30th Aug 2006 07:01
Fisher (James) & Sons PLC30 August 2006 James Fisher and Sons plc (FSJ.L) ("James Fisher" or "the Company") Interim Results James Fisher, the UK's leading marine services provider, announces InterimResults for the half year ended 30 June 2006. Revenue, pre-tax profit, earnings per share and cash flow are well ahead of thecomparable period in 2005. Strong growth, particularly organic growth, in marine support service companieshas more than replaced the discontinued cable ship profit with better qualitymarine service income. 57% of the growth is organic with the remaining 43% fromacquisitions, principally Monyana and Fendercare. Financial Highlights % 2006 2005• Revenue +29% £57.0m £44.1m• Profit for half year from continuing operations +55% £7.3m £4.7m• Basic earnings per share from total operations +66% 18.68p 11.28p• Adjusted basic earnings per share from continuing operations +54% 14.87p 9.63p• Financial gearing 34% 57%• Interim dividend proposed +12% 3.47p 3.10p• Group operating cash flow over £7m Operational Highlights • Last cable ship sold for US$18.25M - £1.76m better than book value• Offshore oil service divisional profit from operations up 87%• Specialist technical services divisional profit from operations including joint venture up 101%• Defence divisional profit from operations including joint venture up 13%• Marine oil services divisional profit from operations unchanged, ROCE up to 13.5%, strong cash flow• Pension fund exposure reduced to £5.9m (2005 - £16.9m)• Marine support services contribution to profit from operations since 2001 up from 12.5% to 67.3% of total.• 4 year record of success in finding, integrating and growing acquisitions Commenting on the outlook, Chairman, Tim Harris, said: "The encouraging first half result confirms we have a number of well managedmarine service companies in strong, niche market positions in industries such asoil, port development, nuclear decommissioning and defence (including submarinerescue and surface ship related contracts), either trading well in strongmarkets or well positioned in markets with potential. With the cable ship involvement resolved, the pension exposure effectivelycontrolled and financial gearing at only 34%, the group is well set to make itsnext strategic move and to continue to grow profits strongly for itsshareholders." For further information:James Fisher & Sons plc Tim Harris Chairman 020 7338 5808 Nick Henry Chief Executive Officerwww.james-fisher.co.uk Michael Shields Group Finance Director Adventis Financial PR Peter Binns 07768 392 582020 7034 4765 Chris Steele 07979 604 687 CHAIRMAN'S STATEMENT Highlights 2006 2005Revenue + 29% £57.0m £44.1mProfit for half year from continuing operations + 55% £7.3m £4.7mBasic earnings per share from total operations + 66% 18.68p 11.28pAdjusted basic earnings per share from continuing operations + 54% 14.87p 9.63pFinancial gearing 34% 57% Overview James Fisher and Sons has enjoyed a strong first half by any measure - revenue,profit, earnings per share and cash flow - and produced a result well ahead ofthe comparable period in 2005. Strong growth, particularly organic growth, inour marine support service companies has more than replaced the discontinuedcable ship profit with better quality marine service income. The sale of ourlast remaining cable ship, Oceanic Princess, for $18.25 million in June at aprofit of £1.76 million over the carrying value in last year's balance sheet,concludes our involvement in that business. Strategy The following table demonstrates the success of the group strategy in using itsstrong cash flow to expand its marine service operations, which now account forover two thirds of operating profit, by building on its core expertise ofpractical engineering and operational skills in the marine sector. Segmental profit from operations before separately disclosed items 2002 2003 2004 2005 1st half 2006 £m £m £m £m £mMarine Support Services offshore oil * * 2.9 4.0 3.5 specialist technical * * 0.9 2.7 2.4 defence * * 2.7 2.1 1.2 1.8 4.8 6.5 8.8 7.1 Marine Oil Services 4.7 6.1 6.9 6.7 3.4Cable Ship (discontinued 2005) 7.9 4.3 3.9 4.5 - 14.4 15.2 17.3 20.0 10.5 * not available The growth in marine services has been achieved both organically and by theacquisition of over 15 small-to-medium sized privately held, entrepreneuriallyrun businesses costing in total £52.3 million. A particularly pleasing featureof the 2006 first half result is that 57% of the growth is organic with theremaining 43% from acquisitions, principally the Monyana group in December 2005. With gearing at only 34% at 30 June 2006, against 57% last year and the cableship issue resolved, the group is well placed to continue aggressively itssuccessful marine service strategy by supporting its organic growth with furtheracquisitions. Offshore Oil Services Divisional result £3.5 million (2005 - £1.9 million) This division benefited from strong underlying markets and the acquisition ofthe Monyana group which together enabled a 59% growth in revenue and 87% inprofits, with a margin improvement of 4.6%. 