17th Mar 2008 07:01
Clarkson PLC17 March 2008 CLARKSON PLC 17 March 2008 Preliminary results Clarkson PLC ('Clarksons') the world's largest shipbroker and shipping servicesgroup, today announces unaudited preliminary results for the twelve months ended31 December 2007. Results for 2007 Year ended Year ended 31 December 31 December Year on year 2007 2006 % change Revenue+ £173.4m £116.6m +49%Profit before taxation andexceptional item+ £31.6m £22.1m +43%Profit before taxation+* £25.6m £22.1m +16%Earnings per share* 101.9p 86.6p +18%Dividends per share* 40.0p 36.0p +11% +Continuing operations *Other than as noted, figures are after exceptional item HIGHLIGHTS • Record organic growth in profits driven primarily by dry cargo, futures broking and sale and purchase businesses.• Strategic acquisitions during the year totalling £4m broadening services in dry cargo, LNG and offshore broking.• Continued growth and innovation in financial services o Hedge fund: US$191m under management (2006: US$47m); investment returns for the year ended 31 December 2007, net of fees, of 26.7% o Investment services: creation of a new group to provide advisory and research services to investors and corporates Tim Harris CBE, Chairman of Clarkson PLC, commented: "The business has delivered another good performance, with revenue and margingrowth across the group. During the year, we continued to innovate and build onour unrivalled intelligence in shipping, establishing an investment servicesbusiness and delivering 26.7% returns, net of fees, to the investors in ourhedge fund. "Given a strong start to 2008 and a record forward order book, we remainconfident about the prospects for our business and believe the platform we haveestablished leaves us well positioned to deliver another year of growth in2008." Enquiries: Clarkson PLC: 020 7334 0000Richard Fulford-Smith, Chief ExecutiveJeff Woyda, Finance Director Hudson Sandler: 020 7796 4133Jessica RouleauFran Read CHAIRMAN'S STATEMENT Results Revenue has increased by 49% to £173.4m (2006: £116.6m), driven primarily bystrong performances in the dry bulk, futures and sale and purchase brokingbusinesses. Operating profit on continuing operations before the exceptional item was£26.4m, a 47% increase on the £18.0m reported in 2006. This result was achieveddespite the impact of a weak US dollar, one-off administrative expensesresulting from the initial acquisition cost of new teams (£2.4m) and the legalcosts incurred in defending the Russian litigation (£3.2m). Profit before taxation on continuing operations before the exceptional itemincreased by 43% to £31.6m (2006: £22.1m). As announced in January 2008, theBoard has decided, without any admission of liability, to make a provision of£6.0m against the existing claims totalling US$67m from Sovcomflot and Novoship,the Russian state-owned shipping companies. This provision has been treated asan exceptional item. Consequently, profit before taxation reported amounted to£25.6m (2006: £22.1m). Basic earnings per share on continuing operations was 96.4p (2006: 87.2p). Dividend Clarksons is committed to maintaining a progressive dividend policy and theBoard is recommending a final dividend of 26p per share (2006: 24p per share).The interim dividend was 14p per share, giving a total dividend for the year of40p per share (2006: 36p per share), an increase of over 11%. This increase is areflection of our continued confidence in the prospects for the business goingforward. The dividend will be payable on 6 June 2008 to shareholders on the register asat 23 May 2008. Litigation The group has received notification of a further potential claim by Sovcomflot,relating to a routine year end valuation performed by H Clarkson & CompanyLimited as at 31 December 2003. The total amount claimed under this notificationis US$71m. The Board has reviewed all documentation available to it, anddiscussed the matter at length with its advisors. Consequently, it is theBoard's strongly held view that this claim should not have been brought, iswithout foundation and should not succeed. Accordingly, no provision has been made against this claim, which will bestrenuously defended in court, should it reach this stage. Outlook Given the strong start to 2008 and a record forward order book, we remainconfident about the prospects for our business. Although the potential impact ofuncertainty in global economic conditions cannot be ignored, we believe that theplatform we have established across a broad base of shipping services leaves uswell positioned to deliver another year of growth. Tim Harris CBECHAIRMAN17 March 2008 REVIEW OF STRATEGY Clarksons is a great people business. At a time when our industry increasingly seeks expert and informed input we arebetter placed than ever to meet these needs with teams of exceptionally talentedindividuals. It is they who enable us to grow our diverse shipping servicesbusiness, a strategy to which we remain committed. I am proud of their unifieddetermination to maintain the company's focus whilst growing and despite thepotential distraction of our legal challenges. With strong roots in shipping,many loyal clients and our unequalled research base, the group is well equippedto continue to be the pre-eminent industry provider through organic growth,consolidation and the successful integration of people currently in privateheritage shipbroking businesses. Our strategy is to continue this process ineach of our global products. Our expansion during 2007 has been principally organic, as we continued tomaximise the integration and development of both businesses and teams acquiredover the previous 24 months. We have maintained and extended our position as theglobal leader in shipping services and the core shipping competitor to the newbreed of commodity and financial services groups lured by the increasingcommoditisation of the freight process. We possess the ability to provide fullclient coverage to all markets in physical and synthetic bulk product and thatis unparalleled. Clarksons' research and market knowledge enable us to formviews based upon detailed analysis, extensive historical data and experiencewhich we share with most in the industry as the demand for decision-making basedupon sound analysis and benchmarking is ever increasing. We intend to broadenour client offering with increasing brokerage of the products, minerals andcommodities that we ship. The recognition that freight is a commodity and should be traded as such islargely responsible for our confidence that revenue growth is sustainable. Themassive expansion of world trade and strong freight markets have justified oursignificant global growth and fuel our ability to fund new value-addedinitiatives. Our ongoing investment in IT enables us to provide and extendglobal support to all our valued clients through our extensive network ofregional offices. We shall continue to grow regional presence, particularly inAsia but also with an eye to provide local representation. Globally we shalllook to currently under represented areas including, for example, South America. Growing revenues stem from increased market share in traditional shipbrokingservices plus the added complementary business units which have served tobroaden our base. Our next significant financial services unit will be ClarksonInvestment Services where we have assembled a team of leading investmentbankers. This unit will fill the gap that exists from the very limited informedcoverage currently on offer to the investment community. We aim to provide abetter understanding of our industry to new investors in shipping and a greatercomprehension