29 August 2018

James Fisher's half year results for the six months ended 30 June 2018

James Fisher and Sons plc (FSJ.L) ('James Fisher'), the leading marine service provider, announces its unaudited results for the six months ended 30 June 2018.

  2018 2017 restated % change
Revenue £260.5m £232.5m +12%
Underlying operating profit * £24.5m £20.7m +18%

Underlying operating margin *

9.4% 8.9% +50bps
Underlying profit before tax * £21.7m £18.1m +20%
Underlying diluted earnings per share * 34.5p 29.3p +18%
Interim dividend per share 10.3p 9.4p +10%
Statutory profit before tax £21.5m £17.1m +26%
Statutory diluted earnings per share 34.5p 27.7p +25%

* excludes separately disclosed items (note 3)
2017 restated for IFRS 15 'Revenue from contracts with customers' (note 14)

James Fisher's highlights:

  • Organic growth in revenue of 11%
  • Underlying operating profit up 18% at £24.5m; 25% at constant currency
  • Profit growth in all divisions - Marine Support up 21%; Specialist Technical up 19%
  • First Indian Navy submarine rescue system delivered
  • First long-term maintenance contract in Renewables
  • Strong cash conversion of 120%
  • Interim dividend up 10% to 10.3p per share

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

"We have had an encouraging first half, with particularly strong performances from our Marine Support and Specialist Technical divisions. We continue to invest in those companies with the best prospects for organic growth and to track a number of interesting acquisition prospects. Our cash conversion is strong and a significant working capital unwind is expected in the second half subject to successful delivery of the second submarine rescue vessel to the Indian Navy.

"The Board believes that the Group's outlook for the year is positive and that James Fisher continues to be well placed to provide further growth and value for shareholders."

 

James Fisher's review of the six months ended 30 June 2018

For the full James Fisher half year announcement, please read the financial release:

Strategy

The Group's strategy is to grow its business organically by leveraging its existing marine skill base in areas of specialist expertise to a global market, supplemented by selective bolt-on acquisitions which broaden the Group's range of specific niche services, products or geographical coverage. Our strategic aim is to deliver long-term growth in earnings per share and to consistently increase shareholder value. Whilst the Group prioritises organic growth, our strategy is to supplement it with value enhancing acquisitions which fit into our existing divisions. James Fisher seeks to acquire businesses that have a niche product or service offering, with growth potential, a track record of profitability, cash generation and strong management.

Strategic progress

The Group's corporate objectives are to deliver long-term growth in underlying earnings per share and to deliver progressive dividend growth. In the first half of 2018, underlying diluted earnings per share grew by 18% and the interim dividend was increased by 10%. Whilst the strong growth in the first half of 2018 was encouraging, it is partly due to a weaker first half comparative in 2017.

All divisions increased revenue in the first half of 2018 with Marine Support delivering a 21% increase. Group revenue was 12% ahead and up by 14% at constant currency, due to, on average, an 8% strengthening of Sterling compared to the US Dollar. Each division grew organically in the half and the Group's overall constant currency increase comprised 11% organic and 3% from businesses acquired.

Revenue H1 2018 H1 2017 restated Change Change at constant currency
Group 260.5 232.5 +12% +14%

Marine support

127.2

105.6

+21%

+23%

Specialist technical

77.6

72.5

+7%

+8%

Offshore oil

27.2

27

+1%

+5%

Tankships

28.5

27.4

+4%

+5%

Underlying operating profit growth was achieved at all four divisions with Marine Support and Specialist Technical achieving the highest growth at 21% and 19% respectively. Offshore Oil was slightly ahead of prior period, despite an adverse currency impact and Tankships delivered 10% growth. The Group's underlying operating margin increased from 8.9% to 9.4% in the period.

James Fisher offers a broad range of services to a wide range of sectors and geographical markets in the marine industry. The first half saw encouraging growth across all divisions, broadly spread across all sectors and regions.

Marine Support delivered continued growth in our ship-to-ship operations in Brazil and South East Asia, and in the offshore wind renewable energy market in the UK. The acquisition of EDS in the fourth quarter of 2017 has strengthened and broadened our offering to this market and has been successfully integrated into the Group during the first half of 2018. Our strategic goal has been to establish the Group in the emerging maintenance market for offshore wind and in the first half we were awarded our first longer term contract for maintenance services to the London Array wind farm in the Thames Estuary.

Progress has been made in increasing our market share in the Middle East which remains a buoyant market and in expanding the range of services provided in Brazil. East African gas remains a significant opportunity for future years and the Group has continued to position itself to support potential projects in this area.

In March, the first of two submarine rescue systems was delivered on schedule to the Indian Navy and will complete sea trials in Mumbai after the monsoon season is over. The second system is on schedule for completion before the end of the year.

The Group remains well positioned for an upturn in the oil & gas market. The first half has seen a limited improvement in activity levels but there is growing momentum in the industry.

Tankships has continued to trade strongly and has completed the acquisition of two tankers for £10.6m in line with the policy to refresh the fleet over the coming years.

Board

At the conclusion of the Annual General Meeting on 3 May 2018, Charles Rice retired as Chairman of the Group and was succeeded by Malcolm Paul. Justin Atkinson, who was appointed on 1 February 2018, succeeded Malcolm Paul as Chair of the Audit Committee and Aedamar Comiskey was appointed Chair of the Remuneration Committee. David Moorhouse is now the Senior Independent Non-Executive Director. Fergus Graham was appointed to the Board as an Executive Director on 1 March 2018.

Outlook

We expect that the second half will benefit from the contracts secured and momentum built during the first half in our Marine Support division. The division's results were heavily weighted to the second half in 2017 due to the timing of various projects. 2018 has returned to a more usual spread of business over the summer months such that any growth in the second half will be modest. The division continues to see significant opportunities for 2019 and beyond.

Our Specialist Technical division continues to trade well and has a solid order book for the remainder of the year. Prospects for further significant projects remain strong but the timing of such awards will remain uncertain.

Our Offshore Oil division remains well placed for an upturn in maintenance activity in the sector but it is expected that it will be 2019 before any significant benefit is seen.

Tankships has delivered a strong increase in the first half and with its stable market should continue to perform well as it introduces two more modern vessels into its fleet in the second half.

We continue to invest capital in those companies with the best prospects for organic growth and to track a number of interesting acquisition prospects. Our cash conversion is strong and a significant working capital unwind is expected in the second half subject to successful delivery of the second submarine rescue vessel to the Indian Navy. The Board believes that the Group's outlook for the year is positive and that James Fisher continues to be well placed to provide further growth and value for shareholders.

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 2017 Annual Report and Accounts on pages 19-21. The principal risks set out in the 2017 Annual Report and Accounts were:

  • Strategic - energy markets, operations in emerging markets;
  • Operational - project delivery, recruitment and retention of key staff, health, safety and environment, contractual risk and cyber security; and
  • Financial - foreign currency and interest rates.

The Board considers that the principal risks and uncertainties set out in the 2017 Annual Report and Accounts have not changed and remain relevant for the second half of the financial year.

The Board continues to consider that the UK's exit from the European Union is unlikely to have a material impact on the Group, as its business interests and customer base in the EU are not significant.

For the full James Fisher half year announcement, please read the financial release:

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