"Another record financial performance. Strong cash generation enables us to continue our progressive dividend policy for the 20th consecutive year."
Jeff WoydaChief Financial Officer & Chief Operating Officer
2022 was another record year for the Group. Revenue increased 36.2% to £603.8m (2021: £443.3m) and underlying profit before taxation (classed as an APM*) increased by 45.4% to £100.9m (2021: £69.4m).
The Broking division has been the main driver for this growth, continuing to benefit from the long-term strategy to increase our global footprint and be best-in-class across every segment of shipping and offshore. As we went into 2022, the low level of order book as a percentage of the world fleet combined with the high utilisation highlighted last year, created the backdrop for stronger freight rates and asset prices in many verticals. Overall, Broking generated a segmental profit before taxation of £117.6m in the year (2021: £73.6m), with an increased margin of 23.7% (2021: 21.6%) driven by strong performances in dry bulk, specialised and offshore, together with a much-improved performance in tanker markets.
The Financial division experienced tougher markets compared to 2021, generating a segmental profit before taxation of £7.8m and margin of 15.7% (2021: £13.3m and 23.8%), reflecting more muted activity in capital markets across shipping, metals and minerals and renewables, and more sporadic deal flow in shipping, offshore and real estate project finance, particularly in the second half of the year. The Support and Research divisions experienced good revenue and profit growth, with our port services business continuing its steady improvement following the COVID-19 pandemic, and Clarksons Research benefiting from the investment in enhancing its digital products.
The Group incurred underlying administrative expenses1 of £481.2m (2021: £355.7m) in the year, an increase of 35.3%, largely due to an increase in variable remuneration as a result of the improved business performance. Within these expenses, central costs unallocated to business segments increased to £36.6m (2021: £25.2m), reflecting an increase in variable remuneration from higher profits, further investment into central IT systems, website, branding and people, and increased Sea/ technology amortisation costs as the platform increases maturity of use. Sea/ costs on a cash basis have also increased slightly from 2021 with additional investment in management and sales capabilities to support the growing business and fewer costs being capitalised in 2022 than in previous years.
During the first half of the year, the Gibb Group acquired PPE Suppliers Limited for £0.2m, broadening the reach of our tools and supplies offering within the Support segment. The Group completed two acquisitions under the Maritech brand during the second half of the year: Chinsay, a business which enhances our capabilities and client base within the dry cargo contract management space, and Setapp, a business expert in maritime software development, with a view to further growing and developing Sea/. Chinsay was acquired for a total consideration of US$3.2m and Setapp for €3.0m.
Acquisition-related costs include £0.2m (2021: £0.2m) relating to amortisation of intangibles and £0.3m (2021: £0.1m) of cash and share-based payments spread over employee service periods. A further £0.3m (2021: nil) is included relating to the Chinsay and Setapp acquisitions. We estimate acquisition-related costs for 2023 to be £0.5m assuming no further acquisitions are made.
The Group’s underlying effective tax rate (classed as an APM*) was 20.4% (2021: 21.2%), slightly lower than the prior year as a result of a one-off tax credit in the US, though still reflecting the broad international operations of the Group. The Group’s reported effective tax rate was 20.5% (2021: 21.2%).
Earnings per share
Underlying basic earnings per share (classed as an APM*) increased by 51.1% to 250.3p (2021: 165.6p) and is calculated as underlying profit after taxation (classed as an APM*) attributable to equity holders of the Parent Company divided by the weighted average number of ordinary shares in issue during the year. The reported basic earnings per share was 247.9p (2021: 164.6p).
Forward order book (‘FOB’)
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 during the current financial year are recognised as revenue accordingly. Those amounts which are not yet invoiced, and therefore not recognised as revenue, are held in the FOB. In challenging markets, such amounts may be cancelled or deferred into later periods.
The Directors review the FOB at the year-end and only publish the FOB items which will, in their view, be invoiced in the following 12 months. At 31 December 2022, this estimate was 30.9% higher than the prior year at US$216m (31 December 2021: US$165m).
The Board is recommending a final dividend in respect of 2022 of 64p (2021: 57p) which, subject to shareholder approval, will be paid on 26 May 2023 to shareholders on the register at the close of business on 12 May 2023.
Together with the interim dividend in respect of 2022 of 29p (2021: 27p), this would give a total dividend of 93p for 2022, an increase of 10.7% on 2021 (2021: 84p). In taking its decision, the Board took into consideration the Group’s 2022 performance, balance sheet strength, ability to generate cash and FOB.
This increased dividend represents the 20th consecutive year that the Board has raised the dividend.
The average sterling exchange rate during 2022 was US$1.23 (2021: US$1.38). At 31 December 2022, the spot rate was US$1.21 (2021: US$1.35).
Cash and borrowings
The Group ended the year with cash balances of £384.4m (2021: £261.6m) and a further £3.1m (2021: £9.6m) held in short-term deposit accounts and government bonds, classified as current investments on the balance sheet.
Following correspondence this year with the Corporate Reporting Review Team of the Financial Reporting Council, we agreed to restate certain cash flows relating to equity-settled liabilities within the Consolidated Cash Flow Statement both within ‘net cash flow from operating activities’ and ‘financing activities’. We have restated the Consolidated Cash Flow Statement for the year ended 31 December 2021 to add back £11.3m of equity-settled liabilities as ‘operating activities’ and deduct £11.3m of shares acquired by our Employee Benefit Trust (‘EBT’) as ‘financing activities’. This presentation has also been adopted for the year ended 31 December 2022 (see page 154).
Net cash and available funds (classed as an APM*), being cash balances after the deduction of accrued bonuses, at 31 December 2022 were £161.7m (2021: £122.3m). The Board uses this figure as a better representation of the net cash available to the business since bonuses are typically paid after the year-end, hence an element of the year-end cash balance is earmarked for this purpose. It should be noted that accrued bonuses include amounts relating to the current year and amounts held back from previous years which will be payable in the future.
A further measure used by the Board in taking decisions over capital allocation is free cash resources (classed as an APM*), which deducts monies held by regulated entities from the net cash and available funds (classed as an APM*) figure. Free cash resources at 31 December 2022 were £130.9m (2021: £92.3m).
In addition to these free cash resources (classed as an APM*), the Group has a strong balance sheet and has consistently generated an underlying operating profit and good cash inflow. Management has stress tested a range of scenarios, modelling different assumptions with respect to the Group’s cash resources and, as a result, continues to adopt the going concern basis in preparing the financial statements. See pages 82 and 83 for further details.
Net assets at 31 December 2022 were £413.2m (2021: £361.6m). The balance sheet remains strong, with net current assets and investments exceeding non-current liabilities (excluding pension provisions and lease liabilities as accounted for under IFRS 16) by £163.6m (2021: £120.2m).
The overall loss allowance for trade receivables was £19.6m (2021: £12.9m).
The Group’s pension schemes had a combined surplus before deferred tax of £15.4m (2021: £22.0m).
Chief Financial Officer & Chief Operating Officer
3 March 2023