50% of the profit improvement wasdue to organic growth. We are increasingly using our strong Aberdeen andStavanger market presence to expand by following our customers into the new oilexploration markets being developed around the world. This is reflected in ourrevenue analysis which, for the 2006 first half, was 54% Norwegian North Sea,29% UK North Sea and 17% other global markets. The Monyana group acquisition has been successfully integrated and we shallshortly be combining all of our Aberdeen activities on Monyana's eleven acrefreehold site at Old Meldrum. This will enable both marketing and operationalsynergies to be realised as well as enabling the sale of the former Scan Tech UKfreehold site at Bridge of Don. From September 2006 UK activities for Monyanaand Scan Tech UK activities will trade under a united Fishers Offshore brand.Similarly, in Stavanger we have acquired a new freehold site for development atFinnestad/Dusavik to which we shall relocate our Scan Tech AS, Scan Tech AirSupply and Monyana activities. They will trade under the Scan Tech brand whichhas significant customer recognition in Norway. We continue to invest in new equipment in this division to ensure that we canmeet our customer requirements both in the North Sea and increasingly worldwide. Specialist Technical Services Divisional result including joint ventures £2.4 million (2005 - £1.2 million) Revenue was up 87% and profit doubled in this division with margins alsoimproving. All three of its key components, FenderCare, James Fisher Nuclearand Remote Marine Systems traded well. Although we benefited from threeadditional months from the FenderCare acquisition in March 2005, organic growthwas the main contributor to the improved performance. The FenderCare group performed exceptionally well. It is well placed in twomarkets - oil and port development - both of which are extremely strong atpresent. FenderCare is expanding further worldwide, based on its widelyrecognised specialist skills and have recently upgraded operations in Singaporeand opened a new base in the Middle East, one of the world's fastest growingmarkets. James Fisher Nuclear had a better six months. The nuclear decommissioningmarket, although of real potential, is still suffering from uncertaintyparticularly over the future of the British Nuclear Group but also concerningthe decommissioning bidding process itself which, like everything else in thenuclear business, has been radically revised with uncertain results. However,we enjoy a niche decommissioning skill in remote handling and attractiveindustrial premises at Egremont, close to the Sellafield site. James FisherNuclear has recently teamed with a number of complementary, like-mindedcompanies to form a joint company called Cumbria Nuclear Solutions Limited.This has started to bid for some of the larger contracts which, individually, wepreviously did not have the capacity to take on. Remote Marine Systems again performed well in the first half. It enjoys astrong market niche in the North Sea, for the design and production ofelectrical penetrators for oil wells. In the usual James Fisher way we are nowencouraging a more extensive international marketing effort with some success todate. Defence Divisional result including joint venture £1.2 million (2005 - £1.1 million) Revenue in this division grew by 5% but this was not reflected in the profitbecause of increased bidding costs. The position has not changed materiallyover the last six months - we continue to track and bid for a number ofsignificant contracts, both submarine rescue and surface ship related, thegestations for which are quite long-term. The "bread and butter", regular,smaller work is producing a reasonable result but we have yet to win atransforming contract. The Foreland joint venture company, which operates the Ministry of Defence's sixmilitary roll-on roll-off vessels, continues to operate well and produced animproved result demonstrating the potential