Final Results

RNS Number : 7335Y

Fisher (James) & Sons plc

06 March 2012

 



6 March 2012

James Fisher and Sons plc

Full Year Results 2011

James Fisher and Sons plc ("James Fisher"), the leading marine service provider, announces its results for the twelve months to 31 December 2011.

	2011	2010	change
Group revenue	£307.6m	£268.3m	+ 15%
Underlying operating profit *	£36.1m	£32.5m	+ 11%
Underlying profit before tax *	£30.0m	£27.1m	+ 11%
Underlying diluted earnings per share *	48.4p	41.9p	+ 16%
Proposed final dividend	10.74p	9.68p	+ 11%
Statutory profit before tax	£29.8m	£25.9m	+ 15%
Statutory diluted earnings per share	48.0p	39.7p	+ 21%

* underlying profit excludes cost incurred making acquisitions and the amortisation of acquired intangibles

Highlights:

·      An excellent year with Group revenue up 15%, underlying operating profit up 11% and underlying earnings per share up 16%

·      Specialist Technical, Defence and Offshore Oil divisions all enjoyed strong organic growth

·      Divisional management increasingly working together to win multi-skilled contracts, such as the BP Angola contract won post period-end

·      Strong results in Offshore Oil helped by the continued growth in the world's new oil provinces and a continuing recovery in North Sea markets

·      Defence revenue grew by over 30%, with James Fisher winning an £11m modernisation project for  the Swedish Navy's rescue submarine

·      Marine Oil, despite tough markets, remained profitable and cash generative

·      Cash conversion of 105% and net gearing reduced to 75% at 31 December 2011

Commenting on the results, Chairman, Tim Harris, said:

"James Fisher made excellent progress in 2011, with double-digit growth rates in both revenue and profit.  Our largest divisions, Specialist Technical and Offshore, have strong growth records and will continue to be the prime focus for future investment in new equipment and bolt-on acquisitions.  The prospects for James Fisher Everard, our tankship business, remain unchanged and dependent, to a large degree, on the state of the UK and European economies.  It will improve when the current tonnage overcapacity unwinds but overall this division is of decreasing importance to the Group performance. Trading for 2012 to date has been to management expectations and we continue to be well placed to provide further growth and value for our shareholders."

For further information:

James Fisher and Sons plc	Tim Harris Nick Henry Stuart Kilpatrick	Chairman Chief Executive Officer Group Finance Director	020 7614 9508
FTI Consulting	Richard  Mountain Sophie McMillan		020 7269 7291

James Fisher and Sons plc (James Fisher)

Full Year Results for the twelve months ended 31 December 2011

Chairman's Statement

Introduction

James Fisher and Sons plc has had another excellent year in 2011 with the main financial measures improved by between 11% and 16%.

	2011	2010	change
Group revenue	£307.6m	£268.3m	+ 15%
Underlying operating profit	£36.1m	£32.5m	+ 11%
Underlying profit before tax	£30.0m	£27.1m	+ 11%
Underlying diluted earnings per share	48.4p	41.9p	+ 16%
Proposed final dividend	10.74p	9.68p	+ 11%
Statutory profit before tax	£29.8m	£25.9m	+ 15%
Statutory diluted earnings per share	48.0p	39.7p	+ 21%

Cash conversion was also strong at 105% and net gearing was reduced to 75% at 31 December 2011 from 85% at the previous year end.  This was despite an investment of £17.6 million in new equipment to generate further organic growth.

Strategy

Over the last five years James Fisher has pursued a consistent marine service strategy focused on the world's growing regions rather than on the more mature markets of Europe and North America.  These marine service skills consist of specialist engineering and operational capabilities which characteristically command net margins in excess of 10% and returns on capital employed of at least 15% pre tax and are cash generative.  In 2011 over 60% of the Group's revenue is derived from outside the UK compared to 35% five years ago.

The advantages of our strategy are as follows:

·      The growing marine service markets on which we are focused are vast, fast growing and with less mature competition.  This is particularly true in the Asia Pacific region.

·      We do relatively little business in North America and Continental Europe and have therefore been more sheltered from their economic problems.

·      The growing proportion of non UK operations has helped reduce our effective tax rate, now less than 20%, although recent UK tax reductions have also helped.

The Group also benefits from a strong divisional executive team, most of which has been in place for five years.  Its entrepreneurial skill, together with the capital and commercial support from the centre, has helped drive strong organic growth.  Increasingly Group companies are working together to win larger contracts, mainly overseas, which is an important strategic focus for our management team going forward.

