27th Mar 2007 07:02
Fisher (James) & Sons PLC27 March 2007 27 March 2007 James Fisher and Sons plc ("James Fisher" or "the Company") Preliminary Results James Fisher, the marine services provider, announces Preliminary Results forthe year ended 31 December 2006. 2006 was a productive and successful year for the Group, with profit from thecontinuing activities before separately disclosed items and tax of £15.9 million(2005 - £11.2 million). Over 70% of the Group's segmental profit from continuingoperations is now generated by Marine Support Services activities. Financial Highlights % 2006 2005• Group Revenue +29% £118.1m £91.4m• Profit from continuing activities before separately disclosed items and tax +42% £15.9m £11.2m• Basic earnings/(loss) per share 28.09p (4.50p)• Basic earnings per share after adjustment for separately disclosed items +30% 28.30p 21.84p• Final dividend per share +15% 6.54p 5.69p Operational Highlights • Marine Support Services contribution now over 70% of profit • 65% of profit growth organic • 35% of profit from Monyana and FenderCare acquisitions • Disposal of last cable ship for US$ 18.25m and £1.94m book profit • Purchase of Strainstall in October • Purchase of F.T. Everard in December • Integration proceeding to plan Commenting on the outlook, Chairman, Tim Harris, CBE, said: "James Fisher increased the scale of activities significantly in 2006. Tradingfor 2007 to date is to management expectations. We are well placed in strongmarkets with a proven strategy and track record to continue to produce goodgrowth and value for our shareholders." For further information: James Fisher & Sons plc Tim Harris Chairman 020 7614 9508 Nick Henry Chief Executive Officerwww.james-fisher.co.uk Michael Shields Group Finance Director Adventis Financial PR Chris Steele 020 7034 4759 07979 604 687 Annie Evangeli 020 7034 4757 07778 507 162 CHAIRMAN'S STATEMENT Overview 2006 was a productive and successful year for James Fisher, in particular: • the trading results were good by all relevant measures, revenue up29%, profit from continuing operations before separately disclosed items and taxup 42%, with strong organic growth the key component of profit growth. • we completed the purchase on 28 December 2006 of F T Everard & SonsLimited (Everard), a long established competitor of our Tankship business, whichhas a fine operational record and modern fleet, for an enterprise value of£51.7m, which approximated to underlying asset value. • in June the cs Oceanic Princess, the last of the cable ships, wassold for US$18.25m or £1.94m above her written down value, thus completing ourexit from commodity shipping. We have impaired the value of our oldest vesselmt Severn Fisher by £2.9m to £2.1m. Strategy Our consistent aim since 2002 has been to become and be recognised as the UK'sleading marine service company. The strategy we have followed is to use ourcore expertise of practical marine engineering and operational skills togetherwith the strong cash flow from our marine oil services division to build themarine support service divisions of offshore oil, specialist technical anddefence, both by acquisition and increasingly by organic growth. We havewithdrawn from commodity shipping business such as bulk shipping and cableships. The two tables below show the growth in segmental profits since 2002 (Table 1)and the split between organic growth and growth from acquisitions for the marinesupport divisions of offshore oil, specialist technical and defence which havebeen the prime focus for growth (Table 2). Table 1 shows that, by 2006, over 70% (£14.5 million) of segmentalprofits are coming from the marine support divisions with marine oil services'share being reduced to less than 30% (£5.8 million). It is relevant that,during that time the capital employed in marine oil services fell from £67.9m to£48.6m Table 2 shows that, by 2006, over half of the growth in profits (£7.4million) in the marine support divisions is coming from organic growth achievedin the years following our acquisition, with the share of profits "bought" atthe time of acquisition now falling to less than 50% (£7.1 million) Prior to the Everard acquisition we had spent approximately £60 million oneleven significant acquisitions since 2002, all in the three marine supportservices divisions. Table 1 Segmental profit from operations beforeseparately disclosed items 2002 2003 2004 2005 2006 £m £m £m £m £mMarine Support Services Offshore Oil * * 2.9 4.0 7.3 Specialist Technical * * 0.9 2.7 4.3 Defence * * 2.7 2.1 2.9 1.9 4.8 6.5 8.8 14.5Year on year growth +153% +35% +34% +65%Marine Oil Services 4.7 6.1 6.9 6.7 5.8 * not available Table 2 Constituents of marine support service growthover 2002 base (£1.9 million) 2003 2004 2005 2006 £m £m £m £m2002 base profit 1.9 1.9 1.9 1.9Cumulative growth in profit from acquisitions 1.9 2.9 5.0 7.1 organic 1.2 2.4 3.6 7.4 common costs/Oakleaf* (0.2) (0.7) (1.7) (1.9) 4.8 6.5 8.8 14.5 * RFA Oakleaf charter to MoD ceased September 2004. Reasons for the Everard Acquisition In strategic terms, the acquisition of the Everard fleet should enable JamesFisher to repeat the successful formula of the last few years, with theanticipated cash flow benefits from a larger tankships fleet helping fund aneven stronger and faster development of the offshore oil, specialist technicaland defence divisions. Specific opportunities arising from this acquisition include: • the ability to offer our customers a wider choice of modern, double-hulled vessels • the opportunity to increase the profitability of the combined fleet at least to James Fisher levels • the introduction of the Everard vessels into the tonnage tax regime thereby reducing the taxation payable on profits to a nominal amount • the acquisition, as part of a package deal, of the Cattedown port business whose complementary and highly rated profits will be included in the marine oil division Offshore Oil Services divisional result - £7.3 million (2005 - £4.0 million) This division enjoyed an excellent result with profits up by 82% over 