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RNS
Fisher (James) & Sons plc  -  FSJ   

Final Results

Released 07:00 01-Mar-2017

RNS Number : 1312Y
Fisher (James) & Sons plc
01 March 2017
 

1 March 2017

 

 

James Fisher and Sons plc

Preliminary Results for the year ended 31 December 2016

 

 

James Fisher and Sons plc (FSJ.L) ("James Fisher"), the leading marine service provider, announces its results for the year ended 31 December 2016.

 

 

*      underlying profit excludes separately disclosed items

 

Highlights:

 

·       Continued strong underlying operating profit growth at Marine Support, Specialist Technical and Tankships

-        combined growth of 21%

-        combined operating margin up 120 basis points to 12.0%

·       Underlying profit before tax 11% higher at £45.8m (2015: £41.2m)

·       Underlying diluted earnings per share up 11% to 76.3p (2015: 68.5p)

·       Increased cash conversion of 103% (2015: 95%)

·       Final dividend raised by 10% to 17.6p per share reflecting continued profitable growth

 

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

 

"Underlying profit before tax grew by 11% to £45.8m (2015: £41.2m) reflecting the continued resilience of the James Fisher business model with its well-balanced spread of activities across the marine sector and international markets.  This is supported by a robust balance sheet and consistently strong cash generation.

 

Our Marine Support and Specialist Technical divisions have started 2017 with strong order books and a number of active prospects. Trading volumes in Tankships are stable and we are seeing some early signs of improved activity in Offshore Oil. We therefore have a positive view of the year ahead and are confident of the Group's potential to provide further growth and value for our shareholders in the future." 

 

For further information:

 

James Fisher and Sons plc

Nick Henry

Stuart Kilpatrick

Chief Executive Officer

Group Finance Director

020 7614 9508

FTI Consulting

Richard  Mountain

Susanne Yule


0203 727 1340

 

Notes:

1.     James Fisher and Sons plc uses alternative performance measures (APMs) as key financial indicators to assess the underlying performance of the business.  APMs are used by management as they are considered to better reflect business performance and provide useful additional information.  APMs include underlying operating profit, underlying profit before tax, underlying diluted earnings per share, underlying return on capital employed  and cash conversion.  An explanation of APMs is set out in note 2 in these Preliminary Results.

2.     Certain statements contained in this announcement constitute forward-looking statements.  Forward-looking statements involve risks, uncertainties and other factors which may cause the actual results, performance or achievements of James Fisher and Sons plc to be materially different from future results, performance or achievements expressed or implied by such statements.  Such risks, uncertainties and other factors include exchange rates, general economic conditions and the business environment.

 

 

Chairman's Statement

 

I am pleased to report that James Fisher and Sons plc grew strongly in 2016 producing underlying profit before tax of £45.8m, an increase of 11% over the prior year. This reflected the continued resilience of the Fisher business model with its well-balanced spread of activities across the marine sector and international markets. Three of our four divisions, Marine Support, Specialist Technical and Tankships posted good improvements in results which more than absorbed continued weakness in Offshore Oil. Group revenue for the year grew by 6% to £466.0m (2015: £437.9m) and underlying diluted earnings per share were 76.3 pence, an increase of 11% compared with 2015. Statutory diluted earnings per share were 78.7 pence (2015: 79.2p).

 

Underlying trading improvements were the key driver of growth with currency gains making only a limited contribution to the increase in profit of £1.4m overall. The Group's cash conversion improved further to 103% and the year end balance sheet gearing remained at a conservative 41% despite acquisition expenditure of £24.6m and higher project related working capital requirements.

 

The underlying strength of the Group's performance and the positive outlook for the year ahead has led the Board to propose an increase in the final dividend to 17.6 pence per share (2015: 16.0p), making a total for the year of 26.15 pence per share, an increase of 10% compared with 2015.

 

Strategy

 

The 2016 results confirm the resilience of the James Fisher Group with its spread of businesses across multiple sectors of the marine services market. This has enabled the Group to offset the downturn in the oil and gas sector with continued growth elsewhere. The decentralised structure of the Group has allowed focus to be maintained on seizing the new opportunities available in the Marine Support and Specialist Technical areas in particular, without distracting from the rapid restructuring of our Offshore Oil activities.

 

The Group remains focused on investing in niche businesses which operate in demanding environments where their strong marine service and specialist engineering skills are valued and rewarded. Our businesses have a wide international presence across the faster growing markets of Asia Pacific, the Middle East, Africa and South America and we will continue to invest in expanding our position in these new markets. The Group has only a small presence in Europe outside the UK and Norway and therefore the Brexit process is likely to have limited direct impact on Group trading.

 

The Board believes that each of our four divisions continues to have attractive prospects based on strong market positions.

 

The strongest growth opportunities are currently in Marine Support and Specialist Technical. In Marine Support, the award of the Galloper wind farm contract together with the acquisition of Hughes Sub-Surface Engineering marked a significant step up in our presence in the growing renewables market. We continue to find new growth opportunities for our ship-to-ship transfer activities in Asia Pacific, Africa and Brazil. In Specialist Technical, our JFD subsidiary now has a clear market leadership position in the supply of hyperbaric and specialist diving equipment to the commercial market as well as in its niche defence activities. The past year has seen strong growth in orders from the Asia Pacific region and JFD's acquisition of Lexmar in Singapore will further strengthen our presence in this important market. Our nuclear business has also been successful in establishing an initial presence in the Chinese and Japanese markets and we will seek to build on these opportunities in the future.

 

Over the last seven years, our Tankships division has performed well with profit improvements every year driven mainly by cost efficiencies and tight management of capacity. The point is nearing when some of our older ships will need replacement. While we see opportunities to do this in a cost efficient manner, there will necessarily be some increase in overall vessel costs in the medium term. 

 

The Offshore Oil division is well placed assuming some resumption in customer maintenance spend. Our gross margins have proven to be robust; capital expenditure has been reduced and costs remain under tight control. Our businesses have been very active in seeking out new markets in the Middle East and Asia Pacific. Results have stabilised at levels reported in the second half of 2015. It is too early to be confident of a strong recovery but we have now seen an improvement in the order book in Norway which should benefit 2017. We will continue to invest in Offshore Oil as attractive opportunities arise which meet our niche service criteria.

 

Our businesses are increasingly technology led with the recent contract gains by JFD being one example of how technological leadership can give our businesses a real competitive edge. When combined with the Group's growing scale and its ability to manage increasingly complex contracts we see good opportunities for organic growth.  The strength of our balance sheet enables us to continue to invest for the future and to make bolt-on acquisitions which improve the capability and market presence of our businesses.

 

The Board

 

There were no changes in the Board's composition during the year. This year the annual board appraisal was based on an internal evaluation of its performance across the key areas of business performance, strategy, financial reporting and key performance indicators, risk management, succession planning and corporate social responsibility. The Board reviewed the key issues being raised by the investor community in relation to good corporate governance. The Board considers that it functions well as a unit, provides a good balance of support and challenge to management and reports in appropriate detail to investors for a company of its scale.

