James Fisher and Sons plc (LON:FSJ), the leading marine service provider, announced today its final results for the year ended 31 December 2019.
|Underlying operating profit *||£66.3m||£62.1m||+7%|
|Underlying profit before tax *||£58.5m||£56.1m||+4%|
|Underlying diluted earnings per share *||92.8p||89.5p||+4%|
|Total dividend per share||34.7p||31.6p||+10%|
|Statutory operating profit||£55.6m||£61.4m|
|Statutory profit before tax||£47.8m||£55.4m|
|Statutory diluted earnings per share||72.7p||88.9p|
*excludes separately disclosed items 2019: £10.7m (2018: £0.7m)
- Reported revenue up 10% and up 6% on an organic basis
- Underlying operating profit up 7%, driven by strong Offshore Oil performance
- Investment of £105m in capital and acquisitions
- Total dividend increased by 10%
- Eoghan O’Lionaird appointed as Chief Executive Officer on 1 October 2019
Commenting on the results, Chief Executive Officer, Eoghan O’Lionaird, said:
“Following a strong second half, the Group delivered a 7% increase in underlying operating profit in the full year. A strong recovery in our Offshore Oil division, further progress in Tankships and a broadly similar year-on-year result in Specialist Technical, more than offset a weaker performance in Marine Support. With the offshore renewable energy sector continuing to grow robustly and the oil and gas market for our niche services recovering, the leading position held by a number of our businesses across a broad spread of services in diverse geographical locations underpins the Board’s confidence in the Group’s ability to provide continued growth in shareholder value.”
Following a strong second half I am pleased to report that James Fisher and Sons plc delivered a 4% increase in underlying profit before tax to £58.5m (2018: £56.1m) on revenue that was 10% higher than last year. A strong recovery in our Offshore Oil division, further progress in Tankships and a broadly similar result in Specialist Technical, more than offset a weaker performance in Marine Support.
In a year of transition, the Board was pleased to announce the appointment of Eoghan O’Lionaird as Chief Executive Officer (CEO) on 1 October 2019, replacing Nick Henry, who had led the Group since July 2012. Since joining, Eoghan has demonstrated strong and effective leadership and has commenced a comprehensive review of the Group’s operations. James Fisher has a well-established strategy which aims to deliver long term growth in shareholder value whilst aligning our corporate culture and values with all our stakeholders and the communities in which we operate.
James Fisher and Sons revenue was 10% higher in the year at £617.1m (2018: £561.5m), which included a 3% benefit from businesses acquired and a 1% contribution from foreign exchange movements. After adjusting for currency fluctuations and the impact of businesses acquired in the current and prior year, underlying revenue growth at constant currency was 6%.
Underlying operating profit increased 7% to £66.3m (2018: £62.1m) and adjusted diluted earnings per share increased 4% to 92.8p (2018: 89.5p). Statutory operating profit, which is after separately disclosed items, was £55.6m (2018: £61.4m) following an impairment charge taken in 2019 in respect of the Group’s Murjan business in Saudi Arabia which was acquired earlier in the year. Statutory diluted earnings per share were 72.7p (2018: 88.9p).
The Group’s cash conversion, the percentage of underlying operating profit converted into underlying operating cash was strong at 99% (2018: 157%). Group borrowings increased by £89.4m due to three business acquisitions for £14.4m and capital investment of £90.2m.
The progress of the Group in 2019 and its track record of delivering strong operating cash flow have led the Board to propose a 10% increase in the final dividend to 23.4p per share (2018: 21.3p). Subject to shareholder approval at the Annual General Meeting (AGM), this dividend will be paid on 8 May 2020 to shareholders on the register on 3 April 2020. If approved by shareholders, the total dividend for the year will be 34.7p per share (2018: 31.6p), a 10% increase on 2018.
Our businesses continued to progress well in 2019 with the standout financial performance from Offshore Oil, which increased operating margins from 8.3% to 15.0%, reflecting some recovery in the market and the operational gearing that we are able to generate. Our oil well lift business, RMSpumptools, had a particularly strong year with a noticeable increase in its market share. Fisher Offshore invested in cutting tools for the decommissioning market and won its first significant scope of works in the Middle East.
Tankships continued to produce excellent results and was awarded a five-year contract for the delivery of refueling services to the Royal Navy fleet.
Within Specialist Technical, JFD announced two new contracts to provide deep submergence rescue vehicles for the Republic of Korea Navy and for China Shipbuilding & Offshore International. JFD’s submarine service business successfully carried out two major submarine rescue exercises under its NATO contract and separately for the Royal Australian Navy, from which it also won a four-year contract to build and pressure test cylinders to simulate a submarine hull.