Specialist Technical

2011 underlying profit £19.8 million (2010 £18.5 million)

Specialist Technical enjoyed a strong second half with profits up 22%, due to robust organic growth.  Annual profit growth was good, up 7%, particularly pleasing considering the strong comparator in the first half of 2010 which experienced an exceptionally strong oil contango market, benefiting our ship to ship oil transfer business.  Divisional margins at 14.0% were slightly down on 2010 (15.8%), but this reflected a greater use of chartered-in vessels for specific projects rather than any underlying margin erosion.  A good example is the recent BP Angola contract, the award of which we announced in February 2012.  We shall be managing the oil offtake operations from an FPSO (floating production, storage and offloading) unit with three chartered tugs, as well as providing a number of related diving and maintenance services.  This contract also illustrates how the Group divisions are increasingly working together to win larger contracts.  Among the decisive elements in our offer were:

·      BP's long relationship with James Fisher and Fendercare

·      the Group's established base in Angola, originally developed for Scan Tech Offshore

·      James Fisher's long history and experience in operating coastal tankers through James Fisher Everard

James Fisher Nuclear (JFN) is also included in this division and produced a significantly better result in 2011 with the potential for more improvement to come.  JFN is beginning to benefit from the investments made in prior years and from an increasing recognition of its core capabilities of non destructive testing and remote handling in the complex contracting environment prevalent in the nuclear industry.  JFN also worked closely during the year with James Fisher Defence (JFD) and Scan Tech in Norway, primarily using its remote handling skills.

The prospects for further organic growth in this division remain excellent and we shall continue to support it with suitable capital investment.

Offshore Oil

2011 underlying profit £12.8 million (2010 £11.0 million)

Divisional revenue for the full year grew by 22% compared with 2010 and divisional profit by 16%.  There was a slight reduction in margin reflecting a growing proportion of the business coming from services, as opposed to straight rental which enjoys higher margins owing to its greater use of capital.  This strong performance was the result of two positive features -  strong organic growth in the new oil provinces of the world and the continued recovery of North Sea markets, supported by the capital investment we have made, and continue to make.

The division's growth into new markets is primarily being led by our Scan Tech Offshore and RMSpumptools brands.  Scan Tech Offshore is now an established supplier to the offshore industry in South America, Australia and West Africa and during 2011 RMSpumptools, which sells worldwide, set up an assembly base in Singapore to support its Asian coverage.

The positive trends which helped the 2011 result appear set to continue, supported by the world's proven demand for oil.  Our specialist brands are increasingly winning business and gaining recognition worldwide and we shall continue to support them with further investment.

Defence

2011 underlying profit £5.5 million (2010 £5.3 million)

While divisional revenue in 2011 grew by over 30% to £28.1 million, the divisional profit remained flat at £5.5 million mainly because of extra expenditure on Subsea business development and sales.  James Fisher won a number of significant projects during the year including the modernisation contract for "URF", the Swedish Navy's submarine rescue vehicle - which was announced in May and is now well underway - and the continued development of our "swimmer delivery" vehicle which is well advanced.  We revealed the prototype in September at the DSEi (Defence and Security Equipment International) exhibition in London and it attracted much international attention.  Our existing submarine rescue contracts in Singapore, Australia and the UK performed well and met their operational and financial targets in 2011. 

Developments on the Surface Ship side were less encouraging in 2011.  The Government so far has favoured other priorities to surface ship outsourcing.  At Foreland Shipping Limited, we commented at the half year on the uncertainty over the charter rate at which two of its roll on roll off vessels would be fixed.  The vessels were chartered in January 2012 and current market rates are lower than the previous charter.  Our share of Foreland's result is likely to reduce by around £1.5 million per year as a consequence.

We have great confidence in the prospects for our Subsea operations which have a growing international reputation and outreach and into which we are investing to ensure they meet their potential.  We are less positive about the prospects for surface ship outsourcing.  We have the skills needed and will participate if there is a realistic prospect of success.

Marine Oil

2011 underlying profit £1.1 million (2010 £0.7 million)

Marine Oil is the division most exposed to the UK and Europe's current economic problems and this is reflected in the results which were only slightly better than in 2010.  There is still overcapacity and a weak spot market in Europe.  However, James Fisher Everard, unlike most of world shipping today, is profitable and cash generative although clearly the overall return is still unacceptable.  Our policy is to match fleet capacity to our long term customers contractual requirements which have been declining, particularly to Ireland.  To this end, we have sold mv Audacity (3,000 tonnes) and negotiated early cessation of the charters for mv Pembroke Fisher (15,000 tonnes) and mv Chartsman (6,000 tonnes).  We now only have 16% of the Group's assets in this business and our target is to reduce this to less than 10%.  However, it remains relevant that Tankships is the origin of our marine service skills and is a strong proof point of marine competence, as the BP Angola contract win demonstrated.

Board and staff

Anthony Cooke retired from the Board and his role as Senior Non Executive Director and Chairman of the Audit Committee on 30 December 2011 after ten years service.  He has been replaced as Senior Non Executive Director by Charles Rice and as Chairman of the Audit Committee by Malcolm Paul.  I would like to thank Anthony for his good advice during a very successful period for James Fisher and for the Board.

Simon Harris resigned from the Board and from his role as Chairman of James Fisher Defence (JFD) on 13 February 2011 after eight years on the Board.  I would like to recognise and thank Simon for his role in building up the JFD team into the world leading organisation it is today.

The Group is growing fast and this throws up challenges and opportunities for many throughout the Group every day.  It is gratifying to see us increasing our employment of young people, particularly young graduates when the background economic climate is so uncertain.  I would like to recognise and thank all staff for their contribution to the Group's success.  In a service company like James Fisher people will always be the key asset which makes the difference.

