Clarkson sinks as it warns on profit amid 'challenging environment'

In a very brief trading update, the company said that the "challenging environment" in shipping and offshore capital markets has led to transactions being pushed back and has compounded a quiet period in sale and purchase activity for the group.

In addition, Clarkson has suffered from lower freight rates within the tanker market and a drop in the value of the US dollar, which is the main trading currency of its banking and broking businesses.

"Together these have resulted in financial performance that is below that previously expected by the board. Consequently, whilst it is still too early to determine the exact impact, profits for both the first half and the full year are now anticipated to be materially below those of last year."

The company had said back in its preliminary results in March that it reckoned 2018 would be a year of continued growth amid early signs of recovery across its core markets.

Accendo Markets analyst Artjom Hatsaturjants said: "This bombshell from Clarkson this morning has sunk an otherwise solid share price uptrend, going back to early July, when markets digested Brexit referendum results. It is also in stark contrast to a rather upbeat report just a month ago, announcing a “recovery” for the long-suffering ship hiring sector.

"With such a stunning reversal of outlook, is there more bad news for trade on the horizon? While economic growth in China and the recent rally on the commodity markets might have added some much-needed support to the sector, the latest news from Clarkson will do nothing to reassure not just shipping peers, but global markets in general about growth and growth recovery."

CMC Markets analyst Michael Hewson said lower freight rates doesn’t tally with optimism over the health of the global economy, though over-capacity in the industry has also been a key factor.

"The announcement is all the more surprising because it turns on its head an announcement in March that management were optimistic over a recovery in the shipping market. There is the possibility that recent tensions over trade have dented this recovery as customers delay making key decisions."

At 1010 BST, the shares were down 20% to 2,489.80p.

Liberum downgraded its stance on Clarkson to 'hold' from 'buy' and reduced the price target to 3,200p from 3,600p as it cut its forecasts on the back of quieter asset transaction markets and FX.

"We cut our forecasts by 25% for the current year and 15% for 2019E accordingly. Clarkson remains well positioned in its markets and long-term fundamentals continue to point to improved market conditions, but conditions in the short term are more challenging.

"The cut to earnings estimates is clearly disappointing, especially after the optimism on markets expressed by management at the FY results in March. However, we see the short-term challenges as reflective of uncertainty suppressing transaction activity in asset markets, and the capital markets that fund them, rather than the result of a widespread reversal in freight rates. Indeed, we believe the long-term fundamentals for shipping markets remain attractive and compelling."