Final Results
Fisher (James) & Sons PLC
18 March 2008
18 March 2008
James Fisher and Sons plc (James Fisher)
Full Year Results 2007
James Fisher, the UK marine services provider, announces results for the Full
Year 2007.
2007 2006
Revenue (£m) + 54% £182.0m £118.1m
Profit from operations (£m)* + 35% £21.5m £15.9m
Profit before tax (£m)* + 21% £19.2m £15.9m
Adjusted basic earnings per share (pence)* + 16% 32.85p 28.30p
Final dividend per share (pence) + 15% 7.52p 6.54p
* Profit before separately disclosed items
Highlights
• Organic growth the main source of increased profitability
• Offshore Oil - strong performance from Norwegian and Aberdeen
operations, resulting in good operating profit growth at steady margins
• Specialist Technical - good revenue and operating profit growth, driven
by the excellent performance of FenderCare and the first full year's
contribution from The Strainstall Group
• Defence - increased operating profit and steady margins, resulting from
a number of submarine rescue projects
• Marine Oil - Successful integration of FT Everard with segmental profit
of £8.6 million after £800,000 one-off merger costs charged against
profit
Commenting on the results, Chairman, Tim Harris, said:
'2007 was another good year for James Fisher with significant increases in all
the key financial metrics. James Fisher has a proven track record, consistently
generating cash and good margins. Trading so far in 2008 has met management
expectations. Our main markets of shipping, offshore and port services remain
strong. The company is well placed in these markets to continue to produce good
growth and value for our shareholders.'
For further information:
James Fisher and Sons plc Tim Harris, Chairman 020 7614 9508
www.james-fisher.co.uk Nick Henry, Chief Executive Officer
Michael Shields, Group Finance Director
Financial Dynamics Richard Mountain/Sophie Kernon 020 7269 7121
CHAIRMAN'S STATEMENT
2007 Chairman's Statement
Highlights
2007 was another good year for James Fisher with profit on continuing operations
before tax up 21% on 2006 and basic earnings per share up by 16%. Particular
highlights were:
• organic growth was the prime source of increased profitability
• the Everard integration has been successfully completed and returns are
approaching planned levels
• robust cash flow enabled the Company to spend £15.2 million on acquisitions
and still reduce financial gearing.
Strategy
James Fisher's goal is to be recognised as the UK's leading marine service
company. Its strategy is to grow its marine service activities based on its
core expertise of the practical application of technical and operational skills
in the marine sector.
Key factors of this strategy are:
1. to use the strong cash flows from Marine Oil Services (Tankships) to grow
the Marine Support Divisions of Offshore Oil, Specialist Technical and
Defence by capital investment and acquisitions
2. to encourage organic growth in these marine support divisions
3. to focus on high cash generating, high margin niche businesses
4. to develop the Group's ship management activities into one of the UK's
leading marine 'centres of excellence' based on tankships, which can be
leveraged in the other marine services divisions
The results are released against an uncertain global economic backdrop. While it
would be unrealistic to suggest that James Fisher is immune from the general
economy, we believe it is well placed to ride out and indeed prosper in any
upcoming storm because:
• it has a proven track record generating cash and organic profit growth
• its businesses are firmly established in three of the fastest growing market
sectors, eg offshore oil, marine and port related services
• a growing proportion of group revenue (2007 37% - 2006 30%) is now generated
outside the UK
• as a service business it is largely unaffected by cyclical swings in asset
values
• it has good, long-term relationships and credit lines with its banks and
healthy margins on its bank covenants
Offshore Oil Division - 2007 divisional result £8.6m (2006 £7.3m)
Profits grew 17% over last year, with both margins and returns on capital
employed (including goodwill) steady at around 33% and over 16% respectively.
Organic profit growth was 57%. The only acquisition in Offshore Oil during the
year was of Buchan Technical Services Limited in May for net cash of £3.5
million.
This division is evenly split between its bases in Stavanger, Norway and
Aberdeen. It enjoys a number of distinct market niches - hiring, customising
and selling specialist equipment, together with the associated labour, to the
offshore market. This equipment includes compressors, generators, reels,
winches and other lifting equipment. Increasingly it is going with established
European based contractors beyond the North Sea into the new oil provinces of
the world.
Its customers operate across the oil production, construction and maintenance
markets as well as exploration. These markets remain strong with good prospects
reflecting the global economy's demand for oil.
Specialist Technical - 2007 divisional result £6.3 million (2006 £4.3 million)
This division enjoyed strong revenue and profit growth in 2007, with revenue up
69% and profits 47% greater than in the previous year. Of this profit growth,
74% was organic. Overall margins were slightly lower at 9.5% in 2007, from
10.9% last year. This was primarily caused by the start up costs of James
Fisher Inspection and Measurement Services Limited (JFIMS).
This division is well placed strategically in the service markets related to
world shipping, port related services and offshore, all of which are growing
rapidly. It also has a modest exposure to the UK nuclear decommissioning market
which has potential, but is not yet as fast growing as other markets in which
this division operates.
The FenderCare group, the James Fisher cluster most directly related to world
shipping and ports development, again enjoyed strong growth in all its
activities.
The Strainstall group, whose prime expertise is the application of strain and
similar gauges, enjoyed a strong year in its first full year in the Group. It
too is focused on the port and shipping industries, but its applications include
a wider range than FenderCare, including the rail industry. We made a small
acquisition in February 2008 for £3.0 million net cash - JCM Scotload Limited,
which is involved in the design and application of strain gauges - to strengthen
the Strainstall cluster.
James Fisher's 'downhole' cluster based on Remote Marine Systems Limited (RMS)
was strengthened by the purchase of the Aberdeen based Pump Tools Limited
(Pumptools) for £7.4 million net cash in October 2007. RMS and Pumptools
produce related, specialist electrical submersible pump (ESP) equipment for the
oil industry and will shortly start joint marketing. In the typical James
Fisher way they enjoy strong market niches in a fast growing market and we are
optimistic about this cluster's growth potential.