 

Staff

 

The Group continues to benefit from a strong and stable management team both at Board level and in our operating companies. It is becoming increasingly international in its operations with growing scale and complexity in the customer contracts that it undertakes. Considerable attention has been given to managing these changes effectively both in terms of management recruitment and via a significant step up in our centrally organised training programmes which have the double benefit of improving cohesion across the Group as well as raising skill levels.

 

The broad spread of our businesses means that some staff have been coping with the pressures of growth while others have had to face tougher times. On behalf of the Board, I would like to thank all of our employees for their hard work and commitment shown to the continued success of the James Fisher Group.

 

Outlook

 

Our Marine Support and Specialist Technical divisions have started 2017 with strong order books and a number of active prospects. Trading volumes in Tankships are stable and we are seeing some early signs of improved activity in Offshore Oil. We therefore have a positive view of the year ahead and are confident of the Group's potential to provide further growth and value for our shareholders in the future. 

 

Chief Executive's Review

 

Group strategy and corporate objectives

 

The Group's strategy is to increase shareholder value by growing its marine service businesses, primarily organically but also supplemented by selective bolt-on acquisitions which broaden our service, product and geographical capability. Our businesses are entrepreneurially led, with market leading positions and focused on less mature markets.

 

Our corporate objectives are to deliver long-term growth in underlying earnings per share and to deliver progressive dividend growth. Underlying earnings per share grew by 11% in the year with combined underlying operating profit growth of 21% in three divisions which more than offset a reduced result in Offshore Oil. Over the last ten years the Group has achieved compound annual growth in underlying earnings per share of 12%. Dividends have increased in each of the last 22 years and this year, it is proposed that the dividend be increased by 10%.

 

Business model

 

The Group provides a wide range of marine services predominantly to large multinational corporations and government bodies. It offers solutions to customers through specialist equipment which is often designed and assembled by our people, who then operate it and provide through-life support to our customers.

 

The Group has a decentralised management structure and encourages managers to be responsible for making timely decisions in response to changes in the market and the competitive environment. Whilst the Group's primary focus is organic growth, acquisitions, which broaden our range of products and services or potentially extend our geographical coverage, are also part of our business model.

 

The Key Performance Indicators (KPIs) we use to measure the success of the business model include revenue growth, operating margin, return on capital employed and cash conversion. This year, revenue growth was 6% of which 3% was organic and the underlying operating margin increased by 50 basis points to 10.9% (2015:10.4%).

 

The Group's post-tax return on capital employed was 13.0% (2015: 13.5%) due to increased investment in new businesses and working capital. The Group's cash conversion, which measures the proportion of operating profit that was turned into operating cash, was 103% (2015: 95%) which compares to an average of 115% over the last five years.

 

Strategic progress

 

Our strategy is to grow organically and to supplement organic growth with carefully selected, value enhancing acquisitions which fit into our business model and enhance our products, services or geographic offering. We seek to acquire businesses that have a niche product or service offering, with growth potential, a track record of profitability and cash generation and good management.

 

In February, the integrated marine services contract to support the construction of the Galloper wind farm, located 27km off the coast of Suffolk, UK, was announced. This contract is worth in excess of £25m and is scheduled to complete in 2018. It encompasses the site set-up, marine logistics OWMS™ marine management system, crew transfer vessels, vessel refueling and emergency response services. The contract is being delivered by James Fisher Marine Services (JFMS) into which a number of bolt-on acquisitions have been integrated to form a substantial offshore and subsea operator for the renewables market. Hughes Sub-Surface Engineering, which also operates in this sector was acquired in August and has been integrated into JFMS.

 

The Indian Navy contract to build two submarine rescue systems was announced in March. The £193m contract entails the design and construction of two systems for £83m which will be delivered by the end of 2018. This is then followed by a 25 year service contract to operate and maintain the systems in India. This significant contract award was then followed in November by the award of a c. £35m contract by Shanghai Salvage to supply a 24 man saturation diving system rated for diving support to a depth of 500m.

 

In August the acquisition of Lexmar in Singapore was completed. Lexmar designs modular saturation diving systems and other diving equipment. This strengthens our presence in the defence and diving equipment markets of the Asia Pacific region, which are of strategic importance for further future growth.

 

James Fisher Nuclear (JFN) was awarded a £60m contract by Magnox Limited to decommission the largest of the reactor cores at the Winfrith site in Dorset, UK.  The contract commenced in April and will run through to 2020. This award further establishes JFN as the leading nuclear reactor decommissioning contractor in the UK.

 

The Group acquired the visual asset management company, Return to Scene (R2S) in June 2016. R2S provides high definition, 360 degree, photographic images to create a three dimensional image of an asset, enabling remote personnel to view a virtual environment and manage the asset without the expense of physically travelling to the site. With its customer base primarily within the oil & gas sector, it broadens our Offshore Oil services and has the potential to provide services to other sectors serviced by the Group.

 

Divisional performance


 

Revenue

£m

 

Underlying operating

profit*

£m

 

Underlying

operating margin*

%

 

Underlying return on capital employed*

%

 


2016

2015

2016 

2015 

2016

2015

2016

2015

Marine Support

203.6

193.0

21.0 

19.4 

10.3

10.0

13.9

14.8

Specialist Technical

151.8

129.4

19.9 

13.9 

13.1

10.7

27.8

20.9

Offshore Oil

55.1

63.0

4.2 

7.4 

7.6

11.7

3.5

6.2

Tankships

55.5

52.5

8.2 

7.1 

14.8

13.5

31.9

28.5

Common Costs

-

-

(2.5)

(2.2)

-

-

-

-


466.0

437.9

50.8 

45.6 

10.9

10.4

13.0

13.5

* before separately disclosed items

 

Marine Support

 

Marine Support revenue was up 5% at £203.6m (2015: £193.0m). After adjusting for a significant contract in Angola, which ceased in March 2016 but contributed a full twelve months in 2015, currency effects and the full year contribution of acquisitions, underlying organic revenue growth was 9%.

 

Underlying operating profit increased by 8% to £21.0m with a strong performance at Fendercare and growth in renewables. Excluding the effect of currency movements, businesses acquired and the impact of the Angolan contract, organic growth in underlying operating profit was 23%.

 

Ship-to-ship (STS) transfer business, which in 2016 was 33% of the division, performed strongly as volumes increased by 10% and with mainly US Dollar denominated sales, revenue in the second half of the year was boosted by UK Sterling weakness. The Asia Pacific region performed strongly as did the West African market. The end of the year saw the successful completion of trials for STS operations in Brazil, which commenced in January 2017.

 

Revenue in marine services, principally for the renewables and tidal sectors increased by over 40%. The project to support the construction of the Galloper wind farm commenced the planning and set-up phase in February and entered the operational phase in October. The work to identify and mitigate unexploded ordnance devices for Galloper was successfully completed during the second half. We continued to provide services to the Meygen tidal array project in the Firth of Forth, UK, and also completed a project to install four subsea power cable extensions at the Wave Hub offshore tidal power project in Falmouth, UK.

