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Tide could be turning for Clarkson

Profit growth in the brokerage division helps to compensate for tough trading in the financial business
Tide could be turning for Clarkson

Troubles with the investment banking division at Clarkson (CKN) have continued into the current financial year. Chief financial officer Jeff Woyda said that the company has a significant number of transactions in the pipeline, but the near closure of the capital markets it operates within has preventing these from completing. Geopolitical tensions and the trade war between the US and China, have weighed on investor sentiment and in some cases forced delivery of certain goods to take different and often longer routes to their destination. At group level, strong trading in broking with profit growth of 37 per cent helped to compensate for the 77 per cent drop in operating profit in the financials business.

IC TIP: Hold at 2500p

Clarkson is optimistic about a better second half. The Baltic Dry Index (BDI), which measures shipping activity, was 26 per cent weaker in the first half of 2019 compared to the same time in 2018, and 40 per cent weaker than at the 2018 year end. But the performance of the BDI has begun to improve in recent weeks, and the tanker business reported record earnings, up 80 per cent year-on-year. The International Maritime Organisation regulations limiting the amount of sulphur that can be released from fuel oil comes into effect on 1 January 2020, which will help to reduce the oversupply of ships in the market as some are taken out of service to be fitted with sulphur-reducing scrubbers, or taken out entirely.

Analysts at Liberum expect pre-tax profits of £49.5m during 2019 giving EPS of 116p, increasing to £57.6m and 133p in 2020.

CLARKSON (CKN)   
ORD PRICE:2,500pMARKET VALUE:£ 758m
TOUCH:2,495-2,505p12-MONTH HIGH:2,915pLOW: 1,834p
DIVIDEND YIELD:3.0%PE RATIO:24
NET ASSET VALUE:1,424p*NET CASH:£60.3m
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201815318.042.524.0
201916819.246.225.0
% change+10+7+9+4
Ex-div:05 Sep   
Payment:20 Sep   
*Includes intangible assets of £299m or 985p per share