Full Year Results 2010

RNS Number : 9295C

Fisher (James) & Sons PLC

15 March 2011

 



15 March 2011

James Fisher and Sons plc

Full Year Results 2010

James Fisher and Sons plc ("James Fisher"), the leading marine service provider, announces its results for the full year to 31 December 2010.

	2010	2009	change
Group revenue	£268.3m	£249.6m	+ 8%
Underlying operating profit *	£31.1m	£27.9m	+ 11%
Underlying profit before tax *	£27.1m	£24.8m	+ 9%
Underlying diluted earnings per share *	41.9p	37.0p	+ 13%
Final dividend per share	9.7p	8.8p	+ 10%
Statutory profit before tonnage and income tax	£25.9m	£24.7m
Statutory diluted earnings per share	39.7p	37.0p

* before costs of acquisitions and intangible amortisation

Highlights

·   double digit growth in earnings

·   good cash conversion and financial gearing reduced to 85% (2009 : 93%)

·   four bolt-on acquisitions for total consideration of £20.9m

·   robust growth from Specialist Technical increasing profit to £17.6m

·   Offshore Oil seeing increased levels of activity in the UK and Norway

·   42% profit growth in Defence division

Commenting on the results, Executive Chairman, Tim Harris, said:

"2010 was an encouraging year in which the Group demonstrated good growth, a strong operating cash flow and reduced gearing despite challenging conditions. 

Trading to date for 2011 is in line with management expectations.  James Fisher has a proven marine service strategy and track record for achieving organic growth, strong cash generation and successfully finding and integrating "bolt-on" acquisitions.  It continues to be well placed to provide further growth and value for our shareholders."

For further information

James Fisher and Sons plc	Tim Harris Nick Henry Stuart Kilpatrick	Chairman Chief Executive Officer Group Finance Director	020 7614 9508
Financial Dynamics	Richard Mountain Sophie Moate		020 7269 7291

Full year results for the year ended

31 December 2010

Chairman's Statement

Highlights

2010 proved to be a good year for James Fisher with revenue up by 8% to £268.3m, underlying profit¹ before tax increased by 9% and underlying diluted earnings per share was up by 13% over the previous year.  Cash conversion¹ at 116% was particularly strong and by the year end financial gearing was reduced to 85% despite the expenditure of £20.9 m on acquisitions.  The final dividend per share has been increased by 10% to 9.7 pence making a total of 14.7 pence for the year.

Statutory profit before tonnage and income tax was £25.9m (2009: £24.7m) and statutory diluted earnings per share was 39.7 pence (2009: 37.0 pence).

Strategy

Since 2002 the Company has been transformed from a traditional coastal shipping company into the UK's leading marine service business.  In the last six years revenue has increased by £200m representing a compound annual growth rate of 25%.  The strategy which has achieved this has been to concentrate the Company's core expertise of marine engineering and operational skills into growing marine service businesses which are focused on the fast growing global marine markets.  These businesses share certain characteristics - they are niche businesses with margins over 10%, pre tax returns on capital in excess of 15% and are strongly cash generative.  Initially the emphasis was on acquiring small businesses which met these criteria, but in recent years a significant feature of Fisher's progress has been the strong organic growth that its marine service divisions have been able to achieve.  This has come primarily from growth in the emerging markets in the world, particularly in Asia Pacific where the marine service market is vast, fast growing and far from mature.  A growing and positive feature of the Company's development is that we are increasingly winning larger projects by drawing on the wider range of complementary skills held within Group companies.  In a number of cases Group companies are working closely together in the emerging markets, sharing facilities, technology and marketing resources.

James Fisher's successful record confirms that its marine strategy works.  Its strong cash generation suggests that it can continue to grow quickly, making its customary small to medium sized acquisitions from its own resources.

Specialist Technical

2010 underlying profit £17.6m (2009: £16.0m)

Revenue in this division has grown by a compound rate of 65% from £5.8m to £116.6m over the last six years, with the divisional result increasing by 64% compound over the same period to £17.6m in 2010.  This is now the Company's largest and most profitable division.

The specialist mooring equipment and ship to ship oil transfer markets remained strong, despite the anticipated decline in the oil contango market in the second half.  The markets for the design and application of strain gauges were more mixed, with no signs of recovery in the Middle East but more positive developments elsewhere, including in the marine renewable energy market where our expertise is increasingly recognised.  Our nuclear related businesses performed less well than last year.  Budgetary uncertainties from Sellafield and other major nuclear sites played a part in this disappointing performance.

During the year we acquired two Australian businesses in Fremantle, Western Australia - Australian Commercial Marine Pty Ltd and Maritime Engineers Pty Ltd for a total consideration of £4.9m.  These businesses will serve as an additional "spring board" into the fast growing Australian Pacific market wherein we aim to repeat the success that we have enjoyed from our Singapore base.  They are both performing to our expectations at the time of purchase.

A positive feature of the Company's growth is that our individual companies and divisions are increasingly working together, with complementary skills, in developing new markets.  The "CALM" buoy project which took place over the year end is a good example where James Fisher Defence and Fendercare worked together on a £2m Ministry of Defence contract to recover a large submarine buoy and related moorings from the seabed off Toulon.  Few other marine service companies worldwide possess the subsea diving vessel operating, specialist lifting and project management expertise such an exercise required.

In many ways the Specialist Technical division epitomises James Fishers' marine service skills and what their commercial application in the right markets can achieve.  Its growth record from a divisional profit of £0.9m in 2004 to £17.6m in 2010 has been exceptional, particularly because 79% of this has been from organic growth rather than by acquisition.  Our strategy will continue to support this success through further investment.

¹  Cash conversion represents the percentage of underlying operating profit converted into operating cash. Underlying profits are before costs of acquisitions and intangible amortisation.