 

Our testing and monitoring businesses performed at similar levels to 2015. With effect from 1 July 2016, export containers are required to have their weight verified prior to loading onto a vessel and our Container Weight System (CWSTM), which was launched by Strainstall Marine this year, was installed into 15 ports around the World.

 

Following the cessation of a marine services contract in Angola and protracted negotiations with its customer, the Group has recognised a separately disclosed charge of £2.3m (2015: £nil) due to early termination in March 2016.

 

Specialist Technical

 

Specialist Technical revenue grew by 17% in the year of which 9% was organic, 2% due to currency and the balance due to businesses acquired. Underlying operating profit increased by 43% to £19.9m (2015: £13.9m) due to strong performance in JFD, our submarine rescue and saturation diving equipment business. Excluding the effect of currency and acquisitions, organic underlying operating profit growth was 31%.

 

JFD, which accounted for 70% of divisional sales in 2016, commenced a contract in April, to design and assemble two submarine rescue systems for the Indian Navy for delivery in 2018. The business also entered the market for hyperbaric lifeboats and won orders for six vessels. A c. £35m contract for Shanghai Salvage was announced for a 24 man saturation diving system capable of reaching a depth of 500m. Submarine rescue service revenues increased by 10% and diving equipment product sales were 23% higher with strong demand for our military rebreather diving equipment and a new range of compact bailout rebreathing apparatus (Cobra) which delivers up to 45 minutes of emergency life support at a depth of 120 metres.

 

Our Nuclear business won and commenced a four year contract to decommission a core reactor at Winfrith, Dorset, UK, worth £60m. Overall performance was similar to 2015 as a change in UK decommissioning policy reduced business in the second half as projects ceased to be awarded across the supply chain.

 

Offshore Oil

 

Revenue and underlying operating profit in the second half of 2016 were at similar levels to the previous two halves. Due to a stronger first half in 2015 revenue on a full year basis was down 12% and after adjusting for currency and acquisitions, 20% lower. Second half sales were 5% higher than the comparative for 2015 but flat after adjusting for currency.

 

Underlying operating profit was similar to the first half and £4.2m (2015: £7.4m) for the full year. Gross margins were similar to prior year confirming the strength of our niche positions and actions taken to reduce costs over the last two years. Overheads have been reduced by 21% compared to 2014. Our businesses remain well placed to benefit from any future recovery in maintenance and repair expenditure although no significant recovery in the sector has yet to emerge. 

 

Return to Scene joined the Group in June 2016 and offers our customers a photographic three dimensional representation of an asset, such as an oil rig, allowing them to plan maintenance and repair operations reducing the cost of travelling to the site. Major projects completed in 2016 include a large production and drilling facility in the Gulf of Mexico and similar assets in the North Sea and Azerbaijan.

 

Tankships

 

Our Tankships division increased revenue by 6% to £55.5m (2015: £52.6m). Approximately half of this increase was driven by increased volumes and half due to currency.  Profitability was enhanced by the return of one vessel returning to the fleet from third party charter which was required to cater for the increased demand. Our Plymouth port saw a 6% increase in volumes discharged.

 

Underlying operating profit was 15% above 2015 at £8.2m (2015: £7.1m) reflecting the increase in revenue and the benefit of reduced costs from the renegotiation of certain supplier contracts. Vessel utilisation was 94% (2015: 97%). The business operated 15 vessels in 2016 (2015: 14) and completed 828 voyages in the year compared to 806 in the previous year maintaining its excellent operational safety record.

 

Financial Review

2016 results

 

The Group's performance against its key performance indicators in 2016 saw an increase in underlying operating profit of 11% to £50.8m (2015: £45.6m) on revenue of £466.0m (2015: £437.9m). Underlying operating margin increased to 10.9% (2015: 10.4%) due to strong results of the Specialist Technical, Marine Support and Tankships divisions. Underlying profit before taxation was 11% higher at £45.8m (2015: £41.2m). Statutory profit before taxation was £44.9m (2015: £46.2m) due to separately disclosed items which are set out below. The Group's post-tax return on capital employed was 13.0% (2015: 13.5%) and cash conversion, the measure of how much operating profit is converted into cash, improved to 103% (2015: 95%).

 

The Group is exposed to fluctuations in exchange rates, primarily in respect of US Dollar cash flows and the translation of overseas business results into UK Sterling. Forward currency contracts are entered into periodically to hedge approximately half of forecast net US Dollar inflows to reduce the risk of earnings volatility. In 2016, the Group's US Dollar hedges had the effect of limiting the currency gains following the post-Brexit devaluation of UK Sterling. The Group does not hedge translation exposure where an overseas business records transactions in local currencies, which are then converted into UK Sterling at average rates. The net increase in revenue and underlying operating profit due to changes in exchange rates was £18.2m and £1.4m respectively.

 

Revenue

£m 

% change


Revenue increased by 6% in the year and the incremental effect of businesses acquired (including the full year effect of those added in the prior year) was £27.5m. The cessation of a marine services contract in Angola reduced revenue by £32.4m and currency added £18.2m. Organic growth was 3% comprising a £13.6m fall in the Offshore Oil division offset by an increase of £28.4m in the other divisions.

2015

437.9 



Acquisitions

27.5 

6% 


Angolan contract

(32.4)

(7)%


Currency

18.2 

4% 


Offshore Oil

(13.6)

(3)%


Other divisions

28.4 

6% 


2016

466.0 

6% 


 

Underlying operating profit

£m

% change


Underlying operating profit was 11% higher than 2015. Acquisitions added £2.0m in the year and the effect of the ceased contract in Angola reduced profit by £2.9m. The impact of currency rates is net of US Dollar cash flow hedges of £3.5m and a £1.5m loss on Nigerian Naira cash balances following a 30% devaluation when the peg against the US dollar was removed during 2016. Organic growth was 10% with three divisions performing strongly to offset a reduction in Offshore Oil.

2015

45.6 



Acquisitions

2.0 

4%


Angolan contract

(2.9)

(6)%


Currency

1.4 

3%


Offshore Oil

(4.4)

(10)%


Other divisions

9.1 

20%


2016

50.8 

11%






 

Interest and taxation

 

Net finance charges were £0.6m higher than 2015 at £5.0m (2015: £4.4m) due to an increase in non-cash interest on pension schemes of £0.2m and £0.4m of increased bank interest as the Group borrowed more in 2016. Interest cover, the ratio of underlying operating profit to the net finance charge, excluding pension related charges, was 12.7 times (2015: 13.2 times).

 

Tax charge

2016

2015


The tax charge for the year of £7.1m (2015: £5.9m) on profit before tax and separately disclosed items of £45.8m (2015: £41.2m) represents an underlying effective tax rate (ETR) of 15.4% (2015: 14.3%). The Group ETR is impacted by recurring items such as the geographical mix of profits, tonnage tax relief on the profits of its tanker operations and expenses disallowed for tax. The Group operates in 16 countries so its ETR is a blend of national tax rates applied to locally generated profits. Non-recurring items in 2016 include adjustments to tax calculations in previous years where the outturn has been or will be lower.


