Shipping firm Clarkson boasts record annual result

Clarkson posted another record annual performance, declaring a 20th consecutive year of dividend growth as global trade disruption kept freight rates high.

The world’s largest shipping services provider revealed that its pre-tax profit rose by £40 million to £100.1 million last year, mainly thanks to a strong performance from its brokerage division.

Since Covid-related restrictions have eased around the world, freight rates have soared amid major port congestion caused by rising demand for goods and a shortage of ships.

Clarkson Shares were 6.1 per cent, or 200 pence, higher at £35.05 late Monday morning, making it the second strongest performer on the FTSE 250 Index after Aston Martin Lagonda.

The share price has grown by about a quarter in the past two years.

The large-scale invasion of Ukraine by Russia and the resulting rise in oil and gas prices, already rising on the back of post-Covid demand, has kept the cost of transportation of products high.

As a result of the conflict, many ships had to pick up certain dry bulk commodities such as grain and coal, as well as petroleum or liquefied natural gas from places much further afield or make longer voyages for safety reasons.

This led to the ClarkSea Index – a daily weighted average of shipping revenues and a key measure of shipping – rising 30 percent to a record $37,253 per day.

Although freight rates fell towards the end of 2022 as port disruption eased and container trade came under greater pressure, Clarkson still managed to increase total revenue by more than a third to £603.8 million.

After paying investors an interim payout of 29 pence per share in September, the group has recommended a final dividend of 64 pence per share, meaning it has now achieved two decades of consecutive dividend increases.

Against a backdrop of heightened economic uncertainty, Clarkson told investors on Monday that “chronic underinvestment” and the need to decarbonise the shipping industry should further boost growth.

Chief executive Andi Case said: “While the global geopolitical outlook for 2023 and beyond remains uncertain, the green transition is driving significant activity across our industry.

“This, coupled with a supply-demand balance that will create significant supply-side constraints that will support the market, and our strong order book, gives us confidence in the outlook for Clarksons.”

Gerald Khoo, an analyst with broker Liberum, said the long-standing decline in shipyard volumes has been exacerbated by a shortage of bank financing, contributing to the underordering of dry bulk and tankers.

Capacity is being further reduced due to environmental legislation, leading to early retirement of some vessels as many financiers are unwilling to finance the retrofitting of older vessels.