Half Year Results 2017

30 August 2017

James Fisher and Sons plc

Half Year Results 2017

James Fisher and Sons plc (FSJ.L) ("James Fisher" or "the Group"), the leading marine service provider, announces its results for the six months ended 30 June 2017.

* underlying profit excludes separately disclosed items.

Highlights:

· Revenue up 13% at £235.8m (2016: £209.3m)

· Underlying operating profit 7% higher at £21.3m (2016: £19.9m)

· Strong profit growth in Specialist Technical

· Underlying diluted earnings per share up 2% to 30.1p (2016: 29.4p) per share

· Interim dividend raised by 10% to 9.4p per share

Commenting on the results, Nick Henry, Chief Executive Officer said:

"James Fisher had a positive start to the year with revenue increasing by 13% to £235.8m and underlying operating profit by 7%. The phasing of renewables projects within Marine Support combined with a degree of recovery in maintenance activity in the oil and gas sector indicates stronger growth for the Group in the second half leading to a good improvement in the result for the year."

For further information:

Chairman's Statement

Half Year Results for the six months ended 30 June 2017

Results

I am pleased to report that James Fisher had a positive start to the year with revenue in the first half increasing by 13% to £235.8m (2016: £209.3m) and underlying profit before tax by 6% to £18.6m (2016: £17.5m) compared with the same period last year.

Three of our divisions continued to trade well, with Marine Support and Tankships profits at similar levels to last year and Specialist Technical significantly ahead. Offshore Oil reported similar revenue but reduced profits after a slow start in the first four months of the year reduced utilisation levels. Trading in May and June in this division gives grounds for some optimism for an improved second half.

Strategic Developments

James Fisher continues to pursue a consistent strategy of investing in niche businesses operating in demanding environments where strong marine service skills are valued and rewarded. Whilst organic growth has driven the majority of James Fisher's development, the Group continues to be alert for incremental acquisitions which will strengthen our range of products, services or geographical coverage.

The first half saw the Group's investments of recent years bear fruit with significantly higher volumes of work in Asia Pacific for our Specialist Technical businesses and the opening of an important new market in Brazil for ship-to-ship oil transfer services. In March we strengthened our product offering to the offshore renewables sector with the acquisition of Rotos 360, a high technology specialist in the repair and reconditioning of wind turbine rotor blades.

Outlook

Profit in the second half is likely to benefit from the phasing of projects across our renewables businesses due to seasonal factors and across our offshore oil businesses due to some improvement in oil and gas sector demand. We would therefore expect to see good growth from our Marine Support division. In Offshore Oil, orders in our Norwegian and our downhole equipment businesses have begun to show clear signs of recovery. Our Specialist Technical businesses continue to trade well despite some slowing in our nuclear decommissioning activities. Tankships maintain its good performance of recent years. Overall, we therefore expect to see stronger growth for the Group in the second half leading to a good improvement in the result for the year.

Dividend

The Board believes that James Fisher remains well placed to provide further growth and value for its shareholders. The Board has agreed a 10% increase in the interim dividend to 9.40 pence per share (2016: 8.55p) payable on 3 November 2017 to shareholders on the register on 6 October 2017.

C J Rice

29 August 2017

Operating and Financial Review

Half Year Results for the six months ended 30 June 2017

Operating performance

The Group's financial performance in the first half progressed well with a 7% increase in underlying operating profit on revenue that was 13% higher at £235.8m (2016: £209.3m). The overall growth rates reported have been positively impacted by exchange rates as a significant proportion of the Group's revenue is received in US Dollars. Changes at constant exchange rates have been calculated by retranslating the results for the six months ended 30 June 2016 at the average rates for the comparator in 2017.

