Source - LSE Regulatory
RNS Number : 8729R
Fisher (James) & Sons plc
11 March 2021
 

 

11 March 2021

 

 

James Fisher and Sons plc

 Results for the year ended 31 December 2020

 

Results summary


Underlying


Statutory



2020

2019

% change

2020

2019

Group revenue


£518.2m

£617.1m

(16)

£518.2m

£617.1m

Operating profit / (loss)


£40.5m

£66.3m

(39)

£(43.5)m

£55.6m

Operating margin


7.8%

10.7%

(2.9)pp

(8.4)%

9.0 %

Profit / (loss) before tax


£31.5m

£58.5m

(46)

£(52.5)m

£47.8m

Diluted earnings per share


47.9p

92.8p

(48)

(114.2)p

72.7p

Dividend per share


8.0p

11.3p

(29)

8.0p

11.3p

Cash conversion


217%

99%

118pp

217%

99%

Net borrowings


£198.1m

£230.4m

(14)

£198.1m

£230.4m

 

Key points:

·      Priority remains safety and wellbeing of employees and customers

·      Group faced dual challenges of Covid-19 and energy prices during the year

·      Swift management action taken to reduce costs, optimise cash flow and protect liquidity

·      Underlying operating profit of £40.5m, slightly ahead of November's guidance of £35m-£40m

·      Underlying operating margin resilient at 7.8% (2019: 10.7%)

·      Strong cash performance reduced net borrowings by £32.3m

·      Strategic review progressing well

 

Eoghan O'Lionaird, Chief Executive Officer commented:

"2020 was a challenging year for the Group. Despite the many issues we faced, our employees showed great resilience and the operating and financial performance of the Group held up well in the circumstances confirming the benefit of strong market positions and responsive niche businesses.

 

Although early in 2021, the Group is trading in line with our expectations, however caution remains due to the ongoing effects of the pandemic. The Group has a resilient business model with a broad spread of end markets, customers and geographies, supported by a strong track record of converting its operating profit into cash.

 

Our ongoing strategic review confirms the fundamental strengths of the Group and has also identified scope for significant financial and operational improvement. Our goal is to improve the quality of our business by focusing on structurally growing markets, improving operating margins, increasing returns and sustainably delivering value for all stakeholders."

 

For further information:

James Fisher and Sons plc

Eoghan O'Lionaird

Stuart Kilpatrick

Chief Executive Officer

Group Finance Director

020 7614 9508

FTI Consulting

Richard Mountain

Susanne Yule


0203 727 1340

 

Notes:

1.     James Fisher 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, underlying Ebitda, cash conversion and underlying net borrowings.  An explanation of APMs is set out in note 2 to 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 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

 

When I reported at this time last year, few could have imagined the impact that the Covid-19 pandemic would have on communities around the world and also on our own business. In March 2020, the first UK national lockdown was announced which gave rise to the initial challenge of keeping our employees safe, whilst continuing to service our broad customer base. In addition, internationally and offshore, where we often operate in extreme and dangerous environments, we took action to ensure effective and appropriate health and safety regimes were in place. It is right that I firstly pay tribute to all our management and staff who worked so diligently in extraordinarily difficult circumstances to maintain our services for the benefit of all our stakeholders.

 

Through a sensible and robust approach to the effective management of our facilities, including the use of protective equipment and social distancing, we were able to continue to operate efficiently in many, but not all, of our business divisions. In response to the UK Government's call to manufacturers, we should all be proud that JFD, with its position as a global leader in subsea breathing apparatus, developed the InVicto™ Ventilator, a non-invasive medical device to assist patients with breathing difficulties.

 

The management team has made good progress on the strategic review which has confirmed the strong fundamentals of the Group but identified scope for significant financial and operational improvement.  We will seek to improve the quality of our business by focusing on structurally growing markets, improving operating margins, increasing returns and sustainably delivering value for all stakeholders. The strategy will be presented to shareholders at a Capital Markets Day in the first half of 2021.

 

Results 

 

Inevitably, the pandemic had a material impact on our annual financial results with Group revenue 16% lower at £518.2m (2019: £617.1m). Currency fluctuations had a small adverse effect which was offset by the contribution from recent acquisitions. We had a stronger end to the year with revenue in the fourth quarter 7% higher than the previous quarter.

 

Underlying operating profit for the year was slightly ahead of previous guidance at £40.5m (2019: £66.3m) and reflects a relatively resilient performance in three of our four divisions, all of which were impacted to some degree by the pandemic. Underlying profit before tax and underlying diluted earnings per share were £31.5m (2019: £58.5m) and 47.9p (2019: 92.8p) respectively.

 

The Marine Support division continued to disappoint. Whilst the ship-to-ship business had another strong year our operations in the challenging offshore marine and oil & gas markets were impacted by the pandemic with projects delayed or cancelled. As announced in January 2021 and within total separately disclosed items of £84.0m (2019: £10.7m), we have made a material impairment charge of £70.4m against the carrying value of certain assets in this division.

 

On a statutory basis the Group reported a loss before taxation of £52.5m (2019: profit of £47.8m) and statutory diluted earnings per share was a loss of 114.2 pence (2019: earnings of 72.7 pence).

 

The Group has a strong historical record of cash generation. By continuing to focus on working capital and, with tighter restrictions on capital expenditure in response to the pandemic, net borrowings reduced by £32.3m to £198.1m at December 2020 with headroom from committed bank facilities at the same date increasing to £120.2m (2019: £41.7m).

 

Dividends 

 

Faced with the uncertainty of the pandemic and wishing to preserve cash resources, the Board announced in March 2020 that it had suspended the final dividend for the year ended 31 December 2019 and this dividend was subsequently cancelled. Having overcome the initial impact of the pandemic and with trading no longer deteriorating, the Board announced an interim dividend of 8.0p per share, amounting to £4.0m, in August 2020, which was paid in November 2020. During the second half, further enforced Covid-19 restrictions across many of the areas the Group operates negatively affected financial performance, particularly in Marine Support.  Although the Board recognises the importance of dividends to its shareholders, in view of the 2020 financial results, the Board is not recommending a final dividend for the year ended 31 December 2020. 

 

Business review

 

Our principal focus has been on supporting our businesses during these difficult times, ensuring that they have the resources to deliver our services in a safe environment. In order to preserve cash, we introduced a salary reduction plan across our wider leadership team in the early months of the pandemic which was subsequently repaid, save for our senior leadership team and members of the Board who accepted a salary cut for the second quarter at this crucial time. Where appropriate we made use of the UK Government's Covid-19 support scheme furloughing certain employees especially in the Marine Support division in order to preserve many jobs. Unfortunately, as the year has continued, we have had to make some redundancies to right size the business to match market opportunities.

 

In 2019, the Group invested in two dive support vessels to take advantage of identified market opportunities with diving and offshore construction services for oil majors. Both vessels required an element of refurbishment before they were able to come into service. The purchase and subsequent refurbishment of these vessels coincided with the rapid decline in oil prices coupled with the delays in supply chains brought about by Covid-19. Both vessels are now available for use but, recognising that end markets have changed, we have taken the view that we should write these assets down to their estimated recoverable amount.

 

The three divisions of Specialist Technical, Offshore Oil and Tankships have all produced creditable results demonstrating our strong and diverse position in these markets. Many of the issues experienced by Marine Support were outside our control but nevertheless, we remain an important provider of services in the offshore marine and renewables sectors and we are well positioned as these markets recover.