£m

£m


Underlying profit before tax

45.8 

41.2 


UK rate of 20.0% (2015: 20.3%)

9.2 

8.3 


Adjusted for the effects of recurring items:




  Effect of overseas tax rates

0.4 

0.5 


  Tonnage tax relief on vessel activities

(1.0)

(0.9)


  Other recurring items

0.1 

0.1 


Adjusted for the effects of non-recurring items:




  Over provisions in prior years

(0.9)

(2.1)


  UK deferred tax rate reduction

(0.7)



7.1 

5.9 






 

In addition, in 2016 the Group benefitted from the UK government committing to reduce future corporation tax rates to 17% with effect from 1 April 2020 which resulted in a non-recurring benefit of £0.7m.

 

The Group's tax policy has been approved by the Board and shared with the UK tax authorities. Whilst the Group has a duty to shareholders to seek to minimise its tax burden, its tax policy is to do so in a manner which is consistent with its commercial objectives, meets its legal obligations and its code of ethics. We aim to manage our tax affairs in a responsible and transparent manner and with regard for the intention of the legislation rather than just the wording itself.

 

Our tax objectives are to comply with all applicable tax laws and regulations, including the timely submission of all tax returns and tax payments and to undertake all dealings with local tax authorities in a professional and timely manner. The Group operates in a complex global environment and a principal tax risk is the acceptance of intragroup transaction pricing by tax authorities around the World. The Group continues to monitor the OECD's Base Erosion Profit Shifting (BEPS) project as part of its tax risk management and seeks to comply with local transfer pricing legislation in each relevant jurisdiction and involve external tax advisers, where appropriate, to identify any changes to pricing policies and related documentation.

 

In terms of cash tax, the Group paid £6.9m (2015: £8.8m) across all of its jurisdictions with around 40% paid to the UK tax authorities. A further £28.2m was paid in the UK for payroll taxes (2015: £26.3m).

 

Earnings per share and dividends

 

Underlying diluted earnings per share increased by 11% to 76.3p per share (2015: 68.5p). Statutory diluted earnings per share were 78.7p per share (2015: 79.2p) due to a separately disclosed charge after tax of £0.6m compared to a gain of £5.3m in the previous year. The Board are recommending a 10% increase to the total dividend for the year to 26.15p per share (2015: 23.80p). A final dividend of 17.6p per share (2015: 16.0p) will be paid on 9 May 2017 to shareholders on the register on 7 April 2017, subject to approval at the Annual General Meeting. Dividend cover based on the ratio of underlying earnings per share divided by the dividend per share was 2.9 times (2015: 2.9 times).

 

Separately disclosed items

 

The Directors' consider that the alternative performance measures described in note 2 assist an understanding of the underlying trading performance of the businesses. These measures exclude separately disclosed items. Items disclosed separately comprise gains or losses on the sale of businesses, asset impairments, other significant non-recurring items and acquisition related charges or income.

 

Separately disclosed items

2016

£m

2015

£m


Costs incurred on acquiring businesses decreased due to fewer businesses being acquired in 2016. Amortisation of intangible assets which have arisen when businesses have been acquired was unchanged, contingent consideration releases are based on latest estimates of obligations in relation to estimated outcomes against targets originally agreed within a sale and purchase agreement. A credit of £3.4m (2015: £8.5m) related mainly to Subtech, which was acquired in 2015.

 

Acquisition related (charges) and income:




Costs incurred on acquiring businesses

(0.7)

(1.4)


Amortisation of acquired intangible assets

 

(1.2)

(1.2)


Adjustments to contingent consideration provisions

 

3.4 

8.5 



1.5 

5.9 


Provision for contract cessation costs in Angola

(2.3)


Loss on disposal of businesses

- 

(1.0)


Separately disclosed items before tax

(0.8)

4.9 


Tax on separately disclosed items

0.2

0.4 



(0.6)

5.3 


In 2016, the Group recognised a charge of £2.3m relating to the early cessation of a marine services contract in Angola which is classified as separately disclosed, being a significant, non-recurring item.

 

Cash flow and borrowings

 

Free cash flow, which is the net cash generated before the cash spend on acquisitions and before dividends paid to shareholders, increased by £18.0m to £25.1m (2015: £7.1m) due to higher operating cash flow and a 27% reduction in capital expenditure, mainly from lower investment in Offshore Oil. Cash conversion, the ratio of underlying operating cash flow to underlying operating profit was 103% (2015: 95%) despite a further investment in working capital.

 

Summary cash flow

2016

2015

 

The working capital outflow of £19.0m (2015: £22.7m) was primarily in respect of projects within Specialist Technical and growth in the Marine Support renewables business. The ratio of working capital to sales increased from 16% to 18% and is expected to increase further in 2017 due to the India submarine rescue contract.

 

Net capital expenditure in the year was £14.8m (2015: £20.2m) which represents 66% of depreciation. Spend in Offshore Oil on rental equipment was lower at £5.6m (2015: £7.9m), Marine Support was £4.6m (2015: £7.2m), reflecting continued investment into the renewables and tidal sector and Specialist Technical was £2.1m (2015: £2.3m).


£m

£m


Underlying operating profit

50.8 

45.6 


Depreciation and amortisation

24.6 

23.2 


Underlying Ebitda

75.4 

68.8 


Working capital

(19.0)

(22.7)


Pension / other

(4.3)

(2.7)


Operating cash flow

52.1 

43.4 


Interest & tax

(10.8)

(12.2)


Capital expenditure

(14.8)

(20.2)


Other

(1.5)

(3.9)


Free cash flow

25.0 

7.1 


Businesses acquired

(24.6)

(27.2)


Dividends

(12.3)

(11.4)


Increase in net borrowings

(11.9)

(31.5)





 

Net borrowings increased in the year by £11.9m to £105.7m (2015: £93.8m) with a cash outflow on businesses acquired of £24.6m (2015: £27.2m) of which £6.9m related to businesses acquired in the previous year. At 31 December 2016, the ratio of net borrowings to underlying earnings before interest, tax, depreciation and amortisation (Ebitda) was 1.4 times (2015: 1.4 times) and the Group had £49.7m (2015: £67.4m) of undrawn committed banking facilities. Net gearing, the ratio of net debt to equity, was 41% (2015: 43%).

 

Acquisitions

 

During the year the Group acquired Lexmar Engineering Pte Limited and Lexmar Sat Systems Pte Limited (together "Lexmar") for S$26.8m (£15.0m), inclusive of net cash in the business on 1 August 2016 of S$8.8m (£4.9m). Lexmar is complementary to our saturation diving business within JFD in our Specialist Technical division and broadens the Group's offering, particularly in the Asia Pacific region. Hughes Sub-Surface Engineering Limited was acquired for an initial consideration of £9.0m, inclusive of net cash in the business of £2.0m. A further £1.0m is potentially payable based on the profitability of certain projects up to 28 February 2017. Return to Scene was acquired for £1.9m in June 2016 and a further £3.0m was spent to acquire SWT, Norway for its heat suppression capability.

