25 August 2020
Half year results for the six months ended 30 June 2020
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 2020.
|Underlying operating profit*||£19.5m||£24.5m||(20)%|
|Underlying profit before tax*||£15.1m||£20.9m||(28)%|
|Underlying diluted earnings per share*||23.6p||33.2p||(29)%|
|Interim dividend per share||8.0p||11.3p||(29)%|
|Statutory operating profit||£11.5m||£24.5m||(47)%|
|Statutory profit before tax||£7.1m||£20.9m||(59)%|
|Statutory diluted earnings per share||9.9p||33.6p||(62)%|
*excludes separately disclosed items of £(8.0)m (2019: £nil) [note 5]
- Key priority remains the safety and wellbeing of employees and customers
- Swift response to Covid-19 to reduce costs, optimise cash flow and protect liquidity
- Resilient trading performance
- £30m reduction in debt
- Interim dividend of 8.0p per share
Commenting on the results, Chief Executive Officer, Eoghan O'Lionaird, said:
"The first half of 2020 was one of the most demanding periods the Company has faced, and the commitment, support and engagement of our employees in stepping up to the challenges has been remarkable. The Group responded swiftly to both the unprecedented headwinds presented by Covid-19 and the longer-term implications for energy demand by taking actions to reduce costs and protect the Group's liquidity. Whilst the second half is expected to remain challenging and the outlook for our end markets is uncertain, we expect trading to improve through the second half, assuming no material deterioration in the Covid-19 situation.
James Fisher is well diversified by geographical sector and end market. The resilience of the Group, our strong liquidity position combined with swift actions taken to reduce costs, position James Fisher well for any improvement in market conditions in the second half and beyond. Whilst the financial performance in 2020 will be lower than 2019, the Group remains well placed to deliver future growth for its shareholders."
Review of the six months ended 30 June 2020
For the full James Fisher half year announcement, please read the financial release:
Resilient performance in challenging conditions
The first half of 2020 was particularly challenging for our employees, customers and suppliers, local communities and shareholders as, after a stable start to the year, oil prices were adversely impacted by over production relative to real demand which was then quickly followed by the global lockdown due to Covid-19.
The Group responded quickly to these challenges with our priority being to protect our employees and, within that context, to do all we could to continue to provide our services and goods to customers, whilst supporting and maintaining our supply chain. The commitment, support and engagement of our 3,000 employees during this period has been remarkable. Since the third week of March, approximately 70% of our office-based staff have been working from home, made possible by our past investment in the appropriate technology. At our operational sites we introduced enhanced safety measures, deep cleansing and social distancing which has helped to keep people safe, whilst maintaining good levels of efficiency and performance.
The Group took swift actions to reduce costs, optimise cash flow and protect liquidity. This included the deferral of all discretionary capital expenditure, instituting a hiring freeze, placing approximately 400 UK employees on furlough and implementing a 20% pay deferral for approximately 800 employees across the world. The deferred pay will be repaid to our employees during the second half of the current year, with the exception of all Board members, the Executive Committee and our senior leadership team, who have agreed that their pay reduction of 20% for the second quarter will not be reimbursed. The Group has returned to full salaries with effect from 1 July 2020 and has ceased to take advantage of the UK Government's furlough scheme since July.
In addition, the Group has deferred payment of cash bonuses in relation to the 2019 financial year until July and deferred payments of taxes where possible and defined benefit pension scheme contributions, with the agreement of the Pension Trustees. We announced on 26 March 2020 that the payment of the final dividend in relation to the year ended 31 December 2019 had been suspended as part of our response to protect the Group's liquidity going into the Covid-19 lockdown and we have now taken the decision to cancel this dividend.
Revenue in the first half of 2020 was 10% lower than the prior year period comparator at £258.1m (2019: £286.9m). All our divisions showed good resilience and traded profitably in each month during the second quarter and underlying operating profit for the first half was £19.5m (2019: £24.5m).
Underlying profit before taxation was £15.1m (2019: £20.9m) and underlying diluted earnings per share were 23.6p (2019: 33.2p).
The strong momentum we saw in Offshore Oil through the second half of 2019 continued into the first quarter of 2020 and although there was a negative impact in the second quarter, this division reported a first half underlying operating profit which was 23% ahead of the prior period.
The combination of Covid-19 and the sharp decline in energy prices has resulted in projects in our subsea operations in both Renewables and Oil & Gas being deferred into the second half of 2020 and beyond. In response to these challenges, we have taken actions, which are ongoing, to restructure our Marine Support division. In addition, less favourable market conditions have led us to revise assumptions of the carrying values of certain assets across the Group which has resulted in an impairment charge. These items are included within separately disclosed items by virtue of their size and nature. Total separately disclosed items in the period were £8.0m (2019: £nil) comprising restructuring in Marine Support of £1.5m, impairment charges of £4.8m and acquisition related charges of £1.7m.