of the significance of shipping through our enlarged team ofsector and equity analysts. This newly-formed unit which follows our successfulentry into fund management will further spread our income base. We shall focuson taking companies to the public markets, innovative funding and equityplacement and mergers and acquisitions. Our clear ambition is to be a one-stop shop for the broadest audience inshipping, always concentrating on higher margin businesses which will beaccretive to shareholder returns. We continually review all areas of ourbusiness and have clearly outlined our future core activities. Consequently, weshall cease our shipowning business, Clarksons Logistics and dispose of theremaining assets - a process started in 2007 with the sale of the CFF Seine. Wewill also continue modernising and updating our business plan to embrace andlead the significant structural changes in our industry. Team Clarkson has grown significantly over the last 12 months. The addition ofnew key employees attracted by our transparent incentive packages, and theunrivalled ability to deliver a global service to clients, has increasedrevenues and market share in the key areas of freight physicals and derivatives,sale and purchase and newbuilding. Clarksons research, data and ideas are at theheart of this growth delivered to an enlarged, better-informed and enthusiasticaudience. We shall grow our analyst team during 2008, both in the UK andglobally, to provide our clients with full market commentary. Growth in shipping has been inevitable as it provides the core arteries to worldtrade which has been growing at a significant pace. Increased demand fordelivery of raw materials and energy products over long distances is largelyattributable to the Asian industrial boom. Correspondingly inflated commodityprices have not hindered the belief that higher freight levels can be justifiedfor high quality service. Strategically it makes sense for us to deliver qualitywith an expanded service base which will reward shareholders and staff alike. Richard Fulford-SmithCHIEF EXECUTIVE17 March 2008 BUSINESS REVIEW: OPERATIONS Broking Dry bulk chartering Revenue: US$102.9m (2006: US$53.1m)Result: £14.6m (2006: £6.0m)Forward order book for 2008: US$63m (At 31 December 2006 for 2007: US$27m) In 2007 rates for dry bulk carriers earnings set new records. Our charteringdepartment performed significantly ahead of expectation, with success in bothspot and term business throughout the year. The division started 2008 with arecord forward order book. Bulk carrier earnings prospered from the continued surge in raw material demandas Chinese steel production reached record levels. Port infrastructureconstraints and a relative shortage of available ships resulted in a tightsupply and demand balance which led to exceptionally high freight levels. Ratevolatility increased with frequent changes in sentiment and derivative tradingprospered as a result. Given the attractive yields of the shipping markets,speculative trading increased, also assisting the upward push. Newbuilding contracts reached record levels in 2007, driven by the wealthreinvested back into the dry bulk sector. Delivery over the next few years,combined with the sale of single-hull tankers for conversion to dry bulk shipsand reduction in scrapping, contribute to a market consensus of opinionforecasting a declining freight market in the longer term, despite our bullishexpectations for 2008. Clarksons dry bulk clientele comprises ship owners, cargo owners, charterers,traders and any other entity interested in trading seaborne freight. On thephysical side freight cover is organised through contracts of affreightment,spot market deals or longer term period deals. Clarksons dry bulk teams aremainly organised in capesize, panamax, handymax and handysize. Our dry bulk chartering vision is to apply a disciplined culture where ourglobal capability creates the greatest value. Together with our extensive ITinvestments, Clarksons global dry bulk chartering team aims to maximise thevalue of a network of operations extending to local and regional markets in 13different countries. Brokers are able to monitor real-time data and the dynamicmoves of the market as presented in the derivative market, forging a comparativeadvantage in the highly competitive and dynamic shipping market. Container chartering Revenue: US$7.0m (2006: US$5.4m)Result: £1.0m (2006: £0.6m)Forward order book for 2008: US$4m (At 31 December 2006 for 2007: US$5m) Despite concerns at the beginning of 2007 that the container market would failto absorb the global newbuilding order book, trade expansion of approximately10% ensured that boxship rates steadied and firmed during the year. In fact, FarEast / Europe trade was particularly buoyant. The container market is rapidly expanding and is the largest gross earner offreight across all sectors. Very large post panamax vessels (8,000 teu plus) areentering the market over the next few years in increasing numbers. Whilst thesebig ships are dominated by the major liner companies, who have their ownmarketing teams, the interaction between owners and the majors is significantand our teams will be built up to provide the same global coverage as we haveelsewhere. Clarksons has yet to fulfil its market share ambitions and the team is focusingon expansion in 2008. This is an area in which we can achieve significantgrowth. Our offices are in London, Shanghai, Singapore and Sydney and we expectto expand this further, particularly with the development of derivative productsand the expansion of our sale and purchase and longer term charteringactivities. Deep sea chartering Revenue: US$46.3m (2006: US$45.1m)Result: £5.9m (2006: £5.7m)Forward order book for 2008: US$8m (At 31 December 2006 for 2007: US$7m) Revenue, in US dollar terms, increased in 2007. This resulted from further gainsin market share and, on average, a reasonable deep sea freight market. Theexception was VLCCs, where rates were soft throughout the year. Although productrates were robust west of Suez in the first six months of the year, east of Suezthey did not fair so well. Consequently, to have increased revenues exhibitsjust how strongly our spot teams performed. We also made significant advances onthe timecharter and projects desk which bodes well for future years. One cannot underestimate the positive impact that the commoditisation of freighthas had on the tanker market. Further consolidation combined with rapid growthin the freight futures market is set to continue in 2008. Clarksons remainsfully equipped to assist the global tanker industry adapt to the many changesthat are now sweeping through the market. Clarksons' deep sea business has grown to have a significant presence in London,Singapore, Houston, Geneva, New Delhi and Dubai. This global coverage, combinedwith our extensive portfolio of clients including all oil company majors, oiltraders and shipowners gives Clarksons an unparalleled position in the deep seamarket. As we enter 2008 the trend to trade freight in a more sophisticated way mayprovide a backdrop of increased volatility for charterers. Clarksons remainswell placed in all deep sea tankers sections, from refined clean petroleum anddirty petroleum products, plus all crude oil markets up to VLCC, to leverage itsposition as the world's largest shipping services provider. Finally the unfortunate incident on the Hebei Spirit remains a source ofdiscussion in certain sectors of the tanker industry and it will be interestingto see if the 2010 phase out of single skin vessels is brought forward on asignificant scale. Specialised