Final Results

Fisher (James) & Sons PLC 14 March 2006 14 March 2006 James Fisher and Sons plc ('James Fisher' or 'the Company') Preliminary Results James Fisher, the marine services provider, announces Preliminary Results for the year ended 31 December 2005. 2005 was the year in which the transformation of James Fisher from a traditional shipping company into a marine services company came to fruition and, for the first time, this is fully reflected in the accounts which show a profit from continuing activities of £10.7 million (2004 - £8.1 million), the trading results of which are ahead of market expectations. Financial Highlights % 2005 2004 • Group Revenue +28% £91.4m £71.2m • Profit for year on continuing operations +32% £10.7m £8.1m • Pro forma pre tax profit £15.7m, including cable ships 2005 trading • Discontinued operations (loss)/profit - (£12.9m) £3.9m cable ships • Basic earnings per share (4.50p) 24.82p • Basic earnings per share on continuing +41% 21.84p 15.47p operations after adjustment for separately disclosable items • Final dividend per share +15% 5.69p 4.95p • Strong operating cash flows £20.6m £17.7m Operational Highlights • Marine Support Services grew by 34% in 2005, now accounts for 57% of profit from continuing operations • Cable ship division - recognised as a discontinued business, having sold Oceanic Pearl and the write down of the Oceanic Princess • Rescue of Russian submariners by James Fisher Rumic team under Royal Navy builds international reputation in marine support services • £11m FenderCare acquisition, a global market leader in its sector, fully integrated • £11m Monyana acquisition, a market leader in the UK North Sea and Norwegian sectors in refurbishing, design, supply of winches, and other marine equipment • Full year's contributions from both acquisitions in 2006 • Established businesses in the continuing four divisions - offshore oil services, specialist technical services, defence and marine oil services (formerly tankships) - all trading well, many globally Commenting on the outlook, Chairman, Tim Harris, CBE, said: 'Our markets remain strong. James Fisher is well placed to generate significant organic growth through 2006 and beyond. It has the financial strength to continue its acquisition strategy when the right opportunities arise. We have confidence in our core businesses to grow profits strongly.' For further information: James Fisher & Sons PLC Tim Harris Chairman 020 7338 5808 Nick Henry Chief Executive Officer www.james-fisher.co.uk Michael Shields Group Finance Director Binns & Co PR Ltd 020 7786 9600 Peter Binns 07768 392 582 Paul McManus 07980 541893 CHAIRMAN'S STATEMENT Overview 2005 was the year in which the transformation of James Fisher from a traditional shipping company into a marine services company came to fruition and, for the first time, this is fully reflected in the accounts which show a profit from continuing operations of £10.7 million (2004 - £8.1 million), the trading results of which are ahead of market expectations. In view of the increasing importance of our marine support services activity, which grew by 34% in 2005 and now accounts for 57% of profit from continuing operations, we are providing the individual results of the constituent parts of offshore oil services, specialist technical services and defence into three new divisions. Marine oil services, formerly James Fisher Tankships, is the Group's other division and has contributed the remaining 43% to profit from operations. Furthermore, we have recognised the cable layers as a discontinued business having sold Oceanic Pearl and have written down severely the remaining ship, Oceanic Princess, which we shall sell in due course. The write down charge and loss on sale amounting to £20.8 million has resulted in that division showing a pre tax loss of £12.9 million. The Group pre tax profit before separately disclosable items for 2005 would have been £15.7 million, well ahead of market expectations, but for these capital and discontinued business write-downs. An operating cash flow of over £20 million again demonstrates the Group's sound cash generating ability and the gearing of only 54% is after the cable ships write down, accounting for a pension deficit of £13.5 million and financing three acquisitions costing over £22 million during the year. The Group is in a strong financial position with its core marine service businesses doing well and our oil related businesses benefiting from a strong oil price. 2005 2004 Revenue +28% £91.4 m £71.2 m Profit for year on continuing +32% £10.7 m £8.1 m operations Discontinued operations (loss)/profit (£12.9 m) £3.9 m (Loss)/profit to equity holders (£2.2 m) £12.0 m Basic (loss) earnings per share (4.50p) 24.82p Basic earnings per share after +41% 21.84p 15.47p adjustment for separately disclosable items Dividend Your Board is recommending a final dividend of 5.69p per share, a 15% increase, giving a total for the year of 8.79p (2004 - 7.72 p) - an increase of 14%. The dividend is payable on 12 May 2006, to shareholders on the register on 21 April 2006. Offshore Oil Services - divisional result £4.0 million (2004 - £2.9 million) This division consists of the Scan Tech group of companies based in Stavanger, Norway and Aberdeen which hires specialist equipment to the offshore oil industry, primarily in the North Sea but increasingly in the developing oil areas of the former Soviet Republic, Mexico, West Africa and elsewhere globally. Segmental revenue was £14.90 million (2004 - £12.07 million), margins have improved to 27.0% (2004 - 23.9%). The main types of equipment provided are compressors, steam generators, hydraulic power packs, high pressure wash-down units and winches. Typically, we customise units for particular customer requests and also provide specialist labour where necessary. Demand for our services was strong during 2005 and all parts of the business have produced significant organic growth. We have also been marketing and operating the HydroDigger, a specialist subsea excavation tool, with increasing financial success. In December 2005, we completed the acquisition of the businesses of the Monyana group for £11 million in cash. Monyana is the market leader