Offshore Oil

2010 underlying profit £10.9m (2009: £12.5m)

The decline in profitability of this division was predominantly in the first half and was well flagged at the half year.  Our compressor services have proved their resilience in the period of post credit crunch cutbacks in the oil sector, because their primary focus is on production and maintenance rather than exploration.  However, our winch and lifting gear activities are more dependent on the level of expenditure on capital projects which has been lower since 2008.  In Aberdeen in 2010 we did not benefit from the significant winch revenue from the renewables sector which we have enjoyed over the previous two years.  The Norwegian sector was generally slower and we have had the added disadvantage this year of relocating from three separate sites into our new Dusavika works which are now fully functional   These works were refinanced for £17.0m in June 2010 on a 15 year lease agreement based on a yield of c 7.0%.

With the oil price now recovered to 2008 levels, activity is picking up in both the UK and Norwegian sectors of the North Sea and our activities in the new emerging oil markets continue to grow fast and represent a higher proportion of our revenue each year.  To support this growth and recovery in our original markets during the year, we purchased GMC Produkt AS for £11.3m in April and RigCool for £4.4m in September.  Stavanger based GMC Produkt AS has synergies with our existing Norwegian business and will provide greater scale and product range.  Over 50% of RigCool's business, which essentially consists of providing water cooling systems to oil rigs, is in the Asia Pacific region.  Its activities are complementary to our existing Scan Tech Air Supply operation with which it is being merged to provide both management and marketing synergies.

Offshore is a sector in which our marine service skills are very relevant and we have done well by building up a strong market presence in certain specialist sectors.  We shall continue to provide investment to support growth both organically and by "bolt on" acquisitions.

Defence

2010 underlying profit £5.2m (2009: £3.7m)

The divisional profit of £5.2m was over 40% higher than the equivalent result last year.  This encouraging result reflected the world leading position that James Fisher Defence has now reached in the niche business of submarine rescue and related services.  It was achieved without the delivery of a major new system, such as to South Korea in 2008 and to Singapore in 2009, but by the success of a significant number of small to medium sized contracts which we won because we are now the acknowledged experts in the field.  We also benefited from the operating contracts, such as in Singapore and Australia, that we have won in recent years and which are now performing well both operationally and commercially.

We continue to track a number of major national submarine rescue system contracts but the exact timing of their award will always be difficult to predict.  The 2010 result suggests that these major contracts are an opportunity for further incremental profit to supplement the more regular and predictable income stream that we are now achieving.

The recent round of Government expenditure cuts has not so far involved the outsourcing of the remaining specialist ships that the public sector continue to manage.  While this seems inevitable in the longer term because the economics are compelling, the timescale and manner in which it will happen remain uncertain.  We continue to track the opportunities.  In the meantime our joint venture company, Foreland, which has successfully managed the Ministry of Defence's six military roll on roll off ferries since December 2001, continues to perform well in both operational and commercial terms.  In February 2011 Foreland paid us an exceptional dividend of £4.0m as against the more usual £1.2m in 2010.  However, there remains some uncertainty as to the rate at which two of its vessels, whose charters come up for renewal in 2012, will be fixed.

In short, our submarine rescue and related services represent a real and proven opportunity for further growth on the back of an established world leading expertise.  The opportunity for growth from the future outsourcing of public sector vessels is real but much more uncertain although James Fisher, with its marine service skills, is well placed to make the most of opportunities when they occur.

Marine Oil

2010 underlying profit £0.7m (2009: loss of £1.6m)

The return to profit by this division is a step in the right direction but a good deal more remains to be done.  The recovery was due to two main features.  Firstly, we were better able to match our capacity against demand because we sold one vessel, mt Supremity, in May for slightly more than book value and allowed the bareboat charter to lapse for mt Summity and mt Stability in September 2010, saving £1.8m in annual charter hire.  The second factor was a recovery in the market for our smaller vessels which are now trading at pre 2008 levels.  For the larger vessels of 6000+ tonnes, there continues to be an excess of supply over demand and consequently historically low freight rates.  We have the potential to address this issue when the charters for the larger vessels fall due over the next two years in the light of the market conditions then prevailing.

This division has historically proved a useful source of cash, both from operating cash flow and from the sale of vessels.  Our policy is to match the demand of our customers with our fleet capacity which should, in due course, enable us to release more cash and earn profits consistent with those recorded for many years before 2008. Inevitably, given the growth of the Company overall, this division will represent an increasingly smaller proportion of the Group's overall assets employed.

Board and staff

Mike Shields retired as Group Finance Director on 30 November 2010 after over 46 years with the Company.  Rightly this feat was acknowledged by the Financial Times as exceptional service and I would like to thank him, both personally and on behalf of the Company, for his great contribution.  Stuart Kilpatrick was appointed Group Finance Director on Mike's retirement, after an initial period of five months in which to get to know the Company.  Malcolm Paul joined the Board on 1 February 2011 as a non executive director.  Malcolm is a Fellow of the Institute of Chartered Accountants and was a founder and finance director of WSP Group plc between 1987 and 2009.  I would like to welcome both Stuart and Malcolm to the Board, to which there have been no other changes.

There was a net charge of £9.7m to reserves in respect of pension deficits during the year.  This related primarily to the triennial revaluation of the Merchant Navy Officers Pension Fund as noted at the half year, offset by a gain in the second half from a revaluation in pension deficits stemming from higher bond yields and an increase in investment performance.

James Fisher's growth has enabled it to increase its average number of employees by 6% from 1,432 people in 2009 to 1,520 in 2010.  Our strong engineering focus means that we are recruiting young qualified graduates directly from university, around 10 in 2010 alone.  Providing high value added employment and paying the tax revenues, which sustain Government expenditure, is James Fisher's main corporate responsibility achievement.  During 2010 there was no general group pay rise, including directors, and I would like to thank all employees for their contribution in making 2010 a success in quite difficult conditions.

Outlook

2010 proved to be an encouraging year in that the Company was able to demonstrate good growth, a strong cash flow and reduced gearing despite challenging conditions.  Recent problems appear to be receding but are not yet eliminated. In particular Marine Oil returned to profit, the North Sea offshore outlook has improved and the tide of increasing pension deficits may have turned.

Specialist Technical remains the Company's largest division and, in some ways, its main engine.  The formula and outlook remain unchanged - our aim is further organic growth from businesses with a consistently good track record.  There are two notes of caution - in the first half of 2010 we benefited from an exceptionally strong oil contango market which currently does not apply, although our basic ship to ship market remains strong - and there is currently no sign of an uptick for our Nuclear businesses.