 

Sustainability

 

During 2020 our business continued to deliver operational carbon reductions, developing business travel alternatives, plastic reduction and continued support to multilateral global environment initiatives. This year also saw our first CDP submission, which is an important milestone in our disclosure of greenhouse gas impacts and further demonstrates our commitment to drive the business with renewed purpose over the long term. We are positioning to take advantage of the ongoing energy market transition, where many of our customers are setting net zero carbon commitments and looking to us for solutions to help them reduce their own carbon footprint. Our history in supporting the marine environment means we are well placed to service the continued global growth in offshore renewables. This global shift to a greener energy transition is also having an impact on our business in parallel ways, as we support sustainable approaches to the decommissioning of existing oil and gas assets.

 

The Board

 

It was announced a year ago that, having completed nine years as an independent director of James Fisher including three years as Chairman, I would step down as a director once a replacement had been appointed. In January 2021, following an external search, that the Board agreed to appoint Angus Cockburn as a non-executive director and Chairman of the Company with effect from 1 May 2021. I will retire as a director on 30 April 2021.

 

Angus is a chartered accountant with an MBA from the IMD Business School in Switzerland and is currently Group Chief Financial Officer at Serco Group Plc, a position he has held since October 2014. He will step down from the Serco Board at its AGM in April 2021. His previous roles have included Chief Financial Officer and Interim Chief Executive of Aggreko plc and Managing Director of Pringle of Scotland. Angus is currently a Non-Executive Director of Ashtead Group plc and the privately owned Edrington Group Limited.

 

On 20 March 2020 it was announced that Fergus Graham had stepped down from the Board to pursue other business opportunities. I would like to thank Fergus for his contribution to the Group since his appointment to the Board in 2018 and wish him every success in the future.

 

I would like to record my thanks to all the Directors for the help and support they have given me over the last ten years and in particular during this difficult last 12 months. Your Company has a well-balanced and experienced Board of Directors who bring a wealth of experience and knowledge across a wide spectrum of subjects. I am confident that the Board, under the new direction of Angus, will bring the right mix of continuity and change to support the executive Directors.

 

Outlook

 

Although early in 2021, the Group is trading in line with our expectations, however caution remains due to the ongoing effects of the pandemic.  The Group has a resilient business model with a broad spread of end markets, customers and geographies, supported by a strong track record of converting its operating profit into cash. 

 

Our ongoing strategic review confirms the fundamental strengths of the Group and has also identified scope for significant financial and operational improvement. Our goal is to improve the quality of our business by focusing on structurally growing markets, improving operating margins, increasing returns and sustainably delivering value for all stakeholders.

 

Malcolm Paul

Chairman

 

 

Chief Executive's Review

 

Having joined the Board on 1 October 2019, my first full year as Chief Executive has been one of the most challenging in the Group's 173-year history; a year like no other. However, despite the many issues we have faced, our employees have shown great resilience and the operating and financial performance of the Group held up well in the circumstances, confirming the benefit of strong market positions, responsive niche businesses and a broad spread of end markets and geographies.  

 

Response to Covid-19

 

In the first half of 2020, oil prices were adversely impacted by over production and this was quickly followed by the global lockdown due to Covid-19. At the start of the pandemic we quickly established our priorities: to keep our people safe; preserve as many jobs as possible, and to protect the interests of the company and its stakeholders. Within that context, we continued as far as possible, to provide our services and goods to customers, whilst supporting and maintaining our supply chain. I am immensely proud of how our employees have adapted to rapidly changing circumstances and continued to operate safely and efficiently.

 

In March, we established weekly Executive meetings and a weekly video call for the senior leaders of all our businesses. This ensured a quick and, where appropriate, consistent approach and enabled learning from each other's experiences in conditions not previously experienced. We set out clear Group practices in response to Covid-19 but recognised, as a decentralised international Group, the value of local autonomous teams having the latitude to respond appropriately. In addition, we increased communications to ensure the Group was well informed and aligned.

 

Our employees

 

In facing the challenges of the pandemic, our priority throughout has been to protect the safety and wellbeing of our employees. Since the third week of March, the majority of our office-based staff throughout the world have been working from home, utilising video conferencing technology. At our operational sites, we introduced enhanced safety measures, deep cleansing and social distancing which has helped to keep people safe, whilst maintaining good levels of efficiency and performance. Additionally, recognising the stress and strain resulting from the pandemic-related constraints, we adopted practices and procedures to support the mental wellbeing of our employees.

 

Customers and suppliers

 

Throughout this period our businesses have remained open and our teams have worked hard to provide our unique products and marine services to our customers globally. The pandemic challenged our ability to receive supplies promptly, to complete projects overseas and generally to move people and equipment around. Our businesses responded innovatively to these challenges and supported the supply chain throughout.

 

Martek, our marine safety products and services business, responded quickly to new crew change guidelines due to the pandemic, by launching a coronavirus antibody test. It also provided comprehensive personal protective equipment to its marine customer base.

 

JFD responded to the UK Government's call for rapidly manufactured ventilators to provide essential medical equipment to the NHS. Using its world-leading breathing gas reclaim systems, the InVicto™ ventilator was quickly developed, tested and designed for minimal oxygen consumption, which could become a scarce resource. While the UK medical authority did not take InVicto™ forward, the ventilator is being used to treat patients in India.

 

Communities

 

We recognised the importance of supporting the communities in which our employees live and work during these challenging times. Many of our businesses supported local charities and made donations of protective equipment. In addition, our employees helped distribute vital food supplies to the vulnerable unable to leave their homes during the first lockdown. In Singapore, we supported the Courage Fund to help provide relief to susceptible individuals and families affected by Covid-19.

 

Financial response to Covid-19

 

The Group took swift actions to reduce costs, optimise cash flow and protect liquidity. This included the deferral of all discretionary capital expenditure, instituting a hiring freeze, placing approximately 400 UK employees on furlough and implementing a 20% pay deferral for approximately 800 employees across the world. The deferred pay was repaid in the second half, except for all Board members, the Executive and our senior leaders.

 

In addition, the Group took immediate action to preserve and improve liquidity, increasing committed borrowing facilities by £50m in the first half. Actions taken to defer bonuses, tax payments and defined benefit pension scheme contributions improved liquidity by approximately £16m in the first half which reversed in the second half save for around £3m, which will be paid in 2021. Due to the uncertainty of Covid-19, the Board took the decision to cancel the payment of the final dividend in relation to the year ended 31 December 2019, which was due to be paid in May 2020, and this reduced cash outflows by £11.8m in the year.

 

Strategic Review

 

After joining James Fisher in the latter part of 2019, this year was an opportune time to revisit and re-test the Group's strategy and to create a plan for further growth in shareholder value for the future. Despite the challenges of 2020, the strategic review has progressed well and each of our businesses has developed a structured plan for future growth. We will provide shareholders with full details at a Capital Markets Day in the first half of 2021.

 

Since 2001, the Group has delivered a strong trend of increasing underlying diluted earnings per share and dividends. However, in the last five years, the quality of our business, as indicated by its underlying operating margin, has remained flat. Over the same period, return on capital employed, our measure of the return to shareholders, has marginally declined. The challenge we have set for ourselves through the strategic review is to sustainably improve the quality of our business by increasing our margins and to increase the return to our stakeholders. Our findings have led us to the conclusion that to achieve this goal, we need to extend the purview of our strategy to encompass all our primary stakeholders - our employees, our customers and suppliers, the local communities in which we operate, the environment, and our shareholders. By creating and executing effective strategies aimed at all our stakeholders, we aim to create a more intrinsically sustainable company.

 

With the support of the Executive, the Group has commenced a process to become a purpose-led company, which defines how we sustainably create value for all our stakeholders. We operate a decentralised model that facilitates autonomy and accountability and encourages leadership teams to react quickly to changing circumstances. Whilst each of our businesses has its own identity, there is a common thread linking them together which is to pioneer safe and trusted solutions to complex problems in harsh environments.