James Fisher's nuclear cluster is based on the core skills of remote handling
and plant characterisation for nuclear decommissioning and inspection
measurement services. The nuclear decommissioning industry in the UK is
currently in a state of confusion and some restriction of funds. Our policy is
to identify and invest in market sectors where our skills are not commoditised
and can command a decent margin. In line with this policy, in July 2007 we
strengthened our start-up, JFIMS, through the acquisition of Inspection Holdings
Limited and its main operating subsidiary, NDT Inspection and Testing LTD (NDT),
for £1.0 million net cash.
The JFIMS start-up has been successful and to plan and we expect our nuclear
cluster to show real progress in 2008.
Defence Division - 2007 divisional result £3.0 million (2006 £3.0 million)
The 2007 operating profit result was 8% better than 2006 when a one off tax
credit of £0.2 million from Foreland Shipping Limited, our military roll on-roll
off (ro-ro) shipping associate company, is eliminated from the result for the
earlier year. Margins on a like for like basis remained steady at 26%. The
Defence division has two principal activities: the design, construction and
operation of submarine rescue equipment and the operation of surface ships with
the services associated thereto.
Submarine rescue has been particularly active in 2007 with the construction of
rescue vehicles for the South Korean (delivery end 2008) and Singaporean (1st
half of 2009) navies well underway. The Korean contract is for the
straightforward delivery of a rescue vehicle and is funded by stage payments
throughout the build period. The Singaporean contract is more comprehensive as
we work together with our partners, Singapore Technologies Marine Limited (ST
Marine) the Singapore naval dockyard, to provide a through life rescue service
until 2029. We are funding the construction of the rescue vessel from our own
resources until its sale in 2009 to a 50/50 joint venture company with ST
Marine, who are providing the mother ship. It is then planned to re-finance the
joint venture company with Singaporean banks. Both Korean and Singaporean
vessels, which share a similar design, are under construction in our Renfrew
base and progress to date has been to plan both in terms of costs and timeline.
We have taken revenue of £4.4 million and profit of £0.3 million on the Korean
contract in the 2007 results. No revenue or profit has been taken on the
Singaporean contract and costs to date of £3.8 million have been included in
work in progress.
For the surface vessels Foreland, the military ro-ro PFI company in which we
have a 25% shareholding, continues to prosper. During the year we were awarded
the management of the lay-up of three corvettes built by BAe Systems for the
Brunei Navy. One of these has since been re-activated and has successfully
completed a series of sea trials. This exercise demonstrated the range of
marine skills that James Fisher offers, skills which are becoming increasingly
rare in the UK.
Marine Oil Services Division - 2007 divisional result £8.6 million (2006 £5.8
million)
There was much activity in this division in 2007 owing to the Everard
acquisition made on 28 December 2006. The Everard fleet was commercially,
operationally and managerially integrated with James Fisher Tankships to form
James Fisher Everard Limited by the half year, when we announced one off merger
costs of £800,000 which had been charged directly against profit. Despite this,
profit for the full year 2007 was 48% higher than 2006 and importantly margins
at 11.3% (12.4% after adjustment for the £800,000 merger costs) were close to
those of 2006 (12.7%). The return on capital was 12% in 2007, unchanged from
2006, the great majority of which is effectively tax free because of the
tonnage tax. Through greater productivity with a larger fleet our aim is to
push margins and return on capital closer to those achieved by James Fisher in
earlier years, eg 2005, margin 15%, ROCE 13%.
Highlights of a busy year included the entry to trade of the last two of the
four Everard 4,000 tonne newbuildings, mt Superiority and mt Supremity and the
re-financing of the first three of them as bareboat charters raising £22.6
million. We also sold two older ships, mt Severn Fisher and mt Agility, for
£3.3 million cash booking a profit of £0.2 million. A further vessel, mt
Alacrity, has been sold in January 2008 for £1.5 million net cash.
James Fisher Everard has recently been awarded a contract from the European
Maritime Safety Agency (EMSA) to provide standby oil recovery services. This
contract is for the provision of three tankers from the James Fisher Everard
fleet which have been prepared to receive emergency oil recovery equipment so
that they can be called on in case of an oil slick emergency. It has an initial
three-year period from 31 March 2008, renewable for a further three years and
will provide gross revenue earnings of £1 million per annum.
Directors and Employees
There have been no changes to the Board during the year other than William
Everard who stood down as Technical Director of the Fleet in September after the
merger of the two fleets to create James Fisher Everard. I would like to thank
William for his contribution to the process. He will continue to represent the
Company in a number of industry bodies.
Actuarial losses on defined benefit schemes during the year caused a £4.6
million charge to reserves compared to a £4.1 million write-back in 2006 with
the industry MNOPF scheme for officers, the main cause. This scheme is now the
primary area of focus because all of the other schemes have been closed to new
entrants but as an industry scheme it is less easy to influence. Realistically
increased deficits must be anticipated in 2008 owing to a likely combination of
lower interest rates together with increased life expectancy assumptions.
James Fisher continues to grow in terms of employee numbers and in 2007 employed
over 1,300 people. Particularly interesting is that we are now increasingly
able to offer qualified people of talent, engineering work to support our
technically based marine support activities and much of this work is in Cumbria
and the North where such employment is particularly beneficial. I would like to
recognise and thank all at James Fisher for their contribution in making 2007
another successful year.
Outlook
James Fisher has a proven track record, consistently generating cash and organic
profit growth.
Trading so far in 2008 has met management expectations. Our main markets of
shipping, offshore and port services continue to be strong. Both the offshore
oil and specialist technical divisions are well positioned to continue to grow
profits organically, as they have in recent years. We shall continue to support
them by selective capital expenditure and further 'bolt on' acquisitions.