in the defence arena, given theright combination of skills and patience. Marine Oil Services Divisional result £3.4 million (2005 - £3.4 million) The result was effectively the same as last year with revenue, profit and marginvirtually unchanged. The return on capital improved by almost 1% to 13.5%,virtually tax free under the tonnage tax regime, and reflecting the charterednature of the new tonnage, Cumbrian Fisher, Clyde Fisher and Shannon Fisheragainst the owned tonnage of the three older ships, Lough Fisher, Tees Fisherand Wear Fisher which we operated in the first half of 2005, then sold. We haverecently taken delivery of the last in the current round of newbuildings, SolwayFisher, and will benefit from her contribution in the second half. TheBuncefield fire in December 2005 had an adverse effect on one contract for the6,000 tonne ships because it disrupted the planned distribution of cleanpetroleum products around the coast, temporarily reducing the contractrequirement for that class of vessel. The Marine Oil Services division is now contributing a virtually tax free returnon capital of 13.5% and a strong cash flow which supports the expansion of ourother fast growing marine service divisions. It also provides and underpinsmany of our marine service skills and represents an important part of our "core"activities. Directors and Employees Ian Serjent, our Marine and Technical Services Director, retired from the Boardat this year's AGM after more than thirty years with the Group. In many waysIan was the embodiment of James Fisher's "practical engineering and operationalskills" and I would like to thank him for his great contribution to the Group'ssuccess. The pension fund deficit reported under IFRS in the balance sheet declined from£16.9 million at 30 June 2005 to £5.9 million at 30 June 2006. This reductionwas partly the result of management action in phasing out the final salaryscheme to existing members and making special cash contributions to the twoJames Fisher Schemes totalling £3.0 million in the last twelve months. However,improved investment returns and more importantly a rise in longer term interestrates also played a significant role. I would like to thank all of our employees and seafarers for their effort inproducing a most encouraging result in the first half. James Fisherintentionally operates a flat management structure which places delegatedresponsibility on managers. The aim is to challenge and encourage individualinitiative. I would particularly like to recognise and thank all of those whohave risen to the challenge and put the group in a position to do even better.In the same way, I would like to thank all the founding shareholders of thebusinesses we have acquired who, in the Fishers way, have remained with us insuch an enthusiastic manner. Outlook James Fisher's aim is to be the UK's leading marine service group and in recentyears has followed a clear strategy to achieve it. The encouraging first halfresult and current trading confirm that we have a number of well managed marineservice companies which enjoy strong, niche market positions in industries suchas oil, port development, nuclear decommissioning and defence, which are eithergrowing strongly or have the potential for significant future growth. With thecable ship issue resolved, the pension exposure effectively controlled andfinancial gearing at only 34%, the group is now well set to make its nextstrategic move and to continue to grow profits strongly for its shareholders. GROUP INCOME STATEMENT For the six months ended 30 June 2006 Unaudited Unaudited Audited Note six months ended six months ended Year ended 30 June 2006 30 June 2005 31 December 2005 Before Separately Before Separately separately disclosed separately disclosed disclosed items disclosed items items note 5 Total items note 5 Total Total £000 £000 £000 £000 £000 £000 £000Continuing operationsGroup revenue 57,010 57,010 44,128 44,128 91,411Cost of sales (45,515) (45,515) (35,631) (35,631) (73,931)Gross profit 11,495 11,495 8,497 8,497 17,480 Administrative expenses (2,793) (2,793) (2,518) (2,518) (5,413) Profit from operations before 8,702 8,702 5,979 5,979 12,067separately disclosed items Pension benefit curtailment - - - - - - 2,000 Loss on ship disposals - (24) (24) - (1,449) (1,449) (1,617) Profit from operations 8,702 (24) 8,678 5,979 (1,449) 4,530 12,450 Finance costs Finance income (revenue) 159 - 159 180 - 180 304 Finance costs (1,299) - (1,299) (1,355) - (1,355) (2,591) Exchange gain/(loss) on loan - 