in the UK sector of the North Sea and also fast growing within the Norwegian sector, in the refurbishment, design and supply of a wide range of winches and other marine equipment. It overlaps and strongly complements the Scan Tech group's activities and has been integrated with them. Jake Lorimer, one of the managing partners of Monyana, has become the Managing Director of all our businesses in Aberdeen. Specialist Technical Services - divisional result £2.6 million (2004 - £0.9 million) This division includes our nuclear activities and other specialist marine services, of which FenderCare which was acquired in 2005 and Remote Marine Services are the most important. Segmental revenue was £22.28 million (2004 - £5.81 million), a segmental margin of 11.8% (2004 - 15.7%). All of our nuclear decommissioning activities were merged into one company, James Fisher Nuclear (JFN) during the year. The primary expertise of JFN is the design, construction and operation of remote handling systems for nuclear decommissioning on the contaminated or radioactive side of the nuclear shield and in the underwater storage ponds. 2005 was not the easiest year because of the upheaval in the industry caused by the creation of the new Nuclear Decommissioning Authority (NDA) and the changed role of British Nuclear Fuels plc from owner to operator. However, JFN is progressing well and we are seeking to expand both by organic growth and acquisition. We bought the FenderCare group of companies for £11 million on 17 March 2005 and its results are included from that date. FenderCare is a worldwide market leader in supplying large-scale pneumatic fenders for shipping, offshore, port, construction and defence projects and is the largest global operator of ship-to-ship oil transfers. Although the former shareholders narrowly missed their earn out target for the year ended 30 September 2005 and the related £740,000 of deferred consideration was not paid, FenderCare is trading strongly and represents a most complementary and highly useful addition to James Fisher's marine service activities. We acquired Remote Marine Services in December 2004, primarily for its nuclear decommissioning operation which was a direct competitor of our own James Fisher Rumic. Its other business - the design and assembly of electrical penetrators for borehole activities in the on and offshore drilling industry - has an excellent product reputation and significant growth potential. It is doing well and we propose to increase its scope and marketing outreach in the usual James Fisher way. Defence Service - divisional result (including Foreland JV) £2.1 million (2004 - £2.7 million) Our defence skills are twofold - we are recognised globally as a leader in submarine rescue and we bring commercial skills to support ships engaged in defence activities. Segmental revenue in 2005 was £9.33 million (2004 - £8.13 million), with segmental margin of 22.7% (2004 - 33.6%). The principal reason for the fall in profits was the loss of income as a result of the exercise of the Oakleaf purchase option by the MoD in September 2004 - the contribution in 2004 had been £0.8 million. Also, James Fisher MIMIC had a quieter year owing to current Royal Navy spending restrictions but is beginning to expand overseas, having recently signed a maintenance management contract for the Malaysian coastguard vessels. Foreland Shipping Ltd (formerly AWSR Shipping Ltd) had another good year with all six ro-ro ships working well, with the two commercial vessels on charter to Transfennica Deutschland GmbH until December 2007. The rescue of the seven Russian submariners in July by the James Fisher Rumic team, under Royal Navy command, not only confirmed the skill and courage of our submarine rescue team but also provided visible proof of our expertise which we are now actively marketing to a growing global market. We have had a very busy year and have, amongst other things: • completed a major refit of the UK Submarine Rescue (UKSRS) vehicle • extended the contract with the MoD for the operation of UKSRS for a further two years • signed a letter of intent with the MoD for the purchase of UKSRS for a consideration depending on results; we are now marketing the system, with the Royal Navy's active support, to foreign navies • signed a letter of intent with Rolls Royce to jointly operate the new NATO Submarine Rescue Service (NSRS) when it enters service in 2007 • partnered with Singapore Technologies Marine Ltd to bid jointly to the Singapore Navy for a dedicated ship and submersible rescue service When considering the defence result it is worth noting that, under existing accounting rules, all bid costs are written off until a letter of intent is signed, with no write back of costs even if the bid is successful. During 2005 we incurred bid costs of around £0.4 million which have all been charged against profit. We have also expanded our overhead as we are increasing our marketing scale and coverage and expect to see the benefit of this in future years. Marine Oil Services - divisional result £6.7 million (2004 - £6.9 million) The key to the Marine Oil Services (formerly James Fisher Tankships) division's result in 2005 was the fleet renewal programme, which resulted in us operating 7% less capacity in 2005. Segmental revenue was £44.90 million (2004 - £45.15 million), with segmental margin of 15.0% (2004 - 15.3%). Over the last three years we have sold eight of our oldest vessels, these being replaced by Cumbrian Fisher (12,800 dwt February 2005), Clyde Fisher (12,800 dwt April 2005), Shannon Fisher (5,000 dwt March 2006) and Solway Fisher (5,000 dwt August 2006). The sale of the older vessels was stimulated by one particular incident for the industry, the loss of the Prestige off Spain in 2002, which led us to progress the programme more quickly than we had originally anticipated. Obviously we shall only receive the full benefit from the new tonnage in the second half of 2006 and in 2007 when all the new vessels have been delivered. We shall then have one of the industry's most modern fleets. The coastal tanker business has longstanding relationships with our customers, the oil majors, and most cargo is carried under contracts