A fifth of Clarkson’s (CKN) market value was wiped off in trading on Monday following an unexpected profit warning.
The shipping services provider says pre-tax profits for the both the first half and the full year to 31 December 2018. Both figures are expected to be ‘materially below’ last year when it chalked-up £24.5m and £50.2m respectively.
Unsurprisingly, shares in Clarkson have sunk significantly, down around 20% to £24.70, slashing about £187m of Friday's closing £939m market value.
DELAYS, DELAYS, DELAYS
Clarkson blames a ‘challenging environment’ in shipping and offshore capital markets. Apparently several clients delayed signing new business agreements due to their own difficulties in raising project financing.
Volatile global equity markets seem to have played a part here.
Global stock markets have come under pressure in 2018 amid concerns over high valuations. The perceived quicker pace of interest rate hikes is a big factor. The potential for an escalation in trade hostilities between China and the US hasn't helped either.
Clarkson has also struggled with lower freight rates in the tanker market and a weakening dollar, its main trading currency.
ANALYST GET OUT THE RED PEN
Panmure Gordon analyst Colin Smith has slashed his underlying pre-tax profit forecast for this year from £60.1m to £45.1m. The impact of that 25% cut equates to an earnings per share figure expected to be around 108p, versus the 142.8p previous forecast.
For the time being the analyst remains reasonably confident that beyond this year things should stabilise for Clarkson. Smith is currently leaving 2019 forecasts unchanged, although 2019 is clearly a long way off.
The analyst does argue that the big threats immediately ahead for Clarkson are likely to come in the shape of lower asset activity and strengthening sterling. The pound has risen 4% versus the US currency since the start of the year.
