. In 2017, employees with new responsibilities for health and safety management will be trained to Institute of Occupational Safety and Health (IOSH) Managing Safely certification. This is an internationally recognised certification for those who manage health and safety, accredited by IOSH who are the chartered body for health and safety professionals. It is anticipated that this training will be refreshed in line with recommended best practice. Refresher training is being undertaken in 2017 for existing health and safety personnel whose certification is over three years old. The health and safety committees review training needs on a regular basis for all employees as well as those directly responsible for health and safety. For example, upcoming training includes first aid qualifications.
Clarkson Port Services Limited (CPSL) sites cover a wide variety of activities from office-based support to port agents working alongside vessels at quayside. A well-established schedule of external and internal health and safety audits takes place at CPSL sites, targeting all aspects of the activities. Actions from audits are tracked to completion and reported to the CPSL health and safety committee. In line with the Clarkson approach for continual improvement, the health and safety team at CPSL is working towards achieving Occupational Health and Safety Standard 18001. Audit for this certification is expected to take place during August 2017.
Clarksons recognises that slavery, servitude, forced labour and human trafficking (modern slavery) is a global issue.
We are committed to ensuring that there is no modern slavery in our operations or supply chains. The Clarkson Modern Slavery and Human Trafficking Statement for the financial year ended 31 December 2016 is available on our website at http://www. clarksons.com/modern-slavery-act/.
Clarksons is committed to managing its environmental impact and seeks to improve its performance and reduce emissions wherever possible. This is our fourth year of reporting greenhouse gas (GHG) emissions and we are pleased that significant progress has been made in disclosing the full impacts of our global offices.
In addition to reporting all material emission sources for which we have operational control, in 2016 we have greatly expanded our disclosure of Scope 3 to include emissions associated with business travel, water, waste and paper. Increasing the emissions sources reported has increased our total footprint compared with previous years but we believe this provides a more accurate representation of our environmental impact.
Total Scope 1 and 2 emissions measured in tonnes CO2 equivalent (tCO2 e) have decreased by 10% to 2,944 tCO2 e in 2016, from 3,271 tCO2 e reported in 2015. This decrease is primarily attributable to significant improvements in data quality and coverage across our office portfolio. We are pleased to report substantial progress has been made this year in obtaining accurate emissions data from our global offices, following the addition of Platou in 2015. This includes enhanced coverage for our London head office, Commodity Quay, which was highly estimated last year.
| tCO2 e |
||
|---|---|---|
| 2016 | 2015 | |
| Scope 1 – Direct control Natural gas, company cars, refrigerants |
860 | 922 |
| Scope 2 – Indirect control Purchased electricity, heat, steam and cooling |
2,084 | 2,349 |
| Scope 3 – Clarksons influence Transmission and distribution only |
179 | 195 |
| Sub-total | 3,123 | 3,466 |
| Emissions intensity tCO2 e per full time employee (FTE) |
2.37 | 2.51 |
UK offices account for over half our Scope 2 emissions, and the 11% reduction in the UK electricity conversion factor in 2016 contributes to a 265 tCO2 e reduction in reported Scope 2 emissions.
In line with best practice, we have for the first time included Scope 3 emissions reporting on business travel (flights, rail, company cars and taxis) and additional buildings-related emissions (water, waste and paper) for our global offices. This increases our total emissions across all scopes, however, given the nature of our business, emissions arising from flights are responsible for 46% of our carbon footprint and other business travel accounts for a further 6%. Water, waste and paper usage contribute to less than 3% of our total emissions.
| tCO2 e |
||
|---|---|---|
| 2016 | 2015 | |
| Additional Scope 3 | Not | |
| Business travel, water, waste, paper | 3,273 | reported |
| Total all Scopes | 6,396 | 3,466 |
| Emissions intensity | ||
| (tCO2 e per FTE) |
4.86 | 2.51 |
Comparison of emissions by region (tCO2 e) Scopes 1, 2 and part of Scope 3 (including transmission and distribution).
| 0% | 20% | 40% | 60% | 80% | 100% |
|---|---|---|---|---|---|
| Electricity | Natural gas | Flights | Other travel | Other |
Excluding the additional Scope 3 emissions introduced in 2016, UK offices are responsible for 59% of Clarksons' total footprint, with our largest office, Commodity Quay, responsible for 40%.
Clarksons' business has expanded through a combination of acquisition and organic growth, creating fluctuations in our reported emissions on an annual basis. Increased data quality in 2016 has created a slight decrease in emissions intensity to 2.37 tCO2 e/FTE. By disclosing additional Scope 3 emissions, this intensity increases to 4.86 tCO2 e/FTE largely due to the impact of flights.
Clarksons' GHG emissions were calculated in accordance with the requirements of the World Resources Institute 'Greenhouse Gas Protocol (revised version)', 'Environmental Reporting Guidelines: including mandatory greenhouse gas emissions reporting guidance' (Defra, 2013) and ISO 14064 – part 1.
James Hughes-Hallett Chairman
We are focused on delivering our strategy and strengthening our position as a modern, profitable business, underpinned by high standards of corporate governance.
I am pleased to present to you the Board's corporate governance report. In this section you will find our review of corporate governance at Clarkson PLC together with reports from the audit, nomination and remuneration committees.
We welcomed Marie-Louise Clayton as an independent Non-Executive Director to the Board in January 2017. Marie-Louise has a wealth of financial and strategic experience gained in a wide range of businesses, from technology to manufacturing, sugar processing to power and energy. Marie-Louise will be appointed as Chair of the audit committee at the AGM in May 2017. Marie-Louise's extensive experience will bring a fresh insight to the Board as we continue to deliver against our strategy.
James Morley will be retiring from the Board at the 2017 AGM. James has served on the Board of Clarkson PLC and as Chair of the audit committee for nearly nine years. His guidance, knowledge and active participation in the Board have been invaluable and I would like to take this opportunity to thank James for his dedication and his service to Clarkson PLC and wish him the very best for the future.
As part of our insurance renewal process in 2016, we instructed our insurance brokers to conduct a benchmarking exercise to compare our directors' and officers' liability coverage against that purchased by other companies in the FTSE 250 to ensure that it remained at a level comparable with that purchased by our peers. Following the review, the Board is comfortable that the level of directors' and officers' liability insurance cover is appropriate for a company of our size and our risk base, and comparable to that of our peer group.
The well-being of our employees is paramount. Integration from the Platou acquisition in February 2015 brought new employees and new locations into the Group. These changes warranted a review of our health and safety policies and procedures during 2016. The outcome of this review is a revised Group Health and Safety Policy Statement which was approved by the Board on 3 February 2017 along with refreshed procedures and committees. For more information about this review and the new policy, please see page 46.
The Board believes that a key aspect of good corporate governance is engagement with shareholders and being aware of their views. We welcome meaningful communication with shareholders. For more details on how we stay in touch with shareholders, please see page 54.
An external Board evaluation was undertaken this year by Boardroom Review Limited. The review included individual interviews with Board members and the Company Secretary as well as observation at a Board meeting. For more information on the Board evaluation, please go to page 53.
As the financial year began before 17 June 2016, the 2014 UK Corporate Governance Code (the Code) was effective for the Company's current reporting period. We discuss how we comply with the Code in more detail on page 52.
I look forward to meeting you at our AGM on 12 May 2017 and addressing any questions you may have.
Yours faithfully
James Hughes-Hallett Chairman
10 March 2017
James Hughes-Hallett, CMG Chairman (Non-Executive)
James Hughes-Hallett was appointed as a Director on 20 August 2014 and became Chairman on 1 January 2015. James is a Non-Executive Director of John Swire & Sons Limited. He is also Chairman of the Courtauld Institute of Art and of the Esmée Fairbairn Foundation. James was Chairman of John Swire & Sons Limited in London from 2005 to 2014 and before that Chairman of Cathay Pacific Airways Limited and Swire Pacific Limited in Hong Kong. Earlier in his career he was also the Managing Director and Chairman of The China Navigation Company and of Swire Pacific Offshore and chairman of the Hong Kong Shipowners Association. He served as a Non-Executive Director of HSBC Holdings PLC from 2005 to 2014.
James is a fellow of the Institute of Chartered Accountants in England and Wales and an honorary fellow of the University of Hong Kong and of Merton College, Oxford. He was made a CMG in the 2012 Queen's Birthday Honours.
James is Chair of the nomination committee and a member of the remuneration committee.
Chief Executive Officer
Andi Case was appointed to the Board as Chief Executive Officer on 17 June 2008, having previously been Clarksons' Chief Operating Officer. Andi joined Clarksons in 2006 as Managing Director of the Group's shipbroking arm, H Clarkson & Company Limited. He began his shipbroking career with C W Kellock and later Eggar Forrester. Prior to joining Clarksons he was with Braemar Seascope for 17 years, latterly as head of sale and purchase and newbuildings.
Jeff Woyda Chief Financial Officer and Chief Operating Officer
Jeff Woyda was appointed to the Board on 1 November 2006. Jeff qualified as a chartered accountant with KPMG and before joining Clarksons was a member of the executive committee of Gerrard Group PLC. He also spent 13 years at GNI where he was Chief Operating Officer. Jeff serves as a Non-Executive Director of the International Transport Intermediaries Club (ITIC).
Peter M. Anker President of Broking and Investment Banking
Peter M. Anker joined the Board on 2 February 2015.
Peter started his career in RS Platou's Houston office in 1982 as an offshore broker.
After returning to Norway in 1986, Peter became Chief Executive Officer and Managing Partner of the RS Platou Group in 1987, a position he held until joining the Board of Clarkson PLC in February 2015.
Peter Backhouse Senior Independent Director (Non-Executive)
Peter Backhouse was appointed to the Board on 16 September 2013 and became Senior Independent Director on 5 November 2013. Peter is Chairman of the Supervisory Board of HES International B.V., a leading provider of port services in dry and liquid bulk handling and a member of the Advisory Board of US private equity firm Riverstone Energy Partners. He has over 40 years' experience in the international energy business. At British Petroleum he was Chairman and Chief Executive Officer of BP Europe, Executive Vice-President of global refining and marketing, and head of both North Sea oil development and global mergers and acquisitions. He served as a Non-Executive Director of BG Group PLC, the international energy company, between 2000 and 2014.
Peter is a member of the audit, remuneration and nomination committees.
A N R
N R
Committee membership
Audit committee A
Nomination committee N
Remuneration committee R
Chairman A
Marie-Louise Clayton Director (Non-Executive)
Marie-Louise Clayton was appointed to the Board on 1 January 2017. Marie-Louise is a chartered accountant and currently Chair of the audit committee of Zotefoams PLC, a Non-Executive Director of GCHO Holdings Ltd and trustee of Street League, a youth employment charity. Marie-Louise has served as Finance Director of Venture Production PLC, Chief Financial Officer & IT Director of the Primary Food Group division of Associated British Foods plc and Chief Financial Officer of Lincoln Gas Turbines at GEC Alstom. She also held roles at Advent Venture Capital, Exxon Chemicals, Inland Revenue and Guest, Keen and Nettlefold.
Marie-Louise's past non-executive appointments have included audit committee Chair of Diploma PLC and Forth Ports PLC and Non-Executive Director of Independent Oil & Gas Ltd and Ocean Rig ASA.
Marie-Louise is a member of the audit committee and remuneration committee.
James Morley Director (Non-Executive)
James Morley was appointed to the Board on 5 November 2008. James is Senior Independent Director of Costain Group PLC and a Director of Minova Insurance Holdings Limited. He has served as Chief Operating Officer of Primary Insurance Group, Group Finance Director of Cox Insurance Holdings and Arjo Wiggins Appleton PLC, Group Executive Director (finance) at Guardian Royal Exchange, Deputy Chief Executive and Group Finance Director at AVIS Europe PLC and was a Non-Executive Director of The Bankers Investment Trust PLC, W S Atkins PLC, Trade Indemnity Group PLC, The Innovation Group PLC and Speedy Hire PLC. James is a chartered accountant.
James is Chair of the audit committee and a member of the remuneration and nomination committees.
Birger Nergaard Director (Non-Executive)
Birger Nergaard joined the Board on 2 February 2015 and has been Deputy Chairman of the Board of Clarksons Platou AS (formerly RS Platou ASA) since 2008. He is a Board member at Clarksons Platou Securities AS and Maritime & Merchant Bank AS. Birger established Four Seasons Venture (today Verdane Capital) in 1985 and was the company's Chief Executive Officer until 2006. He is currently a Director of Verdane Capital's funds V, VI, VII and VIII, Nergaard Investment Partners AS and an advisor to the P/E fund Advent International in Norway.
Birger was awarded King Harald's gold medal in 2006 for pioneering the Norwegian venture capital industry. He holds a law degree from the University of Oslo.
Birger is a member of the remuneration committee.
(Non-Executive)
Ed Warner was appointed to the Board on 27 June 2008. Ed is Chairman of derivatives exchange LMAX, the Standard Life Private Equity Trust PLC and the Blackrock Commodities Income Investment Trust PLC. He is also Chairman of Grant Thornton UK LLP, a leading accountancy and advisory practice. He was previously Chairman of investment bank Panmure Gordon and Chief Executive of IFX Group PLC and Old Mutual Financial Services UK, head of Pan European Equities at BT Alex Brown, and head of global research at Dresdner Kleinwort Benson. Ed is Chairman of UK Athletics and the Crystal Palace Football Club Foundation.
Ed is Chair of the remuneration committee and a member of the audit and nomination committees.
R
Good corporate governance underpins the Company's objectives, strategy and business model, as set out in the strategic report on pages 1 to 47. The Board is committed to maintaining a high standard of corporate governance, which is critical to retaining investor trust in the Company and in the Board as custodian of the Company's assets and values.
The statement of corporate governance practices set out on pages 49 to 81, and information incorporated by reference, constitutes the Clarkson PLC corporate governance report setting out how the Company has applied the principles of the 2014 UK Corporate Governance Code (the Code), which was applicable to the Company for the financial year ended 31 December 2016. We are compliant with the Code.
It is noted that the UK Corporate Governance Code was revised in April 2016 (the Revised Code) and that the Revised Code will apply to the Company for the financial year beginning 1 January 2017.
The September 2014 and April 2016 editions of the Code can be viewed on the Financial Reporting Council website at https://frc.org.uk/Our-Work/Corporate-Governance-Reporting/Corporate-governance.aspx.
The Board comprises James Hughes-Hallett (Chairman), Andi Case, Peter M. Anker, Jeff Woyda, Peter Backhouse (Senior Independent Director), Birger Nergaard, James Morley, Ed Warner and Marie-Louise Clayton. Marie-Louise Clayton joined the Board on 1 January 2017. James Morley, who has been a Non-Executive Director for nine years, will retire at the Annual General Meeting (AGM) to be held on 12 May 2017. James will be replaced as Chair of the audit committee by Marie-Louise Clayton. Biographies of the Directors in office at the date of signing the financial statements are set out on pages 50 to 51.
Ed Warner will reach his nine year tenure in 2017. Whilst taking into account the need to progressively refresh its members through new appointments, the Board recognises the importance of continuity and the value that Directors who serve for many years are able to bring. Given the changes that are currently taking place due to James Morley's retirement and the appointment of Marie-Louise Clayton, the Board recognises the need for stability and acknowledges the contribution, continuity and experience that Ed, as a long-serving Director, brings to the Board overall and the support he can provide. The nomination committee has recommended to the Board that it would be appropriate for Ed Warner to remain on the Board and as Chair of the remuneration committee and the Board has determined that Ed continues to demonstrate qualities of independence and judgement in carrying out his role. Ed's continued tenure will be subject to shareholder approval and rigorous review by the nomination committee and Board for each year of continued service.
The Board, supported by its committees, is responsible for ensuring leadership and setting strategic direction with the aim of delivering sustainable shareholder value. It is imperative that the combined experience and knowledge represented by the Board is appropriate to lead the Company in maintaining its market-leading position and achieving its strategic objectives. On appointment, the Chairman and the Non-Executive Directors met the independence criteria set out under the Code and confirmed that they have sufficient time available to discharge their responsibilities effectively. Non-Executive Directors are appointed for an initial three year term, subject to re-election by shareholders at each AGM, after which their appointment may be extended, subject to mutual agreement. All members of the Board will retire and seek re-election by shareholders at the 2017 AGM, with the exception of James Morley. Marie-Louise Clayton will seek election by shareholders having joined the Board at the beginning of the year.
There is a clear division of responsibilities between the Chairman and the Chief Executive Officer which is set out in writing and has been approved by the Board:
| Chairman | Chief Executive Officer |
|---|---|
| – Leading the Board | – Running day-to-day |
| business | |
| – Ensuring Board | – Implementing Board |
| effectiveness | strategy |
| – Promoting high standards | |
| of corporate governance |
The Non-Executive Directors have a vital role in ensuring that the strategies proposed by the Executive Directors are appropriately discussed and constructively challenged. They help scrutinise the performance of management against the agreed goals and strategic objectives of the Board and monitor the integrity of the Company's financial information and systems of risk control and management. In addition, they are responsible for considering and approving executive remuneration. The Chairman maintains direct communication with each of the Non-Executive Directors without the Executive Directors present where necessary.
The Board meets regularly with at least four scheduled meetings each year plus additional meetings where required to address matters arising outside the normal course of business. The Non-Executive Directors serve on a number of committees established by the Board. More information regarding Board and committee meetings can be found on pages 55 and 56.
The Board has powers and duties as set out in all relevant laws and the Company's articles of association (the Articles). Amendments to the Articles may be made in accordance with the provisions of the Companies Act 2006. The Board has adopted a formal schedule of matters it reserves for its own decision-making, such as decisions relating to:
Strategic report
A Director has a duty to avoid a situation in which he or she has a direct or indirect interest that conflicts, or may conflict, with the interests of the Company. The Board may authorise any potential conflicts, where appropriate, in accordance with the Articles. The Company has established comprehensive procedures for the disclosure of any such conflicts by Directors, and for the consideration and authorisation of these by the Board. The Board considers each conflict on its particular facts and in the context of the other duties owed by the Director to the Company. The Board regularly reviews and monitors potential conflicts of interest.
Jeff Woyda, Chief Financial Officer and Chief Operating Officer, is a Non-Executive Director of the International Transport Intermediaries Club (ITIC). During the year, Jeff Woyda received £16,600 remuneration for serving as a Non-Executive Director of ITIC.
Where a potential or possible conflict of interest arises, a Director will declare their interest and not participate in the decision-making process in respect of the relevant business.
There are currently nine Directors on the Board of Clarkson PLC. The structure of the Board is regularly reviewed and we seek to appoint the best candidate for each vacancy.
The Board oversees the Group's senior management succession plan to ensure that there are appropriate skills and experience within the Company and on the Board.
The process for Board appointments is led by the nomination committee which, in accordance with its terms of reference, evaluates the balance of skills, experience, independence and knowledge on the Board and makes recommendations for appointments to the Board.
Non-Executive Directors are appointed for a specific term. Details of their service contracts can be found on page 63. A report on the work carried out by the nomination committee during the year is set out on page 56.
A careful assessment is made of the time commitment required from the Chairman and the Non-Executive Directors to discharge their roles properly and, on appointment, new Directors are provided with a tailored induction programme relating to the Company's business. All Directors are encouraged to regularly update and refresh their skills and knowledge by attending seminars and training sessions. During the annual Board evaluation process, the Directors have the opportunity to highlight any areas in which they feel professional development would be beneficial, either individually or as a unit. The Board has access to the Company Secretary who provides advice on corporate governance matters.
The Company Secretary is responsible for ensuring that the Board has access to the information it requires and that such information is supplied in a timely manner and is of appropriate quality to enable Directors to discharge their duties effectively. In addition, Directors may take independent professional advice at the Company's expense in the course of discharging their duties.
The Senior Independent Director provides a sounding board for the Chairman and serves as an intermediary for other Directors when required.
The Company purchased and maintained directors' and officers' liability insurance throughout 2016 and it will be maintained throughout 2017.
An external Board evaluation was conducted by Boardroom Review Limited for the year ended 31 December 2016.
In preparation for the exercise, the Chairman and Company Secretary considered a number of Board evaluation consultancies and the range of services which they provide. Boardroom Review Limited was deemed to be the most suitable to conduct the review.
Following the evaluation review, the Board, its committees and individual Directors, were considered to be wellfunctioning and effective. In terms of the evaluation process, this focused on the following areas: basics (use of time, quality of information, operation, support); contribution (culture, dynamics, composition); and areas and depth of engagement (strategy, risk and control, performance management, stakeholder communications).
The review noted that there were particular strengths in the Board's positive culture, relevant composition and size, shared perspective on strategy, oversight of risk and control, approach to remuneration and talent management and communication with shareholders. Areas identified for further consideration include the Board's longer-term engagement with strategy, composition and succession planning and the use of time.
It should be noted that there are no connections between the Company and Boardroom Review Limited other than the services provided in relation to the evaluation review.
The Non-Executive Directors, led by the Senior Independent Director, Peter Backhouse, have also conducted a performance evaluation of the Chairman, taking into account the views of the Executive Directors. The review concluded that the Chairman continues to be effective in his role.
Following amendment at the 2015 AGM, the Articles now provide that all Directors shall retire from office and, subject to satisfactory performance, are put forward for re-election at each AGM. Shareholders are provided with comprehensive information about the Directors subject to election and re-election, including their commitment to the role, in the notice of AGM.
James Morley will retire from the Board at the 2017 AGM when he reaches nine years' service as a Non-Executive Director.
The Board is responsible for promoting the long-term success of the Company for the benefit of shareholders, assessing the Company's position and prospects, and for ensuring that the information presented to shareholders is fair, balanced and understandable. Further details of Directors' responsibilities for preparing the Company's financial statements are set out in the Directors' responsibilities statement on page 75.
The Board is responsible for:
The audit committee is responsible for the independent review and challenge of the adequacy and effectiveness of the risk management approach and for reporting its findings to the Board.
Managing risk to deliver opportunities is a key element of the Company's business activities, which is undertaken using a practical and flexible framework, providing a consistent and sustained approach to risk evaluation.
The Board has established policies and risk management procedures together with key controls, which are reviewed in accordance with applicable regulations and best practice guidelines, to ensure that they continue to be effective and protect the Company's stakeholders.
The Company's internal control system encompasses controls over areas including financial reporting, operations, compliance and risk management procedures. Such a system is designed to evaluate and manage rather than eliminate risk and can only provide reasonable and not absolute assurance against material misstatement or loss.
There is a comprehensive budgetary process in place with both annual and regular forecasts being considered and approved by the Board and monthly monitoring of trading results taking place in order to mitigate risks associated with financial reporting and the preparation of consolidated financial statements. An established compliance, legal and governance process is in place to monitor regulatory developments and to ensure that all existing and forthcoming regulations are complied with.
In addition to compliance with the Code, as required for all listed entities, the regulated entities in the Group are all governed by the respective regulators in their jurisdictions. Regulated entities include Clarksons Platou Securities AS (CPSA) and Clarksons Platou Project Sales AS (CPPSA), both of which are authorised and regulated by the Financial Supervisory Authority of Norway. Through its affiliation with the US entity Clarksons Platou Securities Inc., a Securities and Exchange Commission (SEC) regulated entity, CPSA adheres to best practice in respect of the SEC rules. Each of these regulatory bodies incorporates rules and practices which require all registered firms to adhere to high standards of corporate governance.
The Company issues a Code of Business Conduct and Ethics, to which all staff are expected to adhere, in order to maintain Clarksons' status as a responsible and trustworthy business.
All employees are responsible for ensuring compliance with Group policies and for identifying risks within their business areas and to ensure that these risks are controlled and monitored in the appropriate way.
The Board has established arrangements by which employees of the Company may, in confidence, raise concerns about possible improprieties or wrongdoing in financial reporting or other matters. The audit committee regularly reviews this arrangement.
The Board, with advice from the audit committee, has carried out an annual review of the effectiveness of the system of internal control and risk management and confirms that the ongoing process for identifying, evaluating and managing the Group's principal risks has operated throughout the year and up to the date of the approval of this annual report. Please refer to pages 40 to 41 for more details on the principal risks facing the business and the mitigation in place.
The AGM gives all shareholders the opportunity to communicate directly with the Board and encourages their participation. The Company's AGM will be held on 12 May 2017 at the Company's office in Commodity Quay, St. Katharine Docks, London E1W 1BF. Further details of the business to be addressed at the meeting can be found in the notice of meeting.
The Executive Directors meet regularly with the Company's major shareholders and make presentations to analysts, institutional investors and investment managers following the announcement of the interim and full year results.
The Senior Independent Director is available to meet with shareholders and institutional investors as required.
We primarily communicate with shareholders via the Company's annual and interim reports and the Company's website on which the Company publishes its trading updates and other news released to the London Stock Exchange.
For shareholder information see page 74 or visit www.clarksons.com/investors.
The Board is supported by the audit, nomination and remuneration committees. The responsibilities of each committee are set out in their respective terms of reference, which are approved by the Board and available on the Company's website at http://www.clarksons.com/investors/financial-calendar/.
The attendance of the Directors at Board and committee meetings during the year was as follows:
| Board | Audit committee |
Remuneration committee |
Nomination committee |
|
|---|---|---|---|---|
| Total number of meetings | ||||
| held in the year | 8 | 3 | 3 | 3 |
| James Hughes-Hallett | 8 | 3* | 3 | 3 |
| Peter Backhouse | 8 | 3 | 3 | 3 |
| Andi Case | 8 | 1* | 2* | 1* |
| Marie-Louise Clayton | – 1 | – ² | – 3 | – |
| Peter M. Anker | 7 | – | – | – |
| Birger Nergaard | 6 | – | 3 | – |
| James Morley | 8 | 3 | 3 | 3 |
| Ed Warner | 7 | 3 | 3 | 3 |
| Jeff Woyda | 8 | 3* | 2* | 1* |
* Attends by invitation only.
1 Appointed 1 January 2017.
2 Appointed 2 March 2017.
3 Appointed 7 March 2017.
1 Appointed 2 March 2017.
2 Appointed 7 March 2017.
James Morley (Chair)
Peter Backhouse
Marie-Louise Clayton (appointed 2 March 2017)
Ed Warner
The audit committee is chaired by James Morley. James has been a Non-Executive Director and Chair of the audit committee for the last nine years and will retire from the Board at the AGM which will take place on 12 May 2017. Marie-Louise Clayton, who joined the Board on 1 January 2017 and the committee on 2 March 2017, will succeed him as Chair of the committee. Both James and Marie-Louise have been deemed by the Board to have recent and relevant financial experience.
The committee assists the Board by:
The Chairman of the Board, the Chief Executive Officer, Chief Financial Officer and Chief Operating Officer and other senior managers may be invited to attend meetings when appropriate. The external Auditors are invited to attend on a regular basis. The committee meets privately with the external Auditors in the absence of management.
Further details on the work of the audit committee are shown in the report on pages 72 and 73.
Peter Backhouse
James Morley
Ed Warner
Responsibilities and activities of the committee include:
The committee gives full consideration to planning for future succession to the Board, in particular for the key roles of Chairman and Chief Executive Officer, and other senior executives.
Clarksons recognises and embraces the benefits of a diverse Board. The committee will consider suitable candidates for Board appointments on the basis of a wide range of criteria including personal merit, ability, knowledge, experience and independence. This is to ensure that we are appointing the best possible candidate for each vacancy and to ensure a well-balanced Board.
Spencer Stewart & Associates Limited, an executive search and recruitment specialist, were engaged to assist with the appointment of a new Non-Executive Director. After a rigorous search and interview process, the committee recommended the appointment of Marie-Louise Clayton to the Board. There are no other connections between Spencer Stewart and Clarksons.
Ed Warner (Chair)
Peter Backhouse
Marie-Louise Clayton (appointed 7 March 2017)
James Hughes-Hallett
James Morley
Birger Nergaard
The committee is chaired by Ed Warner and is responsible for determining, in conjunction with the Board, the framework or broad policy for the remuneration of the Chief Executive Officer, Chairman, Executive Directors, Company Secretary and such other members of the executive management that it is designated to consider.
The remuneration of Non-Executive Directors is reviewed by the Chairman and the executive members of the Board. No Director or manager is involved in any decisions regarding their own remuneration.
James Morley will step down from the committee when he retires from the Board at the AGM which will take place on 12 May 2017. Marie-Louise Clayton joined the Board on 1 January 2017 and the committee on 7 March 2017.
Further details regarding the work of the remuneration committee are contained within the Directors' remuneration report on pages 57 to 71.
Ed Warner Remuneration committee Chairman
I am pleased to introduce, on behalf of the Board, the Directors' remuneration report for the year ended 31 December 2016, which summarises the Company's performance and the resulting remuneration for the year.
This report will be subject to two shareholder votes at the forthcoming AGM:
We hope that you will be able to support both resolutions at the AGM on 12 May 2017.
The performance bonuses are lower than last year reflecting the slight reduction in profit.
The challenging EPS targets set under the LTIP granted in 2014 have not been achieved, and consequently, all conditional shares awarded against this target will lapse. TSR performance has however exceeded the base target, and therefore a proportion of conditional shares, awarded against the TSR targets will vest. Overall, 15% of the conditional shares awarded will vest.
The Executive Directors have again made a sacrifice of a proportion of the bonuses they were eligible to receive, to enable the Company to reward other senior members of staff. The amount sacrificed has fluctuated over the past five years, and amounted to 5% of the entitlement in 2016. There were no changes in base salaries during the year.
