30 August 2017

 

James Fisher and Sons plc

Half Year Results 2017

 

James Fisher and Sons plc (FSJ.L) ("James Fisher" or "the Group"), the leading marine service provider, announces its results for the six months ended 30 June 2017.

 

	H1 2017	H1 2016	% change
Group revenue	£235.8m	£209.3m	+13%
Underlying operating profit *	£21.3m	£19.9m	+7%
Underlying profit before tax *	£18.6m	£17.5m	+6%
Underlying diluted earnings per share *	30.1p	29.4p	+2%
Interim dividend per share	9.40p	8.55p	+10%
Statutory profit before tax	£17.6m	£17.4m	+1%

* underlying profit excludes separately disclosed items.

 

Highlights:

 

·   Revenue up 13% at £235.8m (2016: £209.3m)

·   Underlying operating profit 7% higher at £21.3m (2016: £19.9m)

·   Strong profit growth in Specialist Technical

·   Underlying diluted earnings per share up 2% to 30.1p (2016: 29.4p) per share

·   Interim dividend raised by 10% to 9.4p per share

 

Commenting on the results, Nick Henry, Chief Executive Officer said:

 

"James Fisher had a positive start to the year with revenue increasing by 13% to £235.8m and underlying operating profit by 7%. The phasing of renewables projects within Marine Support combined with a degree of recovery in maintenance activity in the oil and gas sector indicates stronger growth for the Group in the second half leading to a good improvement in the result for the year."

 

For further information:

 

James Fisher and Sons plc	Nick Henry Stuart Kilpatrick	Chief Executive Officer Group Finance Director	020 7614 9508
FTI Consulting	Susanne Yule Richard  Mountain		0203 727 1340

 

Chairman's Statement

 

Half Year Results for the six months ended 30 June 2017

 

Results

 

I am pleased to report that James Fisher had a positive start to the year with revenue in the first half increasing by 13% to £235.8m (2016: £209.3m) and underlying profit before tax by 6% to £18.6m (2016: £17.5m) compared with the same period last year.

 

Three of our divisions continued to trade well, with Marine Support and Tankships profits at similar levels to last year and Specialist Technical significantly ahead. Offshore Oil reported similar revenue but reduced profits after a slow start in the first four months of the year reduced utilisation levels. Trading in May and June in this division gives grounds for some optimism for an improved second half.

 

Strategic Developments

 

James Fisher continues to pursue a consistent strategy of investing in niche businesses operating in demanding environments where strong marine service skills are valued and rewarded. Whilst organic growth has driven the majority of James Fisher's development, the Group continues to be alert for incremental acquisitions which will strengthen our range of products, services or geographical coverage.

 

The first half saw the Group's investments of recent years bear fruit with significantly higher volumes of work in Asia Pacific for our Specialist Technical businesses and the opening of an important new market in Brazil for ship-to-ship oil transfer services.  In March we strengthened our product offering to the offshore renewables sector with the acquisition of Rotos 360, a high technology specialist in the repair and reconditioning of wind turbine rotor blades.

 

Outlook

 

Profit in the second half is likely to benefit from the phasing of projects across our renewables businesses due to seasonal factors and across our offshore oil businesses due to some improvement in oil and gas sector demand. We would therefore expect to see good growth from our Marine Support division. In Offshore Oil, orders in our Norwegian and our downhole equipment businesses have begun to show clear signs of recovery. Our Specialist Technical businesses continue to trade well despite some slowing in our nuclear decommissioning activities. Tankships maintain its good performance of recent years. Overall, we therefore expect to see stronger growth for the Group in the second half leading to a good improvement in the result for the year.

 

Dividend

 

The Board believes that James Fisher remains well placed to provide further growth and value for its shareholders. The Board has agreed a 10% increase in the interim dividend to 9.40 pence per share (2016: 8.55p) payable on 3 November 2017 to shareholders on the register on 6 October 2017.

 

 

C J Rice

29 August 2017

 

Operating and Financial Review

Half Year Results for the six months ended 30 June 2017

 

Operating performance

 

The Group's financial performance in the first half progressed well with a 7% increase in underlying operating profit on revenue that was 13% higher at £235.8m (2016: £209.3m). The overall growth rates reported have been positively impacted by exchange rates as a significant proportion of the Group's revenue is received in US Dollars. Changes at constant exchange rates have been calculated by retranslating the results for the six months ended 30 June 2016 at the average rates for the comparator in 2017.

 

Revenue	H1 2017	H1 2016	Change	Change at constant currency	Group revenue increased by 13% compared to prior period and by 8% at constant currency. The contribution from businesses acquired was 5% and organic growth, driven by Marine Support and Specialist Technical, was 3%. Offshore Oil revenue was flat but 7% lower excluding currency effects reflecting reduced demand in the first four months, in particular.   Underlying operating profit increased by 7% to £21.3m (2016: £19.9m). Underlying operating profits at Marine Support and Tankships were broadly similar to prior period and a 38% increase at Specialist Technical more than offset the lower result at Offshore Oil.
Group	235.8	209.3	+13%	+8%
Marine Support	105.6	92.4	+14%	+9%
Specialist Technical	75.7	62.9	+20%	+19%
Offshore Oil	27.1	27.0	-	(7)%
Tankships	27.4	27.0	+1%	(2)%
Underlying operating profit	H1 2017	H1 2016	Change	Change at constant currency
Group	21.3	19.9	+7%	+4%
Marine Support	9.1	9.3	(2)%	(6)%
Specialist Technical	8.5	6.1	+39%	+38%
Offshore Oil	1.1	2.1	(47)%	(52)%
Tankships	3.9	3.8	+3%	+1%
Common costs	(1.3)	(1.4)