For Offshore, an underlying increase in customer activity on both sides of the North Sea is a positive factor which should benefit the year as a whole, although it is uncertain how much of this will fall in the first half.  The prospects for further growth in the emerging markets remain good, as this becomes increasingly the larger part of our offshore business.

In our Defence division our submarine rescue services are well placed to grow further based on the sound reputational platform established in recent years.  There is also considerable scope for expanding into related submarine fields which are not directly related to submarine rescue.  There is little prospect now for profit growth in 2011 from the outsourcing of public sector ship management.  This is a longer term prospect, if at all.

The achievement of historic levels of profitability by the Marine Oil division is considered to be realistic but the timing of its achievement will be determined by when the larger tankships market returns to a better balance and market rates recover.  This has not yet happened and as always in shipping, it is most difficult to predict accurately its precise timing.

The Company benefits from a strong dollar because of its export focus, so any significant weakening of the US dollar is an adverse factor.  We currently have about half of our annual exposure covered at $1.60 to the pound.

Trading to date for 2011 is in line with management expectations.  James Fisher has a proven marine service strategy and track record for achieving organic growth, strong cash generation and finding and integrating successfully "bolt on" acquisitions.  It continues to be well placed to provide further growth and value for our shareholders.

Tim Harris

Chairman

Responsibility Statement of the Directors in respect of the Annual Financial Report

We confirm that to the best of our 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 of the Company and the undertakings included in the consolidation taken as a whole; and

-           the Report of the Directors, Chairman's statement and Review of operations 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 they face.

T C Harris

Chairman

S C Kilpatrick

Group Finance Director

On behalf of the Board of Directors

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2010

		Notes		Year ended			Year ended
			31 December 2010			31 December 2009
				£000			£000
Continuing operations:
Revenue		2		268,349			249,594
Cost of sales				(233,444)			(218,497)
Gross profit				34,905			31,097
Administrative expenses				(9,657)			(7,380)
Trading profit				25,248			23,717
Share of post tax results of associates and joint ventures				4,680			4,183
Analysis of operating profit:
	Underlying operating profit			31,115			27,933
	Acquisition costs			(1,010)			-
	Intangible amortisation			(177)			(33)
Operating profit				29,928			27,900
Finance income				256			228
Finance costs				(4,243)			(3,386)
Analysis of profit before tonnage and income tax:
	Underlying profit before tax			27,128			24,775
	Acquisition costs			(1,010)			-
	Intangible amortisation			(177)			(33)
Profit before tonnage and income tax		2		25,941			24,742
Tonnage tax				(24)			(25)
Income tax		4		(6,085)			(6,293)
Total tonnage and income tax				(6,109)			(6,318)
Profit for the year				19,832			18,424
Earnings per share
				pence			pence
Basic		5		39.9			37.1
Diluted		5		39.7			37.0

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2010

	Notes		Year ended		Year ended
		31 December 2010		31 December 2009
			£000		£000
Profit for the year			19,832		18,424
Other comprehensive income
Exchange differences on translation of foreign operations			3,216		1,275
Net loss on hedge of net investment in foreign operations			(430)		(1,283)
Exchange gains transferred to income statement on disposal of subsidiary assets			2		(195)
Effective portion of changes in fair value of cash flow hedges			(1,577)		(60)
Effective portion of changes in fair value of cash flow hedges in associates and joint ventures			429		730
Net changes in fair value of cash flow hedges transferred to profit or loss			455		4,624
Defined benefit plan actuarial losses			(9,749)		(5,839)
Income tax on other comprehensive income	4		4,125		455
Other comprehensive income for the period, net of income tax			(3,529)		(293)
Total comprehensive income for the period attributable to equity holders of the parent			16,303		18,131

CONSOLIDATED BALANCE SHEET

As at 31 December 2010

	Notes	31 December 2010		31 December 2009
			£000		£000
Assets
Non current assets
Goodwill and other intangible assets			89,274		73,438
Property, plant and equipment			104,683		111,086
Investment in associates and joint ventures			11,693		8,978
Available for sale financial assets			1,370		1,370
Deferred tax assets			3,689		-
			210,709		194,872
Current assets
Inventories			32,583		28,441
Trade and other receivables			61,416		50,760
Derivative financial instruments			3		170
Cash and short term deposits			16,590		20,563
Assets classified as held for sale			-		1,375
			110,592		101,309
Total assets			321,301		296,181
Equity and liabilities
Capital and reserves
Called up share capital			12,466		12,456
Share premium			24,700		24,576
Treasury shares			(579)		(768)
Other reserves			6,032		3,937
Retained earnings			75,146		66,877
Total equity			117,765		107,078
Non current liabilities
Other payables			831		934
Retirement benefit obligations	7		29,786		22,361
Cumulative preference shares			100		100
Loans and borrowings			111,573		109,490
Deferred tax liabilities			604		1,147
			142,894		134,032
Current liabilities
Trade and other payables			45,695		39,640
Current tax			8,490		4,706
Derivative financial instruments			1,211		230
Loans and borrowings			5,246		10,495
			60,642		55,071
Total liabilities			203,536		189,103
Total equity and liabilities			321,301		296,181
These accounts were approved by the board of directors on 14 March 2011 and signed on its behalf by:
TC Harris
Executive Chairman