Financial

The Group continues to receive strong support from its bankers and has been able to renew facilities and obtain new ones on competitive terms.  In November it agreed a new facility with DBS Bank of Singapore, reflecting our strong focus on the Asia Pacific region.

The current low interest rate environment is detrimental to the calculation of pension fund deficits because of the low discount rates used to calculate future obligations.  During 2011 this effectively meant that, despite £4.5 million of cash contribution during the year, the reported deficits at the year end effectively remained unchanged.

As an export orientated company James Fisher benefits from a strong dollar.  Balance sheet US dollar exposure is hedged.

Summary and Outlook

Over the last five years James Fisher has pursued a consistent marine service strategy focused on the world's growing regions rather than on the more mature markets of Europe and North America.  As a result the Company's growth record has been strong, with organic growth the key component, and we have avoided much of the downside from the economic challenges witnessed since 2008.  We have stable and experienced senior and divisional management teams which have been responsible for the successful execution of this strategy.

Our largest divisions, Specialist Technical and Offshore, have strong growth records and will continue to be the prime focus for future investment in new equipment and bolt-on acquisitions.

JFD's Subsea activities are promising and we are investing in more business development expenditure to increase sales and penetration worldwide.  They have the potential to become a significantly larger business.  The prospects for management of surface ships is less promising, partly due to the protracted and costly bidding process involved.  We have indicated a deterioration in Foreland's profit of around £1.5 million in 2012 but would expect to compensate for it elsewhere.  The prospects for James Fisher Everard, our tankship business, remain unchanged and dependent, to a large degree, on the state of the UK and European economies.  It will improve when the current tonnage overcapacity unwinds but overall this division is of decreasing importance to the Group performance.

Trading for 2012 to date has been to management expectations and we continue to be well placed to provide further growth and value for our shareholders.

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2011

							Restated
							(Note 3)
		Notes		Year ended			Year ended
			31 December 2011			31 December 2010
				£000			£000
Revenue		2		307,624			268,349
Cost of sales				(269,051)			(233,052)
Gross profit				38,573			35,297
Administrative expenses				(8,379)			(8,681)
Share of post tax results of joint ventures				5,685			4,680
Operating profit				35,879			31,296
Analysis of operating profit:
	Underlying operating profit			36,133			32,483
	Acquisition costs			-			(1,010)
	Amortisation of acquired intangibles			(254)			(177)
Finance income				322			256
Finance costs				(6,450)			(5,611)
Profit before tonnage and income tax		2		29,751			25,941
Analysis of profit before tonnage and income tax:
	Underlying profit before tax			30,005			27,128
	Acquisition costs			-			(1,010)
	Intangible amortisation			(254)			(177)
Tonnage tax				(23)			(24)
Income tax		4		(5,611)			(6,085)
Total tonnage and income tax				(5,634)			(6,109)
Profit for the year				24,117			19,832
Profit attributable to :
Owners of the company				24,091			19,832
Non - controlling interests				26			-
				24,117			19,832
Earnings per share
				pence			pence
Basic		5		48.4			39.9
Diluted		5		48.0			39.7

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2011

	Notes		Year ended		Year ended
		31 December 2011		31 December 2010
			£000		£000
Profit for the year			24,117		19,832
Other comprehensive income
Exchange differences on translation of foreign operations			(809)		3,216
Net loss on hedge of net investment in foreign operations			331		(430)
Exchange gains transferred to income statement on disposal of subsidiary assets			-		2
Effective portion of changes in fair value of cash flow hedges			(541)		(1,577)
Effective portion of changes in fair value of cash flow hedges in joint ventures			(399)		429
Net changes in fair value of cash flow hedges transferred to profit or loss			128		455
Defined benefit plan actuarial losses			(4,127)		(9,749)
Income tax on other comprehensive income	4		2,445		4,125
Other comprehensive income for the year, net of income tax			(2,972)		(3,529)
Total comprehensive income for the year			21,145		16,303
Attributable to:
Owners of the Company			21,119		16,303
Non-controlling interests			26		-
			21,145		16,303

CONSOLIDATED BALANCE SHEET

As at 31 December 2011

	Notes	31 December 2011		31 December 2010
			£000			£000
Assets
Non current assets
Goodwill and other intangible assets			93,188			90,011
Property, plant and equipment			103,898			104,683
Investment in joint ventures			12,534			11,693
Available for sale financial assets			1,370			1,370
Deferred tax assets			2,664			3,962
			213,654			211,719
Current assets
Inventories			33,691			32,583
Trade and other receivables			80,526			61,416
Derivative financial instruments			218			3
Cash and short term deposits	9		13,575			16,590
			128,010			110,592
Total assets			341,664			322,311
Equity and liabilities
Capital and reserves
Called up share capital			12,481			12,466
Share premium			24,924			24,700
Treasury shares			(1,681)			(579)
Other reserves			4,742			6,032
Retained earnings			91,304			75,146
Equity attributable to owners of the Company			131,770			117,765
Non-controlling interests			(91)			-
Total equity			131,679			117,765
Non current liabilities
Other payables			607			1,841
Retirement benefit obligations	7		30,133			29,786
Cumulative preference shares			100			100
Loans and borrowings			103,383			111,573
Deferred tax liabilities			1,141			604
			135,364			143,904
Current liabilities
Trade and other payables			59,124			45,695
Current tax			4,732			8,490
Derivative financial instruments			1,880			1,211
Loans and borrowings			8,885			5,246
			74,621			60,642
Total liabilities			209,985			204,546
Total equity and liabilities			341,664			322,311
These accounts were approved by the board of directors on 5 March 2012 and signed on its behalf by:
TC Harris
Executive Chairman