 

 

Marine Support

	H1 2017	H1 2016
Revenue (£m)	105.6	92.4
Underlying operating profit (£m)	9.1	9.3
Underlying operating margin	8.6%	10.1%
Return on capital employed	12.0%	13.6%

 

Revenue in Marine Support grew by 14%. Volumes in ship-to-ship transfers were weaker in Asia Pacific, but this was offset by the commencement of operations for the Brazilian market. Whilst the businesses acquired in the renewables sector contributed to some increase in revenue, the phasing of projects within both the UK renewables and international marine service sectors, suppressed profits in the first half. Subtech, our South African based marine service business, contributed to the first half growth with project wins in the Middle East and West Africa.

 

Underlying operating profit was marginally lower at £9.1m (2016: £9.3m) as the benefit from increased ship-to-ship transfers and businesses acquired was offset by a lower level of marine service projects and by a slow start from our mass-flow excavation business which suffered from the weakness in the oil & gas sector, particularly in the first four months of the year. The Group's marine services and support contract in relation to the construction of the Galloper Wind Farm performed well in the period but did not see the benefit of additional work.

 

On 22 March 2017, the Group acquired Rotos 360 for an initial consideration of £1.5m with potential further consideration of £5.0m dependant on profit targets for the three years ending 31 December 2019. Rotos 360 uses the latest technological innovation to provide solutions in the inspection, repair and reconditioning of wind farm rotor blades, primarily in the offshore environment. The company was established in 2013 as part of a UK Government funded research project to reduce the cost of operation and maintenance of offshore wind turbines.

 

Specialist Technical

	H1 2017	H1 2016
Revenue (£m)	75.7	62.9
Underlying operating profit (£m)	8.5	6.1
Underlying operating margin	11.2%	9.7%
Return on capital employed	18.8%	15.6%

 

Specialist Technical revenue was 20% higher than prior period at £75.7m (2016: £62.9m). Our defence and diving equipment business, JFD, was 24% ahead of 2016, reflecting a full six months from the Indian submarine rescue project compared to three months in 2016, the start of a saturation diving system for China and including 5% relating to businesses acquired. In nuclear decommissioning, whilst the Winfrith reactor project continued to perform well, the business saw a 5% reduction in revenue as a change in UK policy has reduced projects awarded across the supply chain.

 

Underlying operating profit was 39% ahead of the equivalent six months in 2016 at £8.5m (2016: £6.1m) reflecting good contributions from JFD's service contracts, products and submarine rescue and diving equipment projects which more than offset a small reduction in nuclear profitability.

 

JFD successfully completed the first operational dive of its Compact Bailout Rebreathing Apparatus (Cobra) which provides 45 minutes of fully independent breathing gas to a diver in an emergency to enable them to return to the diving bell. Our nuclear decommissioning business, JFN, won its first order to supply a manipulator to China in the second half.

 

Offshore Oil

	H1 2017	H1 2016
Revenue (£m)	27.1	27.0
Underlying operating profit (£m)	1.1	2.1
Underlying operating margin	4.1%	7.8%
Return on capital employed	1.6%	3.3%

 

Offshore Oil had a slow start to the year and although revenue was similar to 2016, after adjusting for currencies, it was 7% lower. The majority of the reduction was due to low utilisation levels in the early months of the year which decreased margins.

 

Underlying operating profit was £1.0m lower at £1.1m (2016: £2.1m) and underlying earnings before interest, tax, depreciation and amortisation was £6.4m (2016: £7.6m). Overheads in the half were reduced by a further 10%. Whilst the first half result was lower, the business remains profitable and orders received since May, together with indications from customers, suggest a stronger second half.

 

Tankships

	H1 2017	H1 2016
Revenue (£m)	27.4	27.0
Underlying operating profit (£m)	3.9	3.8
Underlying operating margin	14.2%	14.1%
Return on capital employed	29.2%	28.3%

 

Tankships reported a similar result to the first half of 2016 with an operating margin of around 14%. The business operated 14 vessels (2016: 15) in the period and received some benefit from lower bareboat charter costs in the period. It also won a contract to supply two vessels for the refuelling of the HMS Queen Elizabeth during the second half of 2017.

 

Finance

 

Interest and taxation

 

Net interest was £0.2m higher at £2.6m (2016: £2.4m) due to increased borrowings mainly arising from the funding of working capital for the project to design and assemble two submarine rescue vessels for the Indian Navy and from other large projects.

 

The effective tax rate on underlying profit before tax in the period increased to 17.2% (2016: 15.4%). This rate is based on estimates for the full year and has increased due to a greater proportion of profits being earned in higher tax jurisdictions such as Brazil and Ghana. The first half of 2016 also benefitted from adjustments to tax provisions in respect of prior years which has not been repeated in 2017. The Group's tanker operations continue to be taxed with respect to tonnage rather than profits and this reduces the effective rate by 2.3 (2016: 2.4) percentage points in the period.

 

Separately disclosed items

 

The directors consider that alternative performance measures described in note 3 assist an understanding of the underlying trading performance of the businesses. These measures exclude separately disclosed items which consist of gains or losses on the sale of a business, asset impairments and charges or income relating to the acquisition of businesses. The net charge for separately disclosed items after tax in the six months ended 30 June 2017 was £0.8m (2016: £nil).