35 35 - (93) (93) (130) conversion (1,140) 35 (1,105) (1,175) (93) (1,268) (2,417) Share of post tax results of joint 859 - 859 639 - 639 1,413ventures Profit on continuing operations 2 8,421 11 8,432 5,443 (1,542) 3,901 11,446before taxationTaxation (including overseas 10 (1,133) - (1,133) (753) - (753) (754)taxation of £469,000; 2005 £260,000) Profit on continuing operations 7,288 11 7,299 4,690 (1,542) 3,148 10,692 Discontinued operationsProfit/(loss) from discontinued 4 1,856 2,348 (12,889)operations Profit/(loss) attributable to equity holders of the 9,155 5,496 (2,197)parent Earnings per share (EPS) pence pence pence Basic EPS from continuing operations 12 14.89 6.46 21.91Diluted EPS from continuing 12 14.76 6.40 21.72operations Basic EPS on profit/(loss) from 12 18.68 11.28 (4.50)total operationsDiluted EPS on profit/(loss) from 12 18.52 11.17 (4.50)total operations Adjusted earnings per share Basic EPS from continuing operations 12 14.87 9.63 21.84Diluted EPS from continuing 12 14.74 9.54 21.64operations Dividends Paid or approved by shareholders in the periodFinal dividend 5.69 4.95 4.95Interim dividend - - 3.10 5.69 4.95 8.05 Proposed but not accruedFinal dividend - - 5.69Interim dividend 3.47 3.10 - 3.47 3.10 5.69 GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE For the six months ended 30 June 2006 Unaudited Unaudited Audited Note six months ended six months ended Year ended 30 June 2006 30 June 2005 31 December 2005 £000 £000 £000 Income and expense recognised directly in equity Exchange differences on translation of foreignoperations: Currency translation differences (130) 81 26 Net investment hedge 147 (104) 9 17 (23) 35 Fair value of gains/(losses) on cash flow 52 (163) (134)hedges Share of fair value (losses)/gains of cash flow hedges in (17) (67) 169joint venture Actuarial gains/(losses) on defined benefit 7 5,331 (4,070) (4,531)schemes 5,383 (4,323) (4,461) Transfers to the income statement On cash flow hedges (4) (40) 36 Tax on items taken directly to equity 10 (1,054) 780 123 Net income/(expense) recognised directly in 4,325 (3,583) (4,302)equity Profit/(loss) for the period 9,155 5,496 (2,197) Total recognised income/(expense) for the 13 13,480 1,913 (6,499)period All recognised income/(expense) is attributable to the equity holders ofthe parent. GROUP BALANCE SHEET At 30 June 2006 Unaudited Unaudited Audited 30 June 2006 30 June 2005 31 December 2005 Note £000 £000 £000AssetsNon current assetsGoodwill 36,205 30,649 36,168Property, plant and equipment 66,236 102,042 67,081Investment in joint ventures 3,406 2,576 2,587Available for sale financial assets 1,368 1,157 1,368Deferred tax assets 187 1,825 1,197 107,402 138,249 108,401 Current assetsInventories 6,673 5,745 5,797Trade and other receivables 23,913 20,642 21,026Derivative financial instruments 77 - -Cash and short term deposits 9 10,098 5,875 9,725 40,761 32,262 36,548 Non-current assets classified as held for sale 4 - 1,189 7,959 Total assets 148,163 171,700 152,908 Equity and liabilities Capital and reservesCalled up share capital 13 12,373 12,345 12,345Share premium 13 24,081 23,960 23,960Treasury shares 13 (1,154) (1,116) (1,184)Other reserves 13 226 (221) 178Retained earnings 13 48,666 48,050 38,030Total equity 84,192 83,018 73,329 Non current liabilitiesOther payables 963 33 593Retirement benefit obligations 7 5,912 16,870 13,536Derivative financial instruments - - 18Cumulative preference shares 100 100 100Interest-bearing loans and borrowings 30,640 41,256 42,695 37,615 58,259 56,942Current liabilitiesTrade and other payables 16,936 17,101 14,802Current tax 1,616 1,601 1,370Derivative financial instruments 30 183 102Interest-bearing loans and borrowings 7,774 11,538 6,363 26,356 30,423 22,637 Total liabilities 63,971 88,682 79,579 Total equity and liabilities 148,163 171,700 152,908 GROUP CASH FLOW STATEMENT For the six months ended 30 June 2006 Unaudited Unaudited Audited six months ended six months ended Year ended Note 30 June 2006 30 June 2005 31 December 2005 £000 £000 £000 Group profit from operations 8,678 4,530 12,450 Adjustments to reconcile Group operatingprofit to net cash inflows from operatingactivitiesProfit/(loss) from discontinued operations 1,858 2,351 (12,886)Adjustments for: Depreciation 2,773 3,983 7,670 Profit on sale of property, plant and (185) (17) (51) equipment Pension benefit curtailment - - (2,000) Impairment of non - current assets - - 10,885 (Profit)/loss on ship disposals (1,737) 1,449 11,565Increase in trade and other receivables (3,035) (3,548) (3,014)(Increase)/decrease in inventories (910) 471 258Increase/(decrease) in trade and other payables 2,584 24 (1,291)Additional defined benefit pension scheme contributions (2,418) (88) (1,994)Share based compensation 263 201 432Cash generated from operations 7,871 9,356 22,024Income tax payments (539) (781) (1,404)Cash flow from operating activities 7,332 8,575 20,620 Investing activitiesDividends from joint venture undertakings - - 1,068Proceeds from the sale of property, plant and equipment 9,897 1,015 12,995Interest received 163 175 321Acquisition of subsidiaries, net of cash acquired (27) (10,862) (22,077)Acquisition of property, plant and equipment (2,119) (4,187) (7,357)Acquisition of available for sale financial asset - - (211)Cash flows from/(used in) investing activities 7,914 (13,859) (15,261) Financing activitiesProceeds from the issue of share capital 149 190 190Preference dividend paid (2) (2) (4)Interest paid (1,371) (1,386) (2,871)Proceeds from other non-current borrowings 309 9,332 20,524Purchase less sales of own shares by ESOP (233) - 7Repayment of borrowings (10,918) (4,582) (19,547)Dividends paid (2,796) (2,412) (3,927)Cash flows (used in)/ from financing activities (14,862) 1,140 (5,628) Net increase/(decrease) in cash and cash equivalents 384 (4,144) (269)Cash and cash equivalents at beginning of period 9,725 10,045 10,045Net foreign exchange difference (11) (26) (51) Cash and cash equivalents at end of period 9 10,098 5,875 9,725 NOTES TO THE INTERIM FINANCIAL STATEMENTS General information The Group's interim result consolidates the results of the company and itssubsidiary companies made up to 30 June 2006. The interim financial information is presented in Sterling and all values arerounded to the nearest thousand pounds (£000) except when otherwise indicated. The company is a limited liability company incorporated and domiciled in England& Wales and whose shares are listed on the London Stock Exchange. The interim report was approved for issue by the Board of Directors on 29 August2006. Basis of preparation The financial information contained in this interim report does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985. It doesnot therefore include all the information and disclosures required in the annualfinancial statements and should be read in conjunction with the Group's annualfinancial statements as at 31 December 2005. The financial information for thepreceding year is based on the statutory accounts for the year ended 31 December2005. These accounts, upon which the auditors issued an unqualified opinion,have been delivered to the Registrar of Companies. Significant accounting policies The interim report has been prepared using accounting policies consistent withthose followed in the preparation of the Group's annual financial statements forthe year ended 31 December 2005. Seasonality of operations Although some of the Group's operations may sometimes be affected by seasonalfactors such as general weather conditions, the Directors do not feel that thishas a material effect on the performance of the Group when comparing the interimresults to those achieved in the second half of the year. 2 Segmental Information Primary reporting format business segments The following tables present revenue and profit informationregarding the Group's business segments for the six months ended 30 June 2006and 2005 and the year ended 31 December 2005. Six months ended Discontinued30 June 2006 Continuing Operations Operations Offshore Specialist Defence Marine Total Cable Oil Services Technical Oil Ships Services Services £000 £000 £000 £000 £000 £000Revenue Group revenue 11,315 19,176 5,557 22,722 58,770 -Inter segment sales - (1,619) (141) - (1,760) - Segmental revenue 11,315 17,557 5,416 22,722 57,010 - Result Segmental result before 3,460 2,275 495 3,450 9,680 97separately disclosed items Common costs (978)Profit from operations before separately disclosed items and joint ventures 8,702 (Loss)/profit on ship disposals (24) 1,761 Profit from operations before joint ventures 8,678 1,858 Finance income (revenue) 159 -Finance costs (1,299) -Exchange gain on loan conversion 35 - (1,105) - Share of post tax results of joint ventures 116 743 859 Profit before tax 8,432 1,858 Taxation (1,133) (2)Profit attributable to equity holders 7,299 1,856 2 Segmental Information (cont'd) Six months ended Discontinued30 June 2005 Continuing Operations Operations Offshore Specialist Defence Marine Total Cable Oil Services Technical Oil Ships