Marine Support

Revenue in Marine Support grew by 14%. Volumes in ship-to-ship transfers were weaker in Asia Pacific, but this was offset by the commencement of operations for the Brazilian market. Whilst the businesses acquired in the renewables sector contributed to some increase in revenue, the phasing of projects within both the UK renewables and international marine service sectors, suppressed profits in the first half. Subtech, our South African based marine service business, contributed to the first half growth with project wins in the Middle East and West Africa.

Underlying operating profit was marginally lower at £9.1m (2016: £9.3m) as the benefit from increased ship-to-ship transfers and businesses acquired was offset by a lower level of marine service projects and by a slow start from our mass-flow excavation business which suffered from the weakness in the oil & gas sector, particularly in the first four months of the year. The Group's marine services and support contract in relation to the construction of the Galloper Wind Farm performed well in the period but did not see the benefit of additional work.

On 22 March 2017, the Group acquired Rotos 360 for an initial consideration of £1.5m with potential further consideration of £5.0m dependant on profit targets for the three years ending 31 December 2019. Rotos 360 uses the latest technological innovation to provide solutions in the inspection, repair and reconditioning of wind farm rotor blades, primarily in the offshore environment. The company was established in 2013 as part of a UK Government funded research project to reduce the cost of operation and maintenance of offshore wind turbines.

Specialist Technical

Specialist Technical revenue was 20% higher than prior period at £75.7m (2016: £62.9m). Our defence and diving equipment business, JFD, was 24% ahead of 2016, reflecting a full six months from the Indian submarine rescue project compared to three months in 2016, the start of a saturation diving system for China and including 5% relating to businesses acquired. In nuclear decommissioning, whilst the Winfrith reactor project continued to perform well, the business saw a 5% reduction in revenue as a change in UK policy has reduced projects awarded across the supply chain.

Underlying operating profit was 39% ahead of the equivalent six months in 2016 at £8.5m (2016: £6.1m) reflecting good contributions from JFD's service contracts, products and submarine rescue and diving equipment projects which more than offset a small reduction in nuclear profitability.

JFD successfully completed the first operational dive of its Compact Bailout Rebreathing Apparatus (Cobra) which provides 45 minutes of fully independent breathing gas to a diver in an emergency to enable them to return to the diving bell. Our nuclear decommissioning business, JFN, won its first order to supply a manipulator to China in the second half.

Offshore Oil

Offshore Oil had a slow start to the year and although revenue was similar to 2016, after adjusting for currencies, it was 7% lower. The majority of the reduction was due to low utilisation levels in the early months of the year which decreased margins.

Underlying operating profit was £1.0m lower at £1.1m (2016: £2.1m) and underlying earnings before interest, tax, depreciation and amortisation was £6.4m (2016: £7.6m). Overheads in the half were reduced by a further 10%. Whilst the first half result was lower, the business remains profitable and orders received since May, together with indications from customers, suggest a stronger second half.

Tankships

Tankships reported a similar result to the first half of 2016 with an operating margin of around 14%. The business operated 14 vessels (2016: 15) in the period and received some benefit from lower bareboat charter costs in the period. It also won a contract to supply two vessels for the refuelling of the HMS Queen Elizabeth during the second half of 2017.

Finance

Interest and taxation

Net interest was £0.2m higher at £2.6m (2016: £2.4m) due to increased borrowings mainly arising from the funding of working capital for the project to design and assemble two submarine rescue vessels for the Indian Navy and from other large projects.

The effective tax rate on underlying profit before tax in the period increased to 17.2% (2016: 15.4%). This rate is based on estimates for the full year and has increased due to a greater proportion of profits being earned in higher tax jurisdictions such as Brazil and Ghana. The first half of 2016 also benefitted from adjustments to tax provisions in respect of prior years which has not been repeated in 2017. The Group's tanker operations continue to be taxed with respect to tonnage rather than profits and this reduces the effective rate by 2.3 (2016: 2.4) percentage points in the period.