 

Earnings per share and dividends

 

Underlying profit before taxation increased 6% to £18.6m (2016: £17.5m) due to the strong operating profit growth at Specialist Technical. Underlying diluted earnings per share rose by 2% to 30.1 pence per share (2016: 29.4p), which was lower than the uplift in underlying profit before taxation due to the higher effective tax rate and a larger minority interest charge in the period.

 

Diluted earnings per share after separately disclosed items were 28.5 pence per share (2016: 29.4p). The interim dividend has increased by 10% to 9.40 pence per share (2016: 8.55p) and will be paid on 3 November 2017 to shareholders on the register on 6 October 2017.

 

Cash flow and borrowings

 

Summary cash flow			Underlying earnings before interest, tax depreciation and amortisation (Ebitda) increased by 8% to £34.4m (2016: £32.0m). This funded the seasonal increase in working capital of £10.2m and a project related increase of £15.4m, including, as previously stated, working capital in relation to the submarine rescue project for the Indian Navy.   Cash conversion, the proportion of underlying operating profit converted into operating cash, excluding the project for the Indian Navy was 62% (2016: 102%). Capital expenditure was 31% up on prior period £11.3m (2016: £8.6m) and £4.2m (2016: £7.7m) was spent on business acquisitions, inclusive of £1.5m of deferred consideration in respect of a business that had been acquired in 2013.
	H1 2017	H1 2016
	£m	£m
Underlying operating profit	21.3	19.9
Depreciation & amortisation	13.1	12.1
Ebitda *	34.4	32.0
Working capital	(18.9)	(10.1)
Working capital - Indian Navy	(6.7)	-
Pension / other	(2.3)	(1.7)
Operating cash flow	6.5	20.2
Interest & tax	(5.1)	(5.1)
Capital expenditure	(11.3)	(8.6)
Acquisitions	(4.2)	(7.7)
Dividends	(8.8)	(8.0)
Other	0.3	(2.4)
Net outflow	(22.6)	(11.6)
Net borrowings at start of period	(105.7)	(93.9)
Net borrowings at end of period	(128.3)	(105.5)
* Underlying earnings before interest, tax,   depreciation and amortisation

 

After dividends paid in the period of £8.8m (2016: £8.0m), the net cash outflow was £22.6m (2016: £11.6m) and net borrowings increased to £128.3m (2016: £105.5m). The ratio of net borrowings (which includes project related bonds and guarantees) to ebitda increased in line with management expectations, to 2.2 times (2016: 1.8 times) reflecting the working capital bonds and guarantees in relation to the Indian Navy project. Excluding this project, the ratio would be 1.8 times. Net gearing, the ratio of net debt to equity was to 49% (2016: 46%).

 

Balance sheet

 

	30 June 2017	30 June 2016	Intangible assets have increased by £21.8m since June 2016 due to the acquisitions of Lexmar and Hughes in the second half of 2016 and the acquisition of Rotos 360 in March 2017.   Working capital was £37.5m higher than prior year due to the project for the Indian Navy which cumulatively is £13.4m and from businesses acquired in the last twelve months amounting to £6.9m. The balance relates to project related outflows, mainly in Specialist Technical and Marine Support reflecting the uneven cash flows of a more project led business.
	£m	£m
Intangible assets	185.6	163.8
Other assets	136.6	135.7
Working capital	112.8	75.3
Other liabilities	(42.3)	(38.7)
Capital employed	392.7	336.1
Borrowings	128.3	105.5
Equity	264.4	230.6
	392.7	336.1

Delivery of the two submarine rescue vessels for the Indian Navy is scheduled for March 2018 and December 2018 and as previously stated, a further increase of working capital in the second half of 2017 of around £15m-£18m is expected which reverses when the vessels are delivered during 2018.

 

Risks and uncertainties

 

The principal risks and uncertainties which may have the largest impact on performance in the second half of the year are the same as disclosed in the 2016 Annual Report and Accounts on pages 20-22. The principal risks set out in the 2016 Annual Report and Accounts were:

 

·      Strategic - energy markets, operations in emerging markets;

·      Operational - project delivery, recruitment and retention of key staff, reputational risk and cyber security;

·      Financial - foreign currency and interest rates.

 

The Directors consider that the principal risks and uncertainties set out in the 2016 Annual Report and Accounts have not changed and remain relevant for the second half of the financial year.

 

Directors' Responsibilities

 

We confirm to the best of our knowledge:

 

The interim financial report has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union.

 

The interim management report includes a fair review of the information required by:

 

(a)     DTR 4.2.7R of the "Disclosure and Transparency Rules", being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

 

(b)     DTR 4.2.8R of the "Disclosure and Transparency Rules", being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during the period; and any changes in the related party transactions described in the last annual report that could do so.