 

The Group has earned a reputation for pioneering unique solutions to demanding operational and technical challenges around the world. In partnership with our customers we continue to tackle the toughest problems, supporting energy production safely and reliably, providing life-saving equipment and securing critical infrastructure. A diverse group of businesses and people, we are united by an entrepreneurial spirit, technical expertise, and a strong commitment to safety. The Group aspires to be an exceptional place to work, have fair and trusted relationships with customers and suppliers, support communities to grow, protect the environment, and provide strong returns for our investors.

 

We have identified three macro-economic trends that will impact the markets in which the Group operates:

(i)         Changing energy mix as renewable energy reduces carbon emissions and environmental concerns will lead to an increased focus on innovation, new technologies and decommissioning. Whilst recognising that oil and gas will remain part of the energy mix for some time, we aim to provide services to production, maintenance and decommissioning in the safest, most sustainable way whilst actively supporting and investing in the energy transition to low carbon sources.  

(ii)         Acceleration of innovation as customers seek efficiencies and more effective asset management; and

(iii)        Shifting economic power to developing regions giving potentially increased political risk and increased defence spending.

 

These trends are central to the development of the Group's strategic aim to deliver sustainable benefits to our five key stakeholders. Capital will be allocated to growth opportunities, supplemented by selective acquisitions whilst business with below benchmark return potential will be divested. Delivery of the Group's strategy will require a strong focus on both commercial and operational excellence.

 

Financial performance

 

The Group's goal is to deliver sustainable long-term growth in underlying earnings per share and dividends. With the sharp drop in energy prices followed by the global pandemic, the results in 2020 interrupted a lengthy period of double-digit growth in earnings and dividends. 

 

Three of the Group's divisions and its ship-to-ship transfer business performed with resilience in the year. However, project-related businesses, particularly subsea activities within Marine Support, were significantly impacted by deferrals or cancellations. Group revenue was 16% below 2019 at £518.2m (2019: £617.1m) and underlying operating profit was £40.5m (2019: £66.3m). Swift actions to reduce the cost base resulted in a 17% reduction to selling, general and administration costs.

 

Underlying cash conversion, which measures the proportion of underlying operating profit that is turned into operating cash, was 217% (2019: 99%) reflecting actions taken to optimise cash flow and to increase liquidity.

 

The Group reported an operating loss, on a statutory basis of £43.5m (2019: profit of £55.6m) due to significant non-recurring charges of £84.0m which are more fully described below and in note 5. Cash performance was strong with net borrowings reduced by £32.3m in the year.

 

 

Acquisitions

 

The Group acquired Fathom Systems in February for £1.2m. It is a market leader in diver communications, gas analysis, diver monitoring and integrated diving control systems and complements JFD in our Specialist Technical division.

 

Divisional performance

 


Revenue

Underlying operating profit

Underlying operating margin


Operating (loss) /profit


2020

2019


2020

2019


2020

2019


2020

2019


£m

£m


£m

£m


%

%


£m

£m

Marine Support

249.4

311.6


10.1

24.5


4.0%

7.9%


(69.5)

14.6

Specialist Technical

130.4

149.4


14.0

18.4


10.7%

12.3%


12.4

18.1

Offshore

78.0

88.2


11.2

14.2


14.4%

16.1%


8.4

13.7

Tankships

60.4

67.9


8.0

12.0


13.2%

17.7%


8.0

12.0

Corporate costs

-

-


(2.8)

(2.8)


-



(2.8)

(2.8)

Group

518.2

617.1


40.5

66.3


7.8%

10.7%


(43.5)

55.6

 

Marine Support

 

Marine Support revenue in the year was £62.2m (20%) lower at £249.4m (2019: £311.6m). Subsea projects for offshore wind and oil & gas were c.£70m below 2019 and the impact of the pandemic substantially reduced revenue across marine services and products, stress testing and monitoring. Despite Covid-19 interruptions, progress on the early and temporary beach landing project for the new gas fields in Mozambique, and a good performance in ship-to-ship transfers, partly offset the lack of subsea projects.

 

Underlying operating profit was £14.4m lower at £10.1m (2019: £24.5m) with the fall in revenue partly mitigated by a 20% reduction in overheads. Ship-to-ship services performed well, with a particularly strong first half reflecting transfers in and out of storage capacity.

 

The Group responded swiftly to the challenges, particularly in subsea projects and carried out a significant restructure during the second and third quarters of 2020. The division also suffered from challenges in receiving prompt payment for offshore services to the oil & gas market in challenging parts of the world and, whilst relentlessly pursuing settlement, considers it prudent to make provision. In light of the performance in 2020, we have taken a goodwill impairment of £17.0m and in consideration of the prospects for dive support vessels, impaired carrying values by £31.6m. Due to their size and their irregular nature, these items have been disclosed separately and are more fully described in note 5.

 

Marine Support holds leading positions in ship-to-ship services and renewable energy, particularly in high voltage jointing, blade repair and unexploded ordnance. Opportunities in offshore wind continue to increase and are rapidly expanding globally outside of the North Sea. 

 

Specialist Technical

 

Specialist Technical performed with resilience in 2020 with a 13% reduction in revenue to £130.4m (2019: £149.4m) and the impacts of currency and businesses acquired offset each other. At JFD, our defence and diving equipment provider, the pandemic affected the completion of projects, particularly in the Asia Pacific region and delayed the arrival of specialist components from our suppliers. Submarine rescue and escape exercise services were reduced or curtailed as a consequence of the pandemic. Decisions on new projects were also delayed, which impacted the second half. Our nuclear decommissioning business, which represents around 30% of the division, quickly adjusted to homeworking and delivered increased revenue and profit in the year.  

 

Underlying operating profit was £4.4m lower at £14.0m (2019: £18.4m) due to the revenue fall but mitigated by a 14% reduction in overheads. Underlying operating margin was resilient at 10.7% (2019: 12.3%).

 

JFD completed customer acceptance testing of its landmark 500m saturation diving system in December, having suffered challenges due to the pandemic of getting into the Asia Pacific region to complete assembly and approval. It also completed its contract to deliver six swimmer delivery vehicles during the fourth quarter. Two submarine rescue vessel projects are progressing well with delivery dates in 2021 and 2022.

 

Nuclear decommissioning performed well through the pandemic due to improved project delivery and good progress in nuclear source distribution. Its Hamburg based radiation detection and instrumentation business was sold in the year for £1.6m.

 

Offshore Oil

 

Despite the dual challenges of energy prices and Covid-19, Offshore Oil performed resiliently. Revenue was 12% lower at £78.0m (2019: £88.2m) and underlying operating profit was 21% down at £11.2m (2019: £14.2m) which was a creditable result given energy price movements and the global pandemic.  Lower volumes in 2020 impacted gross margins but pricing was broadly maintained. Selling, general and administration costs were reduced by 18% in the year as the businesses reacted quickly to the challenging economic conditions. This mitigated the impact on underlying operating margin which was 14.4% (2019: 16.1%).

 

Our businesses in Offshore Oil are predominantly the rental of specialist equipment with specialist people to the inspection, repair and maintenance market and the extension of asset life services. Strategically we have sought to limit our exposure to exploration which reduces earnings volatility in the event of sudden changes to energy prices. In parallel, our businesses continue to evolve to support the changing energy mix. Revenue from supplying our products and services for bubble curtains in renewables and for the decommissioning of oil and gas infrastructure represented 14% of the division's annual sales in 2020.

