Clarkson PLC LON:CKN, has often been described as the ‘Undisputed Heavyweight Champion of the Ship Broking Business.’
Based in St.Katharine’s Dock on the edge of the City of London, this FTSE250 company has been shipbroking since 1852. The modern Clarkson’s still operates principally as a shipbroker, arranging the transportation of commodities globally from some of the biggest producers of natural resources. However, Clarkson’s has also added Research to its portfolio, collating information on global merchant shipping and offshore markets. The firm also offers financial services and support and administration to ocean-going transportation companies.
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Despite the Covid lag in global trade, the company has consistently been in the money. In its last interim statement from August, Clarkson’s reported that for the six months to the end of June it had accrued GBP321.1m of revenue, up some 20% on the same period in 2022.
Clarkson maintains consistent dividends
This translated into underlying profit (before tax) of GBP53.1m, up 25.8% y-o-y and underlying earnings per share was up to 133.5p from 98.9p in the first six months of 2022. The company declared a 30p dividend per share, up a penny from 2022 and has a track record of over 10 years of dividends, showing it isn’t scared of sharing its profits with its shareholders. Clarkson’s has maintained a strong balance sheet with GBP128.2m of cash, down marginally from GBP130.9m at the end of December 2022.
The share price hasn’t really reflected this, however. Opening Tuesday (31st October) at a price of 2,600p over a year the share price has fallen nearly 6% and in the year-to-date had lost about 17% of its value. But it’s been a bit of an up-down year for Clarkson’s shareholders. Back in March shares were changing hands at GBP33.75 apiece, but about a week ago they had fallen to GBP25.50 each and over a 52-week period have ranged between 2,500p and 3,545p. It’s not a huge company at a market cap of GBP803.3m, but it is a leader in its field and is usually on speed dial for the likes of Gunvor and Glencore LSE:GLEN when they have to move a bulk shipment from port-to-port.
At the current price it is worth considering an entry into this mid-cap logistics company, as when the global economy comes back from recession, intercontinental trade – especially in bulk commodities – is one of the first parts to roar back into action, and Clarkson’s is at the centre of this particular web. The stock has underperformed, but part of this drag-down is because of the company’s dividend payouts. The company is also keenly investing back into its own technology and personell.
Net Zero opportunities
The transition to net zero is also offering new opportunities to Clarkson’s. The company is excited about the potential of global wind energy – especially with most installations being marine and offshore-based. Its research claims that in the next 10-years over USD25bn will be spent on new vessels to service the industry. Its research arm said that spending on specific wind-installation service vessels is already at record levels and in the next seven years this should increase by more than 160%. It said that 2022 was a record year for newbuild wind installation service vessels.
The company has already booked over USD1bn of wind vessel transactions and sees this as an important growth opportunity for its business. The renewable energy sector is already grumbling about a lack of vessels, and we are yet at the foothills of the development curve with the nations of Asia and North America late to the party, but coming with big plans and big money.
It’s not all been plain sailing for Clarkson’s this year. Shareholders, or at least a vocal 44% minority, took umbrage at the company’s executive’s pay packets in May. A bit of a mutiny on the bounties. Andi Case, who has been CEO since 2008, was pushing for a bonus on his annual salary of GBP550,000 to be approved at the AGM. Last year, bonuses and options included, Case’s take-home pay was GBP10.1m about a quarter’s worth of the dividend. The company’s CFO/COO, Jeff Woyda had a similarly structured remuneration package. Shareholders were irked as they believed that the company was being run more for the benefit of its employees than its shareholders. It’s not a new thing for Clarkson’s as the firm has had the same revolt at it last seven AGMs. But 44% is a growing core and next year the company might have to act on it.
Prices are low for this stock – it is quite volatile, but it’s worth putting it on your watchlist.