 

 

 

N P Henry                                 S C Kilpatrick

Chief Executive Officer                Group Finance Director

 

29 August 2017

CONDENSED CONSOLIDATED INCOME STATEMENT

for the six months ended 30 June 2017

 

		Note	Six months ended 30 June 2017		Six months ended 30 June 2016	Year ended 31 December 2016
			£000		£000		£000
Revenue		4	235,775		209,317		465,969
Cost of sales			(168,064)		(144,999)		(324,239)
Gross profit			67,711		64,318		141,730
Administrative expenses			(47,379)		(45,083)		(94,641)
Share of post tax results of joint ventures			924		647		1,414
Acquisition related income and (expense)		7	(1,009)		(83)		1,456
Operating profit		4	20,247		19,799		49,959
Analysis of operating profit:
	Underlying operating profit		21,256		19,882		50,781
	Separately disclosed items		(1,009)		(83)		(822)
Net finance expense		5	(2,640)		(2,421)		(5,026)
Profit before taxation			17,607		17,378		44,933
Analysis of profit before tax:
	Underlying profit before taxation		18,616		17,461		45,755
	Separately disclosed items		(1,009)		(83)		(822)
Income tax		6	(3,014)		(2,567)		(6,786)
Profit for the period			14,593		14,811		38,147
Attributable to:
Owners of the Company			14,387		14,835		39,753
Non-controlling interests			206		(24)		(1,606)
			14,593		14,811		38,147
Earnings per share
			pence		pence		pence
Basic		8	28.7		29.6		79.4
Diluted		8	28.5		29.4		78.7

 

CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

for the six months ended 30 June 2017

 

	Note	2017		2016		2016
		Six months ended		Six months ended		Year ended
		30 June		30 June	31 December
		£000		£000		£000
Profit for the period		14,593		14,811		38,147
Items that will not be reclassified to the income statement
Remeasurement loss on defined benefit pension schemes	10	-		-		(3,054)
Actuarial loss in defined benefit pension schemes		-		(697)		-
Tax on items that will not be reclassified		28		(553)		(124)
		28		(1,250)		(3,178)
Items that may be reclassified subsequently to the income statement
Exchange differences on foreign currency net investments		(2,798)		7,158		16,771
Effective portion of changes in fair value of cash flow hedges		5,262		(2,783)		(3,249)
Effective portion of changes in fair value of cash flow hedges in joint ventures		(229)		(213)		(139)
Net change in fair value of cash flow hedges transferred to income statement		(282)		(6)		551
Deferred tax on items that may be reclassified		(742)		488		432
		1,211		4,644		14,366
Total comprehensive income for the period		15,832		18,205		49,335
Attributable to:
Owners of the Company		15,642		18,062		50,725
Non-controlling interests		190		143		(1,390)
		15,832		18,205		49,335

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

at 30 June 2017

 

		2017		2016		2016
		30 June		30 June	31 December
	Note	£000		£000		£000
Non-current assets
Goodwill		163,661		147,832		165,047
Other intangible assets		21,908		15,979		15,453
Property, plant and equipment		128,536		128,191		131,026
Investment in joint ventures		6,678		6,031		6,424
Available for sale financial assets		1,377		1,478		1,377
Deferred tax assets		1,850		3,588		2,852
		324,010		303,099		322,179
Current assets
Inventories		56,392		49,786		54,092
Trade and other receivables		178,674		150,029		157,384
Cash and cash equivalents	11	14,861		29,720		21,848
		249,927		229,535		233,324
Current liabilities
Trade and other payables		(122,218)		(124,582)		(129,332)
Current tax		(8,394)		(6,515)		(8,426)
Loans and borrowings		(2,891)		(10,800)		(3,086)
		(133,503)		(141,897)		(140,844)
Net current assets		116,424		87,638		92,480
Total assets less current liabilities		440,434		390,737		414,659
Non-current liabilities
Other liabilities		(10,280)		(9,141)		(4,962)
Retirement benefit obligations	10	(25,395)		(26,416)		(26,770)
Cumulative preference shares		(100)		(100)		(100)
Loans and borrowings		(140,192)		(124,345)		(124,380)
Deferred tax liabilities		(111)		(153)		(111)
		(176,078)		(160,155)		(156,323)
Net assets		264,356		230,582		258,336
Equity
Called up share capital		12,550		12,543		12,543
Share premium		25,690		25,573		25,573
Treasury shares		(75)		(610)		(554)
Other reserves		4,024		(6,877)		2,797
Retained earnings		221,233		197,422		216,979
Equity attributable to owners of the Company		263,422		228,051		257,338
Non-controlling interests		934		2,531		998
Total equity		264,356		230,582		258,336

 

 

 

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

for the six months ended 30 June 2017

 