products Revenue: US$27.1m (2006: US$19.5m)Result: £2.6m (2006: £1.9m)Forward order book for 2008: US$9m (At 31 December 2006 for 2007: US$9m) The integration of businesses acquired in 2006, together with further expansionof our global activities continues to underscore Clarksons major commitment tothis market segment. Global coverage within this sector provides us with the ability to maintaingenuine root contact with our rapidly expanding multinational client base ofimportant oil and energy groups, chemical companies and niche customers withinthe specialised products sector. There are specialised products teams in Singapore, London and Houston, and weare establishing new operations in Geneva and Hamburg. Our ability to provideglobal coverage to an increasing charterer and ship owner clientele isrecognised and with their encouragement we will continue to maintain the drivetowards regional and centralised growth. Large tranches of the specialised products business are controlled bysignificant operators for whom we aim to provide a bespoke service. We providededicated and specialist advice coupled with logistics input. Contracts ofaffreightment, time charters or indeed spot fixtures arising from such adviceare efficiently serviced by a dedicated team of operators and analysts. The specialised products business involves a high level of operational support.Increasingly we are acting as the outsourcer to much of our existing client baseregardless of whether they are large or small. The structure of our globaloperation and the ability to provide full analytical and logistic support placesus in a position whereby consolidation and growth can be achieved in tandem. Petrochemical gas The petrochemical gas chartering business complements the activities of ourspecialised products and gas chartering divisions. The team providescomprehensive brokerage services to the same producers and traders active in allthree market places. The petrochemical gas team is based in London and Singapore and has justcompleted its first full year of trading as a separate entity. During the year,it has secured a significant share of this exciting and expanding sector of thebulk shipping market. The wealth of experience within the team ensures it iswell placed to take full advantage of growth opportunities in different parts ofthe globe. Gas Revenue: US$13.4m (2006: US$10.2m)Result: £1.3m (2006: £1.3m)Forward order book for 2008: US$7m (At 31 December 2006 for 2007: US$4m) The gas market in 2007 was very challenging. Generally, tight LPG supplies inthe Middle East, together with the delayed start-up of a number of major new LPGprojects, and accelerating deliveries of newbuildings, resulted in a weak marketfor the largest vessels (VLGCs). In other sizes, a combination of high levels ofterm cover and generally unexciting conditions in spot markets led to diminishedtransaction volumes. Against this difficult background, our excellent team ofbrokers has significantly increased its market share and also booked a number ofsale and purchase deals, producing very good spot revenues and forward business.Our well equipped team of dedicated specialists, who are particularly strong inLPG, ammonia and petrochemical gases, continues to extend their influence and,with the support of our analysts, will further grow our product brokerageactivities in 2008. LPG and LNG are sourced from oil and gas fields which are typically locatedoutside the principal import markets, whilst smaller quantities are produced inthe oil refining process. Over the next couple of years there will be asignificant increase in the number of new gas fields to serve the market,including those associated with new LNG projects as they come on stream. LPGtrade is set to grow significantly but the market is already equipped with alarge number of newbuildings to meet the increased demand. This rapid rate ofnewbuilding deliveries, unfortunately in advance of the start-up of the newvolumes, is having an impact on freight rates for the largest LPG carriers. As aresult, significant action would appear to be required from owners to reduce thecurrent oversupply of tonnage. The successful acquisition of the remaining 50% of LNG Shipping Solutions wasconcluded in 2007. Our activity is focused in London which remains the principalcentre for the trading of the product, although we also have an increasingpresence in Houston. Our freight coverage is enhanced by the presence of productbrokers working in both our centres on the LPG side, and this is something thatwe intend to develop further. Indeed Clarksons recognises the advantages offreight and commodities brokerage businesses sitting side-by-side. Goingforward, we believe, some of our future competition will stem from theinter-dealer broking community which has been particularly focused on tradingphysical and derivative products in energy businesses. Sale and purchase broking Revenue: US$74.8m (2006: US$38.2m)Result: £6.2m (2006: £3.5m)Forward order book for 2008: US$40m (At 31 December 2006 for 2007: US$21m) In 2007, secondhand sales were up 30% in volume and 50% in value with totalglobal revenue exceeding US$53bn. Newbuilding activity continued at anincredible pace and the number of deals surpassed all expectations. The stellar performer was the dry bulk market where values increased by 77%,resulting in a comparable increase in the stock price of quoted dry bulkcompanies. This drew attention to shipping in the public markets and our saleand purchase brokers were able to benefit from this development to grow marketshare. At the same time we took a lead position in the tanker sale and purchasesegment. Clarksons has for a number of years been recognised as an organisation capableof uniquely placing blocs of ships. With the establishment of the InvestmentServices team our activity in mergers and acquisitions is anticipated toincrease significantly. Clarksons operate in every single freight market sectorand this sets us aside from all of our competitors and allows us to leverage offour research and consultancy base. This should see our income in sale andpurchase broking and investment banking further propel revenues. Sale and purchase broking activities extend to our Asian offices of Hong Kong,Shanghai and Singapore. However, we are also unique in having a very significantand profitable operation in Greece. Our Piraeus and Asian offices have greatlyenhanced our global coverage and our team in Greece have been particularlysuccessful in demonstrating the advantages to the local community of theClarksons presence and the extension of our global reach. Our newbuilding desk acts as an intermediary in the placing of contracts by shipowners for new vessels with shipyards. The scale of our involvement inshipbuilding places us in a position of great relevance to the ship buildingcommunity with whom we undertake a lot of research and consultancy in additionto our broking business. In conjunction with our research department we provideour clients with ideas and initiatives to enhance their business plans. We alsooperate the 'Shipbuilding Club' which analyses future demand trends for shipbuilders, sub-contractors and sub-suppliers. Through our Shanghai newbuilding desk we provide an important service to theemerging Chinese shipbuilding community as well as leading our shipowner clientsthrough the process of doing business in China. Our broader client base is welldemonstrated by our placement of orders in China for local, domestic clients.The majority of newbuilding revenue is invoiced on a 'forward order book' basis.As 2007 was a particularly active year for our