 

Pensions

 

The Group operates a range of defined contribution schemes for current employees and in 2016, contributed £3.7m (2015: £3.7m) into those schemes. The Group has an obligation of £26.8m (2015: £27.0m) for its own closed defined benefit scheme and for two industry-wide defined benefit schemes. In respect of these obligations, the net pension liability decreased by £0.2m to £26.8m as contributions of £4.4m were offset by an increase in re-measurement losses due to reduced long-term interest rates, particularly following the outcome of the Brexit vote.

 

Annual Financial Report

 

In accordance with Disclosure and Transparency Rule (DTR) 6.3.5, the following additional information is required to be made through a Regulatory Information Service: Principal risks and uncertainties; and Directors' responsibility statement.  The information below, which is summarised and extracted from the 2016 Annual Report and Accounts that is to be published in March 2017, is included solely for the purpose of complying with DTR 6.3.5 (2) and the requirements it places on issuers on external communications.

 

Risk management

 

The Board is ultimately responsible for the management of risk in the Group. Our internal control and risk management framework is regularly monitored and reviewed by the Board and the Audit Committee and comprises a series of policies, processes, procedures and organisational structures which are designed to ensure that the level of risk to which the Group is exposed is consistent with the Board's risk appetite and the Company's strategic objectives.

 

The Board determines the Group's policies on risk, appetite for risk and levels of risk tolerance and specifically approves: risk management policies and plans; significant insurance and/or legal claims and/or settlements; major acquisitions, disposals and capital expenditures; and the Group budget, forecast and three year plan. The Board has put in place a documented organisational structure with strictly defined limits of authority from the Board to operating units that have been communicated throughout the businesses and are well understood by the Executive Directors, the central management team, functional and business leaders who have delegated authority and specific responsibility for ensuring compliance with and implementing policies at corporate, divisional and business unit level. Central functions and operating units are each required to operate within this control environment and in accordance with the Group's established policies and procedures which include ethical, anti-bribery and corruption, treasury, employment, health and safety and environmental policies and procedures.

 

The Group's trading companies are supported by centralised finance, treasury, taxation, internal audit, legal and company secretarial, human resource and payroll and information systems functions: the functional heads report to a nominated Executive Director. The Board retains an oversight role, receives regular reports on key issues and has a schedule of matters specifically reserved to it for decision thus ensuring that it maintains full and effective control over appropriate strategic, investment, financial, organisational and compliance issues. This schedule is subject to review by the Board on an annual basis.

 

Principal risks and uncertainties

 

The most significant risks that the Board considers may affect our business are listed below. These risks are similar to last year except for the addition of 'Contractual risk' and the re-designation of 'Reputational risk from operations' to 'Health, safety and environment'.

 

·      Project delivery

·      Contractual risk

·      Recruitment and retention of key staff

·      Health, safety and environment

·      Financial risk

·      Energy markets

·      Operations in emerging markets

·      Cyber security

 

Contractual risk refers to the exposure to late payment, or cost overruns as a result of winning larger contracts and operating in more geographies. The Group utilises professional expertise to minimise risk in contract negotiation and levels of authority are designed to ensure that contracts are reviewed and approved at appropriate levels prior to commitment. A full description of the principal risk and uncertainties and their management and mitigation will be set out in the 2016 Annual Report and Accounts.

 

Directors' responsibility statement

 

The following is an extract of the full statement prepared in connection with the Company's Annual Report and Accounts for the year ended 31 December 2016.

 

The Directors of the Company confirm that to the best of their knowledge:

 

·    the Group financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole; and

·    the Preliminary Results report  includes a fair review of the development and performance of the business and the position of the Group  and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

 

The Directors of James Fisher and Sons plc and their respective responsibilities are set out in the 2015 Annual Report and Accounts.  The responsibility statement was approved by the Board on 28 February 2017 and signed on its behalf by:

 

 

 

 

 

N P Henry

S C Kilpatrick

Chief Executive Officer

Group Finance Director

 

 

CONSOLIDATED INCOME STATEMENT

for the year ended 31 December 2016

 




Year ended


Year ended




31 December 2016


31 December 2015




Before

separately

Separately



Before

separately

Separately





disclosed

disclosed



disclosed

disclosed





items

items

Total


items

items

Total




(note 4)




(note 4)



Notes

£000

£000

£000


£000

£000

£000

Group revenue

3

465,969

-

465,969


437,930

-

437,930

Cost of sales


(324,239)

-

(324,239)


(307,208)

-

(307,208)

Gross profit


141,730

-

141,730


130,722

-

130,722

Administrative expenses


(92,363)

(2,278)

(94,641)


(85,219)

-

(85,219)

Share of post-tax results of joint ventures


1,414

-

1,414


87

-

87

Acquisition related income and (expense)

4

-

1,456

1,456


-

5,926

5,926

Operating profit

3

50,781

(822)

49,959


45,590

5,926

51,516

Loss on disposal of business


-

-

-


-

(959)

(959)

Net finance expense


(5,026)

-

(5,026)


(4,343)

-

(4,343)

Profit before taxation


45,755

(822)

44,933


41,247

4,967

46,214

Income tax

5

(7,053)

267

(6,786)


(5,903)

396

(5,507)

Profit for the year


38,702

(555)

38,147


35,344

5,363

40,707

Attributable to:









Owners of the Company


38,508

1,245

39,753


34,522

5,363

39,885

Non-controlling interests


194

(1,800)

(1,606)


822

-

822




38,702

(555)

38,147


35,344

5,363

40,707

Earnings per share

6



pence




pence

Basic




79.4




79.7

Diluted




78.7




79.2

 

 

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

for the year ended 31 December 2016

 


Year

ended

Year

ended


31

December

2016

31

December

2015


£000

£000




Profit for the year

38,147

40,707

Items that will not be classified to the income statement



Remeasurement loss on defined benefit pension schemes

(3,054)

(8,596)

Actuarial gain in defined benefit pension schemes

-

813

Tax on items that will not be reclassified

(124)

1,635


(3,178)

(6,148)

Items that may be reclassified to the income statement



Exchange differences on foreign currency net investments

16,771

(4,587)

Effective portion of changes in fair value of cash flow hedges

(3,249)

836

Effective portion of changes in fair value of cash flow hedges in joint ventures

(139)

354

Net changes in fair value of cash flow hedges transferred to income statement

551

77

Deferred tax on items that may be reclassified

432

(220)


14,366

(3,540)

Total comprehensive income for the year

49,335

31,019




Owners of the Company

50,725

30,067

Non-controlling interests

(1,390)

952


49,335

31,019

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 at 31 December 2016

 



31 December

2016


31 December

2015


Notes

£000


£000

Non-current assets





Goodwill


165,047


140,414

Other intangible assets


15,453


16,041

Property, plant and equipment


131,026


127,594

Investment in joint ventures


6,424


6,250

Available for sale financial assets


1,377


1,478

Deferred tax assets


2,852


3,189



322,179


294,966






Current assets





Inventories


54,092


47,436

Trade and other receivables


157,384


141,736

Cash and cash equivalents

9

21,848


22,962



233,324


212,134






Current liabilities





Trade and other payables


(129,332)


