TIDMFSJ
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 GBP518.2m GBP617.1m (16) GBP518.2m GBP617.1m
Operating profit / (loss) GBP40.5m GBP66.3m (39) GBP(43.5)m GBP55.6m
Operating margin 7.8% 10.7% (2.9)pp (8.4)% 9.0 %
Profit / (loss) before
tax GBP31.5m GBP58.5m (46) GBP(52.5)m GBP47.8m
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 GBP198.1m GBP230.4m (14) GBP198.1m GBP230.4m
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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 GBP40.5m, slightly ahead of
November's guidance of GBP35m-GBP40m
-- Underlying operating margin resilient at 7.8% (2019: 10.7%)
-- Strong cash performance reduced net borrowings by GBP32.3m
-- 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:
Chief Executive
James Fisher and Eoghan O'Lionaird Officer
Sons plc Stuart Kilpatrick Group Finance Director 020 7614 9508
Richard Mountain
FTI Consulting Susanne Yule 0203 727 1340
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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(TM) 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 GBP518.2m (2019:
GBP617.1m). 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 GBP40.5m (2019: GBP66.3m) 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 GBP31.5m (2019: GBP58.5m) 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
GBP84.0m (2019: GBP10.7m), we have made a material impairment
charge of GBP70.4m against the carrying value of certain assets in
this division.
On a statutory basis the Group reported a loss before taxation
of GBP52.5m (2019: profit of GBP47.8m) 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 GBP32.3m to GBP198.1m at December 2020
with headroom from committed bank facilities at the same date
increasing to GBP120.2m (2019: GBP41.7m).
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 GBP4.0m, 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(TM) 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(TM)
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
GBP50m in the first half. Actions taken to defer bonuses, tax
payments and defined benefit pension scheme contributions improved
liquidity by approximately GBP16m in the first half which reversed
in the second half save for around GBP3m, 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 GBP11.8m 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 r evenue was 16% below 2019 at GBP518.2m
(2019: GBP617.1m) and underlying operating profit was GBP40.5m
(2019: GBP66.3m). 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
GBP43.5m (2019: profit of GBP55.6m) due to significant
non-recurring charges of GBP84.0m which are more fully described
below and in note 5. Cash performance was strong with net
borrowings reduced by GBP32.3m in the year.
Acquisitions
The Group acquired Fathom Systems in February for GBP1.2m. 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
Underlying operating Underlying Operating
Revenue profit operating margin (loss) /profit
2020 2019 2020 2019 2020 2019 2020 2019
GBPm GBPm GBPm GBPm % % GBPm GBPm
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 GBP62.2m (20%) lower at
GBP249.4m (2019: GBP311.6m). Subsea projects for offshore wind and
oil & gas were c.GBP70m 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 GBP14.4m lower at GBP10.1m
(2019: GBP24.5m) 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 GBP17.0m and in consideration of the
prospects for dive support vessels, impaired carrying values by
GBP31.6m. 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 GBP130.4m (2019: GBP149.4m) 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 GBP4.4m lower at GBP14.0m (2019:
GBP18.4m) 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 GBP1.6m.
Offshore Oil
Despite the dual challenges of energy prices and Covid-19,
Offshore Oil performed resiliently. Revenue was 12% lower at
GBP78.0m (2019: GBP88.2m) and underlying operating profit was 21%
down at GBP11.2m (2019: GBP14.2m) 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 GBP60.4m (2019:
GBP67.9m). 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 GBP4.0m lower at GBP8.0m (2019: GBP12.0m).
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 GBP11.4m
lower, whereas due to the lack of subsea projects, Marine Support
was GBP14.4m lower. Group underlying operating profit was 39% down
at GBP40.5m (2019: GBP66.3m).
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 GBP20.5m (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 GBP1: $1.29 (2019:
GBP1: $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 GBP84.0m (2019: GBP10.7m) with the majority in
relation to the Marine Support division. A major restructuring in
Marine Support cost GBP3.9m 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
GBP8.0m. In addition, whilst continuing to pursue settlement
vigorously, an impairment provision of GBP19.3m 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 GBP19.4m and a
further GBP31.6m 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 GBP3.3m.
Profit before tax on an underlying basis was GBP31.5m (2019:
GBP58.5m) and on a statutory basis, a loss of GBP52.5m (2019:
profit of GBP47.8m).