As mentioned above, the committee undertook a comprehensive review of senior executive remuneration at the Company and found that the current structure comprising base salary, benefits, a profit-related annual bonus and annual awards of performance shares remains appropriate. The committee has, however, strengthened the alignment between executives and shareholders by increasing the share ownership guideline for all Executive Directors.
The remuneration policy at Clarksons has been designed to attract and retain the best talent in our markets, while at the same time ensuring a close alignment between the interests of shareholders and management. There is a consistent approach to the application of the remuneration policy across the whole Company.
The overarching objectives of the remuneration policy are to ensure rewards are performance-based and encourage longterm shareholder value creation. Therefore, the policy for senior executives is directly linked to the achievement of the Company's business strategy; it drives long-term growth, encourages share ownership and secures high calibre leaders.
The major elements of the Executive Directors' reward structures are as follows:-
All Executive Directors are shareholders in Clarksons and accordingly understand the imperative to deliver long-term returns for the Company's owners. Their short-term rewards are directly aligned to the profitability of the Company.
The remuneration committee takes shareholder engagement seriously and actively seeks shareholder views on all remuneration matters.
We believe the principles underlying our new policy continue to be correct ones for a business such as Clarksons and I commend this remuneration policy to you. Should you have any questions, please contact me through the Company Secretary.
Remuneration committee Chairman
10 March 2017
The remuneration policy (the policy) will be put to a binding shareholder vote at the AGM on 12 May 2017 and, subject to approval, the new policy will take formal effect from that date (replacing the previous policy approved by shareholders at the 2014 AGM). It is intended that the policy will be in force for a period of three years from the date of approval.
There are no substantial changes proposed to the current executive remuneration structure, other than to increase the share ownership guidelines from 100% of salary to 200% of salary for the Chief Executive Officer and from 100% to 150% of salary for other Executive Directors. The increases are in line with current investor sentiment and provide even closer alignment between the interests of the executives and shareholders.
The remuneration committee is responsible, on behalf of the Board, for:
The remuneration committee encourages dialogue with shareholders and takes into account their views when setting the policy.
The objectives of the policy are to ensure that executive rewards are linked to performance, to provide an incentive to achieve the key business aims, deliver an appropriate link between reward and performance and to maintain a reasonable relationship of rewards to those offered in other competitor companies in order to attract, retain and motivate executives within a framework of what is acceptable to shareholders. We maintain a strong focus on ensuring that executives are incentivised to drive economic profit as well as being rewarded for creating sustainable value.
There are few comparable UK public companies involved solely in the business of providing shipping and related wholesale financial services. Comparisons are therefore made with Citybased companies and private companies in the shipping sector, many of which are headquartered overseas. In the highly competitive global labour market which operates within the shipping services sector where business is based around personal client relationships, the retention of key talent is critical to continued business success. Remuneration levels are set to attract and retain the best talent and to ensure that market competitive rewards are available for the delivery of strong business and personal performance within an appropriate risk framework.
It is recognised by the remuneration committee that the current management team is highly regarded and would be attractive to Clarksons' competitors in the shipping industry and, increasingly, wholesale brokerage and agency businesses. Retention of key talent in this context is critical, whilst recognising the need for appropriate succession planning.
The proportionate breakdown of the total remuneration is such that, in line with most other wholesale brokerage and agency companies, a very high proportion of the package is performance-related. Where an Executive Director's role includes revenue generating broking responsibilities, the bonus may recognise this, in addition to the duties and responsibilities incumbent with the role of an Executive Director.
The Company is committed to maintaining good communications with investors. The remuneration committee takes on board investors' views and maintains open dialogue, giving shareholders the opportunity to raise any issues or concerns they may have. In addition, the remuneration committee would engage directly with major shareholders should any material changes be made to the Directors' remuneration policy or in the way in which it is being implemented.
Details of the votes cast in respect of the resolutions to approve last year's remuneration report and any matters discussed with shareholders during 2016 are set out in the annual report on remuneration on page 71.
Key elements of remuneration policy are set out below:
| Purpose and link to strategy |
Operation | Maximum opportunity | Performance framework | |
|---|---|---|---|---|
| Base salary | – To attract and retain high performing Executive Directors who are critical for the business – Set at a level to provide a core reward for the role and cover essential living costs |
– Normally reviewed annually – Paid monthly – Salaries are determined taking into account: – the experience, responsibility, effectiveness and market value of the executive – the pay and conditions in the workforce |
– There is no prescribed maximum annual increase. The committee is guided by the general increase for the broader workforce but on occasion may recognise an increase in certain circumstances, such as assumed additional responsibility or an increase in the scale or scope of the role or in the case of a new executive, a move towards the desired rate over a period of time where salary was initially set below the intended positioning |
n/a |
| Benefits | – To provide a market standard suite of basic benefits in kind to ensure the Executive Directors' well being |
– Taxable benefits may include: – car allowance – healthcare insurance – club membership – Participation in HMRC approved (or equivalent) schemes – Other benefits may be payable where appropriate – Any reasonable business related expenses (including tax thereon) may be reimbursed if determined to be a taxable benefit |
– A car allowance in line with market norm. The value of other benefits is based on the cost to the Company and is not predetermined – HMRC (or equivalent) scheme participation up to prevailing scheme limits |
n/a |
| Annual bonus (including deferred shares) |
– To reward significant annual profit performance – To ensure that the bonus plan is competitive with our peers. As a result, bonus forms a significant proportion of the remuneration package – To ensure that if there is a reduction in profitability, the level of bonus payable falls away sharply |
– 90% of the bonus is paid in cash and, although they have no contractual obligation, the Directors have agreed that 10% of annual bonus payable is deferred in shares, vesting after four years – Directors have voting rights and receive dividends on deferred shares – Performance criteria are reviewed and re-calibrated carefully each year to ensure they are linked to strategic business goals, take full account of economic conditions and are sufficiently demanding to control the total bonus pool and individual allocations – Clawback provision operates for overpayments due to misstatement or error |
– In line with Clarksons' peers, the annual bonus is not subject to a formal individual cap. This policy, which is contractual for the current Chief Executive Officer and Chief Financial Officer and Chief Operating Officer encourages the maximisation of profit, and ensures that Executive Directors are aligned with all stakeholders in the business |
– Bonus is determined by Group performance measured over one year on the following basis: – below a 'profit floor' set by the committee each year no bonus is triggered – above the floor, an escalating percentage of profits is payable into a bonus pool for progressively higher profit before tax performance – profit for bonus calculations may be adjusted by the remuneration committee where appropriate and does not include mark-to-market valuations or business that has not been invoiced – for Executive Directors with revenue generating broking responsibilities, a further key determinant of the annual bonus is the significance of personally generated broking revenues – a proportion of an individual's share of the bonus pool may be based on the achievement of personal objectives set by the remuneration committee at the start of the year |
Other information
| Purpose and link to strategy |
Operation | Maximum opportunity | Performance framework | |
|---|---|---|---|---|
| Long-term incentives |
– To incentivise and reward significant long term financial performance and share price performance relative to the stock market – To encourage share ownership and provide further alignment with shareholders |
– Awards are performance-related and are normally structured as nil cost options – Awards are granted each year following the publication of annual results – Clawback provision operates for overpayments due to misstatement or error |
– Annual maximum limit of 150% of basic salary for awards subject to long-term performance targets (200% of basic salary in exceptional circumstances) – Dividend equivalents (in cash or shares) may accrue between grant and vesting, to the extent that shares under award ultimately vest |
– Currently, the awards are subject to performance conditions measured on a combination of three year EPS growth and relative TSR – The committee may introduce new measures or reweight the current EPS and TSR performance measures so that they are directly aligned with the Company's strategic objectives for each performance period – Normally measured over a three year performance period – 25% of an award will vest for achieving threshold performance, increasing pro rata to full vesting for the achievement of stretch performance targets |
| Pension | – To provide a market competitive pension arrangement |
– Executive Directors participate in a Company defined contribution pension scheme and/or receive a cash allowance in lieu of pension contributions |
– Employer contributions are up to 15% of basic salary or an equivalent cash allowance net of employer's NI |
n/a |
| Non-Executive Directors' fees |
– To attract and retain high calibre Non-Executive Directors through the provision of market competitive fees |
– Reviewed annually – Paid monthly – Fees are determined taking into account: – the experience, responsibility, effectiveness and time commitments of the Non Executive Directors – the pay and conditions in the workforce – Additional fees may be payable in relation to extra responsibilities undertaken such as chairing a Board committee and/or a Senior Independent Director role or being a member of a committee – Any reasonable business-related expenses (including tax thereon) can be reimbursed if determined to be a taxable benefit |
– As for the Executive Directors there is no prescribed maximum annual increase. Fee increases are guided by the general increase for the broader workforce but on occasion may recognise an increase in certain circumstances, such as assumed additional responsibility or an increase in the scale or scope of the role |
n/a |
| Share ownership guidelines |
– To provide alignment between the longer-term interests of Directors and shareholders |
– Executive Directors are expected to build up and maintain shareholdings in the Company – Executives are required to retain at least half of the net of tax vested number of shares awarded and received until the guideline has been achieved |
– Chief Executive Officer: 200% of salary – Other Executive Directors: 150% of salary |
n/a |
1 A description of how the Company intends to implement the above policy for 2017 is set out in the annual report on remuneration on page 64.
2 The 2017 annual bonus is focused on profit before taxation (PBT) performance. PBT is a key financial metric and is used to reflect how successful the Company has been in managing its operations.
The long-term incentive plan (LTIP) performance measures, earnings per share (EPS) and total shareholder return (TSR), reward significant long-term returns to shareholders and long-term financial growth. EPS growth is derived from the audited financial statements while TSR performance is monitored on the remuneration committee's behalf by New Bridge Street.
Targets are set on a sliding scale that takes account of internal strategic planning and external market expectations for the Company. Only modest rewards are available for achieving threshold performance with maximum rewards requiring substantial out-performance of challenging strategic plans approved at the start of each year.
The Company's remuneration policy results in a proportionate breakdown of total remuneration such that, in line with most other wholesale brokerage and agency companies, a very high proportion of the package is performance-related.
The charts below show an estimate of the potential remuneration payable for the Executive Directors in office on 1 January 2017 at different levels of performance. The charts highlight that the performance-related elements of the package comprise a highly significant portion of the Executive Directors' total remuneration at target and maximum performance.
| Fixed pay | Annual bonus | LTIP | |||
|---|---|---|---|---|---|
| £000 | |||||
| Minimum | 100% | 640 | |||
| On target | 15% | 76% | 9% | 4,474 | |
| Maximum | 13% | 71% | 16% | 5,152 |
| Fixed pay Annual bonus LTIP |
|
|---|---|
| £000 | |
| Minimum 100% |
408 |
| On target 29% 52% 19% |
1,408 |
| Maximum 24% 46% 30% |
1,727 |
| Fixed pay Annual bonus |
LTIP |
|---|---|
| £000 | |
| Minimum 100% |
385 |
| On target 29% 52% 19% |
1,385 |
| Maximum 18% 59% |
2,254 23% |
1 Basic salary levels applying on 1 January 2017.
2 The value of taxable benefits is estimated at 2016 values.
3 The value of the pension receivable is up to 15% of basic salary.
4 - Minimum performance assumes no award is earned under the annual bonus plan and no vesting is achieved under the LTIP;
5 Share price movement has been excluded from the above analysis.
Strategic report
The remuneration committee has the objective to attract and retain the best talent in our markets, while at the same time ensuring executive pay is aligned to the corporate plan and business goals as well as supporting the interests of shareholders.
If a new Executive Director was appointed, the Company would seek to align the remuneration package with the remuneration policy approved by shareholders, including the maximum limit for the LTIP and an annual bonus pool entitlement in line with the existing policy. An LTIP award could be made shortly following an appointment (assuming the Company is not in a close period).
Flexibility is retained to offer remuneration on appointment in respect of remuneration arrangements forfeited on leaving a previous employer. The committee will look to replicate the arrangements being forfeited as closely as possible and, in doing so, will take account of relevant factors including the nature of the deferred remuneration, performance conditions and the time over which they would have vested or been paid.
The initial notice period for a service contract may be longer than the policy of one year, provided it reduces to one year within a short space of time.
For an internal appointment, any ongoing remuneration obligations existing prior to appointment may continue.
The remuneration committee may also agree that the Company will meet certain relocation and incidental expenses as appropriate.
The remuneration committee reviews the contractual terms for Executive Directors in light of developments in best practice and trends in our sector. The remuneration-related elements of the current contracts for Executive Directors are shown in the table below:
| Provision | Detailed terms One year by the Company or the Director. |
||
|---|---|---|---|
| Notice period | |||
| Termination payment Chief Executive Officer: The Company may elect to pay in lieu of notice: – an amount equivalent to 12 months' base salary plus the cost of contractual benefits; plus |
|||
| – an amount equivalent to 50% of the last bonus received. | |||
| In addition: – if not already paid, any bonus in respect of the prior year is payable (if not agreed, an amount equal to the last bonus received); and |
|||
| – a pro-rated bonus for the period of the year worked is payable. | |||
| Chief Financial Officer and Chief Operating Officer: | |||
| The Company may elect to pay in lieu of notice: – an amount equivalent to base salary, benefits and bonus for the relevant period of notice. |
|||
| President of Broking and Investment Banking: The Company may elect to pay in lieu of notice: – an amount equivalent to base salary and contractual benefits for the relevant period of notice only. |
|||
| The remuneration committee recognises that it is unusual in the context of listed PLCs to pay an amount in lieu of annual bonus for the notice period for the Chief Executive Officer and the Chief Financial Officer and Chief Operating Officer but considers that the policy is appropriate for the following reasons: |
|||
| – salary forms a lower proportion of remuneration than in most other UK companies; | |||
| – typically, in the shipbroking industry, income from business conducted is received over a number of years in arrears; | |||
| – bonuses are only payable if profit thresholds and targets are achieved i.e. there is no automatic entitlement to a bonus; and – unvested awards under the LTIP are capable of vesting subject to performance. |
|||
| For unvested entitlements to share awards under the 2004 Clarkson LTIP which reached the end of its ten year life in May 2014, the rules contain discretionary provisions setting out the treatment of awards where a participant ceases to be employed by the Group for designated reasons. In the case of the participant's injury, disability, statutory redundancy, retirement, a sale of their employing company or business in which they were employed or for any other reason at the discretion of the committee, the participant's awards will not be forfeited but will vest on the date of cessation of employment, subject to the satisfaction of the relevant performance conditions. In the case of a participant's death, any unvested awards will vest in full on the date of cessation. |
|||
| For unvested entitlements to share awards under the 2014 Clarkson LTIP, where a participant ceases to be employed by the Group due to ill-health, injury, disability, redundancy, retirement, a sale of his employing company or business or for any other reason at the discretion of the committee (good leaver circumstance), then he will be entitled to keep his award as described below: – performance-related awards will normally vest at the normal vesting dates (unless the remuneration committee determines |
| Provision | Detailed terms |
|---|---|
| Change of control | Chief Executive Officer: If, within 18 months of a change of control, the Company gives the Chief Executive Officer notice (except for reasons of gross misconduct or material breach of contract) or the Chief Executive Officer gives notice as a result of a material breach of his contract or the Company limits his ability to earn future bonuses, the Chief Executive Officer will, within 30 days of termination, receive an amount equivalent to one year's basic salary, 150% of the last annual bonus received and the gross annual value of contractual benefits (pro-rated). In these circumstances, the Chief Executive Officer's notice period is reduced to four weeks. |
| Chief Financial Officer and Chief Operating Officer: Within one year of a change of control the executive or the Company may give notice (of not less than four weeks in the case of the former) whereupon the executive will receive immediately an amount equivalent to one year's basic salary, contractual benefits, employer pension contributions and annual bonus. |
|
| President of Broking and Investment Banking: No change of control provisions exist. |
|
| All unvested awards under the 2004 Clarkson LTIP would vest, to the extent that any performance conditions attaching to the relevant award have been achieved. |
|
| All unvested awards under the 2014 Clarkson LTIP would vest, in respect of performance–related awards, the extent of vesting would be subject to any performance conditions attaching to the relevant award have been achieved and any time pro-rating applied at the discretion of the remuneration committee. |
|
| In August 2008 it was contractually agreed with the current Chief Financial Officer and Chief Operating Officer, Jeff Woyda, that no time pro-rating will be applied to his LTIP awards. |
|
| The remuneration committee recognises that it is now unusual, in the context of listed PLCs, for service contracts to contain change of control provisions and will therefore seek to avoid such provisions for future executive appointments to the Board. |
| are as follows: | Date of contract | Unexpired term | Notice period |
|---|---|---|---|
| Andi Case | 17 June 2008 | 12 months | 12 months |
| Jeff Woyda | 3 October 2006 | 12 months | 12 months |
| Peter M. Anker | 27 November 2014 | 12 months | 12 months |
Service contracts are available for inspection at the Company's registered office.
| Details of the Non-Executive Directors' appointment terms are as follows: |
Date of appointment | Unexpired term at 31 December 2016 |
Notice period |
|---|---|---|---|
| James Hughes-Hallett | 20 August 2014 | 8 months | 3 months |
| Peter Backhouse | 16 September 2013 | 33 months | 3 months |
| Ed Warner | 27 June 2008 | 6 months | 3 months |
| James Morley | 5 November 2008 | 11 months | 3 months |
| Birger Nergaard | 2 February 2015 | 14 months | 3 months |
| Marie-Louise Clayton | 1 January 2017 | N/A | 3 months |
Non-Executive Directors are appointed by letter of appointment for a fixed term not exceeding three years, renewable on the agreement of both the Company and the Director and are subject to re-election at each AGM. Each appointment can be terminated before the end of the three-year period with three months' notice due.
Fees payable for a new Non-Executive Director appointment will take into account the experience of the individual and the current fee structure.
| 1 January 2016 | |||
|---|---|---|---|
| 1 January 2017 | (or appointment if later) | % change | |
| Andi Case | GBP 550,000 | GBP 550,000 | 0% |
| Jeff Woyda | GBP 350,000 | GBP 350,000 | 0% |
| Peter M. Anker* | NOK 4,015,000 | NOK 4,015,000 | 0% |
* Fixed in NOK as £350,000 at NOK/GBP 11.4723 at 2 February 2015 being the date Peter M. Anker joined the Board.
In particular there has been a widespread salary freeze for employees earning salaries of £100,000 p.a. or more. In contrast, salaries for lower paid employees have generally increased (on average across the population) each year.
For 2017, the annual bonus opportunity will remain on the same basis as previous years and will continue to be based on a bonus pool derived from Group profit before tax as follows:
– below a 'profit floor' set by the committee no bonus is triggered; and
– above the floor, an escalating percentage of profits is payable into a bonus pool for progressively higher profit before tax performance.
Profit for bonus calculations may be adjusted by the remuneration committee where appropriate and do not include mark-to-market valuations or business that has not been invoiced.
The profit floor and challenges for 2017 have not been disclosed on a prospective basis as these are considered to be commercially sensitive although disclosure will be provided retrospectively. The threshold and maximum targets are higher than those that applied for 2016.
Consistent with the policy applied to the majority of senior employees, 90% of the bonus payable will be paid in cash with 10% deferred into restricted shares vesting four years after grant. Executive Directors have agreed to this deferral, although they have no contractual obligation to defer bonuses. Clawback provisions will continue to apply as previously highlighted, in circumstances of misstatement or error.
Consistent with past practice, it is envisaged that:
EPS and relative TSR are considered to be the most appropriate measures of long-term performance for the Group, in that they ensure executives are incentivised and rewarded for the earnings performance of the Group as well as returning value to shareholders.
The awards will be subject to clawback provisions.
The committee has carefully considered the EPS range for the 2017 award and believes the 140p to 190p range is stretching against market consensus and the actual 2016 EPS delivered.
Details of emoluments and compensation payable in their capacity as Directors during the year are set out below:
| 2016 | Basic salary and fees £000 |
Benefits1 £000 |
Pension2 £000 |
Performance related bonus6 £000 |
Total remuneration before LTIP £000 |
Long-term incentives7 £000 |
Total remuneration £000 |
|---|---|---|---|---|---|---|---|
| Executive Directors | |||||||
| Andi Case | 550 | 16 | 74 | 2,938 | 3,578 | 100 | 3,678 |
| Jeff Woyda | 350 | 12 | 46 | 633 | 1,041 | 45 | 1,086 |
| Peter M. Anker | 3563 | 22 | 7 | 633 | 1,018 | – | 1,018 |
| Non-Executive Directors | |||||||
| James Hughes-Hallett | 160 | – | – | – | 160 | – | 160 |
| Peter Backhouse | 73 | – | – | – | 73 | – | 73 |
| Ed Warner | 73 | – | – | – | 73 | – | 73 |
| James Morley | 73 | – | – | – | 73 | – | 73 |
| Birger Nergaard | 55 | – | – | – | 55 | – | 55 |
| 1,690 | 50 | 127 | 4,204 | 6,071 | 145 | 6,216 |
| Performance | Total | ||||||
|---|---|---|---|---|---|---|---|
| Basic salary | related | remuneration | Long-term | Total | |||
| and fees | Benefits1 | Pension2 | bonus | before LTIP | incentives | remuneration | |
| 2015 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
| Executive Directors | |||||||
| Andi Case | 550 | 26 | 74 | 3,495 | 4,145 | 8134 | 4,958 |
| Jeff Woyda | 308 | 12 | 40 | 753 | 1,113 | 3704 | 1,483 |
| Peter M. Anker5 | 309 | 22 | 5 | 655 | 991 | – | 991 |
| Non-Executive Directors | |||||||
| James Hughes-Hallett | 140 | – | – | – | 140 | – | 140 |
| Peter Backhouse | 73 | – | – | – | 73 | – | 73 |
| Ed Warner | 73 | – | – | – | 73 | – | 73 |
| James Morley | 73 | – | – | – | 73 | – | 73 |
| Birger Nergaard5 | 50 | – | – | – | 50 | – | 50 |
| 1,576 | 60 | 119 | 4,903 | 6,658 | 1,183 | 7,841 |
We consider key management personnel to be Clarkson PLC Directors.
1 Benefits include cash allowances in lieu of company cars, healthcare insurance and club memberships.
2 Pension includes pension contributions and cash supplements where relevant.
3 Fixed salary of NOK 4,015,000.
4 The 2015 LTIP values have been restated to reflect the share price on the actual date of vesting.
5 Peter M. Anker and Birger Nergaard joined the Board on 2 February 2015 and therefore the salary numbers shown are pro-rated.
6 Annual bonus for 2016 was based on the allocation of the following pool:
| Underlying profit before taxation and bonus | % of pre-bonus profit |
|---|---|
| If profit < £26.46m | 0% |
| If profit > £26.47m then £0m - £52.92m | 11% |
| If profit > £52.93m then £52.93m - £61.70m | 16% |
| If profit > £61.71m then on profits > £61.71m | 18% |
| Actual underlying profit before taxation | £44.8m |
| Actual underlying profit before taxation for bonus calculation after deducting the minority interest of pre-tax profit and adding back the cost of bonus |
£48.5m |
| Actual bonus pool | £5.3m |
| % of pool allocated to Executive Directors (this is after 5% voluntary sacrifice by Directors) | 79% |
The bonus is paid 90% in cash and, although they have no contractual obligation, the Directors have agreed that 10% of the bonus will be deferred in shares, vesting after four years. Both the cash and share element of the bonus are subject to clawback where overpayments may be reclaimed in the event of misstatement or error.
7 Long-term incentives relate to awards granted on 5 June 2014 which vest in June 2017 based on performance for the year ended 31 December 2016. The performance conditions attached to this award and actual performance against these conditions are as follows:
| Performance measure | Performance condition | Threshold target | Stretch target | Actual | % vesting |
|---|---|---|---|---|---|
| Earnings per share (out of 50%) |
25% of award vesting at threshold up to 100% of award vesting at stretch on straight-line basis |
120p | 160p | 105.2p | 0% |
| Total shareholder return (out of 50%) |
25% vesting of award at threshold up to 100% of award vesting at stretch on straight-line basis |
Median | Upper quartile | 5.9% | 30% |
| Total vesting (out of 100%) | 15% |
The award details for the Executive Directors are as follows:
| Executive Directors | Number of shares granted |
Number of shares to vest |
Number of shares to lapse |
Estimated value of vested shares* £000 |
|---|---|---|---|---|
| Andi Case | 31,682 | 4,801 | 26,881 | 100 |
| Jeff Woyda | 14,400 | 2,182 | 12,218 | 45 |
| Peter M. Anker | n/a | n/a | n/a | n/a |
* The estimated value of the vested shares is based on the average share price during the three month period from 1 October to 31 December 2016 of £20.81. These shares will vest on the third anniversary of grant, 4 June 2017, subject to continued employment.
Comparative LTIP values were based on the 2013 awards which vested in 2016 based on performance to 31 December 2015 and were based on a three month price to 31 December 2015 of £22.96. The actual share price at vesting was £22.59. 2015 LTIP amounts in the single figure table have been restated.
Non-Executive Director fee levels for 2017 are as follows:
| 2017 £000 |
2016 £000 |
% change | |
|---|---|---|---|
| Chairman | 163 | 160 | 2% |
| Non-Executive Director | 56 | 55 | 2% |
| Chair of committee* | 18 | 18 | 0% |
| Senior Independent Director* | 18 | 18 | 0% |
* Incremental fees above base Non-Executive Director fee.
The table below sets out details of outstanding share awards held by the Executive Directors. The share awards have been granted as nil cost options under the LTIP, subject to the EPS and TSR performance criteria (50% of the award each) detailed in the LTIP section of this report on page 60.
| Interests under |
Interests under |
Face value at 31 |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| plan at 1 January 2016 |
Awards granted in the year |
Awards exercised in the year |
Awards lapsed in the year |
plan at 31 December 2016 |
December 201610 £ |
% vesting at threshold performance |
Grant date |
End of performance period |
Vesting date |
Date exercisable until |
|
| Andi Case | 99,3881 | – | 99,388 | – | – | – | 25% | 16 Dec 09 | Dec 11 | 15 Dec 12 | 15 Dec 19 |
| 36,5812 | – | 36,581 | – | – | – | 25% | 24 Dec 10 | Dec 12 | 23 Dec 13 | 23 Dec 20 | |
| 33,6183 | – | 33,618 | – | – | – | 25% | 25 May 11 | Dec 13 24 May 14 | 24 May 21 | ||
| 42,7194 | – | 42,719 | – | – | – | 25% | 11 May 12 | Dec 14 10 May 15 | 10 May 22 | ||
| 36,0045 | – | 36,004* | – | – | – | 25% | 10 May 13 | Dec 15 | 9 May 16 | 9 May 23 | |
| 31,6826 | – | – | 26,881 | 4,8019 | 104,326 | 25% | 5 Jun 14 | Dec 16 | 4 Jun 17 | – | |
| 36,7487 | – | – | – | 36,748 | 798,534 | 25% | 17 Apr 15 | Dec 17 | 16 Apr 18 | – | |
| – | 36,6018 | – | – | 36,601 | 795,340 | 25% | 15 Apr 16 | Dec 18 | 14 Apr 19 | – | |
| Jeff Woyda | 15,2813 | – | 15,281 | – | – | – | 25% | 25 May 11 | Dec 13 24 May 14 | 24 May 21 | |
| 19,4184 | – | 19,418 | – | – | – | 25% | 11 May 12 | Dec 14 10 May 15 | 10 May 22 | ||
| 16,3655 | – | 16,365* | – | – | – | 25% | 10 May 13 | Dec 15 | 9 May 16 | 9 May 23 | |
| 14,4006 | – | – | 12,218 | 2,1829 | 47,415 | 25% | 5 Jun 14 | Dec 16 | 4 Jun 17 | – | |
| 16,7037 | – | – | – | 16,703 | 362,956 | 25% | 17 Apr 15 | Dec 17 | 16 Apr 18 | – | |
| – | 23,2918 | – | – | 23,291 | 506,113 | 25% | 15 Apr 16 | Dec 18 | 14 Apr 19 | – | |
| Peter M. Anker |
– | 23,2918 | – | – | 23,291 | 506,113 | 25% | 15 Apr 16 | Dec 18 | 14 Apr 19 | – |
* Vested during the year.
The share price on the date of the award was 1. £8.06, 2. £11.22, 3. £12.05, 4. £13.50, 5. £16.50, 6. £24.99, 7. £22.16, 8. £22.12.
9 Although the performance period for these awards ended on 31 December 2016, the awards will vest on 4 June 2017.
10 Values calculated using the closing share price at 31 December 2016 of £21.73.
Directors who exercised share options during the year are contained in note 21.
| Executive Directors | Options held at 1 January 2016 |
Options granted during the year |
Options exercised during the year |
Options lapsed during the year |
Options held at 31 December 2016 |
Exercise price £ |
Date from which exercisable |
Expiry date | |
|---|---|---|---|---|---|---|---|---|---|
| Andi Case | Other options | 25,000¹ | – | 25,000 | – | – | 9.91 | 26 October 2010 | 25 October 2017 |
| ShareSave | 993 | – | – | – | 993 | 18.12 | 1 July 2018 | 31 December 2018 | |
| Jeff Woyda | ShareSave | 993 | – | – | – | 993 | 18.12 | 1 July 2018 | 31 December 2018 |
1 These options are fully vested and were exercised on 18 October 2016 at £19.50.
The Company requires Executive Directors to build a shareholding equivalent to 200% of salary for the Chief Executive Officer and 150% of salary for the other Executive Directors. Until this is attained they are required to retain 50% of any share award that vests.