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2010

	Notes	31 December 2010		31 December 2009
			£000		£000
Cash flow from operating activities	3		28,108		24,229
Investing activities
Dividends from associates and joint venture undertakings			2,804		2,286
Proceeds from the sale of property, plant and equipment			8,229		531
Proceeds from the sale of trade and assets of subsidiary net of cash disposed of			-		1,040
Finance income			256		228
Acquisition of subsidiaries, net of cash acquired			(17,468)		(4,540)
Proceeds from the sale of business			13,698		-
Acquisition of Norway property			(5,940)		(5,223)
Acquisition of property, plant and equipment			(17,789)		(13,891)
Acquisition of investment in associates and joint ventures			(20)		(2,102)
Development expenditure			(1,429)		-
Cash flows used in investing activities			(17,659)		(21,671)
Financing activities
Proceeds from the issue of share capital			134		162
Preference dividend paid			(3)		(4)
Finance costs			(4,735)		(3,543)
Proceeds from other non-current borrowings			33,425		38,840
Purchase less sales of own shares by ESOP			(180)		(31)
Capital element of finance lease repayments			(195)		(69)
Repayment of borrowings			(38,239)		(26,717)
Dividends paid			(6,879)		(6,672)
Cash flows from financing activities			(16,672)		1,966
Net (decrease)/increase in cash and cash equivalents			(6,223)		4,524
Cash and cash equivalents at 1 January 2010			20,563		16,859
Net foreign exchange difference			2,250		(820)
Cash and cash equivalents at 31 December 2010			16,590		20,563

CONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITY

For the year ended 31 December 2010

For the year ended 31 December 2010
	Capital						Attributable to equity holders of parent
													Total
	Share		Share				Retained		Other		Treasury		shareholders
	capital		premium				earnings		reserves		shares		equity
	£000		£000				£000		£000		£000		£000
At 1 January 2010	12,456		24,576				66,877		3,937		(768)		107,078
Profit for the period	-		-				19,832		-		-		19,832
Other comprehensive income for the period	-		-				(5,624)		2,095		-		(3,529)
Contributions by and distributions to owners
Ordinary dividends paid	-		-				(6,879)		-		-		(6,879)
Share-based compensation	-		-				1,309		-		-		1,309
Arising on the issue of shares	10		124				-		-		-		134
Purchase of shares	-		-				-		-		(180)		(180)
Transactions with shareholders	10		124				(5,570)		-		(180)		(5,616)
Transfer on disposal of shares	-		-				(369)		-		369		-
At 31 December 2010	12,466		24,700				75,146		6,032		(579)		117,765
For the year ended 31 December 2009
	Capital						Attributable to equity holders of parent
	Share		Share				Retained		Other		Treasury		Total
	capital		premium				earnings		reserves		shares		shareholders
													equity
	£000		£000				£000		£000		£000		£000
At 1 January 2009	12,438		24,432				60,370		(1,154)		(1,036)		95,050
Profit for the period	-		-				18,424		-		-		18,424
Other comprehensive income for the period	-		-				(5,384)		5,091		-		(293)
Contributions by and distributions to owners
Ordinary dividends paid	-		-				(6,672)		-		-		(6,672)
Share-based compensation	-		-				438		-		-		438
Arising on the issue of shares	18		144				-		-		-		162
Purchase of shares	-		-				-		-		(31)		(31)
Transactions with shareholders	18		144				(6,234)		-		(31)		(6,103)
Transfer on disposal of shares	-		-				(299)		-		299		-
At 31 December 2009	12,456		24,576				66,877		3,937		(768)		107,078
Other reserve movements
Other reserves									Translation		Hedging		Total
									reserve		reserve
									£000		£000		£000
At 1 January 2009									5,100		(6,254)		(1,154)
Other comprehensive income for the period									(203)		5,294		5,091
At 31 December 2009									4,897		(960)		3,937
Other comprehensive income for the period									2,788		(693)		2,095
At 31 December 2010									7,685		(1,653)		6,032

NOTES TO THE PRELIMINARY RESULTS

1.         General information

Basis of preparation of group accounts

In accordance with EU law (IAS Regulation EC 1606/2002), the preliminary results have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use in the EU as at 31 December 2010 (adopted IFRS), International Financial Reporting Interpretations Committee (IFRIC) interpretations and those part of the Companies Act 2006 applicable to companies reporting under IFRS.

The accounting policies are consistent with those presented in the annual report for 2009 with the exception of the new policies given below.

In the current financial year the following new statements have been adopted for the first time;

IFRS 3 (2008)          Business combinations

                              Improvements to IFRS 2009

Amendments to existing standards:

IAS 27                    Consolidated and Separate Financial Statements

IFRS 2                    Amendment for Group Cash Settled Share Based Payments

Interpretations:

IFRIC 15                  Agreements for construction of Real Estate

IFRIC 16                  Hedges of a net investment in a foreign operation

IFRIC 17                  Distribution of non cash assets to owners

IFRIC 18                  Transfers of assets from customers

The adoption of these standards and interpretations had no impact on the Group other than those set out below.

IFRS 3 (2008)          Business combinations

The Group is now required to expense to the income statement all direct costs relating to business combinations. Previously these costs were capitalised and included in the calculation of goodwill. This change applies to all acquisitions made on or after 1 January 2010.There is no requirement to apply these changes retrospectively to earlier acquisitions and consequently no restatement is required in respect of earlier acquisitions. The costs charged to the income statement in 2010 in relation to business combinations are treated as separately disclosed items on the face of the consolidated income statement.   Contingent consideration is recognised at fair value at the acquisition date.  If the contingent consideration is classed as equity it is not remeasured and settlement is accounted for within equity.  In all other cases changes in the fair value of contingent consideration are recognised in profit or loss.  The impact on earnings per share is disclosed in note 5.

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing the financial statements.

The Group financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2010 or 2009. Statutory accounts for 2009 have been delivered to the registrar of companies, and those for 2010 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2010.

The annual report and accounts for the year ended 31 December 2010 will be posted to shareholders in early April 2011.

The results were approved by the Board of Directors on the 14 March 2011.

Acquisitions

On 1 March 2010 the Group purchased the business and property leases of Australian Commercial Marine Pty Limited (ACM) based in Perth, Australia for £3.4m in cash including costs.  ACM provides marine equipment to commercial shipping, port and offshore industries.

On 29 April 2010, GMC Produkt AS (GMC) was acquired for £11.3m inclusive of costs.  GMC is based in Stavanger, Norway and provides lifting equipment, cranes, winches, spooling and related services to the local offshore, rig and oilfield service markets.

On 23 September 2010 the Group acquired RigCool Limited, based in Aberdeen, UK and RigCool Australia Pty Limited, based in Perth, Australia for £4.4m including acquisition costs.  The RigCool companies test out pumps, high tech nozzles and piping together with manpower support to protect drilling rigs during well testing operations.