(126,827)

Current tax


(8,426)


(7,190)

Loans and borrowings

9

(3,086)


(106)



(140,844)


(134,123)






Net current assets


92,480


78,011

Total assets less current liabilities


414,659


372,977

Non-current liabilities





Other liabilities


(4,962)


(8,728)

Retirement benefit obligations

8

(26,770)


(26,956)

Cumulative preference shares


(100)


(100)

Loans and borrowings

9

(124,380)


(116,645)

Deferred tax liabilities


(111)


(153)



(156,323)


(152,582)

Net assets


258,336


220,395






Equity





Called up share capital


12,543


12,541

Share premium


25,573


25,525

Treasury shares


(554)


(1,613)

Other reserves


2,797


(11,354)

Retained earnings


216,979


192,908

Equity attributable to owners of the Company

257,338


218,007

Non-controlling interests


998


2,388

Total equity


258,336


220,395

 

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 31 December 2016

 



31 December

2016


31 December

2015


Notes

£000


£000

Profit before tax


44,933


46,214

Adjustments to reconcile profit before tax to net cash flows





     Depreciation and amortisation


25,821


24,442

     Acquisition costs charged


727


1,355

     Profit on disposal of fixed assets


(556)


(417)

     Provision for contract cessation


2,278


959

     Adjustment to provision for contingent consideration


(3,384)


(8,491)

     Net finance expense


5,026


4,343

     Share of post-tax results of joint ventures


(1,414)


(87)

     Share based payments


1,144


214

Increase in inventories


(54)


(6,073)

Increase in trade and other receivables


(5,675)


(19,911)

(Decrease)/increase in trade and other payables


(13,291)


3,095

Defined benefit pension cash contributions less service cost


(4,233)


(3,494)

Cash generated from operations


51,322


42,149

Cash outflow from acquisition costs


(631)


(1,325)

Income tax payments


(6,930)


(8,828)

Cash flow from operating activities


43,761


31,996






Investing activities





Dividends from joint venture undertakings


700


1,089

Proceeds from the disposal of property, plant and equipment


1,678


2,120

Proceeds from the disposal of investments


144


-

Finance income


180


236

Acquisition of subsidiaries, net of cash acquired


(19,093)


(25,933)

Proceeds from the sale of business


-


88

Acquisition of property, plant and equipment


(13,859)


(19,597)

Development expenditure


(2,672)


(2,704)

Cash flows used in investing activities


(32,922)


(44,701)






Financing activities





Proceeds from the issue of share capital


50


303

Finance costs


(4,115)


(3,603)

Purchase of own shares by Employee Share Ownership Trust


(556)


(2,590)

Capital element of finance lease repayments


(174)


(102)

Proceeds from other non-current borrowings


2,363


35,807

Dividends paid


(12,303)


(11,364)

Cash flows from financing activities


(14,735)


18,451






Net (decrease)/increase in cash and cash equivalents

9

(3,896)


5,745

Cash and cash equivalents at 1 January


22,962


17,719

Net foreign exchange differences


2,782


(502)






Cash and cash equivalents at 31 December


21,848


22,962

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

for the year ended 31 December 2016





























Capital


Attributable to equity holders of parent
















Total


Non-




Share


Share

 Retained


Other

 Treasury

 shareholders

 controlling


Total

capital

 premium

 earnings

 reserves


shares


equity


interests


equity


£000


£000


£000


£000


£000


£000


£000


£000

At 1 January 2015

12,525


25,238


174,663 


(7,684)


(1,988)


202,754 


1,436 


204,190 

Total comprehensive income

-


-


33,737 


(3,670)



30,067 


952 


31,019 

Contributions by and distributions to owners:









  







Ordinary dividends paid

-


-


(11,364)




(11,364)



(11,364)

Share based payments

-


-


214 




214 



214 

Tax effect of share based payments

-


-


70 




70 



70 

Purchase of shares by ESOT

-


-




(4,220)


(4,220)



(4,220)

Sale of shares by ESOT

-


-




183 


183 



183 

Arising on the issue of shares

16


287





303 



303 


16


287


(11,080)



(4,037)


(14,814)



(14,814)

Transfer

-


-


(4,412)



4,412 




At 31 December 2015

12,541


25,525


192,908 


(11,354)


(1,613)


218,007 


2,388 


220,395 

Total comprehensive income

-


-


36,574 


14,151 



50,725 


(1,390)


49,335 

Contributions by and distributions to owners:
















Ordinary dividends paid

-


-


(12,303)




(12,303)



(12,303)

Share based payments

-


-


1,144 




1,144 



1,144 

Tax effect of share based payments

-


-


271 




271 



271 

Purchase of shares by ESOT

-


-




(1,102)


(1,102)



(1,102)

Sale of shares by ESOT

-


-




546 


546 



546 

Arising on the issue of shares

2


48





50 



50 


2


48


(10,888)



(556)


(11,394)



(11,394)

Transfer

-


-


(1,615)



1,615 




At 31 December 2016

12,543


25,573


216,979 


2,797 


(554)


257,338 


998 


258,336 

 

Other reserve movements



Translation


Hedging





reserve


reserve


Total

Other reserves


£000


£000


£000

At 1 January 2015


(5,335)


(2,349)


(7,684)

Other comprehensive income for the period


(4,717)


1,047 


(3,670)

At 31 December 2015


(10,052)


(1,302)


(11,354)

Other comprehensive income for the period


16,556 


(2,405)


14,151 

At 31 December 2016


6,504 


(3,707)


2,797 

 

 

NOTES TO THE PRELIMINARY RESULTS

 

1.       General information

 

          James Fisher and Sons plc (the Company) is a public limited company registered and domiciled in England and Wales and listed on the London Stock Exchange. The consolidated financial statements comprise the financial statements of the Company, its subsidiary undertakings and its interest in associates and jointly controlled entities (together referred to as the Group), for the year ended 31 December 2016. The Company's shares are listed on the London Stock Exchange. The Company and consolidated financial statements were approved for publication by the Directors on 28 February 2017.

 

          The Group and Company financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), adopted by the European Union (adopted IFRS). The financial statements are prepared on a going concern basis and on an historical cost basis, modified to include revaluation to fair value of certain financial instruments. As permitted by section 408 of the Companies Act 2006, a separate income statement and related notes for the holding company have not been presented in these financial statements.  The profit after taxation in the Company was £39.8m (2015: £39.6m). The Group and Company financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated.

 

          The consolidated financial statements and those of the Company have been prepared in accordance with IFRS adopted by the EU as at 31 December 2016 and are applied in accordance with the provisions of the Companies Act 2006

 

          Financial information

 

          The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2016 or 2015. Statutory accounts for 2015 have been delivered to the registrar of companies, and those for 2016 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 2016.