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2011

		31 December 2011		31 December 2010
			£000		£000
Profit before tax			29,751		25,941
Adjustments to reconcile Group profit before tax to net cash flows
Depreciation and amortisation			13,806		11,336
Acquisition costs and amortisation of acquired intangibles			254		1,187
Loss/(profit) on sale of property, plant and equipment			335		(597)
Finance income			(322)		(256)
Finance costs			6,450		5,611
Exchange gain on loans			218		(50)
Share of post tax results of joint ventures			(5,685)		(4,680)
Share based compensation			1,503		1,309
Increase in trade and other receivables			(19,491)		(6,927)
Increase in inventories			(2,081)		(1,850)
Increase in trade and other payables			12,282		5,914
Defined benefit pension costs less cash contributions			(5,012)		(3,559)
Cash generated from operations			32,008		33,379
Cash outflow from acquisition costs			-		(1,010)
Income tax payments			(4,865)		(4,261)
Cash flow from operating activities			27,143		28,108
Investing activities
Dividends from joint venture undertakings			5,913		2,804
Proceeds from the sale of property, plant and equipment			3,989		8,229
Finance income			322		256
Acquisition of subsidiaries, net of cash acquired			(154)		(17,468)
Proceeds from the sale of business			459		7,758
Acquisition of property, plant and equipment			(17,624)		(17,789)
Acquisition of investment in joint ventures			(1,220)		(20)
Development expenditure			(2,779)		(1,429)
Cash flows used in investing activities			(11,094)		(17,659)
Financing activities
Proceeds from the issue of share capital			239		134
Preference dividend paid			(4)		(3)
Finance costs			(4,750)		(4,735)
Purchase less sales of own shares by ESOP			(1,449)		(180)
Capital element of finance lease repayments			(423)		(195)
Proceeds from other non-current borrowings			25,448		33,425
Repayment of borrowings			(30,162)		(38,239)
Dividends paid			(7,479)		(6,879)
Cash flows from financing activities			(18,580)		(16,672)
Net decrease in cash and cash equivalents			(2,531)		(6,223)
Cash and cash equivalents at 1 January 2011			16,590		20,563
Net foreign exchange differences			(484)		2,250
Cash and cash equivalents at 31 December 2011			13,575		16,590

CONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITY

For the year ended 31 December 2011

For the year ended 31 December 2011
	Capital				Attributable to equity holders of parent
	Share		Share		Retained		Other		Treasury		Total	Non-controlling			Total
	capital		premium		earnings		reserves		shares	shareholders			interests		equity
											equity
	£000		£000		£000		£000		£000		£000		£000		£000
At 1 January 2011	12,466		24,700		75,146		6,032		(579)		117,765		-		117,765
Profit for the period	-		-		24,117		-		-		24,117		-		24,117
Other comprehensive income for the period	-		-		(1,708)		(1,290)		-		(2,998)		26		(2,972)
Contributions by and distributions to owners
Ordinary dividends paid	-		-		(7,479)		-		-		(7,479)		-		(7,479)
Gain on disposal of interest in Joint ventures					72						72				72
															-
Share-based compensation	-		-		1,503		-		-		1,503		-		1,503
Acquired with subsidiaries	-		-		-		-		-		-		(117)		(117)
Arising on the issue of shares	15		224		-		-		-		239		-		239
Purchase of shares	-		-		-		-		(1,449)		(1,449)		-		(1,449)
Transactions with shareholders	15		224		(5,904)		-		(1,449)		(7,114)		(117)		(7,231)
Transfer on disposal of shares	-		-		(347)		-		347		-		-		-
At 31 December 2011	12,481		24,924		91,304		4,742		(1,681)		131,770		(91)		131,679
For the year ended 31 December 2010
	Capital				Attributable to equity holders of parent
	Share		Share		Retained		Other		Treasury		Total	Non-controlling			Total
	capital		premium		earnings		reserves		shares	shareholders			interests		equity
											equity
	£000		£000		£000		£000		£000		£000		£000		£000
At 1 January 2010	12,456		24,576		66,877		3,937		(768)		107,078		-		107,078
Profit for the period	-		-		19,832		-		-		19,832		-		19,832
Other comprehensive income for the period	-		-		(5,624)		2,095		-		(3,529)				(3,529)
Contributions by and distributions to owners
Ordinary dividends paid	-		-		(6,879)		-		-		(6,879)		-		(6,879)
Share-based compensation	-		-		1,309		-		-		1,309		-		1,309
Arising on the issue of shares	10		124		-		-		-		134		-		134
Purchase of shares	-		-		-		-		(180)		(180)		-		(180)
Transactions with shareholders	10		124		(5,570)		-		(180)		(5,616)		-		(5,616)
Transfer on disposal of shares	-		-		(369)		-		369		-		-		-
At 31 December 2010	12,466		24,700		75,146		6,032		(579)		117,765		-		117,765
Other reserve movements
Other reserves					Translation				Hedging		Total
							reserve		reserve
							£000		£000		£000
At 1 January 2010							4,897		(960)		3,937
Other comprehensive income for the period							2,788		(693)		2,095
At 31 December 2010							7,685		(1,653)		6,032
Other comprehensive income for the period							(478)		(812)		(1,290)
At 31 December 2011							7,207		(2,465)		4,742