2005, with49% from the acquisition of Monyana Engineering Services in the UK and MonyanaEurotech AS in Norway (Monyana) and Gjerde Lofteteknikk AS (Gjerde) in December2005 and November 2006 respectively and the remaining 51% from organic growth.Margins were up by 6% compared to 2005 reflecting the very strong offshoremarket. Our offshore activities consist of the Scan Tech group of companies based inStavanger, Norway, and Fisher Offshore which was formed this year in Aberdeenfrom the merger of Monyana with our other UK based activities. Both Scan Techand Fisher Offshore operate in a similar way but with a slightly differentproduct range. Typically, we customise and rent out specialist equipment andprovide specialist labour where this is necessary. Our main products arecompressors, power packs, winches, wash down units and the HydroDiggerexcavation tool. The offshore market has been and continues to be extremely strong. A majorchallenge in a period of high demand has been to keep and expand our specialistlabour force which gives us an edge in our niche markets. We have beeninvesting in new equipment so that we can meet our customers' demands,particularly at peak periods. In November 2006 we bought Gjerde, a privately owned company which specialisesin designing and customising lifting equipment for the offshore industry, for£644,400. In the eleven months to 30 November 2006 Gjerde had a turnover of£2.2 million and a pre tax profit of £153,000. We have merged it into ourexisting Scan Tech operation with which it is complementary. During the year we concentrated all our Aberdeen operations onto the eleven acrefreehold Oldmeldrum site which we acquired with the Monyana acquisition. Thisenabled us to sell the Bridge of Don premises for £2.2m with a book profit of£1.1m. In Stavanger we have bought a four acre freehold site at Finnestad/Dusavik which we are developing as the centre for all our Norwegian Scan Techactivities. Specialist Technical Services Divisional Result - £4.3 million (2005 - £2.6 million) This division includes James Fisher's specialist marine services businesses ofwhich FenderCare and the Strainstall group of companies are the largest, andRemote Marine Systems (RMS), plus the nuclear decommissioning businesses.Profits for the year were up by 62% with 70% from organic growth and theremainder from the FenderCare (March 2005) and Strainstall (October 2006)acquisitions. Margins remained stable at around 10% which was commendable,given the decline in the US dollar. FenderCare had an excellent year demonstrating strong growth in all of itsactivities. It is the market leader for supplying large-scale pneumatic fendersfor shipping, offshore, port, construction and defence projects and is also thelargest global operator of ship-to-ship oil transfers. In October 2006 we bought the privately owned Strainstall Group for a maximum of£7.0 million plus the assumption of £4.2 million of debt. We have put in placeearn out arrangements designed to ensure that payment only takes place againstresults. Strainstall is complementary to FenderCare in that it has for sometime undertaken joint marketing of port related products, particularlyquick-release mooring systems. It also provides a wide variety of load andstress monitoring applications which are relevant in the rail and constructionindustries. RMS, which designs and produces electrical penetrators for oil wells, had a goodyear. It has long enjoyed a strong niche position in the North Sea and we arenow increasing its marketing on a global basis, with some success. Conditions in the nuclear decommissioning industry have been less helpful owingto the uncertainty caused by the privatisation of the British Nuclear Group(BNG) leading to disruption to the flow of decommissioning work. There has alsobeen some cost escalation in the nuclear industry as contractors, including BNG,have sought staff with specialist skills. James Fisher Nuclear had a moredifficult year financially but made progress in focusing on core skills ofremote handling and plant characterisation. We took the opportunity, during theyear, to set up a new nuclear company, James Fisher Inspection and MeasurementServices (JFIMS) under Dr Paul Read, the former Managing Director of BILSolutions Ltd, a BNG subsidiary. It has already obtained some contracts whichgive us a base level of work for further development. The net cost of thisstart up was charged against the 2006 results and we anticipate that JFIMS willbe profit generative by the end of 2007. Defence Divisional Result including Foreland joint venture - £3.0 million (2005 - £2.1 million) Our defence operations consist of two parts - submarine rescue and providingcommercial skills to support ships engaged in defence and related activities.Although, in 2006, segmental profits were up 41% over 2005, this was not themost significant development for this division. More importantly, we have woncontracts in competitive tenders for the supply of submarine rescue systems tothe South Korea and Singapore navies, confirming our world leading position inthe specialist submarine rescue market, which was highlighted by the rescue ofthe seven Russian submariners off Kamchatka in July 2005. The key task for thisdivision is now to deliver the two systems on time and to cost, and to build onour leading position in this most specialist of world markets. The keysubmarine rescue contracts we have today are: • the support of the UK Submarine Rescue Service (UKSRS) until at least December 2007 when the new NATO Submarine Rescue Service (NSRS) is now scheduled to enter service • the operation of NSRS as a sub-contractor to Rolls Royce • the marketing or sale of the UKSRS vehicle to foreign navies in conjunction with the Ministry of Defence • the delivery of a purpose built submarine rescue vehicle to the South Korean Navy - this contract is worth £10 million in turnover over three years • together with our Singapore partners, Singapore Technologies Marine Ltd, the delivery to the Singaporean Navy of a comprehensive submarine rescue