The beneficial interests of the directors in the share capital of the Company at 31 December 2016 were as follows:
| % of salary required to be held in shares under |
||||
|---|---|---|---|---|
| Number of ordinary shares | the shareholding guidelines | Guideline met? | ||
| 31 December 2016 | 31 December 2015 | |||
| James Hughes-Hallett* | 2,163 | – | n/a | n/a |
| Andi Case | 785,5484 | 645,9104 | 200% | Yes |
| Jeff Woyda | 120,5164 | 93,1494 | 150% | Yes |
| Peter M. Anker | 363,0481,2,4 | 529,1444 | 150% | Yes |
| Peter Backhouse | 6,000 | 3,500 | n/a | n/a |
| Ed Warner | 15,000 | 15,000 | n/a | n/a |
| James Morley | 4,500 | 4,500 | n/a | n/a |
| Birger Nergaard | 205,8693 | 205,869 | n/a | n/a |
| Marie-Louise Clayton* | 1,100 | n/a | n/a | n/a |
* Shares held in part or in full by connected persons.
There was no change in the beneficial interests of the Directors in the share capital of the Company between 31 December 2016 and 9 March 2017, being the last practicable date before the signing of this report.
1 This figure includes restricted stock units.
2 This figure includes 357,477 shares held by Langebru AS on behalf of Peter M. Anker and his connected persons.
3 This figure includes 205,869 shares held by Acane AS on behalf of Birger Nergaard and his connected persons.
4 These figures include restricted shares and restricted stock units granted as part of annual bonus as follows:
| Number of shares | ||||||
|---|---|---|---|---|---|---|
| Type of award | Bonus year Vesting date |
2012 April 2017 |
2013 June 2018 |
2014 June 2019 |
2015 June 2020 |
|
| Andi Case | Restricted shares |
13,103 | 9,924 | 15,233 | 15,506 | |
| Jeff Woyda | Restricted shares |
2,795 | 2,117 | 3,249 | 3,341 | |
| Peter M. Anker | Restricted stock units |
n/a | n/a | 2,667 | 2,904 |
Further restricted share and restricted stock unit awards will be made in 2017 in respect of 10% of the Directors' 2016 bonus.
Pension contributions were £nil (2015: £nil) for Andi Case and £nil (2015: £nil) for Jeff Woyda, with the balance for both Andi Case and Jeff Woyda (up to 15% of salary) paid as a cash supplement in lieu of pension (net of employer's NI) and included in the table on page 65 as pension. Peter M. Anker's pension contribution was NOK 77,430 (2015: NOK 66,000).
No payments were made to past Executive Directors during the year ended 31 December 2016.
No payments were made in respect of loss of office during the year ended 31 December 2016.
This graph shows total shareholder return (that is, share price growth assuming re-investment of any dividends) of the Company over the last eight financial years compared to the FTSE SmallCap Index, which the committee considers an appropriate index for comparison purposes, and compared to the total remuneration of the Chief Executive Officer.
This graph shows the value, by 31 December 2016, of £100 invested in Clarkson PLC on 31 December 2008, compared with the value of £100 invested in the FTSE 250 and FTSE SmallCap Indices on the same date.
The other points plotted are the values at intervening nancial year-ends.
| 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | |
|---|---|---|---|---|---|---|---|---|
| LTIP vesting % | 15% | 70% | 69% | 50% | 47% | 98% | 44% | 50% |
The table below shows the movement in salary, benefits and annual bonus for the Chief Executive Officer between the 2015 and 2016 financial years, compared to the average for all employees:
| % change | |
|---|---|
| Chief Executive Officer | |
| Salary and benefits | -1.7% |
| Bonus | -15.9% |
| All employees | |
| Salary and benefits | +4.4% |
| Bonus | +1.2% |
The following table sets out the percentage change in profit, dividends and overall spend on pay in 2016 compared to 2015:
| 2016 £m |
2015 £m |
% change | |
|---|---|---|---|
| Underlying profit for the year | 33.6 | 37.9 | -11.3% |
| Dividends | 18.5 | 18.2 | +1.6% |
| Employee remuneration costs, of which: | 191.3 | 186.1 | +2.8% |
| Executive Directors' total pay excluding LTIP (continuing) | 5.6 | 6.2 | -9.7% |
| Executive Directors' annual bonus (continuing) | 4.2 | 4.9 | -14.3% |
During the year the remuneration committee comprised the following Non-Executive Directors: Peter Backhouse, James Hughes-Hallett, James Morley, Birger Nergaard and Ed Warner. Marie-Louise Clayton joined the committee on 7 March 2017. The committee continues to be chaired by Ed Warner. None of the committee members have day-to-day involvement with the business nor do they have any personal financial interest in the matters to be recommended. The Company Secretary acts as secretary to the committee. The number of formal meetings held and the attendance by each member is shown in the table below. The committee also held informal discussions as required.
| Number of meetings attended out of potential maximum | |
|---|---|
| James Hughes-Hallett | 3 out of 3 |
| Peter Backhouse | 3 out of 3 |
| Ed Warner | 3 out of 3 |
| James Morley | 3 out of 3 |
| Birger Nergaard | 3 out of 3 |
In particular, the Board is satisfied that the committee has the range of skills and relevant business experience to reach an independent judgement on the suitability of the remuneration policy. The committee's remit already covers remuneration arrangements for all employees (where the committee reviews bonus payments for all employees in the business) and consideration of risk is foremost in the committee's deliberations.
Following a tender process in 2016, New Bridge Street (NBS), part of Aon PLC, were retained by the committee to provide independent advice and services that materially assist the committee. The committee is satisfied that the quality of advice received during the year was sufficient and that NBS remain objective and independent.
The fees paid by the Company to NBS during the financial year for advice on share plans and to the remuneration committee were £39,069 (2015: £55,121).
NBS is a signatory to the Remuneration Consultants' Code of Conduct which requires its advice to be objective and impartial.
At the 2016 AGM, the Directors' remuneration report received the following votes from shareholders:
| Total number of votes | % of votes cast | |
|---|---|---|
| For | 17,975,477 | 87.60% |
| Against | 2,090,580 | 10.19% |
| Discretion | 454,624 | 2.21% |
| Total | 20,520,681 | 100% |
| Withheld | 3,334,664 | – |
At the AGM to be held on 12 May 2017 a resolution approving this report is to be proposed as an ordinary resolution.
This report to shareholders provides information on the remuneration and share interests of all Clarkson PLC Directors and the criteria by which that remuneration has been determined. It has been prepared in accordance with the Companies Act 2006 and the applicable Listing Rules.
This report was approved by the Board and signed on its behalf by:
Remuneration committee Chairman 10 March 2017
James Morley Audit committee Chairman
During the year, the audit committee (the Committee) as further described on page 55 has continued to devote significant time to reviewing the following:
In addition to the above responsibilities, the Committee has reviewed the processes for the prevention, detection and reporting of fraud and the Group's Code of Business Conduct and Ethics.
The Committee's terms of reference are reviewed on regular basis to ensure compliance with the requirements of the Code and are also published on the Company's website. For more information on evaluation of the Board and its Committees during the year, please see page 53.
The Committee met three times during 2016 and addressed four main areas in the year:
(1) financial reporting and significant issues;
(2) internal control, risk management and internal audit;
(3) viability statement; and
(4) external Auditors.
The Committee reviewed and considered the following areas in respect of financial reporting and preparation of the interim and annual financial statements:
The Committee also reviews reports by the external Auditors on the full year and half year results which highlight any issues with respect to the work undertaken on the audit. The issues and how they were addressed by the Committee are set out below:
| Issue | Area of focus | How the issue was addressed by the Committee |
|---|---|---|
| Recoverability of trade receivables |
A number of judgements are made in the calculation of the provision, primarily the age of the invoice, the existence of any disputes, |
The Committee discussed with management the results of its review, the internal controls and the composition of the related financial information. The Committee also discussed with the external auditors their review of the provision. |
| recent historical payment patterns and the debtor's financial position. |
The Committee is satisfied that the judgements made by management are reasonable and that appropriate disclosures have been included in the financial statements. |
|
| Revenue recognition |
In the broking and financial segments, the Group's entitlement to commission revenue usually depends on third party obligations |
The Committee considered the revenue recognition processes in place for all four business segments with management and cut-off procedures with the external Auditors. |
| being fulfilled. Since the Group has no control over this, it is important to recognise revenue at the appropriate time. |
The Committee is satisfied with the control environment and that revenue has been recognised in the correct periods. |
|
| Carrying value of goodwill and intangible assets |
Determining whether goodwill is impaired requires an estimation of the value-in-use of the cash-generating units to which these assets have been allocated. The value-in-use calculation requires estimation of future cash flows expected to arise for each cash |
The Committee discussed with management and reviewed the results of its testing and evaluated the appropriateness of the assumptions used within its impairment models. The Committee also discussed with the external Auditors their review of management's testing. The Committee then discussed with both management and the external Auditors the headroom in each of the cash-generating units and the impact of sensitivity analysis from changes in key assumptions. |
| generating unit, the selection of suitable discount rates and the estimation of future growth rates. |
The Committee is satisfied with management's assumptions, judgement and the conclusion not to record impairment in any of the cash-generating units and that appropriate disclosures have been included in the financial statements. |
| Issue | Area of focus | How the issue was addressed by the Committee |
|---|---|---|
| Classification and recognition |
Exceptional items are those which are non recurring in nature and considered to be |
The Committee considered the reasons behind showing these items separately and therefore excluding the costs from the 'underlying' earnings measures. |
| of adjusting items |
material in size. In 2016, this column in the consolidated income statement represents the gain and special dividend arising on the sale of The Baltic Exchange shares. |
The Committee agreed that the use of alternative performance measures, which exclude these items, can provide the users of the financial statements with a better understanding of the Group's underlying financial performance. The Committee is satisfied that the existing format is consistent with the Group's |
| The 'acquisition related costs' column includes the amortisation of intangible assets, the expensing of the cash and share-based elements of consideration linked to ongoing employment obligations on acquisitions, acquisition related professional fees and interest on loan notes issued as part of the Platou acquisition. |
accounting policy. |
The work described above, together with a review of the content of the strategic report, provided the assurance to the Committee and to the Board that the annual report for the year ended 31 December 2016, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's and the Company's position and performance, business model and strategy.
The Company continually seeks to improve and update existing procedures and to introduce new controls where necessary. The risk management system is designed to identify principal risks and to provide assurance that these risks are fully understood and managed. As an ongoing process, the Committee oversees the development of the internal control procedures which provide assurance to the Committee that the controls which are operating in the Group are effective and sufficient to counteract the risks to which the Company is exposed. No significant control deficiencies were identified during the year. Further details of risk management are shown on pages 38-41.
The need for an internal audit function is reviewed regularly by the Board and the Committee. Given the changes in structure of the Group following the completion of the Platou acquisition in 2015 and the scale and regulatory nature of the Platou operations, it was considered necessary to establish an internal audit function for the banking and finance operations headquartered in Norway. Ernst & Young were appointed to carry out this function on an outsourced basis. The Committee will continue to review the possible need for an internal audit function in respect of the Group's other activities but to date has concluded that there is no immediate requirement for such a function.
The Committee, in conjunction with the Board, has established arrangements by which employees of the Group may, in confidence, raise concerns about possible improprieties or wrongdoing.
The Committee considered the form of the viability statement. In particular, there was a debate over the period of time that it was appropriate to consider and it was decided that it was appropriate to limit the statement to three years. The Committee reviewed the analysis supporting the viability statement and the processes underpinning the assessment of the Group's longer-term prospects were also reviewed. Further assessment of viability and the viability statement is set out on page 39.
The Committee reviews and makes recommendations to the Board regarding the re-appointment and remuneration of the external Auditors.
The Committee considered the following:
external audit strategy for the current year;
overall work plan;
To ensure that the Auditors maintain their independence and objectivity, the Committee has implemented a policy which is designed to ensure that the provision of non-audit services does not have an impact on the external Auditors' independence and objectivity. It restricts the engagement of the Auditors in relation to non-audit services, whilst recognising that there are some types of work, such as accounting and tax advice, where a detailed understanding of the Company's business is advantageous.
It also requires that individual engagements above a certain fee level may only be undertaken with appropriate authority from the Committee or the Committee Chair.
The Committee agreed in November 2016 that the Auditors would no longer be used for any non-audit services other than those either required or permitted by statute.
The fees for services provided by the Auditors during the year are shown in note 3.
The Committee meets privately on a regular basis with the external Auditors in the absence of management.
The Committee has discussed the requirements of the Code and the final order published by the Competition and Markets Authority in respect of tendering the Group's external audit and has recommended to the Board that it does not carry out a tender process for 2017; the next tender process is due in 2019. In making this assessment, the Committee has considered the performance of the current external Auditors, PricewaterhouseCoopers LLP (PwC), who have served since 2009. The current audit partner, John Waters, has served since 2014.
The Committee does not consider that PwC's independence or effectiveness are impaired. Accordingly, the Committee has recommended to the Board that PwC be re-appointed as Auditors and that a resolution be put to shareholders at the AGM.
Audit committee Chairman 10 March 2017
Financial statements
Other information
The Directors' report required under the Companies Act 2006, together with the financial statements for the year ended 31 December 2016, comprises sections of the annual report incorporated by reference as set out below which, taken together, contain the information to be included in the annual report, where applicable, under Listing Rule 9.8.4.
| Going concern | Page 39 |
|---|---|
| Board membership | Pages 50 - 51 |
| Dividend | Page 37 |
| Directors' long-term incentives | Pages 57- 71 |
| Waiver of Directors' emoluments | Page 57 |
| Corporate governance report | Pages 52 - 56 |
| Future developments of the business of the Group | Pages 16 - 35 |
| Employee equality, diversity and involvement | Pages 44 - 45 |
| Carbon emissions | Pages 46 - 47 |
| Information to the Independent Auditors | Page 75 |
| Dividend waiver | Page 111 |
| Financial risk management | Pages 113 - 115 |
| Subsidiaries | Pages 132 - 136 |
| Indemnity provision | Page 113 |
Details of the Company's share capital are shown in note 23 to the financial statements. The rights and obligations attaching to the ordinary shares are set out in the Company's articles of association (the Articles), copies of which can be obtained free of charge from the Registrar of Companies at http://www.gov.uk/get-information-about-a-company.
The Chief Executive Officer is expected to maintain a shareholding equivalent to 200% of salary and other Executive Directors equivalent to 150% of salary.
A transfer of shares is only permitted for shares which are fully paid up. A transfer form must be duly stamped (if required) and made out in favour of a single transferee or no more than four joint transferees. The transfer form must be delivered to the Company's registrars, Computershare, accompanied by the share certificate to which it relates or such other evidence that proves the title of the transferor. Please contact Computershare on +44 (0) 370 707 1055 or online at http://www.clarksons.com/investors/.
The holders of ordinary shares have the right to:
There are no restrictions or special conditions regarding voting rights and control of the Company. Major shareholders have the same voting rights per share as all other shareholders. Shareholders who wish to appoint a proxy to exercise their voting rights at the AGM are required to submit a proxy voting form to the Company no later than 48 hours prior to the time of the meeting online at http://www.investorcentre.co.uk/eproxy.
Shares acquired through Clarksons' share schemes and plans rank equally with other shares in issue and have no special rights.
There are no restrictions on transfers of ordinary shares in the Company other than:
The Company is not party to any significant agreements that would take effect, alter or terminate upon a change of control following a takeover bid.
Details of the Executive Directors' service contracts, including contractual arrangements in connection with a change of control of the Company, are set out in the Directors' remuneration report on pages 57 and 71.
Upon a change of control, all unvested awards under the 2004 Clarkson PLC LTIP would vest to the extent that, where applicable, any performance conditions attaching to awards have been achieved.
All unvested awards under the 2014 Clarkson PLC LTIP shall vest on the date of such event. In the case of performance awards, the number of shares to vest will be determined by the remuneration committee subject to the performance or any other conditions and/or pro rata reduction in the case of leavers.
The following interests have been disclosed to the Company by major shareholders under Rule 5 of the Disclosure and Transparency Rules (DTR) as at the end of the financial year and at 9 March 2017 (being the latest practicable date of this report):
| 31-Dec-16 | 9-Mar-17 | |
|---|---|---|
| Franklin Templeton Investment Management Limited |
14.39% | 14.39% |
| RS Platou Holdings AS | 7.10% | 7.10% |
| Heronbridge Investment Management LLP | 5.01% | 5.01% |
| Legal & General Investment Management Limited |
< 5% | <5% |
Information provided to the Company pursuant to the DTR is published on a Regulatory Information Service and on the Company's website at: www.clarksons.com/news.
In addition, as at 9 March 2017, employees directly held 19.36% of the Company's share capital and 4.64% was held by employee share trusts for use under the Company's various incentive schemes.
Interests in the shares of the Company, or derivatives or any other financial instrument relating to those shares, conducted by the Directors of the Company on their own account, notified to the Company pursuant to Article 19 of the Market Abuse Regulation, are set out in the Directors' remuneration report on pages 57 and 71.
At the 2016 AGM the Company's shareholders authorised the Company, for the purposes of Section 701 of the Companies Act 2006, to make market purchases of its own shares up to a maximum aggregate amount of 3,023,260 shares (representing 10% of the Company's share capital as at 30 March 2016). This authority is due to expire at the end of the 2017 AGM and a resolution will be put to shareholders at that meeting to extend the authority for a further period. The Company has not acquired or disposed of any interests in its own shares.
By order of the Board
Company Secretary 10 March 2017
The following statement, which should be read in conjunction with the Auditors' statement of their responsibilities set out in their reports on pages 76 to 81 and 117 to 118, is made to distinguish the respective responsibilities of the Directors and of the Auditors in relation to the financial statements.
The Directors are responsible for preparing the annual report, the Directors' remuneration report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group and Parent Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors' remuneration report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
In accordance with Section 418 of the Companies Act 2006, each Director at the time of approval of this report confirms that so far as they are aware, there is no relevant audit information of which the Company's Auditors are unaware, and each Director has taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's Auditors are aware of that information.
The Group's business activities, together with the factors likely to affect its future development, performance and position, are set out in the strategic report on pages 1 to 47. The financial position of the Group, its cash flows and liquidity position are described in the financial review. The risk management section of the strategic report and note 26 to the financial statements include a description of the Group's objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and hedging activities and its exposures to credit and liquidity risks.
The Group has considerable financial resources available and a strong balance sheet, as explained in the financial review on pages 36 to 37. 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. The Directors have a reasonable expectation that the Group has sufficient resources to continue in operation for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
Each of the Directors, whose names and functions are listed on pages 50 to 51 of this annual report, confirm that:
On behalf of the Board
Chairman 10 March 2017
In our opinion, Clarkson PLC's consolidated financial statements (the financial statements):
The financial statements, included within the annual report, comprise:
Certain share-based payment and Directors' remuneration disclosures which are required by the financial reporting framework have been presented elsewhere in the annual report, rather than in the notes to the financial statements. These are cross-referenced from the financial statements in notes 21 and 28 respectively and are identified as audited.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and IFRSs as adopted by the European Union.
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (ISAs (UK & Ireland)).
We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we looked at where the Directors made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud.
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are identified as 'areas of focus' in the following table. We have also set out how we tailored our audit to address these specific areas in order to provide an opinion on the financial statements as a whole, and any comments we make on the results of our procedures should be read in this context. This is not a complete list of all risks identified by our audit.
Refer to page 72 (Audit committee report), note 14 of the financial statements and note 2.3 for the Directors' disclosures of the related accounting policies, judgements and estimates for further information.
At the year-end the Group had trade receivables of £58.2m before provisions for impairment of £15.5m. As set out in the business review section of the strategic report, the shipping industry has faced a challenging year and the global shipping market continues to be impacted by certain macro-economic factors such as oil prices and freight rates. Accordingly, the Group experienced uncertainty over the collectability of trade receivables from specific customers.
The determination as to whether a trade receivable is collectable involves management judgement. Specific factors management considers include the age of the balance, location and known financial condition of certain customers, existence of disputes, recent historical payment patterns and any other available information concerning the creditworthiness of the counterparty.
Management uses this information to determine whether a provision for impairment is required either for a specific transaction or for a customer's balance overall. We focused on this area because it requires a high level of management judgement and the materiality of the amounts involved.
expected settlement dates.
completing our audit procedures.
write-offs during the year; and
that there were no indicators of impairment. This included verifying if payments had been received since the year-end, reviewing historical payment patterns and any correspondence with customers on
We selected a sample of the larger trade receivable balances where a provision for impairment of trade receivables was recognised and understood the rationale behind management's judgement for a provision being required. In order to evaluate the appropriateness of these judgements, we verified whether balances were overdue, the customer's location and historical payment patterns and whether any post year-end payments had been received up to the date of
We also obtained corroborative evidence including correspondence supporting any disputes between the parties involved, attempts by management to recover the amounts outstanding and on the credit
By performing the procedures set out above we also challenged management's rationale where provisions were recognised on transactions that were not overdue as at the balance sheet date and verified these were appropriately supported. In assessing the appropriateness of the overall provision for impairment, we considered the consistency of management's application of policy for recognising provisions with the prior year and in the context of the current macro-
i) how much of prior years' provisions had been utilised for bad debt
ii) prior year provision amounts released where a customer had paid. Releases of the provision during the year are disclosed in note 14. This included some infrequent payments of overdue amounts from customers where a provision continues to be recognised for new invoices raised. Despite these payments, management continues to provide for such customers on the basis there still remains ongoing uncertainty over their underlying financial condition as indicated by
status of significant counterparties where available.
economic challenges. Specifically we considered:
the ad hoc timing of payments beyond dates due.
to be consistent with the evidence obtained.
We tested aged balances where no provision was recognised to check
Strategic report
Refer to page 72 (Audit committee report), notes 3 and 4 of the financial statements and note 2.3 for the Directors' disclosures of the related accounting policies, judgements and estimates for further information.
The Group's entitlement to commission revenue in the broking and financial segments is usually dependent upon the fulfilment of certain obligations, for example stage completion of a vessel build in broking or formal approval of a debt or equity transaction in financial between two or more third parties over which the Group has no control.
Consideration is therefore required as to whether the parties' obligations have been fulfilled and the commission revenue can be recognised.
Some of these transactions, such as within the sale and purchase, offshore or financial revenue streams, are individually significant in value. Consistent with the prior year, we therefore focused on these revenue streams, particularly transactions surrounding the year-end, where there is a risk that large transactions may be recorded in the incorrect period.
The other revenue streams, such as support and research, were relatively less significant. Revenue in respect of these streams is recognised when the service is completed or when the products are despatched, as explained further in note 2.21 of the financial statements. There is therefore less judgement and risk of a material cut-off error in these streams.
For the sale and purchase, offshore and financial transactions near the year-end, we tested that revenue cut-off was appropriately determined. We selected a sample of transactions and agreed the details of these transactions to underlying contractual information or other supporting documents which demonstrated the timing of when obligations had been fulfilled by the parties to the transaction.
From the work we have performed we consider the level of provisioning
From the evidence obtained we found no material instances of revenue being recognised in the incorrect period.
Refer to page 72 (Audit committee report), note 13 of the financial statements and note 2.3 for the Directors' disclosures of the related accounting policies, judgements and estimates for further information.
The goodwill balance of £294.2m is allocated across multiple cashgenerating units (CGUs), and is subject to an annual impairment review.
Management used a value-in-use model to compute the present value of forecast future cash flows for each CGU which was then compared with the carrying value of the net assets of each CGU (including goodwill and intangible assets) to determine if there was an impairment.
Determining if an impairment charge is required for goodwill and intangible assets involves significant judgements about forecast future performance and cash flows of the business, including growth in revenues and operating profit margins, as well as determining an appropriate discount factor and long-term growth rate.
No charge for impairment of goodwill has been recognised in the current financial year.
The risk that we focused on during the audit was that the goodwill and other acquired intangible assets may be overstated and that an impairment charge may be required. In particular, we focused on the goodwill and intangible assets in the offshore broking and securities CGUs which have been most affected by the economic conditions, described in the business review section of this annual report.
We evaluated the Directors' future cash flow projections for all CGUs with a particular focus on the offshore broking and securities CGUs and the process by which they were drawn up, including comparing them with the latest Board approved budget and forecasts, and testing the accuracy of the underlying calculations in the model. We concluded that the cash flow projections were consistent with the Board approved budgets and forecasts.
For the Directors' key assumptions we:
We found the Directors' assumptions to be in line with the information we compared them against and the discount rate to be within our expected range.
We also performed sensitivity analyses on the key drivers of the cash flow projections including assumed profits, short and long-term growth rates and the discount rate. In performing these sensitivities we considered the level of historical budgeting inaccuracies and how the assumptions compared with the actual values achieved in prior years.
Having ascertained the extent of change in those assumptions that either individually or collectively would be required for the goodwill or intangible assets to be impaired, we considered the likelihood of such a movement in those key assumptions arising.
We determined that the disclosures made in note 13 regarding the related assumptions appropriately draw attention to the significant areas of judgement.
Refer to page 73 (Audit committee report), note 2.1 (basis of preparation) of the financial statements and note 2.3 for the Directors' disclosures of the related accounting policies, judgements and estimates for further information.
The Group excludes adjusting items (exceptional items and acquisition related costs) from its 'underlying' earnings measure. The Directors believe that alternative or additional performance measures can provide the users of the financial statements with a better understanding of the Group's underlying financial performance and strategy, if properly used. If improperly used and presented, these measures could mislead the users of the financial statements by obscuring the real profitability and financial position of the Group.
Management judgement is required as to what items qualify for this classification. There can also be judgement as to the point at which costs should be recognised and the amount to record.
Included in adjusting items were:
We also focused on the accuracy of other charges included in acquisition related costs due to their financial significance, such as ongoing earn-out charges and the amortisation of acquired intangible assets, which are presented as adjusting items consistently with prior periods.
We tested whether the exceptional items were non-recurring in nature and recognised and presented in accordance with the Group's disclosed accounting policy. In relation to the gain on sale of shares in The Baltic Exchange we examined disposal proceeds and agreements and verified the accuracy of management's computation of the amount of the gain recognised.
In respect of other adjusting items we verified that management's computations of the costs were accurate.
We have also assessed the extent to which 'underlying' financial information is given prominence in the annual report, whether it is clearly, accurately and consistently applied and whether the 'underlying' financial information is not otherwise misleading in the form and context in which it appears in the annual report.
From the evidence obtained, we concurred with management's assessment to classify and disclose these items as adjusting items, in line with the disclosed accounting policy.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the geographic structure of the Group, the accounting processes and controls, and the industry in which the Group operates.
The financial statements are a consolidation of reporting units, comprising the Group's operating businesses and centralised functions.
In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed at the reporting units by us, as the Group engagement team, or by component Auditors of other PwC network firms and other firms operating under our instruction. Where the work was performed by component Auditors, we determined the level of involvement we needed to have in the audit work at those reporting units to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the financial statements as a whole.
We identified 70 reporting units, three of which were significant due to their size. These comprised certain operating business and centralised functions which required an audit of their complete financial information. We also conducted specific audit procedures on certain balances and transactions in respect of a number of other reporting units. This gave us coverage of 84% of the Group's profit before taxation, adjusted for exceptional items and acquisition related costs, and 89% of revenue. This, together with the additional procedures performed at the Group level, including testing the consolidation process, gave us the evidence we needed for our opinion on the financial statements as a whole.
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
| Overall Group materiality | £2.2m (2015: £2.5m). |
|---|---|
| How we determined it | 5% of profit before taxation, adjusted for exceptional items and acquisition related costs. |
| Rationale for benchmark applied |
In arriving at this judgement we have had regard to profit before taxation, adjusted for exceptional items and acquisition related costs, because, in our view, this represents the most appropriate measure of underlying performance. |
We agreed with the audit committee that we would report to them misstatements identified during our audit above £112,000 (2015: £125,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Under the Listing Rules we are required to review the Directors' report, set out by cross-reference on page 74, in relation to going concern. We have nothing to report having performed our review.
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to the Directors' report about whether they considered it appropriate to adopt the going concern basis in preparing the financial statements. We have nothing material to add or to draw attention to.
As noted in the Directors' report, the Directors have concluded that it is appropriate to adopt the going concern basis in preparing the financial statements. The going concern basis presumes that the Group has adequate resources to remain in operation, and that the Directors intend it to do so, for at least one year from the date the financial statements were signed. As part of our audit we have concluded that the Directors' use of the going concern basis is appropriate.
As not all future events or conditions can be predicted, these statements are not a guarantee as to the Group's ability to continue as a going concern.