NOTES TO THE PRELIMINARY RESULTS

1.         General information

Basis of preparation of group accounts

In accordance with EU law (IAS Regulation EC 1606/2002), the preliminary results have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use in the EU as at 31 December 2011 (adopted IFRS), International Financial Reporting Interpretations Committee (IFRIC) interpretations and those part of the Companies Act 2006 applicable to companies reporting under IFRS.

The accounting policies are consistent with those presented in the annual report for 2010 with the exception of the new policies given below.

In the current financial year the following new statements have been adopted for the first time;

Amendments to existing standards:

IAS 24                    Related Party Disclosures (revised 2009)

                              Improvements to IFRS 2010

Interpretations:

IFRIC 14                  Prepayments of a Minimum Funding Requirement

The adoption of these standards and interpretations had no impact on the Group.

Following the closure of its principal defined benefit scheme in 2010 the Group has changed its accounting for the cost of defined benefit pension schemes. The charges to the income statement now relate mainly to the unwinding of the discount rate on the scheme liability and the expected return on investments. These elements are more similar to a financing cost than an operating expense in nature and consequently these costs are now included as part of finance costs rather than operating profit where they have previously been reported. The impact of this change is explained in note 3.

After making enquiries, 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 financial statements.

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 the Company's statutory accounts for the years ended 31 December 2011 or 2010. Statutory accounts for 2010 have been delivered to the registrar of companies, and those for 2011 will be delivered in due course. The auditors have reported on those accounts; their reports were (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 in respect of the accounts for 2011.

The annual report and accounts for the year ended 31 December 2011 will be posted to shareholders in early April 2012.

The results were approved by the Board of Directors on the 5 March 2012.

Acquisitions

On 1 January 2011 the Group acquired an additional 5% interest in its Nigerian based joint venture Fender Care Nigeria Limited (FCN) for a consideration of £1,201,000. Following the acquisition the Group has a 45% interest in this joint venture. FCN provides ship to ship transfer services in the East and West Africa region. Goodwill of £721,000 arose on the acquisition of this interest.

On 8 November 2011 the Company acquired a 49% of the issued share capital of James Fisher Angola Ltda for a consideration of £54,000.   James Fisher Angola meets the criteria for recognition as a subsidiary on the basis of a shareholder agreement which enables the Group to exercise control over the economic benefits arising from the activities of the company. James Fisher Angola is engaged in the provision of specialist services to the Oil production industry in Angola.

Disposals

On 31 March 2011 The FCN joint venture disposed of 20% of its wholly owned subsidiary, Fender Care East Africa Limited for a consideration of $325,000. The Group's share of the profit on disposal of this interest is included in equity.

Taxation

The effective tax rate on profit before tax, intangible amortisation and acquisition costs is 19.0% (2010: 22.7%).  Including the impact of intangible amortisation, acquisition costs and grossing up for tax incurred by joint ventures and associates, the overall tax rate was 19.1% (2010: 23.2%).

This lower than standard rate is due to the element of Group profit derived from overseas and the Marine Oil Services business only incurring a nominal levy due to the UK Tonnage Tax regime.  There is no provision for deferred tax on accelerated capital allowances for activities which fall within tonnage tax. 

Dividends

The Board are recommending a final dividend for the year of 10.74p per share (2010: 9.68p per share), making a total for the year of 16.08p per share (2010: 14.72p per share).  This represents an increase of 9% on 2010.  The final dividend will be paid on 11 May 2012 to shareholders on the register on 13 April 2012.  Dividend cover was 3.0 times (2010: 2.7 times). The Sir John Fisher Foundation owns approximately 25% of the Ordinary shares and its income is distributed to charitable causes with special regard to those based in and for the benefit of the people living in and around Barrow in Furness, Cumbria, UK.

Cash flow and borrowings

The Group is focused on achieving a balance between investing for future growth either organically or from investment in new businesses and maximising its cash generation.  Net borrowings decreased by £1.5 million in the year as £27.1 million was generated from operating activities which was utilised on investing activities (£11.1 million), interest paid (£4.4 million) and dividends to shareholders (£7.5 million).  At 31 December 2011, the ratio of net borrowings (including guarantees) to earnings before interest, tax, depreciation and amortisation (EBITDA) was 2.1 times (2010: 2.5 times).