of affreightment (COAs) rather than spot. In recent years this has enabled us to develop a record of more reliable earnings, strong cash flow and, thanks in part to the tonnage tax and our ability to charter newbuilds rather than own them, a decent return on capital. This subsidiary has appointed a new Managing Director and market conditions are good. It is a niche marine service business and is core for James Fisher. Cable Ships - divisional loss £12.9 million (2004 - profit £3.9 million) We have said for some time that we did not see cable ships as part of James Fisher's core business because the operation is a capital intensive, commodity business which does not fit with our core marine services skills and strategy. We have been playing a waiting game, sheltered by the General Dynamics charter payments which expire during 2006. In October 2005 we determined it was time to sell Oceanic Pearl when we were able to negotiate a US$20 million sales price with a Norwegian buyer who wished to convert her for seismic work. It is our intention to sell Oceanic Princess too, once we receive an appropriate offer. In the meantime we have made an impairment charge to write the book value down to a prudent level. The cable laying market is still deeply recessed but there is some interest in cable ships for conversion for seismic, pipe-laying and other offshore work which we hope to take advantage of. The accounting treatment for cable ships as a discontinued business is given in Note 4 to the preliminary results. In short, we have taken the realised loss on Oceanic Pearl (£9.9 million), the impairment write down on Oceanic Princess (£10.9 million) and offset them by the actual 2005 divisional profit and discounted 2006 charter payments (£7.9 million) which produce overall a total charge of £12.9 million against the 2005 profit. Directors and Employees There have been no changes to the Board other than the appointment as a director of Simon Harris, the Managing Director of James Fisher Defence, in August 2005. The James Fisher Shore Staff Pension Scheme was closed to new members in 2001. During 2005 the decision was taken to phase it out altogether because costs were escalating disproportionately and it was becoming increasingly inequitable to offer substantially different pension benefits to employees doing the same job. With the agreement of the Trustees future benefit accrued has been capped at 11/ 2% per annum on salaries with the scheme ceasing to accrue benefit altogether in five years time. In March 2005, a court case established that former as well as existing employers will have to make payments in respect of the funding deficit of the Merchant Navy Officers' Pension Fund (MNOPF), of which James Fisher's share is now currently estimated at £3.0 million. Under the new International Financial Reporting Standards (IFRS), the liability for all defined benefit schemes for which James Fisher has a share are recorded on the balance sheet for the first time and note 7 of the preliminary results gives full details of how these deficits are being addressed. Pension policy is not easy to change because pensions are a key element of staff welfare. However, with the help and understanding of the Trustees, we believe that we have dealt with the outstanding issues to protect the Group's exposure while being fair to our people. We now provide employment for 471 shore staff and 406 sea staff. I would like to take this opportunity to thank them for their help and support in a constructive year for James Fisher. Outlook Over the last few years James Fisher has had a clear strategy to grow its marine service businesses both organically and by acquisition, as a technically based, commercially driven company, producing better quality earnings and the Group is fast achieving its objective of becoming the UK's leading marine provider. 2005 marks a turning point because the recognition of the cable ships as a discontinued business almost completes the company's transformation. All that remains is to sell Oceanic Princess for at least her present book value and, whilst it continues to generate income under the General Dynamics charter, we have time to find a buyer at a fair price. It is disappointing that market conditions have not allowed us to extricate ourselves from this business without loss but it is now time to put this longstanding problem behind us. The remaining divisions in offshore oil and specialist technical services, defence and marine oil services are core and all have potential for growth. Our acquisition strategy of seeking small to medium sized companies identified by our own research, rather than enter public auctions, has proved successful and all our acquisitions to date are prospering. Since 2002 we have spent £52.3 million on acquisitions. We prefer to acquire entrepreneurially run businesses which are complementary and well-known to our existing operations. We are also demonstrating an ability to generate organic growth, particularly once the new operations have settled in and been integrated with our existing business. Turning to prospects for 2006, defence will be very busy but the accounting treatment, requiring bid costs to be recognised up front whilst income is recognised over the full life of contracts, will militate against any great immediate growth in reported earnings. Conversely, our companies serving the offshore market are well positioned in a strong market and should continue to do well again. We shall also benefit from a full twelve months from the Monyana acquisition for the first time. The specialist technical companies are in good shape and should be able to demonstrate real organic growth and will benefit from a full year's contribution for FenderCare for the first time. Marine oil services (tankships) will benefit from the delivery of their new tonnage with an 8% increase in capacity and their earnings should improve at least proportionately. Our markets remain strong and James Fisher is well placed to generate significant organic growth through 2006 and beyond. It also has the financial strength to continue its acquisition strategy when the right opportunities arise. Overall we have confidence in our core businesses to