In September, JFD confirmed its market leading position by delivering the world’s first saturation diving products rated to a depth of 500m. The products, which include environmental control systems, gas reclaim and life support, provide the most advanced saturation dive capability in the world. We also invested further in diver training with the purchase of saturation diving equipment in Fort William, Scotland which provides subsea operators with the skills, equipment, and capabilities they need to carry out their work whilst ensuring their safety at all times.
JFD won the Innovation for Safety award at the 2019 Subsea Expo for its Compact Bailout Rebreather Apparatus (Cobra). The system supplies an extended duration of fully independent breathing gas in an emergency scenario, and is designed to be smaller than most bailout systems.
In Marine Support, our ship-to-ship business recovered well from a slow first quarter and produced another impressive financial performance. We are now able to offer a comprehensive service to the offshore wind renewable energy market and we are pleased to have won further phases of work in the UK on East Anglia One, and its first work scopes on Triton Knoll, as well as establishing a service centre in Taiwan. EDS, which provides high voltage connections to this sector had an excellent year serving the London Array windfarm and won a 15 year operations and maintenance contract for the Greater Gabbard offshore wind farm off the coast of Suffolk.
During the year we invested in two saturation diving vessels to respond to the needs of the oil majors, however delivery and maintenance delays have meant that only one of these vessels came into service in the latter part of the year and the other is expected to be deployed in the first quarter of 2020. The division further expanded by acquiring the UK marine safety vessel products business, Martek Marine, in January 2019, and geographically in August with the acquisition of the commercial diving company, SM Continental SA in Brazil.
There have been a number of changes to the Board over the past year. In December 2018, Nick Henry served notice that he intended to retire as CEO by the end of 2019. On behalf of the Nominations Committee, I led a comprehensive executive search process supported by independent recruitment consultants, during which both internal and external candidates were considered. After a series of interviews with all the Directors, the Board unanimously agreed the appointment of Eoghan O’Lionaird as the Group’s new CEO. Eoghan joined the Company at the beginning of September 2019 and was appointed CEO on 1 October 2019 at which point Nick stepped down as a Director of James Fisher and Sons plc. I would like to take this opportunity to thank Nick Henry for his contribution to the development of the Group following the retirement of Tim Harris in 2012. During Nick’s tenure, turnover grew 70% and underlying profit before tax increased 40% which is reflected in a share price that has more than doubled. On behalf of the Board and our shareholders, I would like to thank Nick and wish him every success for the future.
On 28 February 2019, David Moorhouse retired as a Non-Executive Director having served the Company for five and a half years. His contribution to the Board and in particular his knowledge of the marine sector has been of great benefit to the Company. Following David’s retirement, Aedamar Comiskey was appointed as Senior Independent Non-Executive Director.
On 1 March 2019, Dr Inken Braunschmidt joined the Board as an Independent Non-Executive Director. Inken is Chief Innovation and Digital Officer at Halma plc and a member of their Executive Board. I have asked her to take special responsibility for Employee Engagement and she is making a good contribution to our Board discussions.
By the time of the Company’s AGM in April 2020, I will have served as a Director of the Company for a period of nine years, firstly as an independent Non-Executive Director and chair of the audit and remuneration committees, then as Senior Independent Director and since the 2018 AGM, as Chairman. Whilst good corporate governance would suggest that I step down having completed nine years’ service, the Board has requested, and I have agreed, to make myself available for re-election at the 2020 AGM whilst the Senior Independent Non-Executive Director commences a search for a new Non-Executive Chairman. This strategy has been formulated on the basis that my knowledge of the Company and the experience I have gained during my term in office will be of benefit to the new CEO and it would be inappropriate to have a change of CEO and Chairman in a relatively short timescale. This proposal has the support of the Trustees of the Company’s largest shareholder, the Sir John Fisher Foundation.
Our employees remain our most important asset and their hard work continues to be a driving force behind our consistent and strong performance. James Fisher’s success is due to the combined efforts of all of the Group’s employees and I would like to thank them all for their support and hard work.
Summary and Outlook
Following a strong second half, the Group delivered a 7% increase in underlying operating profit in the full year. A strong recovery in our Offshore Oil division, further progress in Tankships and a broadly similar year-on-year result in Specialist Technical, more than offset a weaker performance in Marine Support.
With the offshore renewable energy sector continuing to grow robustly and the oil and gas market for our niche services recovering, the leading position held by a number of our businesses across a broad spread of services in diverse geographical locations underpins the Board’s confidence in the Group’s ability to provide continued growth in shareholder value.