In Defence our main task in 2008 will be to deliver the Korean and Singaporean
submarine contracts on time and to budget. If we achieve this, our global
leadership of this market will be confirmed.
Our aim for Marine Oil must be to consolidate the progress made in 2007 with
James Fisher Everard and, through hard work and increased productivity, to
improve margins to the historical levels earned by James Fisher.
The Company is well placed in its markets to continue to produce good growth and
value for our shareholders.
GROUP INCOME STATEMENT
For the year ended 31 December 2007
Notes Year ended Year ended
31 December 2007 31 December 2006
Before Separately Before Separately
separately disclosed separately disclosed
disclosed items disclosed items
items note 4 Total items note 4 Total
£000 £000 £000 £000 £000 £000
Group revenue 182,046 182,046 118,085 118,085
Cost of sales (154,327) (154,327) (96,438) (96,438)
Gross profit 27,719 27,719 21,647 21,647
Administrative expenses (6,191) (6,191) (5,756) (5,756)
Profit from operations before 2 21,528 21,528 15,891 15,891
separately disclosed items
Profit on sale of property - - - - 1,126 1,126
Impairment of ship - - - - (2,906) (2,906)
Profit/(loss) on ship - 95 95 - (24) (24)
disposals
Profit from operations 21,528 95 21,623 15,891 (1,804) 14,087
Finance costs
Finance income (revenue) 375 - 375 316 - 316
Finance costs (5,036) - (5,036) (2,586) - (2,586)
Exchange (loss)/gain on - (184) (184) - 35 35
loan conversion
(4,661) (184) (4,845) (2,270) 35 (2,235)
Share of post tax results of 2,322 - 2,322 2,295 - 2,295
joint ventures
Profit on continuing operations 19,189 (89) 19,100 15,916 (1,769) 14,147
before taxation
Taxation 5 (2,959) - (2,959) (2,034) (377) (2,411)
Profit for the year on 16,230 (89) 16,141 13,882 (2,146) 11,736
continuing operations
Discontinued operations
(Loss)/profit for the year from 3 (6) 2,041
discontinued operations
Profit for the year 16,135 13,777
Profit attributable to :
Equity holders of the parent 16,078 13,780
Minority interests 57 (3)
16,135 13,777
Earnings per share
pence pence
Basic EPS from continuing 6 32.67 23.93
operations
Diluted EPS from continuing 6 32.40 23.71
operations
Basic EPS on profit/(loss) from 6 32.66 28.09
total operations
Diluted EPS on profit/(loss) 6 32.39 27.83
from total operations
Adjusted Earnings per share
Basic EPS from continuing 6 32.85 28.30
operations
Diluted EPS from continuing 6 32.58 28.05
operations
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the year ended 31 December 2007
Notes Year ended Year ended
31 December 2007 31 December 2006
£000 £000
Income and expense recognised directly in equity
Exchange differences on translation of foreign operations:
Currency translation differences 393 189
Net investment hedge 1,041 (571)
1,434 (382)
Fair value (losses)/gains on cash flow hedges (188) 62
Share of fair value (losses)/gains of cash flow hedges in joint (280) 39
venture
Actuarial (losses)/gains on defined benefit schemes (4,587) 4,143
(3,621) 3,862
Transfers to the income statement
On cash flow hedges 8 7
Tax on items taken directly to equity 5 (199) (772)
Net (expense)/income recognised directly in equity (3,812) 3,097
Profit for the year 16,135 13,777
Total recognised income for the year 8 12,323 16,874
Attributable to:
Equity holders of the parent 12,266 16,877
Minority interests 57 (3)
12,323 16,874
GROUP BALANCE SHEET
As at 31 December 2007
Restated
note 11
Notes 31 December 2007 31 December 2006
£000 £000
Assets
Non current assets
Goodwill 67,190 55,814
Other intangible assets 76 60
Property, plant and equipment 92,311 103,620
Investment in joint ventures 4,217 3,575
Available for sale financial assets 1,370 1,370
Retirement benefit assets 9 528 -
165,692 164,439
Current assets
Inventories 18,471 11,268
Trade and other receivables 39,823 32,865
Derivative financial instruments - 17
Cash and cash equivalents 13,221 9,655
71,515 53,805
Non-current assets classified as held for sale 3 1,172 1,518
Total Assets 238,379 219,762
Equity and Liabilities
Capital and reserves
Called up share capital 8 12,428 12,377
Share premium 8 24,338 24,114
Treasury shares 8 (1,134) (1,147)
Other reserves 8 878 (96)
Retained earnings 8 57,395 50,932
Shareholders' Equity 93,905 86,180
Minority interests 8 128 71
Total equity 94,033 86,251
Non current liabilities
Other payables 2,012 2,358
Retirement benefit obligations 9 11,904 10,224
Derivative financial instruments 188 -
Cumulative preference shares 100 100
Financial liabilities 83,628 72,449
Deferred tax liabilities 2,226 1,987
100,058 87,118
Current liabilities
Trade and other payables 34,907 33,987
Current tax 1,940 1,207
Derivative financial instruments - 55
Financial liabilities 7,441 11,144
44,288 46,393
Total liabilities 144,346 133,511
Total equity and liabilities 238,379 219,762
GROUP CASH FLOW STATEMENT
For the year ended 31 December 2007
Notes 31 December 2007 31 December 2006
£000 £000
Group profit before tax from continuing operations 19,100 14,147
Adjustments to reconcile Group profit before tax to
net cash flows
(Loss)/profit from operations from discontinued operations (6) 2,042
Depreciation and amortisation 8,344 5,662
Profit on sale of plant and equipment (735) (377)
Profit on disposal of property - (1,126)
Impairment of non-current assets - 2,906
Profit on ship disposals (95) (1,912)
Interest income (375) (316)
Interest expense 5,220 2,551
Share of profits of joint ventures (2,322) (2,295)
Increase in trade and other receivables (4,669) (3,310)
Increase in inventories attributable to submarine rescue vessels (3,707) (198)
Increase in other inventories (3,203) (1,827)
Increase in trade and other payables 4,890 2,553
Additional defined benefit pension scheme contributions (3,147) (2,979)
Share based compensation 587 516
Cash generated from operations 19,882 16,037
Income tax payments (2,840) (1,481)
Cash flows from operating activities 17,042 14,556
Investing activities
Dividends from joint venture undertakings 1,416 1,275
