Shares in 170 year-old shipping services group Clarksons (CKN) floated 6.5% higher to £39.25 after the company raised its earnings guidance due to strong trading in the second half to date, particularly in its financial and broking divisions.
The firm is now forecasting pre-tax profits of at least £65 million compared with a consensus estimate of £55 million and underlying profits of around £45 million last year.
In August, the company posted a 30% jump in first half profits to £27.5 million driven by strong trading across all areas of the business, lifting the shares 7% to £35.
The shipping market entered 2021 with a large imbalance between the supply of ships and the demand for sea freight. The global order book for new ships was at a 30-year low, shipbuilding capacity was much lower than a decade ago, and shipbuilders were facing difficulty raising finance and uncertainty over emissions rules.
On the demand side, after seaborne trade fell by half a billion tonnes last year due to Covid, demand recovered sharply in 2021 thanks to unprecedented government stimulus and a rebound in consumer spending, pushing up demand for container ships and leading to higher selling prices.
The market for shipping finance also picked up this year after what the firm described as ‘several years of restricted opportunity for shipping and offshore in the capital markets’, allowing the firm to turn a profit in the first half against losses last year.
SECURE AND RISING DIVIDENDS
A lesser-known fact about Clarksons, but one management are very proud of, is that the firm has paid a progressively higher dividend for the last 18 years despite the ups and downs of the global economy.
Clarksons puts this down to the highly cash-generative nature of its business, supported by a strong balance sheet with net cash which has allowed it to invest in growth opportunities, bringing in more revenues and earnings.