Net gearing, the ratio of net debt to equity was 75% (2010: 85%).  The majority of James Fisher's borrowing is with a small group of relationship banks that provide bilateral facilities on an unsecured basis over a 3-5 year term.  The Group's interest cost increased by £0.7 million in the year as the more recently agreed loan facilities bear higher margins than those loans that they have replaced.

At 31 December 2011, the Group had £38.6 million (2010: £33.1 million) of undrawn facilities which £32.3 million (2010: £26.1 million) were committed.

Principal risks and uncertainties

The following is a summary of the principal risks and uncertainties agreed by the Board: contractual risk, economic environment, recruitment and retention of key staff, reputational risk for operational incidents, financial risk of interest rates and foreign exchange and pensions.  A full description of these risks and the mitigation actions taken by the Company will be provided in the 2011 Annual Report.

2.   Segmental Information

            Operating segments

            The following tables present revenue and profit and certain asset and liability information regarding the Group's operating segments for the years ended 31 December 2011 and 2010. 

Information on operating segments relating to 2010 has been revised to reflect the change in accounting for pension costs referred to in note 1 above. Segmental information has also been revised to transfer certain shipping service activities relating from Specialist Technical Services to Marine Oil. The effect for the year ended 31 December 2010 is to increase the segmental profits attributable to Specialist Technical Services by £581,000 and reduce the segmental profits attributable to Marine Oil by the same amount.

Year ended
31 December 2011
		Specialist		Offshore Oil		Defence		Marine		Corporate*		Total
		Technical		Services				Oil
		Services
		£000		£000		£000		£000		£000		£000
Segmental revenue		146,521		71,580		29,271		66,805		-		314,177
Inter segment sales		(5,077)		(369)		(1,107)		-		-		(6,553)
Group  revenue		141,444		71,211		28,164		66,805		-		307,624
Underlying operating profit		19,792		12,783		5,490		1,145		(3,077)		36,133
Amortisation of acquired intangibles		(113)		(141)		-		-		-		(254)
Profit from operations including results of associates and joint ventures		19,679		12,642		5,490		1,145		(3,077)		35,879
Finance income												322
Finance costs												(6,450)
Profit  before tonnage and income tax												29,751
Tonnage and income tax												(5,634)
Profit attributable to equity holders												24,117
Share of post tax results of associates and joint ventures		2,086		-		3,599		-		-		5,685
Assets & liabilities
Segment assets		117,276		120,518		28,994		63,338		(996)		329,130
Investment in joint ventures		7,336		-		5,198		-		-		12,534
Total assets												341,664
Segment liabilities		(25,600)		(10,688)		(10,440)		(17,903)		(145,354)		(209,985)
Other segment information
Capital expenditure:
Property, plant & equipment		4,146		11,110		192		1,506		181		17,135
Depreciation		2,323		6,201		324		4,412		168		13,428
Amortisation of intangible assets		411		221		-		-		-		632
* corporate assets comprise available for sale assets, deferred tax and centrally held corporate assets
* corporate liabilities comprise bank loans, pension schemes and corporate and deferred tax liabilities

Year ended
31 December 2010
		Specialist		Offshore Oil		Defence		Marine		Corporate*		Total
		Technical		Services				Oil
		Services
		£000		£000		£000		£000		£000		£000
Revenue
Segmental revenue		120,493		58,729		21,363		71,857		-		272,442
Inter segment sales		(3,826)		(189)		(78)		-		-		(4,093)
Group  revenue		116,667		58,540		21,285		71,857		-		268,349
Underlying operating profit		18,478		11,023		5,263		725		(3,006)		32,483
Acquisition costs		(406)		(604)		-		-		-		(1,010)
Amortisation of acquired intangibles		(61)		(116)		-		-		-		(177)
Profit from operations including results of associates and joint ventures		18,011		10,303		5,263		725		(3,006)		31,296
Finance income												256
Finance costs												(5,611)
Profit  before tonnage and income tax												25,941
Tonnage and income tax												(6,109)
Profit attributable to equity holders												19,832
Share of post tax results of associates and joint ventures		1,688		-		2,992		-		-		4,680
Assets & liabilities
Segment assets		108,581		113,551		18,268		68,618		1,600		310,618
Investment in joint ventures		4,017		-		7,676		-		-		11,693
Total assets												322,311
Segment liabilities		(18,742)		(11,807)		(3,839)		(20,436)		(149,722)		(204,546)
Other segment information
Capital expenditure:
Property, plant & equipment		8,050		19,180		756		1,758		9		29,753
Depreciation		1,911		4,761		320		4,168		176		11,336
Amortisation of intangible assets		61		116		-		-		-		177
* corporate assets comprise available for sale assets, deferred tax and centrally held corporate assets
* corporate liabilities comprise bank loans, pension schemes and corporate and deferred tax liabilities

Geographical segments

The following table represents revenue, expenditure and certain asset information regarding the Group's geographic presence for the years ended 2011 and 2010.