system, including a mother ship and submersible, by the end of 2008. The annual financial effect of this contract is anticipated to be approximately equivalent to that of UKSRS and it lasts for 20 years from delivery. The South Korean and Singapore vehicles share a similar design and there shouldbe some synergy in their joint construction. These developments confirm ourleading position globally in the specialist submarine rescue market. We shallseek to build further on them in 2007. The surface ship market has been quieter in 2006 although we are engaged on anumber of long-term projects. The excellent results from Foreland confirm thepotential of such projects if realised, although its 2006 result included£188,000 of exceptional tax write-back. We consider that there is furtherpotential for the management of specialist surface ships, including defenceships, because there are now few remaining UK companies with the necessaryskills and track record. Marine Oil Services Divisional Result £5.8 million (2005 - £6.7 million) The second half result for marine oil services was disappointing and the resultof three main factors: i. difficult dry-docks for two vessels each of which were out of service for two months ii. the termination of a remunerative Ministry of Defence contract for mt Severn Fisher in the Falklands which we had anticipated would last longer iii. persistent gales in November and December which significantly increased voyage times Despite these adverse factors, James Fisher Tankships still earned aneffectively tax free return of capital of 12.0% in 2006. Severn Fisher which is approaching 25 years of age, is the last of the JamesFisher "old ladies" which is not double-hulled and as a result of the loss ofthe Falklands contract we have concluded that we should write down her bookvalue by £2.9 million to £2.1 million. The reasons for the Everard acquisition have been elaborated already. In futureour marine oil service division will operate under the James Fisher Everardname. The merger is on track and considerable progress has been made inbringing the Everard's operation together with James Fisher Tankships. InJanuary the commercial and chartering departments were amalgamated and it isplanned that, the technical management will be fully merged into one team basedin Barrow before the end of June 2007. The three oldest Everard vessels, mtAllurity, mt Activity and mt Arduity, have been sold for cash by Everard atprices consistent with the share purchase agreement and over fifty seafarersmade redundant. Delivery from the Chinese yard of the third Everard newbuild,mt Superiority, took place in February 2007, about a month later than originallyanticipated. There have also been delays to the fourth newbuild, mt Supremity,which is now scheduled for late Summer 2007. In some ways, the key integrationrisk is operational in that our customers rely on us for an excellent technicaland operational service where second best will not do. The merger must not beallowed to disrupt this. Directors and Employees I would like to welcome Michael Everard and William Everard to the Board,Michael as a Non-executive Director and Chairman of Cattedown Wharves andWilliam as Technical Director of the Fleet. For many years Everard enjoyed afirst rate operational reputation with our customers and we look forward totheir contribution at James Fisher. Maurice Storey, who is one of the most experienced marine managers in the UK, ishelping facilitate the integration of Everard with James Fisher. For theseservices, he will receive an additional fee of £50,000 in the first half of2007. Maurice is a Non-executive Director but it would be a waste of hisexperience and talent if this were to bar him from providing such a usefulcontribution. This is an excellent example of the value a non-executivedirector can bring. Ian Serjent stood down as Marine and Technical Services Director at the last AGMand again I would like to thank him for his outstanding career with, andcontribution to, the Company. With the Everard acquisition, James Fisher now employs well over 1,000 people.Irrespective of the long-term benefits, mergers are never easy for the peopleinvolved and I would like to recognise the inconvenience and stress that itinevitably brings to employees. Their patience is much appreciated and I wouldlike to thank them for their hard work and goodwill in 2006 and as the mergergoes forward in 2007. Outlook In the early part of 2007, James Fisher's first priority is to complete theintegration of Everard and draw in full the potential synergies. This processis underway but it is important that it is completed without disruption to ourservice to our customers. The potential for profit improvement in the medium tolonger term is significant as, for a variety of reasons, Everards' profitabilitywas well below that of James Fisher. The second task, which is already inprocess, is to complete the refinancing of three of the Everard newbuilds asbareboat charters. It is anticipated that the full integration of Everard willbe completed by the end of the first half from which time we shall begin tobenefit financially from the acquisition. The offshore oil and specialist technical divisions experienced stronglyfavourable market conditions in 2006. To date there has been no change incircumstances, for example the number of rigs forecast to be operational in theNorwegian sector of the North Sea is rising over the next three years. Ourbusinesses are well positioned and well led but it would be unrealistic toexpect the same rate of organic growth as achieved in 2006 to be achieved everyyear. We shall continue to make complementary acquisitions and to strengthentheir performance and growth in their markets. We shall also encourage acquiredcompanies further to market their skills on an international basis. The defence division has achieved a strong strategic position in internationalsubmarine rescue and its prime task in 2007 and 2008 will be to deliver theKorean and Singaporean contracts on time and with the estimated