grow profits strongly for our shareholders. GROUP INCOME STATEMENT For the year ended 31 December 2005 Year ended Year ended Notes 31 December 2005 31 December 2004 Before Separately Before Separately separately disclosable separately disclosable disclosable items disclosable items items note (5) Total items note (5) Total £000 £000 £000 £000 £000 £000 Group revenue 91,411 91,411 71,153 71,153 Cost of sales (73,931) (73,931) (55,726) (55,726) _________ __________ _________ _________ Gross profit 17,480 17,480 15,427 15,427 Administrative expenses (5,413) (5,413) (4,874) (4,874) _________ __________ _________ _________ Profit from operations before 12,067 12,067 10,553 10,553 separately disclosable items Pension benefit curtailment - 2,000 2,000 - - - (Loss)/profit on ship - (1,617) (1,617) - 475 475 disposals _________ _______ ________ _________ ______ ________ Profit from operations 2 12,067 383 12,450 10,553 475 11,028 Finance costs Finance income (revenue) 304 - 304 330 - 330 Finance costs (2,591) - (2,591) (2,511) - (2,511) Exchange (loss)/gain on loan - (130) (130) - 155 155 conversion (2,287) (130) (2,417) (2,181) 155 (2,026) Share of post tax results of 1,413 - 1,413 1,219 - 1,219 joint venture _________ _______ ________ _________ ______ ________ Profit on continuing operations 11,193 253 11,446 9,591 630 10,221 before taxation Taxation 6 (538) (216) (754) (2,123) - (2,123) _________ _______ ________ _________ ______ ________ Profit for the year on 10,655 37 10,692 7,468 630 8,098 ========= ======= ========= ====== continuing operations Discontinued operations 4 (Loss)/profit for the year from (12,889) 3,886 _______ ______ Discontinued operations (2,197) 11,984 Preference dividend - (4) -------- ------ (Loss)/profit attributable to (2,197) 11,980 equity holders of the parent ======== ====== Earnings per share (EPS) 8 pence pence Basic EPS from continuing 21.91 16.77 operations Diluted EPS from continuing 21.72 16.56 operations Basic (loss)/EPS on (loss)/profit from (4.50) 24.82 total operations Diluted (loss)/EPS on (loss)/profit from (4.50) 24.52 total operations Adjusted earnings per share Basic adjusted EPS from continuing 21.84 15.47 operations Diluted adjusted EPS from continuing 21.64 15.27 operations GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE For the year ended 31 December 2005 Year ended Year ended Notes 31 December 2005 31 December 2004 £000 £000 Income and expenses recognised directly in equity Exchange differences on translation of foreign operations: Currency translation differences 26 (126) Net investment hedge 9 303 ________ _______ 35 177 Fair value of losses on cash flow hedges (134) - Share of fair value gains of cash flow hedges in 169 - joint venture Actuarial (losses)/gains on defined benefit (4,531) 400 schemes ________ _______ (4,461) 577 Transfers to the income statement On cash flow hedges 36 Tax on items taken directly to equity 123 (120) ________ _______ Net (expense)/income recognised directly in (4,302) 457 equity (Loss)/profit for the year (2,197) 11,980 ________ _______ Total recognised (expense)/income for the 10 (6,499) 12,437 year ======== ======= All recognised income is attributable to the equity holders of the parent Effects of changes in accounting policy: 10 Net gain on cash flow hedges on first time 20 - adoption of IAS 39 Loss on cash flow hedges in joint ventures on first time (125) - adoption of IAS 39 ________ _______ (105) - ======== ======= GROUP BALANCE SHEET As at 31 December 2005 Notes 31 December 2005 31 December 2004 £000 £000 Assets Non current assets Goodwill 36,168 21,254 Property, plant and equipment 67,081 103,091 Investment in joint ventures 2,587 1,810 Financial assets 1,368 1,157 Deferred tax assets 1,197 1,391 ________ ________ 108,401 128,703 ________ ________ Current assets Inventories 5,797 4,028 Trade and other receivables 21,026 14,901 Cash and cash equivalents 9,725 10,045 ________ ________ 36,548 28,974 ________ ________ Non-current assets classified as 7,959 - held for sale ________ ________ Total Assets 152,908 157,677 ======== ======== Equity and Liabilities Capital and reserves Called up share capital 10 12,345 12,305 Cumulative preference shares - 100 Share premium 10 23,960 23,810 Treasury shares 10 (1,184) (1,212) Other reserves 10 178 177 Retained earnings 10 38,030 48,151 ________ ________ Total equity 73,329 83,331 ________ ________ Non current liabilities Other payables 593 14 Retirement benefit obligations 7 13,536 12,800 Derivative financial instruments 18 - Cumulative preference shares 100 - Interest-bearing loans and 42,695 38,472 borrowings ________ ________ 56,942 51,286 ________ ________ Current liabilities Trade and other payables 14,802 13,280 Current tax 1,370 1,601 Derivative financial instruments 102 - Interest-bearing loans and 6,363 8,179 borrowings ________ ________ 22,637 23,060 ________ ________ Total liabilities 79,579 74,346 ________ ________ Total equity and liabilities 152,908 157,677 ======== ======== GROUP CASH FLOW STATEMENT For the year ended 31 December 2005 31 December 2005 31 December 2004 £000 £000 Group profit from operations 12,450 11,028 Adjustments to reconcile Group operating profit to net cash inflows from operating activities (Loss)/profit from operations from (12,928) 3,893 discontinued operations Adjustments for: Depreciation 7,670 8,259 Profit on sale of property, plant and (51) (59) equipment Pension benefit curtailment (2,000) - Impairment of non-current assets 10,885 - Loss/(profit) on ship disposals 11,565 (475) Income tax payments (1,404) (1,583) Increase in trade and other (3,014) (2,697) receivables Decrease/(increase) in inventories 258 (150) Decrease in trade and other payables (3,285) (790) Share based compensation 432 289 _______ _______ Cash flows from operating activities 20,578 17,715 Investing activities Dividends from joint venture 1,068 1,000 undertakings Proceeds from the sale of property, plant and 12,995 4,966 equipment Interest received 363 314 Acquisition of subsidiaries, net of (22,077) (6,250) cash acquired Acquisition of property, plant and (7,357) (3,649) equipment Loans to joint venture repaid - 225 Acquisition of available for sale (211) - financial asset Refund of payment