Companies Act 2006 opinion
In our opinion:
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:
| – information in the annual report is: | We have no |
|---|---|
| – materially inconsistent with the information in the audited financial statements; or | exceptions |
| – apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired in the course of performing our audit; or |
to report. |
| – otherwise misleading. | |
| – the explanation given by the Directors on page 75, in accordance with provision C.1.1 of the UK Corporate Governance Code | We have no |
| (the Code), as to why the annual report does not include a statement that they consider the annual report taken as a whole to be fair, balanced and understandable and provides the information necessary for members to assess the Group's position and performance, business model and strategy is materially inconsistent with our knowledge of the Group acquired in the course of performing our audit. |
exceptions to report. |
|
|---|---|---|
| – the section of the annual report on page 72, as required by provision C.3.8 of the Code, describing the work of the audit | We have no |
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to:
committee does not appropriately address matters communicated by us to the audit committee.
| – the Directors' confirmation on page 39 of the annual report, in accordance with provision C.2.1 of the Code, that they have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. |
We have nothing material to add or to draw attention to. |
|---|---|
| – the disclosures in the annual report that describe those risks and explain how they are being managed or mitigated. | We have nothing material to add or to draw attention to. |
| – the Directors' explanation on page 39 of the annual report, in accordance with provision C.2.2 of the Code, as to how they have assessed the prospects of the Group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. |
We have nothing material to add or to draw attention to. |
Under the Listing Rules we are required to review the Directors' statement that they have carried out a robust assessment of the principal risks facing the Group and the Directors' report in relation to the longer-term viability of the Group, set out on page 39. Our review was substantially less in scope than an audit and only consisted of making inquiries and considering the Directors' process supporting their statements; checking that the statements are in alignment with the relevant provisions of the Code; and considering whether the statements are consistent with the knowledge acquired by us in the course of performing our audit. We have nothing to report having performed our review.
Under the Companies Act 2006 we are required to report to you if, in our opinion, we have not received all the information and explanations we require for our audit. We have no exceptions to report arising from this responsibility.
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of Directors' remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.
Under the Listing Rules we are required to review the part of the corporate governance statement relating to ten further provisions of the Code. We have nothing to report having performed our review.
exceptions to report.
As explained more fully in the Directors' responsibilities statement set out on page 75, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Parent Company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, 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.
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:
We primarily focus our work in these areas by assessing the Directors' judgements against available evidence, forming our own judgements and evaluating the disclosures in the financial statements.
We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.
In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
We have reported separately on the Parent Company financial statements of Clarkson PLC for the year ended 31 December 2016 and on the information in the Directors' remuneration report that is described as having been audited.
Senior Statutory Auditor
for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London
10 March 2017
for the year ended 31 December
| 2016 | 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Before | After | Before | After | ||||||
| exceptional | exceptional | exceptional | exceptional | ||||||
| items and | Acquisition | items and | items and | Acquisition | items and | ||||
| acquisition related |
Exceptional items |
related costs |
acquisition related |
acquisition related |
Exceptional items |
related costs |
acquisition related |
||
| costs | (note 5) | (note 6) | costs | costs | (note 5) | (note 6) | costs | ||
| Notes | £m | £m | £m | £m | £m | £m | £m | £m | |
| Revenue | 3, 4 | 306.1 | – | – | 306.1 | 301.8 | – | – | 301.8 |
| Cost of sales | (8.9) | – | – | (8.9) | (10.3) | – | – | (10.3) | |
| Trading profit | 297.2 | – | – | 297.2 | 291.5 | – | – | 291.5 | |
| Other income | – | 9.7 | – | 9.7 | – | 1.3 | – | 1.3 | |
| Administrative expenses | (253.0) | – | (7.7) | (260.7) | (242.0) | (3.8) | (15.1) | (260.9) | |
| Operating profit | 3, 4 | 44.2 | 9.7 | (7.7) | 46.2 | 49.5 | (2.5) | (15.1) | 31.9 |
| Finance revenue | 3 | 0.8 | 1.4 | – | 2.2 | 2.5 | – | – | 2.5 |
| Finance costs | 3 | (0.1) | – | (0.9) | (1.0) | (1.1) | – | (1.1) | (2.2) |
| Other finance costs – pensions | 3, 22 | (0.1) | – | – | (0.1) | (0.4) | – | – | (0.4) |
| Profit before taxation | 44.8 | 11.1 | (8.6) | 47.3 | 50.5 | (2.5) | (16.2) | 31.8 | |
| Taxation | 7 | (11.2) | – | 1.8 | (9.4) | (12.6) | 0.6 | 2.5 | (9.5) |
| Profit for the year | 33.6 | 11.1 | (6.8) | 37.9 | 37.9 | (1.9) | (13.7) | 22.3 | |
| Attributable to: | |||||||||
| Equity holders of the Parent | |||||||||
| Company | 31.4 | 11.1 | (6.8) | 35.7 | 35.3 | (1.9) | (13.7) | 19.7 | |
| Non-controlling interests | 2.2 | – | – | 2.2 | 2.6 | – | – | 2.6 | |
| Profit for the year | 33.6 | 11.1 | (6.8) | 37.9 | 37.9 | (1.9) | (13.7) | 22.3 | |
| Earnings per share | |||||||||
| Basic | 8 | 105.2p | 119.7p | 121.9p | 68.2p | ||||
| Diluted | 8 | 104.2p | 118.6p | 120.5p | 67.4p |
| Notes | 2016 £m |
2015 £m |
|
|---|---|---|---|
| Profit for the year | 37.9 | 22.3 | |
| Other comprehensive income/(loss): | |||
| Items that will not be reclassified to profit or loss: | |||
| Actuarial gain on employee benefit schemes – net of tax | 22 | 4.0 | 7.2 |
| Items that may be reclassified subsequently to profit or loss: | |||
| Foreign exchange differences on retranslation of foreign operations | 50.5 | (20.4) | |
| Foreign currency hedge – net of tax | 24 | (3.9) | (1.1) |
| Other comprehensive income/(loss) | 50.6 | (14.3) | |
| Total comprehensive income for the year | 88.5 | 8.0 | |
| Attributable to: | |||
| Equity holders of the Parent Company | 85.8 | 6.3 | |
| Non-controlling interests | 2.7 | 1.7 | |
| Total comprehensive income for the year | 88.5 | 8.0 |
as at 31 December
| Notes | 2016 £m |
2015 £m |
|---|---|---|
| Non-current assets | ||
| Property, plant and equipment 10 |
30.0 | 30.8 |
| Investment property 11 |
1.2 | 1.2 |
| Intangible assets 12 |
300.5 | 263.2 |
| Trade and other receivables 14 |
1.8 | 1.1 |
| Investments 15 |
4.1 | 1.9 |
| Employee benefits 22 |
7.5 | – |
| Deferred tax asset 7 |
12.8 | 12.5 |
| 357.9 | 310.7 | |
| Current assets | ||
| Inventories 16 |
0.7 | 0.9 |
| Trade and other receivables 14 |
56.7 | 61.3 |
| Income tax receivable | 2.3 | 1.7 |
| Investments 15 |
29.8 | 5.7 |
| Cash and cash equivalents 17 |
154.0 | 168.4 |
| 243.5 | 238.0 | |
| Current liabilities | ||
| Interest-bearing loans and borrowings 18 |
(23.6) | (23.1) |
| Trade and other payables 19 |
(142.3) | (139.3) |
| Income tax payable | (6.5) | (5.9) |
| Provisions 20 |
– | (0.2) |
| (172.4) | (168.5) | |
| Net current assets | 71.1 | 69.5 |
| Non-current liabilities | ||
| Interest-bearing loans and borrowings 18 |
– | (23.0) |
| Trade and other payables 19 |
(11.3) | (8.1) |
| Provisions 20 |
(0.1) | – |
| Employee benefits 22 |
(5.2) | (4.1) |
| Deferred tax liability 7 |
(5.7) | (4.1) |
| (22.3) | (39.3) | |
| Net assets | 406.7 | 340.9 |
| Capital and reserves | ||
| Share capital 23 |
7.6 | 7.6 |
| Other reserves 24 |
240.1 | 194.2 |
| Retained earnings | 155.8 | 136.2 |
| Equity attributable to shareholders of the Parent Company | 403.5 | 338.0 |
| Non-controlling interests | 3.2 | 2.9 |
| Total equity | 406.7 | 340.9 |
The financial statements on pages 82 to 116 were approved by the Board on 10 March 2017, and signed on its behalf by:
James Hughes-Hallett Jeff Woyda Registered number: 1190238
Chairman Chief Financial Officer and Chief Operating Officer
Strategic report
Governance
for the year ended 31 December
| Attributable to equity holders of the Parent Company | |||||||
|---|---|---|---|---|---|---|---|
| Notes | Share capital £m |
Other reserves £m |
Retained earnings £m |
Total £m |
Non controlling interests £m |
Total equity £m |
|
| Balance at 1 January 2016 | 7.6 | 194.2 | 136.2 | 338.0 | 2.9 | 340.9 | |
| Profit for the year | – | – | 35.7 | 35.7 | 2.2 | 37.9 | |
| Other comprehensive income: | |||||||
| Actuarial gain on employee benefit schemes – net of tax |
22 | – | – | 4.0 | 4.0 | – | 4.0 |
| Foreign exchange differences on retranslation of foreign operations |
24 | – | 50.0 | – | 50.0 | 0.5 | 50.5 |
| Foreign currency hedge – net of tax | 24 | – | (3.9) | – | (3.9) | – | (3.9) |
| Total comprehensive income for the year |
– | 46.1 | 39.7 | 85.8 | 2.7 | 88.5 | |
| Transactions with owners: | |||||||
| Share issues | 23,24 | – | 0.1 | – | 0.1 | – | 0.1 |
| Employee share schemes | 24 | – | (0.3) | (1.8) | (2.1) | – | (2.1) |
| Tax on other employee benefits | 7 | – | – | 0.3 | 0.3 | – | 0.3 |
| Tax on other items in equity | 7 | – | – | (0.1) | (0.1) | – | (0.1) |
| Dividend paid | 9 | – | – | (18.5) | (18.5) | (2.4) | (20.9) |
| – | (0.2) | (20.1) | (20.3) | (2.4) | (22.7) | ||
| Balance at 31 December 2016 | 7.6 | 240.1 | 155.8 | 403.5 | 3.2 | 406.7 |
| Attributable to equity holders of the Parent Company | |||||||
|---|---|---|---|---|---|---|---|
| Notes | Share capital £m |
Other reserves £m |
Retained earnings £m |
Total £m |
Non controlling interests £m |
Total equity £m |
|
| Balance at 1 January 2015 | 5.2 | 35.5 | 126.6 | 167.3 | – | 167.3 | |
| Profit for the year | – | – | 19.7 | 19.7 | 2.6 | 22.3 | |
| Other comprehensive (loss)/income: | |||||||
| Actuarial gain on employee benefit schemes – net of tax |
22 | – | – | 7.2 | 7.2 | – | 7.2 |
| Foreign exchange differences on retranslation of foreign operations |
24 | – | (19.5) | – | (19.5) | (0.9) | (20.4) |
| Foreign currency hedge – net of tax | 24 | – | (1.1) | – | (1.1) | – | (1.1) |
| Total comprehensive (loss)/income for the year |
– | (20.6) | 26.9 | 6.3 | 1.7 | 8.0 | |
| Transactions with owners: | |||||||
| Share issues | 23,24 | 2.4 | 178.7 | – | 181.1 | – | 181.1 |
| Employee share schemes | 24 | – | 0.6 | 0.3 | 0.9 | – | 0.9 |
| Tax on other employee benefits | 7 | – | – | 0.7 | 0.7 | – | 0.7 |
| Tax on other items in equity | 7 | – | – | (0.1) | (0.1) | – | (0.1) |
| Acquisition of subsidiary | 12 | – | – | – | – | 10.8 | 10.8 |
| Dividend paid | 9 | – | – | (18.2) | (18.2) | (9.6) | (27.8) |
| 2.4 | 179.3 | (17.3) | 164.4 | 1.2 | 165.6 | ||
| Balance at 31 December 2015 | 7.6 | 194.2 | 136.2 | 338.0 | 2.9 | 340.9 |
for the year ended 31 December
| Notes | 2016 £m |
2015 £m |
|
|---|---|---|---|
| Cash flows from operating activities | |||
| Profit before taxation | 47.3 | 31.8 | |
| Adjustments for: | |||
| Foreign exchange differences | 3 | (3.6) | (1.9) |
| Depreciation of property, plant and equipment | 3, 10 | 5.0 | 4.2 |
| Share-based payment expense | 21 | 1.3 | 1.6 |
| Gain on sale of property, plant and equipment | (0.1) | (0.1) | |
| (Gain)/loss on sale of investments | (9.6) | 0.3 | |
| Amortisation of intangibles | 3, 12 | 6.6 | 9.2 |
| Difference between pension contributions paid and amount recognised in the income statement | (1.9) | (2.3) | |
| Finance revenue | 3 | (2.2) | (2.5) |
| Finance costs | 3 | 1.0 | 2.2 |
| Other finance costs – pensions | 3 | 0.1 | 0.4 |
| Decrease in inventories | 16 | 0.2 | 0.5 |
| Decrease in trade and other receivables | 13.9 | 20.8 | |
| Decrease in bonus accrual | (3.0) | (11.1) | |
| Decrease in trade and other payables | (1.9) | (12.5) | |
| Decrease in provisions | 20 | (0.1) | (2.8) |
| Cash generated from operations | 53.0 | 37.8 | |
| Income tax paid | (7.4) | (13.1) | |
| Net cash flow from operating activities | 45.6 | 24.7 | |
| Cash flows from investing activities | |||
| Interest received | 3 | 0.6 | 0.8 |
| Purchase of property, plant and equipment | 10 | (3.1) | (24.4) |
| Proceeds from sale of investments | 15 | 11.3 | 6.8 |
| Proceeds from sale of property, plant and equipment | 0.4 | 0.3 | |
| Purchase of investments | (3.8) | – | |
| Transfer (to)/from current investments (funds on deposit) | (24.0) | 20.0 | |
| Acquisition of subsidiaries, including settlement of deferred consideration | (23.7) | (26.5) | |
| Net cash and cash equivalents acquired on acquisitions | 12 | – | 43.2 |
| Dividends received from investments | 3 | 1.5 | 1.7 |
| Net cash flow from investing activities | (40.8) | 21.9 | |
| Cash flows from financing activities | |||
| Interest paid | (0.1) | (1.1) | |
| Dividend paid | 9 | (18.5) | (18.2) |
| Dividend paid to non-controlling interests | (2.4) | (1.7) | |
| Repayment of borrowings | – | (12.8) | |
| Proceeds from shares issued (net of transaction costs) | 23 | – | 1.2 |
| ESOP shares acquired | (6.0) | – | |
| Net cash flow from financing activities | (27.0) | (32.6) | |
| Net (decrease)/increase in cash and cash equivalents | (22.2) | 14.0 | |
| Cash and cash equivalents at 1 January | 168.4 | 152.9 | |
| Net foreign exchange differences | 7.8 | 1.5 | |
| Cash and cash equivalents at 31 December | 17 | 154.0 | 168.4 |
The Group and Parent Company financial statements of Clarkson PLC for the year ended 31 December 2016 were authorised for issue in accordance with a resolution of the Directors on 10 March 2017. 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 term 'Company' refers to Clarkson PLC and 'Group' refers to the Company, its consolidated subsidiaries and the relevant assets and liabilities of the share purchase trusts.
Copies of the annual report will be circulated to all shareholders and will also be available from the registered office of the Company at Commodity Quay, St. Katharine Docks, London E1W 1BF.
The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 31 December 2016.
The financial statements are presented in pounds sterling and all values are rounded to the nearest one hundred thousand pounds sterling (£0.1m) except when otherwise indicated.
The consolidated income statement is shown in columnar format to assist with understanding the Group's results by presenting profit for the period before exceptional items and acquisition related costs; this is referred to as underlying profit. Items which are non-recurring in nature and considered to be material in size are shown as 'exceptional items'. The column 'exceptional items' represents the gain and special dividend arising on the sale of The Baltic Exchange shares. The column 'acquisition related costs' includes the amortisation of intangible assets, the expensing of the cash and share-based elements of consideration linked to ongoing employment obligations on acquisitions, acquisition related professional fees and interest on the loan note obligations. These notes form an integral part of the financial statements on pages 82 to 85.
The financial statements of Clarkson PLC have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, IFRS IC interpretations and the Companies Act 2006 applicable to companies reporting under IFRSs.
The consolidated financial statements have been prepared on the going concern basis, under the historical cost convention, as modified by financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.
The Group has considerable financial resources available and a strong balance sheet, as explained in the financial review on pages 36 and 37. 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. The Directors have a reasonable expectation that the Group has sufficient resources to continue in operation for the next 12 months. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.
The Group's consolidated financial statements incorporate the results and net assets of Clarkson PLC and all its subsidiary undertakings made up to 31 December each year.
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
See note U to the Parent Company financial statements for full details on subsidiaries.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.
All inter-group transactions, balances, income and expenses are eliminated on consolidation, however for the purposes of segmental reporting, internal arm's-length recharges are included within the appropriate segments.
The annual improvements (2014) to existing standards which are mandatory for the Group for the first time for the financial year beginning on or after 1 January 2016 have had no material impact on the Group.
There were no other new IFRSs or interpretations issued by the IFRS Interpretation Committee (IFRS IC) that had to be implemented during the year that significantly affect these financial statements.
As at the date of authorisation of these financial statements, the following standards and interpretations were in issue but not yet effective (and in some cases had not yet been adopted by the EU). The Group has not applied these standards and interpretations in the preparation of these financial statements.
The impact on the Group's financial statements of the future adoption of these and other new standards and interpretations is still under review. The Group does not expect, with the exception of IFRS 15 'Revenue from contracts with customers' and IFRS 16 'Leases', that any of these changes will have a material effect on the results or net assets of the Group.
There were no other new IFRSs or IFRS IC interpretations that are not yet effective that would be expected to have a material impact on the Group.
The preparation of the Group's 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.
Trade receivables are amounts due from customers in the ordinary course of business. Trade receivables are classified as current assets if collection is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current assets.
The provision for impairment of receivables represents management's best estimate at the balance sheet date. A number of judgements are made in the calculation of the provision, primarily the age of the invoice, the existence of any disputes, recent historical payment patterns and the debtor's financial position.
The Group's entitlement to commission revenue in the broking and financial segments is usually dependent upon the fulfilment of certain obligations, for example stage completion of a vessel build in broking or formal approval of a debt or equity transaction in finance, between two or more third parties over which the Group has no control. Consideration is therefore required as to whether the parties' obligations have been fulfilled and the commission revenue can be recognised. See note 2.21 for further details.
Determining whether goodwill is impaired requires an estimation of the value-in-use of the cash-generating units to which these assets have been allocated. The value-in-use calculation requires estimation of future cash flows expected to arise for the cash-generating unit, the selection of suitable discount rates and the estimation of future growth rates.
The Group excludes adjusting items (exceptional items and acquisition related costs) from its 'underlying' earnings measure. The Directors believe that alternative performance measures can provide the users of the financial statements with a better understanding of the Group's underlying financial performance, if properly used. If improperly used and presented these measures could mislead the users of the financial statements by obscuring the real profitability and financial position of the Group.
Management judgement is required as to what items qualify for this classification. There can also be judgement as to the point at which costs should be recognised and the amount to record.
Certain statements in this annual 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.
Land held for use in the production or supply of goods or services, or for administrative purposes, is stated on the balance sheet at its historic cost.
Freehold and long leasehold properties, leasehold improvements, office furniture and equipment and motor vehicles are recorded at cost less accumulated depreciation and any recognised impairment loss. Cost includes the original purchase price of the asset.
Land is not depreciated. Depreciation on other assets is charged on a straight-line basis over the estimated useful life (after allowing for estimated residual value based on current prices) of the asset, and is charged from the time an asset becomes available for its intended use. Estimated useful lives are as follows:
| Freehold and long leasehold properties | 10-60 years |
|---|---|
| Leasehold improvements | Over the period of the lease |
| Office furniture and equipment | 2–10 years |
| Motor vehicles | 4-5 years |
Estimates of useful lives and residual scrap values are assessed annually.
At each balance sheet date, the Group reviews the carrying amounts of its property, plant and equipment to determine whether there is any indication that those assets have suffered an impairment loss.
Land and buildings held for long-term investment and to earn rental income are classified as investment properties. Investment properties are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is charged on a straight-line basis over the estimated useful life of the asset, and is charged from the time an asset becomes available for its intended use. Estimated useful lives are as follows:
Investment properties 60 years
In addition to historical cost accounting, the Directors have also presented, through additional narrative, the fair value of the investment properties in note 11.
Financial statements
Governance
Business combinations are accounted for using the acquisition method.
Goodwill is initially measured at cost being the excess of the cost of the business combination over the Group's share in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities.
All transaction costs are expensed in the income statement as incurred.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash-generating units that are expected to benefit from the synergies of the combination.
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is the fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.
Intangible assets with finite lives are amortised over the useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in income statement within administrative expenses.
Amortisation is calculated using estimates of revenues generated by each asset over their estimated useful lives of between two and five years.
Amortisation is calculated based on expected future cash flows estimated to be three years.
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value-in-use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, or other available fair value indicators.
Impairment losses of continuing operations are recognised in profit or loss in those expense categories consistent with the function of the impaired asset.
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group makes an estimate of recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.
The following criteria are also applied in assessing impairment of specific assets:
The Group assesses whether there are any indicators that goodwill is impaired at each reporting date. Goodwill is tested for impairment annually.
Impairment is determined for goodwill by assessing the recoverable amount of the cash-generating units to which the goodwill relates. Where the recoverable amount of the cash-generating units is less than their carrying amount an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods. The Group performs its annual impairment test of goodwill as at 31 December.
Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.
The Group determines the classification of its financial assets on initial recognition, taking into account the purpose for which the financial assets were acquired. Where allowed and appropriate, the Group re-evaluates this designation at each financial year-end.
Financial assets at fair value through profit or loss includes financial assets held for trading and financial assets designated upon initial recognition as at fair value through profit or loss.
Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Gains or losses on investments held for trading are recognised in profit or loss.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement loans and receivables are carried at amortised cost using the effective interest method less any allowance for impairment. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.
Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified in any of the two preceding categories or held-to-maturity investments. They are included in non-current assets unless the investment matures within 12 months of the end of the reporting period. Available-for-sale financial assets are measured at cost, since they are investments in unlisted companies where the fair value cannot be determined.
The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the balance sheet date. For investments where there is no active market, fair value is determined using valuation techniques, unless these are not reliable in which case the investments are shown at cost. Such valuation techniques include using recent arm's-length market transactions; reference to the current market value of another instrument which is substantially the same; discounted cash flow analysis; or other valuation models.
Loans and receivables are measured at amortised cost. This is computed using the effective interest method less any allowance for impairment. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of the effective interest rate.
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less provision for impairment.
The Group assesses at each balance sheet date whether a financial asset or group of financial assets is impaired.
If there is objective evidence that an impairment loss on assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset's original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through use of an allowance account. The amount of the loss is recognised in profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Any subsequent reversal of an impairment loss is recognised in profit or loss.
In relation to trade receivables, a provision for impairment is made when there is objective evidence that the Group will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. Impaired debts are derecognised when they are assessed as uncollectable.
If an available-for-sale asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss. Reversals in respect of equity instruments classified as available-for-sale are not recognised in profit or loss. Reversals of impairment losses on debt instruments are reversed through profit or loss, if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognised in profit or loss.
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method. It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of between one day and three months.
The Group uses various derivative financial instruments to reduce exposure to foreign exchange movements. These can include forward foreign exchange contracts and currency options. All derivative financial instruments are initially recognised on the balance sheet at their fair value adjusted for transaction costs.
The fair values of financial instrument derivatives are determined by reference to quoted prices in an active market. Where no such active market exists, the fair value is determined using appropriate valuation techniques from observable data, including discounted cash flow analysis and the Black-Scholes option pricing model.
The method of recognising the movements in the fair value of the derivative depends on whether the instrument has been designated as a hedging instrument and, if so, the cash flow being hedged. To qualify for hedge accounting, the terms of the hedge must be clearly documented at inception and there must be an expectation that the derivative will be highly effective in offsetting changes in the cash flow of the hedged risk. Hedge effectiveness is tested throughout the life of the hedge and if at any point it is concluded that the relationship can no longer be expected to remain highly effective in achieving its objective, the hedge relationship is terminated.
Gains and losses on financial instrument derivatives which qualify for hedge accounting are recognised according to the nature of the hedge relationship and the item being hedged.
Cash flow hedges: derivative financial instruments are classified as cash flow hedges when they hedge the Group's exposure to changes in cash flows attributable to a particular asset or liability or a highly probable forecast transaction. Gains or losses on designated cash flow hedges are recognised directly in equity, to the extent that they are determined to be effective. Any remaining portion of the gain or loss is recognised immediately in the income statement. On recognition of the hedged asset or liability, any gains or losses that had previously been recognised directly in equity are included in the initial measurement of the fair value of the asset or liability. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss in equity remains there and is recognised in the income statement when the forecast transaction is ultimately recognised. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.
Where financial instrument derivatives do not qualify for hedge accounting, changes in the fair market value are recognised immediately in the income statement.
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
All loans and borrowings are initially recognised at fair value less directly attributable transaction costs and have not been designated as 'at fair value through profit and loss'.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in profit or loss net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
The Group operates various post-employment schemes, including both defined contribution and defined benefit pension plans.
For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
The asset/liability recognised in the balance sheet in respect of defined benefit pension plans is the difference between the present value of the defined benefit obligation at the end of the reporting period and the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that have terms to maturity approximating to the terms of the related pension obligation.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.
Past-service costs are recognised immediately in income.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the income statement.
Employees (including senior executives) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments (equity-settled transactions).
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are granted. The fair value of the element of these awards which have a Total Shareholder Return performance condition was valued using a stochastic model. All other elements of awards were valued using a Black-Scholes model.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting date). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance and/or service conditions are satisfied.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share (further details are given in note 8).
The social security contributions payable in connection with the grant of the share options is considered an integral part of the grant itself, and the charge will be treated as a cash-settled transaction.
Ordinary shares are recognised in equity as share capital at their nominal value. The difference between consideration received and the nominal value is recognised in the share premium account, except when applying the merger relief provision of the Companies Act 2006.
Incremental costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax, from the proceeds.
Company shares held in trust in connection with the Group's employee share schemes are deducted from consolidated shareholders' equity. Purchases, sales and transfers of the Company's shares are disclosed as changes in consolidated shareholders' equity. The assets and liabilities of the trusts are consolidated in full into the Group's consolidated financial statements.
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured.
Shipbroking and offshore revenue consists of commission receivable and is recognised by reference to the stage of completion, which is measured by reference to the underlying commercial contract. Futures broking commissions are recognised when the services have been performed.
Revenue consists of commissions and fees receivable from financial services activities. Fees for investment banking activities, syndication and other financial solutions are recognised on a success basis when certain criteria in applicable agreements have been met. Commission from trading activities is recognised at trade date. Fees for advisory and accounting services are recognised as earned.
Port service income is recognised on vessel load or discharge completion date and store rent on a time basis. Agency income is recognised when vessels arrive in port. Revenue from the sale of goods is recognised when the goods are physically despatched to the customer. Rental income arising from operating leases on properties is accounted for on a straightline basis over the lease term.
Revenue comprises fees, which are recognised as and when services are performed, and sales of shipping publications and other information, which is recognised when products are delivered. Subscriptions to periodicals and other information are recognised over the subscription period.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The Group considers the executive members of the Company's Board to be the chief operating decision-maker.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing on the date of the transaction. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Gains and losses arising on retranslation are included in the income statement.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the date of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates as at the date when the fair value was determined.
On consolidation, the assets and liabilities of the Group's overseas operations are translated into pounds sterling at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period as an approximation of rates prevailing at the date of the transaction unless exchange rates fluctuate significantly. Exchange differences arising, if any, are recognised in the consolidated statement of comprehensive income and transferred to the Group's currency translation reserve. Such translation differences are recognised as income or expense in the period in which an operation is disposed of. Cumulative translation differences have been set to zero at the date of transition to IFRSs.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.
Current income tax is recognised in the income statement, except on items relating to equity, in which case the related current income tax is recognised directly in equity.
Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences, except:
Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax credits and unused tax losses can be utilised, except:
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
Deferred income tax relating to items recognised directly in equity is recognised in equity and not in profit or loss.
Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority, where there is an intention to settle the balances on a net basis.
Where the Group is a lessee, operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. Lease incentive payments are amortised over the lease term.
Exceptional items are significant items of a non-recurring nature and considered material in both size and nature. These are disclosed separately to enable a full understanding of the Group's financial performance.
| 2016 £m |
2015 £m |
|
|---|---|---|
| Revenue | ||
| Rendering of services | 293.9 | 288.0 |
| Rental income | 0.7 | 2.2 |
| Sale of goods | 11.5 | 11.6 |
| 306.1 | 301.8 | |
| 2016 £m |
2015 £m |
|
| Finance revenue | ||
| Bank interest income | 0.6 | 0.8 |
| Income from available-for-sale financial assets | 1.6 | 1.7 |
| 2.2 | 2.5 | |
| 2016 | 2015 | |
| £m | £m | |
| Finance costs | ||
| Loan note interest | 0.9 | 1.1 |
| Loan interest | – | 0.4 |
| Overdraft interest | – | 0.2 |
| Other finance costs | 0.1 | 0.5 |
| 1.0 | 2.2 | |
| 2016 | 2015 | |
| £m | £m | |
| Other finance costs – pensions | ||
| Net benefit charge | 0.1 0.1 |
0.4 0.4 |
| Operating profit | ||
| Operating profit from continuing operations is stated after charging/(crediting): | ||
| 2016 £m |
2015 £m |
|
| Depreciation | 5.0 | 4.2 |
| Amortisation of intangible assets | 6.6 | 9.2 |
| Operating lease expense – land and buildings | 11.3 | 13.9 |
| Operating sublease income – land and buildings | (0.5) | (2.2) |
| Net foreign exchange gains | (3.6) | (1.9) |
| 2016 £000 |
2015 £000 |
|
|---|---|---|
| Auditors' remuneration | ||
| Fees payable to the Company's Auditors for the audit of the Company's and Group financial statements | 233 | 232 |
| Fees payable to the Company's Auditors and their associates for other services: | ||
| The auditing of financial statements of subsidiaries of the Company | 301 | 322 |
| Audit-related assurance services | 64 | 50 |
| Taxation compliance services | 40 | 18 |
| Taxation advisory services | 18 | 102 |
| 656 | 724 | |
| 2016 | 2015 | |
| £m | £m | |
| Employee compensation and benefits expense | ||
| Wages and salaries | 170.7 | 165.8 |
| Social security costs | 15.7 | 15.5 |
| Expense of share-based payments | 1.3 | 1.6 |
| Pension costs – defined contribution plans | 3.6 | 3.2 |
| 191.3 | 186.1 |
The numbers above include remuneration and pension entitlements for each Director. Details are included in the Directors' remuneration report in the Directors' emoluments and compensation table on page 65.