Proceeds from the sale of property, plant and equipment 28,377 12,255
Proceeds from the sale of subsidiaries net of cash disposed of 491 -
Interest received 377 320
Acquisition of subsidiaries, net of cash acquired (18,486) (22,151)
Acquisition of property, plant and equipment (22,967) (7,424)
Acquisition of investment in joint ventures (27) -
Acquisition of available for sale financial asset - (1)
Cash flows used in investing activities (10,819) (15,726)
Financing activities
Proceeds from the issue of share capital 275 170
Preference dividend paid (4) (3)
Interest paid (4,932) (2,807)
Proceeds from other non-current borrowings 43,855 28,912
Purchase less sales of own shares by ESOP (274) (229)
Capital element of finance lease repayments (75) (7)
Repayment of borrowings (37,017) (20,362)
Dividends paid (5,129) (4,499)
Cash flows (used in)/from financing activities (3,301) 1,175
Net increase in cash and cash equivalents 2,922 5
Cash and cash equivalents at 1 January 2007 9,655 9,725
Net foreign exchange difference 644 (75)
Cash and cash equivalents at 31 December 2007 13,221 9,655
NOTES TO THE PRELIMINARY RESULTS
1. General information
Statement of compliance
The consolidated financial statements have been prepared in accordance
with IFRS adopted by the European Union (EU) as at 31 December 2007
and are applied in accordance with the provisions of the Companies Act
1985.
Basis of preparation of group accounts
The Group financial statements are presented in Sterling and all
values are rounded to the nearest thousand pounds (£000) except when
otherwise indicated.
The financial information set out above does not constitute statutory
accounts for the years ended 31 December 2007 or 2006 as defined in
section 240 of the Companies Act 1985 but is derived from those
financial statments. Statutory accounts for 2006 have been delivered
to the Registrar of Companies. The auditor's report on those accounts
was unqualified and did not contain any statement under section 237(2)
or (3) of the Companies Act 1985.
The auditors have given an unqualified opinion on the accounts for the
year ended 31 December 2007. These will be delivered to the Registrar
of Companies following the annual general meeting.
2. Segmental Information
Primary reporting format business segments
The following tables present revenue and profit and certain asset and
liability information regarding the Group's business segments for the
years ended 31 December 2007 and 2006.
Year ended Discontinued
31 December 2007 Continuing Operations Operations
Offshore Oil Specialist Defence Marine Total Cable Total
Services Technical Oil Ships
Services Services
£000 £000 £000 £000 £000 £000 £000
Revenue
Segmental revenue 26,311 69,264 14,132 75,932 185,639 -
Inter segment sales - (3,406) (187) - (3,593) -
Group revenue 26,311 65,858 13,945 75,932 182,046 -
Result
Segmental result before ship 8,566 5,713 1,228 8,605 24,112 (6)
disposals
Common costs (2,584)
Profit from operations before separately disclosed items and joint 21,528
ventures
Profit on ship disposals 95 -
Profit from operations before 21,623 (6)
joint ventures
Finance income (revenue) 375 -
Finance costs (5,036) -
Exchange loss on loan conversion (184) -
(4,845) -
Share of post tax results of 548 1,774 2,322
joint ventures
Profit before tax 19,100 (6)
Taxation (2,959) -
Profit attributable to equity 16,141 (6)
holders
Assets & Liabilities
Segment assets 57,941 68,289 12,405 89,793 228,428 - 228,428
Investment in joint ventures - 946 3,271 - 4,217 - 4,217
Non-current assets classified 1,172 1,172 - 1,172
as held for sale
Unallocated assets 4,562 4,562
Total assets 238,379 - 238,379
Segment liabilities (4,358) (12,434) (2,432) (19,107) (38,331) - (38,331)
Unallocated liabilities (106,015) - (106,015)
Total liabilities
(144,346) - (144,346)
Other segment information
Capital expenditure:
Property, plant & equipment 7,139 4,814 67 10,938 22,958 - 22,958
Unallocated 991 991
23,949 - 23,949
Intangible fixed assets 76 76 76
Depreciation 1,934 836 57 5,334 8,161 - 8,161
Amortisation of intangible 5 5 - 5
assets
Unallocated 178 178
8,344 - 8,344
Year ended Discontinued
31 December 2006 Continuing Operations Operations
Offshore Oil Specialist Defence Marine Total Cable Total
Services Technical Oil Ships
Services Services
£000 £000 £000 £000 £000 £000 £000
Revenue
Segmental revenue 21,977 42,282 11,197 45,937 121,393 -
Inter segment sales - (3,217) (91) - (3,308) -
Group revenue 21,977 39,065 11,106 45,937 118,085 -
Result
Segmental result before ship 7,320 3,919 1,024 5,819 18,082 106
disposals
Common costs (2,191)
Profit from operations before separately disclosed items and joint 15,891
ventures
Profit on sale of property 1,126 -
Impairment of ship (2,906) -
(Loss)/profit on ship disposals (24) 1,936
Profit from operations before joint 14,087 2,042
ventures
Finance income (revenue) 316 -
Finance costs (2,586) -
Exchange loss on loan conversion 35 -
(2,235) -
Share of post tax results of 346 1,949 2,295
joint ventures
Profit before tax 14,147 2,042
Taxation (2,411) (1)
Profit attributable to equity 11,736 2,041
holders
Assets & Liabilities
Segment assets 45,432 46,770 8,844 109,692 210,738 10 210,748
Investment in joint ventures - 598 2,977 - 3,575 - 3,575
Non-current assets classified as 1,518 1,518 1,518
held for sale
Unallocated assets 3,921 3,921
Total assets 219,752 10 219,762
Segment liabilities (3,895) (9,130) (1,082) (16,430) (30,537) (58) (30,595)
Unallocated liabilities (102,916) - (102,916)
Total liabilities
(133,453) (58) (133,511)
Other segment information
Capital expenditure:
Property, plant & equipment 3,108 2,973 58 41,634 47,773 - 47,773
Unallocated 611 611
48,384 48,384
Intangible fixed assets 60 60 60
Depreciation 1,527 543 89 3,353 5,512 5,512
Amortisation of intangible 1 1 1
assets
Unallocated 149 149
5,662 - 5,662
Geographical segments
The following table represents revenue, expenditure and certain asset
information regarding the Group's geographical segments for the years ended
2007 and 2006.