to acquire property, plant - 3,851 and equipment Sale of shipbuilding contracts - 7,293 ________ ________ Cash flows (used in)/from investing (15,219) 7,750 activities Financing activities Proceeds from the issue of share capital 190 346 Preference dividend paid (4) (4) Interest paid (2,871) (2,482) Proceeds from other non-current 20,524 12,574 borrowings Purchase less sales of own shares by 7 (616) ESOP Repayment of borrowings (19,547) (27,409) Dividends paid (3,927) (3,410) ________ ________ Cash flows from financing activities (5,628) (21,001) Net (decrease)/increase in cash and cash (269) 4,464 equivalents Cash and cash equivalents at 1 January 2005 10,045 5,455 Net foreign exchange difference (51) 126 ________ ________ Cash and cash equivalents at 9,725 10,045 31 December 2005 ======== ======== NOTES TO THE PRELIMINARY RESULTS 1. General information This is the first year in which the Group has prepared financial statements under International Financial Reporting Standards 'IFRS'. Comparatives have therefore, with the exceptions noted below, been restated from UK Generally Accepted Accounting Practice 'UK GAAP' to comply with IFRS. The Group issued a press release in August 2005 which contained reconciliations to IFRS from previously published UK GAAP financial statements. These reconciliations are available on the Company's web site at www.james-fisher.co.uk. First time adoption In general the group is required to apply its accounting policies determined under IFRS fully retrospectively to determine the opening IFRS balance sheet. In order to ease the transition to IFRS the accounting standard IFRS 1 'First Time Adoption of International Financial Reporting Standards' includes several exceptions to this principle, some of which are mandatory and some permissive. In preparing these initial statements the group has applied the following exemptions to the restatement of historical data: • Business combinations - The provisions of IFRS 3 'Business Combinations' have been applied prospectively from 1 January 2004. The accounting treatments applied to business combinations that occurred prior to this date have not been revised in the opening IFRS balance sheet at 1 January 2004. • Cumulative translation differences arising on the consolidation of subsidiaries - IAS 21 'The Effects of Changes in Foreign Exchange Rates' requires that such differences be held in a separate translation reserve. This reserve has been deemed to be nil at 1 January 2004. • Financial instruments - The provisions of IAS 32 'Financial Instruments: Disclosure and Presentation' and IAS 39 'Financial Instruments: Recognition and Measurement' have not been applied to the comparative financial statements for the year ended 31 December 2004. The group has applied these standards prospectively from 1 January 2005. For the comparative period the group has continued to account for its foreign exchange contracts and interest rate swaps under UK GAAP. The principal impacts of applying these standards from 1 January 2005 are: - The 3.5% cumulative preference shares which have a book and fair value of £100,000 have been reclassified from equity to long term debt. From 1 January 2005 the dividend on the shares of £3,500 per annum is classified as an interest expense. - The group has not recognised the fair value of hedging derivatives in its 2004 IFRS comparative balance sheet and income statement. - From 1 January 2005 the fair value of these derivatives used for hedging purposes has been included in a hedging reserve and released to the income statement in the year when the hedged commitment affects profit or loss. The impact of this change is to recognise in reserves a gain on the fair value of cash flow hedges of £20,000 in the Group and Company and a loss of £125,000 in reserves of the Group being the Group's share of the loss on fair value of cash flow hedges in the Group's joint venture, Foreland Holdings Limited. • Employee benefits - The group has elected to recognise all cumulative actuarial gains and losses relating to its defined benefit pension schemes in equity at 1 January 2004, the date of transition. The Group has elected to recognise all future actuarial gains and losses in equity in the statement of recognised income and expense. • Share based payments - In respect of share based payments, the group has applied the exemption in IFRS 1 'First time adoption of IFRS' and has only applied the standard to equity settled awards granted after 7 November 2002 that had not vested on or before 1 January 2005. The financial information set out above does not constitute statutory accounts for the years ended 31 December 2005 or 2004 as defined in section 240 of the Companies Act 1985. Statutory accounts for 2004, which were prepared under UK GAAP, 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 2005 which have been prepared under IFRS. 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 2005 and 2004. Year ended Discontinued 31 December 2005 Continuing Operations Operations _____________________ ____________ Offshore Specialist Defence Marine Total Cable Total Oil Technical Oil Ships Services Services Services £000 £000 £000 £000 £000 £000 £000 Revenue Group revenue 14,936 25,898 9,679 44,903 95,416 9,019 Inter segment sales (37) (3,622) (346) - (4,005) - _______ _______ _____ _______ _______ _______ Segmental revenue 14,899 22,276 9,333 44,903 91,411 9,019 ======= ======= ===== ======= ======= ======= Result Segmental result before 4,017 2,551 782 6,733 14,083 4,510 ship disposals Common costs (2,016) _______ Profit from operations before separately disclosable items 12,067 and joint ventures Pension benefit curtailment 2,000 Impairment of non-current - (10,885) assets Recognition of rentals due - 3,395 on sold ship Loss on ship disposals (1,617) (9,948) _______ ________ Profit from operations before joint 12,450 (12,928) ventures Finance income (revenue) 304 42 Finance costs (2,591) - Exchange loss on loan (130) - conversion (2,417) 42 Share of post tax results - 79 1,334 - 1,413 of joint ventures _______ ________ Profit before tax 11,446 (12,886) Taxation (754) (3) _______ ________ Profit attributable to 10,692 (12,889) equity holders ======= ======== Assets & Liabilities Segment assets 39,501 24,908 8,867 58,347 131,623 5,095 136,718 Investment in joint - 398 2,189 - 2,587 - 2,587 ventures Non-current assets - 7,959 7,959 classified as held for sale Unallocated assets 5,644 5,644 _______ _______ _____ _______ _______ _______ ________ Total assets 139,854 13,054 152,908 ======= ======== Segment liabilities (1,922) (2,802) (1,441) (6,820) (12,985) (1,437) (14,422) Unallocated liabilities (65,157) - (65,157) _______ _______ _____ _______ _______ _______ ________ Total liabilities (78,142) (1,437) (79,579) ======= ======== Other segment information Capital expenditure: Property, plant & 7,242 3,733 71 3,317 14,363 588 14,951 equipment Unallocated 53 53 _______ _______ _____ _______ _______ _______ ________ 14,416 588 15,004 ======= ======== Depreciation 939 400 118 3,838 5,295 2,189 7,484 Impairment provision 10,885 10,885 Unallocated 186 186 _______ _______ _____ _______ _______ _______ ________ 5,481 13,074 18,555 ======= ======== Year ended Discontinued 31 December 2004 Continuing Operations Operations _____________________ ____________ Offshore Specialist Defence Marine Total Cable Total Oil Technical Oil Ships Services Services Services £000 £000 £000 £000 £000 £000 £000 Revenue Group revenue 12,071 9,576 8,260 45,148 75,055 7,600 Inter segment sales - (3,768) (134) - (3,902) - _______ _______ _______ _______ _______ _______ Segmental revenue 12,071 5,808 8,126 45,148 71,153 7,600 ======= ======= ======= ======= ======= ======= Result Segmental result before 2,884 914 1,509 6,909 12,216 3,893 ship disposals Common costs (1,663) _______ Profit from operations before separately disclosable items and 10,553 joint ventures Profit on ship disposals 475 _______ _______ Profit from operations before 11,028 3,893 joint ventures _______ _______ Finance income (revenue) 330 - Finance costs (2,511) - Exchange gain on loan conversion 155 - (2,026) - Share of post tax - - 1,219 - 1,219 - results of joint ventures _______ _______ Profit before tax 10,221 3,893 Taxation (2,123) (7) _______ _______ Profit attributable to 8,098 3,886 equity holders ======= ======= Assets & Liabilities Segment assets 24,496 8,860 8,274 62,657 104,287 42,095 146,382 Investment in joint 1,810 1,810 1,810 ventures Unallocated assets 9,485 - 9,485 _______ _______ _______ _______ _______ _______ ________ Total assets 115,582 42,095 157,677 ======= ======== Segment liabilities (1,763) (728) (1,691) (6,051) (10,233) (1,595) (11,828) Unallocated liabilities (62,518) - (62,518) _______ _______ _______ _______ _______ _______ ________ Total liabilities (72,751) (1,595) (74,346) ======= ======== Other segment information Capital expenditure: Property, plant & 2,402 833 92 1,078 4,405 (3,851) 554 equipment Unallocated 747 747 _______ _______ _______ _______ _______ _______ ________ 5,152 (3,851) 1,301 ======= ======== Depreciation 851 66 111 4,680 5,708 2,342 8,050 Unallocated 209 209 _______ _______ _______ _______ _______ _______ ________ 5,917 2,342 8,259 ======= ======== Unallocated net liabilities comprise certain assets and liabilities of the parent company, loans, pension liabilities and taxation. Geographical segments The following table represents revenue, expenditure and certain asset information regarding the group's geographical segments by location for the years ended 2005 and 2004. UK & Ireland Norway Rest of the Total World 2005 2004 2005 2004 2005 2004 2005 2004 £000 £000 £000 £000 £000 £000 £000 £000 Revenue Continuing operations Group revenue 68,964 52,145 8,110 6,643 18,342 16,267 95,416 75,055 Inter-segment (4,005) (3,902) - - - - (4,005) (3,902) sales _______ ________ _______ _______ _______ _______ ________ ________ Segmental 64,959 48,243 8,110 6,643 18,342 16,267 91,411 71,153 revenue ======= ======== ======= ======= ======= ======= ======== ======== Discontinued activities Group revenue - - - - 9,019 7,600 9,019 7,600 ======= ======== ======= ======= ======= ======= ======== ======== Segment assets 109,210 123,161 25,091 23,221 2,417 - 136,718 146,382 Investment in 2,189 1,810 - - 398 - 2,587 1,810 joint ventures Non-current 7,959 - - - - - 7,959 - assets classified as held for sale Unallocated 5,644 9,485 corporate assets ________ ________ 152,908 157,677 ======== ======== Segment (9,376) (9,635) (2,941) (2,193) (2,105) - (14,422) (11,828) liabilities Unallocated (65,157) (62,518) corporate liabilities ________ ________ (79,579) (74,346) Capital ======== ======== expenditure: Property, plant 14,211 871 793 430 - - 15,004 1,301 and equipment 3. Proforma adjusted segmental information The directors present below an analysis of segmental results adjusted to remove the effect of classifying the cable ship operation as discontinued and to reflect the inclusion of the Group's interest in joint ventures. This provides a comparison of current performance against the previous year of the Group as previously structured. 2005 2004 £000 £000 Marine Support Services Offshore Oil Services 4,017 2,884 Specialist Technical Services 2,551 914 Defence 782 1,509 ______ _______ 7,350 5,307 ______ _______ Joint Ventures - Defence 1,334 1,219 - Specialist Technical Services 79 - 1,413 1,219 ______ _______ Total Marine Support Services 8,763 6,526 Marine Oil Services 6,733 6,909 Cable Ships 4,510 3,893 Common costs (2,016) (1,663) ______ _______ 17,990 15,665 Net Interest (2,245) (2,181) ______ _______ Profit from operations before separately 15,745 13,484 disclosable items (Loss)/profit on ship disposals (11,565) 475 Impairment of non current assets (10,885) - Recognition of rentals due on sold ships 3,395 - Pension benefit curtailment 2,000 - Exchange (loss)/gain on loan conversion (130) 155 ______ _______ (Loss)/profit before (1,440) 14,114 tax ====== ======= 4. Discontinued operations Discontinued operations relate to the withdrawal of the Group from cable laying activities. Following the disposal in 2005 of the cable ship CS Oceanic Pearl the remaining vessel, CS Oceanic Princess, will be disposed of and has therefore been reclassified as an asset held for sale. An impairment review has been performed by the Directors, taking into account the expected disposal proceeds and costs and revenues anticipated to arise during