 

Tankships

 

Tankships traded well in the first four months of 2020 but experienced a sharp drop in utilisation in May as the immediate effect of the lockdown reduced demand for the clean petroleum products it delivers. Utilisation improved each month thereafter to recover to just below 90% by the end of the third quarter, and despite some fluctuations in the final quarter due to the second wave of Covid-19, utilisation was maintained in the high 80s.

 

Revenue in 2020 was 11% lower than prior year at £60.4m (2019: £67.9m). With the cost of operations relatively fixed, the reduction in sales impacted underlying operating profit and was only partly mitigated by a 13% reduction in overheads. Underlying operating profit was £4.0m lower at £8.0m (2019: £12.0m).

 

Health and Safety

 

Given the inherent risk in some of the work we complete and the environments in which our people operate, we have a responsibility for the health and safety of our employees, contractors, suppliers and customers at all times. Health and Safety is the first item on the agenda of every quarterly business board meeting and Group-wide safety meetings share and promote best practice to recognise potentially hazardous situations and appropriate mitigation.

 

The need to embed and commit to this objective is never more necessary than when catastrophic outcomes occur. I am profoundly saddened to report that in October we lost a long serving employee and a customer to an accident. On a pile-testing project in Kenya, the transportation barge on which employees were travelling capsized following an engine failure. Everyone on board was rescued, or managed to swim to safety, except for the two fatalities. We are deeply saddened by this event and investigations indicate that nothing could have been done to avoid this tragic outcome. Our thoughts remain with both families.

 

Financial review

 

2020 was undoubtedly challenging to many businesses around the globe and the results for the year are testament to the dedication and hard work of our people.

 

Whilst revenue for the Group was down by 16%, three divisions, Specialist Technical, Offshore Oil and Tankships were 12% lower than 2019, showing some resilience to the two challenges of the global pandemic and a sharp fall in energy prices. Similarly, underlying operating profit in these three divisions was £11.4m lower, whereas due to the lack of subsea projects, Marine Support was £14.4m lower.  Group underlying operating profit was 39% down at £40.5m (2019: £66.3m).

 

Gross margins decreased from 29.9% to 26.6% due to lower volumes covering the non-variable element of cost of goods sold. Prices held up well. Swift actions to respond to market conditions reduced administrative expenses by £20.5m (17%) in the year and mitigated the fall in underlying operating margin to 7.8% (2019: 10.7%).

 

The Group's main currency exposure is in respect of US Dollar cash inflows and the average rate in 2020 of £1: $1.29 (2019: £1: $1.28) was similar to prior year and therefore had no material impact on the financial results.

 

The challenging market conditions had the largest impact on project dependant businesses, primarily in subsea services. As a result, the Group has taken a substantial separately disclosed charge totalling £84.0m (2019: £10.7m) with the majority in relation to the Marine Support division. A major restructuring in Marine Support cost £3.9m and reduced headcount by 202. This was commenced in the second quarter with due care taken to protect the Group's renewables business where future opportunities are strong globally. Annualised savings from the restructure are approximately £8.0m. In addition, whilst continuing to pursue settlement vigorously, an impairment provision of £19.3m was considered prudent against overdue receivables in relation to primarily three projects within Marine Support. Non-cash impairments in respect of goodwill and other intangible assets amounted to £19.4m and a further £31.6m was charged in relation to two dive support vessels reflecting utilisation experienced to date. The net cash outflow in relation to separately disclosed items was £3.3m.

 

Profit before tax on an underlying basis was £31.5m (2019: £58.5m) and on a statutory basis, a loss of £52.5m (2019: profit of £47.8m).

 

Finance charges

 

Net finance charges were £9.0m (2019: £7.8m) inclusive of non-cash charges in respect of pensions and leases of £1.9m (2019: £2.0m). Bank related finance charges increased by £1.3m to £7.1m (2019: £5.8m) due to higher borrowings as a result of capital investment in 2019. Interest cover, the ratio of underlying operating profit to net finance charges, based on our banking agreements was 6.1 times (2019: 12.3 times), which compares to a covenant of 3.0 times.

 

Taxation

 

The tax charge before separately disclosed items for the year of £7.2m (2019: £11.6m) represents an underlying effective tax rate ('UETR') of 22.8% (2019: 19.8%). The UETR, which reflects the geographical mix of profits, tonnage tax relief on the profits from tanker operations and expenses disallowed for tax, increased in the year due to unrelieved losses in a number of jurisdictions. The total tax charge for the year on the loss before tax was £4.8m (2019: £11.1m) as the impairment charges within separately disclosed items did not benefit from tax relief. The Group paid £7.9m (2019: £9.6m) of corporation tax in cash across all of its jurisdictions. A further £28.1m was paid in the UK in respect of payroll taxes (2019: £31.3m).

 

The Group's tax strategy and policy is 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 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's tax strategy is reviewed and approved by the Board annually and is available on our website.

 

Earnings per share and dividends

 

Underlying diluted earnings per share were 47.9 pence per share (2019: 92.8 pence) reflecting the fall in underlying profit before taxation. Statutory diluted earnings per share were a loss of 114.2 pence per share (2019: earnings of 72.7 pence). Due to the uncertainty created by the global pandemic, the Board initially suspended the proposed dividend in relation to the year ended 31 December 2019 of £11.8m, which was due to be paid on 11 May 2020, and subsequently confirmed its cancelation. An interim dividend of £4.0m was paid on 6 November 2020.

 

Balance sheet

 

The Group swiftly took actions to protect and improve its balance sheet in response to the global pandemic. Additional committed revolving credit facilities of £50m were agreed in the first half of 2020 increasing total committed facilities to £300m (2019: £250m).

 

In addition, the Group reduced discretionary costs and capital expenditure and increased the focus on cash collection. Net borrowings decreased in the year by £32.3m to £198.1m (2019: £230.4m) and at 31 December 2020, the Group had £120.2m (2019: £41.7m) of undrawn committed banking facilities. The ratio of underlying net borrowings, which excludes right of use operating leases of £23.1m (2019: £27.4m), to underlying earnings before interest, tax, depreciation and amortisation (Ebitda) was 2.3 times (2019: 2.1 times).

 

The Group's banking agreements are based on underlying net borrowings but inclusive of bonds and guarantees of £28.3m (2019: £54.8m) and the net debt to Ebitda for covenant calculations was similar to previous year at 2.7 times (2019: 2.7 times). With the support of its banks, the Group's net debt : Ebitda covenant was amended during the year to 3.95 times at 31 December 2020, 3.75 times at 30 June 2021, reverting to 3.5 times at 31 December 2021.

 

Cash flow and borrowings

 

Summary cash flow




Operating cash flow increased to £87.7m (2019: £65.9m) as the 22% reduction in underlying Ebitda was offset by a working capital inflow of £19.5m (2019: outflow of £21.3m). Cash conversion, which is the ratio of operating cash flow to underlying operating profit, was 217% (2019: 99%).

 

The cash outflow of separately disclosed items relates to Marine Support restructuring costs. Net capital expenditure was much reduced at £17.8m (2019: £90.2m) and the Group spent £7.1m businesses acquired or disposed. Fathom was acquired for £1.2m in February 2020 and the balance was deferred consideration paid to the vendors of Martek (£1.0m), EDS (£2.3m) and businesses now forming part of JFD (£2.7m). Transaction costs were £0.7m and this was offset by net proceeds from disposals of £1.3m.

 

The net cash inflow in the year was £38.4m compared to an outflow in 2019 of £84.5m and net borrowings decreased by £32.3m to £198.1m (2019: £230.4m) inclusive of right-of-use operating leases.