Geographical revenue is determined by the location in which the product or service is provided. Where customers receive the product or service in one geographical location for use or shipment to another it is not practicable for the Group to identify this and the revenue is attributed to the location of the initial shipment. The geographical allocation of segmental assets and liabilities is determined by the location of the attributable business unit.

	United Kingdom				Rest of Europe				Middle East, Africa			Asia Pacific				Total
									& Americas
	2011		2010		2011		2010		2011		2010	2011		2010		2011		2010
	£000		£000		£000		£000		£000		£000	£000		£000		£000		£000
Revenue
Segmental revenue	135,388		119,373		80,143		66,589		42,178		40,994	56,468		45,486		314,177		272,442
Inter segment sales	(6,431)		(4,093)		(122)		-		-		-	-		-		(6,553)		(4,093)
Group revenue	128,957		115,280		80,021		66,589		42,178		40,994	56,468		45,486		307,624		268,349
Segment assets	84,250		76,652		28,783		21,885		5,044		5,544	12,597		9,463		130,674		113,544
Investment in  joint ventures	3,412		5,319		222		228		6,127		3,269	2,773		2,877		12,534		11,693
Financial assets	1,370		1,370		-		-		-		-	-		-		1,370		1,370
Other non current assets	144,443		136,929		39,671		45,573		2,743		2,467	10,229		10,735		197,086		195,704
																341,664		322,311

3.      Adjustment arising from change in accounting policy

         As explained in note 1, the results of earlier years have been restated to include the unwinding of the discount on pension liabilities and expected return on pension assets within finance costs rather than in operating expenses. The impact on operating profit and finance costs for the period concerned is as follows:

				31 December 2010
					£000
Operating profit
As previously reported					29,928
Adjustment					1,368
Restated					31,296
Net finance costs
As previously reported					(4,243)
Adjustment					(1,368)
Restated					(5,611)

         These adjustments have no impact on profit before tax for the period, cash flow or equity.

         A balance sheet in respect of earlier periods has not been presented as the accounting policy changes does not have any effect on the balance sheet presentation.

4.      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 as follows:		2011		2010
		£000		£000
Current tax:
UK corporation tax		(2,700)		(5,135)
Tax (underprovided)/overprovided in previous years		935		-
Foreign tax		(2,381)		(1,883)
Total current tax		(4,146)		(7,018)
Deferred tax:
Origination and reversal of timing differences		(1,465)		933
Total taxation on continuing operations		(5,611)		(6,085)

The total tax charge in the income statement is allocated as follows:
		2011		2010
		£000		£000
Income tax expense reported in group income statement		5,611		6,085
Share of joint ventures' current tax		152		256
Total income tax expense		5,763		6,341

         Income tax on comprehensive income

						Group
						2011		2010
						£000		£000
Current  tax:
Current tax on foreign exchange losses/(profits) on internal loans						177		(186)
Current tax on contributions to defined benefit pension schemes						881		539
Current tax on contributions to defined benefit pension schemes -  relating to prior year						1,770		-
Deferred tax:
Deferred tax relating to the actuarial gains and losses on defined benefit pension schemes						(547)		3,426
Deferred tax relating to share based payments						-		9
Deferred tax relating to fair value of derivatives						164		337
						2,445		4,125

Reconciliation of effective tax rate

The tax on the Group's profit on continuing activities differs from the theoretical amount that would arise using the rate applicable under UK corporation tax rules as follows:

							2011		2010
							£000		£000
Profit before tax from continuing operations							29,751		25,941
Tax arising in interests in joint ventures							152		256
							29,903		26,197
At UK statutory tax rate of 26.5% (2010: 28%)							7,924		7,335
Difference due to application of tonnage tax to vessel activities							(248)		583
Expenses not deductible for tax purposes							202		257
(Over)/under provision in previous years
	Current tax						(935)		-
	Deferred tax						1,016		(560)
Share based payments							(82)		151
Lower taxes on overseas income							(1,360)		(1,166)
Research and development relief							(151)		(105)
Utilisation of losses brought forward							(6)		(112)
Non taxable income							(411)		-
Impact of change of rate							(270)		(28)
Other							84		(14)
							5,763		6,341

         Deferred tax at 31 December relates to the following:

		Group				Group
		Balance sheet				Income statement
		2011		2010		2011		2010
		£000		£000		£000		£000
Deferred tax assets
Retirement benefits		5,886		6,259		(175)		682
Share based payments		692		482		(210)		151
Derivative financial instruments		500		337		-		-
		7,078		7,078
Deferred tax liabilities
Property plant and equipment		(4,095)		(3,088)		586		199
Intangible assets		(2,003)		(986)		1,163		(72)
Other items		543		354		101		(27)
		(5,555)		(3,720)
Deferred income tax charge						1,465		933
Net deferred income tax asset		1,523		3,358

5.      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.

At 31 December 2011 389,000 options (2010: 536,000) were excluded from the diluted weighted average number of ordinary shares calculation as their effect would have been anti-dilutive.

The average market value of the Company's shares for purposes of calculating the dilutive effect of share options was based on quoted market prices for the period during which the options were outstanding.