profit. James Fisher increased the scale of its activities significantly in 2006.Trading for 2007 to date is to management expectations. We are well placed instrong markets with a proven strategy and track record to continue to producegood growth and value for our shareholders. Timothy C.Harris Chairman GROUP INCOME STATEMENT For the year ended 31 December 2006 Notes Year ended Year ended 31 December 2006 31 December 2005 Before Separately Before Separately separately disclosed separately disclosed disclosed items disclosed items items note 4 Total items note 4 Total £000 £000 £000 £000 £000 £000 Group revenue 118,085 118,085 91,411 91,411Cost of sales (96,438) (96,438) (73,931) (73,931)Gross profit 21,647 21,647 17,480 17,480 Administrative expenses (5,756) (5,756) (5,413) (5,413) Profit from operations before 2 15,891 15,891 12,067 12,067separately disclosed items Profit on sale of property - 1,126 1,126 - - - Impairment of ship - (2,906) (2,906) - - - Pension benefit curtailment - - - - 2,000 2,000 Loss on ship disposals - (24) (24) - (1,617) (1,617) Profit from operations 15,891 (1,804) 14,087 12,067 383 12,450 Finance costs Finance income (revenue) 316 - 316 304 - 304 Finance costs (2,586) - (2,586) (2,591) - (2,591) Exchange gain/(loss) on - 35 35 - (130) (130) loan conversion (2,270) 35 (2,235) (2,287) (130) (2,417) Share of post tax results of 2,295 - 2,295 1,413 - 1,413joint venture Profit on continuing operations 15,916 (1,769) 14,147 11,193 253 11,446before taxationTaxation (including overseas 5 (2,034) (377) (2,411) (538) (216) (754)taxation of £883,000; 2005£567,000)Profit for the year on 13,882 (2,146) 11,736 10,655 37 10,692continuing operations Discontinued operationsProfit/(loss) for the year from 3 2,041 (12,889)discontinued operations Profit/(loss) for the year 13,777 (2,197)Profit/(loss) attributable to :Equity holders of the parent 13,780 (2,197)Minority interests (3) - 13,777 (2,197) Earnings per share (EPS) pence PenceBasic EPS from continuing 6 23.93 21.91operationsDiluted EPS from continuing 6 23.71 21.72operations Basic EPS on profit/(loss) from 6 28.09 (4.50)total operationsDiluted EPS on profit/(loss) 6 27.83 (4.50)from total operations Adjusted Earnings per share Basic EPS from continuing 6 28.30 21.84operationsDiluted EPS from continuing 6 28.05 21.64operations GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE For the year ended 31 December 2006 Notes Year ended Year ended 31 December 2006 31 December 2005 £000 £000Income and expense recognised directly in equityExchange differences on translation of foreign operations:Currency translation differences 189 26Net investment hedge (571) 9 (382) 35 Fair value of gains/(losses) on cash flow hedges 62 (134)Share of fair value gains of cash flow hedges in joint 39 169ventureActuarial gains/(losses) on defined benefit schemes 4,143 (4,531) 3,862 (4,461)Transfers to the income statementOn cash flow hedges 7 36 Tax on items taken directly to equity 5 (772) 123Net income/(expense) recognised directly in equity 3,097 (4,302)Profit/(loss) for the year 13,777 (2,197)Total recognised income/(expense) for the year 8 16,874 (6,499) Attributable to:Equity holders of the parent 16,877 (6,499)Minority interests (3) - 16,874 (6,499) Effects of changes in accounting policy: Net gain on cash flow hedges on first time adoption of IAS 39 20Loss on cash flow hedges in joint ventures on first time adoption of IAS 39 (125) (105) GROUP BALANCE SHEET As at 31 December 2006 Notes 31 December 2006 31 December 2005 £000 £000AssetsNon current assetsGoodwill 55,773 36,168Other intangible assets 60 -Property, plant and equipment 102,629 67,081Investment in joint ventures 3,575 2,587Available for sale financial assets 1,370 1,368Deferred tax assets - 1,197 163,407 108,401Current assetsInventories 11,317 5,797Trade and other receivables 32,897 21,026Derivative financial instruments 17 -Cash and cash equivalents 9,655 9,725 53,886 36,548 Non-current assets classified as held for sale 3 1,518 7,959 Total Assets 218,811 152,908 Equity and LiabilitiesCapital and reservesCalled up share capital 12,377 12,345Share premium 24,114 23,960Treasury shares (1,147) (1,184)Other reserves (96) 178Retained earnings 50,932 38,030Shareholders' Equity 86,180 73,329Minority interests 71 -Total equity 86,251 73,329 Non current liabilitiesOther payables 1,610 593Retirement benefit obligations 9 10,049 13,536Derivative financial instruments - 18Cumulative preference shares 100 100Financial liabilities 72,449 42,695Deferred tax liabilities 1,987 - 86,195 56,942Current liabilitiesTrade and other payables 33,959 14,802Current tax 1,207 1,370Derivative financial instruments 55 102Financial liabilities 11,144 6,363 46,365 22,637 Total liabilities 132,560 79,579 Total equity and liabilities 218,811 152,908 GROUP CASH FLOW STATEMENT For the year ended 31 December 2006 31 December 2006 31 December 2005 £000 £000 Group profit from operations 14,087 12,450Adjustments to reconcile Group profit from operationsto net cash inflows from operating activitiesProfit/(loss) from operations from discontinued operations 2,042 (12,886)Adjustments for: Depreciation 5,661 7,670 Profit on sale of plant and equipment (377) (51) Profit on disposal of property (1,126) - Pension benefit curtailment - (2,000) Impairment of non-current assets 2,906 10,885 (Profit)/loss on ship disposals (1,912) 11,565Increase in trade and other receivables (3,309) (3,014)(Increase)/decrease in inventories (2,025) 258Increase/(decrease) in trade and other payables 2,553 (1,291)Additional defined benefit pension scheme contributions (2,979) (1,994)Share based compensation 516 432Cash generated from operations 16,037 22,024Income tax payments (1,481) (1,404)Cash flows from operating activities 14,556 20,620 Investing activitiesDividends from joint venture undertakings 1,275 1,068Proceeds from the sale of property, plant and equipment 12,255 12,995Interest received 320 321Acquisition of subsidiaries, net of cash acquired (22,151) (22,077)Acquisition of property, plant and equipment (7,424) (7,357)Acquisition of available for sale financial assets (1) (211)Cash flows used in investing activities (15,726) (15,261) Financing activitiesProceeds from the issue of share capital 170 190Preference dividend paid (3) (4)Interest paid (2,807) (2,871)Proceeds from other non-current borrowings 28,912 20,524Purchase less sales of own shares by ESOP (229) 7Capital element of finance lease repayments (7) -Repayment of borrowings (20,362) (19,547)Dividends paid (4,499) (3,927)Cash flows from/(used in) financing activities 1,175 (5,628) Net increase/(decrease) in cash and cash equivalents 5 (269)Cash and cash equivalents at 1 January 2006 9,725 10,045Net foreign exchange difference (75) (51) Cash and cash equivalents at 31 December 2006 9,655 9,725 NOTES TO THE PRELIMINARY RESULTS 1. General information Statement of compliance The consolidated financial statements have been prepared in accordance with IFRSadopted by the European Union (EU) as at 31 December 2006 and are applied inaccordance with the provisions of the Companies Act 1985. Basis of preparation of group accounts The financial statements are prepared on an historical cost basis except forderivative financial instruments which are measured at fair value. The Group financial statements are presented in Sterling and all values arerounded to the nearest thousand pounds (£000) except when otherwise indicated. The financial information set out above does not constitute statutory accountsfor the years ended 31 December 2006 or 2005 as defined in section 240 of theCompanies Act 1985. Statutory accounts for 2005 have been delivered to theRegistrar of Companies. The auditor's report on those accounts was unqualifiedand did not contain any statement under section 237(2) or (3) of the CompaniesAct 1985. The auditors have given an unqualified opinion on the accounts for the yearended 31 December 2006. These will be delivered to the Registrar of Companiesfollowing the annual general meeting. 2. Segmental Information Primary reporting format business segments The following tables present revenue and profit and certain assetand liability information regarding the Group's business segments for the yearsended 31 December 2006 and 2005. Year ended Discontinued31 December 2006 Continuing Operations Operations Offshore Oil Specialist Defence Marine Total Cable Total Services Technical Oil Ships Services Services £000 £000 £000 £000 £000 £000 £000Revenue Group revenue 21,977 42,282 11,197 45,937 121,393 -Inter segment sales - (3,217) (91) - (3,308) - Segmental revenue 21,977 39,065 11,106 45,937 118,085 - Result Segmental result before ship 7,320 3,919 1,024 5,819 18,082 106disposals Common costs (2,191)Profit from operations before separately disclosed items and joint 15,891ventures Profit on sale of property 1,126 -Impairment of ship (2,906) -(Loss)/profit on ship (24) 1,936disposals Profit from operations before joint ventures 14,087 2,042 Finance income (revenue) 316 -Finance costs (2,586) -Exchange loss on loan 35 -conversion (2,235) - Share of post tax results of - 346 1,949 - 2,295 -joint ventures Profit before tax 14,147 2,042 Taxation (2,411) (1)Profit attributable to equity 11,736 2,041holders Assets & Liabilities Segment assets 45,432 46,686 8,844 110,343 211,305 10 211,315Investment in joint ventures - 598 2,977 - 3,575 - 3,575Unallocated assets 3,921 3,921Total assets 218,801 10 218,811 Segment liabilities (3,895) (9,046) (1,082) (15,738) (29,761) (58) (29,819)Unallocated liabilities (102,741) - (102,741) Total liabilities (132,502) (58) (132,560) Other segment informationCapital expenditure:Property, plant & equipment 3,108 2,973 58 40,643 46,782 - 46,782Unallocated 611 611 47,393 - 47,393Other intangible assets 60 60 60 Depreciation 1,527 543 89 3,353 5,512 - 5,512Unallocated 149 149 5,661 - 5,661Amortisation of intangible 1 1 1assets Year ended Discontinued31 December 2005 Continuing Operations Operations Offshore Oil Specialist Defence Marine Total Cable Total Services Technical Oil Ships Services Services £000 £000 £000 £000 £000 £000 £000Revenue Group revenue 14,936 25,898 9,679 44,903 95,416 9,019Inter 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 ship 4,017 2,551 782 6,733 14,083 4,552disposals Common costs (2,016)Profit from operations before separately disclosed items and joint 12,067ventures Pension benefit curtailment 2,000 -Impairment of non-current assets - (10,885)Recognition of rentals due on - 3,395sold shipLoss on ship disposals (1,617) (9,948) Profit from operations before joint 12,450 (12,886)ventures Finance income (revenue) 304 -Finance costs (2,591) -Exchange loss on loan conversion (130) - (2,417) - Share of post tax results of - 79 1,334 - 1,413 -joint ventures Profit before tax 11,446 (12,886) Taxation (754) (3)Profit attributable to equity 10,692 (12,889)holders Assets & Liabilities Segment assets 39,501 24,908 8,867 58,347 131,623 5,095 136,718Investment in joint ventures - 398 2,189 - 2,587 - 2,587Non-current assets classified as - 7,959 7,959held for saleUnallocated assets 5,644 5,644Total 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 informationCapital expenditure:Property, plant & equipment 7,242 3,733 71 3,317 14,363 588 14,951Unallocated 53 53 14,416 588 15,004 Depreciation 939 400 118 3,838 5,295 2,189 7,484Impairment provision - 10,885 10,885Unallocated 186 186 5,481 13,074 18,555 Unallocated net liabilities comprise certain assets and liabilities of theparent company, loans, pension liabilities and taxation. Geographical segments The following table represents revenue, expenditure and certain assetinformation regarding the Group's geographical segments for the years ended 2006and 2005. UK & Ireland Norway Rest of the World Total 2006 2005 2006 2005 2006 2005 2006 2005 £000 £000 £000 £000 £000 £000 £000 £000RevenueContinuing operationsGroup revenue 85,621 68,964 9,988 8,110 25,784 18,342 121,393 95,416Inter-segment sales (3,308) (4,005) - - - - (3,308) (4,005)Group revenue 82,313 64,959 9,988 8,110 25,784 18,342 118,085 91,411 Segmental revenue - - - - - 9,019 - 9,019 