Market news and results from Clarkson PLC.
Market News
Friday’s mixed US jobs report had something for bulls and bears: the 187,000 growth in payrolls was softer than estimated, wages topped forecasts, and unemployment fell. With 47 days to go before the next Federal Reserve decision — and so many other economic reports in between — the one thing that really hasn’t changed was the sense the Fed is close to wrapping up its hiking cycle.
Ukraine’s drone attacks on shipping put Russia’s commodity exports at risk, given most of its grain and up to 20% of its oil go via the Black Sea route. Significantly higher insurance and shipping costs are likely to follow, as are added risks to global energy and agricultural markets. Wheat futures in Chicago climbed more than 2% in Asian hours this morning. Brent Crude ($86 a barrel) hovered at the highest levels in four months, underpinned by Saudi Arabia and Russia’s announcement that they would extend voluntary supply cuts through next month to bolster oil prices.
This morning in Asia, Japanese shares advanced (Nikkei 225, +0.2%) as upbeat earnings and stable domestic bond yields offset geopolitical headwinds. Elsewhere, Asian markets moved lower: Hang Seng (-0.3%); Shanghai Composite (-0.8%). The S&P futures are currently predicting a 0.5% rise at the open this afternoon, while the FTSE 100 is trading 0.3% lower at 7,542. Gold trades at $1,937 an ounce.
The UK’s red-hot labour market showed signs of loosening, with recruiters reporting a strong jump in the number of people looking for work and a drop in demand for staff. The REC’s measure of total staff availability rose to 61.4 last month, the highest since 2009, except for the period around the pandemic. Demand for permanent staff fell to the lowest in almost three years. Sterling currently trades at $1.2730 and €1.1591.
Bond traders will get little respite this week, which brings the biggest Treasury refunding slate since last year and a pivotal inflation reading. Yields on 10- and 30-year Treasuries are roughly 20 bps or more higher than just a couple weeks ago. The question is whether they are high enough to entice buyers as the Treasury sells a combined $103bn of 3-, 10- and 30-year debt in the days ahead.
Source: Bloomberg
Company News
This morning, Clarkson PLC released its half-year results and reiterated its expectations for the full year. The shares, which are part of the FTSE 250 Index, are unchanged in early trading this morning.
Clarksons is the world’s leading provider of integrated services and investment banking capabilities to the shipping and offshore markets. The group plays an intermediary role in the movement of most commodities around the world. However, the shipping sector is cyclical and volatile, and has experienced varied market conditions over the last few years. The green transition is a global megatrend which is underpinning change in shipping. As shipowners and charterers drive to meet their net zero commitments, all are looking closely at supply chains for a lower emissions option. In addition, the industry is faced with increased digitalisation and ever more complex global trade dynamics. In response, Clarksons has scaled up its offering to advise its clients how to navigate the changing markets and take advantage of opportunities wherever they arise.
During the first six months of 2023, the business enjoyed a continuation of the positive momentum seen in 2022. In an uncertain geo-political and global macroeconomic environment, the company is now starting to see the softening of rates in some sectors, much of which was anticipated post-COVID-19. During the period, revenue rose 20% to £614m, while underlying profit before tax grew by 26% to £53.1m.
The Broking division, which accounts for 80% of group revenue, enjoyed a very strong first half, with standout performances from the tanker, specialised product, gas, offshore, and sale and purchase sectors. Profit before taxation grew by 24% to £58.2m, with a margin of 22.6%.
The Financial division had a tougher period, with profit falling by 12% to £5.0m. There was an increase in profits from banking and shipping project finance, reflecting an increase in transaction flow and value from core markets, and a reduction in profits from real estate project finance as the changing economic backdrop and increase in interest rates reduced activity.
The Support division experienced profit growth of 70% to £3.4m, while Clarksons Research grew by 9% to £3.7m.
The highly cash generative nature of Clarkson’s business, supported by a strong balance sheet has enabled the group to continue to invest in the business to capitalise on the upturn in its markets. Free cash resources steady at £128.2m. The company has delivered 21 years of consecutive dividend growth and has today announced a 3.4% increase in its half-year payout to 30p.
In the outlook statement, the group highlights that while it is mindful of the currency headwinds and softening rate environment, which are expected to result in a more balanced split between the first and second half, expectations for the full year are unchanged.
Source: Bloomberg