 


2020

2019



£m

£m


Underlying operating profit

40.5

66.3


Depreciation & amortisation

34.2

29.9


Underlying ebitda *

74.7

96.2


Working capital

19.5

(21.3)


Pension / other

(6.5)

(9.1)


Operating cash flow

87.7

65.8


Outflow on separately disclosed

(3.9)

(7.4)


Interest paid & tax

(14.6)

(14.6)


Net capital expenditure

(17.8)

(90.2)


Businesses acquired / disposed

(7.1)

(19.1)


Dividends paid to shareholders

(4.0)

(18.4)


Other

(1.9)

(0.6)


Net cash inflow / (outflow)

38.4

(84.5)


Net borrowings# at 1 January

(203.0)

(113.6)


Non-cash movements

(10.4)

(4.9)


Net borrowings# at 31 December

(175.0)

(203.0)


Right-of-use operating leases

(23.1)

(27.4)


Net borrowings

(198.1)

(230.4)






* Underlying earnings before interest, tax, depreciation and amortisation

# Underlying net borrowings before right-of-use operating leases

 

Pensions


In the year, the Group contributed £4.8m (2019: £5.0m) into defined contribution pension schemes through which existing employees receive pension benefits. The Group has an obligation of £8.8m (2019: £0.4m) for its own closed defined benefit scheme. A formal triennial valuation of this scheme was carried out at 31 July 2019 which reported a funding deficit of £8.2m with an 88% funding level. Contributions paid in the year amounted to £1.2m (2019: £1.6m).

 

The Group also contributes to two industry-wide defined benefit schemes, the Merchant Navy Officers Pension Fund and the Merchant Navy Ratings Pension Fund, of which the Group share of the accounting deficit was £1.5m (2019: £5.4m). With no worsening of the deficit based on each one's triennial valuations, contributions are currently scheduled to cease in 2023. The deficit reduction in 2020 was due to contributions of £3.8m (2019: £7.0m).

 

Impact of Brexit

 

The UK's exit from the European Union is not expected to materially impact the Group's profitability. A free trade agreement announced at the end of 2020 is welcomed and, whilst not underestimating the potential impact on trade and logistics between the UK and the EU, it is relevant that 9% of Group turnover is sold to EU countries.

 

Risk management

 

The Board and Audit Committee continue to recognise the importance of risk management in achieving the Group's strategic objectives. Keeping risk management integral to the operation of our businesses is a priority, requiring a continuous scan of all threats and opportunities. Our risk management processes aim to anticipate risks before they impact upon our activities to ensure that we are in the best place to mitigate those risks and recognise the opportunities they may bring in a competitive marketplace. For all our key risks, we identify the key mitigating controls and their ownership. Our assurance activities are focused upon those controls so we can continually gauge their effectiveness. Within that context, the Group is disappointed to report significant separately disclosed items in both 2019 and 2020. The items relate to strategic initiatives that were either not executed successfully or severely impacted by the global pandemic and energy price changes in the first half of 2020. The Board has carried out a detailed cause and effect review and combined with the strategic review, a more rigorous approach to the markets the Group seeks to provide services into and the capital allocated to those activities has been implemented.

 

The Board is 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 our overall risk appetite and strategic objectives, as defined by the Board.

 

The Board specifically approves risk management policies and plans; significant insurance claims, legal claims or settlements, acquisitions, disposals and capital expenditures and the Group budget, forecast and five-year plan. The Board has put in place a documented organisational structure with strictly defined limits of authority. These have been communicated throughout the businesses and are well understood by the Executive Directors, and by 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. Group functions and operating units are each required to operate within this control environment and in accordance with the established policies and procedures. This includes ethics, anti-bribery and corruption, conflicts, treasury, employment, slavery and human trafficking, whistleblowing, data protection, health and safety and environment. 

 

Principal risks and uncertainties

 

The most significant risks that the Board considers may affect our business, based on the risk evaluation process described above, are listed below. Pandemic risk and the consequences of climate change were added by the Board to the principal risk to the Group during 2020.

 

·      Health, safety and environment

·      Cyber security

·      Operating in emerging markets

·      Climate change

·      Contractual risk

·      Project delivery risk

·      Recruitment and retention of key staff

·      Financial risk

·      Pandemic risk

 

A full description of the principal risk and uncertainties and their management and mitigation will be set out in the 2020 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 2020.

 

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

 

•      the 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 Company and the undertakings included in the consolidation taken as a whole; and

•      the Strategic report and the Directors' report include a fair review of the development and performance of the business and the position of the Company 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 2020 Annual Report and Accounts.  The responsibility statement was approved by the Board on 10 March 2021 and signed on its behalf by:

 

 

 

 

 

E P O'Lionaird

S C Kilpatrick

Chief Executive Officer

Group Finance Director

 

 

CONSOLIDATED INCOME STATEMENT

for the year ended 31 December 2020

 



Year ended


Year ended



31 December 2020


31 December 2019



Before separately

Separately



Before separately

Separately




disclosed

disclosed



disclosed

disclosed




items

items

Total


items

items

Total

Notes

£m

£m

£m


£m

£m

£m

Revenue

3

518.2

-

518.2


617.1

-

617.1

Cost of sales


(380.6)

(43.2)

(423.8)


(432.4)

-

(432.4)

Gross profit


137.6

(43.2)

94.4


184.7


184.7

Administrative expenses


(98.7)

(40.8)

(139.5)


(119.2)

(10.7)

(129.9)

Share of post-tax results of associates


1.6

-

1.6


0.8

-

0.8

Operating profit/(loss)

3

40.5

(84.0)

(43.5)


66.3

(10.7)

55.6

Net finance expense


(9.0)

-

(9.0)


(7.8)

-

(7.8)

Profit/(loss) before taxation


31.5

(84.0)

(52.5)


58.5

(10.7)

47.8

Income tax

5

(7.2)

2.4

(4.8)


(11.6)

0.5

(11.1)

Profit/(loss) for the year


24.3

(81.6)

(57.3)


46.9

(10.2)

36.7

Attributable to:









Owners of the Company


24.1

(81.6)

(57.5)


46.9

(10.2)

36.7

Non-controlling interests


0.2

-

0.2


-

-

-



24.3

(81.6)

(57.3)


46.9

(10.2)

36.7










Earnings per share

6



pence




pence

Basic




(114.2)




73.1

Diluted




(114.2)




72.7

 

 

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

for the year ended 31 December 2020

 



Year ended


Year ended



31 December 2020


31 December 2019


£m


£m

(Loss)/profit for the year


(57.3)


36.7

Items that will not be classified to the income statement





Actuarial (loss)/gain in defined benefit pension schemes


(9.3)


2.2

Tax on items that will not be reclassified


1.1


0.6



(8.2)


2.8

Items that may be reclassified to the income statement





Exchange differences on foreign currency net investments


(7.8)


(8.1)

Effective portion of changes in fair value of cash flow hedges


0.6


2.3

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


(0.2)


(0.1)

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

(0.1)


(1.4)

Deferred tax on items that may be reclassified


1.1


(0.4)



(6.4)


(7.7)

Total comprehensive income for the year


(71.9)


31.8






Attributable to:





Owners of the Company


(72.0)


31.8

Non-controlling interests


0.1


-



(71.9)


31.8

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 at 31 December 2020

 




31 December 2020


31 December 2019


Notes


£m


£m

Non-current assets






Goodwill



166.5


185.5

Other intangible assets



20.1


29.7

Property, plant and equipment



158.2


210.6

Right-of-use assets



30.7


27.1

Investment in joint ventures



7.5


8.5

Other investments



1.4


1.4

Deferred tax assets



5.2


4.5




389.6


467.3







Current assets






Inventories



46.6


47.9

Trade and other receivables



162.8


213.7

Cash and cash equivalents

9


23.9


18.5




233.3


280.1







Current liabilities






Trade and other payables



(140.1)