UK & Ireland Norway Rest of the World Total
2007 2006 2007 2006 2007 2006 2007 2006
£000 £000 £000 £000 £000 £000 £000 £000
Revenue
Segmental revenue 118,015 85,621 18,271 9,988 49,353 25,784 185,639 121,393
Inter-segment sales (3,593) (3,308) - - - - (3,593) (3,308)
Group revenue 114,422 82,313 18,271 9,988 49,353 25,784 182,046 118,085
Segment assets 183,522 178,158 36,044 28,350 8,861 4,240 228,427 210,748
Investment in joint 3,271 2,977 - - 946 598 4,217 3,575
ventures
Non-current assets
classified as
held for sale 1,172 1,518 1,172 1,518
Unallocated assets 4,563 3,921
238,379 219,762
Segment liabilities (34,083) (26,767) (2,318) (2,897) (1,930) (931) (38,331) (30,595)
Unallocated liabilities (106,015) (102,916)
(144,346) (133,511)
Capital expenditure:
Property, plant and 17,919 47,088 3,432 1,294 2,598 2 23,949 48,384
equipment
3. Discontinued operations
Discontinued operations relate to the withdrawal of the Group from cable
laying activities announced in 2005. Following the disposal in 2005 of the
cable ship CS Oceanic Pearl, the remaining vessel, CS Oceanic Princess, was
disposed of on 12 June 2006.
The results of discontinued operations are presented below:
2007 2006
£000 £000
Cost of sales (6) 106
Gross (loss)/profit (6) 106
Profit on ship disposals - 1,936
(Loss)/profit before tax from discontinued operations (6) 2,042
Taxation - (1)
Net (loss)/profit attributable to discontinued operations (6) 2,041
Taxation is payable on the (loss)/profit from operations under the tonnage tax
regime as explained in note 5.
The net cash flows attributable to discontinued operations are:
2007 2006
£000 £000
Operating cash flows (10) 3,366
Investing cash flows - 9,357
Financing activities - (6,933)
(10) 5,790
(Loss)/earnings per share from discontinued operations (pence):
pence pence
Basic (0.01) 4.16
Diluted (0.01) 4.12
Non current assets held for sale
At 31 December 2007 the mt Alacrity which was disposed of by the
Group in January 2008 was classified as held for sale and was recorded
at its carrying value of £1,172,000.
The assets classed as held for sale at 31 December 2006 were the mt
Allurity and mt Arduity which were disposed of by the Group in January
2007. The vessels were recorded at their fair value less costs to
sell.
4. Separately disclosed items
Separately disclosed items consist of:
2007 2006
£000 £000
Profit on sale of property - 1,126
Impairment of ship - (2,906)
Loss on ship disposals (77) (24)
Profit on ship disposals 172 -
Exchange (loss)/gain on loan conversion (184) 35
(89) (1,769)
In June 2007 the Group carried out a refinancing exercise which
involved the disposal of mt Seniority, mt Speciality and mt
Superiority to FSL Trust Management for a consideration of £22,602,000
the proceeds of which were used to repay existing debt. These vessels
have subsequently been chartered by the Group on bareboat charters for
an initial period of ten years. The loss on disposal also includes
the sale of mt Allurity and mt Arduity in January 2007 and mt Severn
Fisher in December 2007. The profit on ship disposals relates to the
mt Agility which was disposed of in October 2007.
Year ended 31 December 2006
On 1 December 2006 the Group disposed of an industrial property at
Bridge of Don, Aberdeen for a gross consideration of £2,100,000.
The Directors performed an impairment review of the carrying value of
the mt Severn Fisher, built in 1983 and the Group's oldest tanker.
The review took account of the ending of a contract with the Ministry
of Defence in 2006 and the limits to trading in the European Union
increasingly imposed by the International Maritime Organisation and
the major oil companies as the vessel neared the twenty fifth
anniversary of its construction.
The review took into account the expected residual value and the cost
and revenues anticipated to arise during the period prior to disposal,
discounted at a rate of 6.5% which the Directors believed took into
account the risks associated with the relevant cash flows. As a
result the Group recognised an impairment provision against the
carrying value of the vessel of £2,906,000 in the income statement.
This vessel was disposed of in December 2007 realising an additional
loss of £8,000.
The loss on ship disposals in 2006 arose from adjustments following
the sale in 2005 of the CS Oceanic Pearl and mt Tees Fisher and mt
Wear Fisher.
The exchange differences on loans arose on foreign currency loans used
to finance the acquisition of vessels in the UK.
The tax arising on these items is £Nil (2006: £377,000).
5. Taxation
The group has entered the UK tonnage tax regime under which tax on its
ship owning and operating activities is based on the net tonnage of
vessels operated. Any income and profits outside the tonnage tax
regime are taxed under the normal tax rules of the relevant tax
jurisdiction.