Statutory operating profit for the first six months of 2020, which is the underlying operating profit less separately disclosed items, was £11.5m (2019: £24.5m) and statutory diluted earnings per share were 9.9p (2019: 33.6p).
We believe the Group has weathered the initial storm of Covid-19 and we have seen a significant improvement in the financial headroom on our committed banking facilities. Global economies are slowly recovering, and the price of oil has partially recovered from the low point in April. We operate in diverse markets and have a wide geographic spread so whilst certain parts of our business have been seriously impacted by Covid-19, other parts of our business have been resilient.
With this backdrop the Board has declared an interim dividend of 8.0 pence per share (2019: 11.3p), reflecting the reduction in underlying profit before taxation in the period. The dividend will be paid on 6 November 2020 to shareholders on the register at the close of business on 2 October 2020.
Our strategy has been to grow our business organically by leveraging our extensive marine services skill base in areas of specialist expertise across global markets, 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, this has been supplemented by value enhancing acquisitions which fit into our existing divisions. James Fisher looks to acquire businesses that have a niche product or service offering with growth potential, a track record of profitability, cash generation and strong management.
The appointment of Eoghan O'Lionaird as CEO on 1 October 2019 was an opportune time to revisit and retest the Group's strategy and to create a plan for further growth in the years ahead. We had intended to hold a capital markets day in June 2020 to update shareholders on our strategic review but whilst considerable progress has been made, our primary focus has been on protecting the Group, its employees and its financial integrity and we have deferred any announcement until next year.
Environmental, Social and Governance
The Health and Safety of our employees is always our highest priority and new measures in response to Covid-19 were quickly implemented throughout our Group. Regrettably, 56 James Fisher employees have contracted the virus and one has sadly passed away. The majority of cases in the Group have been in Brazil and many of our team working in Mozambique were quarantined following an outbreak at their operational base. We have sought to ensure any affected employees receive the best medical care and support.
Our work in reviewing the Group strategy includes expanding our focus to include our five key stakeholder groups: employees, customers and suppliers, the local communities in which we operate, the environment and our shareholders. With the objective of ensuring that our strategy is intrinsically sustainable, each of our operating companies is updating their respective strategies to include policies, objectives and actions focused on each of these primary stakeholders.
James Fisher continues to focus on diversity and inclusion. In the first half of 2020, women represented 29% of our Board membership and 29% of our Executive Committee.
During the first half, with the support of its bankers, the Group increased its committed revolving credit facilities by ?£50m to £300m (30 June 2019: £250m). Rapid actions taken to protect the Company and improve liquidity resulted in a £29.9m reduction in borrowings when compared to 31 December 2019. At 30 June 2020, the Group had headroom against its committed revolving credit facilities of £115.6m (2019: £83.7m). The ratio of net debt (inclusive of bonds and guarantees) to Ebitda was 2.5 times (2019: 2.3 times) as calculated under our banking agreements, which require a covenant of less than 3.5 times.
The first half of 2020 was one of the most demanding periods the Company has faced, and the commitment, support and engagement of our employees in stepping up to the challenges has been remarkable. The Group responded swiftly to both the unprecedented headwinds presented by Covid-19 and the longer-term implications for energy demand by taking actions to reduce costs and protect the Group's liquidity. Whilst the second half is expected to remain challenging and the outlook for our end markets is uncertain, we expect trading to improve through the second half, assuming no material deterioration in the Covid-19 situation.
James Fisher is well diversified by geographical sector and end market. The resilience of the Group, our strong liquidity position combined with swift actions taken to reduce costs position James Fisher well for any improvement in market conditions in the second half and beyond. Whilst the financial performance in 2020 will be lower than 2019, the Group remains well placed to deliver future growth to its shareholders.
Risks and uncertainties
Aside from Covid-19, 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 2019 Annual Report and Accounts on pages 25-27. The principal risks set out in the 2019 Annual Report and Accounts were:
- Operational - project delivery, recruitment and retention of key staff, health, safety and environment, contractual risk and cyber security;
- Strategic - operating in emerging markets; and
- Financial - foreign currency and interest rates.
The Board considers that the principal risks and uncertainties set out in the 2019 Annual Report and Accounts remain the same, although there has been a slight increase in some of the operational and financial risks, predominantly as a result of the impact and uncertainties of the global pandemic which have been set out above. The principal risks set out in the 2019 Annual Report and Accounts, together with the addition of a global pandemic, remain relevant for the second half of the financial year.
We confirm that to the best of our knowledge:
(a) The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union.
(b) 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.