(158.0)

Provisions



-


(0.7)

Current tax



(7.6)


(10.5)

Borrowings

9


(10.6)


(11.3)

Lease liabilities



(7.2)


(8.9)




(165.5)


(189.4)

Net current assets



67.8


90.7

Total assets less current liabilities



457.4


558.0

Non-current liabilities






Other payables



(3.6)


(4.8)

Provisions



(1.6)


-

Retirement benefit obligations

8


(10.3)


(5.8)

Cumulative preference shares



(0.1)


(0.1)

Borrowings



(178.8)


(207.3)

Lease liabilities



(25.3)


(21.3)

Deferred tax liabilities



(1.8)


(4.7)




(221.5)


(244.0)

Net assets



235.9


314.0







Equity






Called up share capital



12.6


12.6

Share premium



26.7


26.5

Treasury shares



(0.2)


-

Other reserves



(16.5)


(10.6)

Retained earnings



212.6


284.7

Total shareholders equity



235.2


313.2

Non-controlling interests



0.7


0.8

Total equity



235.9


314.0

 

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 31 December 2020

 




31 December 2020

31 December 2019

Restated

(note 9)


Note


£m

£m

(Loss)/profit before tax



(52.5)

47.8

Adjustments to reconcile profit before tax to net cash flows





     Depreciation and amortisation



48.0

43.1

     Separately disclosed items (excluding amortisation)



81.1

7.6

     Other non-cash items



7.1

6.4

Decrease/(increase) in inventories



2.0

(2.4)

Decrease/(increase) in trade and other receivables



30.9

(31.1)

(Decrease)/increase in trade and other payables



(13.4)

12.2

Defined benefit pension cash contributions less service cost



(4.8)

(8.4)

Cash generated from operations



98.4

75.2

Cash outflow from separately disclosed items



(3.9)

(7.5)

Income tax (payments)/receipts



(7.9)

(9.6)

Cash flow from operating activities



86.6

58.1






Investing activities





Dividends from joint venture undertakings



1.8

1.7

Proceeds from the disposal of a subsidiary



1.3

-

Proceeds from the disposal of property, plant and equipment



2.6

2.2

Finance income



0.3

0.3

Acquisition of subsidiaries, net of cash acquired



(7.9)

(12.5)

Investment in joint ventures and other investments



(0.5)

(4.7)

Acquisition of property, plant and equipment



(17.5)

(88.9)

Development expenditure



(2.9)

(3.5)

Cash flows used in investing activities



(22.8)

(105.4)






Financing activities





Proceeds from the issue of share capital



0.2

-

Finance costs



(7.0)

(5.3)

Net purchase of own shares by Employee Share Ownership Trust


(0.9)

(1.1)

Notional purchase of own shares for LTIP vesting



(1.0)

(1.3)

Capital element of lease repayments



(13.0)

(11.3)

Proceeds from borrowings



34.3

106.6

Repayment of borrowings



(64.5)

(32.2)

Dividends paid



(4.0)

(16.4)

Dividends paid to non-controlling interest



(0.2)

(2.0)

Cash flows (used in)/from financing activities



(56.1)

37.0






Net increase in cash and cash equivalents

9


7.7

(10.3)

Cash and cash equivalents at 1 January



7.5

18.6

Net foreign exchange differences



(1.7)

(0.8)

Cash and cash equivalents at 31 December



13.5

7.5

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2020

 

 

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 the Group), for the year ended 31 December 2020. 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 10 March 2021.

 

          The Group financial statements have been prepared with international accounting standards in conformity with the requirements of the Companies Act 2006 (Adopted IFRSs) and in addition the Group financial statements are prepared in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The financial statements are prepared on a going concern basis and on a historical cost basis, modified to include revaluation to fair value of certain financial instruments. The Group financial statements are presented in Sterling and all values are rounded to the nearest million pounds (£m) except when otherwise indicated.  The consolidated financial statements have been prepared in accordance with international accounting standards in conformity with the requirements 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 2020 or 2019. Statutory accounts for 2019 have been delivered to the registrar of companies, and those for 2020 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor 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.

 

          The Directors have, at the time of approving these Financial Statements, a reasonable expectation that the Group and Company have adequate resources to continue in operational existence for at least 12 months from this reporting date. 

 

In light of the Covid-19 global pandemic experienced in 2020 and subsequent uncertainty, the Group has undertaken a detailed viability review and taken appropriate mitigating actions to protect the business and liquidity. Operations have been impacted by travel restrictions, supply chain logistics and actions to protect employees to ensure safe working conditions. The Group's quick response to Covid-19 has mitigated some of the impact on financial performance, however the potential impact of a post pandemic recession gives on-going risk to future financial performance. Liquidity is monitored through daily balance reporting, quarterly forecasting and 18 month cash flow forecasting.

 

The Group had £120.2m of undrawn committed facilities at 31 December 2020 (2019: £41.7m) and increased committed facilities by £50m in the year to £300m (2019: £250m).  Revolving credit facilities of £70m are due for renewal within twelve months from the date of this report, however the Directors have no indication that these will not be renewed and forecasts have been prepared which continue to show headroom should they not be renewed. These facilities are linked to covenant compliance requirements, being the ratio of net debt to Ebitda ratio and interest cover. The Group has been in compliance with covenant requirements in the year, post year end, and are forecast to be compliant for at least 12 months from the date of approval of these financial statements. Post year end, as at the date of approval of the financial statements, the Group had approximately £115m of undrawn credit facilities available.   

 

The Directors' base case forecast reflected financial performance in the year ended 31 December 2020 and the associated impacts of Covid-19. There is limited impact to the Group and Company of the UK's exit from the EU. A number of severe but plausible downside scenarios were calculated compared to the base case forecast of profit and cash flow to assess headroom against facilities for the next 12 months. Against these negative scenarios, which reduced operating profit by £10m in 2021 and £20m in 2022, adjusted projections showed no breach of covenants. Additional sensitivities which reduced cash receipts by £10m in 2021 and £20m in 2022 and delayed project delivery reducing profit by £10m in 2021 and £20m in 2022 and deferring debtor collection by £3m in 2021 and by £6m in 2022 were also run separately in combination with the severe but plausible downside and adjusted projections showed no breach of covenants. Further mitigating actions could also be taken in such scenarios should it be required, including reducing capital expenditure, reducing dividend payments and not carrying out any acquisitions.

 

Taking into account the level of cash and available facilities outlined above, the Directors consider that the Group and Company have sufficient funds to allow them to meet their liabilities as they fall due for at least 12 months from the date of approval of the financial statements, having undertaken a rigorous assessment of financial forecasts and therefore continue to adopt the going concern basis of accounting in preparing these Financial Statements.

 

         

2.       Alternative performance measures

 

          The Group uses a number of alternative (non-Generally Accepted Accounting Practice (non-GAAP)) performance 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 the Annual Report and Accounts.

 

          2.1 Underlying operating profit and underlying profit before taxation

          Underlying operating profit is defined as operating profit before acquisition related income and expense (amortisation or impairment of acquired intangible assets, acquisition expenses, adjustments to contingent consideration), the costs of a material restructuring, litigation, or asset impairment and the profit or loss relating to the sale of businesses.  As acquisition related income and expense fluctuates with activity and to provide a better comparison to businesses that are not acquisitive, the Directors consider that these items should be separately disclosed to give a better understanding of operating performance. Underlying profit before taxation is defined as underlying operating profit less net finance expense.

         


2020


2019


£m


£m

Operating (loss)/profit

(43.5)


55.6

Separately disclosed items before taxation

84.0


10.7

Underlying operating profit

40.5


66.3

Net finance expense

(9.0)


(7.8)

Underlying profit before taxation

31.5


58.5

 

          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 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 a better understanding of the underlying earnings capability of the Group. Underlying earnings per share is set out in note 6.

