martin stopford marine money 24 feb 2011[1]
TRANSCRIPT
Tanker & Bulk Overview
Martin Stopford, Marine Money Hamburg 24 Feb 2011 1
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Martin Stopford
CRSL24th Feb 2011
Tanker & Bulker Markets Tanker & Bulker Markets
Marine Money Hamburg
30th September 2010
CLARKSON RESEARCH SERVICES LTD
The Agenda For Today
1. Fundamentals 2. Economic Outlook3. Shipbuilding Outlook4. Tanker Outlook5. Bulker Outlook6. Conclusions
90
115
140
165
190 After two years the pressures are
building
Tanker & Bulk Overview
Martin Stopford, Marine Money Hamburg 24 Feb 2011 2
30th September 2010
CLARKSON RESEARCH SERVICES LTD
2. Shipping Bankers
We only need
$800MM Sir
1. Shipping investors
What shall I
buy now?
3. Shipbuilders
We want to make loads of money building ships
Why not build our
own fleet?
4. Charterers
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Shipping In The 2010sShipping In The 2010s• We entered the 2000s
decade with excellent fundamentals -China “taking off”, not much shipbuilding capacity, and an old fleet
• The result was the strongest boom for years.
• In 2010 we started a new decade with the Credit Crisis problems, China steel slowing; record shipbuilding capacity
Shall we say $5 a tonne?
Cargo owner Ship owner
B**tard!
Tanker & Bulk Overview
Martin Stopford, Marine Money Hamburg 24 Feb 2011 3
30th September 2010
CLARKSON RESEARCH SERVICES LTD
World Economy & Sea Trade 2000 2010
Sea trade M tonnes 5,911 8,154 38%Trade Growth (last 10 years) % pa 4.30% 3.80%
World FleetFleet M Dwt 800 1,292 62%Fleet Growth previous decade % p.a. 3.60% 6.1%Tons/dwt 7.4 6.3
ShipbuildingShipbuilding Deliveries M dwt 45.8 152 232%Deliveries % Fleet % fleet 6% 12%
Orderbook M Dwt 93.2 471.2 406%% Fleet 12% 36%
Fundamentals 2000 and 2010
Increase
30th September 2010
CLARKSON RESEARCH SERVICES LTD
0
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Cla
rkse
a In
dex
$000
/day (Clarksea Index is a weighted (Clarksea Index is a weighted
average of earnings by tankers, average of earnings by tankers, bulkers, containerships & gas.)bulkers, containerships & gas.)
Earnings Trend 1980-2011
Here
Source: Clarkson Research Services Ltd
Dress
rehearsal
The Great Shipping Boom
1980s Recession
$8,500/day
$12,000/day
$22,800/day
SERIOUS SURPLUS SMALL SURPLUS SMALL SHORTAGEBulk Shipping Fundamentals balance
SMALL…
Tanker & Bulk Overview
Martin Stopford, Marine Money Hamburg 24 Feb 2011 4
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Capes won, products lost
Ship Type League Table 2010
*Ratio KeyRatio Key1 = deep recession or depression2 = recession3 = mild recession4-6 = Strong Market etc
Rank Size TEU Earnings OPEX Ratio *1 Capesize 29,601 7,512 3.942 VLCC 37,970 10,812 3.513 Suezmax 31,328 9,309 3.374 Handymax 19,465 5,991 3.255 Panamax 18,472 6,321 2.925 Aframax 18,823 8,374 2.256 3300 TEU 12,313 8,000 1.547 2500 TEU 9,171 6,500 1.4110 1700 TEU 6,471 5,500 1.1811 Clean Prod 9,048 7,908 1.14
Earnings League Table 2010
CLARKSON RESEARCH SERVICES LTD
0102030405060708090
100
Jan-
80Ja
n-82
Jan-
84Ja
n-86
Jan-
88Ja
n-90
Jan-
92Ja
n-94
Jan
'96Ja
n-98
Jan-
00Ja
n-02
Jan-
04Ja
n '06
Jan
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n '10
price
$ m
illio
n
Aframax Tanker 5 Year OldPanamax bulk carrier 5 year old
Panamax peak $90MM
June 2008
Market Prices 1980-2011
Source CRSL
$42MM
$29Mm
Prices heading back to 1990s levels
Tanker & Bulk Overview
Martin Stopford, Marine Money Hamburg 24 Feb 2011 5
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Millionaire for a day
Look, this one offers a $50,000
mortgage, $100,000 cash back & free
coffee
Where shall I put the credit
default swaps, pal?