Finance charges
Net finance charges were GBP9.0m (2019: GBP7.8m) inclusive of
non-cash charges in respect of pensions and leases of GBP1.9m
(2019: GBP2.0m). Bank related finance charges increased by GBP1.3m
to GBP7.1m (2019: GBP5.8m) 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
GBP7.2m (2019: GBP11.6m) 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 GBP4.8m
(2019: GBP11.1m) as the impairment charges within separately
disclosed items did not benefit from tax relief. The Group paid
GBP7.9m (2019: GBP9.6m) of corporation tax in cash across all of
its jurisdictions. A further GBP28.1m was paid in the UK in respect
of payroll taxes (2019: GBP31.3m).
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 GBP11.8m, which was due to be paid on 11 May 2020,
and subsequently confirmed its cancelation. An interim dividend of
GBP4.0m 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 GBP50m were agreed in the
first half of 2020 increasing total committed facilities to GBP300m
(2019: GBP250m).
In addition, the Group reduced discretionary costs and capital
expenditure and increased the focus on cash collection. Net
borrowings decreased in the year by GBP32.3m to GBP198.1m (2019:
GBP230.4m) and at 31 December 2020, the Group had GBP120.2m (2019:
GBP41.7m) of undrawn committed banking facilities. The ratio of
underlying net borrowings, which excludes right of use operating
leases of GBP23.1m (2019: GBP27.4m), 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 GBP28.3m (2019:
GBP54.8m) 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
2020 2019
GBPm GBPm
-------------------------------- -------- --------
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)
================================ ======== ========
Operating cash flow increased to GBP87.7m
(2019: GBP65.9m) as the 22% reduction
in underlying Ebitda was offset by
a working capital inflow of GBP19.5m
(2019: outflow of GBP21.3m). 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 GBP17.8m (2019: GBP90.2m)
and the Group spent GBP7.1m businesses
acquired or disposed. Fathom was acquired
for GBP1.2m in February 2020 and the
balance was deferred consideration
paid to the vendors of Martek (GBP1.0m),
EDS (GBP2.3m) and businesses now forming
part of JFD (GBP2.7m). Transaction
costs were GBP0.7m and this was offset
by net proceeds from disposals of
GBP1.3m.
The net cash inflow in the year was
GBP38.4m compared to an outflow in
2019 of GBP84.5m and net borrowings
decreased by GBP32.3m to GBP198.1m
(2019: GBP230.4m) inclusive of right-of-use
operating leases.
* Underlying earnings before interest, tax, depreciation and amortisation
(#) Underlying net borrowings before right-of-use operating leases
Pensions
In the year, the Group contributed GBP4.8m (2019: GBP5.0m) into
defined contribution pension schemes through which existing
employees receive pension benefits. The Group has an obligation of
GBP8.8m (2019: GBP0.4m) 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 GBP8.2m with an 88%
funding level. Contributions paid in the year amounted to GBP1.2m
(2019: GBP1.6m).
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 GBP1.5m (2019: GBP5.4m). 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 GBP3.8m (2019:
GBP7.0m).