Separately disclosed items

The directors consider that alternative performance measures described in note 3 assist an understanding of the underlying trading performance of the businesses. These measures exclude separately disclosed items which consist of gains or losses on the sale of a business, asset impairments and charges or income relating to the acquisition of businesses. The net charge for separately disclosed items after tax in the six months ended 30 June 2017 was £0.8m (2016: £nil).

Earnings per share and dividends

Underlying profit before taxation increased 6% to £18.6m (2016: £17.5m) due to the strong operating profit growth at Specialist Technical. Underlying diluted earnings per share rose by 2% to 30.1 pence per share (2016: 29.4p), which was lower than the uplift in underlying profit before taxation due to the higher effective tax rate and a larger minority interest charge in the period.

Diluted earnings per share after separately disclosed items were 28.5 pence per share (2016: 29.4p). The interim dividend has increased by 10% to 9.40 pence per share (2016: 8.55p) and will be paid on 3 November 2017 to shareholders on the register on 6 October 2017.

Cash flow and borrowings

After dividends paid in the period of £8.8m (2016: £8.0m), the net cash outflow was £22.6m (2016: £11.6m) and net borrowings increased to £128.3m (2016: £105.5m). The ratio of net borrowings (which includes project related bonds and guarantees) to ebitda increased in line with management expectations, to 2.2 times (2016: 1.8 times) reflecting the working capital bonds and guarantees in relation to the Indian Navy project. Excluding this project, the ratio would be 1.8 times. Net gearing, the ratio of net debt to equity was to 49% (2016: 46%).

Balance sheet

Delivery of the two submarine rescue vessels for the Indian Navy is scheduled for March 2018 and December 2018 and as previously stated, a further increase of working capital in the second half of 2017 of around £15m-£18m is expected which reverses when the vessels are delivered during 2018.

Risks and uncertainties

The principal risks and uncertainties which may have the largest impact on performance in the second half of the year are the same as disclosed in the 2016 Annual Report and Accounts on pages 20-22. The principal risks set out in the 2016 Annual Report and Accounts were:

· Strategic - energy markets, operations in emerging markets;

· Operational - project delivery, recruitment and retention of key staff, reputational risk and cyber security;

· Financial - foreign currency and interest rates.

The Directors consider that the principal risks and uncertainties set out in the 2016 Annual Report and Accounts have not changed and remain relevant for the second half of the financial year.

Directors' Responsibilities

We confirm to the best of our knowledge:

The interim financial report has been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union.

The interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the "Disclosure and Transparency Rules", being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the "Disclosure and Transparency Rules", being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during the period; and any changes in the related party transactions described in the last annual report that could do so.

N P Henry S C Kilpatrick

Chief Executive Officer Group Finance Director

29 August 2017

CONDENSED CONSOLIDATED INCOME STATEMENT

for the six months ended 30 June 2017

CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

for the six months ended 30 June 2017

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

at 30 June 2017

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

for the six months ended 30 June 2017

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 June 2017

NOTES TO THE CONDENSED CONSOLIDATED HALF YEAR STATEMENTS

1 Basis of preparation

James Fisher and Sons plc (the Company) is a public limited company registered and domiciled in England and Wales and listed on the London Stock Exchange. The condensed consolidated half year financial statements of the Company for the six months ended 30 June 2017 comprise the Company and its subsidiaries (together referred to as the Group) and the Group's interests in jointly controlled entities.

Statement of compliance

The condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standard (IFRS) IAS 34 "Interim Financial Reporting" as adopted by the European Union (EU). As required by the Disclosure and Transparency Rules of the Financial Services Authority, the condensed consolidated set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial statements for the year ended 31 December 2016 with the exceptions described below. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2016.

The comparative figures for the financial year ended 31 December 2016 are not the Group's statutory accounts for that financial year. Those accounts which were prepared under IFRS as adopted by the EU (adopted IFRS), have been reported on by the Group's auditors and delivered to the Registrar of Companies. The report of the auditors was (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.

