'Monitoring the Performance of Stock Listed Shipping Companies' By Dimitris Lyras, Lyras Shipping Director, Advisor to the board of Directors of Ulysses Sytsems (Economic Outlook - Issue 87 - December 2004 - Shipping p.16)
01/02/2005 - Economc Outlook - Issue 87 - December 2004 - Shipping p.16
A stock listing is seen as a very coveted end for many shipping companies, there are unfortunately some obstacles as far as the stock markets rewarding real management expertise.
Stock analysts require that they have ways to benchmark all aspects of a company's performance, which they consider important. For example, they measure all aspects of commercial income and market prospects and if we are to attempt similar analysis of shipping companies, they will benchmark operating efficiency.
Operating efficiency is something quite close to the core competence of many companies, an area that good companies would like stock analysts to cover. One aspect of traditional ship-owner managers is the ability to create a culture of problem solving, cost efficiency, flexibility to address new situations, hard work, perseverance and leadership.
Companies whose expertise is more easily demonstrated will meet with more favor from analysts. The ability of companies to meet the requirements of the Oil Major's new Tanker Management and Self Assessment requirements (TMSA), the most current issue being discussed in the Tanker Industry, will be a vital aspect of influencing informed analysts. TMSA was introduced this summer by OCIMF, the Oil Industries International Maritime Forum, a body established by the Oil Majors to monitor and maintain standards in tanker management and safety.
However, OCIMF's TMSA has a different approach to that addressed by shareholders in a company. A vital aspect of OCIMF's requirements are that Key Performance Indicators are used to ensure that tanker companies can demonstrate, measure and improve their performance bringing transparency to shipmanagement.
Will these values be useful to financial analysts?
Key Performance Indicators (KPls) will give analysts clear insight into the management of tanker companies.
Eventually, KPI's will develop to reflect matters that will also serve internal performance quantification as they do externally. This in turn requires that internal transparency and record keeping is such as to make it possible to evaluate more subtle KPI's than might show, for example, how many people per annum have fallen down on deck or whether the company has a five year environmental plan and is actually implementing the plan.
For analysts trying to find indications that a company will remain a low cost, high efficiency operator, benchmarking the on going condition of vessels as well as the operating costs will be a useful tool. This requires immensely detailed breakdowns of the vessels'' condition. This is something that is not currently practiced but is certainly feasible using information technology.
Leading tanker operators are moving in this direction and overhauling the detail with which they manage this sort of information. These companies do so not only to enable such eventual KPl's to be reported externally to analysts, but more importantly to enable them internally to manage the performance that they see as a company differentiator. They are responding to their own needs, the needs of their clients and, eventually, the needs of those looking to invest in shipping and monitor the performance of their investment.