The average monthly number of persons employed by the Group during the year including Executive Directors is analysed below:
| 2016 | 2015 | |
|---|---|---|
| Broking | 1,021 | 1,012 |
| Financial | 121 | 121 |
| Support | 154 | 163 |
| Research | 96 | 89 |
| 1,392 | 1,385 |
The Group considers the executive members of the Company's Board to be the chief operating decision-maker. The Board receives segmental operating and financial information on a regular basis. The segments are determined by the class of business the Company provides and are broking, financial, support and research. This is consistent with the way the Group manages itself and with the format of the Group's internal financial reporting.
Clarksons' broking division represents services provided to shipowners and charterers in the transportation by sea of a wide range of cargoes. It also represents services provided to buyers and sellers/yards relating to sale and purchase transactions. Also included is a futures broking operation which arranges principal-to-principal cash-settled contracts for differences based upon standardised freight contracts.
The financial division represents full-service investment banking, specialising in the maritime, oil services and natural resources sectors. Clarksons also provides structured asset finance services and structured projects in the shipping, offshore and real estate sectors.
Support includes port and agency services representing ship agency services provided throughout the UK and property services regarding the provision of accommodation.
Research services encompass the provision of shipping-related information and publications.
All areas of the business work closely together to provide the best possible service to our clients. Occasionally revenue is shared between different segments to reflect relative contributions to a particular transaction. Internal arm's-length recharges are included within the appropriate segments.
| Revenue | ||||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| £m | £m | £m | £m | |
| Broking | 233.6 | 239.5 | 40.2 | 49.1 |
| Financial | 41.0 | 28.7 | 6.8 | 1.2 |
| Support | 17.8 | 26.2 | 2.1 | 3.3 |
| Research | 13.7 | 11.1 | 4.9 | 3.4 |
| 306.1 | 305.5 | |||
| Less: property services revenue arising within the Group, | ||||
| included under support | – | (3.7) | ||
| Segment revenue/results | 306.1 | 301.8 | 54.0 | 57.0 |
| Head office costs | (9.8) | (7.5) | ||
| Operating profit before exceptional items and acquisition related costs | 44.2 | 49.5 | ||
| Exceptional items | 9.7 | (2.5) | ||
| Acquisition related costs | (7.7) | (15.1) | ||
| Operating profit after exceptional items and acquisition related costs | 46.2 | 31.9 | ||
| Finance revenue | 2.2 | 2.5 | ||
| Finance costs | (1.0) | (2.2) | ||
| Other finance costs – pensions | (0.1) | (0.4) | ||
| Profit before taxation | 47.3 | 31.8 | ||
| Taxation | (9.4) | (9.5) | ||
| Profit for the year | 37.9 | 22.3 |
Business segments
| Assets | Liabilities | ||||
|---|---|---|---|---|---|
| 2016 £m |
2015 £m |
2016 £m |
2015 £m |
||
| Broking | 355.6 | 348.1 | 98.8 | 102.2 | |
| Financial | 166.3 | 130.8 | 20.9 | 22.2 | |
| Support | 8.7 | 38.8 | 5.3 | 6.3 | |
| Research | 17.4 | 9.6 | 4.5 | 4.6 | |
| Segment assets/liabilities | 548.0 | 527.3 | 129.5 | 135.3 | |
| Unallocated assets/liabilities | 53.4 | 21.4 | 65.2 | 72.5 | |
| 601.4 | 548.7 | 194.7 | 207.8 |
Unallocated assets predominantly relate to head office cash balances, the pension scheme surplus and tax assets. Unallocated liabilities include the pension scheme deficit, tax liabilities and loan notes.
| Non-current asset additions | Depreciation | Amortisation and impairment | ||||||
|---|---|---|---|---|---|---|---|---|
| Property, plant and equipment 2016 |
Intangible assets 2016 |
Property, plant and equipment 2015 |
Intangible assets 2015 |
2016 | 2015 | 2016 | 2015 | |
| £m | £m | £m | £m | £m | £m | £m | £m | |
| Broking | 1.6 | – | 4.8 | 148.6 | 4.3 | 1.6 | 6.4 | 8.8 |
| Financial | 0.9 | – | 0.2 | 105.9 | 0.2 | 0.3 | 0.2 | 0.4 |
| Support | 0.6 | – | 19.4 | – | 0.5 | 2.3 | – | – |
| 3.1 | – | 24.4 | 254.5 | 5.0 | 4.2 | 6.6 | 9.2 |
Geographical segments – by origin of invoice
| Revenue | ||
|---|---|---|
| 2016 £m |
2015 £m |
|
| Europe, Middle East and Africa* | 240.1 | 231.1 |
| Americas | 26.0 | 29.5 |
| Asia Pacific | 40.0 | 41.2 |
| 306.1 | 301.8 |
| Non-current assets** | ||
|---|---|---|
| 2016 £m |
2015 £m |
|
| Europe, Middle East and Africa* | 312.9 | 277.0 |
| Americas | 3.3 | 2.8 |
| Asia Pacific | 21.4 | 18.4 |
| 337.6 | 298.2 |
* Includes revenue for the UK of £148.4m (2015: £154.0m) and non-current assets for the UK of £87.6m (2015: £83.2m).
** Non-current assets exclude deferred tax assets.
Exceptional items include a gain of £9.7m on the sale of shares in The Baltic Exchange to SGX. A special final dividend from The Baltic Exchange of £1.4m, which was closely linked to the sale, was also treated as an exceptional item in 2016, although a £1.4m special dividend received in 2015 was included in underlying income in keeping with the treatment in previous years.
During 2014, Clarkson PLC signed a 15 year lease on a new flagship head office at Commodity Quay, St. Katharine Docks, London, commencing on 29 September 2014. The lease for the previous head office, St. Magnus House, London expired in December 2015. The additional rent and associated costs in the year were £1.9m for Commodity Quay up to the relocation date, and £0.4m for St. Magnus House after relocation. An onerous lease provision of £0.3m for a property in Singapore was also treated as an exceptional item. Costs associated with the reorganisation of the enlarged Group post-acquisition totalling £1.2m were treated as exceptional, as they are non-recurring. The release of the unutilised portion of the dilapidation provision for St. Magnus House of £1.3m was also treated as exceptional other income.
Included in acquisition related costs are cash and share-based payment charges of £0.4m (2015: £2.1m) relating to previous acquisitions. These are contingent on employees remaining in service and are therefore spread over the service period. Also included is £0.7m (2015: £0.7m) relating to the acquisition of the remaining non-controlling interest in Clarksons Platou Tankers AS. The charge consists of cash and share-based payment charges which are linked to future service of the employees and are therefore spread over a four year period.
Also included is £nil (2015: £3.1m) of legal and professional fees relating to the Platou and other acquisitions and £6.6m (2015: £9.2m) relating to amortisation of intangibles acquired as part of the Platou and other prior acquisitions. Interest on the loan notes issued as part of the Platou acquisition totalled £0.9m (2015: £1.1m).
Tax charged/(credited) in the consolidated income statement is as follows:
| 2016 £m |
2015 £m |
|
|---|---|---|
| Current tax | ||
| Tax on profits for the year | 9.5 | 9.1 |
| Adjustments in respect of prior years | (1.0) | 0.5 |
| 8.5 | 9.6 | |
| Deferred tax | ||
| Origination and reversal of temporary differences | 0.7 | 0.1 |
| Impact of change in tax rates | 0.2 | (0.2) |
| 0.9 | (0.1) | |
| Total tax charge in the income statement | 9.4 | 9.5 |
| Tax relating to items charged/(credited) to equity is as follows: | ||
| 2016 £m |
2015 £m |
|
| Current tax | ||
| Employee benefits – on pension benefits |
(0.4) | (0.4) |
| – other employee benefits | (1.5) | (0.7) |
| Other items in equity | 0.1 | 0.1 |
| (1.8) | (1.0) | |
| Deferred tax | ||
| Employee benefits – on pension benefits |
1.0 | 2.3 |
| – other employee benefits | 1.2 | – |
| Foreign currency hedge | (0.9) | (0.3) |
| 1.3 | 2.0 | |
| Total tax (credit)/charge in the statement of changes in equity | (0.5) | 1.0 |
The tax charge in the income statement for the year is lower (2015: higher) than the average standard rate of corporation tax in the UK of 20.00% (2015: 20.25%). The differences are reconciled below:
| 2016 £m |
2015 £m |
|
|---|---|---|
| Profit before taxation | 47.3 | 31.8 |
| Profit at UK average standard rate of corporation tax of 20.00% (2015: 20.25%) | 9.5 | 6.4 |
| Effects of: | ||
| Expenses not deductible for tax purposes | 1.6 | 2.8 |
| Non-taxable income | (2.3) | (0.3) |
| Lower tax rates on overseas earnings | (0.4) | (0.1) |
| Tax losses not recognised | 1.3 | – |
| Adjustments relating to prior year | (0.7) | 0.5 |
| Adjustments relating to changes in tax rates | 0.2 | 0.4 |
| Other adjustments | 0.2 | (0.2) |
| Total tax charge in the income statement | 9.4 | 9.5 |
Deferred tax charged/(credited) in the consolidated income statement is as follows:
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| Employee benefits – on pension benefits |
0.1 | 0.9 |
| – other employee benefits | 1.4 | 0.1 |
| Tax losses recognised | (0.6) | 0.5 |
| In relation to earnings of overseas subsidiaries | 0.2 | – |
| Intangible assets recognised on acquisition | (1.5) | (2.4) |
| Other temporary differences | 1.3 | 0.8 |
| Deferred tax charge/(credit) in the income statement | 0.9 | (0.1) |
Deferred tax included in the balance sheet is as follows:
| 2016 £m |
2015 £m |
|
|---|---|---|
| Deferred tax asset | ||
| Employee benefits – on pension benefit liability |
0.8 | 0.7 |
| – other employee benefits | 8.9 | 10.6 |
| Tax losses | 1.0 | – |
| Foreign currency contracts | 1.2 | 0.3 |
| Other temporary differences | 0.9 | 0.9 |
| 12.8 | 12.5 | |
| Deferred tax liability | ||
| Employee benefits – on pension benefit asset |
(1.2) | – |
| In relation to earnings of overseas subsidiaries | (1.3) | (1.1) |
| Intangible assets recognised on acquisition | (1.4) | (2.6) |
| Other temporary differences | (1.8) | (0.4) |
| (5.7) | (4.1) |
Included in the above are deferred tax assets of £4.4m (2015: £4.3m) and deferred tax liabilities of £0.8m (2015: £1.3m) which are due within one year. Deferred tax assets are recognised to the extent that the realisation of the related tax benefit through future taxable profits is probable.
All deferred tax movements arise from the origination and reversal of temporary differences. The Group did not recognise a deferred tax asset of £4.4m (2015: £1.4m) in respect of unused tax losses, which have no expiry date.
Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the Parent Company by the weighted average number of ordinary shares in issue during the year.
Diluted earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the Parent Company by the weighted average number of ordinary shares in issue during the year, 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:
| 2016 £m |
2015 £m |
|
|---|---|---|
| Profit for the year attributable to ordinary equity holders of the Parent Company | 35.7 | 19.7 |
| 2016 | 2015 | |
| Weighted average number of ordinary shares (excluding share purchase trusts' shares) for basic earnings per share | 29,862,508 | 28,952,917 |
| Dilutive effect of share options | 269,262 | 330,362 |
| Dilutive effect of acquisition related shares | 795 | 870 |
| Weighted average number of ordinary shares (excluding share purchase trusts' shares) adjusted for the effect of dilution |
30,132,565 | 29,284,149 |
The share awards relating to Directors, where the performance conditions have not yet been met at the balance sheet date, are not included in the above numbers. The weighted average number of these shares was 136,634 (2015: 99,533).
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| Declared and paid during the year: | ||
| Final dividend for 2015 of 40p per share (2014: 39p per share) | 11.9 | 11.7 |
| Interim dividend for 2016 of 22p per share (2015: 22p per share) | 6.6 | 6.5 |
| Dividend paid | 18.5 | 18.2 |
| Proposed for approval at the AGM (not recognised as a liability at 31 December): |
Final dividend for 2016 proposed of 43p per share (2015: 40p per share) 12.9 11.9
31 December 2016
| Freehold and | |||||
|---|---|---|---|---|---|
| long leasehold properties |
Leasehold improvements |
Office furniture and equipment |
Motor vehicles |
Total | |
| £m | £m | £m | £m | £m | |
| Original cost | |||||
| At 1 January 2016 | 7.6 | 17.1 | 15.1 | 1.1 | 40.9 |
| Additions | – | 0.7 | 2.1 | 0.3 | 3.1 |
| Disposals | – | (0.2) | (0.5) | (0.3) | (1.0) |
| Reclassified to investment property | (0.5) | – | – | – | (0.5) |
| Foreign exchange differences | 0.6 | 0.5 | 1.3 | – | 2.4 |
| At 31 December 2016 | 7.7 | 18.1 | 18.0 | 1.1 | 44.9 |
| Accumulated depreciation | |||||
| At 1 January 2016 | 1.1 | 1.9 | 6.6 | 0.5 | 10.1 |
| Charged during the year | 0.2 | 1.4 | 3.0 | 0.3 | 4.9 |
| Disposals | – | (0.1) | (0.4) | (0.2) | (0.7) |
| Reclassified to investment property | (0.4) | – | – | – | (0.4) |
| Foreign exchange differences | 0.1 | 0.2 | 0.7 | – | 1.0 |
| At 31 December 2016 | 1.0 | 3.4 | 9.9 | 0.6 | 14.9 |
| Net book value at 31 December 2016 | 6.7 | 14.7 | 8.1 | 0.5 | 30.0 |
During the year a property in Dubai was reclassified as an investment property.
31 December 2015
| Freehold and long leasehold properties |
Leasehold improvements |
Office furniture and equipment |
Motor vehicles |
Total | |
|---|---|---|---|---|---|
| £m | £m | £m | £m | £m | |
| Original cost | |||||
| At 1 January 2015 | 4.8 | 1.9 | 19.8 | 1.1 | 27.6 |
| Additions | 2.6 | 14.9 | 6.7 | 0.2 | 24.4 |
| Arising on acquisitions | 0.3 | 0.9 | 2.1 | 0.1 | 3.4 |
| Disposals | (0.1) | (0.7) | (13.4) | (0.3) | (14.5) |
| Foreign exchange differences | – | 0.1 | (0.1) | – | – |
| At 31 December 2015 | 7.6 | 17.1 | 15.1 | 1.1 | 40.9 |
| Accumulated depreciation | |||||
| At 1 January 2015 | 1.2 | 1.3 | 16.9 | 0.5 | 19.9 |
| Charged during the year | – | 1.1 | 2.8 | 0.3 | 4.2 |
| Disposals | – | (0.7) | (13.4) | (0.3) | (14.4) |
| Foreign exchange differences | (0.1) | 0.2 | 0.3 | – | 0.4 |
| At 31 December 2015 | 1.1 | 1.9 | 6.6 | 0.5 | 10.1 |
| Net book value at 31 December 2015 | 6.5 | 15.2 | 8.5 | 0.6 | 30.8 |
Included within additions are amounts relating to the office moves in London, Oslo and Singapore.
| 2016 | 2015 | |
|---|---|---|
| Cost | £m | £m |
| At 1 January | 1.5 | 0.6 |
| Reclassified from property, plant and equipment | 0.5 | 0.9 |
| At 31 December | 2.0 | 1.5 |
| Accumulated depreciation | ||
| At 1 January | 0.3 | 0.3 |
| Charged during the year | 0.1 | – |
| Reclassified from property, plant and equipment | 0.4 | – |
| At 31 December | 0.8 | 0.3 |
| Net book value at 31 December | 1.2 | 1.2 |
The fair value of the investment properties at 31 December 2016 was £1.9m (2015: £1.4m). This was based on valuations from independent valuers who have the appropriate professional qualifications and recent experience of valuing properties in the location and of the type being valued.
| Other intangible |
|||
|---|---|---|---|
| Goodwill £m |
assets £m |
Total £m |
|
| Cost | |||
| At 1 January 2016 | 264.0 | 28.3 | 292.3 |
| Foreign exchange differences | 42.6 | 3.2 | 45.8 |
| At 31 December 2016 | 306.6 | 31.5 | 338.1 |
| Accumulated amortisation and impairment | |||
| At 1 January 2016 | 12.3 | 16.8 | 29.1 |
| Charged during the year | – | 6.6 | 6.6 |
| Foreign exchange differences | 0.1 | 1.8 | 1.9 |
| At 31 December 2016 | 12.4 | 25.2 | 37.6 |
| Net book value at 31 December 2016 | 294.2 | 6.3 | 300.5 |
None of the intangible assets are internally generated. The intangible assets have a remaining amortisation period of between one and three years.
Goodwill and other intangible assets are held in the currency of the businesses acquired and are subject to foreign exchange retranslations to the closing rate at each year-end.
31 December 2015
| Other intangible | |||
|---|---|---|---|
| Goodwill £m |
assets £m |
Total £m |
|
| Cost | |||
| At 1 January 2015 | 52.7 | 7.8 | 60.5 |
| Additions | 232.6 | 21.9 | 254.5 |
| Foreign exchange differences | (21.3) | (1.4) | (22.7) |
| At 31 December 2015 | 264.0 | 28.3 | 292.3 |
| Accumulated amortisation and impairment | |||
| At 1 January 2015 | 12.3 | 7.8 | 20.1 |
| Charged during the year | – | 9.2 | 9.2 |
| Impairment | – | (0.2) | (0.2) |
| At 31 December 2015 | 12.3 | 16.8 | 29.1 |
| Net book value at 31 December 2015 | 251.7 | 11.5 | 263.2 |
None of the intangible assets are internally generated.
Included within other intangible assets are £11.5m relating to customer relationships, forward order book and trade name which were identified as part of the Platou acquisition.
There were no material business combinations in 2016.
2015
On 2 February 2015, Clarkson PLC acquired 100% of the share capital of RS Platou ASA (Platou), which subsequently changed its name to Clarksons Platou AS.
The fair value of the consideration was £249.9m, of which £23.5m was paid in cash, £179.9m being the fair value of ordinary shares issued (based on the Clarkson PLC share price on the acquisition date) and £46.5m comprised loan notes.
Further information on the Platou acquisition, including details of the consideration paid, the fair value of the assets acquired and the liabilities assumed, can be found on pages 88 and 89 of the 2015 annual report.
Goodwill is allocated to the Group's cash-generating units (CGUs) identified according to operating segment.
The carrying amount of goodwill acquired through business combinations is as follows:
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| Dry cargo chartering | 12.0 | 12.0 |
| Container chartering | 1.8 | 1.8 |
| Tankers chartering | 11.8 | 9.6 |
| Specialised chartering | 12.2 | 12.2 |
| Gas chartering | 2.7 | 2.7 |
| Sale and purchase broking | 50.7 | 42.0 |
| Offshore broking | 81.8 | 71.4 |
| Securities | 115.0 | 93.8 |
| Port and agency services | 2.9 | 2.9 |
| Research services | 3.3 | 3.3 |
| 294.2 | 251.7 |
The movement in the aggregate carrying value is analysed in more detail in note 12.
Goodwill is allocated to CGUs which are tested for impairment at least annually. The goodwill arising in each CGU is similar in nature and thus the testing for impairment uses the same approach.
The recoverable amounts of the CGUs are assessed using a value-in-use model. Value-in-use is calculated as the net present value of the projected riskadjusted cash flows of the CGU to which the goodwill is allocated.
The key assumptions used for value-in-use calculations are as follows:
The results of the Directors' review of goodwill, including sensitivity analyses for reasonable changes in assumptions, still indicate remaining headroom. Accordingly, no reasonably possible change is foreseen which gives rise to an impairment of goodwill.
In light of global macro-economic and geo-political uncertainty, the Board keeps the carrying value of goodwill under constant review. 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.
| 2016 £m |
2015 £m |
|
|---|---|---|
| Non-current | ||
| Other receivables | 1.8 | 1.1 |
| Current | ||
| Trade receivables | 42.7 | 49.8 |
| Other receivables | 6.2 | 6.1 |
| Prepayments and accrued income | 7.8 | 5.4 |
| 56.7 | 61.3 |
Trade receivables are non-interest bearing and are generally on terms payable within 90 days.
As at 31 December 2016, Group trade receivables at nominal value of £15.5m (2015: £12.3m) were impaired and fully provided for. The amount of the provision equates to the total amount of impaired debt. The provision is based on experience and ongoing market information about the creditworthiness of counterparties.
Movements in the provision for impairment of trade receivables were as follows:
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| At 1 January | 12.3 | 9.9 |
| Arising on acquisition | – | 2.1 |
| Provision release | (5.5) | (4.3) |
| Written off | (2.9) | (2.4) |
| New provision | 9.2 | 6.4 |
| Foreign exchange differences | 2.4 | 0.6 |
| At 31 December | 15.5 | 12.3 |
The other classes within trade and other receivables do not include any impaired items.
As at 31 December, the ageing analysis of trade receivables is as follows:
| 2016 £m |
2015 £m |
|
|---|---|---|
| Neither past due nor impaired | 38.1 | 43.9 |
| Past due not impaired > 90 days | 4.6 | 5.9 |
| 42.7 | 49.8 | |
| The carrying amounts of the Group's trade receivables are denominated in the following currencies: | ||
| 2016 £m |
2015 £m |
|
| US Dollar | 28.2 | 32.4 |
| Sterling | 6.3 | 10.0 |
| Norwegian Krone | 7.5 | 6.6 |
| Other currencies | 0.7 | 0.8 |
| 42.7 | 49.8 |
| 2016 £m |
2015 £m |
|
|---|---|---|
| Non-current | ||
| Available-for-sale financial assets | 4.1 | 1.9 |
| Current | ||
| Funds on deposit | 29.4 | 5.4 |
| Available-for-sale financial assets | 0.3 | 0.2 |
| Held for trading investments | 0.1 | 0.1 |
| 29.8 | 5.7 |
The movement in non-current available-for-sale financial assets in the year comprises the addition of a minority investment in CargoMetrics Technologies LLC of £3.8m and the disposal of The Baltic Exchange shares of £1.6m.
The Group held £19.4m (2015: £5.4m) in a deposit with a 95 day notice period. The Group also held £10.0m (2015: £nil) in a deposit with a maturity of six months at the year-end. These deposits are held with an A-rated financial institution.
Available-for-sale financial assets consist of investments in unlisted ordinary shares and are shown at cost. There are no reasonable pricing alternatives to be able to give a range of fair value to these assets.
| 2016 £m |
2015 £m |
|
|---|---|---|
| Finished goods | 0.7 | 0.9 |
| The cost of inventories recognised as an expense and included in cost of sales amounted to £5.0m (2015: £7.0m). |
| 2016 £m |
2015 £m |
|
|---|---|---|
| Cash at bank and in hand | 147.7 | 161.3 |
| Short-term deposits | 6.3 | 7.1 |
| 154.0 | 168.4 |
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. The fair value of cash and cash equivalents is £154.0m (2015: £168.4m).
Included in cash at bank and in hand is £1.3m (2015: £1.8m) of restricted funds relating to employee tax.
| 2016 £m |
2015 £m |
|
|---|---|---|
| Current | ||
| Loan notes | 23.6 | 23.1 |
| Non-current | ||
| Loan notes | – | 23.0 |
Interest-bearing loans and borrowings comprise the vendor loan notes issued as part of the consideration for the Platou acquisition. Interest is charged at 12 month sterling LIBOR plus 1.25%. Half the loan notes were repaid on 30 June 2016, the balance is repayable on 30 June 2017.
Strategic report
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| Current | ||
| Trade payables | 24.3 | 24.8 |
| Other payables | 6.9 | 8.4 |
| Other tax and social security | 2.7 | 2.8 |
| Deferred consideration | 0.9 | 0.3 |
| Foreign currency contracts | 4.2 | 1.2 |
| Accruals and deferred income | 103.3 | 101.8 |
| 142.3 | 139.3 | |
| Non-current | ||
| Other payables | 9.3 | 7.4 |
| Deferred consideration | – | 0.5 |
| Foreign currency contracts | 2.0 | 0.2 |
| 11.3 | 8.1 |
Terms and conditions of the financial liabilities:
– trade payables are non-interest bearing and are normally settled on demand; and
– other payables are non-interest bearing and are normally settled on demand.
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| Current | ||
| At 1 January | 0.2 | 3.0 |
| Arising during the year | – | 0.2 |
| Utilised during the year | (0.2) | (1.7) |
| Released during the year | – | (1.3) |
| At 31 December | – | 0.2 |
| Non-current | ||
| At 1 January | – | – |
| Arising during the year | 0.1 | – |
| At 31 December | 0.1 | – |
Provisions have been recognised for the dilapidation of various leasehold premises which will be utilised on cessation of the lease between one and four years.
During the year, an onerous lease provision was utilised.
During 2015, the St. Magnus House dilapidation provision and onerous lease were utilised with the excess released to the income statement. This release was treated as an exceptional item as set out in note 5.
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| Expense arising from equity-settled share-based payment transactions | 1.3 | 1.6 |
The share-based payment plans are described below. There have been no cancellations or modifications to any of the plans during 2016 or 2015.
Details of the long term incentive awards are included in the Directors' remuneration report on page 60. Awards made to the Directors are given in the Directors' remuneration report on page 67. The fair value of the element of these awards, which have a TSR performance condition, was valued using a Stochastic model. All other elements of the awards were valued using a Black-Scholes model.
The ShareSave scheme is approved by HMRC and enables eligible employees to acquire options over ordinary shares of the Company at a discount. The fair value of these awards was valued using the Black-Scholes model.
These options were granted in 2007 to senior executives where the performance conditions have since been met. The fair value of the element of these awards, which have a TSR performance condition, was valued using a Stochastic model. All other elements of the awards were valued using a Black-Scholes model.
The following table illustrates the number of, and movements in, share options during the year:
| Outstanding at 1 January 2016 |
Granted in year |
Lapsed in year |
Exercised in year |
Outstanding at 31 December 2016 |
Exercisable at 31 December 2016 |
Weighted average contractual life Years |
|
|---|---|---|---|---|---|---|---|
| Long term incentive awards1 | 398,907 | 83,183 | (39,099) | (299,374) | 143,617 | – | 8.25 |
| 2013 ShareSave2 | 16,135 | – | (1,380) | (14,755) | – | – | – |
| 2014 ShareSave3 | 36,715 | – | (11,310) | – | 25,405 | – | 1.00 |
| 2015 ShareSave4 | 132,597 | – | (28,433) | – | 104,164 | – | 2.00 |
| 2016 ShareSave5 | – | 64,888 | (1,779) | – | 63,109 | – | 3.33 |
| Other options6 | 40,000 | – | – | (25,000) | 15,000 | 15,000 | 0.81 |
| 624,354 | 148,071 | (82,001) | (339,129) | 351,295 | 15,000 |
The weighted average share price at the date of exercise was £19.89 in relation to the long term incentive awards, £20.56 for the 2013 ShareSave options and £19.92 for the Other options.
There is one exercise price for each type of share option award, as follows: 1 £nil, 2 £13.03, 3 £21.11, 4 £18.12, 5 £17.19, 6 £9.91.
| Outstanding at 1 January 2015 |
Granted in year |
Lapsed in year |
Exercised in year |
Outstanding at 31 December 2015 |
Exercisable at 31 December 2015 |
Weighted average contractual life Years |
|
|---|---|---|---|---|---|---|---|
| Long term incentive awards 1 | 367,900 | 53,451 | (22,444) | – | 398,907 | 247,005 | 6.28 |
| 2012 ShareSave2 | 119,745 | – | (1,427) | (118,318) | – | – | – |
| 2013 ShareSave3 | 17,626 | – | (1,491) | – | 16,135 | – | 1.00 |
| 2014 ShareSave4 | 78,215 | – | (41,347) | (153) | 36,715 | – | 2.00 |
| 2015 ShareSave5 | – | 138,229 | (5,632) | – | 132,597 | – | 3.00 |
| Other options6 | 40,000 | – | – | – | 40,000 | 40,000 | 1.82 |
| 623,486 | 191,680 | (72,341) | (118,471) | 624,354 | 287,005 |
The weighted average share price at the date of exercise was £23.90 in relation to the 2012 ShareSave options and £23.71 for the 2014 ShareSave options.