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

Weighted average number of shares
						2011		2010
						Number of		Number of
						shares		shares
For basic earnings per ordinary share*						49,777,165		49,693,215
Potential exercise of share options and LTIPs						425,687		307,411
For diluted earnings per ordinary share						50,202,852		50,000,626

*        Excludes 329,615 (2010:126,698) shares owned by the James Fisher and Sons Public Limited Company Employee Share Ownership Trust.

Adjusted earnings per share

To provide a better understanding of the underlying performance of the Group, an adjusted earnings per share on continuing activities is provided. Adjusted earnings are before the costs of any business combinations and amortisation of acquired intangibles.

					2011		2010
					£000		£000
Profit attributable to owners of the Company					24,091		19,832
Adjustments:
Acquisition expenses					-		1,010
Amortisation of intangible assets net of tax					182		127
					24,273		20,969
					pence		pence
Basic earnings per share on profit from operations					48.4		39.9
Diluted earnings per share on profit  from operations					48.0		39.7
Adjusted basic earnings per share on profit from operations					48.8		42.2
Adjusted diluted earnings per share on profit  from operations					48.4		41.9

6.      Dividends paid and proposed

						2011		2010
						£000		£000
Declared and paid during the year
Equity dividends on ordinary shares:
Final dividend for 2010: 9.68p per share (2009: 8.80p)						4,830		4,385
Interim dividend for 2011: 5.34p per share (2010: 5.04p)						2,666		2,511
Less dividends on own shares held by ESOP						(17)		(17)
						7,479		6,879
Proposed for approval at Annual General Meeting (not recognised as a liability at 31 December)
Equity dividends on ordinary shares:
Final dividend for 2011: 10.74p per share (2010: 9.68p)						5,327		4,815

            The ordinary final dividend will be paid on 11 May 2012 to those shareholders registered in the books of the Company at the close of business on 13 April 2012.

7.      Retirement benefit obligations

The retirement benefit obligations included in the Group and Company balance sheets relate to The James Fisher and Sons plc Pension Fund for Shore Staff, (Shore staff); 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. The Company has obligations under the Shore Staff and under the MNOPF scheme, the balance of which relates to its subsidiary, FT Everard & Sons.

The Group has two defined benefit schemes located in Norway. These are included in the table below at their fair value based on an actuarial valuation as at 31 December 2011.

The Group's obligations in respect of its pension schemes at 31 December 2011 were as follows:

					2011		2010
					£000		£000
Shore staff pension scheme					(10,840)		(9,137)
MNOPF pension scheme					(19,219)		(20,662)
GMC pension scheme					(74)		13
					(30,133)		(29,786)

         Details of the schemes operated by the Group are as follows:

         James Fisher and Sons plc Pension Fund for Shore Staff

         These financial statements incorporate the latest full actuarial valuation of the Shore staff scheme carried out as at 1 August 2010, rolled forward to 31 December 2011.  

         The scheme closed to future accrual on 31 December 2010. No contributions from employees were made in 2011. In 2010 the Company contributed 14.4% of pensionable pay. Contributions to the scheme from the Company amounted to £99,667 per month (2010: £99,667). A revised level of contributions of £134,583 per month has been agreed for 2012 following the agreement of the valuation carried out as at 1 August 2010.

         In 2011 the Shore staff scheme offered pensioners the option of foregoing future increases in pension payments in exchange for a fixed pension entitlement set at a higher level than the previous variable entitlement. Taking into account those pensioners who chose this option and an estimate of the expected take up rate by members eligible in future periods, the actuaries have calculated that this variation has reduced the Company's pension obligation in respect of the Shore staff scheme by £785,000. This amount is included in the administrative expenses in the income statement in the year ended 31 December 2011.

         Merchant Navy Officers Pension Fund

         In 2005 the High Court established that former as well as existing employers are liable to make payments in respect of the funding deficit of the MNOPF. The Company was 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 of £193.5 million. Since that date further adjustments have been made arising from the acquisition of FT Everard in December 2006; a reallocation of the 2003 deficit arising from an anticipated shortfall of receipts from existing contributors in February 2007 and following the incorporation of the valuation of the scheme as at 31 March 2006 when an additional £164.6 million liability was recognised.

         In April 2010 the Company was notified of the result of the valuation carried out at 31 March 2009 in which an additional £390.0 million was recognised and further payments requested from the Group commencing September 2010. There have been no further changes in the liability in 2011. The total amount paid by the Group in 2011 to the MNOPF was £3.0 million (2010: £2.7 million).

8.      Related party transactions

         Other than the transactions involving Fender Care Nigeria and James Fisher Angola Limited, referred to in note 1, there have been no significant changes in the nature and size of related party transactions from that disclosed in the 2010 Annual Report.

9.      The Annual General Meeting will be held at 12.00 noon, Thursday 3 May 2012 at the Abbey House Hotel, Abbey Road, Barrow in Furness, Cumbria.  Report and accounts will be posted to members in early April 2012.  Copies will be made available to members of the public at Fisher House, PO Box 4, Barrow in Furness, Cumbria, LA14 1HR.  The preliminary statement was approved by the Board of Directors on 5 March 2012.

 

END

 

 

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