newbuilding department, thebenefit will be seen over the coming years as ships are delivered. Research Research services Revenue: £6.0m (2006: £5.2m)Result: £1.2m (2006: £1.0m) Clarkson Research Services Limited continued to perform strongly, with sales up15% on the previous year. Digital product sales grew rapidly, but it was also asuccessful year for hard copy products. The customer services and consultancysections also performed well, benefiting from the high level of activity ofshipping companies in the financial markets. The business continues to widen itsbase as an information provider and by developing its sales and marketingcapability. During the year, the integration of the offshore structures databasewas completed, as was the new database of public shipping companies, coveringmaritime companies listed on 39 different exchanges. In the merchant shippingarea our fleet coverage was extended to include ferries and cruise ships. Clarkson Research Services Limited provides the shipping and offshore industrieswith a wide range of market information from its extensive proprietarydatabases. Its income derives from subscriptions to periodical reports,directories, digital and online data provision, maps and from services andconsultancy provided to external clients and within the group. The scope of information provided is encapsulated in the market-leading serviceShipping Intelligence Network, which supplies on-line information about all themajor shipping segments including ships, shipbuilding and commercial markets.Clarkson Research provides a range of digital publications and an extensive timeseries database. The time series database is now widely used across the shippingindustry. The development of offshore information continues with a successful new shippingdiary range and advertising sales. Our Shanghai office continues to expand, andin addition to China Intelligence Monthly maintains a comprehensive database andmarket intelligence system about the Chinese shipbuilding industry. Financial Futures broking Revenue: US$32.9m (2006: US$16.7m)Result: £5.5m (2006: £2.5m)Forward order book for 2008: US$26m (At 31 December 2006 for 2007: US$7m) In 2007, futures broking trade volumes exceeded expectations, with revenues upby 97% and profit more than doubling. As a result we grew our team, which isfocused now in London and Hong Kong. Clarksons remains the world's foremost arranger of Forward Freight Agreement(FFA) trades, having formulated the concept almost 20 years ago. The FFA is aprincipal to principal, cash settled contract for difference based uponstandardised cargo routes or timecharter indices. Settlement of these contractsis against indices generated by the Baltic Exchange. Much of this business was historically undertaken over the counter with theprincipals bearing counter party risk, although several institutions includingLCH/Clearnet, SGX and NOS now offer clearing facilities which has enhanced theusability of the products. We have seen the development of an options market,which trades alongside the well established swap activities. The market isdivided into two core elements of dry and wet and Clarksons has significantteams in both products. Clarkson Securities Limited, through which all futures activity is arranged, isregulated by the UK Financial Services Authority (FSA). Fund management Revenue: US$5.2m (2006: US$0.9m)Result: £0.6m (2006: £0.0m)Funds under management at 31 December 2007: US$168m (2006: US$47m at 31 December2006) The hedge fund, for which Clarksons operates as discretionary manager, generateda return to investors for the year of 26.7% net of all fees. This puts the fundinto the top 10% of the 1,356 performers listed in the Eurohedge database during2007. Funds under management increased significantly and have now reached alevel where the underlying costs of the operation are covered by managementfees. Investing in the shipping hedge fund enables institutional investors who have nodirect experience of the complex market of shipping to have exposure to thissector. Clarkson Fund Management Limited (CFML), a wholly owned London basedsubsidiary of Clarkson PLC, is authorised and regulated by the FSA to undertakediscretionary investment management activities for the Cayman Island basedClarkson Shipping Hedge Fund. The fund invests in shares of shipping and shipping related companies and infreight derivatives taking long and /or short positions based on a combinationof fundamental, technical and tactical analysis. Financial and investment services Revenue: US$2.6m (2006: US$4.3m)Loss: £0.3m (2006: profit £0.7m) The financial services team, whose results are linked to success with majorfinancing projects, was unable to generate the same return as in 2006. Investment services Towards the end of 2007 we started to create an investment services team. Thisteam will be developed over the coming year, with centres in the UK, US andMiddle East. The establishment of the new investment services team cost £0.5m in2007. Financial services Clarkson Financial Services (CFS) concentrates on three major areas of business: • Structuring and arrangement of shipping-related projects; • Advisory work for financial institutions; • Ship operation. CFS works alongside Clarkson Fund Management Limited, concentrating on investorskeen to invest in physical assets, rather than shares in shipping companies, aswell as developing a range of other shipping services. Our experienced team, which is based in London, has a good track record andlong-standing relationships with various financial institutions, particularly inGermany. Support Port and agency services Revenue: £3.8m (2006: £1.9m)Result: £0.2m (2006: £0.2m) 2007 saw a full year's revenue and result for port and agency services,originally acquired in 2006 from Genchem. The business recorded increasednumbers of ships' agency attendances and significantly higher grain exports andanimal feed imports. Ships' agency The ships' agency activity is concentrated in five locations in the UK:Avonmouth, Birkenhead, Great Yarmouth, Ipswich and Southampton. We earn fee income from attending to all the needs of a ship in port, fromarranging pilots, boatmen and cargo handlers to procuring the services of tugs,chandlers and the like. Stevedoring and warehousing The stevedoring and warehousing unit operates from sites within the ports ofIpswich and Great Yarmouth. Operating principally as bulk agricultural dry goodswarehouses and stevedoring terminals there are two main income streams. Theseare from the export and import of grains, animal feeds and similar commoditiesto and from the near continent, Europe and North Africa. Revenue is generated from exports in the form of vessel loading of ex-farmcommodity, transit from store to vessel, cargo analysis, and weighbridgecharges. Import operations attract revenue from vessel discharging, transit tostore, re-delivery from store and rental income. Property services Revenue: £6.5m (2006: £6.2m)Result: £1.0m (2006: £0.9m) Clarkson PLC acquired the head lease of St Magnus House, in Lower Thames Street,London EC3, with an unexpired term of 11 years, from HSBC Bank in December 2004.Clarksons occupies 40,000 square feet of the building out of a total of 136,000square feet, representing approximately 30% of the available space. All theavailable space in the building is let. Logistics and technical services Revenue: US$7.8m (2006: US$2.4m)Loss: £2.1m (2006: loss £0.3m) Logistics Logistics remains a non-core activity of the group. The Pacific Dhow was purchased in September 2005 to service a four year contractthe group had secured to transport jet fuel