the period prior to disposal, discounted at an appropriate rate which takes into account the risks associated with the relevant cash flows. As a result an impairment provision of £10.885m has been made against the carrying value of the vessel and charged to the income statement. The discount rates used to assess the cash flows were between 4.5% and 10%. Following the disposal of the CS Oceanic Pearl on 6 October 2005, the Group has recognised the remaining income due under the General Dynamics charter which expires in December 2006. The present value of the remaining income has been recognised in the balance sheet at 6 October 2005 after applying a discount rate of 4.5%. The results of discontinued operations are presented below: 2005 2004 £000 £000 Revenue 9,019 7,600 Cost of sales (4,509) (3,707) _______ _______ Gross profit 4,510 3,893 Loss on ship disposal (9,948) - Recognition of rentals due on sold ship 3,395 - _______ _______ (2,043) 3,893 Impairment of non-current assets (10,885) - _______ _______ (Loss)/profit from operations (12,928) 3,893 Finance income Movement in discount on receivables 42 - _______ _______ (Loss)/profit before tax from discontinued operations (12,886) 3,893 Taxation (3) (7) _______ _______ Net (loss)/profit attributable to discontinued operations (12,889) 3,886 ======= ======= Taxation is payable on profit from operations under the tonnage tax regime. Non current assets held for sale Other than the vessel CS Oceanic Princess, there are no other assets or liabilities of the cable ship operations which are classified as held for sale. At 31 December 2005 the carrying value of the CS Oceanic Princess was £7,959,000. The net cash flows attributable to discontinued operations are: 2005 2004 £000 £000 Operating cash flows 7,085 7,019 Investing cash flows (5,522) (1,818) Financing activities - (3,900) _______ _______ 1,563 1,301 ======= ======= (Loss)/earnings per share from discontinued operations 2005 2004 (pence): p p Basic (26.41) 8.05 Diluted (26.41) 7.95 5. Separately disclosable items Separately disclosable items consist of: 2005 2004 £000 £000 Pension benefit curtailment 2,000 - (Loss)/profit on ship disposals (1,617) 475 Exchange (loss)/gain on loan conversion (130) 155 _______ _______ 253 630 ======= ======= The pension benefit curtailment arises from the closure of the Group's defined benefit pension scheme to existing members in 2010 and changes to the contribution rates. The exchange differences on loans arise on foreign currency financing loans in the UK. The tax arising on these items is £216,000 (2004: £nil). 6. 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: 2005 2004 £000 £000 Current tax: UK tonnage tax (24) (32) UK corporation tax (514) (832) ______ ______ (538) (864) Tax over/(underprovided) in previous years 327 (409) Foreign tax (567) (477) ______ ______ Total current tax (778) (1,750) ______ ______ Deferred tax: Origination and reversal of temporary differences 21 (380) ______ ______ Total taxation expense included in group income (757) (2,130) statement ====== ====== Share of joint ventures' current tax (72) (61) The total tax charge in the income statement is allocated as follows: Taxation on continuing operations 754 2,123 Taxation attributable to discontinued operations 3 7 ______ ______ 757 2,130 ====== ====== Tax credited/(charged) to equity included in statement of recognised income and expense: 2005 2004 £000 £000 Deferred tax: Deferred tax relating to the actuarial gains and losses on 123 (120) defined benefit pension schemes ====== ====== 7. Retirement benefit obligations The Retirement benefit obligations included in the Group and Company balance sheets comprise the following elements, details of which are explained below: 2005 2004 £000 £000 Shore staff pension scheme 8,100 10,200 Dockworkers pension scheme 2,400 2,600 MNOPF pension scheme 3,036 - ______ ______ 13,536 12,800 ====== ====== Shore staff and Dockworkers pension schemes The Company reviews, formally the position of the pension schemes at three yearly intervals. As a result of the review carried out in 2005 the Company has agreed a deficit recovery plan with the trustees of the schemes. Under this plan the Company has agreed to make special pension payments into the schemes totalling £3,000,000. The first payment of £1,399,000, which included £400,000 paid to the Dockworkers' scheme, was made in December 2005. The balance will be paid by the Company during the first half of 2006. The Company has also 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 five year period that the scheme remains open to existing members the rate of growth of pensionable salary has been reduced to 1.5% and the rate at which the company contributes to the scheme will be reduced to 14.7% of pensionable pay. As a result of these curtailments to the benefits available to the members the Company's liabilities to the scheme have been reduced by £2.0m. This curtailment benefit has been recognised in the income statement in the current period. MNOPF pension scheme As was reported in the chairman's AGM statement in 2005, a court case on 22 March 2005 has established that former as well as existing employers will be liable to make payments in respect of the funding deficit of the Merchant Navy Officers' Pension Fund 'MNOPF'. The Company has been informed by the Trustees that it will be required to make annual payments of £418,000 into the fund for a period of ten years commencing October 2005 representing its share of the current projected deficit. The Company will in the future be exposed on a proportional basis to movements in the total assets and liabilities of the fund. Therefore the Company has determined that the fund should be accounted for as a defined benefit scheme and its liability recognised accordingly. As this liability has not arisen from any new benefits in the period since the company ceased to contribute to the scheme the company has concluded that the recognition of the liability should be accounted for as an actuarial adjustment, and it is therefore recorded in the statement of recognised income and expense. 8. 