30th September 2010
CLARKSON RESEARCH SERVICES LTD
-13
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-3
2
7
12
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Six Crises & Six Rebounds
1. 1957Suez Crisis
5. 2001Dot.com
crisis
2. 19731st OilCrisis
3. 19792nd OilCrisis
4. USFinancial
Criisi
% growth
6.Creditcrisis
THIS CHART SHOWS WORLD INDUSTRIAL PRODUCTIONBounce
back as in previous
crises
Tanker & Bulk Overview
Martin Stopford, Marine Money Hamburg 24 Feb 2011 6
30th September 2010
CLARKSON RESEARCH SERVICES LTD
90
100
110
120
130
140Fe
b-93
Feb-
94Fe
b-95
Feb-
96Fe
b-97
Feb-
98Fe
b '9
9Fe
b'00
Feb'
01Fe
b'02
Feb
'03
Feb
'04
Feb-
05Fe
b '0
6Fe
b '0
7Fe
b '0
8Fe
b '0
9Fe
b '1
0
050100150200250300350400450
Industrial ProductionIndex
1992=100
Atlantic economies(left axis) did well in
the 1990s
Pacific Economies(right Axis)
Index 1992=100
30th September 2010
CLARKSON RESEARCH SERVICES LTD
0102030405060708090
100110120
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
$ per
bar
rel
Oil Price Expon. (Oil Price)
The Oil Price – Trending Up
Source: BP energy review
After 20 years of cheap oil the crude price is
heading up
Tanker & Bulk Overview
Martin Stopford, Marine Money Hamburg 24 Feb 2011 7
30th September 2010
CLARKSON RESEARCH SERVICES LTD
China's Trade Growth
0102030405060708090
100110120130140
Jan-
99Ja
n-00
Jan-
01Ja
n-02
Jan-
03Ja
n-04
Jan-
05Ja
n-06
Jan-
07Ja
n-08
Jan-
09Ja
n-10
Imports
China Trade Surge & Stagnation
• After a big jump China’s imports look as though they have got stuck in a rut at 120 Mt/month
• Exports are very sluggish
Mt trade per month
1. Trade takes offin 2000
2. Investment overheats
2005
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Oil, Dry Bulk Trade Growth
-5%
0%
5%
10%
15%
1990
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Major BulksCrude Oil ImportsLinear (Crude Oil Imports)Log. (Major Bulks)
% growthForecast
2011
Trend 5-6%pa
Trend 2-3 p%a
Tanker & Bulk Overview
Martin Stopford, Marine Money Hamburg 24 Feb 2011 8
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Sea Trade Scenarios 1950-2020
0123456789
1011121314151617
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2015
2020
seab
orne
impo
rts b
illio
n to
nnes
C hina Impo rtsW o rld le ss C hina7 % i
Figure 8 World & ChinaFigure 8 World & China’’s seaborne imports with scenarioss seaborne imports with scenarios
Period %pa1950-60 7.5%1961-70 9.1%1971-80 4.8%1981-90 0.9%1991-00 4.1%2001-09 2.9%
Growth of sea trade
1% scenario
3% scenario
4% scenario
7% scenario
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Tanker & Bulk Overview
Martin Stopford, Marine Money Hamburg 24 Feb 2011 9
3/1/2011 17
CLARKSON RESEARCH SERVICES LTD
World Shipbuilding: Past The Peak!
0
20
40
60
80
100
1902 1912 1922 1932 1942 1952 1962 1972 1982 1992 2002 2012
Milli
on G
T De
liver
ies
The last shipbuilding peak was in 1975 when output
reached 36 million GT
Source Maritime Economics 3rd Ed Martin Stopford (2009)
Restructuring of capacity 1976-86
Looks like 2010 was the peak of the shipbuilding boom with
97 m GT deliveries
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Investment In New Ships
1. Between 2003 and 2008 the industry ordered $857 billion of new ships
2. 50% of the orders were placed in 2007/8 when prices were at a peak
3. The pace of investment slumped to $28 Million in 2009
4. $72bn investment in 2010
8 13 7 5 13 11 10 21 21 23
5539 35
7 1356
3 75 3 7
11 13 14
25
105
68
13
32
12
0 13 4 3
212 9
9
5
1
0
1
9 35 6
117 4
2221 28
28
47
17
1
8
12 1417 14
167 9
13
2133
40
61
42
7
7
020406080
100120140160180200220240
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Bill $ Orders
0
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120
New Cape $MM
OthersContainerLPGLNGBulkTankersNew Cape $MM
Source: Clarkson Research Services LtdInvestment in new ships & newbuilding prices
Price of new Cape (right axis)
Tanker & Bulk Overview
Martin Stopford, Marine Money Hamburg 24 Feb 2011 10
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Deliveries– The Downturn Scenario
29 33 38 3724
41 46 46 50 55 62 70 75 8089
117
39
192
157
59
0
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80
100
120
140160
180
200
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Mill
ion
Dea
dwei
ght
Original scheduled orderbook
Deliveries
Demolition
Current Scenario(based on orderbook)
Stage 2
Stage 1
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Shipyard Output: Downturn Starts
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Mill
ion
CG
T D
eliv
erie
s
Other OthersTaiwanEuropeJapanS KoreaChina
The graph shows deliveries per quarter in million CGT downswing starts (but still
preliminary data)
Tanker & Bulk Overview
Martin Stopford, Marine Money Hamburg 24 Feb 2011 11
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Quarterly Shipbuilding Output: By Country
01122334455
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2001
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2010
Mill
ion
CG
T D
eliv
erie
sChinaS KoreaJapanEuropeTaiwanOther Others