         

          2.3 Capital employed and Return on Capital Employed (ROCE)

          Capital employed is defined as net assets less right-of-use 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.

         


2020


2019


£m


£m

Net assets

235.9


314.0

Less right-of-use assets

(30.7)


(27.1)

Plus net borrowings

198.1


230.4

Capital employed

403.3


517.3





Underlying operating profit

40.5


66.3

Notional tax at the effective tax rate

(9.2)


(13.1)


31.3


53.2

Average capital employed

467.6


471.1

Return on average capital employed

6.7%


11.3%

 

          2.4 Cash conversion

          Cash conversion is defined as the ratio of operating cash flow to underlying operating profit.  Operating cash flow comprises:

 


2020


2019


£m


£m

Cash generated from operations

98.4


75.2

Dividends from joint venture undertakings

1.8


1.7

Capital element of lease repayments

(13.0)


(11.3)

Other

0.5


0.2

Operating cash flow

87.7


65.8

Underlying operating profit

40.5


66.3

Cash conversion

217%


99%

         

2.5 Underlying earnings before interest, tax, depreciation and amortisation (Ebitda)

Underlying Ebitda is defined as the underlying operating profit before interest, tax, depreciation and amortisation.

 


2020


2019


£m


£m

Underlying operating profit

40.5


66.3

Depreciation and amortisation

48.0


43.1

Less: Deprecation on right-of-use assets

(10.9)


(10.1)

          Amortisation of acquired intangibles (note 4)

(2.9)


(3.1)

Underlying Ebitda

74.7


96.2

 

          2.6 Underlying dividend cover

Underlying dividend cover is the ratio of underlying diluted earnings per share to the total dividend per share.

  


pence


pence

Underlying earnings per share

47.9


92.8

Total dividends per share

8.0


11.3

Underlying dividend cover (times)

6.0


8.2

 

             2019 dividend cover restated for interim dividend only (note 7).

 

          2.7 Underlying net borrowings

          Underlying net borrowings is net borrowings as set out in note 9, excluding right of use operating leases. The Group's banking arrangements are based on underlying net borrowings.


2020


2019


£m


£m

Net borrowings (note 9)

198.1


230.4

Less: Right-of-use operating leases

(23.1)


(27.4)


175.0


203.0

 

          2.8 Organic constant currency

         Organic constant currency growth represents absolute growth, adjusted for current and prior year acquisitions and for constant currency. Constant currency takes the non-sterling results of the prior year and re-translates them at the average exchange rate of the current year.

 

3.       Segmental information

 

          The Group has four operating segments reviewed by the Board: Marine Support, Specialist Technical, Offshore Oil and Tankships. The Board assess the performance of the segments based on underlying operating profit, underlying operating margin and return on capital employed. It considers that this information is the most relevant in evaluating the performance of its segments relative to other entities which operate in similar markets.  In 2019, £5.5m of revenue and £0.6m of operating loss formerly included within Specialist Technical and Offshore Oil was transferred to Marine Support to align with changes to the operational and financial reporting of the segments.  Inter-segmental sales are made using prices determined on an arms-length basis. Sector assets exclude cash, 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 2020








Marine

Specialist

Offshore





Support

Technical

Oil

Tankships

Corporate

Total


£m

£m

£m

£m

£m

£m

Segmental revenue







- point in time

225.3

42.2

80.1

-

-

347.6

- over time

24.5

89.2

-

60.4

-

174.1

Inter-segmental sales

(0.4)

(1.0)

(2.1)

-

-

(3.5)

Revenue

249.4

130.4

78.0

60.4

-

518.2








Underlying operating profit/(loss)

10.1

14.0

11.2

8.0

(2.8)

40.5

Separately disclosed items

(79.6)

(1.6)

(2.8)

-

-

(84.0)

Operating (loss)/profit

(69.5)

12.4

8.4

8.0

(2.8)

(43.5)

Net finance expense






(9.0)

Loss before tax






(52.5)

Income tax






(4.8)

Loss for the year






(57.3)

 

Assets and liabilities







Segmental assets

246.7

156.0

139.4

53.5

19.8

615.4

Investment in joint ventures

2.1

3.0

2.4

-

-

7.5

Total assets

248.8

159.0

141.8

53.5

19.8

622.9

Segmental liabilities

(90.5)

(57.6)

(24.9)

(22.2)

(191.8)

(387.0)


158.3

101.4

116.9

31.3

(172.1)

235.9

Other segmental information







Capital expenditure

7.1

1.9

5.4

3.1

-

17.5

Depreciation and amortisation

17.8

6.7

12.7

10.5

0.3

48.0

 

Revenue disclosed in the income statement is comprised of goods and services of £398.9m (2019: £506.9m), equipment hire of £40.2m (2019: £42.6m) and construction contract income of £79.1m (2019: £67.6m).

 

Year ended 31 December 2019








Marine

Specialist

Offshore





Support

Technical

Oil

Tankships

Corporate

Total


£m

£m

£m

£m

£m

£m

Segmental revenue







- point in time

276.3

55.5

91.0

-

-

422.8

- over time

35.6

95.4

-

67.9

-

198.9

Inter-segmental sales

(0.3)

(1.5)

(2.8)

-

-

(4.6)

Revenue

311.6

149.4

88.2

67.9

-

617.1








Underlying operating profit/(loss)

24.5

18.4

14.2

12.0

(2.8)

66.3

Separately disclosed items

(9.9)

(0.3)

(0.5)

-

-

(10.7)

Operating profit

14.6

18.1

13.7

12.0

(2.8)

55.6

Net finance expense






(7.8)

Profit before tax






47.8

Income tax






(11.1)

Profit for the year






36.7








Assets and liabilities







Segmental assets

333.3

161.9

160.9

60.7

22.1

738.9

Investment in joint ventures

3.6

3.0

1.9

-

-

8.5

Total assets

336.9

164.9

162.8

60.7

22.1

747.4

Segmental liabilities

(102.0)

(51.9)

(28.5)

(28.9)

(222.1)

(433.4)


234.9

113.0

134.3

31.8

(200.0)

314.0

Other segmental information







Capital expenditure

66.6

4.5

11.4

12.8

-

95.3

Depreciation and amortisation

13.9

6.6

12.5

9.7

0.4

43.1

 

4.       Separately disclosed items

 

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

 





2020

2019





£m

£m

Acquisition related income and (expense):






  Costs incurred in acquiring businesses




(1.0)

(0.6)

  Amortisation of acquired intangibles (note 2)




(2.9)

(3.1)

  Adjustment to provision for contingent consideration




-

3.5





(3.9)

(0.2)

Marine support restructure




(3.9)

-

Disposal of businesses




(3.5)

-

Costs of material litigation




-

(1.5)

Impairment charges:






Intangible assets




(19.4)

-

Dive support vessels




(31.6)

-

Tangible fixed assets




(2.4)

(2.7)

    Receivables




(19.3)

(6.3)

Separately disclosed items before taxation




(84.0)

(10.7)

Tax on separately disclosed items




2.4

0.5





(81.6)

(10.2)

 

(i)   Acquisition related income and expense comprises costs incurred on the acquisition of businesses including external due diligence costs, amortisation of acquired intangibles and any adjustment for contingent consideration.  As set out in note 2 these items fluctuate with acquisition activity and are disclosed separately to provide a better comparison to businesses that are not acquisitive.

(ii) Due to the deferral of subsea projects in oil and gas and renewables, a material restructure of marine support activities was completed during the year.  The charge of £3.9m relates to redundancy and notice costs in relation to 202 employees.