There is one exercise price for each type of share option award, as follows: 1 £nil, 2 £10.82, 3 £13.03, 4 £21.11, 5 £18.12, 6 £9.91.
Significant inputs
The inputs into the models used to value options granted in the period fell within the following ranges:
| 2016 | 2015 | |
|---|---|---|
| Share price at date of grant (£) | 19.75 – 22.21 | 22.16 – 23.07 |
| Exercise price (£) | 0.00 – 17.19 | 0.00 – 18.12 |
| Expected term (years) | 3.0 – 3.3 | 3.0 – 3.3 |
| Risk-free interest rate (%) | 0.3 – 0.4 | 0.7 – 0.9 |
| Expected dividend yield (%) | 0.0 – 3.1 | 0.0 – 2.6 |
| Expected volatility (%) | 33.4 – 34.6 | 25.4 – 26.2 |
During the year, 284,509 shares (2015: 439,648 shares) at a weighted average price of £22.53 (2015: £22.45) were awarded to employees in settlement of 2015 (2014) cash bonuses. There was no expense in 2016 as a result of these awards.
The fair value of the above shares was determined based on the market price at the date of grant.
As part of previous acquisitions, certain elements of consideration are payable in the form of shares in Clarkson PLC. Where these are contingent on the employees remaining in service, the cost of these shares are charged to the consolidated income statement over the service period. The 2016 charge in relation to such awards is £0.4m (2015: £0.5m).
The Group's three defined benefit pension schemes are in the UK and all financial information provided in this note relates to the sum of the three separate schemes.
The Group operates three defined benefit pension schemes, being the Clarkson PLC scheme, the Plowrights scheme and the Stewarts scheme, which are funded by the payment of contributions to separate trusts administered by Trustees who are required to act in the best interests of the schemes' beneficiaries. The schemes' assets are invested in a range of pooled pension investment funds managed by professional fund managers.
Defined benefit pension arrangements give rise to open ended commitments and liabilities for the sponsoring company. As a consequence, the Company closed its original defined benefit section of the Clarkson PLC scheme to new entrants on 31 March 2004. This section was closed to further accrual for all existing members as from 31 March 2006. The Plowrights scheme was closed to further accrual from 1 January 2006. The Stewarts scheme was closed to further accrual on 1 January 2004.
Every three years, a pension scheme must obtain from an actuary a report containing a valuation and a recommendation on rates of contribution. Triennial valuations for all the schemes have been prepared.
The valuation of the Clarkson PLC scheme showed a pension surplus of £3.6m as at 31 March 2016. Clarkson PLC and the Trustees agreed to cease funding with effect from 1 October 2016.
The valuation of the Plowrights scheme showed a pension deficit of £1.2m as at 31 March 2016. Clarkson PLC and the Trustees agreed to continue the funding plan, at the rate of £0.9m per annum, until 30 September 2017.
The valuation of the Stewarts scheme showed a pension deficit of £2.1m as at 1 September 2015. Clarksons Platou (Offshore) Limited have agreed with the Trustees to pay contributions to remove the deficit over a period of seven years from 1 September 2015 at the rate of £0.4m per annum until 31 October 2016 and £0.3m per annum thereafter.
The Group is exposed to a number of risks, the most significant of which are detailed below:
The scheme liabilities are calculated using a discount rate set with reference to corporate bond yields; if scheme assets underperform this yield, this will create a deficit. All schemes hold a significant proportion of equities, which are expected to outperform corporate bonds in the long-term while providing volatility and risk in the short-term.
A decrease in corporate bond yields will increase scheme liabilities, although this will be partially offset by an increase in the value of the schemes' bond holdings.
Some of the Group pension obligations are linked to inflation, and higher inflation will lead to higher liabilities. The majority of the schemes' assets are either unaffected by (fixed interest bonds) or loosely correlated with (equities) inflation, meaning that an increase in inflation will also increase the deficit.
The majority of the schemes' obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the schemes' liabilities.
Overseas defined contribution arrangements have been determined in accordance with local practice and regulations.
The Group also operates various other defined contribution pension arrangements. Where required, the Group also makes contributions into these schemes.
The Group incurs no material expenses in the provision of post-retirement benefits other than pensions.
The following tables summarise amounts recognised in the consolidated balance sheet and the components of net benefit charge recognised in the consolidated income statement:
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| Fair value of schemes' assets | 200.5 | 170.1 |
| Present value of funded defined benefit obligations | (194.1) | (172.8) |
| 6.4 | (2.7) | |
| Minimum funding requirement in relation to the Plowrights scheme | (4.1) | (1.4) |
| Net benefit asset/(liability) recognised in the balance sheet | 2.3 | (4.1) |
The net benefit asset/(liability) disclosed above is the combined total of the three schemes. The Clarkson PLC scheme has a surplus of £7.5m (2015: £0.6m deficit), the Plowrights scheme has a deficit of £0.6m (2015: £0.9m) and the Stewarts scheme has a deficit of £4.6m (2015: £2.6m). As there is no right of set-off between the schemes, the benefit asset of £7.5m (2015: £nil) is disclosed separately on the balance sheet from the benefit liability of £5.2m (2015: £4.1m).
A deferred tax asset on the benefit liability amounting to £0.8m (2015: £0.7m) and a deferred tax liability on the benefit asset of £1.2m (2015: £nil) is shown in note 7.
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| Recognised in other finance costs – pensions: | ||
| Expected return on schemes' assets | 6.4 | 5.8 |
| Interest cost on benefit obligation and minimum funding requirement | (6.5) | (6.2) |
| Recognised in administrative expenses: | ||
| Scheme administrative expenses | (0.2) | (0.2) |
| Net benefit charge recognised in the income statement | (0.3) | (0.6) |
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| Actual return on schemes' assets | 36.2 | 3.3 |
| Less: expected return on schemes' assets | (6.4) | (5.8) |
| Actuarial gain/(loss) on schemes' assets | 29.8 | (2.5) |
| Actuarial (loss)/gain on defined benefit obligations | (22.6) | 13.0 |
| Actuarial gain recognised in the statement of comprehensive income | 7.2 | 10.5 |
| Tax charge on actuarial gain | (1.6) | (2.2) |
| Minimum funding requirement in relation to the Plowrights scheme | (2.6) | (1.4) |
| Tax credit on minimum funding requirement | 1.0 | 0.3 |
| Net actuarial gain on employee benefit obligations | 4.0 | 7.2 |
| Cumulative amount of actuarial losses recognised in the statement of comprehensive income | (8.8) | (16.0) |
Schemes' assets
| % | 2016 £m |
% | 2015 £m |
|
|---|---|---|---|---|
| Equities* | 47.5 | 95.1 | 48.9 | 83.2 |
| Government bonds* | 31.8 | 63.7 | 32.1 | 54.6 |
| Corporate bonds* | 13.3 | 26.8 | 12.7 | 21.6 |
| Property | 3.5 | 7.0 | 4.2 | 7.1 |
| Cash and other assets | 3.9 | 7.9 | 2.1 | 3.6 |
| 100.0 | 200.5 | 100.0 | 170.1 |
* Based on quoted market prices.
Changes in the fair value of the net defined benefit asset/(liability) are as follows:
| Present value of obligation £m |
Fair value of plan assets £m |
Total £m |
Impact of minimum funding requirement £m |
Total £m |
|
|---|---|---|---|---|---|
| At 1 January 2016 | (172.8) | 170.1 | (2.7) | (1.4) | (4.1) |
| Expected return on assets | – | 6.4 | 6.4 | – | 6.4 |
| Interest costs | (6.4) | – | (6.4) | (0.1) | (6.5) |
| Contributions | – | 2.1 | 2.1 | – | 2.1 |
| Administrative expenses | – | (0.2) | (0.2) | – | (0.2) |
| Benefits paid | 7.7 | (7.7) | – | – | – |
| Actuarial (loss)/gain | (22.6) | 29.8 | 7.2 | (2.6) | 4.6 |
| At 31 December 2016 | (194.1) | 200.5 | 6.4 | (4.1) | 2.3 |
31 December 2015
| Present value of obligation £m |
Fair value of plan assets £m |
Total £m |
Impact of minimum funding requirement £m |
Total £m |
|
|---|---|---|---|---|---|
| At 1 January 2015 | (173.3) | 163.0 | (10.3) | – | (10.3) |
| Acquired on acquisition | (14.5) | 9.8 | (4.7) | – | (4.7) |
| Expected return on assets | – | 5.8 | 5.8 | – | 5.8 |
| Interest costs | (6.2) | – | (6.2) | – | (6.2) |
| Contributions | – | 2.3 | 2.3 | – | 2.3 |
| Administrative expenses | – | (0.2) | (0.2) | – | (0.2) |
| Insurance income for insured pensioners | – | 0.1 | 0.1 | – | 0.1 |
| Benefits paid | 8.2 | (8.2) | – | – | – |
| Actuarial gain/(loss) | 13.0 | (2.5) | 10.5 | (1.4) | 9.1 |
| At 31 December 2015 | (172.8) | 170.1 | (2.7) | (1.4) | (4.1) |
The Group expects, based on the valuations and funding requirements including expenses, to contribute £1.4m to its defined benefit pension schemes in 2017 (2016: £2.2m).
The principal valuation assumptions are as follows:
| 2016 | 2015 |
|---|---|
| % | % |
| Rate of increase in pensions in payment 3.2 – 7.0 |
2.8 – 7.0 |
| Price inflation (RPI) 3.3 |
3.2 |
| Price inflation (CPI) 2.3 |
2.2 |
| Discount rate for scheme liabilities 2.7 |
3.8 |
The mortality assumptions used to assess the defined benefit obligation at 31 December 2016 is based on the 'SAPS Light' standard mortality tables published by the actuarial profession in 2014 (31 December 2015: 'SAPS Light' tables published in 2008). These tables have been adjusted to allow for anticipated future improvements in life expectancy using the standard projection model published in 2015 (31 December 2015: projection models published between 2011 and 2013). Examples of the assumed future life expectancy are given in the table below:
| Additional years | |||
|---|---|---|---|
| 2016 | 2015 | ||
| Post-retirement life expectancy on retirement at age 65: | |||
| Pensioners retiring in the year | – male | 22.0 to 23.1 | 24.4 |
| – female | 24.0 to 24.3 | 25.6 | |
| Pensioners retiring in 20 years' time | – male | 23.5 to 24.5 | 26.2 |
| – female | 25.6 to 25.8 | 27.5 | |
| Experience adjustments | 2016 | 2015 | |
| £m | £m | ||
| Experience gain/(loss) on schemes' assets | 29.8 | (2.5) | |
| Gain/(loss) on schemes' liabilities due to changes in demographic assumptions | 14.1 | – | |
| (Loss)/gain on schemes' liabilities due to changes in financial assumptions | (40.6) | 12.5 | |
| Experience gains on schemes' liabilities | 3.9 | 0.5 | |
| Loss on minimum funding requirement | (2.6) | (1.4) |
The table below provides information on the sensitivity of the defined benefit obligation to changes to the most significant actuarial assumptions. The table shows the impact of changes to each assumption in isolation although, in practice, changes to assumptions may occur at the same time and can either offset or compound the overall impact on the defined benefit obligation. These sensitivities have been calculated using the same methodology as used for the main calculations. The weighted average duration of the defined obligation is 17 years.
| Change in assumption |
Change in defined benefit obligation |
|
|---|---|---|
| Discount rate for scheme liabilities | +0.25% | -4.0% |
| -0.25% | +4.3% | |
| Price inflation (RPI) | +0.25% | +2.5% |
| -0.25% | -2.9% |
An increase of one year in the assumed life expectancy for both males and females would increase the defined benefit obligation by 3.9% (2015: 4.1%).
| Ordinary shares of 25p each, issued and fully paid: | 2016 Number |
2015 Number |
2016 £m |
2015 £m |
|---|---|---|---|---|
| At 1 January | 30,231,767 | 20,598,389 | 7.6 | 5.2 |
| Additions | 1,412 | 9,633,378 | – | 2.4 |
| At 31 December | 30,233,179 | 30,231,767 | 7.6 | 7.6 |
In 2016 the Company issued 1,412 shares in relation to the 2012 ShareSave scheme (2015: 115,009 shares). The difference between the exercise price of £10.82 and the nominal value of £0.25 has been taken to the share premium account, see note 24.
On 2 February 2015, the Company issued 9,518,369 shares at a nominal value of £2.4m as part of the acquisition of Platou, refer to note 12.
The trustees have waived their right to dividends on the unallocated shares held in the employee share trust.
31 December 2016
| Share premium £m |
ESOP reserve £m |
Employee benefits reserve £m |
Capital redemption reserve £m |
Hedging reserve £m |
Merger reserve £m |
Currency translation reserve £m |
Total £m |
|
|---|---|---|---|---|---|---|---|---|
| At 1 January 2016 | 29.0 | (4.3) | 4.1 | 2.0 | (1.1) | 177.5 | (13.0) | 194.2 |
| Total comprehensive (loss)/income |
– | – | – | – | (3.9) | – | 50.0 | 46.1 |
| Share issues | 0.1 | – | – | – | – | – | – | 0.1 |
| Employee share schemes: | ||||||||
| Share-based payments expense |
– | – | 1.2 | – | – | – | – | 1.2 |
| Transfer to profit and loss on vesting |
– | 6.1 | (2.8) | – | – | – | – | 3.3 |
| Net ESOP shares acquired | – | (4.8) | – | – | – | – | – | (4.8) |
| Total employee share schemes | – | 1.3 | (1.6) | – | – | – | – | (0.3) |
| At 31 December 2016 | 29.1 | (3.0) | 2.5 | 2.0 | (5.0) | 177.5 | 37.0 | 240.1 |
31 December 2015
| Share premium £m |
ESOP reserve £m |
Employee benefits reserve £m |
Capital redemption reserve £m |
Hedging reserve £m |
Merger reserve £m |
Currency translation reserve £m |
Total £m |
|
|---|---|---|---|---|---|---|---|---|
| At 1 January 2015 | 27.8 | (5.4) | 4.6 | 2.0 | – | – | 6.5 | 35.5 |
| Total comprehensive loss | – | – | – | – | (1.1) | – | (19.5) | (20.6) |
| Share issues | 1.2 | – | – | – | – | 177.5 | – | 178.7 |
| Employee share schemes: | ||||||||
| Share-based payments expense |
– | – | 1.6 | – | – | – | – | 1.6 |
| Transfer to profit and loss on vesting |
– | 0.7 | (2.1) | – | – | – | – | (1.4) |
| Net ESOP shares utilised | – | 0.4 | – | – | – | – | – | 0.4 |
| Total employee share schemes | – | 1.1 | (0.5) | – | – | – | – | 0.6 |
| At 31 December 2015 | 29.0 | (4.3) | 4.1 | 2.0 | (1.1) | 177.5 | (13.0) | 194.2 |
ESOP reserve
The ESOP reserve in the Group represents 159,676 shares (2015: 280,106 shares) held by the share purchase trusts to meet obligations under various incentive schemes. The shares are stated at cost. The market value of these shares at 31 December 2016 was £3.5m (2015: £6.3m). At 31 December 2016 none of these shares were under option (2015: none). During the year the share purchase trusts acquired 535,238 shares at a weighted average price of £20.23 (2015: 481,514 shares at £22.93).
The employee benefits reserve is used to record the value of equity-settled share-based payments provided to employees. Further details are included in note 21.
The capital redemption reserve arose on previous share buy-backs by Clarkson PLC.
The hedging reserve comprises the effective portion of the fair value of cash flow hedging instruments relating to hedged transactions that have not yet occurred.
The currency translation reserve represents the currency translation differences arising from the consolidation of foreign operations.
This comprises the premium on the share placing in November 2014 and the shares issued in February 2015 as part of the Platou acquisition. No share premium is recorded in the financial statements, through the operation of the merger relief provisions of the Companies Act 2006.
The Group has entered into commercial leases in relation to land and buildings and other assets on the basis that it is not in the Group's best interests to purchase these assets. The leases expire within one and 12 years and have varying terms, escalation clauses and renewal rights. Renewals are at the option of the specific entity that holds the lease. There are no restrictions placed upon the lessee by entering into these leases.
Future minimum rentals payable under non-cancellable operating leases as at 31 December are as follows:
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| Within one year | 9.1 | 6.9 |
| After one year but not more than five years | 39.4 | 36.0 |
| After five years | 53.4 | 55.1 |
| 101.9 | 98.0 |
The Group has sublet space in certain properties. The future minimum sublease payments expected to be received under non-cancellable sublease agreements as at 31 December 2016 is £1.2m (2015: £1.2m).
The Group has given no financial commitments to suppliers (2015: none).
The Group has given no guarantees (2015: none).
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.
The Group also maintained throughout the financial year directors' and officers' liability insurance in respect of its Directors.
The Group's principal financial liabilities comprise loan notes, trade and other payables and accruals. The Group's principal financial assets are trade receivables, current asset investments and cash and cash equivalents and short-term deposits, which arise directly from its operations.
The Group has not entered into derivative transactions other than the forward currency contracts explained later in this section. It is, and has been throughout 2016 and 2015, the Group's policy that no trading in derivatives shall be undertaken for speculative purposes.
The main risks arising from the Group's financial instruments are credit risk, liquidity risk and foreign exchange risk. The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below.
The Group seeks to trade only with recognised, creditworthy third parties. Receivable balances are monitored on an ongoing basis and any potential bad debts identified at an early stage. The maximum exposure is the carrying amounts as disclosed in note 14; based on experience and ongoing market information about the creditworthiness of counterparties, we reasonably expect to collect all amounts unimpaired. There are no significant concentrations of credit risk within the Group.
With respect to credit risk arising from cash and cash equivalents and deposits held as current investments, the financial institutions used are closely monitored by the Group treasury function to ensure they are held with creditworthy institutions and to ensure there is no over-exposure to any one institution.
For all financial assets held, the Group's exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.
Cash flow forecasting is performed at an entity level and also consolidated at a Group level. This is to ensure there is sufficient cash to meet operational requirements and any regulatory requirements where applicable.
The tables below summarise the maturity profile of the Group's financial liabilities at 31 December based on contractual undiscounted payments.
| On demand £m |
Less than 3 months £m |
3 to 12 months £m |
1 to 5 years £m |
Total £m |
|
|---|---|---|---|---|---|
| Interest-bearing loans and borrowings | – | – | 23.9 | – | 23.9 |
| Trade and other payables | 31.2 | – | – | 9.3 | 40.5 |
| Deferred consideration | – | – | 0.9 | – | 0.9 |
| Provisions | – | – | – | 0.1 | 0.1 |
| 31.2 | – | 24.8 | 9.4 | 65.4 |
31 December 2015
| On demand £m |
Less than 3 months £m |
3 to 12 months £m |
1 to 5 years £m |
Total £m |
|
|---|---|---|---|---|---|
| Interest-bearing loans and borrowings | – | – | 23.4 | 23.9 | 47.3 |
| Trade and other payables | 33.2 | – | – | 7.4 | 40.6 |
| Deferred consideration | – | 0.3 | – | 0.5 | 0.8 |
| Provisions | – | – | 0.2 | – | 0.2 |
| 33.2 | 0.3 | 23.6 | 31.8 | 88.9 |
The Group has transactional currency exposures arising from revenues and expenses in currencies other than its functional currency, which can significantly impact results and cash flows. The Group's revenue is mainly denominated in US dollars and the majority of expenses are denominated in local currencies. The Group also has balance sheet exposures, either at the local entity level where monetary assets and liabilities are held in currencies other than the functional currency, and at a group level on the retranslation of non-sterling balances into the Group's functional currency.
Our aim is to manage this risk by reducing the impact of any fluctuations. The Group hedges currency exposure through forward sales of US dollar revenues. We also sell US dollars on the spot market to meet local currency expenditure requirements. We also continually assess rates of exchange, non-sterling balances and asset exposures by currency.
The Group is most sensitive to changes in the US dollar and Norwegian Krone exchange rates. The following table demonstrates the sensitivity to a reasonably possible change in these rates, with all other variables held constant, of the Group's profit before taxation and equity.
| US\$ | NOK | ||||
|---|---|---|---|---|---|
| Strengthening/ (weakening) in rate |
Effect on profit before taxation £m |
Effect on equity £m |
Effect on profit before taxation £m |
Effect on equity £m |
|
| 2016 | 5% | 2.6 | 0.5 | 1.1 | 1.1 |
| (5%) | (2.3) | (0.5) | (1.0) | (1.0) | |
| 2015 | 5% | 1.6 | 1.7 | 0.7 | 0.7 |
| (5%) | (1.5) | (1.5) | (0.6) | (0.6) |
It is the Group's policy to cover or hedge a proportion of its transactional US dollar exposures with foreign currency contracts. Where these are designated and documented as hedging instruments in the context of IAS 39 and are demonstrated to be effective, mark-to-market gains and losses are recognised directly in equity (see note 24) and transferred to the income statement upon receipt of cash and conversion to sterling of the underlying item being hedged.
The fair value of foreign currency contracts at 31 December are as follows:
| Liabilities | ||
|---|---|---|
| 2016 | 2015 | |
| £m | £m | |
| Foreign currency contracts | 6.2 | 1.4 |
At 31 December 2016 the Group had US\$60m outstanding forward contracts due for settlement in 2017, 2018 and 2019 (2015: US\$110m for settlement in 2016, 2017 and 2018).
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. Total capital is calculated as equity as shown in the consolidated balance sheet.
The Group manages its capital structure, and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.
No changes were made in the objectives, policies or processes during the years ended 31 December 2016 and 31 December 2015. These financial statements are prepared on the going concern basis and the Group continues to pay dividends.
A number of the Group's trading entities are subject to regulation by the Norwegian FSA, the FCA in the UK and NFA and FINRA in the US. Regulatory capital at entity level depends on the jurisdiction in which it is incorporated. In each case, the approach is to hold an appropriate surplus over the local minimum requirement. Each regulated entity complied with their regulatory capital requirements throughout the year.
IFRS 13 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
The following table presents the Group's assets and liabilities that are measured at fair value at 31 December.
| Level 2 | ||
|---|---|---|
| 2016 | 2015 | |
| £m | £m | |
| Liabilities | ||
| Foreign currency contracts | 6.2 | 1.4 |
The fair value of the foreign currency contracts are calculated by management based on external valuations received. These valuations are calculated based on forward exchange rates at the balance sheet date.
The classification of financial assets and financial liabilities at 31 December is as follows:
| 2016 | 2015 | |||||||
|---|---|---|---|---|---|---|---|---|
| Held for trading £m |
Available for-sale £m |
Loans and receivables £m |
Total £m |
Held for trading £m |
Available for-sale £m |
Loans and receivables £m |
Total £m |
|
| Other receivables | – | – | 8.0 | 8.0 | – | – | 7.2 | 7.2 |
| Investments | 0.1 | 4.4 | 29.4 | 33.9 | 0.1 | 2.1 | 5.4 | 7.6 |
| Trade receivables | – | – | 42.7 | 42.7 | – | – | 49.8 | 49.8 |
| Cash and cash equivalents | – | – | 154.0 | 154.0 | – | – | 168.4 | 168.4 |
| 0.1 | 4.4 | 234.1 | 238.6 | 0.1 | 2.1 | 230.8 | 233.0 |
Financial liabilities
| 2016 | 2015 | |||||
|---|---|---|---|---|---|---|
| Hedging instruments £m |
Amortised cost £m |
Total £m |
Hedging instruments £m |
Amortised cost £m |
Total £m |
|
| Loan notes | – | 23.6 | 23.6 | – | 46.1 | 46.1 |
| Trade payables | – | 24.3 | 24.3 | – | 24.8 | 24.8 |
| Other payables | – | 16.2 | 16.2 | – | 15.8 | 15.8 |
| Foreign currency contracts | 6.2 | – | 6.2 | 1.4 | – | 1.4 |
| Other tax and social security | – | 2.7 | 2.7 | – | 2.8 | 2.8 |
| Deferred consideration | – | 0.9 | 0.9 | – | 0.8 | 0.8 |
| Accruals | – | 99.1 | 99.1 | – | 98.3 | 98.3 |
| Provisions | – | 0.1 | 0.1 | – | 0.2 | 0.2 |
| 6.2 | 166.9 | 173.1 | 1.4 | 188.8 | 190.2 |
Loan notes were initially recognised at fair value and have not been designated as 'fair value through profit or loss'. These are subsequently measured at amortised cost using the effective interest method. The carrying value of the loan notes and other current and non-current financial assets and liabilities is deemed to equate to the fair value at 31 December 2016.
As in 2015, the Group did not enter into any related party transactions during the year, except as noted below.
There were no key management personnel in the Group apart from the Clarkson PLC Directors. Details of their compensation are set out below.
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| Short-term employee benefits | 5.9 | 6.5 |
| Post-employment benefits | 0.1 | 0.1 |
| Share-based payments | 0.6 | 0.7 |
| 6.6 | 7.3 |
Full remuneration details are provided in the Directors' remuneration report on pages 57 to 71.
In our opinion, Clarkson PLC's Parent Company financial statements (the financial statements):
The financial statements, included within the annual report, comprise:
Certain required disclosures have been presented elsewhere in the annual report, rather than in the notes to the financial statements. These are crossreferenced from the financial statements and are identified as audited.
The financial reporting framework that has been applied in the preparation of the financial statements is IFRSs as adopted by the European Union and applicable law as applied in accordance with the provisions of the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
In addition, in light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we are required to report if we have identified any material misstatements in the strategic report and the Directors' report.
We have nothing to report in this respect.
Under International Standards on Auditing (UK and Ireland) (ISAs (UK & Ireland)) we are required to report to you if, in our opinion, information in the annual report is:
We have no exceptions to report arising from this responsibility.
Under the Companies Act 2006 we are required to report to you if, in our opinion:
We have no exceptions to report arising from this responsibility.
In our opinion, the part of the Directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of Directors' remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.
As explained more fully in the Directors' responsibilities statement set out on page 76, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Parent Company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, 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.
We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:
We primarily focus our work in these areas by assessing the Directors' judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.
We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.
In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
With respect to the strategic report, Directors' report and corporate governance statement, we consider whether those reports include the disclosures required by applicable legal requirements.
We have reported separately on the consolidated financial statements of Clarkson PLC for the year ended 31 December 2016.