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, w hilst 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 Before
separately Separately separately Separately
disclosed disclosed disclosed disclosed
items items Total items items Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
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 31 December
2020 2019
GBPm GBPm
(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 GBPm GBPm
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
2019
31 December Restated
2020 (note 9)
Note GBPm GBPm
(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
Total Non-
Share Share Retained Other Treasury shareholders controlling Total
capital premium earnings reserves shares equity interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January
2019 12.6 25.9 267.8 (0.9) (0.4) 305.0 1.4 306.4
IFRIC 23 opening
balance
adjustments - - (1.6) - - (1.6) - (1.6)
Profit for the
year - - 36.7 - - 36.7 - 36.7
Other
comprehensive
income - - 2.2 (7.1) - (4.9) - (4.9)
Contributions by
and
distributions
to owners:
Ordinary
dividends
paid - - (16.4) - - (16.4) (2.0) (18.4)
Non-controlling
interest
dividend
waiver - - (1.7) - - (1.7) 0.8 (0.9)
Acquisition - - - (2.6) - (2.6) 0.6 (2.0)
Share based
payments - - 0.9 - - 0.9 - 0.9
Tax effect of
share
based payments - - 0.2 - - 0.2 - 0.2
Purchase of
shares
by ESOT - - - - (1.1) (1.1) - (1.1)
Notional
purchase
of own shares - - (1.9) - - (1.9) - (1.9)
Arising on the
issue of shares - 0.6 - - - 0.6 - 0.6
Transfer - - (1.5) - 1.5 - - -
Balance at 31
December
2019 12.6 26.5 284.7 (10.6) - 313.2 0.8 314.0
Loss for the
year - - (57.5) - - (57.5) 0.2 (57.3)
Other
comprehensive
income - - (8.7) (5.8) - (14.5) (0.1) (14.6)
Contributions by
and
distributions
to owners:
Ordinary
dividends
paid - - (4.0) - - (4.0) - (4.0)
Dividend paid to
non-controlling
interest - - - - - - (0.2) (0.2)
Remeasurement of
non-controlling
interest put
option - - - (0.1) - (0.1) - (0.1)
Share based
payments - - 0.1 - - 0.1 - 0.1
Tax effect of
share
based payments - - (0.3) - - (0.3) - (0.3)
Purchase of
shares
by ESOT - - - - (0.9) (0.9) - (0.9)
Notional
purchase
of own shares - - (1.0) - - (1.0) - (1.0)
Arising on the
issue of shares - 0.2 - - - 0.2 - 0.2
Transfer - - (0.7) - 0.7 - - -
At 31 December
2020 12.6 26.7 212.6 (16.5) (0.2) 235.2 0.7 235.9
======== ======== ========= ========= ========= ============= ============ =======
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 (GBPm) 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 GBP120.2m of undrawn committed facilities at 31
December 2020 (2019: GBP41.7m) and increased committed facilities
by GBP50m in the year to GBP300m (2019: GBP250m). Revolving credit
facilities of GBP70m 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 GBP115m 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 GBP10m in 2021 and
GBP20m in 2022, adjusted projections showed no breach of covenants.
Additional sensitivities which reduced cash receipts by GBP10m in
2021 and GBP20m in 2022 and delayed project delivery reducing
profit by GBP10m in 2021 and GBP20m in 2022 and deferring debtor
collection by GBP3m in 2021 and by GBP6m 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
GBPm GBPm
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
GBPm GBPm
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
GBPm GBPm
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
GBPm GBPm
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
GBPm GBPm
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, GBP5.5m
of revenue and GBP0.6m 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
GBPm GBPm GBPm GBPm GBPm GBPm
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 GBP398.9m (2019: GBP506.9m), equipment hire of
GBP40.2m (2019: GBP42.6m) and construction contract income of
GBP79.1m (2019: GBP67.6m).
Year ended 31 December
2019
Marine Specialist Offshore
Support Technical Oil Tankships Corporate Total
GBPm GBPm GBPm GBPm GBPm GBPm
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
GBPm GBPm
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 GBP3.9m 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 GBP1.6m which resulted in a loss of
GBP1.2m. The balance includes GBP2.0m in respect of the exchange of
interests in an associate and GBP0.3m relating to cost adjustments
in respect of businesses disposed of in previous years.
(iv) Impairment charges
(a) Intangible assets comprise goodwill of GBP17.0m (2019:
GBP6.0m) and other intangible asset impairments of GBP2.4m (2019:
GBPnil) 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
(GBP10.0m) and James Fisher Testing Services (GBP7.0m) 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 GBP31.6m (2019: GBPnil) 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 GBP6.3m
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
GBPm GBPm
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
GBP0.1m (2019: GBP0.1m) which is stated within the share of
post-tax results of joint ventures.
2020 2019
GBPm GBPm
(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 GBP30.3m (2019: GBP7.3m). 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 Number
of 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
GBPm GBPm
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 pence
share per share GBPm GBPm
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
GBPm GBPm
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
GBPm GBPm GBPm GBPm GBPm
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
GBPm GBPm GBPm GBPm GBPm
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 GBP11.0m (1
January 2019: GBPnil) with a corresponding increase of GBP11.0m 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
GBPm GBPm
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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END
FR DZGMFGGVGMZZ
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March 11, 2021 02:00 ET (07:00 GMT)
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