to Hong Kong International Airportfrom a local refinery. The original contract was terminated by the charterer inJanuary 2008. We are evaluating the best options available now that the vesselis free of the original contract. In May 2007, a further vessel, the Jet Express, was acquired as a possiblereplacement for the Pacific Dhow given it was more suited to undertake theoriginal jet fuel transport contract. Following the termination of the jet fuelcontract after the year end, we are reviewing how best to utilise this asset. The wholly owned freight ferry CFF Seine was sold in November 2007. Technical services The technical services operation generated gross revenues of £2.8m in its firstyear of trading. Various joining incentive arrangements, which are expensed infull in the period, resulted in a small loss. This situation should not recur in2008. The technical services team concentrates on: • Provision of skilled riding squads ex-shipyard. Worldwide availability for logistic reasons and with US visas performing repairs at sea as an alternative to costly dry-dock repairs; • Project management with turnkey solutions including dealing with class and plan approvals, vessel modernisation, new installations, conversions, compliance with new regulations, boiler renewals/repairs, steel renewals, main engine and diesel generator overhauls, turbocharger overhauls, hydraulic systems, cargo pumps and systems. All work performed with our skilled labour and under full guarantee; • Ship inspections, class record inspections; • Ultrasonic thickness measurement/steel specifications; • Dry-dock and newbuilding supervision; • Superintendent services; • Blasting and coatings works - hydro / sand blasting of decks and tanks. Technical services are provided from London, Dubai, Fujairah and Singapore. KEY PERFORMANCE INDICATORS The performance of the group's business is analysed by desk, division andbusiness segment. Segmental performance is reviewed on revenue, overhead and operating margin. Owing to the nature of shipbroking, estimates of new business concluded areanalysed between 'spot' revenue, which is invoiced during the current financialyear, and the forward order book which will be invoiced in future years. Theforward order book relating to billable revenues in the following financial yearis summarised as follows: At At 31 December 31 December 2007 for 2006 for invoicing invoicing Increase / Increase / In 2008 in 2007 (decrease) (decrease) US$m US$m US$m % Dry bulk chartering 63 27 36 133Container chartering 4 5 (1) (20)Deep sea chartering 8 7 1 14Specialised productschartering 9 9 - -Gas chartering 7 4 3 75Sale and purchasebroking 40 21 19 90Futures broking 26 7 19 271 ________________________________________________________ 157 80 77 96 ======================================================== The group monitors the level of outstanding commissions on a regular basis andbelieves that the amount of working capital tied up in such balances can besignificantly reduced over the coming year. Richard Fulford-SmithCHIEF EXECUTIVE17 March 2008 BUSINESS REVIEW: FINANCE Income statement Results Following a very buoyant year, the group reports a record profit of £31.6m oncontinuing operations before the exceptional item and taxation; an increase of43% over the prior year. After the exceptional item, profit before taxation was£25.6m for the year ended 31 December 2007 (2006: £22.1m), an increase of 15%. Earnings per share on continuing activities were 96.4p per share (2006: 87.2pper share), an 11% increase. When combined with the 5.5p per share from discontinued activities (2006: lossof 0.6p per share), total basic earnings per share on profit for the yearamounted to 101.9p (2006: 86.6p) Revenue Revenues from continuing operations increased 49% to £173.4m from £116.6m.Segmental revenue is fully explained in note 3 below. Revenues increased in allbusiness segments other than financial and investment services and deep seachartering (although in dollar terms revenue for this segment has increased).The most significant increase in revenues derived from the dry bulk chartering,futures broking and sale and purchase divisions. This increase was a reflectionof the buoyant market, growth in our market share, increasingly sophisticatedusers of hedging instruments and the successful integration of new teamsacquired during 2006. 29% of revenues and 32% of profits arise from overseas, where the group hascontinued to invest in meeting both the local and global needs of our clients. Administrative expenses As the group has grown over the past 12 months, both organically and byacquisition, staff costs have increased by £35.4m. The company continues toattempt to keep fixed remuneration increases to a minimum, with a key element ofremuneration being performance related bonuses. Included within administrativeexpenses are the following: • A £6.0m exceptional item, representing a provision in relation to the outstanding litigation from two recently merged Russian shipping companies. This amount has been determined by the directors, after taking advice and without any admission of liability, based upon a detailed review of all the information available to them. • £3.2m for legal costs of defending the claims set out above, as indicated to the market at the half year. • £2.4m of acquisition costs of new teams, particularly within the Sale & Purchase department. These costs will not recur in 2008, however up front costs to employ new staff and teams are used where appropriate and necessary. Foreign exchange The majority of Clarkson's revenue is US dollar denominated and therefore itsresults are heavily impacted by the sterling/US dollar exchange rate. At 31December 2007 the sterling exchange rate was US$1.99, a slight weakening since31 December 2006 when the rate was US$1.96. During the year the sterlingexchange rate moved from a trough of US$1.93 to a peak of US$2.11. The groupused spot currency contracts to convert cash collected into local currency tomeet operating costs, resulting in an average sterling exchange rate for theperiod of US$2.01 (2006: US$1.86). No forward contracts were used during 2007.Exchange losses amounted to £0.4m (2006: loss £2.2m). Finance revenue and costs The group initially invested US$20m seed capital in the hedge fund in May 2006.As of 1 January 2007 this had increased to US$21.3m invested. During the year to31 December 2007, the fund made investment returns, net of fees, of 26.7% or£2.7m (2006: £0.7m). The group rebased seed capital back to the initial US$20m,from the beginning of 2008. Although borrowings remained constant throughout 2007 at £51.8m, finance costsincreased as a result of the higher level of average borrowings compared to2006, during which borrowings increased by £43.6m. Of the £51.8m borrowings atthe year end (2006: £51.8m), £23.7m remained in cash and cash equivalents at theyear end (2006: £16.0m). Other finance revenue, which relates to the impact of pension accounting,reflects the expected returns on the assets of the schemes less the interestcost on the liabilities of the schemes. The 2007 profit of £1.1m (2006: £1.1m)reflects the matched assets and liabilities but with a greater expected returnthan interest cost. 2008 will show a lower profit, given the underlying netasset position and the smaller difference between expected rates of return anddiscount rates. Taxation The effective tax rate on continuing operations was 32.8% (2006: 32.6%). Theoverall effective tax rate on continuing and discontinued operations was 32.6%(2006: 31.2%). The overall tax rate is higher than the standard rate of UK tax of 