Segment assets 177,427 109,210 28,350 25,091 4,240 2,417 209,797 136,718Investment in joint 2,977 2,189 - - 598 398 3,575 2,587venturesNon-current assets 1,518 7,959 - - - - 1,518 7,959classified as held forsaleUnallocated assets 3,921 5,644 218,811 152,908 Segment liabilities (25,991) (9,376) (2,897) (2,941) (931) (2,105) (29,819) (14,422)Unallocated liabilities (102,741) (65,157) (132,560) (79,579) Capital expenditure:Property, plant and 46,097 14,211 1,294 793 2 - 47,393 15,004equipment 3. Discontinued operations Discontinued operations relate to the withdrawal of the Group fromcable laying activities announced in 2005. Following the disposal in 2005 of thecable ship CS Oceanic Pearl, the remaining vessel, CS Oceanic Princess, wasreclassified as an asset held for sale in December 2005. This vessel wasdisposed of on 12 June 2006. Following the disposal of the CS Oceanic Pearl on 6 October 2005, theGroup had recognised the remaining income due under the General Dynamics charterwhich expires in December 2006. The present value of the remaining income hadbeen recognised in the balance sheet at 6 October 2005 after applying a discountrate of 4.5%. Following the reclassification of CS Oceanic Princess as an asset heldfor sale an impairment review was performed by the Directors, taking intoaccount the expected disposal proceeds and costs and revenues anticipated toarise during the period prior to disposal, discounted at an appropriate rate totake into account the risks associated with the relevant cash flows. As a resultan impairment provision of £10,885,000 was made against the carrying value ofthe vessel and charged to the income statement in December 2005. The discountrates used to assess the cash flows were between 4.5% and 10%. The results of discontinued operations are presented below: 2006 2005 £000 £000Revenue - 9,019Cost of sales 106 (4,467)Gross profit 106 4,552 Profit/(loss) on ship disposals 1,936 (9,948)Recognition of rentals due on sold ship - 3,395 2,042 (2,001) Impairment of non- current assets - (10,885)Profit/(loss) before tax from discontinued operations 2,042 (12,886)Taxation (1) (3)Net profit/(loss) attributable to discontinued operations 2,041 (12,889) Taxation is payable on the profit/(loss) from operations under the tonnage tax regime as explained innote 5. The net cash flows attributable to discontinued operations are: 2006 2005 £000 £000 Operating cash flows 3,366 6,190 Investing cash flows 9,357 10,227 Financing activities (6,933) (14,854) 5,790 1,563 Earnings/(loss) per share from discontinued operations (pence): pence pence Basic 4.16 (26.41) Diluted 4.12 (26.18) Non current assets held for sale Other than the vessel CS Oceanic Princess, there were no other assets orliabilities of the cable ship operation which were classified as held fordisposal. At 31 December 2005 the carrying value of the CS Oceanic Princess was£7,959,000. The assets classed as held for sale at 31 December 2006 are the mt Allurity andmt Arduity which were disposed of by the Group in January 2007. The vessels arerecorded at their fair value less costs of disposal. 4. Separately disclosed items Separately disclosed items consist of: 2006 2005 £000 £000Profit on sale of property 1,126 -Impairment of ship (2,906) -Pension benefit curtailment - 2,000Loss on ship disposals (24) (1,617)Exchange gain/(loss) on loan conversion 35 (130) (1,769) 253 On 1 December 2006 the Group disposed of an industrial property at Bridge ofDon, Aberdeen for a gross consideration of £2,200,000. The Directors have performed an impairment review of the carrying value of themt Severn Fisher, built in 1983 and the Group's oldest tanker. The review hastaken account of the ending of a contract with the Ministry of Defence in 2006and the limits to trading in the European Union increasingly imposed by theInternational Maritime Organisation and the major oil companies as the vesselnears the twenty fifth anniversary of its construction. The review has taken into account the expected residual value and the cost andrevenues anticipated to arise during the period prior to disposal, discounted ata rate of 6.5% which the Directors believe takes into account the risksassociated with the relevant cash flows. As a result the Group has recognised an impairment provision of £2,906,000against the carrying value of the vessel in the income statement. The pension benefit curtailment arose from the closure of the Group's definedbenefit pension scheme to existing members in 2010 and changes to thecontribution rates as explained in note 9. The loss on ship disposals arose from the sale in 2005 of the CS Oceanic Pearland mt Tees Fisher and mt Wear Fisher. The exchange differences on loans arise on foreign currency financing loans inthe UK. The tax arising on these items is £377,000 (2005: £216,000). 5. Taxation The group has entered the UK tonnage tax regime under which tax on its shipowning and operating activities is based on the net tonnage of vessels operated.Any income and profits outside the tonnage tax regime are taxed under thenormal tax rules of the relevant tax jurisdiction. The tax charge is made up as follows: 2006 2005 £000 £000Current tax:UK tonnage tax (21) (24)UK corporation tax (1,309) (514) (1,330) (538) Tax overprovided in previous years 770 327Foreign tax (883) (567)Total current tax (1,443) (778)Deferred tax:Group deferred tax (969) 21Total taxation on continuing operations (2,412) (757) Share of joint ventures' current tax 130 (72) The total tax charge in the income statement is allocated as follows: 2006 2005 £000 £000Taxation expense reported in group income statement 2,411 754Taxation attributable to discontinued activities 1 3Total tax expense 2,412 757 Tax (charged)/credited to equity in statement of recognised income and expense: 2006 2005 £000 £000Deferred tax:Deferred tax relating to the actuarial gains and losses on defined benefit (772) 123pension schemes Reconciliation of effective tax rate The tax on the Group's profit/(loss) before tax differs from the theoreticalamount that would arise