On 3 December 2010 the Group acquired Maritime Engineers Pty Limited (Maritime) for £1.5m inclusive of costs.  Maritime is a leading marine engineering, consultancy and inspection company providing its services to commercial and naval ships, offshore energy and to the financial services sector.

A summary of the effect of acquisitions is as follows:

	£'000
Fair value of assets acquired	5,493
Goodwill	12,996
	18,489
Satisfied by:      Cash	18,410
Contingent consideration	79
	18,489
The impact on net debt in respect of acquisitions comprised:
Cash consideration	18,410
Net debt acquired	1,501
Acquisition costs	1,010
	20,921

Disposals

On 26 June 2010 Scan Tech Eiendom AS ("STE") was sold for £17.0m.  STE was a property company which owns the premises occupied under a 15 year lease by the Group's Scan Tech AS business based in Stavanger, Norway.

Taxation

The effective tax rate on profit before tax, intangible amortisation and acquisition costs is 22.7% (2009: 25.5%).  Including the impact of intangible amortisation, acquisition costs and grossing up for tax incurred by joint ventures and associates, the overall tax rate was 23.2% (2009: 25.7%).

This lower than standard rate is due to the element of Group profit derived from overseas and the Marine Oil Services business only incurring a nominal levy due to the UK Tonnage Tax regime.  There is no provision for deferred tax on accelerated capital allowances for activities which fall within tonnage tax. 

Dividends

The Board are recommending a final dividend for the year of 9.7p per share (2009: 8.8p per share), making a total for the year of 14.7p per share (2009: 13.6p per share).  This represents an increase of 8% on 2009.  The final dividend will be paid on 13 May 2011 to shareholders on the register on 15 April 2011.  Dividend cover was 2.8 times (2009: 2.7 times).

Cash Flow and borrowings

The Group is focused on achieving a balance between investing for future growth either organically or from investment in new businesses and maximising its cash generation.  Net borrowings increased by £0.8m in the year as £28.1m was generated from operating activities which was utilised on investing activities (£17.8m), interest paid (£4.5m) and dividends to shareholders (£6.9m).  At 31 December 2010, the ratio of net borrowings (including guarantees) : earnings before interest, tax, depreciation and amortisation (EBITDA) was 2.5 times (2009: 2.6 times).

Net gearing, the ratio of net debt to equity was 85% (2009: 93%).  The majority of James Fisher's borrowing is with a small group of relationship banks that provide bilateral facilities on an unsecured basis over a 3-5 year term.  The Group's interest cost increased by £0.8m in the year as the more recently agreed loan facilities bear higher margins than those loans that they have replaced.

At 31 December 2010, the Group had £33.1m (2009: £23.6m) of undrawn facilities which £26.1m (2009: £23.6m) were committed.

Principal Risks and Uncertainties

This section sets out a number of the risks which could affect the business operations and results of the Group.

Reputational risks for operational incidents

The results of the Group are reliant to a degree on the maintenance by the various businesses of high reputations with their customers.  The Group places a particular emphasis on the safety and security of operations but notwithstanding this, it is possible that an adverse operational incident may occur, which could in turn damage the Group's reputation.

World Economic Outlook

Demand for the Group's products and services is inevitably a factor of wider economic conditions.  During an economic slowdown it is possible that demand for certain products and services provided by the Group may reduce. This risk is mitigated to a degree by the diverse nature of the Group's businesses and its expanding geographical spread. Furthermore the current economic environment may increase the risk that parties with whom the Group trades become unable to meet their commitments to the Group.  The Group seeks to manage this risk by performing credit checks and taking third party comfort, including guarantees, where appropriate.

Product Liability

The Group is involved in the design, manufacture and sale or hire of various items such as engineering tools, software and electronics.  It is possible that the Group may become liable for losses which are incurred by customers and others in the event that any such product does not meet the agreed specifications or other quality requirements.  The Group seeks to limit the impact of this risk through its quality assurance processes by negotiating appropriate limits on its liability to customers and also through its insurance policies.

Integration Benefits

The Group continues to experience growth and development through acquisitions.  Integrating the operations and personnel of acquired businesses is a complex process and there is a risk that the anticipated benefits of the acquisition may not be realised in their entirety, or may be realised over a longer time span than originally envisaged.  Where appropriate, the Group manages this risk through the formation of an integration committee comprised of senior managers from across the Group with significant experience of the underlying businesses, drawing on external advice and support as appropriate.

Recruitment and retention of talent

The success of the Group is dependent to a significant degree upon the skills and motivation of its workforce, including its senior management team.  There is a risk that if the Group loses, or fails to attract personnel of the requisite calibre, that this could have an adverse impact on the performance of the business.  The risk is mitigated through the application of appropriate remuneration incentives and the implementation of skills development initiatives, designed to assist in making the Group an attractive environment in which to work.

Legislation and regulation

The businesses conducted by the Group are subject to numerous laws and regulations, both in the United Kingdom and overseas, which regulate matters including safety procedures, employment requirements, taxation, environmental procedures and other operating issues.  Failure to comply with such laws and regulations may harm the business or the Group's reputation.  The Group draws upon the expertise of various professionals, both within and outside the business, in order to seek to ensure compliance with such provisions.

Competitive pressures

In common with other markets our businesses compete with others on price and service, and these markets are subject to cycles determined by the balance between supply and demand.  There exists a risk that over-tonnaging may occur in the shipping markets in which the Marine Oil division operates and given the ease with which, for example, shipping assets may be moved from one geographical market to another, no regional or local market can be totally isolated from the influence of over-tonnaging in other markets should it occur.  The global supply of tonnage makes it difficult to predict over-tonnaging in any particular local market with any accuracy.  There are however, high barriers of entry to the contract of affreightment business with the oil majors, with vigorous vetting procedures.