Senior Statutory Auditor for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London
10 March 2017
as at 31 December
| Notes | 2016 £m |
2015 £m |
|
|---|---|---|---|
| Non-current assets | |||
| Property, plant and equipment | B | 17.8 | 19.2 |
| Investment property | C | 0.3 | 0.3 |
| Investments in subsidiaries | D | 296.2 | 302.5 |
| Employee benefits | N | 7.5 | – |
| Deferred tax asset | E | 1.5 | 3.7 |
| 323.3 | 325.7 | ||
| Current assets | |||
| Trade and other receivables | F | 40.7 | 63.7 |
| Income tax receivable | 4.2 | 2.7 | |
| Investments | G | 29.4 | 5.4 |
| Cash and cash equivalents | H | 0.7 | 0.1 |
| 75.0 | 71.9 | ||
| Current liabilities | |||
| Interest-bearing loans and borrowings | I | (23.6) | (23.1) |
| Trade and other payables | J | (37.1) | (12.7) |
| (60.7) | (35.8) | ||
| Net current assets | 14.3 | 36.1 | |
| Non-current liabilities | |||
| Interest-bearing loans and borrowings | I | – | (23.0) |
| Trade and other payables | J | (6.5) | (3.6) |
| Employee benefits | N | (0.6) | (1.5) |
| Deferred tax liability | L | (1.5) | – |
| (8.6) | (28.1) | ||
| Net assets | 329.0 | 333.7 | |
| Capital and reserves | |||
| Share capital | O | 7.6 | 7.6 |
| Other reserves | P | 210.6 | 212.5 |
| Retained earnings | 110.8 | 113.6 | |
| Total equity | 329.0 | 333.7 |
The financial statements on pages 119 to 136 were approved by the Board on 10 March 2017, and signed on its behalf by:
Registered number: 1190238
Chairman Chief Financial Officer and Chief Operating Officer
Strategic report
Governance
Financial statements
Other information
for the year ended 31 December
| Attributable to equity holders of the Parent Company | |||||
|---|---|---|---|---|---|
| Notes | Share capital £m |
Other reserves £m |
Retained earnings £m |
Total equity £m |
|
| Balance at 1 January 2016 | 7.6 | 212.5 | 113.6 | 333.7 | |
| Profit for the year | – | – | 11.8 | 11.8 | |
| Other comprehensive income: | |||||
| Actuarial gain on employee benefit schemes – net of tax | N | – | – | 5.8 | 5.8 |
| Total comprehensive income for the year | – | – | 17.6 | 17.6 | |
| Transactions with owners: | |||||
| Share issues | O,P | – | 0.1 | – | 0.1 |
| Employee share schemes | – | (2.0) | (1.7) | (3.7) | |
| Tax on other employee benefits | – | – | (0.2) | (0.2) | |
| Dividend paid | – | – | (18.5) | (18.5) | |
| – | (1.9) | (20.4) | (22.3) | ||
| Balance at 31 December 2016 | 7.6 | 210.6 | 110.8 | 329.0 |
| Attributable to equity holders of the Parent Company | |||||
|---|---|---|---|---|---|
| Notes | Share capital £m |
Other reserves £m |
Retained earnings £m |
Total equity £m |
|
| Balance at 1 January 2015 | 5.2 | 33.1 | 95.3 | 133.6 | |
| Profit for the year | – | – | 30.7 | 30.7 | |
| Other comprehensive income: | |||||
| Actuarial gain on employee benefit schemes – net of tax | N | – | – | 6.1 | 6.1 |
| Total comprehensive income for the year | – | – | 36.8 | 36.8 | |
| Transactions with owners: | |||||
| Share issues | O,P | 2.4 | 178.7 | – | 181.1 |
| Employee share schemes | – | 0.7 | (0.7) | – | |
| Tax on other employee benefits | – | – | 0.4 | 0.4 | |
| Dividend paid | – | – | (18.2) | (18.2) | |
| 2.4 | 179.4 | (18.5) | 163.3 | ||
| Balance at 31 December 2015 | 7.6 | 212.5 | 113.6 | 333.7 |
for the year ended 31 December
| Notes | 2016 £m |
2015 £m Stra |
|
|---|---|---|---|
| Cash flows from operating activities | teg | ||
| Profit before taxation | 8.8 | ic re 28.9 |
|
| Adjustments for: | por t |
||
| Foreign exchange differences | (0.2) | (0.2) | |
| Depreciation of property, plant and equipment | B | 2.2 | 1.5 |
| Share-based payment expense | 0.6 | 0.7 | |
| Impairment of investments | – | 4.6 | |
| Difference between pension contributions paid and amount recognised in the income statement | (1.5) | (1.8) | |
| Finance revenue | (25.6) | (46.9) | |
| Finance costs | 0.9 | Gov 1.1 |
|
| Other finance costs – pensions | – | ern 0.3 |
|
| Decrease/(increase) in trade and other receivables | 17.9 | anc (18.3) e |
|
| Increase/(decrease) in bonus accrual | 7.5 | (2.9) | |
| Increase/(decrease) in trade and other payables | 21.0 | (5.0) | |
| Decrease in provisions | K | – | (3.0) |
| Cash utilised from operations | 31.6 | (41.0) | |
| Income tax received | 3.8 | 2.8 | |
| Net cash flow from operating activities | 35.4 | (38.2) | |
| Cash flows from investing activities | |||
| Interest received | 0.1 | Fina 0.1 ncia |
|
| Purchase of property, plant and equipment | B | (0.8) | (18.8) l sta |
| Transfer (to)/from current investments (funds on deposit) | (24.0) | 20.0 tem |
|
| Disposal of subsidiaries | 6.3 | ents – |
|
| Acquisition of subsidiaries, including settlement of deferred consideration | D | (23.4) | (23.5) |
| Dividends received from investments | 25.4 | 46.9 | |
| Net cash flow from investing activities | (16.4) | 24.7 | |
| Cash flows from financing activities | |||
| Dividend paid | (18.5) | (18.2) | |
| Repayment of borrowings | – | Oth (1.5) |
|
| Proceeds from shares issued (net of transaction costs) | O | – | er in 1.2 |
| Net cash flow from financing activities | (18.5) | form (18.5) |
|
| Net (decrease)/increase in cash and cash equivalents | 0.5 | atio (32.0) n |
|
| Cash and cash equivalents at 1 January | 0.1 | 32.1 | |
| Net foreign exchange differences | 0.1 | – | |
| Cash and cash equivalents at 31 December | H | 0.7 | 0.1 |
The accounting policies applied in the preparation of the Parent Company financial statements are the same as those set out in note 2 to the consolidated financial statements, and have been applied consistently to all periods, with the addition of the following:
The financial statements of Clarkson PLC have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, IFRS IC interpretations and the Companies Act 2006 applicable to companies reporting under IFRSs.
The Parent Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the Parent Company income statement or statement of comprehensive income. The profit for the Parent Company for the year was £11.8m (2015: £30.7m).
The Parent Company recognises its investments in subsidiaries at cost less provision for impairment. Income is recognised from these investments in relation to distributions received.
| Freehold and long leasehold properties £m |
Leasehold improvements £m |
Office furniture and equipment £m |
Total £m |
|
|---|---|---|---|---|
| Original cost | ||||
| At 1 January 2016 | 1.9 | 14.1 | 5.0 | 21.0 |
| Additions | – | 0.3 | 0.5 | 0.8 |
| At 31 December 2016 | 1.9 | 14.4 | 5.5 | 21.8 |
| Accumulated depreciation | ||||
| At 1 January 2016 | 0.4 | 0.5 | 0.9 | 1.8 |
| Charged during the year | – | 1.0 | 1.2 | 2.2 |
| At 31 December 2016 | 0.4 | 1.5 | 2.1 | 4.0 |
| Net book value at 31 December 2016 | 1.5 | 12.9 | 3.4 | 17.8 |
| Freehold and | Office | |||
|---|---|---|---|---|
| long leasehold | Leasehold | furniture and | ||
| properties | improvements | equipment | Total | |
| £m | £m | £m | £m | |
| Original cost | ||||
| At 1 January 2015 | 1.9 | 0.5 | 6.9 | 9.3 |
| Additions | – | 14.1 | 4.7 | 18.8 |
| Disposals | – | (0.5) | (6.6) | (7.1) |
| At 31 December 2015 | 1.9 | 14.1 | 5.0 | 21.0 |
| Accumulated depreciation | ||||
| At 1 January 2015 | 0.3 | 0.5 | 6.6 | 7.4 |
| Charged during the year | 0.1 | 0.5 | 0.9 | 1.5 |
| Disposals | – | (0.5) | (6.6) | (7.1) |
| At 31 December 2015 | 0.4 | 0.5 | 0.9 | 1.8 |
| Net book value at 31 December 2015 | 1.5 | 13.6 | 4.1 | 19.2 |
| 2016 £m |
2015 £m |
|
|---|---|---|
| Cost | ||
| At 1 January and 31 December | 0.6 | 0.6 |
| Accumulated depreciation | ||
| At 1 January and 31 December | 0.3 | 0.3 |
| Net book value at 31 December | 0.3 | 0.3 |
The fair value of the investment property at 31 December 2016 was £0.8m (2015: £0.6m). This was based on valuations from an independent valuer who has the appropriate professional qualification and recent experience of valuing properties in the location and of the type being valued.
| 2016 £m |
2015 £m |
|
|---|---|---|
| Cost | ||
| At 1 January | 302.5 | 54.0 |
| Additions | – | 253.1 |
| Transfer to subsidiary | (6.3) | – |
| Impairment | – | (4.6) |
| At 31 December | 296.2 | 302.5 |
During the year an investment of £6.3m was transferred to a subsidiary, Clarkson Shipbroking Group Limited (CSGL). This investment was in relation to a previous acquisition where, subsequent to the acquisition, the employees transferred to a subsidiary of CSGL.
2015
On 2 February 2015, the Company acquired 100% of the share capital of RS Platou ASA (Platou), which subsequently changed its name to Clarksons Platou AS, for £249.9m. On 20 October 2015 the Company acquired 100% of the share capital of Clarkson Norway AS for £3.2m from its subsidiary Clarkson Overseas Shipbroking Limited, prior to a merger between Clarkson Norway AS and Clarksons Platou AS.
In 2015, the Company impaired £4.6m of a direct investment in a subsidiary which has ceased all trading during that year.
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| Employee benefits – on pension benefit liability |
– | 0.3 |
| – other employee benefits | 1.5 | 3.0 |
| Other temporary differences | – | 0.4 |
| 1.5 | 3.7 |
Included in the above are deferred tax assets of £0.1m (2015: £0.4m) which are due within one year. Deferred tax assets are recognised to the extent that the realisation of the related tax benefit through future taxable profits is probable.
All deferred tax movements arise from the origination and reversal of temporary differences.
| 2016 £m |
2015 £m |
|
|---|---|---|
| Other receivables | – | 0.1 |
| Prepayments and accrued income | 0.4 | 0.3 |
| Owed by Group companies | 40.3 | 63.3 |
| 40.7 | 63.7 |
The Company has no trade receivables (2015: none).
As at 31 December 2016, the Company did not provide for related party receivables (2015: £nil). Further details of related party receivables are included in note T.
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| Funds on deposit | 29.4 | 5.4 |
The Company held £19.4m (2015: £5.4m) in a deposit with a 95 day notice period. The Company also held £10.0m (2015: £nil) in a deposit with a maturity of six months at the year-end. These deposits are held with an A-rated financial institution.
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| Cash at bank and in hand | 0.7 | 0.1 |
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. The fair value of cash and cash equivalents is £0.7m (2015: £0.1m).
| 2016 £m |
2015 £m |
|
|---|---|---|
| Current | ||
| Loan notes | 23.6 | 23.1 |
| Non-current | ||
| Loan notes | – | 23.0 |
Interest-bearing loans and borrowings comprise the vendor loan notes issued as part of the consideration for the Platou acquisition. Interest is charged at 12 month sterling LIBOR plus 1.25%. Half the loan notes were repaid on 30 June 2016, the balance is repayable on 30 June 2017.
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| Current | ||
| Owed to Group companies | 19.6 | 1.5 |
| Accruals and deferred income | 17.5 | 11.2 |
| 37.1 | 12.7 | |
| Non-current | ||
| Other payables | 6.5 | 3.6 |
Other payables are non-interest bearing and are normally settled on demand.
Further details of related party payables are included in note T.
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| At 1 January | – | 3.0 |
| Utilised during the year | – | (1.7) |
| Released during the year | – | (1.3) |
| At 31 December | – | – |
During 2015, the St. Magnus House dilapidation provision and onerous lease were utilised with the excess released to the income statement.
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| Employee benefits – on pension benefit liability | 1.2 | – |
| Other temporary differences | 0.3 | – |
| 1.5 | – |
None of the above deferred tax liabilities are due within one year.
All deferred tax movements arise from the origination and reversal of temporary differences.
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| Expense arising from equity-settled share-based payment transactions | 0.6 | 0.7 |
For more information on the Parent Company share-based payment plans, see note 21 of the consolidated financial statements.
The Company operates two defined benefit pension schemes, being the Clarkson PLC scheme and the Plowrights scheme, which are funded by the payment of contributions to separate trusts administered by Trustees who are required to act in the best interests of the schemes' beneficiaries. All financial information provided in this note relates to the sum of the two separate schemes. The schemes' assets are invested in a range of pooled pension investment funds managed by professional fund managers.
Defined benefit pension arrangements give rise to open ended commitments and liabilities for the sponsoring company. As a consequence, the Company closed its original defined benefit section of the Clarkson PLC scheme to new entrants on 31 March 2004. This section was closed to further accrual for all existing members as from 31 March 2006. The Plowrights scheme was closed to further accrual from 1 January 2006.
Every three years, a pension scheme must obtain from an actuary a report containing a valuation and a recommendation on rates of contribution. Triennial valuations for all the schemes have been prepared.
The valuation of the Clarkson PLC scheme showed a pension surplus of £3.6m as at 31 March 2016. Clarkson PLC and the Trustees agreed to cease funding with effect from 1 October 2016.
The valuation of the Plowrights scheme showed a pension deficit of £1.2m as at 31 March 2016. Clarkson PLC and the Trustees agreed to continue the funding plan, at the rate of £0.9m per annum, until 30 September 2017.
The Company is exposed to a number of risks, the most significant of which are detailed below:
The scheme liabilities are calculated using a discount rate set with reference to corporate bond yields; if scheme assets underperform this yield, this will create a deficit. Both schemes hold a significant proportion of equities, which are expected to outperform corporate bonds in the long-term while providing volatility and risk in the short-term.
A decrease in corporate bond yields will increase scheme liabilities, although this will be partially offset by an increase in the value of the schemes' bond holdings.
Some of the Company pension obligations are linked to inflation, and higher inflation will lead to higher liabilities. The majority of the schemes' assets are either unaffected by (fixed interest bonds) or loosely correlated with (equities) inflation, meaning that an increase in inflation will also increase the deficit.
The majority of the schemes' obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the schemes' liabilities.
Strategic report
Other information
The Company operates a defined contribution pension scheme. Where required, the Company also makes contributions into this scheme.
The Company incurs no material expenses in the provision of post-retirement benefits other than pensions.
The following tables summarise amounts recognised in the balance sheet and the components of net benefit charge recognised in the income statement:
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| Fair value of schemes' assets | 189.5 | 160.1 |
| Present value of funded defined benefit obligations | (178.5) | (160.2) |
| 11.0 | (0.1) | |
| Minimum funding requirement in relation to the Plowrights scheme | (4.1) | (1.4) |
| Net benefit asset/(liability) recognised in the balance sheet | 6.9 | (1.5) |
The net benefit asset/(liability) disclosed above is the combined total of the two schemes. The Clarkson PLC scheme has a surplus of £7.5m (2015: £0.6m deficit) and the Plowrights scheme has a deficit of £0.6m (2015: £0.9m). As there is no right of set-off between the schemes, the benefit asset of £7.5m (2015: £nil) is disclosed separately on the balance sheet from the benefit liability of £0.6m (2015: £1.5m).
A deferred tax asset on the benefit liability amounting to £nil (2015: £0.3m) is shown in note E and a deferred tax liability on the benefit asset of £1.2m (2015: £nil) is shown in note L.
| 2016 £m |
2015 £m |
|
|---|---|---|
| Recognised in other finance costs – pensions: | ||
| Expected return on schemes' assets | 6.0 | 5.4 |
| Interest cost on benefit obligation and minimum funding requirement | (6.0) | (5.8) |
| Recognised in administrative expenses: | ||
| Scheme administrative expenses | (0.2) | (0.2) |
| Net benefit charge recognised in the income statement | (0.2) | (0.6) |
| 2016 £m |
2015 £m |
|
|---|---|---|
| Actual return on schemes' assets | 35.2 | 3.2 |
| Less: expected return on schemes' assets | (6.0) | (5.4) |
| Actuarial gain/(loss) on schemes' assets | 29.2 | (2.2) |
| Actuarial (loss)/gain on defined benefit obligations | (19.7) | 11.0 |
| Actuarial gain recognised in the statement of comprehensive income | 9.5 | 8.8 |
| Tax charge on actuarial gain | (2.1) | (1.6) |
| Minimum funding requirement in relation to the Plowrights scheme | (2.6) | (1.4) |
| Tax credit on minimum funding requirement | 1.0 | 0.3 |
| Net actuarial gain on employee benefit obligations | 5.8 | 6.1 |
| Cumulative amount of actuarial losses recognised in the statement of comprehensive income | (8.2) | (17.7) |
| 2016 | 2015 | |||
|---|---|---|---|---|
| % | £m | % | £m | |
| Equities* | 48.0 | 91.0 | 49.5 | 79.2 |
| Government bonds* | 33.2 | 62.8 | 32.2 | 51.5 |
| Corporate bonds* | 12.8 | 24.3 | 13.5 | 21.6 |
| Property | 3.5 | 6.6 | 4.1 | 6.6 |
| Cash and other assets | 2.5 | 4.8 | 0.7 | 1.2 |
| 100.0 | 189.5 | 100.0 | 160.1 |
* Based on quoted market prices.
Changes in the fair value of the net defined benefit asset/(liability) are as follows:
| Present value of obligation £m |
Fair value of plan assets £m |
Total £m |
Impact of minimum funding requirement £m |
Total £m |
|
|---|---|---|---|---|---|
| At 1 January 2016 | (160.2) | 160.1 | (0.1) | (1.4) | (1.5) |
| Expected return on assets | – | 6.0 | 6.0 | – | 6.0 |
| Interest costs | (5.9) | – | (5.9) | (0.1) | (6.0) |
| Contributions | – | 1.7 | 1.7 | – | 1.7 |
| Administrative expenses | – | (0.2) | (0.2) | – | (0.2) |
| Benefits paid | 7.3 | (7.3) | – | – | – |
| Actuarial (loss)/gain | (19.7) | 29.2 | 9.5 | (2.6) | 6.9 |
| At 31 December 2016 | (178.5) | 189.5 | 11.0 | (4.1) | 6.9 |
31 December 2015
| Present value of obligation £m |
Fair value of plan assets £m |
Total £m |
Impact of minimum funding requirement £m |
Total £m |
|
|---|---|---|---|---|---|
| At 1 January 2015 | (173.3) | 163.0 | (10.3) | – | (10.3) |
| Expected return on assets | – | 5.4 | 5.4 | – | 5.4 |
| Interest costs | (5.8) | – | (5.8) | – | (5.8) |
| Contributions | – | 1.9 | 1.9 | – | 1.9 |
| Administrative expenses | – | (0.2) | (0.2) | – | (0.2) |
| Insurance income for insured pensioners | – | 0.1 | 0.1 | – | 0.1 |
| Benefits paid | 7.9 | (7.9) | – | – | – |
| Actuarial gain/(loss) | 11.0 | (2.2) | 8.8 | (1.4) | 7.4 |
| At 31 December 2015 | (160.2) | 160.1 | (0.1) | (1.4) | (1.5) |
The Company expects, based on the valuations and funding requirements including expenses, to contribute £0.9m to its defined benefit pension schemes in 2017 (2016: £1.9m).
The principal valuation assumptions are as follows:
| 2016 % |
2015 % |
|
|---|---|---|
| Rate of increase in pensions in payment | 3.2 – 7.0 | 2.8 – 7.0 |
| Price inflation (RPI) | 3.3 | 3.2 |
| Price inflation (CPI) | 2.3 | 2.2 |
| Discount rate for scheme liabilities | 2.7 | 3.8 |
The mortality assumptions used to assess the defined benefit obligation at 31 December 2016 is based on the 'SAPS Light' standard mortality tables published by the actuarial profession in 2014 (31 December 2015: 'SAPS Light' tables published in 2008). These tables have been adjusted to allow for anticipated future improvements in life expectancy using the standard projection model published in 2015 (31 December 2015: projection models published between 2011 and 2013). Examples of the assumed future life expectancy are given in the table below:
| Additional years | |||
|---|---|---|---|
| 2016 | 2015 | ||
| Post-retirement life expectancy on retirement at age 65: | |||
| Pensioners retiring in the year | – male | 23.1 | 24.4 |
| – female | 24.3 | 25.6 | |
| Pensioners retiring in 20 years' time | – male | 24.5 | 26.2 |
| – female | 25.8 | 27.5 |
| 2016 | 2015 | |
|---|---|---|
| £m | £m | |
| Experience gain/(loss) on schemes' assets | 29.2 | (2.2) |
| Gain on schemes' liabilities due to changes in demographic assumptions | 13.9 | – |
| (Loss)/gain on schemes' liabilities due to changes in financial assumptions | (37.5) | 10.5 |
| Experience gains on schemes' liabilities | 3.9 | 0.5 |
| Loss on minimum funding requirement | (2.6) | (1.4) |
| Total actuarial gain | 6.9 | 7.4 |
The table below provides information on the sensitivity of the defined benefit obligation to changes to the most significant actuarial assumptions. The table shows the impact of changes to each assumption in isolation although, in practice, changes to assumptions may occur at the same time and can either offset or compound the overall impact on the defined benefit obligation. These sensitivities have been calculated using the same methodology as used for the main calculations. The weighted average duration of the defined obligation is 17 years.
| Change in assumption |
Change in defined benefit obligation |
|
|---|---|---|
| Discount rate for scheme liabilities | +0.25% | -4.0% |
| -0.25% | +4.3% | |
| Price inflation (RPI) | +0.25% | +2.8% |
| -0.25% | -3.2% |
An increase of one year in the assumed life expectancy for both males and females would increase the defined benefit obligation by 3.8% (2015: 4.1%).
| Ordinary shares of 25p each: | 2016 Number |
2015 Number |
2016 £m |
2015 £m |
|---|---|---|---|---|
| At 1 January | 30,231,767 | 20,598,389 | 7.6 | 5.2 |
| Additions | 1,412 | 9,633,378 | – | 2.4 |
| At 31 December | 30,233,179 | 30,231,767 | 7.6 | 7.6 |
In 2016 the Company issued 1,412 shares in relation to the 2012 ShareSave scheme (2015: 115,009 shares). The difference between the exercise price of £10.82 and the nominal value of £0.25 has been taken to the share premium account, see note P.
On 2 February 2015, the Company issued 9,518,369 shares at a nominal value of £2.4m as part of the acquisition of Platou, refer to note 12 of the consolidated financial statements.
| Share premium £m |
Employee benefits reserve £m |
Capital redemption reserve £m |
Merger reserve £m |
Total £m |
|
|---|---|---|---|---|---|
| At 1 January 2016 | 29.0 | 4.0 | 2.0 | 177.5 | 212.5 |
| Share issues | 0.1 | – | – | – | 0.1 |
| Employee share schemes: | |||||
| Share-based payments expense | – | 0.8 | – | – | 0.8 |
| Transfer to profit and loss on vesting | – | (2.8) | – | – | (2.8) |
| Total employee share schemes | – | (2.0) | – | – | (2.0) |
| At 31 December 2016 | 29.1 | 2.0 | 2.0 | 177.5 | 210.6 |
31 December 2015
| Share premium £m |
Employee benefits reserve £m |
Capital redemption reserve £m |
Merger reserve £m |
Total £m |
|
|---|---|---|---|---|---|
| At 1 January 2015 | 27.8 | 3.3 | 2.0 | – | 33.1 |
| Share issues | 1.2 | – | – | 177.5 | 178.7 |
| Employee share schemes: | |||||
| Share-based payments expense | – | 1.0 | – | – | 1.0 |
| Transfer to profit and loss on vesting | – | (0.3) | – | – | (0.3) |
| Total employee share schemes | – | 0.7 | – | – | 0.7 |
| At 31 December 2015 | 29.0 | 4.0 | 2.0 | 177.5 | 212.5 |
Capital redemption reserve
The capital redemption reserve arose on previous share buy-backs by the Company.
This comprises the premium on the share placing in November 2014 and the shares issued in February 2015 as part of the Platou acquisition. No share premium is recorded in the financial statements, through the operation of the merger relief provisions of the Companies Act 2006.
The Company has entered into a commercial lease in relation to land and buildings on the basis that it is not in the Company's best interests to purchase these assets. The lease has a life of 15 years with renewal terms included in the contract. There are no restrictions placed upon the Company by entering into this lease.
Future minimum rentals payable under non-cancellable operating leases as at 31 December are as follows:
| 2016 £m |
2015 £m |
|
|---|---|---|
| Within one year | 2.1 | 1.1 |
| After one year but not more than five years | 18.8 | 16.1 |
| After five years | 36.5 | 41.0 |
| 57.4 | 58.2 |
The Company has sublet space in its property. The future minimum sublease payments expected to be received under non-cancellable sublease agreements as at 31 December 2016 is £1.1m (2015: £1.0m).
The Company has given no financial commitments to suppliers (2015: none).
The Company has given no guarantees (2015: none).
From time to time the Company may be engaged in litigation in the ordinary course of business. The Company carries professional indemnity insurance. There are currently no liabilities expected to have a material adverse financial impact on the Company's results or net assets.
The Company maintained throughout the year directors' and officers' liability insurance in respect of itself and its Directors.
The Company's principal financial liabilities comprise loan notes, loans from Group companies and accruals. The Company has various financial assets such as current asset investments and loans to Group companies, which arise directly from its operations.
The Company has not entered into any derivative transactions.
The main risks arising from the Company's financial instruments are credit risk and liquidity risk.
With respect to credit risk arising from cash and cash equivalents and current investments, the Company's exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.
The Company monitors its risk to a shortage of funds using projected cash flows from operations.
The tables below summarise the maturity profile of the Company's financial liabilities at 31 December based on contractual undiscounted payments.
| On demand £m |
Less than 3 months £m |
3 to 12 months £m |
1 to 5 years £m |
Total £m |
|
|---|---|---|---|---|---|
| Interest-bearing loans and borrowings | – | – | 23.9 | – | 23.9 |
| Trade and other payables | – | – | – | 6.5 | 6.5 |
| – | – | 23.9 | 6.5 | 30.4 | |
31 December 2015
| On | Less than | 3 to 12 | 1 to 5 | ||
|---|---|---|---|---|---|
| demand | 3 months | months | years | Total | |
| £m | £m | £m | £m | £m | |
| Interest-bearing loans and borrowings | – | – | 23.4 | 23.9 | 47.3 |
| Trade and other payables | – | – | – | 3.6 | 3.6 |
| – | – | 23.4 | 27.5 | 50.9 |
For information on the Parent Company capital management objectives, policies and processes, see note 26 of the consolidated financial statements.
The classification of financial assets and liabilities at 31 December is as follows:
| 2016 | 2015 | ||||
|---|---|---|---|---|---|
| Loans and receivables £m |
Total £m |
Loans and receivables £m |
Total £m |
||
| Other receivables | – | – | 0.1 | 0.1 | |
| Owed by Group companies | 40.3 | 40.3 | 63.3 | 63.3 | |
| Investments | 29.4 | 29.4 | 5.4 | 5.4 | |
| Cash and cash equivalents | 0.7 | 0.7 | 0.1 | 0.1 | |
| 70.4 | 70.4 | 68.9 | 68.9 |
| 2016 | 2015 | |||
|---|---|---|---|---|
| Amortised cost £m |
Total £m |
Amortised cost £m |
Total £m |
|
| Loan notes | 23.6 | 23.6 | 46.1 | 46.1 |
| Other payables | 6.5 | 6.5 | 3.6 | 3.6 |
| Owed to Group companies | 19.6 | 19.6 | 1.5 | 1.5 |
| Accruals | 17.4 | 17.4 | 11.1 | 11.1 |
| 67.1 | 67.1 | 62.3 | 62.3 |
During the year, the Company entered into transactions, in the ordinary course of business, with related parties. Transactions with subsidiaries during the year were as follows:
| 2016 £m |
2015 £m |
|
|---|---|---|
| Management fees charged | 3.1 | 2.7 |
| Rent receivable | 4.1 | 2.1 |
| Dividends received | 25.4 | 46.9 |
| Impairment of investments in subsidiaries | – | (4.6) |
| Transfer of investment in subsidiaries | (6.3) | – |
| Balances with subsidiaries at 31 December were as follows: | ||
| 2016 £m |
2015 £m |
|
| Amounts owed by related parties | 40.3 | 63.3 |
| Amounts owed to related parties | (19.6) | (1.5) |
There were no terms or conditions attached to these balances.
There were no key management personnel in the Company apart from the Clarkson PLC Directors. Details of their compensation are set out in note 28 to the consolidated financial statements.