(iii) Disposal of businesses relates to the disposal in 2020 of JF Nuclear GmbH for proceeds of £1.6m which resulted in a loss of £1.2m.  The balance includes £2.0m in respect of the exchange of interests in an associate and £0.3m relating to cost adjustments in respect of businesses disposed of in previous years.

(iv) Impairment charges

(a) Intangible assets comprise goodwill of £17.0m (2019: £6.0m) and other intangible asset impairments of £2.4m (2019: £nil) in relation to development expenditure and intellectual property where expected future cash flows no longer justify carrying value. The goodwill impairment related to the Subtech (£10.0m) and James Fisher Testing Services (£7.0m) cash generating units.

(b) Dive support vessels:  In 2019, the Group acquired two dive support vessels with the strategic aim of targeting the market of subsea projects in the oil and gas sector in West Africa and the Middle East.  The combination of changes in energy prices in the first half of 2020 and the onset of the global pandemic resulted in lower utilisation of these vessels than expected and has given rise to an impairment charge of £31.6m (2019: £nil) based on their recoverable amount.

(c) the tangible fixed asset impairment relates to certain assets in Marine Support and Offshore where latest forecasts of future cash flows in respect of these assets is less than carrying net book value.

(d) the impairment in respect of receivables relates to a number of projects commenced by the Group during 2019 where payment for amounts invoiced or considered due under the contract have yet to be paid and the Board considers it appropriate to make provision.  A number of these issues are subject to legal or contractual process and the outcome is uncertain.  In 2019, the impairment of £6.3m related to a receivable from an associated company.

 

5.      Taxation

                               

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


2020


2019



£m


£m

Current tax:





UK corporation tax


(1.1)


(4.1)

Overseas tax


(7.9)


(9.5)

Adjustment in respect of prior years:





UK corporation tax


2.7


0.5

Overseas tax


(1.1)


1.0

Total current tax


(7.4)


(12.1)

Deferred tax:





Origination and reversal of temporary differences:





Current year





  UK corporation tax


1.9


0.8

  Overseas tax


1.1


1.0

Prior year





  UK corporation tax


(0.3)


(0.7)

  Overseas tax


(0.1)


(0.1)

Total tax on profit for the year


(4.8)


(11.1)

 

The total tax charge in the income statement includes a further £0.1m (2019: £0.1m) which is stated within the share of post-tax results of joint ventures.

 



2020


2019



£m


£m

(Loss)/profit before tax


(52.5)


47.8

Tax arising from interests in joint ventures


0.1


0.1



(52.4)


47.9

Tax on (loss)/profit at UK statutory tax rate of 19% (2019: 19%)


(10.0)


9.1

Tonnage tax relief on vessel activities


(0.7)


(1.6)

Expenses not deductible for tax purposes





Separately disclosed items


3.6


2.3

Other


0.3


0.4

(Over)/under provision In previous years:





    Current tax


(1.6)


(1.5)

    Deferred tax


0.4


0.8

Higher tax rates on overseas income


2.0


3.2

Research and development relief


(0.6)


(0.5)

Non-taxable income


-


(0.7)

Impact of change of rate


0.5


0.1

Movement on unrecognised deferred tax


11.0


(0.4)



4.9


11.2

 

The effective rate on the (loss)/profit before income tax from continuing operations is (9.1%) (2019: 23.2%). The effective income tax rate on the underlying profit before tax is 22.8% (2019: 19.8%). Over provision in previous years arose due to the timing in which certain transactions have been accounted for, rather than any correction. At 31 December 2020, the Group had unrecognised tax losses of £30.3m (2019: £7.3m). Deferred tax assets are recognised in respect of these losses based on expected future recovery.

 

6.      Earnings per share

 

Basic earnings per share is calculated by dividing the profit attributable to shareholders by the weighted average number of ordinary shares in issue during the year, after excluding 9,227 (2019: 510) 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 shareholders 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 2020, 386,317 options (2019: 44,809) 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



2020

2019



Number of

Number of



shares

shares

Basic weighted average number of shares


50,342,732

50,282,962

Potential exercise of share based payment schemes


85,973

240,597

Diluted weighted average number of shares


50,428,705

50,523,559

 

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).

 



2020


2019



£m


£m

Profit attributable to owners of the Company


(57.5)


36.7 

Adjustments:





Separately disclosed items


84.0 


10.7 

Tax on separately disclosed items


(2.4)


(0.5)

Underlying profit attributable to owners of the Company


24.1 


46.9 

 

Earnings per share



pence

pence

Basic earnings per share


(114.2)

73.1

Diluted earnings per share


(114.2)

72.7

Underlying basic earnings per share


48.0

93.2

Underlying diluted earnings per share


47.9

92.8

 

 7.     Dividends paid and proposed

 




2020

2019

2020


2019




pence per share

pence per share

£m


£m

Declared and paid during the year
















Equity dividends on ordinary shares:








Final dividend for 2019



-

21.3

-


10.7

Interim dividend for 2020



8.0

11.3

4.0


5.7






4.0


16.4

 

No final dividend in respect of the year ended 31 December 2020 is proposed. In 2019, a final dividend of 23.4p per share was proposed but subsequently cancelled to protect the liquidity of the Group due to uncertainty caused by the global coronavirus pandemic.

 

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 2020 by qualified actuaries.  The Group's obligations in respect of its pension schemes at 31 December 2020 were as follows:







Group







2020


2019







£m


£m

Shore staff






(8.8)


(0.4)

MNOPF






(1.3)


(3.4)

MNRPF






(0.2)


(2.0)







(10.3)


(5.8)

 

9.     Reconciliation of net borrowings

       

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

 

31 December

Cash

Other

Exchange

31 December


2019

flow

non-cash

movement

2020


£m

£m

£m

£m

£m

Cash and cash equivalents

7.5

7.7

-

(1.7)

13.5

Debt due within one year

(0.3)

0.1

-

-

(0.2)

Debt due after one year

(207.4)

30.1

(0.7)

(0.9)

(178.9)


(207.7)

30.2

(0.7)

(0.9)

(179.1)

Lease liabilities

(30.2)

13.0

(15.4)

0.1

(32.5)

Net borrowings

(230.4)

50.9

(16.1)

(2.5)

(198.1)







31 December

Cash

Other

Exchange

31 December


2018

flow

non-cash

movement

2019






Restated


£m

£m

£m

£m

£m

Cash and cash equivalents

18.6

(10.3)

-

(0.8)

7.5

Debt due within one year

(10.0)

9.7

-

-

(0.3)

Debt due after one year

(122.0)

(84.1)

(2.3)

1.0

(207.4)


(132.0)

(74.4)

(2.3)

1.0

(207.7)

Lease liabilities

(0.2)

11.3

(40.7)

(0.6)

(30.2)

Net borrowings

(113.6)

(73.4)

(43.0)

(0.4)

(230.4)

 

 

Cash and cash equivalents have been restated at 31 December 2019 to include bank overdrafts repayable on demand as they form part of the Group's cash management.  The prior year cash flow statement has been restated accordingly.  The Group cash and cash equivalents figure as at 31 December 2019 has been reduced by £11.0m (1 January 2019: £nil) with a corresponding increase of £11.0m in the cash outflow from repayment of the borrowings in the Group cash flow statement. 

 

 

For the purpose of the cash flow statement, cash and cash equivalents are:







Group







2020


2019







£m


£m

Cash at bank and in hand






23.9


18.5

Overdrafts






(10.4)


(11.0)







13.5


7.5

 

10.     Related party transactions

 

There have been no significant changes to related party transactions from that disclosed in the 2019 Annual report.

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