 

          The Annual Report and Accounts for the year ended 31 December 2016 will be posted to shareholders in March 2017. The preliminary announcement was approved by the Board of Directors on 28 February 2017.

 

2.       Alternative performance measures

 

          The Group uses a number of alternative (non-Generally Accepted Accounting Practice (non-GAAP)) financial measures which are not defined within IFRS. The Directors use these measures in order to assess the underlying operational performance of the Group and, as such, these measures are important and should be considered alongside the IFRS measures. The adjustments are separately disclosed and are usually items that are significant in size or non-recurring in nature. The following non-GAAP measures are referred to in this Annual Report and Accounts.

 

          2.1 Underlying operating profit and underlying profit before taxation

          Underlying operating profit is defined as operating profit before amortisation or impairment of acquired intangible assets, acquisition expenses, adjustments to deferred consideration (together, 'acquisition related income and expense'), the costs of a material restructuring, asset impairment or rationalisation of operations and the profit or loss relating to the sale of businesses. Amortisation of acquired intangible assets and acquisition expenses are recurring in nature where business combinations are part of a group's strategy. As acquisition expenses fluctuate with activity and to provide a better comparison to businesses that are not acquisitive, the Directors consider that both of these items should be separately disclosed to give a better understanding of operating performance. The Directors believe that the underlying operating profit is an important measure of the operational performance of the Group.  Underlying profit before taxation is defined as underlying operating profit less net finance expense.

 

          2.2 Underlying earnings per share

          Underlying earnings per share (EPS) is calculated as the total of underlying profit before tax, less income tax, but excluding the tax impact on separately disclosed items included in the calculation of underlying profit less profit attributable to non-controlling interests, divided by the weighted average number of ordinary shares in issue during the year.  The Directors believe that underlying EPS provides an important measure of the underlying earnings capability of the Group.

 

2.3 Capital employed and return on capital employed (ROCE)

          Capital employed is defined as net assets less cash and short-term deposits and after adding back borrowings. Average capital employed is adjusted for the timing of businesses acquired and after adding back cumulative amortisation of customer relationships.  Segmental ROCE is defined as the underlying operating profit, divided by average capital employed.  The key performance indicator, Group post-tax ROCE, is defined as underlying operating profit, less notional tax, calculated by multiplying the effective tax rate by the underlying operating profit, divided by average capital employed.

 

2.4 Cash conversion

Cash conversion is defined as the ratio of operating cash flow to underlying operating profit. Operating cash flow comprises cash generated from operations adjusted for dividends from joint venture undertakings.

 


2016


2015


£000


£000

Operating profit

49,959 


51,516 

Separately disclosed items before taxation

822 


(5,926)

Underlying operating profit

50,781 


45,590 

Net finance expense

(5,026)


(4,343)

Underlying profit before tax

45,755 


41,247 









Return on capital employed for the Group is calculated as follows:





2016


2015


£000


£000

Capital employed:




Net assets

258,336 


220,395 

less cash and short-term deposits

(21,848)


(22,962)

plus borrowings

127,466 


116,645 

Capital employed:

363,954 


314,078 





Underlying operating profit

50,781 


45,590 

Notional tax at the effective tax rate

(7,820)


(6,519)


42,961 


39,071 

Average capital employed

331,344 


290,224 

Return on average capital employed

13.0%


13.5%

 

3.       Segmental information

 

          For management reporting purposes, the Group has four operating segments reviewed by the Board: Marine Support, Specialist Technical, Offshore Oil and Tankships. These operating segments form the basis of the primary segmental disclosures below. 

 

          The Board assess the performance of the segments based on operating profit as set out in note 2. The Board believes that such information is the most relevant in evaluating the results of certain segments relative to other entities which operate within these industries.  Intersegmental sales are made using prices determined on an arms length basis.

 

          Sector assets exclude cash and short-term deposits and corporate assets that cannot reasonably be allocated to operating segments.  Sector liabilities exclude borrowings, retirement benefit obligations and corporate liabilities that cannot reasonably be allocated to operating liabilities.

 

Year ended












31 December 2016


 


Marine

Support

Specialist

Technical


Offshore

Oil

Tankships


Corporate


Total


£000


£000


£000


£000


£000


£000

Segmental revenue

203,926 


152,678 


55,490 


55,492 



467,586 

Intersegment sales

(354)


(893)


(362)


(8)



(1,617)

Revenue

203,572 


151,785 


55,128 


55,484 



465,969 













Underlying operating profit

20,956 


19,950 


4,200 


8,188 


(2,513)


50,781 

Contract cessation costs

(2,278)






(2,278)

Acquisition costs

(249)


(312)


(166)




(727)

Amortisation of acquired intangibles

(400)


(801)





(1,201)

Adjustment to provision for contingent consideration

2,865 


519 





3,384 

Operating profit

20,894 


19,356 


4,034 


8,188 


(2,513)


49,959 

Net finance expense











(5,026)

Profit before tax











44,933 

Income tax











(6,786)

Profit for the year











38,147 

Assets and liabilities












Segment assets

208,605 


141,792 


133,611 


33,398 


31,673 


549,079 

Investment in joint ventures

3,744 


2,680 





6,424 

Total assets

212,349 


144,472 


133,611 


33,398 


31,673 


555,503 

Segment liabilities

(48,440)


(60,335)


(8,363)


(7,160)


(172,869)


(297,167)


163,909 


84,137 


125,248 


26,238 


(141,196)


258,336 

Other segment information












Capital expenditure

4,622 


2,077 


5,599 


1,413 


160 


13,871 

Depreciation and amortisation

7,437 


4,002 


10,978 


3,166 


239 


25,822 













Year ended












31 December 2015


 


Marine

Support

Specialist

Technical


Offshore Oil

Tankships


Corporate


Total


£000


£000


£000


£000


£000


£000

Segmental revenue

194,389 


130,293 


63,742 


52,627 



441,051 

Intersegment sales

(1,411)


(850)


(786)


(74)



(3,121)

Revenue

192,978 


129,443 


62,956 


52,553 



437,930 













Underlying operating profit

19,352 


13,907 


7,399 


7,164 


(2,232)


45,590 

Acquisition costs

(904)


(451)





(1,355)

Amortisation of acquired intangibles

(397)


(769)


(45)




(1,211)

Adjustment to provision for contingent consideration

4,998 


3,494 





8,492 

Operating profit

23,049 


16,181 


7,354 


7,164 


(2,232)


51,516 

Loss on sale of business

(393)



(566)




(959)

Net finance expense











(4,343)

Profit before tax











46,214 

Income tax











(5,507)

Profit for the year











40,707 













Assets & liabilities












Segment assets

202,612 


100,480 


126,405 


32,898 


38,455 


500,850 

Investment in joint ventures

4,023 


2,227 





6,250 

Total assets

206,635 


102,707 


126,405 


32,898 


38,455 


507,100 

Segment liabilities

(66,346)


(41,881)


(8,300)


(6,441)


(163,737)


(286,705)


140,289 


60,826 


118,105 


26,457 


(125,282)