		2017		2016		2016
	Note	Six months ended		Six months ended		Year ended
		30 June		30 June	31 December
		£000		£000		£000
Profit before tax for the period		17,607		17,378		44,933
Adjustments to reconcile profit before tax to net cash flows
Depreciation and amortisation		13,942		12,647		25,821
Acquisition costs charged		135		60		727
Profit on disposal of fixed assets		(818)		(61)		(556)
Provision for contract cessation		-		-		2,278
Adjustment to provision for contingent consideration		-		(522)		(3,384)
Net finance expense		2,640		2,421		5,026
Share of post tax results of joint ventures		(924)		(647)		(1,414)
Share based payments		218		577		1,144
Increase in inventories		(2,550)		(4,177)		(54)
Increase in trade and other receivables		(23,556)		41		(5,675)
Decrease/(increase) in trade and other payables		454		(5,962)		(13,291)
Defined benefit pension cash contributions less service cost		(1,686)		(1,691)		(4,233)
Cash generated from operations		5,462		20,064		51,322
Cash outflow from acquisition costs		(231)		-		(631)
Income tax payments		(2,848)		(3,376)		(6,930)
Cash flow from operating activities		2,383		16,688		43,761
Investing activities
Dividends from joint venture undertakings		988		172		700
Proceeds from the disposal of property, plant and equipment		1,509		724		1,678
Proceeds from the disposal of investments		-		-		144
Finance income		190		87		180
Acquisition of subsidiaries, net of cash acquired		(4,020)		(7,689)		(19,093)
Acquisition of property, plant and equipment		(9,706)		(7,964)		(13,859)
Development expenditure		(1,622)		(1,376)		(2,672)
Cash flows used in investing activities		(12,661)		(16,046)		(32,922)
Financing activities
Proceeds from the issue of share capital		124		49		50
Finance costs		(2,403)		(1,815)		(4,115)
Purchase of own shares by Employee Share Ownership Trust		(709)		(635)		(556)
Capital element of finance lease repayments		(50)		(81)		(174)
Proceeds from other non-current borrowings		15,868		16,460		2,363
Dividends paid		(8,830)		(8,026)		(12,303)
Dividend paid to minority interest		(416)		-		-
Cash flows from financing activities		3,584		5,952		(14,735)
Net increase in cash and cash equivalents		(6,694)		6,594		(3,896)
Cash and cash equivalents at beginning of period		21,848		22,962		22,962
Net foreign exchange differences		(293)		164		2,782
Cash and cash equivalents at end of period	11	14,861		29,720		21,848

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 June 2017

 

 

	Share		Share	Retained			Other	Treasury		Shareholders'		Non-controlling			Total
	capital	premium		earnings			reserves		shares		equity		interests		equity
	£000		£000		£000		£000		£000		£000		£000		£000
At 1 January 2017	12,543		25,573		216,979		2,797		(554)		257,338		998		258,336
Total comprehensive income	-		-		14,415		1,227		-		15,642		190		15,832
Contributions by and distributions to owners:
Ordinary dividends paid	-		-		(8,830)		-		-		(8,830)		-		(8,830)
Dividend paid to minority interest	-		-		-		-		-		-		(416)		(416)
Acquisition of minority interest					(318)		-		-		(318)		162		(156)
Share based payments	-		-		218		-		-		218		-		218
Tax effect of share based payments	-		-		(43)		-		-		(43)		-		(43)
Purchase of shares by ESOT	-		-		-		-		(1,094)		(1,094)		-		(1,094)
Sale of shares by ESOT	-		-		-		-		385		385		-		385
Arising on the issue of shares	7		117		-		-		-		124		-		124
	7		117		(8,973)		-		(709)		(9,558)		(254)		(9,812)
Transfer	-		-		(1,188)		-		1,188		-		-		-
At 30 June 2017	12,550		25,690		221,233		4,024		(75)		263,422		934		264,356
	Share	Share		Retained			Other	Treasury		Shareholders'		Non- controlling			Total
	capital	premium		earnings			reserves		shares		equity		interests		equity
	£000		£000		£000		£000		£000		£000		£000		£000
At 1 January 2016	12,541		25,525		192,908		(11,354)		(1,613)		218,007		2,388		220,395
Total comprehensive income	-		-		13,585		4,477		-		18,062		143		18,205
Contributions by and distributions to owners:
Ordinary dividends paid	-		-		(8,026)		-		-		(8,026)		-		(8,026)
Share based payments	-		-		577		-		-		577		-		577
Tax effect of share based payments	-		-		16		-		-		16		-		16
Purchase of shares by ESOT	-		-		-		-		(1,153)		(1,153)		-		(1,153)
Sale of shares by ESOT	-		-		-		-		518		518		-		518
Arising on the issue of shares	2		48		-		-		-		50		-		50
	2		48		(7,433)		-		(635)		(8,018)		-		(8,018)
Transfer	-		-		(1,638)		-		1,638		-		-		-
At 30 June 2016	12,543		25,573		197,422		(6,877)		(610)		228,051		2,531		230,582

 

NOTES TO THE CONDENSED CONSOLIDATED HALF YEAR STATEMENTS

 

1          Basis of preparation

 

James Fisher and Sons plc (the Company) is a public limited company registered and domiciled in England and Wales and listed on the London Stock Exchange. The condensed consolidated half year financial statements of the Company for the six months ended 30 June 2017 comprise the Company and its subsidiaries (together referred to as the Group) and the Group's interests in jointly controlled entities.

 

Statement of compliance

 

The condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standard (IFRS) IAS 34 "Interim Financial Reporting" as adopted by the European Union (EU). As required by the Disclosure and Transparency Rules of the Financial Services Authority, the condensed consolidated set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial statements for the year ended 31 December 2016 with the exceptions described below. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2016.

 

The comparative figures for the financial year ended 31 December 2016 are not the Group's statutory accounts for that financial year. Those accounts which were prepared under IFRS as adopted by the EU (adopted IFRS), have been reported on by the Group's auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

The consolidated financial statements of the Group for the year ended 31 December 2016 are available upon request from the Company's registered office at Fisher House, PO Box 4, Barrow-in-Furness, Cumbria LA14 1HR or at www.james-fisher.co.uk.

 

The half year financial information is presented in Sterling and all values are rounded to the nearest thousand pounds (£000) except where otherwise indicated.

 

The half year report was approved for issue by the Board of Directors on 29 August 2017.

 

Going concern

 

After making enquires, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing the condensed consolidated financial statements.

 

The Group meets its day to day working capital requirements through operating cash flows with borrowings in place to fund acquisitions and capital expenditure. The Group had £34.0m of undrawn committed facilities at 30 June 2017 and no revolving credit facilities due for renewal within the next twelve months.

