Cash-rich shipping giant Clarkson reports 8% rise in profits

The global nature of the maritime business means that geopolitical events are always likely to have an effect on shipbroker Clarkson (CKN). And so it proved in 2023, when container lines faced major disruption in the Red Sea at the end of the year, as well as a drought that temporarily restricted traffic through the Panama Canal.

This had the effect of pushing up rates in container markets that have been under pressure from the amount of new supply entering the market. This pressure is likely to be reapplied once the Red Sea situation improves.

A similar dynamic is at play for gas carriers, but in other parts of the market capacity remains constrained. This contributed to growth in revenue and higher profits at Clarksons’ core broking arm. Profits also increased in its support and research divisions, although the financial unit was hit as higher interest rates meant companies were more focused on paying down debt than doing deals.

Still, an 8 per cent increase in group-wide underlying profit – in line with expectations – fed through to its balance sheet, and the company finished the year with £175mn of available free cash, up from £131mn a year earlier. Even after upping its dividend for the 21st year in succession to 102p, there is plenty spare to fund either organic growth or acquisitions.

Clarkson's shares have rallied hard in recent months, up 50 per cent since hitting their 12-month low in October. And even though house broker Liberum forecasts slightly weaker earnings per share (down 2 per cent) this year, a price/earnings ratio of 14 times doesn’t look excessive. Buy.

Last IC view: Buy, 3,505p, 06 Mar 2023