30.0% due tothe impact of disallowable trading expenses and impairment adjustments which arenot eligible for income tax relief. Dividends The directors are recommending that, in line with our progressive dividendpolicy and reflecting our confidence in the business plan, the total dividendfor the year increases to 40p per share (2006: 36p per share). The finaldividend of 26p per share will be paid to shareholders on 6 June 2008. Inaccordance with International Financial Reporting Standards, the amount of thefinal dividend is not provided in the 2007 financial statements as it will bepaid in the following year. Statement of recognised income and expense The major movements in the statement of recognised income and expense relate, asin 2006, to the actuarial gains of £0.9m on the defined benefit pension schemes(2006: £4.3m) and exchange gains of £0.3m (2006: £2.4m loss) on the translationof overseas operations' results. Balance sheet Non-current assets The significant increases in non-current assets are: • Intangibles arising on acquisition of £4.7m - all goodwill; • The gain on the seed capital invested in the hedge fund (£2.7m); • The presentation of the £9.9m asset relating to the combined defined benefit schemes. Current assets Trade and other receivables have increased due to the high level of incomegenerated and invoiced in the latter part of the year. During 2007, the grouphas increased resources dedicated to managing debtor balances, and has achieveda significant reduction in the ageing of these debts. Consequently, the increaseis lower than expected from the volume of activity. Cash balances include amounts set aside for the payment of bonuses after theyear end relating to the results of the year and amounts due to trade creditors. Current liabilities In common with previous years, bonuses are accrued at the end of the year, forpayment after the year end. At 31 December 2007 this amounted to £47.7m (2006:£23.2m). There is also an amount of £4.2m relating to deferred consideration onacquisitions. Non-current liabilities The company maintained its £50.0m three year revolving facility from BarclaysBank PLC. As at the year end £48.6m (2006: £47.7m) was drawn down. A further£3.2m (2006: £4.1m) was borrowed from DVB Bank in Singapore secured on the MVPacific Dhow. Capital and reserves The company issued further shares during the year to meet current and futureobligations arising on the various acquisitions. A total of 513,087 shares wereissued for a consideration of £4.9m. Cash flow Cash generation remains a key strength of the group. During the year the group accumulated cash as profit linked bonus entitlementswere accrued; bonuses are paid in February and May following the end of thefinancial year. At the end of the financial year the aggregate cash balance had increased to£115.3m (2006: £74.8m). Subsequent to the year end a number of significant payments will be madetotalling £52.6m (2006: £27.5m). These include £47.7m in staff bonuses relatingto 2007 (2007 in relation to 2006: £23.2m) and a £4.9m final dividend paymentrelating to 2007 (2007 in relation to 2006: £4.3m). Acquisitions In May 2007 the group announced the acquisition of the remaining 51% in CofimarSA for a further consideration of £1.5m satisfied in cash and shares. Also in May 2007 we acquired the remaining 50% of LNG Shipping Solutions for aconsideration of £1.1m, satisfied in cash. In July 2007 we announced the acquisition of Normarine Offshore Consultants fora consideration of £1.4m satisfied in shares. Discontinued activities In November 2007, Clarkson Ferries sold its only remaining asset, the CFF Seineand ceased operations. Segmental reporting The financial statements continue to provide a detailed analysis of theoperating performance of the full range of business activities undertaken by theClarkson group, to provide shareholders with a fuller understanding of thespread of business activity. Pensions The company now operates two defined benefit schemes: the Clarkson PLC pensionscheme and the Plowrights defined benefit scheme. Defined benefit pension arrangements give rise to open ended commitments andliabilities for the sponsoring company. As a consequence the company closed theoriginal defined benefit section of the Clarkson PLC scheme to new entrants on31 March 2004 and closed this section for further accrual to all existingmembers as from 31 March 2006. The Plowrights scheme was closed to new entrantsand to further accrual with effect from 1 January 2006. From 1 April 2006 allpension benefits accrued in the UK arise in defined contribution schemes. The Clarkson PLC defined benefit pension scheme surplus at the end of 2007 was£9.9m. The Plowrights scheme also has a small surplus of £0.4m but the companyis unable to recognise this as an asset in its balance sheet. The group also operates a variety of pension arrangements throughout the world,all of which are either provided by the state or are defined contributionschemes. Risk management The identification, control and monitoring of risks facing the business remainsa management priority and steps continue to be taken to improve further our riskmanagement procedures. The risks monitored include operational, market,treasury, credit, legal and reputational risk. Liquidity risk The group's policy is to maintain borrowings and facilities at a level such thatthey provide access to funds sufficient to meet all of its foreseeablerequirements. At the end of the year the company had short- and medium-termborrowing facilities of £50.0m (2006: £55.0m) of which £48.6m was drawn down(2006: £47.7m). Taking the group's bank facilities and strong operating cashflow generation, the group is well placed to fund future developments of itsglobal business. Interest rate risk The majority of the group's borrowings are at variable rates of interest. Wekeep under constant review the appropriateness of this exposure to interest ratemovements. Foreign exchange risk As stated, the US dollar is the major trading currency of the group. Movementsin the US dollar relative to other currencies, particularly sterling, have thepotential to impact the results of the group as was evident in 2007 both interms of the operating results and the revaluation of the balance sheet. Credit risk In common with most other companies, the group is exposed to credit-relatedlosses in the event of non-payment of invoices. The group mitigates this risk byclosely monitoring amounts outstanding from all sources and by adopting aconservative approach to accounting for bad debt. Share price The share price at 31 December 2007 was £10.20. During 2007 the share priceranged from a low of £7.96 in January to a high of £11.12 in October. Compliance and regulation Clarksons has two subsidiaries which are authorised and regulated by the UKFinancial Services Authority (FSA). Clarkson Securities Limited provides futures broking services and Clarkson FundManagement Limited provides investment management services to the ClarksonShipping Hedge Fund. Both companies have strong balance sheets to comply with regulatory capitaladequacy requirements. Jeff WoydaFINANCE DIRECTOR17 March 2008 CONSOLIDATED INCOME STATEMENTFor the year ended 31 December 2007 2007 Before After exceptional Exceptional exceptional item item item 2006 £m £m £m £m Revenue - continuing operations 173.4 - 173.4 116.6Cost of sales (3.3) - (3.3) - _________________________________________________Trading profit 170.1 - 170.1 116.6Administrative expenses (143.7) (6.0) (149.7) (98.6) _________________________________________________Operating profit - continuing 26.4 (6.0) 20.4 18.0operationsShare