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