The graph shows deliveries per quarter in million CGT
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Newbuilding Prices 1990-2010
• Aframax tanker price peaked at $75 million in 2008
• Today a new Aframax costs about $58 million
• Orders firm over summer but Autumn quieter
90
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'00
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'10
New
Pric
e In
dex
1988
=100
New prices fell 28% in 2009
25%fall
Index peaks at 190
Tanker & Bulk Overview
Martin Stopford, Marine Money Hamburg 24 Feb 2011 12
30th September 2010
CLARKSON RESEARCH SERVICES LTD
World Merchant Fleet
0100200300400500600700800900
10001100120013001400
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wor
ld fl
eet m
dw
t
-4%
-2%
0%
2%
4%
6%
8%
10%
12%Tankers CombosOther % pa
Figure 8 World fleet by ship typeFigure 8 World fleet by ship type
1980s recession fleet
falls
Latest figures show fleet now growing at 7% pa
Flee
t gro
wth
% p
a
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Tanker & Bulk Overview
Martin Stopford, Marine Money Hamburg 24 Feb 2011 13
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Tanker Earnings 1990-2008
$0
$10
$20
$30
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$60
$70
$80Ja
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Jan
'11
$/da
y ea
rnin
gs o
ver l
ast 1
2 m
onth
s
Crude Tankers 12 Month AverageProducts Tankers 12 Month Average
Asia Crisis
Chart shows 12 month moving average of tanker earnings (i.e.
$71,000/day is average for September 2007 to August 2008))
1
2
3
4
30th September 2010
CLARKSON RESEARCH SERVICES LTD
VLCC Cost & Revenue 1990-2011
0
20
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$000/day
InterestDepreciationOPEXCost with commercial spreadVLCC Earnings (12 month average)
Operating cost, plus interest at LIBOR on new cost, plus depreciation
INTEREST based on Newbuilding value at LIBOR
Depreciation –over 20 yrs
12 month earnings way
above cost
Tanker & Bulk Overview
Martin Stopford, Marine Money Hamburg 24 Feb 2011 14
CLARKSON RESEARCH SERVICES LTD
048
121620242832
2,000
6,000
10,00
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,000
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,000
26,00
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,000
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,000
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,000
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,000
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,000
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,000
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,000
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,000
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094
,000
98,00
0
Num
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f mon
ths
2000-09
1990-99
2009-11
Shows the earnings profile of Aframax tanker on the specified dates
Source CRSL
Aframax Earnings 2009-11
Tight supply makes this possible
30th September 2010
CLARKSON RESEARCH SERVICES LTD
76.3 76.8 77.279.0
82.5 83.7 85.1 86.3 85.087.8 89.2
86.5
66
71
76
81
86
91
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2001
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2008
2009
2010
2011
World Oil Demand Recovering
• Oil demand jumped 2.8 m bpd in 2010 and 1.4 m bpd increase predicted for 2011
• That would push up oil trade by about 4%
Million barrels per day
IEA Forecast Feb 2011
9.5 m bpd growth
2000-2007
Figure 6: World oil demand 2000-2011 & IEA projection
Tanker & Bulk Overview
Martin Stopford, Marine Money Hamburg 24 Feb 2011 15
30th September 2010
CLARKSON RESEARCH SERVICES LTD
-100
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VLOC ConvFPSO ConversionOrderbookDeliveries Deliveries ForecastDemolition forecast2007 OrdersOrdersDemolition
2011 orderbook of 43.8 m
dwt
Tanker Orders, Deliveries & Demolition
Tanker orders, deliveries, scrapping and future deliveries
Million dwt
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Tanker Supply/Demand Balance 1963-2013
0
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M. Dwt
-10%
0%
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50%
60%% Surplus
Available tanker fleet
Tanker demand
growing less than fleet
Surplus tanker capacity (right
axis)
Fleet growing faster than
demand due to high investment
Tanker & Bulk Overview
Martin Stopford, Marine Money Hamburg 24 Feb 2011 16
30th September 2010
CLARKSON RESEARCH SERVICES LTD
1. Massive collapse2. China Steel declining3. Rates own to
$20,000/day for Capesize4. Huge orderbook
Capesize heads for its terminal
BulkerForecast
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Dry Bulk Carrier Earnings Trend
0102030405060708090
100110120130
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$ 000
Per
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Panamax Capesize
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Shows 12 month average earnings
Tanker & Bulk Overview
Martin Stopford, Marine Money Hamburg 24 Feb 2011 17