Pensions

The Group contributes to a number of defined benefit pension schemes. There is a risk that changes in the market conditions for bond yields and equities and changes in the actuarial assumptions (eg on life expectancy), may result in an increase in the deficits in any of such schemes from time to time.  There is further risk that the Group could be obliged to fund additional liabilities of the industry wide schemes, the Merchant Navy Officers Pension Fund and the Merchant Navy Ratings Pension Fund, in addition to the liabilities in respect of its own employees, in relation to any other employee(s) unconnected to the Group whose employer has become insolvent. 

Financial

The Group is exposed to interest rate risk and foreign exchange risk which it seeks to manage, where appropriate, via hedging arrangements.  Furthermore the loan facilities entered into by the Group include a number of financial covenants.  Breach of these covenants would constitute events of default under such facilities which might result in these borrowings becoming immediately repayable.  Recent events in the financial markets have demonstrated the risks associated with credit and liquidity.  The Group continues to be proactive in managing these risks, both fostering existing and developing new relationships with lenders.

2.   Segmental Information

            Operating segments

            The following tables present revenue and profit and certain asset and liability information regarding the Group's operating segments for the years ended 31 December 2010 and 2009. 

Year ended
31 December 2010		Continuing operations
		Specialist	Offshore Oil			Defence		Marine		Corporate*		Total
		Technical		Services				Oil
		Services
		£000		£000		£000		£000		£000		£000
Segmental revenue		120,493		58,729		21,363		71,857		-		272,442
Inter segment sales		(3,826)		(189)		(78)		-		-		(4,093)
Group  revenue		116,667		58,540		21,285		71,857		-		268,349
Underlying operating profit		17,652		10,926		5,195		680		(3,338)		31,115
Acquisition costs		(406)		(604)		-		-				(1,010)
Intangible amortisation		(61)		(116)		-		-				(177)
Profit from operations including results of associates and joint ventures		17,185		10,206		5,195		680		(3,338)		29,928
Finance income												256
Finance costs												(4,243)
Profit  before tonnage and income tax												25,941
Tonnage and income tax												(6,109)
Profit attributable to equity holders												19,832
Share of post tax results of associates and joint ventures		1,688		-		2,992		-		-		4,680
Assets & liabilities
Segment assets		108,581		112,541		18,268		68,618		1,600		309,608
Investment in joint ventures		4,017		-		7,676		-		-		11,693
Total assets												321,301
Segment liabilities		(18,742)		(10,797)		(3,839)		(20,436)		(149,722)		(203,536)
Other segment information
Capital expenditure:
Property, plant & equipment		8,050		19,180		756		1,758		9		29,753
Depreciation		1,911		4,761		320		4,168		176		11,336
Amortisation of Intangible assets		61		116		-		-		-		177
												11,513
* corporate assets comprise available for sale assets, deferred tax and centrally held corporate assets
* corporate liabilities comprise Bank loans, pension schemes and corporate and deferred tax liabilities

Year ended
31 December 2009		Continuing operations
		Specialist	Offshore Oil			Defence		Marine		Corporate*		Total
		Technical		Services				Oil
		Services
		£000		£000		£000		£000		£000		£000
Revenue
Segmental revenue		107,261		48,163		27,164		71,123		-		253,711
Inter segment sales		(3,833)		(4)		(280)		-		-		(4,117)
Group  revenue		103,428		48,159		26,884		71,123		-		249,594
Underlying operating profit		16,013		12,519		3,657		(1,593)		(2,663)		27,933
Intangible amortisation		(30)		(3)		-		-				(33)
Profit from operations including results of associates and joint ventures		15,983		12,516		3,657		(1,593)		(2,663)		27,900
Finance income												228
Finance costs												(3,386)
Profit  before tonnage and income tax												24,742
Tonnage and income tax												(6,318)
Profit attributable to equity holders												18,424
Share of post tax results of associates and joint ventures		1,713		-		2,470		-		-		4,183
Assets & liabilities
Segment assets		90,386		98,133		14,809		77,318		5,182		285,828
Investment in joint ventures		2,883		-		6,095		-		-		8,978
Non-current assets classified as held for sale		-		1,375		-		-		-		1,375
Total assets												296,181
Segment liabilities		(18,475)		(7,414)		(2,352)		(14,098)		(146,764)		(189,103)
Other segment information
Capital expenditure:
Property, plant & equipment		4,240		13,085		1,298		710		159		19,492
Depreciation		1,421		3,514		216		4,761		204		10,116
Amortisation of Intangible assets		30		3		-		-		-		33
												10,149
* corporate assets comprise available for sale assets, deferred tax and centrally held corporate assets
* corporate liabilities comprise Bank loans, pension schemes and corporate and deferred tax liabilities

Geographical segments

The following table represents revenue, expenditure and certain asset information regarding the Group's geographic presence for the years ended 2010 and 2009.

Geographical revenue is determined by the location in which the product or service is provided. The geographical allocation of segmental assets and liabilities is determined by the location of the attributable business unit.

	UK & Ireland				Norway				Rest of the World				Total
	2010		2009		2010		2009		2010		2009		2010		2009
	£000		£000		£000		£000		£000		£000		£000		£000
Revenue
Segmental revenue	135,745		137,983		29,240		22,235		107,457		93,493		272,442		253,711
Inter-segment sales	(4,093)		(4,117)		-		-		-		-		(4,093)		(4,117)
Segmental revenue	131,652		133,866		29,240		22,235		107,457		93,493		268,349		249,594
Segment assets	86,822		67,194		21,885		15,568		15,007		17,172		123,714		99,934
Investment in associates and joint ventures	5,319		4,231		-		-		6,374		4,747		11,693		8,978
Financial assets	1,370		1,370		-		-		-		-		1,370		1,370
Other non current assets	125,749		135,936		45,573		43,732		13,202		4,856		184,524		184,524
Assets classified as
held for sale	-		1,375		-		-		-		-		-		1,375
													321,301		296,181