of profits of associatesand joint 0.4 - 0.4 0.4venturesFinance revenue 6.9 - 6.9 4.2Finance costs (3.2) - (3.2) (1.6)Other finance revenue - pensions 1.1 - 1.1 1.1 _________________________________________________Profit before taxation -continuing 31.6 (6.0) 25.6 22.1operationsTaxation (10.2) 1.8 (8.4) (7.2) _________________________________________________Profit for the year - continuingoperations 21.4 (4.2) 17.2 14.9Profit / (loss) for the yearfrom 1.0 - 1.0 (0.1)discontinued operations _________________________________________________Profit for the year 22.4 (4.2) 18.2 14.8 _________________________________________________Attributable to:Equity holders of the parent 22.4 (4.2) 18.2 14.8 _________________________________________________Earnings per shareBasic - continuing operations 119.9p 96.4p 87.2p _________________________________________________Diluted - continuing operations 118.6p 95.3p 86.9p _________________________________________________Basic - profit for the year 125.4p 101.9p 86.6p _________________________________________________Diluted - profit for the year 124.1p 100.8p 86.3p _________________________________________________ CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEFor the year ended 31 December 2007 2007 2006 £m £m Actuarial gain on employee benefits - net of tax 0.9 4.3Foreign exchange differences on retranslation of foreignoperations 0.3 (2.4) ______________________Total recognised directly in equity 1.2 1.9Profit for the year 18.2 14.8 ______________________Total recognised income and expense for the year 19.4 16.7 ______________________Attributable to:Equity holders of the parent 19.4 16.7 ______________________ CONSOLIDATED BALANCE SHEETAs at 31 December 2007 2007 2006 £m £mNon-current assetsProperty, plant and equipment 18.6 20.1Investment property 0.4 0.4Intangible assets 47.2 42.4Investments in associates and joint ventures 1.1 2.6Trade and other receivables 2.0 0.4Investments 16.4 14.0Employee benefits 9.9 7.1Deferred tax asset 3.3 3.7 ______________________ 98.9 90.7 ______________________Current assetsTrade and other receivables 43.4 30.5Cash and short-term deposits 115.3 74.8Income tax receivable 0.8 0.6 ______________________ 159.5 105.9 ______________________Current liabilitiesInterest-bearing loans and borrowings (0.8) (0.9)Trade and other payables (101.4) (66.6)Provisions (0.3) (0.6)Income tax payable (3.8) (2.0) ______________________ (106.3) (70.1) ______________________Net current assets 53.2 35.8 ______________________Non-current liabilitiesInterest-bearing loans and borrowings (51.0) (50.9)Trade and other payables (3.1) (5.0)Provisions (6.7) (0.5)Deferred tax liability (7.3) (4.7) ______________________ (68.1) (61.1) ______________________Net assets 84.0 65.4 ______________________ Capital and reservesIssued capital 4.7 4.5Share premium 25.4 20.7ESOP reserve (3.5) (3.7)Deferred share consideration 0.9 1.1Employee benefits reserve 0.8 -Capital redemption reserve 2.0 2.0Profit and loss 54.7 42.1Currency translation reserve (1.0) (1.3) ______________________Clarkson PLC group shareholders' equity 84.0 65.4 ______________________ CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2007 2007 2006 £m £mCash flows from operating activitiesProfit before tax from continuing operations 25.6 22.1Profit / (loss) before tax from discontinued operations 1.4 (0.6) ______________________Profit before tax 27.0 21.5Adjustments for:Depreciation 2.5 2.6Profit on sale of property, plant and equipment (1.9) -Profit on sale of investments (0.1) -Amortisation and impairment of intangibles 1.4 0.5Provision for investments in associates and joint ventures 0.5 -Difference between ordinary pension contributions paid andamount (0.5) (0.4)recognised in the income statementShare of profits of associates and joint ventures (0.4) (0.4)Finance revenue (6.9) (4.2)Other finance revenue - pensions (1.1) (1.1)Finance costs 3.2 1.6Increase in trade and other receivables (12.5) (2.4)Increase / (decrease) in bonus accrual 18.4 (9.4)Increase in trade and other payables 21.8 13.0Increase / (decrease) in provisions 5.9 (3.0) ______________________Cash generated from operations 57.3 18.3Income tax paid (4.9) (8.3)Interest paid (3.2) (1.6) ______________________Net cash flow from operating activities 49.2 8.4 ______________________Cash flows from investing activitiesInterest received 3.5 1.7Purchase of property, plant and equipment (3.3) (2.2)Proceeds from sale of investments 0.3 -Proceeds from sale of property, plant and equipment 4.0 0.1Purchase of investments - (11.2)Special contribution to pension scheme - (6.7)Investment in associates and joint ventures (0.8) (0.7)Disposal of associate 0.2 -Acquisition of subsidiaries and businesses, including (3.1) (8.8)deferredconsiderationCash acquired on acquisitions 1.7 3.3Dividends received from associates and joint ventures 0.6 0.3Dividends received from investments 0.5 1.8 ______________________Net cash flow from investing activities 3.6 (22.4) ______________________Cash flows from financing activitiesDividends paid (6.7) (5.7)Proceeds from borrowings 0.9 44.8Repayments of borrowings (0.9) (1.2)ESOP shares acquired (6.1) (3.1) ______________________Net cash flow from financing activities (12.8) 34.8 ______________________Net increase in cash and cash equivalents 40.0 20.8Cash and cash equivalents at 1 January 74.8 55.1Net foreign exchange differences 0.5 (1.1) ______________________Cash and cash equivalents at 31 December 115.3 74.8 ______________________ NOTES TO THE PRELIMINARY FINANCIAL STATEMENTS 1 General information The preliminary announcement of results for the year ended 31 December 2007 isan extract from the forthcoming 2007 annual report and does not constitute thegroup's statutory financial statements for 2007 nor 2006. Statutory financialstatements for 2006 have been delivered to the Registrar of Companies, and thosefor 2007 will be delivered following the company's annual general meeting. Theauditors have reported on the 2006 financial statements; their report wasunqualified and did not contain statements under Sections 237(2) or (3) of theCompanies Act 1985. 2 Accounting policies Whilst the financial information included in this preliminary announcement hasbeen prepared in accordance with International Financial Reporting Standards(IFRSs) adopted for use in the European Union, this announcement does not itselfcontain sufficient information to comply with IFRSs. The company expects topublish full financial statements that comply with IFRSs on 9 April 2008. 3 Segmental analysis Segmental information on continuing operations for revenue and results is asfollows: Business segments Revenue Results ________________________________________ 2007 2006 2007 2006 £m £m £m £mDry bulk chartering 51.3 28.6 14.6 6.0Container chartering 3.5 2.9 1.0 0.6Deep sea chartering 23.1 24.3 5.9 5.7Specialised products chartering 13.5 10.5 2.6 1.9Gas chartering 6.7 5.5 1.3 1.3Sale and purchase broking 37.3 20.6 6.2 3.5Research services 6.0 5.2 1.2 1.0Futures broking 16.4 9.0 5.5 2.5Fund management 2.6 0.5 0.6 -Financial and investment services 1.3 2.3 (0.3) 0.7Port and agency services 3.8 1.9 0.2 0.2Property services 6.5 6.2 1.0 0.9Logistics and technical services 3.9 1.3 (2.1) (0.3) ________________________________________ 175.9 118.8Less property services revenue arisingwithin (2.5) (2.2)the group ____________________ Segment revenue/results 173.4 116.6 37.7 24.0 ____________________ Unallocated other costs (5.9) -Head office costs (5.7) (4.0)Unallocated foreign exchange differences 0.3 (2.0) ___________________Operating profit before exceptional item 26.4 18.0Exceptional item (6.0) - ___________________Operating profit after exceptional item 20.4 18.0Share of profits of associates and jointventures 0.4 0.4Finance revenue 6.9 4.2Finance costs (3.2) (1.6)Other finance revenue - pensions 1.1 1.1 ___________________Profit before taxation 25.6 22.1Taxation (8.4) (7.2) ___________________Profit after taxation 17.2 14.9 ___________________ 4 Exceptional item The Board has decided, without any admission of liability, to make a provisionof £6.0m against the existing claims from Sovcomflot and Novoship, the Russianstate-owned shipping companies. Further details are provided in note 11. 