 

Significant accounting policies

 

            The accounting policies applied by the Group in these condensed consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2016.

 

2          Accounting estimates and judgements

 

            The preparation of half year financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

 

            The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 31 December 2016.

 

3          Alternative performance measures

 

            The Group uses a number of alternative (non-Generally Accepted Accounting Practice (non-GAAP)) financial measures which are not defined within IFRS. The Directors use these measures in order to assess the underlying operational performance of the Group and, as such, these measures are important and should be considered alongside the IFRS measures. The adjustments are separately disclosed and are usually items that are significant in size or non-recurring in nature. The following non-GAAP measures are referred to in the half year results.

 

3.1.  Underlying operating profit and underlying profit before taxation

 

Underlying operating profit is defined as operating profit before amortisation or impairment of acquired intangible assets, acquisition expenses, adjustments to deferred consideration (together, acquisition related income and expense), the costs of a material restructuring, asset impairment or rationalisation of operations and the profit or loss relating to the sale of businesses.  Amortisation of acquired intangible assets and acquisition expenses are recurring in nature where business combinations are part of a group's strategy.  As acquisition expenses fluctuate with activity and to provide a better comparison to businesses that are not acquisitive, the Directors consider that both of these items should be separately disclosed to give a better understanding of operating performance.  The Directors believe that the underlying operating profit is an important measure of the operational performance of the Group. Underlying profit before taxation is defined as underlying operating profit less net finance expense.

 

				2017		2016		2016
				Six months ended 30 June	Six months ended 30 June		Year ended 31 December
				£000		£000		£000
Operating profit				20,247		19,799		49,959
Separately disclosed items before taxation				1,009		83		822
Underlying operating profit				21,256		19,882		50,781
Net finance expense				(2,640)		(2,421)		(5,026)
Underlying profit before taxation				18,616		17,461		45,755

 

3.2.  Underlying earnings per share

 

Underlying earnings per share (EPS) is calculated as the total of underlying profit before tax, less income tax, but excluding the tax impact on separately disclosed items included in the calculation of underlying profit less profit attributable to non-controlling interests, divided by the weighted average number of ordinary shares in issue during the year.  The Directors believe that underlying EPS provides an important measure of the underlying earnings capability of the Group. Underlying earnings per share is set out in note 8.

 

3.3.  Capital employed and return on capital employed (ROCE)

 

    Capital employed is defined as net assets less cash and short-term deposits and after adding back borrowings. Average capital employed is adjusted for the timing of businesses acquired and after adding back cumulative amortisation of customer relationships.  Segmental ROCE is defined as the underlying operating profit, divided by average capital employed.  The key performance indicator, Group post-tax ROCE, is defined as underlying operating profit, less notional tax, calculated by multiplying the effective tax rate by the underlying operating profit, divided by average capital employed.

 

3.4.  Cash conversion

 

       Cash conversion is defined as the ratio of operating cash flow to underlying operating profit.  Operating cash flow comprises cash generated from operations adjusted for dividends from joint venture undertakings.

 

4          Segmental information

 

            Management has determined that the Group has four operating segments reviewed by the Board: Marine Support, Specialist Technical, Offshore Oil and Tankships.  Their principal activities are set out in the Strategic report within the consolidated financial statements of the Group for the year ended 31 December 2016.

 

            The Board assesses the performance of the segments based on operating profit. The Board believes that such information is the most relevant in evaluating the results of certain segments relative to other entities which operate within these industries. Inter-segmental sales are made using prices determined on an arms-length basis.  Sector assets exclude cash, short-term deposits and corporate assets that cannot reasonably be allocated to operating segments.  Sector liabilities exclude borrowings, retirement benefit obligations and corporate liabilities that cannot reasonably be allocated to operating segments.

 

Six months ended 30 June 2017
	Marine		Specialist	Offshore			Tankships		Corporate		Total
	Support		Technical		Oil
	£000		£000		£000		£000		£000		£000
Segmental revenue	105,791		75,993		27,115		27,418		-		236,317
Inter-segmental sales	(182)		(300)		(60)		-		-		(542)
Revenue	105,609		75,693		27,055		27,418		-		235,775
Underlying operating profit	9,060		8,496		1,080		3,860		(1,240)		21,256
Acquisition costs	(12)		-		-		-		(123)		(135)
Amortisation of acquired intangibles	(594)		(132)		(148)		-		-		(874)
Operating profit	8,454		8,364		932		3,860		(1,363)		20,247
Net finance expense											(2,640)
Profit before tax											17,607
Income tax											(3,014)
Profit for the period											14,593
Assets and liabilities
Segmental assets	222,589		155,808	131,209			33,173		24,480		567,259
Investment in joint ventures	3,688		2,990		-		-		-		6,678
Total assets	226,277		158,798	131,209			33,173		24,480		573,937
Segmental liabilities	(61,027)		(53,207)		(8,176)		(6,469)		(180,702)		(309,581)
	165,250		105,591		123,033		26,704		(156,222)		264,356
Other segmental information
Capital expenditure	3,450		3,270		729		1,975		287		9,711
Depreciation and amortisation	4,785		1,905		5,328		1,652		272		13,942

 

 