The tax charge is made up as follows: 2007 2006
£000 £000
Current tax:
UK tonnage tax (31) (21)
UK corporation tax (1,433) (1,309)
(1,464) (1,330)
Tax overprovided in previous years 175 770
Foreign tax (1,542) (883)
Total current tax (2,831) (1,443)
Deferred tax:
Group deferred tax (128) (969)
Total taxation on continuing operations (2,959) (2,412)
Share of joint ventures' current tax (20) 130
The total tax charge in the income statement is allocated as follows:
2007 2006
£000 £000
Taxation expense reported in group income statement 2,959 2,411
Taxation attributable to discontinued activities - 1
Total tax expense 2,959 2,412
Tax (charged)/credited to equity in statement of recognised income and expense:
2007 2006
£000 £000
Deferred tax:
Deferred tax relating to the actuarial gains and losses on defined benefit pension (276) (772)
schemes
Deferred tax relating to share based payments 77 -
(199) (772)
Reconciliation of effective tax rate
The tax on the Group's profit before tax differs from the theoretical amount
that would arise using the rate applicable under UK corporation tax rules as
follows:
2007 2006
£000 £000
Profit before tax from continuing operations 19,100 14,147
(Loss)/profit before tax from discontinued activities (6) 2,042
19,094 16,189
At UK statutory tax rate of 30% (2006: 30%) 5,728 4,857
Difference due to application of tonnage tax to all vessel disposals and operating (1,882) (1,394)
activities
Expenses not deductible for tax purposes 42 673
Chargeable gains (22) 60
Over provision in previous years
Current tax (175) (770)
Deferred tax (269) (190)
Share based payments - (650)
Lower taxes on overseas income (272) (174)
Rate change on deferred tax (174) -
Other (17) -
2,959 2,412
Group
Deferred tax at 31 December relates to the following:
Group Group
Balance sheet Income statement
2007 2006 2007 2006
£000 £000 £000 £000
Deferred tax assets
Retirement benefits 190 677 (189) (362)
Share based payments 443 248 118 23
633 925
Deferred tax liabilities
Accelerated capital allowances for tax purposes (1,383) (1,447) (46) (630)
Roll over gains (1,476) (1,465) (11) -
(2,859) (2,912)
Deferred income tax charge (128) (969)
Net deferred income tax liability (2,226) (1,987)
6. Earnings per share
Basic earnings per share are calculated by dividing the profit
attributable to equity holders of the company by the weighted average
number of ordinary shares in issue during the year, after excluding
ordinary shares purchased by the employee share ownership trust and
held as treasury shares.
Diluted earnings per share are calculated by dividing the net profit
attributable to ordinary equity holders of the parent 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:
2007 2006
£000 £000
Profit attributable to equity holders 16,078 13,780
Loss/(profit) attributable to discontinued activities 6 (2,041)
Profit on continuing activities attributable to equity 16,084 11,739
holders
Weighted average number of shares
2007 2006
Number of Number of
shares shares
For basic earnings per ordinary share* 49,236,346 49,058,347
Exercise of share options and LTIPs 399,411 449,306
For diluted earnings per ordinary share 49,635,757 49,507,653
* Excludes 312,870 (2006:392,592) shares owned by the James Fisher and
Sons Public Limited Company Employee Share Ownership Trust.
2007 2006
£000 pence £000 pence
Basic earnings per share 16,078 32.66 13,780 28.09
Loss/(profit) attributable to discontinued activities 6 0.01 (2,041) (4.16)
Basic earnings per share on profit from continuing
operations 16,084 32.67 11,739 23.93
Diluted earnings per share 16,078 32.39 13,780 27.83
Loss/(profit) attributable to discontinued activities 6 0.01 (2,041) (4.12)
Diluted earnings per share on profit from continuing
operations 16,084 32.40 11,739 23.71
Adjusted Earnings per Share
The basic earnings per share on continuing activities before
separately disclosed items is shown to highlight the underlying
earnings trend and is calculated using the number of shares outlined
in the table above.
2007 2006
£000 pence £000 pence
Basic earnings per share on profit on continuing
operations 16,084 32.67 11,739 23.93
Adjustments:
Exchange loss/(gain) on loan conversion 184 0.37 (35) (0.07)
(Profit)/loss on ship disposals (95) (0.19) 24 0.05
Profit on sale of property including tax effect of - - (749) (1.53)
£377,000
Impairment of ship - - 2,906 5.92
Basic adjusted earnings per share on profit on
continuing operations 16,173 32.85 13,885 28.30
Diluted earnings per share on profit on continuing
operations 16,084 32.40 11,739 23.71
Adjustments:
Exchange loss/(gain) on loan conversion 184 0.37 (35) (0.07)
(Profit)/loss on ship disposals (95) (0.19) 24 0.05
Profit on sale of property including tax effect of - - (749) (1.51)
£377,000
Impairment of ship - - 2,906 5.87
Diluted adjusted earnings per share on profit on
continuing operations 16,173 32.58 13,885 28.05
7. Dividends paid and proposed
2007 2006
£000 £000
Declared and paid during the year
Equity dividends on ordinary shares:
Final dividend for 2006 6.54p (2005 5.69p) 3,238 2,816
Interim dividend for 2007 3.89p (2006 3.47p) 1,929 1,717
Less dividends on own shares held by ESOP (38) (34)
5,129 4,499
Proposed for approval at Annual General Meeting (not recognised as a liability at 31 December)
Equity dividends on ordinary shares:
Final dividend for 2007 7.52p (2006 6.54p) 3,715 3,212
8. Reconciliation of movements in equity
GROUP
Capital Reserves
Share Share retained Other Treasury Total Minority Total
capital premium earnings reserves shares shareholders Interests equity
equity
£000 £000 £000 £000 £000 £000 £000 £000
At 1 January 2006 12,345 23,960 38,030 178 (1,184) 73,329 - 73,329
At acquisition - - - - - - 74 74
Total recognised income 17,151 (274) - 16,877 (3) 16,874
and expense in the
period
Ordinary dividends paid (4,499) (4,499) (4,499)
Share-based 516 516 516
compensation expense
Purchase of shares (242) (242) (242)
Sale of shares 13 13 13
Arising on the issue of 32 154 186 186
shares
Transfer on disposal of (266) 266 - -