5 Earnings per share The calculation of the basic and diluted earnings per share is based on thefollowing data: 2007 2007 Before After Exceptional Exceptional item item 2006 £m £m £m Earnings - continuing operations 21.4 17.2 14.9Earnings - discontinued operations 1.0 1.0 (0.1) ________________________________________Profit for the year 22.4 18.2 14.8 ________________________________________ 2007 2006 Number Number millions millions _________________________Weighted average number of ordinary shares 17.8 17.1 _________________________Diluted weighted average number of ordinaryshares 18.0 17.2 _________________________ 6 Intangible assets Intangibles Goodwill Total £m £m £mCostAt 1 January 2007 6.8 36.1 42.9Acquisition of subsidiaries and businesses - 4.7 4.7Deferred consideration adjustment - 1.3 1.3Foreign exchange differences - 0.2 0.2 _____________________________________At 31 December 2007 6.8 42.3 49.1 _____________________________________Amortisation and impairmentAt 1 January 2007 - 0.5 0.5Amortisation 1.4 - 1.4 _____________________________________At 31 December 2007 1.4 0.5 1.9 _____________________________________Net book value at 31 December 2007 5.4 41.8 47.2 _____________________________________Net book value at 31 December 2006 6.8 35.6 42.4 _____________________________________ On 17 May 2007 the group acquired the controlling 51% interest in Cofimar SA('Cofimar'). Cofimar provides dry bulk chartering services in Paris. The grouporiginally acquired 49% of Cofimar in 2001. On 23 May 2007 the group completed the acquisition of the other 50% shareholdingin LNG Shipping Solutions Limited ('LNGSS'). LNGSS predominantly servesliquefied natural gas. The group subscribed £25,000 for 50% of LNGSS in 2001. On 5 July 2007 the group acquired Normarine Offshore Consultants (USA)('Normarine'). Normarine provides broking services in the off-shore projectmarkets. No individual assets or liabilities exceeded £50,000. Total net assetswere less than £50,000. There were no separately identifiable intangible assets;the entire cost of acquisition has been allocated to goodwill. Cofimar and LNGSS have been accounted for as step acquisitions. The book andfair values of the identifiable assets and liabilities of Cofimar, LNGSS andNormarine at each stage of acquisition were as follows: Acquired in 2007 Cofimar LNGSS Normarine Total Book Fair Book Fair Book Fair Book Fair value value value value value value value value £m £m £m £m £m £m £m £m Investments 0.1 0.1 - - - - 0.1 0.1Tradereceivables 0.1 0.1 - - - - 0.1 0.1Otherreceivables - - 0.1 0.1 - - 0.1 0.1Cash andshort-termdeposits 0.3 0.3 1.4 1.4 - - 1.7 1.7 __________________________________________________________________ 0.5 0.5 1.5 1.5 - - 2.0 2.0 __________________________________________________________________Trade andother payables (0.5) (0.5) (0.8) (0.8) - - (1.3) (1.3)Income taxpayable - - (0.5) (0.5) - - (0.5) (0.5) __________________________________________________________________ (0.5) (0.5) (1.3) (1.3) - - (1.8) (1.8) __________________________________________________________________ - 0.2 - 0.2 _________ _________ _________ _________ Fair value ofnet assets - 0.2 - 0.2Accumulatedreserves - (0.1) - (0.1)Goodwillarising onacquisitions 1.5 1.0 1.4 3.9 _________ _________ _________ _________ 1.5 1.1 1.4 4.0 Previously acquired Cofimar LNGSS Total £m £m £m Fair value of net assets 0.3 - 0.3Goodwill arising on previous acquisition 0.8 - 0.8 ____________________________________Consideration previously paid 1.1 - 1.1 ____________________________________ Cofimar was accounted for as an associate in 2006. Goodwill relating to Cofimarwas previously included within investments in associates. Cofimar LNGSS Normarine Total £m £m £m £m Discharged by:Fair value of shares issued 1.3 - 1.4 2.7Cash - 1.1 - 1.1Costs associated with acquisition,settled in cash 0.2 - - 0.2Consideration previously paid 1.1 - - 1.1 ______________________________________________ 2.6 1.1 1.4 5.1 ______________________________________________ 7 Investments Investments include US$27m held in the shipping hedge fund. The group rebasedseed capital back to US$20m at the beginning of 2008. 8 Employee benefits The group operates two defined benefit schemes. As at 31 December 2007 these schemes had a combined surplus of £10.3m, but thecompany was unable to recognise the £0.4m surplus in the Plowrights scheme andthus shows an employee benefit surplus of £9.9m. The market value of the assetsis £132.6m and independent actuaries have assessed the present value of fundedobligations at £122.3m. The company has provided deferred tax on the £9.9mreported surplus amounting to £2.8m. 9 Analysis of net funds 31 December Reallocation Cash flow Foreign 31 December 2006 £m £m Exchange 2007 £m Differences £m £mCash andshort-termdeposits 74.8 - 40.0 0.5 115.3Currentinterest-bearing loans andborrowings (0.9) (0.8) 0.9 - (0.8)Non-currentinterest-bearing loans andborrowings (50.9) 0.8 (0.9) - (51.0) _________________________________________________________________Net funds 23.0 - 40.0 0.5 63.5 _________________________________________________________________ 10 Dividends The directors will be recommending a final dividend of 26p per share, payable on6 June 2008 to shareholders on the register at the close of business on 23 May2008, making a total dividend for the year of 40p (2006: 36p) per share. 11 Contingencies Two separate legal actions have been commenced against H Clarkson & CompanyLimited by the state-owned Russian shipping companies, Sovcomflot and Novoship,together with their subsidiaries. The actions relate to the payment of thirdparty commissions on business transacted during the period 2001-2004. The claimsinclude both the third party commissions paid and payable, and the repayment ofcommissions received and receivable by Clarksons which together amount toUS$67m. H Clarkson & Company Limited acted throughout on the instructions of theclients' senior management at the time on which it relied. Clarksons has, duringthe year, submitted its defence, and will continue to strongly defend itsposition in both cases. The Board has reviewed, with its advisors, the litigation above. As a result ofits considerations, the Board has decided, without any admission of liability,to make a provision against the claims of £6m, which is reflected in the resultsfor the year. The group has received notification of a further potential claim by Sovcomflot,relating to a routine year end valuation performed by H Clarkson & CompanyLimited as at 31 December 2003. The total amount claimed under this notificationis US$71m. The Board has reviewed all documentation available to it, anddiscussed the matter at length with its advisors. Consequently, it is theBoard's strongly held view that this claim should not have been brought, iswithout foundation and should not succeed. Accordingly, no provision has been made against this claim, which will bestrongly defended in court. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Clarkson