Six months ended 30 June 2016
		Marine			Specialist			Offshore		Tankships		Corporate		Total
		Support			Technical			Oil
		£000			£000			£000		£000		£000		£000
Segmental revenue		92,600			63,441			27,082		26,991		-		210,114
Inter-segmental sales		(161)			(525)			(102)		(9)		-		(797)
Revenue		92,439			62,916			26,980		26,982		-		209,317
Underlying operating profit		9,313			6,149			2,089		3,759		(1,428)		19,882
Acquisition costs		-			-			-		-		(60)		(60)
Adjustment to provision for contingent consideration		-			522			-		-		-		522
Amortisation of acquired intangibles		(192)			(353)			-		-		-		(545)
Operating profit		9,121			6,318			2,089		3,759		(1,488)		19,799
Net finance expense														(2,421)
Profit before tax														17,378
Income tax														(2,567)
Profit for the year														14,811
Assets and liabilities
Segmental assets	204,243				109,756	134,062				33,073		45,469		526,603
Investment in joint ventures		3,380			2,651			-		-		-		6,031
Total assets	207,623				112,407	134,062				33,073		45,469		532,634
Segmental liabilities		(68,877)			(36,308)			(8,169)		(6,549)		(182,149)		(302,052)
		138,746			76,099		125,893			26,524		(136,680)		230,582
Other segmental information
Capital expenditure		2,687			918			2,969		1,143		95		7,812
Depreciation and amortisation		3,490			1,780			5,463		1,652		262		12,647

 

 

Year ended 31 December 2016
	Marine		Specialist		Offshore		Tankships		Corporate		Total
	Support		Technical		Oil
	£000		£000		£000		£000		£000		£000
Segmental revenue	203,926		152,678		55,490		55,492		-		467,586
Inter-segmental sales	(354)		(893)		(362)		(8)		-		(1,617)
Revenue	203,572		151,785		55,128		55,484		-		465,969
Underlying operating profit	20,956		19,950		4,200		8,188		(2,513)		50,781
Contract cessation costs	(2,278)		-		-		-		-		(2,278)
Acquisition costs	(249)		(312)		(166)		-		-		(727)
Amortisation of acquired intangibles	(400)		(801)		-		-		-		(1,201)
Adjustment to provision for contingent consideration	2,865		519		-		-		-		3,384
Operating profit	20,894		19,356		4,034		8,188		(2,513)		49,959
Net finance expense											(5,026)
Profit before tax											44,933
Income tax											(6,786)
Profit for the year											38,147
Assets and liabilities
Segmental assets	208,605		141,792		133,611		33,398		31,673		549,079
Investment in joint ventures	3,744		2,680		-		-		-		6,424
Total assets	212,349		144,472		133,611		33,398		31,673		555,503
Segmental liabilities	(48,440)		(60,335)		(8,363)		(7,160)		(172,869)		(297,167)
	163,909		84,137		125,248		26,238		(141,196)		258,336
Other segmental information
Capital expenditure	4,622		2,077		5,599		1,413		160		13,871
Depreciation and amortisation	7,437		4,002		10,978		3,166		239		25,822

 

 

5          Net finance expense

 

	2017		2016		2016
	Six months ended		Six months ended		Year ended
	30 June		30 June		31 December
	£000		£000		£000
Finance income:
Interest receivable on short-term deposits	188		88		205
Finance expense:
Bank loans and overdrafts	(2,365)		(1,901)		(3,982)
Preference dividend	(2)		(2)		(3)
Finance charges payable under finance leases	(1)		(11)		(36)
Net interest on pension obligations	(309)		(453)		(993)
Unwind of discount on contingent consideration	(151)		(142)		(217)
	(2,828)		(2,509)		(5,231)
Net finance expense	(2,640)		(2,421)		(5,026)

 

6          Taxation

 

            The effective tax rate on underlying profit before income tax, based on an estimated rate for the year ending 31 December 2017, is 17.2% (30 June 2016: 15.4%, 31 December 2016: 15.4%).  The effective rate on profit before income tax (after separately disclosed items) is 17.1% (30 June 2016: 14.8%, 31 December 2016: 15.1%). Of the total tax charge, £2.0m relates to overseas businesses (2016: £1.5m), and £1.0m relates to UK businesses (2016: £1.1m).

 

7          Separately disclosed items

              

	2017		2016		2016
	Six months ended		Six months ended		Year ended
	30 June		30 June		31 December
	£000		£000		£000
Included in operating profit:
Administrative expenses:
Contract cessation costs in Angola	-		-		(2,278)
Acquisition related income and (expense):
Costs incurred on acquiring businesses	(135)		(60)		(727)
Amortisation of acquired intangibles	(874)		(545)		(1,201)
Adjustment to provision for contingent consideration	-		522		3,384
	(1,009)		(83)		1,456
Separately disclosed items before taxation	(1,009)		(83)		(822)
Tax on separately disclosed items	188		117		267
	(821)		34		(555)

 

8          Earnings per share

 

            Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period, after excluding ordinary shares held by the Employee Share Ownership Trust as treasury shares.

 

            Diluted earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

 

           

The calculation of basic and diluted earnings per share is based on the following profits and numbers of shares:

 

            Weighted average number of shares

		30 June 2017		30 June 2016		31 December 2016
		Number of		Number of		Number of
		shares		shares		shares
For basic earnings per ordinary share*		50,144,671		50,066,388		50,096,089
Exercise of share options and LTIPs		401,397		332,104		387,067
For diluted earnings per ordinary share		50,546,068		50,398,492		50,483,156

 

      * Excludes 5,950 (June 2016: 46,619; December 2016: 45,368) shares owned by the James Fisher and Sons plc

        Employee Share Ownership Trust.