shares
At 31 December 2006 12,377 24,114 50,932 (96) (1,147) 86,180 71 86,251
At acquisition - - - - - - - -
Total recognised income 11,292 974 - 12,266 57 12,323
and expense in the
period
Ordinary dividends paid (5,129) (5,129) (5,129)
Share-based 587 587 587
compensation expense
Purchase of shares (276) (276) (276)
Sale of shares 2 2 2
Arising on the issue of 51 224 275 275
shares
Transfer on disposal of (287) 287 - - -
shares
At 31 December 2007 12,428 24,338 57,395 878 (1,134) 93,905 128 94,033
Other reserves Translation Hedging Total
reserve reserve
£000 £000 £000
At 1 January 2006 212 (34) 178
Cash flow hedges:
Transferred to the income 7 7
statement
Fair value losses in 62 62
the period
Share of fair value gains of 39 39
joint ventures
Recognised income in the period including the effect of (382) (382)
net investment hedges
At 31 December 2006 (170) 74 (96)
Cash flow hedges:
Transferred to the income 8 8
statement
Fair value gains in the - (188) (188)
period
Share of fair value gains of - (280) (280)
joint ventures
Recognised income in the period including the effect of 1,434 - 1,434
net investment hedges
At 31 December 2007 1,264 (386) 878
9. Retirement benefit obligations
The Retirement benefit obligations included in the Group balance sheets
relate to three defined benefit schemes operated by the Group, being The
James Fisher and Sons Public Limited Company Pension Fund for Shore Staff,
(Shore staff); The James Fisher and Sons Public Limited Company Pension
Fund for Permanent Dockworkers, (Dockworkers) and The Everard Group
Pension Fund (Everard), together with the Group's obligations to the
Merchant Navy Officers Pension Fund (MNOPF), an industry wide scheme which
is also accounted for as a defined benefit scheme.
As required by IAS 19 the valuations of the schemes have been updated to 31
December 2007 by qualified actuaries.
The Group's assets and obligations in respect of its pension schemes at 31
December 2007 were as follows:
Assets
Group
2007 2006
£000 £000
Shore staff pension scheme 528 -
Everard Group pension scheme - -
528 -
Obligations
Group
Restated
note 11
2007 2006
£000 £000
Shore staff pension scheme - (1,400)
Dockworkers pension scheme (916) (1,550)
Everard group pension scheme - (73)
MNOPF pension scheme (10,988) (7,201)
(11,904) (10,224)
James Fisher and Sons Public Limited Company Pension Fund for Shore
Staff
In 2005 the Company decided to close the Shore staff scheme to
existing members from 2010. At this time members contributing to the
scheme can transfer to a stakeholder scheme option. During the
remaining period that the scheme remains open to existing members the
rate of growth of pensionable salary reduced to 1.5%.
The Company is currently contributing 14.7% (2006:14.7%) of
pensionable pay plus regular contributions of £55,000 (2006:£55,000)
per month into the Shore Staff Scheme. Contributions will continue at
this level in 2008.
At 31 December 2007 the scheme had an actuarial surplus of £657,000.
The Group has recognised £528,000 in respect of this surplus. This
represents the amount recoverable from the scheme by the Group through
reduced contributions and represents the value of employers service
costs over the remaining period until accrual ceases in 2010.
James Fisher and Sons Public Limited Company Pension and Life
assurance scheme for Permanent Dockworkers
The Group also operates a paid up defined benefit scheme for
dockworkers. The latest actuarial valuation of the scheme was at 31
March 2005.
As a result of the review carried out in 2005 the Company agreed a
deficit recovery plan with the trustees of the scheme. Under this plan
the Company made monthly payments of £20,833 (2006: £20,833) into the
scheme. Contributions will continue at this level in 2008.
The Everard Group Pension Fund
FT Everard & Sons operated a defined benefit scheme which was closed
to new entrants from 1 April 2004 and closed to future accrual from 1
March 2005. Under a deficit reduction plan agreed with the schemes
trustees, FT Everard & Sons Limited is making annual additional
contributions of £286,000 for a period of thirteen years commencing 1
March 2005.
At 31 December 2007 the scheme had an actuarial surplus of £1,506,000.
The Group has not recognised any of this surplus as the scheme is
already closed to future accrual.
Merchant Navy Officers Pension Fund
In 2005 the High Court established that former as well as existing
employers will be liable to make payments in respect of the funding
deficit of the MNOPF. The Company is informed by the Trustees as to
the level of annual payments it will be required to make into the fund
over a period of ten years commencing October 2005 representing its
share of the deficit disclosed in the initial actuarial valuation
carried out as at 31 March 2003, as revised by the latest valuation as
at 31 March 2006. Following the acquisition of Everard in December
2006 the Group took on additional liabilities in respect of the share
of the MNOPF attributable to FT Everard & Sons and its subsidiaries.
A new actuarial valuation of the scheme was carried out at 31 March
2006. In August 2007 following the approval of this 2006 actuarial
valuation of the scheme, the Trustees issued calls for further
contributions. As a result of these additional claims the total amount
paid by the Group in 2007 to the MNOPF was £1,896,000 (2006 £524,000).
The amount paid in 2006 excludes any amount relating to Everard which
was acquired in December 2006. The total paid by the enlarged Group in
2006 was £1,074,000. Following further review and discussion with the
MNOPF during 2006, the Company established that there are additional
liabilities in respect of three additional claims relating to former
employers covered under the scheme. Two of these have been added to
the ten year payment plan and one small claim settled in full during
the period. One further claim has also been settled in 2007.The Group
is not aware of any further outstanding claims in respect of the
MNOPF.