using the rate applicable under UK corporation tax rulesas follows: 2006 2005 £000 £000Profit before tax from continuing operations 14,017 11,518Profit/(loss) before tax from discontinued activities 2,042 (12,886) 16,059 (1,368) At UK statutory tax rate of 30% (2005 30%) 4,818 (410) Difference due to application of tonnage tax to all vessel (1,355) 2,015disposals and operating activitiesExpenses not deductible for tax purposes 673 146Chargeable gains 60 -Over provision in previous years (960) (327)Joint ventures (650) -Share base payments - 180Special pension contribution - (409)Lower taxes on overseas income (174) (40)Pension curtailment - (384)Other - (14) 2,412 757 6. Earnings per share Basic earnings per share are calculated by dividing the profit attributable toequity holders of the company by the weighted average number of ordinary sharesin issue during the year, after excluding ordinary shares purchased by theemployee share ownership trust and held as treasury shares. Diluted earnings per share are calculated by dividing the net profitattributable to ordinary equity holders of the parent by the weighted averagenumber of ordinary shares that would be issued on conversion of all the dilutivepotential ordinary shares into ordinary shares. The calculation of basic and diluted earnings per share is based on thefollowing profits and numbers of shares: 2006 2005 £000 £000Profit/(loss) attributable to equity holders 13,780 (2,197)(Profit)/loss attributable to discontinued activities (2,041) 12,889Profit on continuing activities attributable to equity 11,739 10,692holders Weighted average number of shares 2006 2005 Number of Number of Shares SharesFor basic earnings per ordinary share* 49,058,347 48,797,076Exercise of share options and LTIPs+ 449,306 430,920For diluted earnings per ordinary share 49,507,653 49,227,996 * Excludes 392,592 (2005:510,237) shares owned by the James Fisher & SonsPublic Limited Company Employee Share Ownership Trust. + Share options and LTIPs have been excluded from the calculation ofdiluted earnings per share in 2005 as they are antidilutive, but have beenincluded in the calculation of diluted earnings per ordinary share on continuingactivities. 2006 2005 £000 pence £000 penceBasic earnings/(loss) per share 13,780 28.09 (2,197) (4.50) (Profit)/loss attributable to discontinued (2,041) (4.16) 12,889 26.41activities Basic earnings per share on profit from continuing 11,739 23.93 10,692 21.91operations Diluted earnings/(loss) per share 13,780 27.83 (2,197) (4.50) (Profit)/loss attributable to discontinued (2,041) (4.12) 12,889 26.18activities Diluted earnings per share on profit fromcontinuing operations + 11,739 23.71 10,692 21.72 Adjusted Earnings per Share The basic earnings per share on continuing activities before separatelydisclosed items is shown to highlight the underlying earnings trend and iscalculated using the number of shares outlined in the table above. 2006 2005 £000 pence £000 penceBasic earnings per share on profit on continuingoperations 11,739 23.93 10,692 21.91Adjustments:Exchange (gain)/loss on loan conversion (35) (0.07) 130 0.27Loss on ship disposals 24 0.05 1,617 3.31Profit on sale of property including tax effect of (749) (1.53) - -£377,000Impairment of ship 2,906 5.92 - -Pension benefit curtailment including tax effect of - - (1,784) (3.65)£216,000Basic adjusted earnings per share on profit fromcontinuing operations 13,885 28.30 10,655 21.84 Diluted earnings per share on profit on continuingoperations 11,739 23.71 10,692 21.72Adjustments:Exchange (gain)/loss on loan conversion (35) (0.07) 130 0.26Loss on ship disposals 24 0.05 1,617 3.28Profit on sale of property including tax effect of (749) (1.51) - -£377,000Impairment of ship 2,906 5.87 - -Pension benefit curtailment including tax effect of - - (1,784) (3.62)£216,000Diluted adjusted earnings per share on profit fromcontinuing operations 13,885 28.05 10,655 21.64 7. Dividends paid and proposed 2006 2005 £000 £000Declared and paid during the year Equity dividends on ordinaryshares:Final dividend for 2005 5.69p (2004 4.95p) 2,816 2,440Interim dividend for 2006 3.47p (2005 3.10p) 1,717 1,531 Less dividends on own shares held by ESOP (34) (44) 4,499 3,927 Proposed for approval at Annual General Meeting (not recognised as a liability at 31 December) Equity dividends on ordinary shares:Final dividend for 2006 6.54p (2005 5.69p) 3,212 2,781 The ordinary final dividend will be paid on 11 May 2007 to thoseshareholders registered in the books of the Company at the close of business on10 April 2007. 8. Reconciliation of movements in equity GROUP Capital Reserves Share Share retained Other Treasury Total Minority Total capital premium earnings reserves shares shareholders Interests equity equity £000 £000 £000 £000 £000 £000 £000 £000At 31 December 2004 12,405 23,810 48,151 177 (1,212) 83,331 - 83,331Restatement (100) - - (105) - (205) - (205)At 1 January 2005 12,305 23,810 48,151 72 (1,212) 83,126 - 83,126 Total recognised income (6,605) 106 (6,499) (6,499)and expense in the periodOrdinary dividends paid (3,927) (3,927) (3,927) Share-based 432 432 432compensation expensePurchase less sale of 7 7 7shares Arising on the issue of 40 150 190 190shares Transfer on disposal of (21) 21 - -shares At 31 December 2005 12,345 23,960 38,030 178 (1,184) 73,329 - 73,329 At acquisition - 74 74 Total recognised income 17,151 (274) - 16,877 (3) 16,874and expense in theperiodOrdinary dividends paid (4,499) (4,499) (4,499)Share-based 516 516 516compensation expense Purchase less sale of (229) (229) (229)shares Arising on the issue of 32 154 186 186shares Transfer on disposal of (266) 266 - -sharesAt 31 December 2006 12,377 24,114 50,932 (96) (1,147) 86,180 71 86,251 Other reserves Translation Hedging Total reserve Reserve £000 £000 £000At 1 January 2005 177 (105) 72Cash flow hedges:Transferred to the income statement 36 36Fair value losses in the period (134) (134)Share of fair value gains of joint ventures 169 169Recognised income in the period including the effect of net 35 - 35investment