           

            To provide a better understanding of the performance of the Group, underlying earnings per share on continuing activities are presented as set out in note 3.

           

			2017		2016		2016
			Six months ended	Six months ended			Year  ended
			30 June		30 June	31 December
			£000		£000		£000
Profit attributable to owners of the Company			14,387		14,835		39,753
Separately disclosed items			1,009		83		822
Non-controlling interest in separately disclosed items			-		-		(1,800)
Tax on separately disclosed items			(188)		(117)		(267)
Underlying profit attributable to owners of the Company			15,208		14,801		38,508
Basic earnings per share			28.7		29.6		79.4
Diluted earnings per share			28.5		29.4		78.7
Underlying basic earnings per share			30.3		29.6		76.9
Underlying diluted earnings per share			30.1		29.4		76.3

 

9          Interim dividend

 

            The interim dividend of 9.40p (2016: 8.55p) per 25p ordinary share is payable on 3 November 2017 to those shareholders on the register of the Company at the close of business on 6 October 2017. The dividend recognised in the Condensed Consolidated Statement of Changes in Equity is the final dividend for 2016 of 17.60p which was paid on 9 May 2017.

 

10         Retirement benefit obligations

 

Movements during the period in the Group's defined benefit pension schemes are set out below:

   

			2017		2016		2016
		Six months ended		Six months ended			Year ended
			30 June		30 June		31 December
			£000		£000		£000
Net obligation as at 1 January			(26,770)		(26,956)		(26,956)
Expense recognised in the income statement			(368)		(507)		(1,172)
Contributions paid to scheme			1,743		1,744		4,412
Remeasurement gains and losses			-		(697)		(3,054)
At period end			(25,395)		(26,416)		(26,770)

   

The Group's net liabilities in respect of its pension schemes at 30 June 2017 were as follows:

 

			2017		2016		2016
		Six months ended		Six months ended			Year ended
			30 June		30 June		31 December
			£000		£000		£000
Shore Staff			(9,435)		(8,498)		(10,057)
Merchant Navy Officers Pension Fund			(7,634)		(9,163)		(8,464)
Merchant Navy Ratings Pension Fund			(8,326)		(8,755)		(8,249)
			(25,395)		(26,416)		(26,770)

 

The principal assumptions in respect of these liabilities are disclosed in the December 2016 Annual Report.  The Group has not obtained an interim valuation for the period ended 30 June 2017 as there are no material changes to the principal assumptions.

 

11            Reconciliation of net debt

                   

	1 January		Cash		Other		Exchange		30 June
	2017		flow		non-cash		movement		2017
	£000		£000		£000		£000		£000
Cash and cash equivalents	21,848		(6,694)		-		(293)		14,861
Debt due after 1 year	(124,380)		(16,051)		(311)		534		(140,208)
Debt due within 1 year	(2,994)		183		-		4		(2,807)
	(127,374)		(15,868)		(311)		538		(143,015)
Finance leases	(192)		50		(25)		(1)		(168)
Net debt	(105,718)		(22,512)		(336)		244		(128,322)
	1 January		Cash		Other		Exchange		30 June
	2016		flow		non-cash		movement		2016
	£000		£000		£000		£000		£000
Cash and cash equivalents	22,962		6,594		-		164		29,720
Debt due after 1 year	(116,650)		(5,724)		(125)		(1,873)		(124,372)
Debt due within 1 year	-		(10,736)		-		-		(10,736)
	(116,650)		(16,460)		(125)		(1,873)		(135,108)
Finance leases	(201)		81		-		(17)		(137)
Net debt	(93,889)		(9,785)		(125)		(1,726)		(105,525)
	1 January		Cash		Other		Exchange	31 December
	2016		flow		non-cash		movement		2016
	£000		£000		£000		£000		£000
Cash and cash equivalents	22,962		(3,896)		-		2,782		21,848
Debt due after 1 year	(116,650)		(4,066)		(12)		(3,652)		(124,380)
Debt due within 1 year	-		1,703		(4,765)		68		(2,994)
	(116,650)		(2,363)		(4,777)		(3,584)		(127,374)
Finance leases	(201)		174		(127)		(38)		(192)
Net debt	(93,889)		(6,085)		(4,904)		(840)		(105,718)

 

12         Commitments and contingencies

 

            Commitments and contingencies are as set out in the 2016 Annual Report other than for the following changes. At 30 June 2017, the Group had capital commitments of £8.8m (30 June 2016: £1.6m, 31 December 2016: £0.2m) and the Group had issued performance and payment guarantees to third parties with a total value of £44.7m (30 June 2016: £16.9m, 31 December 2016: £42.4m).

 

13            Related parties

 

There have been no significant changes in the nature of related party transactions in the period ended 30 June 2017 from that disclosed in the 2016 Annual Report.

 

Independent review report to James Fisher and Sons plc

 

Introduction 

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated cash flow statement, the condensed consolidated statement of movements in equity and the related explanatory notes.  We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

 

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").  Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. 

 

Directors' responsibilities 

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA. 

 

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. 

 

Our responsibility 

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 

 

Scope of review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion. 

 

Conclusion 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA. 

 

Mike Barradell

for and on behalf of KPMG LLP 

Chartered Accountants 

1 St. Peter's Square

Manchester

M2 3AE  

 

29 August 2017