The Group has an annual commitment to make seven further annual
payments of £1,837,000 to the scheme.
10. Post balance sheet events
On 16 January 2008 the Group made a payment of £750,000 to the former
shareholders of FT Everard & Sons Limited representing the final
instalment of contingent consideration due on the acquisition of the
company.
The Group completed the sale of the mt Alacrity on 29 January 2008.
The gross proceeds from this disposal were $3,000,000. The net
proceeds of £1,454,000 were used to repay bank borrowings.
On 30 January 2008 Scan Tech AS based in Norway entered into an
agreement for the construction of new premises in Stavanger. This
construction will be financed by a loan from SR-Bank, such loan being
secured upon the premises.
On 7 February 2008 the Group acquired the entire issued share capital
of JCM Scotload (Scotload) for a cash consideration of £2,985,000.
Scotload designs and manufactures a range of load measurement
instruments for the offshore oil and related industries.
The provisional fair values of the assets and liabilities acquired are
subject to further review to assess the impact of adopting the Group's
accounting policies and conversion to IFRS. These provisional values
are set out below:
Scotload
Carrying
amount &
fair value
£000
Property, plant & equipment 13
Inventories 138
Trade and other receivable 401
Cash and short term deposits 1,027
Trade and other payables (396)
Fair value of net assets acquired 1,183
Goodwill arising on acquisition 1,946
3,129
Consideration:
Cash 2,985
Direct costs associated with 144
acquisition
3,129
On 11 March 2008 the Group made a payment of £800,000 to the former
shareholders of Inspection Holdings Limited representing the
contingent consideration due on the acquisition of the company.
Under the terms of the acquisition of Strainstall Group (Strainstall)
on 6 October 2006 contingent consideration of £500,000 is payable to
the vendors dependent on achieving certain performance conditions for
the year ended 31 December 2007. In March 2008 following confirmation
that the performance criteria for the year ended 31 December 2006 had
been achieved the vendors were paid £500,000 in cash and loan notes.
On 21 March 2007 the Chancellor of the Exchequer announced that he
intended to phase out Industrial Buildings Allowances (IBA's) from
April 2008. Had the proposed change been enacted at 31 December 2007
it would have increased the Group's deferred tax liability by
£788,000.
11. Restatement of Goodwill arising on acquisitions
The balance sheet at 31 December 2006 has been restated to accommodate
adjustments to goodwill which have been incorporated into the accounts
in 2007 during the twelve month review period allowed in the
provisions of IFRS 3 - Business Combinations. The most significant
adjustments arose on the acquisition of FT Everard & Sons which was
acquired on 28 December 2006. Details of the principal adjustments are
explained below.
Under the terms of the purchase agreement for FT Everard & Sons the
purchase consideration payable has been revised following the
agreement of the balance sheet at completion. As a result the total
consideration payable has been reduced by £2,062,000. This reduction
is principally due to the movement in exchange rates between the date
of completion and the date of preparation of the initial estimates
which affected the valuation of the vessels acquired. This amount was
received in 2007. In December 2006 the amount recoverable was
estimated at £1,571,000 and the deferred consideration payable was
reduced by this amount. An adjustment of £492,000 has been made to
creditors due within one year to reflect this additional adjustment.
A further adjustment to goodwill arising on the acquisition of FT
Everard & Sons of £175,000 has been made representing an increase in
the Group's liability to the MNOPF pension deficit which has been
recalculated by the Group's actuaries on a basis consistent with the
amount attributable to the pension deficit accounted for by James
Fisher and Sons Plc.
Following a review of the fleet requirements the initial fair value of
the mt Agility and mt Alacrity was increased to reflect the decision
to dispose of these vessels and the prevailing market conditions. A
review of the vessels operated under bareboat leases, mt Summity and
mt Stability, indicated that the terms of the bareboat leases
constituted a significant liability to the Group. As a result of this
the carrying value of the vessels at acquisition has been provided
against and an additional provision representing the discounted
present value of the expected onerous liability has been made. The
proportion of the liability arising after one year has been included
in trade and other creditors due after one year. The total adjustments
to property plant and equipment is £991,000 including £1,222,000
relating to the revision of the fair value of mt Agility and mt
Alacrity.
Other adjustments have been made to trade and other creditors due
within one year representing additional liabilities arising from the
costs of the acquisition and adjustments to amounts provided for in
respect of financial liabilities.
Adjustments have been made to trade and other creditors due within one
year representing additional liabilities arising from the costs of the
acquisition and adjustments to amounts provided for in respect of
financial liabilities in respect of Gjerde and Strainstall. The
principal adjustment to the acquisition of Strainstall relates to
provisions for obsolete inventory.
A summary of the adjustments are included in the table below:
2006 Adjustments 2006
As reported Everard Gjerde Strainstall restated
£000 £000 £000 £000 £000
Goodwill 55,773 (68) 55 54 55,814
Property, plant & equipment 102,629 991 - - 103,620
Inventories 11,119 (24) - (25) 11,070
Trade and other receivable 32,897 (32) - - 32,865
Trade and other payables due after 76,146 748 - - 76,894
one year
Retirement benefit obligations 10,049 175 - - 10,224
Trade and other payables due within 46,365 (56) 55 29 46,393
one year
12. The AGM will be held at 12.00 noon, Thursday 1 May 2008 at the Abbey
House Hotel, Abbey Road, Barrow in Furness, Cumbria.
13. Report and accounts will be posted to members in early April 2008.
Copies will be made available to members of the public at Fisher
House, PO Box 4, Barrow in Furness, Cumbria, LA14 1HR.
14. The preliminary statement was approved by the Board of Directors on 17
March 2008.
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