hedgesAt 31 December 2005 212 (34) 178 Cash flow hedges:Transferred to the income statement 7 7Fair value gains in the period 62 62Share of fair value gains of joint ventures 39 39Recognised income in the period including the effect of net (382) - (382)investment hedgesAt 31 December 2006 (170) 74 (96) 9. Retirement benefit obligations The Retirement benefit obligations included in the Group balancesheet comprise the following elements, details of which are explained below: Group 2006 2005 £000 £000 Shore staff pension scheme (1,400) (8,100)Dockworkers pension scheme (1,550) (2,400)Everard Group pension scheme (73) -MNOPF pension scheme (7,026) (3,036) (10,049) (13,536) Shore Staff and Dockworkers pension schemes The Company reviews the position of the pension schemes at three yearlyintervals. As a result of the review carried out in 2005 the Company agreed adeficit recovery plan with the trustees of the schemes. Under this plan theCompany 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 tothe Dockworkers's scheme, was made in December 2005. The balance was paid bythe Company during the first half of 2006. In 2005 the Company also decided to close the Shore staff scheme to existingmembers from 2010. At this time members contributing to the scheme can transferto a stakeholder scheme option. During the remaining period that the schemeremains open to existing members the rate of growth of pensionable salary hasbeen reduced to 1.5% and the rate at which the company contributes to the schemehas been reduced to 14.7% of pensionable pay. As a result of these curtailmentsto the benefits available to the members the Company's liabilities to the schemehave been reduced by £2,000,000. This curtailment benefit was recognised in theincome statement in December 2005. Everard Group pension scheme F.T Everard and Sons Limited operates a defined benefit scheme, The EverardGroup Pension Fund. The scheme was closed to new entrants from 1 April 2004 andclosed to future accrual from 1 March 2005. The scheme is currently in deficit. Under an agreed reduction plan F.T Everard and Sons Limited is making annualadditional contributions of £286,000 for thirteen years commencing 1 March 2005. MNOPF Pension Scheme In 2005 the High Court established that former as well as existing employerswill be liable to make payments in respect of the funding deficit of theMerchant Navy Officers' Pension Fund (MNOPF). The Company has been informed bythe Trustees that it will be required to make annual payments of £555,000 (2005£418,000) into the fund for a period of ten years commencing October 2005representing its share of the deficit disclosed in the actuarial valuationcarried out as at 31 March 2003. The increase in the payments in 2006 over 2005is explained below. The Trustees have also indicated that it may make calls for furthercontributions in the future, if new deficits arise or if other employers liablefor contributions are not able to pay their share. In February 2007 the Groupwas notified that the Trustees are expecting a shortfall in receipts frommembers of approximately 10% of the amount requested. As a result theoutstanding deficit has been reallocated with the result being that the Companyis liable for an additional £80,000 per annum payable in eight annualinstalments from 31 March 2007. An adjustment of £537,000 has been included inthe statement of recognised income and expense representing the fair value ofthis liability. Following further review and discussion with the MNOPF during 2006, the Companyestablished that there are additional liabilities in respect of three additionalclaims relating to former employers covered under the scheme. Two of these havebeen added to the ten year payment plan and one small claim settled in fullduring the period. As a result of these claims the liability attributable to theCompany has increased by £579,000 and the annual payment obligation hasincreased from £418,000 to £475,000. The Company is not aware of any furtheroutstanding claims in respect of the MNOPF. F.T.Everard and Sons also have a liability to the MNOPF arising from the samecircumstances. The annual obligation of this subsidiary to make payments to theMNOPF is £443,000 payable over the ten years commencing October 2005. Everardhave also been assessed for additional payments resulting in an increase in theamount due of £75,000 per annum for eight years commencing 31 March 2007. Since the Company has no control over the calls for contributions made from theMNOPF, it has determined that the fund should be accounted for as a definedbenefit scheme and its liability recognised accordingly. The Company hasconcluded that the recognition of the liability should be accounted for as anactuarial adjustment, and is therefore recorded in equity in the statement ofrecognised income and expense. 10. Post balance sheet events The Group completed the sale of the mt Arduity and mt Allurity on 5 January and11 January 2007 respectively. The gross proceeds from these disposals were$3,300,000. The net proceeds of £1,500,000 were used to repay bank borrowings. On 13 February 2007 the Group took delivery of mt Superiority. Under the terms of the acquisition of Strainstall Group (Strainstall) on 6October 2006 contingent consideration of £1,750,000 is payable to the vendorsdependent on achieving certain performance conditions for the year ended 31December 2006 and 31 December 2007. In March 2007 following confirmation thatthe performance criteria for the year ended 31 December 2006 had been achievedthe vendors were paid £1,250,000 in cash and loan notes. 11. The AGM will be held at 12.00 noon, Thursday 3 May 2007 at the AbbeyHouse Hotel, Abbey Road, Barrow in Furness, Cumbria. 12. Report and accounts will be posted to members in early April 2007.Copies will be made available to members of the public at Fisher House, PO Box4, Barrow in Furness, Cumbria, LA14 1HR. 13. The preliminary statement was approved by the Board of Directors on26 March 2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
James Fisher and Sons