3.      Operating cash flow

			31 December 2010		31 December 2009
				£000		£000
Profit before tax from continuing operations				25,941		24,742
Adjustments to reconcile Group profit before tax to net cash flows
Depreciation and amortisation				11,336		10,116
Acquisition costs and amortisation of intangibles				1,187		33
(Profit)/loss on sale of property, plant and equipment				(389)		388
Loss/(profit) on disposal of trade and assets of subsidiary				15		(160)
(Profit)/loss on ship disposals				(223)		14
Finance income				(256)		(228)
Finance costs				4,243		3,386
Exchange gain on loans				(50)		(150)
Share of post tax results of associates and joint ventures				(4,680)		(4,183)
Share based compensation				1,309		438
Increase in trade and other receivables				(6,927)		(1,695)
Increase in inventories				(2,462)		(7,318)
Decrease in inventories and other receivables attributable to submarine rescue vessels				612		14,044
Increase/(decrease) in trade and other payables				7,579		(6,474)
Additional defined benefit pension scheme contributions				(3,856)		(3,069)
Cash generated from operations				33,379		29,884
Cash outflow from acquisition costs				(1,010)		-
Income tax payments				(4,261)		(5,655)
Cash flow from operating activities				28,108		24,229

4.      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 as follows:		2010		2009
		£000		£000
Current tax:
UK corporation tax		(5,135)		(3,902)
Tax overprovided in previous years		-		194
Foreign tax		(1,883)		(2,387)
Total current tax		(7,018)		(6,095)
Deferred tax:
Origination and reversal of timing differences		933		(198)
Total taxation on continuing operations		(6,085)		(6,293)
The total tax charge in the income statement is allocated as follows:
		2010		2009
		£000		£000
Taxation expense reported in group income statement		6,085		6,293
Share of joint ventures' current tax		256		94
Total tax expense		6,341		6,387

         Income tax on comprehensive income

		2010		2009
		£000		£000
Current tax:
Current tax on foreign exchange profits on internal loans		(186)		(224)
Current tax on contributions to defined benefit pension schemes		539		208
Deferred tax:
Deferred tax relating to the actuarial gains and losses on defined benefit pension schemes		3,426		471
Deferred tax relating to share based payments		9		-
Deferred tax relating to fair value of derivatives		337		-
		4,125		455

Reconciliation of effective tax rate

The tax on the Group's profit on continuing activities differs from the theoretical amount that would arise using the rate applicable under UK corporation tax rules as follows:

						2010		2009
						£000		£000
Profit before tax from continuing operations						25,941		24,742
Tax arising on interests in joint ventures						256		94
						26,197		24,836
At UK statutory tax rate of 28% (2009: 28%)						7,335		6,954
Difference due to application of tonnage tax to all vessel disposals and operating activities						583		1,134
Expenses not deductible for tax purposes						257		40
Chargeable gains						-		6
Over provision in previous years
	Current tax					-		(194)
	Deferred tax					(560)		(168)
Share based payments						151		(185)
Lower taxes on overseas income						(1,166)		(1,140)
Research and development relief						(105)		-
Utilisation of losses brought forward						(112)		-
Impact of change of rate						(28)		-
Other						(14)		(60)
						6,341		6,387

         Deferred tax at 31 December relates to the following:

		Balance sheet				Income statement
		2010		2009		2010		2009
		£000		£000		£000		£000
Deferred tax assets
Retirement benefits		6,259		2,112		682		112
Share based payments		482		331		151		244
Derivative financial instruments		337		-		-		-
		7,078		2,443
Deferred tax liabilities
Property plant and equipment		(3,088)		(3,287)		199		(502)
Intangible assets		(1,259)		(546)		(72)		(140)
Other items		354		243		(27)		88
		(3,993)		(3,590)
Deferred income tax charge						933		(198)
Net deferred income tax asset/(liability)		3,085		(1,147)

5.      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.

At 31 December 2010 536,000 options (2009: 724,000) were excluded from the diluted weighted average number of ordinary shares calculation as their effect would have been 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.

The calculation of basic and diluted earnings per share is based on the following profits and numbers of shares:

						2010		2009
						£000		£000
Profit on continuing activities attributable to equity holders						19,832		18,424
Weighted average number of shares
						2010		2009
						Number of		Number of
						shares		shares
For basic earnings per ordinary share*						49,693,215		49,604,476
Potential exercise of share options and LTIPs						307,411		184,300
For diluted earnings per ordinary share						50,000,626		49,788,776

*        Excludes 126,698 (2009:169,068) shares owned by the James Fisher and Sons Public Limited Company Employee Share Ownership Trust.

		2010				2009
		£000		pence		£000		pence
Basic earnings per share on profit from operations		19,832		39.9		18,424		37.1
Diluted earnings per share on profit from operations		19,832		39.7		18,424		37.0

Adjusted earnings per share

The basic earnings per share on continuing activities before acquisition expenses and amortisation of intangibles is shown to highlight the underlying earnings trend and is calculated using the number of shares outlined in the table above.

		2010				2009
		£000		pence		£000		pence
Basic earnings		19,832		39.9		18,424		37.1
Adjustments:
Acquisition expenses		1,010		2.0		-		-
Amortisation of intangible assets net of tax		127		0.3		24		-
Basic adjusted earnings		20,969		42.2		18,448		37.1
Diluted earnings		19,832		39.7		18,424		37.0
Adjustments:
Acquisition expenses		1,010		2.0		-		-
Amortisation of intangible assets net of tax		127		0.2		24		-
Diluted adjusted earnings		20,969		41.9		18,448		37.0

6.      Dividends paid and proposed

						2010		2009
						£000		£000
Declared and paid during the year
Equity dividends on ordinary shares:
Final dividend for 2009 8.80p (2008 8.65p)						4,385		4,305
Interim dividend for 2010 5.04p (2009 4.80p)						2,511		2,390
Less dividends on own shares held by ESOP						(17)		(23)
						6,879		6,672
Proposed for approval at Annual General Meeting (not recognised as a liability at 31 December)
Equity dividends on ordinary shares:
Final dividend for 2010 9.68p (2009 8.80p)						4,815		4,370

            The ordinary final dividend will be paid on 13 May 2011 to those shareholders registered in the books of the Company at the close of business on 15 April 2011.