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 calculations of basic and diluted earnings per share are based on the following profits and numbers of shares: 2005 2004 £000 £000 (Loss)/profit attributable to (2,197) 11,984 equity holders Preference dividend* - (4) ______ ______ Adjusted (loss)/profit attributable to (2,197) 11,980 equity holders Loss/(profit) attributable to discontinued 12,889 (3,886) activities ______ ______ Profit on continuing activities attributable to 10,692 8,094 equity holders ====== ====== * Following the adoption of IAS 32 and IAS 39 the preference dividend has been included in finance costs in 2005. Weighted average number of shares 2005 2004 Number of Number of shares shares For basic earnings per share** 48,797,076 48,261,182 Exercise of share options and LTIPs+ 430,920 605,628 __________ __________ For diluted earnings per share 49,227,996 48,866,810 ========== ========== ** Excludes 510,237 (2004:563,008) shares owned by the James Fisher & Sons Public Limited Company Employee Share Ownership Trust. + Share options and LTIPs have been excluded from the calculation of diluted earnings per share in 2005 as they are antidilutive, but have been included in the calculation of diluted earnings per share on continuing operations. 2005 2004 £000 p £000 p Basic (loss)/earnings per (2,197) (4.50) 11,980 24.82 share Basic (loss)/earnings per share 12,889 26.41 (3,886) (8.05) attributable to discontinued operations _______ ______ _______ _______ Basic earnings per share on 10,692 21.91 8,094 16.77 profit on continuing operations ======= ====== ======= ======= Diluted earnings per share on 10,692 21.72 8,094 16.56 profit on continuing operations ======= ====== ======= ======= Adjusted Earnings per Share The basic earnings per share on continuing activities before separately disclosable items is shown to highlight the underlying earnings trend and is calculated using the number of shares outlined in the table above. 2005 2004 £000 p £000 p Basic earnings per share on profit 10,692 21.91 8,094 16.77 on continuing operations Adjustments: Exchange loss/(gain) on loan 130 0.27 (155) (0.32) conversion Loss/(profit) on ship disposals 1,617 3.31 (475) (0.98) Pension benefit curtailment (1,784) (3.65) - - (including tax effect of £216,000) ________ ________ _______ _______ 10,655 21.84 7,464 15.47 ======== ======== ======= ======= Diluted earnings per share on profit 10,692 21.72 8,094 16.56 on continuing operations Adjustments: Exchange loss/(gain) on loan 130 0.26 (155) (0.32) conversion Loss/(profit) on ship disposals 1,617 3.28 (475) (0.97) Pension benefit curtailment (1,784) (3.62) - - (including tax effect of £216,000) ________ ________ ______ _______ 10,655 21.64 7,464 15.27 ======== ======== ====== ======= 9. Dividends paid and proposed 2005 2004 £000 £000 Declared and paid during the year Equity dividends on ordinary shares: Final dividend for 2004 4.95p (2003 4.30p) 2,440 2,110 Interim dividend for 2005 3.10p (2004 2.77p) 1,531 1,359 Less dividends on own shares held by ESOP (44) (59) ______ ______ 3,927 3,410 ====== ====== Proposed for approval at Annual General Meeting (not recognised as a liability at 31 December) Equity dividends on ordinary shares: Final dividend for 2005 5.69p (2004 4.95p) 2,781 2,440 ====== ====== The ordinary final dividend will be paid on 12 May 2006 to those shareholdings registered in the books of the Company at the close of business on 21 April 2006. 10. Reconciliation of movements in equity GROUP Capital Reserves Share Share Retained Other Treasury Total capital premium earnings reserves shares £000 £000 £000 £000 £000 £000 At 1 January 2004 12,311 23,558 39,387 - (971) 74,285 Total recognised 12,260 177 12,437 income and expense in the period Ordinary dividends (3,410) (3,410) paid Share-based 289 289 compensation expense Arising on the issue 94 252 346 of shares Purchase less sale (616) (616) of shares Transfer on disposal (375) 375 - of shares _______ _______ _______ ______ _______ _______ At 31 December 2004 12,405 23,810 48,151 177 (1,212) 83,331 Restatement (100) - - (105) - (205) _______ _______ _______ ______ _______ _______ At 1 January 2005 12,305 23,810 48,151 72 (1,212) 83,126 Total recognised (6,605) 106 - (6,499) income and expense in the period Ordinary dividends (3,927) (3,927) paid Share-based 432 432 compensation expense Purchase less sale 7 7 of shares Arising on the issue 40 150 190 of shares Transfer on disposal (21) 21 - of shares _______ _______ _______ ______ _______ _______ At 31 December 2005 12,345 23,960 38,030 178 (1,184) 73,329 ======= ======= ======= ====== ======= ======= Other reserves Translation Hedging Total reserve reserve £000 £000 £000 At 31 December 2004 177 - 177 Restatement - (105) (105) ______ _______ ______ At 1 January 2005 177 (105) 72 Cash flow hedges: Transferred to the - 36 36 income statement Fair value losses in - (134) (134) the period Share of fair value - 169 169 gains of joint ventures Recognised income in 35 - 35 the period including the effect of net investment hedges At 31 December 2005 212 (34) 178 Restatement On adoption of IAS 32 and IAS 39 on 1 January 2005 the following restatements have been made: The fair value of the derivatives used for hedging purposes has been included in a hedging reserve and released to the income statement in the year when the hedged commitment affects profit or loss. The impact of this change is to recognise in reserves a gain on the fair value of cash flow hedges of £20,000 and a loss of £125,000 being the Group's share of the loss on fair value of cash flow hedges in the Group's joint venture, Foreland Holdings Limited. The 3.5% cumulative preference shares which have a book and fair value of £100,000 have been reclassified from equity to long term debt. 11. The AGM will be held at 12.00 noon, Thursday 4 May 2006 at the Abbey House Hotel, Abbey Road, Barrow in Furness, Cumbria. 12. Report and accounts will be posted to members in early April 2006. Copies will be made available to members of the public at Fisher House, PO Box 4, Barrow in Furness, Cumbria, LA14 1HR. 13. The preliminary statement was approved by the Board of Directors on 13 March 2006. This information is provided by RNS The company news service from the London Stock Exchange

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