CEO's review

I am delighted to report that the 2021 results represent a record performance for Clarksons. They are testament to the strategy which we have followed and communicated to stakeholders over recent years.

For some years we have highlighted that tightening of shipping capacity against increased demand and the requirement for decarbonising the trade would be key drivers for our business. But it is important to remember that our performance in 2021 was delivered against the background of COVID-19-induced congestion and supply chain issues which added further complexity to market dynamics. Of course, COVID-19 did not just have an impact on ports and logistics, but impacted everyone in all parts of the world. Indeed, even today, there are still many of our teams who are unable to travel, restricted in their access to meet clients and colleagues in person and suffering from the impact of illness and changed working conditions both for themselves and their families.

It is therefore with great pride that I reflect on the strength of our people in all sectors, roles and geographies, together comprising the best team in the world of shipping, offshore and renewables. I thank every member of staff for their hard work and dedication throughout 2021. It has been a challenging year, but the team has again shown its quality in successfully navigating the business through this period and positioning it to thrive as more favourable market conditions return.

2021 was a year when we saw our cargo clients, driven by consumer demand and regulatory requirements, increasingly focus on the actions needed to reduce harmful emissions. We have therefore created a dedicated Green Transition team to co-ordinate, focus on and deliver Clarksons’ expert services to our clients. Analysis, research, data, advice, execution expertise, support services, technology and finance are essential ingredients in all our clients’ decisions, and the breadth and depth developed throughout Clarksons in recent years is now proving its worth and providing real added
value to the industry.

Broking

The shipping markets performed well in 2021, with the average ClarkSea Index (pg24 of the Annual Report) being 93% higher than that of 2020. However, the strategy to be best in class across all verticals within shipping and offshore has never been more important. 2021 saw the most challenging period for the tanker markets, offset by strength in other markets, particularly the dry cargo and container chartering markets and in asset business within sale and purchase and newbuilding where each of these teams performed particularly well. The investment we have made in people, geographic expansion and the tools for trade of our brokers has certainly improved efficiency and increased our footprint globally. This has meant that we are better placed to benefit from improving markets.

The container chartering market performed very strongly driven by a combination of factors, including a strong rebound in global container volumes and major logistical disruption caused by the pandemic. Port congestion significantly reduced available capacity, which is expected to continue throughout 2022.

Dry bulk rates were at their highest levels for over a decade, helped by good growth in minor bulks and grains, and the Baltic Dry Index reached a 12-year high in the fourth quarter.

The LNG market showed strength in 2021, with tonnage demand and LNG trade volumes both increasing. The importance of this market is growing, and the expertise within the Group is developing alongside our LPG, ammonia and petrochemical gas teams.

After many years of recession, the offshore oil and gas market also improved, spurred on by the increased oil price and the longer-term outlook for greater demand. Increasing strategic energy needs and a drive to expand beyond fossil fuels has driven an increase in the offshore renewables market, where our market-leading teams around the world have increased their transaction revenues and volumes. Our expertise, market analysis and insight are helping our clients in their push for expansion in this area.

The tanker market, as already highlighted, was the weakest it has been for some 30 years, with demand for oil remaining low, impacted particularly by reduced travel and consumption. This was accentuated year on year, due to the extremely high rates in the first half of 2020
arising from the contango in the oil price.

Finally, the sale and purchase team has had a very high volume year, as increasing numbers of people want to buy into the upward trend in rates. Our newbuilding team has also been incredibly busy, particularly in LNG and containers tonnage, with berth space, as anticipated due to reduced overall capacity amongst shipyards, now full for the foreseeable future.

A key focus for growth in the last few years within Broking has been our projects and period business, comprising both longer-term charters and newbuilding business, which made material profit in 2021 and has enabled us to significantly build the forward order book. Unlike many of our competitors, we disclose only that element of the forward order book we believe to be secure and due to be invoiced in the following year. At the year-end, the forward order book for 2022 was US$165m, 42.2% higher than the US$116m brought forward in 2021.

Overall, segmental profit before taxation from Broking was £73.6m, up £18.2m over the year, with a margin of 21.6%.

Financial

Our Financial division has had an exceptional year, reporting £13.3m of profit (2020: £2.5m). Within Clarksons Platou Securities, a total of 40 large corporate finance deals have been executed in the year, raising in excess of US$3.5bn across metals and minerals, shipping, offshore energy and renewables. In addition, within project finance, our real estate team launched 24 new projects and sold 11 existing projects and our shipping and offshore team placed a total of 27 vessels and sold a further 14.

Green transition

The green transition is becoming increasingly important and we believe it will be one of the key drivers of the demand and supply dynamics in shipping for the foreseeable future, as regulation becomes an everincreasing priority. Our Green Transition team, launched in 2021, has seen very strong client demand and is playing a hugely important role in assisting clients in reducing emissions and pushing forward the agenda of positive change.

Research
The Research division continued to perform strongly during the period with sales of digital products across both shipping and offshore growing in excess of expectations. The impact of exchange rate movement dampened the results from valuation income year on year as this revenue is charged in US dollars, but we are now seeing a resurgence in this income stream and, together with digital sales, the future is looking strong as clients have an increasing need for data to assess and benchmark decisions.

Support

The Support division performed strongly over the course of the year, with our agency, supplies, customs clearance and freight forwarding businesses contributing to a return to profit levels last seen before the pandemic. We see growth opportunities in the future, from both hiring good people and corporate activity, across all areas of Support including those particularly focused on renewables.

Sea/

The Sea/ platform continues to make progress and we have made real strides over the year in commercialising the technology that we believe will become so vital to the shipping industry. The launch of Sea/fix in January 2021 to the mining community, for negotiation and execution of business, has been a success with a significant number of major players now signed-up users and putting all their business through the platform. In the second half of 2021 we also launched SeaCarbon/, a complete CO2 shipping toolkit for the maritime industry which has now tracked more than 1,400 voyages, equating to 9.9m nautical miles, and resulting in the saving of 4.2m tonnes of CO2.

Brand update

Since the acquisition of RS Platou ASA in 2015, our Broking and Financial divisions have used the combined brand Clarksons Platou. Now that all teams are fully integrated, we have decided to align the branding of all businesses within the Group by referring to just Clarksons.

Looking forward to 2022

The supply/demand dynamics in the industry continue to be positive as the supply of new ships lags behind the ever-increasing demand for vessels driven by the green transition, increasing demand for commodities and a recovery in the global economy. This means that we start 2022 with a positive backdrop for our markets.

As the impact from COVID-19 reduces, we are anticipating increased business costs as we see a return to business travel and corporate hospitality, which has been virtually non-existent during the pandemic. Nevertheless, our increased forward order book, combined with the
strength of spot markets, a positive pipeline in Financial and continued growth across Research, Support and Sea/, means that we approach 2022 from a position of strength.

The outlook for Clarksons remains strong and we believe the business will continue to benefit from its marketleading position.

Andi Case

Chief Executive Officer

4 March 2022

Back to Annual Report 2021