7.      Retirement benefit obligations

         The Retirement benefit obligations included in the Group balance sheet relate to The James Fisher and Sons Public Limited Company Pension Fund for Shore Staff, (shore staff); together with the Group's obligations to the Merchant Navy Officers Pension Fund (MNOPF), an industry wide scheme which is also accounted for as a defined benefit scheme. The Company has obligations under the shore staff and under the MNOPF scheme, the balance of which relates to its subsidiary, FT Everard & Sons.

During 2010 the Group acquired GMC Produckt AS (GMC). This company has two defined benefit schemes. These are included in the table below at their fair value based on an actuarial valuation as at 31 December 2010.

The Group's obligations in respect of its pension schemes at 31 December 2010 were as follows:

					2010		2009
					£000		£000
Shore staff pension scheme					(9,137)		(14,209)
MNOPF pension scheme					(20,662)		(8,152)
GMC pension scheme					13		-
					(29,786)		(22,361)

         Details of the schemes operated by the Group are as follows:

         James Fisher and Sons Public Limited Company Pension Fund for Shore Staff

         Following a decision in 2005, this Scheme closed to existing members on 31 December 2010.  The deficit at 31 December 2010 incorporates the latest full actuarial valuation of the shore staff scheme carried out at 1 August 2007, rolled forward to 31 December 2010.

         A new valuation has been carried out at 1 August 2010 but this has not been finalised at the balance sheet date.

         In 2010 the Company contributed 14.4% (2009: 14.4%) of pensionable pay plus regular contributions of £99,667 (2009: £99,667) per month into the shore staff scheme.  Contributions will continue at this level in 2011.

         Merchant Navy Officers Pension Fund

In 2005 the High Court established that former as well as existing employers are liable to make payments in respect of the funding deficit of the MNOPF. The Company was informed by the Trustees as to the level of annual payments it will be required to make into the fund over a period of ten years commencing October 2005 representing its share of the deficit disclosed in the initial actuarial valuation carried out as at 31 March 2003 of £193.5m. Since that date further adjustments have been made arising from the acquisition of FT Everard in December 2006; a reallocation of the 2003 deficit arising from an anticipated shortfall of receipts from existing contributors in February 2007 and following the incorporation of the valuation of the scheme as at 31 March 2006 when an additional £151.0m liability was recognised.

In 2010 the results of the latest financial valuation of the scheme were advised to members.  As a result of the incorporation of the Group's share of the increase in the scheme deficit of £390.0m the Group will be required to make payments of £3,031,000 in the financial year ended 31 December 2011.

The total amount paid by the Group to the MNOPF in 2010 was £2,660,000 (2009: £1,873,000).

8.      Related party transactions

         Details of the transactions carried out with related parties are shown in the table below.

				Services to		Sales to		Purchases		Amounts		Amounts
				related		related		from		owed by		owed to
				parties		parties		related		related		related
								parties		parties		parties
				£000		£000		£000		£000		£000
Foreland Shipping Limited		2010		491		-		-		42		-
		2009		401		-		-		30		-
FCM businesses		2010		-		1,904		-		361		222
		2009		-		1,578		-		597		-
Everard Insurance Brokers		2010		93		-		1		7		-
		2009		110		-		16		29		-
First Response Marine		2010		2,677		-		26		614		-
		2009		1,292		19,715		-		2,206		-

         No provision for bad debts has been made in respect of these balances (2009 £nil). No bad debts arose during the period relating to these transactions (2009 £nil).

         F M Everard is a non executive director of the Company. He was also chairman of Cattedown Wharves Limited, a wholly owned subsidiary, until 1 January 2010. In 2009 he received an annual remuneration of £18,250 which ceased on his resignation.

         All transactions with related parties are priced on an arms length basis on terms equivalent to those provided to wholly external parties.

        
The Company is responsible for the provision of services to Foreland Shipping Limited but does not engage in any other transactions with parties who are not wholly owned subsidiaries.

         Foreland Shipping Limited

         The Group provides payroll management services to Foreland Shipping Limited, a wholly owned subsidiary of Foreland Holdings a company in which the Group has a 25% equity interest. No profit is made on the provision of these services which are excluded from the Group's revenue.

         FCM businesses

         The Group has interests of between 25% and 50% in several joint ventures providing ship to ship transfer services in West Africa, Northern Europe and Asia through its wholly owned subsidiary, Fender Care Marine Services Limited.

         Everard Insurance Brokers

         FT Everard and its subsidiaries purchased insurance services from Everard Insurance Brokers Limited, (EIB). EIB is a wholly owned subsidiary of Alchymist Trading Company Limited, (Alchymist) a company controlled by Mr F M Everard and members of his family. Everard also provides accommodation and management services to Alchymist and EIB. The Group continued to receive insurance services from EIB in respect of claims prior to the date of acquisition, and to provide accommodation and management services, including the provision of payroll management services. No amounts are due to/from Alchymist.

         First Response Marine

         The Group holds through its James Fisher Marine Services subsidiary (JFMS) a 50% interest in First Response Marine Pte Ltd (FRM). FRM provides submarine rescue services to the Singapore government under a 20 year service contract which commenced in March 2009. Included in the contract is the provision of a submarine rescue vessel acquired by FRM from JFMS. FRM subcontracts part of the provision of the submarine rescue service to JFMS and its subsidiary James Fisher Singapore Pte Ltd. JFMS has also provided a loan to FRM of SG$3,624,000 (£1,806,000) to support its day to day operations. The loan which is included in the Group balance sheet as part of the investment in joint ventures is interest bearing and is repayable at the end of the project. Interest charged in the period amounted to £111,000 (2009: £50,000). Dividends received or receivable during the period included in the results of the Group are SG$912,500 (£438,000) (2009: SG$450,000 (£198,000)).  

9.      The AGM will be held at 12.00 noon, Thursday 5 May 2011 at the Abbey House Hotel, Abbey Road, Barrow in Furness, Cumbria.

10.     Report and accounts will be posted to members in early April 2011.  Copies will be made available to members of the public at Fisher House, PO Box 4, Barrow in Furness, Cumbria, LA14 1HR.

11.     The preliminary statement was approved by the Board of Directors on 14 March 2011.

 

END

 

 

FR BCGDXUXBBGBS