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Capesize Cost & Revenue 1990-2011
0
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$000/day
DepreciationInterestOPEXCost + spreadCapesize Earnings (12 month average)
Operating cost, plus interest at LIBOR on new cost, plus depreciation
INTEREST based on Newbuilding value at LIBOR
Depreciation –over 20 yrs
12 month earnings way
above cost
12 month earnings not covering depreciation
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Steel output sluggish in 2010
• The recovery started in March and has been strong in China but muted elsewhere
• China now 50 Mt down from 55Mt last year
• Some analysts think the infrastructure programme is now at a mature level
0
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Millio
n to
ns p
er m
onth
China Japan S.Korea EC-12
China’s output slowing and
OECD countries back to pre crash
levels
Figure 5: World steel production showing China’s recovery
Tanker & Bulk Overview
Martin Stopford, Marine Money Hamburg 24 Feb 2011 18
30th September 2010
CLARKSON RESEARCH SERVICES LTD
05
101520253035404550556065
Jan-
07
Apr
-07
Jul-0
7
Oct
-07
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-08
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8
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-08
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-09
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9
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0
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-10
China Ore Imports SluggishM tonnes
collapse in September
2008
Coal imports
Iron ore imports steady
CLARKSON RESEARCH SERVICES LTD
048
121620242832
2,000
6,000
10,00
014
,000
18,00
022
,000
26,00
030
,000
34,00
038
,000
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046
,000
50,00
054
,000
58,00
062
,000
66,00
070
,000
74,00
078
,000
82,00
086
,000
90,00
094
,000
98,00
0
Num
ber o
f mon
ths
2000-09
1990-99
2009-10
Shows the earnings profile of Aframax tanker on the specified dates
Panamax Earnings 1990s
Source CRSL
Tanker & Bulk Overview
Martin Stopford, Marine Money Hamburg 24 Feb 2011 19
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Dry Bulk Deliveries & Demolition
0
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40
60
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140
16019
9019
9119
9219
9319
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9519
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9719
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0020
0120
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1120
1220
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14
Millio
n dw
t deli
verie
s / d
emol
ition
Orderbook (with slippage)DeliveriesDemolition ScenarioOrdersDemolition
Bulk carrier orderbook 277 m dwt, 50% fleet
2010 orderbook of 105 m
dwt but 78 m dwt
delivered
2011orderbook
of 80 m dwt cut
back to 77 m dwt
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Bulker Supply/Demand Balance 1963-13
0
100
200
300
400
500
600
700
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
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2007
2009
2011
2013
M. Dwt
-10%-6%-2%2%6%10%14%18%22%26%30%34%38%42%46%50%
% Surplus
Available Bulker fleet
Surplus bulker capacity (right axis)
Fleet growing faster than
demand due to high investment
Tanker & Bulk Overview
Martin Stopford, Marine Money Hamburg 24 Feb 2011 20
30th September 2010
CLARKSON RESEARCH SERVICES LTD
• The fundamentals are less favourable than they were at the start of the last decade
• Trade could be ok but the economic outlook is still worrying
• Shipyard output has peaked.• The big orderbook is rolling out and
it’s now hard to stop so the fleet will grow fast
• Tankers have sluggish demand but a smaller orderbook
• Bulkers have stronger demand but big orderbook
• So it looks like a classic shipping recession
Sir John Templeton, one of Wall Street’s greatest investors,
warned against investing in the belief that the world has changed
“The four most expensive words
in the English language are This time it’s different”
30th September 2010
CLARKSON RESEARCH SERVICES LTD
Disclaimer
The information supplied herewith is believed to be correct but the accuracy thereof is not guaranteed and the Company and its employees cannot accept liability for loss suffered in consequence of reliance on the information provided.
Provision of this data does not obviate the need to make further appropriate enquiries and inspections. Forecasts are frequently wrong and the information on which they are based is not always accurate, so they are not a reliable basis for business decisions. Always consult as many sources as possible and check the validity of each to the extent the decision justifies.
The information is for the use of the recipient only and is not to be used in any document for the purposes of raising finance without the written permission of Clarkson Research Services Limited, England, No 1944749. Registered Office at St. Magnus House, 3 Lower Thames Street, London, EC3R 6HE.