The Parent Company had the following subsidiaries at 31 December 2016:
| Company | Registered address | Principal activity | Direct or indirect |
% of equity shares |
|---|---|---|---|---|
| Clarkson Capital Markets LLC | 211 East 7th Street, Suite 620, Austin, TX 78701, USA |
Advice for shipping-related projects | Indirect | 100 |
| Clarkson Cloud Limited | * | Creating electronic products and services for shipping clients |
Indirect | 100 |
| Clarkson Morocco Sarl | 92 Boulevard d'Anfa, Cote Boulevard, 5e étage, Casablanca, Morocco |
Shipbroking | Indirect | 100 |
| Clarkson Port Services Limited | * | Ship agency and port services | Indirect | 100 |
| Clarkson Research Services Limited | * | Research services and products relating to shipping and offshore |
Indirect | 100 |
| Clarkson Shipbroking (Shanghai) Co Limited | Room 111, 3# Building, No 170 Huo Shan Road, Shanghai, China 200032 |
Shipbroking | Indirect | 100 |
| Clarkson Shipping Agency | Tower B, 2nd Floor, 2 El Hegaz Street, Roxi, Heliopolis, Cairo, Egypt |
Ship agency and port services | Indirect | ***48 |
| Clarkson Shipping Services India Private Limited 507-508 The Address, 1 Golf Course | Road, Sector 56, Gurgaon, 1220011 Haryana, India |
Shipbroking | Indirect | 100 |
| Clarkson Valuations Limited | * | Valuation services to the shipping industry |
Indirect | 100 |
| Clarksons Platou (Africa) Limited | * | Shipbroking | Indirect | 100 |
| Clarksons Platou (Australia) Pty Limited | Level 12, 636 St. Kilda Road, Melbourne, VIC 3004, Australia |
Shipbroking | Indirect | 100 |
| Clarksons Platou (Brasil) Ltda | Avenida Rio Branco, 89 Sala 1601, Centro Rio de Janeiro, 20040-004, Brazil |
Shipbroking | Indirect | 100 |
| Clarksons Platou (Hellas) Limited | Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 ** |
Shipbroking | Indirect | 100 |
| Clarksons Platou (Italia) Srl | Piazza R. Rosetti, 3A, 16129 Genoa, Italy | Shipbroking | Direct | 100 |
| Clarksons Platou (Nederland) BV | De Coopvaert, 6th Floor, Blaak 522, 3011 TA, Rotterdam, The Netherlands |
Shipbroking | Indirect | 100 |
| Clarksons Platou (Offshore) Limited | * | Shipbroking | Indirect | 100 |
| Clarksons Platou (South Africa) (Pty) Limited | 2 Amadina Road, Douglasdale Ext 68, Sandton 2146, South Africa |
Shipbroking | Indirect | 100 |
| Clarksons Platou (Sweden) AB | Uppsala Castle, 752 37 Uppsala, Sweden |
Shipbroking | Indirect | 100 |
| Clarksons Platou AS | Munkedamsveien 62C, 0270 Oslo, Norway |
Shipbroking | Direct | 100 |
| Clarksons Platou Asia Limited | Room 3209-14 Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong |
Shipbroking | Indirect | 100 |
| Clarksons Platou Asia Pte. Limited | 12 Marina View, #29-01 Asia Square Tower 2, Singapore 018961 |
Shipbroking | Indirect | 100 |
| Clarksons Platou Commodities USA LLC | 211 East 7th Street, Suite 620, Austin, TX 78701, USA |
Introducing broker for LPG swaps | Indirect | 100 |
* Commodity Quay, St. Katharine Docks, London E1W 1BF, UK
** Trading in Greece
*** Controlled
| Company | Registered address | Principal activity | Direct or indirect |
% of equity shares |
|---|---|---|---|---|
| Clarksons Platou DMCC | Office 2603-4 Reef Tower, Jumeirah Lakes Towers, Sheikh Zayed Road, PO Box 102929, Dubai, UAE |
Shipbroking | Indirect | 100 |
| Clarksons Platou Drift AS | Munkedamsveien 62C, 0270 Oslo, Norway |
Property-related services | Indirect | ***25 |
| Clarksons Platou Futures Limited | * | Brokerage of shipping-related derivative financial instruments |
Direct | 100 |
| Clarksons Platou GmbH | Johannisbollwerk 20, 5th Floor, Hamburg 20459, Germany |
Shipbroking | Indirect | 100 |
| Clarksons Platou Japan K.K. | 2nd Floor Azabu KF Building, 1-9-7 Azabu Juban, Minato-Ku, Tokyo 106-0045, Japan |
Shipbroking | Indirect | 100 |
| Clarksons Platou Legal Services Limited | * | Legal services to the shipping industry | Indirect | 100 |
| Clarksons Platou Offshore (Asia) Pte. Limited | 12 Marina View, #29-01 Asia Square Tower 2, Singapore 018961 |
Shipbroking | Indirect | 100 |
| Clarksons Platou Project Finance AS | Munkedamsveien 62C, 0270 Oslo, Norway |
Shipping and offshore project syndication |
Indirect | 50.02 |
| Clarksons Platou Project Sales AS | Munkedamsveien 62C, 0270 Oslo, Norway |
Equity placements for shipping, offshore and real estate projects and secondary trading of project ownership |
Indirect | ***41 |
| Clarksons Platou Property Management AS | Munkedamsveien 62C, 0270 Oslo, Norway |
Property-related services | Indirect | ***25 |
| Clarksons Platou Real Estate AS | Munkedamsveien 62C, 0270 Oslo, Norway |
Real estate project syndication | Indirect | ***31 |
| Clarksons Platou Securities AS | Munkedamsveien 62C, 0270 Oslo, Norway |
Equity and fixed income sales and trading, research and corporate finance services, including equity and debt capital markets and M&A transactions |
Indirect | 100 |
| Clarksons Platou Securities Inc | 280 Park Avenue, 21st Floor, New York, NY 10017, USA |
Equity and fixed income sales and trading, research and corporate finance services, including equity and debt capital markets and M&A transactions |
Indirect | 100 |
| Clarksons Platou Shipbroking (Switzerland) SA |
Rue de la Fontaine1, 1204 Geneva, Switzerland |
Shipbroking | Indirect | 100 |
| Clarksons Platou Shipping Services USA LLC |
211 East 7th Street, Suite 620, Austin, TX 78701, USA |
Shipbroking | Indirect | 100 |
| Clarksons Platou Structured Asset Finance Limited |
* | Structured asset finance advice for shipping-related projects |
Direct | 100 |
| Clarksons Platou Tankers AS | Munkedamsveien 62C, 0270 Oslo, Norway |
Shipbroking | Indirect | 100 |
| Company Event Management Limited | * | Event management services | Indirect | 100 |
| Gibb Tools Limited | 271 King Street, Aberdeen AB24 5AN, UK |
Supply of tools for industrial, commercial and retail use |
Indirect | 100 |
| H. Clarkson & Company Limited | * | Shipbroking | Indirect | 100 |
* Commodity Quay, St. Katharine Docks, London E1W 1BF, UK
*** Controlled
Other information
Financial statements
Strategic report
Governance
| Company | Registered address Principal activity |
Direct or indirect |
% of equity shares |
|
|---|---|---|---|---|
| LNG Shipping Solutions Limited | * | Shipbroking | Indirect | 100 |
| Manfin Consult AS | Munkedamsveien 62C, 0270 Oslo, Norway |
Shipping and offshore project syndication |
Indirect | 50.1 |
| Maritech Limited | * | Creating electronic products and services for shipping clients |
Indirect | 100 |
| Norwegian Marine Services AS | Munkedamsveien 62C, 0270 Oslo, Norway |
Shipping and offshore project syndication |
Indirect | 50.02 |
| Shiplease Management AS | Munkedamsveien 62C, 0270 Oslo, Norway |
Shipping and offshore project syndication |
Indirect | 50.02 |
| Tokyo Shipping and Trading Limited | Room 3209-14 Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong |
Shipbroking | Indirect | 100 |
| Clarkson Australia Holdings Pty Limited | Level 12, 636 St. Kilda Road, Melbourne, VIC 3004, Australia |
Holding company | Indirect | 100 |
| Clarkson Capital Limited | * | Holding company | Direct | 100 |
| Clarkson Holdings Limited | * | Holding company | Indirect | 100 |
| Clarkson Overseas Shipbroking Limited | * | Holding company | Indirect | 100 |
| Clarkson Research Holdings Limited | * | Holding company | Direct | 100 |
| Clarkson Shipbroking Group Limited | * | Holding company | Direct | 100 |
| Clarkson Shipping Investments Limited | * | Holding company | Direct | 100 |
| Clarksons Platou (USA) Inc | 2711 Centerville Road, Suite 400, Wilmington, DE 19808, USA |
Holding company | Indirect | 100 |
| Clarksons Platou Offshore (Singapore) Pte. Limited |
12 Marina View, #29-01 Asia Square Tower 2, Singapore 018961 |
Holding company | Indirect | 100 |
| Genchem Holdings Limited | * | Holding company | Direct | 100 |
| Afromar Properties (Pty) Limited | 2 Amadina Road, Douglasdale Ext 68, Sandton 2146, South Africa |
Non-trading | Indirect | 100 |
| Bonus Plus Investments Limited | Room 3209-14 Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong |
Non-trading | Indirect | 100 |
| Boxton Holding AS | Munkedamsveien 62C, 0270 Oslo, Norway |
Non-trading | Indirect | 100 |
| Clarkson Logistics (HK) Limited | Room 3209-14 Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong |
Non-trading | Indirect | 100 |
| Clarkson Paris SAS | 90 Avenue des Champs Elysees, 75008, Paris, France |
Non-trading | Direct | 100 |
| Clarkson Port Services Ireland Limited | 6 Northbrook Road, Ranelagh, Dublin 6, Ireland |
Non-trading | Indirect | 100 |
| Clarkson Property Holdings Limited | * | Non-trading | Direct | 100 |
| Clarksons Platou Futures Pte. Limited | 12 Marina View, #29-01 Asia Square Tower 2, Singapore 018961 |
Non-trading | Indirect | 100 |
| Clarksons Platou Securities Limited | * | Non-trading | Direct | 100 |
| Diligent Challenger Limited | Room 3209-14 Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong |
Non-trading Indirect |
100 | |
| Rigships FZCO | Building W3, Office 512, Dubai Airport Free Zone, Dubai, UAE |
Non-trading Indirect |
55 | |
| RS Platou (Hellas) Limited | 58 Arch. Makarios III Avenue, Iris Tower, Office 602, Nicosia, Cyprus |
Non-trading | Indirect | 100 |
| RS Platou (USA) Inc | 701 Brazos Street, Suite 1050, Austin, TX 78701, USA |
Non-trading | Indirect | 100 |
* Commodity Quay, St. Katharine Docks, London E1W 1BF, UK
| Company | Registered address | Principal activity | Direct or indirect |
% of equity shares |
|---|---|---|---|---|
| RS Platou Africa Limited | First Island House, 19-21 Peter Street, St. Helier, Jersey, Channel Islands |
Non-trading | Indirect | 100 |
| RS Platou Energy LLP | 44th Floor, The Leadenhall Building, 122 Leadenhall Street, London EC3V 4AB, UK |
Non-trading | Indirect | 51 |
| RS Platou Finance Singapore Pte. Limited | 12 Marina View, #29-01 Asia Square Tower 2, Singapore 018961 |
Non-trading | Indirect | 50.02 |
| RS Platou Geneve (Dry) SA | 20 Route de Pré-Bois, CP 1852, 1215 Geneva 15, Switzerland |
Non-trading | Indirect | 100 |
| RS Platou Houston Inc | 1999 Bryan Street, Suite 900, Dallas, TX 75201, USA |
Non-trading | Indirect | 100 |
| RS Platou LLP | 44th Floor, The Leadenhall Building, 122 Leadenhall Street, London EC3V 4AB, UK |
Non-trading | Indirect | 51 |
| Stewart Offshore Ghana Limited | Wesley House, Liberia Road, PO Box 6274, Accra, Ghana |
Non-trading | Indirect | 75 |
| Stewart Offshore Services (Jersey) Limited | First Island House, 19-21 Peter Street, St. Helier, Jersey, Channel Islands |
Non-trading | Indirect | 100 |
| Calypso Shipping Investments Limited | * | Dormant | Indirect | 100 |
| Clarkson Dry Cargo Limited | * | Dormant | Indirect | 100 |
| Clarkson Ewings Limited | Hurst House, 15-19 Corporation Square, Belfast BT1 3AJ, UK |
Dormant | Indirect | 100 |
| Clarkson Investment Services (DIFC) Limited | Level 6, Liberty House, Dubai International Financial Centre, PO Box 283869, Dubai, UAE |
Dormant | Indirect | 100 |
| Clarkson IQ Limited | * | Dormant | Indirect | 100 |
| Clarkson Logistics Limited | * | Dormant | Indirect | 100 |
| Clarkson Market Analysis Limited | * | Dormant | Indirect | 100 |
| Clarkson Sale and Purchase Limited | * | Dormant | Indirect | 100 |
| Clarkson Shipbrokers Limited | * | Dormant | Indirect | 100 |
| Clarkson Shipping Services Acquisition USA LLC |
1333 West Loop South, Suite 1525, Houston, TX 77027, USA |
Dormant | Indirect | 100 |
| Clarkson Tankers Limited | * | Dormant | Indirect | 100 |
| Coastal Shipping Limited | * | Dormant | Indirect | 100 |
| EnShip Limited | 70 St. Clement Street, Aberdeen AB11 5BD, UK**** |
Dormant | Indirect | 100 |
| Halcyon Shipping Limited | * | Dormant | Indirect | 100 |
| J. O. Plowright & Co. (Holdings) Limited | * | Dormant | Direct | 100 |
| Levelseas Limited | * | Dormant | Indirect | 100 |
| LNG UK PLC | * | Dormant | Direct | 100 |
| Marinet (Ship Agencies) Limited | * | Dormant | Indirect | 100 |
| Michael F. Ewings (Shipping) Limited | Hurst House, 15-19 Corporation Square, Belfast BT1 3AJ, UK |
Dormant | Indirect | 100 |
| Oilfield Publications Limited | * | Dormant | Indirect | 100 |
* Commodity Quay, St. Katharine Docks, London E1W 1BF, UK
**** Changed in 2017 to 303 King Street, Aberdeen AB24 5AP, UK
Strategic report
Governance
Financial statements
Other information
| Company | Registered address | Principal activity | Direct or % of equity indirect shares |
|---|---|---|---|
| RS Platou AS | Munkedamsveien 62C, 0270 Oslo, Norway |
Dormant | Indirect 100 |
| RS Platou Economic Research AS | Munkedamsveien 62C, 0270 Oslo, Norway |
Dormant | Indirect 100 |
| RS Platou Offshore AS | Munkedamsveien 62C, 0270 Oslo, Norway |
Dormant | Indirect 100 |
| RS Platou Shipbrokers AS | Munkedamsveien 62C, 0270 Oslo, Norway |
Dormant | Indirect 100 |
| Samuel Stewart & Co (London) Limited | * | Dormant | Indirect 100 |
| Shipvalue.net Limited | * | Dormant | Indirect 100 |
| Small and Co. (Shipping) Limited | * | Dormant | Indirect 100 |
| Stewart Offshore Services Limited | * | Dormant | Indirect 100 |
| The Stewart Group Limited | * | Dormant | Indirect 100 |
| Waterfront Services Limited | Hurst House, 15-19 Corporation Square, Belfast BT1 3AJ, UK |
Dormant | Indirect 100 |
* Commodity Quay, St. Katharine Docks, London E1W 1BF, UK
| Aframax | A tanker size range defined by Clarksons as between 80-120,000 dwt. |
|---|---|
| AG | Arabian Gulf. |
| AHTS | Anchor Handling Tug and Supply vessel. Used to tow offshore drilling and production units to location and deploy their anchors, and also perform a range of other support roles. |
| Ballast voyage | A voyage with no cargo on board to get a ship in position for the next loading port or docking. On voyage the ship is said to be in ballast. |
| Bareboat charter | A hire or lease of a vessel from one company to another (the charterer), which in turn provides crew, bunkers, stores and pays all operating costs. |
| BHP | Brake horse power. |
| Bulk cargo | Unpackaged cargoes such as coal, ore and grain. |
| Bunkers | A ship's fuel. |
| Cabotage | Transport of goods between two ports or places located in the same country, often restricted to domestic carriers. |
| Capesize (cape) | Bulk ship size range defined by Clarksons as 100,000 dwt or larger. |
| Capesize 4tc | An index derived from an average of four Capesize time charter rates, published by the Baltic Exchange. |
| Cbm | Cubic metres. Used as a measurement of cargo capacity for ships such as gas carriers. |
| Cgt | Compensated gross tonnage. This unit of measurement was developed for measuring the level of shipbuilding output and is calculated by applying a conversion factor, which reflects the amount of work required to build a ship, to a vessel's gross registered tonnage. |
| Charterer | Cargo owner or another person/company who hires a ship. |
| Charter-party | Transport contract between shipowner and shipper of goods. |
| CIF | Cost, insurance and freight. Delivery of goods is the seller's responsibility to the port of discharge. The freight is paid for by the supplier of goods. |
| ClarkSea index | A weighted average index of earnings for the main vessel types where the weighting is based on the number of vessels in each fleet sector. |
| Clean products | Refined oil products such as naphtha. |
| COA | Contract of Affreightment. An agreement to transport a defined amount of cargo at an agreed freight rate, with the shipowner choosing the ship. |
| Combination carrier | Ship capable of carrying oil or dry cargo, thereby increasing the productivity of the vessel. Typically termed OBO or Ore/Oiler. |
| Containership | A cargo ship specifically equipped with cell guides for the carriage of containerised cargo. |
| Crude oil | Unrefined oil. |
| CST | Centistokes. A measure of viscosity used to classify marine fuels. |
| Daily operating costs | The costs of a vessel's technical operation, crewing, insurance and maintenance, but excluding costs of financing, referred to in the industry as opex. |
| Demurrage | Money paid to shipowner by charterer, shipper or receiver for failing to complete loading/discharging within time allowed according to charter-party. |
| Dirty products | Less refined oil products such as fuel oil. |
| Dry (market) | Generic term for the bulk market. |
| Dry cargo carrier | A ship carrying general cargoes or sometimes bulk cargo. |
| Dry docking | To put a vessel into a dry dock for inspection, repair and maintenance. Normally done on a regular basis. |
| Dwt | Deadweight tonne. A measure expressed in metric tonnes (1,000 kg) or long tonnes (1,016 kg) of a ship's carrying capacity, including bunker oil, fresh water, crew and provisions. This is the most important commercial measure of the capacity. |
| E&P | Exploration and Production. |
| FFA | Forward Freight Agreement. A cash contract for differences requiring no physical delivery based on freight rates on standardised trade routes. |
|---|---|
| FOB | Free on Board. Cost of the delivery of goods is the seller's responsibility only up to the port of loading. The freight is paid for by the buyer of the goods. |
| Forward order book (FOB) | Estimated commissions collectable over the duration of the contract as principal payments fall due. The forward order book is not discounted. |
| FOSVA | Forward Ship Value Agreement. An FFA based product designed specifically for the sale and purchase market. |
| FPSO | Floating Production, Storage and Offloading unit. Used offshore for the production and processing of hydrocarbons in remote deepwater areas. |
| Freight rate | The agreed charge for the carriage of cargo expressed per tonne of cargo (also Worldscale in the tanker market) or as a lump sum. |
| FSO | Floating Storage and Offloading. A vessel used for the storage and offloading of crude oil or gas, typically on an offshore field, but occasionally also at a port or terminal. |
| FSRU | Floating Storage & Regasification Unit. This vessel type acts as a floating discharge terminal, typically shore-side within a port, to allow a discharge solution for LNG carriers in ports which may only have seasonal gas import needs, or need a lower-cost solution than a land-based regasification terminal. |
| FSV | Fast Supply Vessel. A type of vessel specialised for crew transport to offshore platforms, along with some transport of supplies. Typically found in regions such as the US Gulf, Mexican Bay of Campeche and West Africa, which have relatively dense fixed platform infrastructure requiring crew changes. |
| Handysize | Bulk carrier size range defined by Clarksons as 10-40,000 dwt or tanker size range defined by Clarksons as 10-60,000 dwt. |
| Handymax | Bulk carrier size range defined by Clarksons as 40-65,000 dwt. Includes supramax and ultramax vessels. |
| IMO | International Maritime Organisation. A United Nations agency devoted to shipping. |
| ISM code | International Safety Management code for the safe operation of ships and for pollution prevention as adopted by the IMO. |
| LGC | Large Gas Carrier. Vessel defined by Clarksons as 40-65,000 cbm. |
| LNG | Liquefied Natural Gas. |
| LPG | Liquefied Petroleum Gas. |
| LR1 | Long Range 1. Coated products tanker defined by Clarksons as 60,000-80,000 dwt. |
| LR2 | Long Range 2. Coated products tanker defined by Clarksons as 80,000-120,000 dwt. |
| MGC | Mid-sized Gas Carrier. Vessel defined by Clarksons as 20-40,000 cbm. |
| MLP | Master Limited Partnership. A limited partnership that is publicly traded on a securities exchange. |
| MOA | Memorandum of Agreement. |
| MR | Medium Range. A product tanker of around 45-60,000 dwt. |
| MT | Metric tonne (see tonne). |
| NGL | Natural gas liquids. |
| OBO | Oil, Bulk, Ore carrier (see combination carrier). |
| Oil tanker | Tanker carrying crude oil or refined oil products. |
| OPEC | Organisation of the Petroleum Exporting Countries. |
| OSV | Offshore Support Vessels. Such as AHTSs and PSVs. Ships engaged in providing support to offshore rigs and oil platforms. |
| OTC | Over the counter. Directly between two parties, without any supervision of an exchange. |
| Panamax | Bulk carrier size range defined by Clarksons as 65-100,000 dwt or tanker size range defined as 60-80,000 dwt. Containership size range defined as vessels 3,000+ TEU capable of transiting the Panama Canal. |
| Product tanker | Tanker that carries refined oil products. |
|---|---|
| PSV | Platform Supply Vessel. Used in supporting offshore rigs and platforms by delivering materials to them from onshore. |
| Reefer | A vessel capable of handling refrigerated cargoes such as meat, fish and fruit. |
| Ro-Ro | Ship with roll-on roll-off ramps for wheeled or tracked cargo. |
| Semi-refrigerated | Semi-refrigerated gas carriers. Ships which employ a combination of refrigeration and pressurisation to maintain the transported gas in liquid form. |
| Shipbroker | A person/company who on behalf of a shipowner/shipper negotiates a deal for the transportation of cargo at an agreed price. Shipbrokers also act on behalf of shipping companies in negotiating the purchasing and selling of ships, both secondhand tonnage and newbuilding contracts. |
| Shuttle tanker | Tanker carrying oil from offshore fields to terminals. |
| SOx/NOx | Sulphur Oxides/Nitrogen Oxides. A ship's emissions which are subject to regulatory limits. |
| Spot business | Broker commission negotiated and invoiced within the same business year. |
| Spot market | Short-term contracts for voyage, trip or short-term time charters, normally no longer than three months in duration. |
| Suezmax | A tanker size range defined by Clarksons as 120-200,000 dwt. |
| Supramax | A sub-sector of the wider handymax bulk carrier fleet defined by Clarksons as 50-60,000 dwt. |
| SURF | Subsea, Umbilicals, Risers and Flowlines. A term for the type of contract often agreed between an offshore construction services company and a field operator for construction work on a field which will need subsea production infrastructure. |
| TEU | 20-foot Equivalent Units. The unit of measurement of a standard 20 foot long container. |
| Time charter | An arrangement whereby a shipowner places a crewed ship at a charterer's disposal for a certain period. Freight is customarily paid periodically in advance. The charterer also pays for bunker, port and canal charges. |
| Time Charter Equivalent (TCE) |
Gross freight income less voyage costs (bunker, port and canal charges), usually expressed in US\$ per day. |
| Tonne | Imperial/Metric tonne of 2,240 lbs/1,000 kilos (2,204 lbs). |
| ULCC | Ultra Large Crude Carrier. Tanker of more than 320,000 dwt. |
| Ultramax | A modern sub-sector of the wider handymax bulk carrier fleet, defined by Clarksons as 60-65,000 dwt, including some vessels up to 70,000 dwt. |
| VLCC | Very Large Crude Carrier. Tanker over 200,000 dwt. |
| VLGC | Very Large Gas Carrier. Vessel defined by Clarksons as 65,000 cbm or larger. |
| Voyage charter | The transportation of cargo from port(s) of loading to port(s) of discharge. Payment is normally per tonne of cargo, and the shipowner pays for bunker, port and canal charges. |
| Voyage costs | Costs directly related to a specific voyage (e.g. bunker, port and canal charges). |
| Wet (market) | Generic term for the tanker market. |
| Worldscale (WS) | An international index of freight for tankers. Worldscale is a schedule of freight rates for a standard ship in US dollars per tonne of oil for an array of oil routes. The rates listed in the table are designated as Worldscale Flat or WS100 and are revised annually. |
Parcel tanker Tanker equipped to carry several types of cargo simultaneously.
| 2016* £m |
2015* £m |
2014* £m |
2013* £m |
2012*† £m |
|
|---|---|---|---|---|---|
| Revenue | 306.1 | 301.8 | 237.9 | 198.0 | 176.2 |
| Cost of sales | (8.9) | (10.3) | (13.3) | (6.2) | (6.3) |
| Trading profit | 297.2 | 291.5 | 224.6 | 191.8 | 169.9 |
| Administrative expenses | (253.0) | (242.0) | (191.3) | (166.9) | (150.8) |
| Operating profit | 44.2 | 49.5 | 33.3 | 24.9 | 19.1 |
| Profit before taxation | 44.8 | 50.5 | 33.8 | 25.1 | 20.0 |
| Taxation | (11.2) | (12.6) | (8.7) | (6.9) | (6.0) |
| Profit for the year | 33.6 | 37.9 | 25.1 | 18.2 | 14.0 |
| * Before exceptional items and acquisition related costs. |
† Restated for the effects of IAS 19 (revised).
| 2016 | 2015 | 2014 | 2013 | 2012 | |
|---|---|---|---|---|---|
| £m | £m | £m | £m | £m | |
| Net cash inflow/(outflow) from operating activities | 45.6 | 24.7 | 37.8 | 22.8 | (4.4) |
| 2016 £m |
2015 £m |
2014 £m |
2013 £m |
2012 £m |
|
|---|---|---|---|---|---|
| Non-current assets | 357.9 | 310.7 | 65.7 | 63.9 | 65.2 |
| Inventories | 0.7 | 0.9 | 1.4 | 0.9 | – |
| Trade and other receivables (including income tax receivable) | 59.0 | 63.0 | 44.2 | 47.8 | 33.5 |
| Current asset investments | 29.8 | 5.7 | 25.3 | 25.2 | 25.2 |
| Cash and cash equivalents | 154.0 | 168.4 | 152.9 | 96.9 | 89.4 |
| Current liabilities | (172.4) | (168.5) | (108.1) | (89.4) | (72.2) |
| Non-current liabilities | (22.3) | (39.3) | (14.1) | (7.6) | (15.1) |
| Net assets | 406.7 | 340.9 | 167.3 | 137.7 | 126.0 |
| 2016 | 2015 | 2014 | 2013 | 2012 | |
|---|---|---|---|---|---|
| Earnings per share – basic* | 105.2p | 121.9p | 134.2p | 98.0p | 74.8p |
| Dividend per share | 65p | 62p | 60p | 56p | 51p |
* Before exceptional items and acquisition related costs.
London Registered office Clarkson PLC Commodity Quay St. Katharine Docks London E1W 1BF United Kingdom Registered number: 1190238
Contact: Andi Case Tel: +44 20 7334 0000 www.clarksons.com
Ipswich
Maritime House 19a St. Helens Street Ipswich IP4 1HE United Kingdom Contact: David Rumsey
Tel: +44 1473 297 300
Ledbury 15 The Homend Ledbury Herefordshire HR8 1BN United Kingdom Contact: Shaun Sturge Tel: +44 1531 634 561
Aberdeen 303 King Street Aberdeen Aberdeenshire AB24 5AP United Kingdom Contact: Innes Cameron Tel: +44 1224 211 500 271 King Street Aberdeen Aberdeenshire AB24 5AN United Kingdom Contact: Sean Maclean Tel: +44 1224 620 944 City Wharf Shiprow Aberdeen Aberdeenshire AB11 5BY United Kingdom
Contact: Paul Love Tel: +44 1224 256 600
Belfast Hurst House 15-19 Corporation Square Belfast BT1 3AJ United Kingdom Contact: Michael Ewings Tel: +44 2890 242 242
Level 2 112 Wellington Parade East Melbourne VIC 3002 Australia Contact: Matthew Russell Tel: +61 3 9867 6800 Perth Level 10 16 St. Georges Terrace Perth WA 6000 Australia
Contact: Mark Rowland Tel: +61 8 6210 8700
Brazil 16th Floor Manhattan Tower Avenida Rio Branco 89 Suite 1601 Rio de Janeiro 20.040-004 Brazil Contact: Jens Behrendt
Tel: +55 21 3923 8803 Hong Kong
3209-3214 Sun Hung Kai Centre 30 Harbour Road Wanchai Hong Kong Contact: Martin Rowe Tel: +852 2866 3111
Room 1303–1304 Standard Chartered Tower 201 Century Avenue Shanghai China 200120 Contact: Cheng Yu Wang Tel: +86 21 6103 0100
Alexandria 31 Elbatal Ahmed Abdel Aziz Street Kasr El Ahlam Building 3rd Floor Apartment 305 Kafr Abdo Alexandria Egypt Contact: Magdy Abbas Tel: +20 3 543 2640 Cairo 2nd Floor 2 El Hegaz Street Roxi Heliopolis Cairo Egypt Contact: Mohamed Refaat Metawei Tel: +20 2 2454 0509
Johannisbollwerk 20, 5. fl 20459 Hamburg Germany Contact: Jan Aldag Tel: +49 40 3197 66 110
62 Kifissias Avenue 15125 Marousi Greece Contact: Savvas Athanassiades Tel: +30 210 458 6700
507–508 The Address 1 Golf Course Road Sector 56 Gurgaon 122011 Haryana India
Contact: Amit Mehta Tel: +91 124 420 5000
Italy Piazza R. Rossetti 3A
16129 Genoa Italy Contact: Massimo Dentice Tel: +39 0 10 55401
2nd Floor Azabu KF Building 1-9-7 Azabu Juban Minato-Ku Tokyo 106-0045 Japan Contact: Robert Chie Tel: +81 3 3584 3590
92 Boulevard d'Anfa Cote Boulevard 5e étage Casablanca Morocco Contact: Hassan Benjelloun Tel: +212 522 493970
De Coopvaert 6th Floor Blaak 522 3011 TA Rotterdam The Netherlands Contact: Hans Brinkhorst
Norway Munkedamsveien 62C 0270 Oslo Norway Contact: Peter M. Anker Tel: +47 2311 2000
Johannesburg PO Box 5890 Rivonia Johannesburg 2128 South Africa Contact: Simon Lester
Tel: +27 11 803 0008 Cape Town
Highfield Road Green Point Cape Town 8001 South Africa Contact: Simon Pethick Tel: +27 21 440 3886
Uppsala Castle 75237 Uppsala Sweden Contact: Torbjorn Helmfrid Tel: +46 18 502 075
Rue de la Fontaine 1 1204 Geneva Switzerland Contact: Joe Green
Tel: +41 22 308 9900
14th Floor Gold Tower Jumeirah Lakes Towers PO Box 102929 Dubai UAE Contact: Essam Bella
Tel: +971 4 450 9400
Houston 1333 West Loop South Suites 1525 and 1550 Houston Texas 77027 USA
Contact: Roger Horton Tel: +1 713 235 7400
21st Floor 280 Park Avenue New York NY 10017 USA Contact: Omar Nokta Tel: +1 212 317 7080
Contact: Philipp Bau Tel: +1 212 314 0970
FSC® – The Forest Stewardship Council® runs a global certification system that ensures timber produced in certified forests has been traced from the tree to the end user. The FSC® certification claim can only be used by certified printers.
This report is available at: www.clarksons.com
Thank you.
Clarkson PLC Commodity Quay St. Katharine Docks London E1W 1BF United Kingdom +44 20 7334 0000 www.clarksons.com
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