220,395 

Other segment information












Capital expenditure

7,221 


2,324 


7,898 


1,629 


525 


19,597 

Depreciation and amortisation

6,708 


3,174 


10,812 


3,294 


454 


24,442 

 

4.       Separately disclosed items

 

          In order for a better understanding of the underlying performance of the Group certain items are disclosed separately as set out in note 2. Separately disclosed items are as follows:


2016


2015


£000


£000

Administrative expenses:




  Contract cessation costs in Angola

(2,278)


Acquisition related income and (expense):




  Costs incurred in acquiring businesses

(727)


(1,355)

  Amortisation of acquired intangibles

(1,201)


(1,210)

  Adjustment to provision for contingent consideration

3,384 


8,491 


1,456 


5,926 

Loss on disposal of business


(959)

Separately disclosed items before taxation

(822)


4,967 

Tax on separately disclosed items

267 


396 


(555)


5,363 

 

         Contract cessation costs relate to a five year Marine Service contract in Angola which was terminated early by the Group's customer and ceased in March 2016. The adjustment to the provision for contingent consideration comprises £2.9m in respect of Subtech and £0.5m in respect of Divex. Contingent consideration has been adjusted based on the most recent business forecasts.

 

5.      Income tax

               

The tax charge is based on profit for the year and comprises:

2016


2015



£000


£000

Current tax:




UK corporation tax

(4,709)


(3,804)

Overseas tax

(4,746)


(4,209)

Adjustment in respect of prior years:




  UK corporation tax

336 


753 

  Overseas tax

346 


1,217 

Total current tax

(8,773)


(6,043)

Deferred tax:




Origination and reversal of temporary differences:




  UK corporation tax

752 


(666)

  Overseas tax

1,235 


1,202 

Total taxation on profit for the year

(6,786)


(5,507)

 

The total tax charge in the income statement includes a further £0.2m (2015: £0.2m) which is stated within the share of post-tax results of joint ventures.

 

Reconciliation of effective tax rate

The Group falls under the UK tonnage tax regime on its ship owning and operating activities and a charge is based on the net tonnage of vessels operated.  Profits for these activities are not subject to corporation tax.  The tax on the Group's profit before tax differs from the theoretical amount that would arise using the rate applicable under UK corporation tax rules as follows:






2016


2015






£000


£000

Profit before tax



44,933 


46,214 

Tax arising from interests in joint ventures

166 


218 






45,099 


46,432 

Tax on profit at UK statutory tax rate of 20% (2015: 20.25%)

9,020 


9,403 

Tonnage tax relief on vessel activities

(990)


(884)

Expenses not deductible for tax purposes

417 


554 

Over provision in previous years








Current tax




(682)


(1,970)


Deferred tax




(188)


(246)

Higher tax rates on overseas income




437 


497 

Research and development relief




(250)


(200)

Non-taxable income




 (1,077)


(1,722)

Impact of change of rate




(750)


(19)

Losses not recognised




508 


210 

Other




507 


102 






6,952 


5,725 

 

6.      Earnings per share

 

Basic earnings per share is 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 45,368 (2015: 148,275) ordinary shares held by the James Fisher and Sons plc Employee Share Ownership Trust (ESOT), as treasury shares.  Diluted earnings per share are calculated by dividing the net profit attributable to ordinary equity holders of the Company 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 2016, 112,108 options (2015: 332,893) were excluded from the diluted weighted average number of ordinary shares calculation as their effect would be 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.

 

Weighted average number of shares



2016


2015



Number of


Number of



shares


shares

Basic weighted average number of shares

50,096,089


50,040,647

Potential exercise of share based payment schemes

387,067


344,743

Diluted weighted average number of shares

50,483,156


50,385,390

 

Underlying earnings per share

To provide a better understanding of the underlying performance of the Group, underlying earnings per share on continuing activities is reported as an alternative performance measure (note 2). Underlying profit is as follows:

 


2016


2015


£000


£000

Profit attributable to owners of the Company

39,753 


39,885 

Adjustments:




Separately disclosed items before taxation

822 


(4,967)

Non-controlling interest in separately disclosed items

(1,800)


Tax on separately disclosed items

(267)


(396)

Underlying profit attributable to owners of the Company

38,508 


34,522 

 

Earnings per share


 pence


pence

Basic earnings per share

79.4


79.7

Diluted earnings per share

78.7


79.2

Underlying basic earnings per share

76.9


69.0

Underlying diluted earnings per share

76.3


68.5

 

7.      Dividends paid and proposed

 




2016


2015


2016


2015




Pence

Per

share


pence per share


£000


£000

Declared and paid during the year



















Equity dividends on ordinary shares:









Final dividend for 2015:


16.00


14.90


   8,026 


7,471 

Interim dividend for 2016:


8.55


7.80


  4,290 


3,913 











Less dividends on own shares held by ESOP





(13)


(20)








12,303 


11,364 

 

            A final dividend in respect of the year ended 31 December 2016 of 17.6p per share (2015: 16.0p) is proposed.

 

8.      Retirement benefit obligations

 

The Group and Company defined benefit pension scheme obligations relate to the James Fisher and Sons plc Pension Fund for Shore Staff (Shore staff), the Merchant Navy Officers Pension Fund (MNOPF) and the Merchant Navy Ratings Pension Fund (MNRPF).  The financial statements incorporate the latest full actuarial valuations of the schemes which have been updated to 31 December 2016 by qualified actuaries using assumptions set out in the table below.  The Group's obligations in respect of its pension schemes at 31 December 2016 were as follows:

 


2016


2015


£000


£000

Shore staff

(10,057)


(8,630)

MNOPF

(8,464)


(9,730)

MNRPF

(8,249)


(8,596)


(26,770)


(26,956)

 

9.      Reconciliation of net debt

        

Net debt comprises interest bearing loans and borrowings less cash and cash equivalents.

 

Group



1 January


Cash


Other


Exchange

31 December




2016


flow

non cash


movement


2016




£000


£000


£000


£000


£000

Cash in hand and at bank



22,962 


(3,896)



2,782 


21,848 

Debt due after 1 year



(116,650)


(4,066)


(12)


(3,652)


(124,380)

Debt due within 1 year




1,703 


(4,765)


68 


(2,994)




(116,650)


(2,363)


(4,777)


(3,584)


(127,374)

Finance leases



(201)


174 


(127)


(38)


(192)

Net debt



(93,889)


(6,085)


(4,904)


(840)


(105,718)
















1 January


Cash


Other


Exchange

31 December




2015


Flow

non cash


Movement


2015




£000


£000


£000


£000


£000

Cash in hand and at bank



17,719 


5,745 



(502)


22,962 

Debt due after 1 year



(79,965)


(35,807)


1,276 


(2,154)


(116,650)

Finance leases



(88)


102 


(247)


32 


(201)

Net debt



(62,334)


(29,960)


1,029 


(2,624)


(93,889)

 

10.     Related party transactions

 

         There have been no significant changes in the nature of related party transactions from that disclosed in the 2015 Annual Report.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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