The consolidated financial statements of the Group for the year ended 31 December 2016 are available upon request from the Company's registered office at Fisher House, PO Box 4, Barrow-in-Furness, Cumbria LA14 1HR or at www.james-fisher.co.uk.

The half year financial information is presented in Sterling and all values are rounded to the nearest thousand pounds (£000) except where otherwise indicated.

The half year report was approved for issue by the Board of Directors on 29 August 2017.

Going concern

After making enquires, 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 condensed consolidated financial statements.

The Group meets its day to day working capital requirements through operating cash flows with borrowings in place to fund acquisitions and capital expenditure. The Group had £34.0m of undrawn committed facilities at 30 June 2017 and no revolving credit facilities due for renewal within the next twelve months.

Significant accounting policies

The accounting policies applied by the Group in these condensed consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2016.

2 Accounting estimates and judgements

The preparation of half year financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 31 December 2016.

3 Alternative performance measures

The Group uses a number of alternative (non-Generally Accepted Accounting Practice (non-GAAP)) financial measures which are not defined within IFRS. The Directors use these measures in order to assess the underlying operational performance of the Group and, as such, these measures are important and should be considered alongside the IFRS measures. The adjustments are separately disclosed and are usually items that are significant in size or non-recurring in nature. The following non-GAAP measures are referred to in the half year results.

3.1. Underlying operating profit and underlying profit before taxation

Underlying operating profit is defined as operating profit before amortisation or impairment of acquired intangible assets, acquisition expenses, adjustments to deferred consideration (together, acquisition related income and expense), the costs of a material restructuring, asset impairment or rationalisation of operations and the profit or loss relating to the sale of businesses. Amortisation of acquired intangible assets and acquisition expenses are recurring in nature where business combinations are part of a group's strategy. As acquisition expenses fluctuate with activity and to provide a better comparison to businesses that are not acquisitive, the Directors consider that both of these items should be separately disclosed to give a better understanding of operating performance. The Directors believe that the underlying operating profit is an important measure of the operational performance of the Group. Underlying profit before taxation is defined as underlying operating profit less net finance expense.

3.2. Underlying earnings per share

Underlying earnings per share (EPS) is calculated as the total of underlying profit before tax, less income tax, but excluding the tax impact on separately disclosed items included in the calculation of underlying profit less profit attributable to non-controlling interests, divided by the weighted average number of ordinary shares in issue during the year. The Directors believe that underlying EPS provides an important measure of the underlying earnings capability of the Group. Underlying earnings per share is set out in note 8.

3.3. Capital employed and return on capital employed (ROCE)

Capital employed is defined as net assets less cash and short-term deposits and after adding back borrowings. Average capital employed is adjusted for the timing of businesses acquired and after adding back cumulative amortisation of customer relationships. Segmental ROCE is defined as the underlying operating profit, divided by average capital employed. The key performance indicator, Group post-tax ROCE, is defined as underlying operating profit, less notional tax, calculated by multiplying the effective tax rate by the underlying operating profit, divided by average capital employed.

3.4. Cash conversion

Cash conversion is defined as the ratio of operating cash flow to underlying operating profit. Operating cash flow comprises cash generated from operations adjusted for dividends from joint venture undertakings.

4 Segmental information

Management has determined that the Group has four operating segments reviewed by the Board: Marine Support, Specialist Technical, Offshore Oil and Tankships. Their principal activities are set out in the Strategic report within the consolidated financial statements of the Group for the year ended 31 December 2016.

The Board assesses the performance of the segments based on operating profit. The Board believes that such information is the most relevant in evaluating the results of certain segments relative to other entities which operate within these industries. Inter-segmental sales are made using prices determined on an arms-length basis. Sector assets exclude cash, short-term deposits and corporate assets that cannot reasonably be allocated to operating segments. Sector liabilities exclude borrowings, retirement benefit obligations and corporate liabilities that cannot reasonably be allocated to operating segments.