Services Services £000 £000 £000 £000 £000 £000Revenue Group revenue 7,103 10,343 5,181 22,480 45,107 4,821Inter segment sales - (968) (11) - (979) - Segmental revenue 7,103 9,375 5,170 22,480 44,128 4,821 Result Segmental result before 1,850 1,130 515 3,440 6,935 2,351separately disclosed items Common costs (956)Profit from operations before separately disclosed items and joint 5,979ventures Loss on ship disposals (1,449) - Profit from operations before joint 4,530 2,351ventures Finance income (revenue) 180 -Finance costs (1,355) -Exchange loss on loan (93) -conversion (1,268) - Share of post tax results of 57 582 639joint ventures Profit before tax 3,901 2,351 Taxation (753) (3)Profit attributable to equity holders 3,148 2,348 2 Segmental Information Year ended Discontinued31 December 2005 Continuing Operations Operations Offshore Specialist Defence Marine Total Cable Oil Services Technical Oil Ships Services Services £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 separately 4,017 2,551 782 6,733 14,083 4,552disclosed items Common costs (2,016)Profit from operations before separately disclosed items and joint ventures 12,067 Pension benefit curtailment 2,000 -Impairment of non-current assets - (10,885)Recognition of rentals due on sold ships - 3,395Loss on ship disposals (1,617) (9,948) Profit/(loss) from operations before joint ventures 12,450 (12,886) Finance income (revenue) 304 -Finance costs (2,591) -Exchange loss on loan (130) -conversion (2,417) - Share of post tax results of joint ventures 79 1334 1,413 Profit/(loss) before tax 11,446 (12,886) Taxation (754) (3)Profit/(loss) attributable to equity holders 10,692 (12,889) 3 Changes in estimates There have been no material effects on the results of the interim period as aresult of changes in estimates reported in prior financial years. There have been no material changes in contingent liabilities during the currentinterim period. The liabilities reported in respect of the defined benefit pension plans arebased on the valuations carried out at the last balance sheet date, 31 December2005 and have been reviewed and updated by a qualified actuary. 4 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 in June 2006. The results of discontinued operations are presented below: Unaudited Unaudited Audited six months ended six months ended Year ended 30 June 2006 30 June 2005 31 December 2005 £000 £000 £000Revenue - 4,821 9,019Cost of sales 97 (2,470) (4,467)Gross profit 97 2,351 4,552 Profit/(loss) on ship disposals 1,761 - (9,948)Recognition of rentals due on sold ship - - 3,395Profit/(loss) from operations 1,858 2,351 (2,001) Impairment of non-current assets - - (10,885)Profit/(loss) before tax from discontinued 1,858 2,351 (12,886)operationsTaxation (2) (3) (3)Net profit/(loss) attributable to discontinued 1,856 2,348 (12,889)operations Non current assets held for sale At 31 December 2005 this related to the carrying value of the CSOceanic Princess following the Group's decision to withdraw from Cable Layingactivities. At 30 June 2005 this item comprised the carrying value of the Tees Fisher and Wear Fisher which were disposed of in August 2005. The net cash flows attributable to discontinued operations are: Unaudited Unaudited Audited six months ended six months ended Year ended 30 June 2006 30 June 2005 31 December 2005 £000 £000 £000Operating cash flows 2,822 3,549 7,085Investing cash flows 9,091 (1,111) 8,988Financing activities (7,066) (1,963) (14,510) 4,847 475 1,563 Earnings/(loss) per share from discontinued operations (pence): pence pence penceBasic 3.79 4.82 (26.41)Diluted 3.75 4.77 (26.41) 5 Separately disclosed items Unaudited Unaudited AuditedSeparately disclosed items consist of: six months ended six months ended Year ended 30 June 2006 30 June 2005 31 December 2005 £000 £000 £000 Pension benefit curtailment - - 2,000Loss on ship disposals (24) (1,449) (1,617)Exchange gain/(loss) on loan conversion 35 (93) (130) 11 (1,542) 253 The exchange differences on loans arise on foreign currencyfinancing loans in the UK in relation to the disposed ship. Loss on ship disposals in the six months ended 30 June 2006 relatesto additional costs connected with the ships disposed of in 2005. The pension benefit curtailment arises from the closure of theGroup's defined benefit pension scheme to existing members in 2010 and changesto the contribution rates. Tax arising on this item amounted to £0.216m. Thereis no tax effect relating to the other items included in separately discloseditems. 6 Property plant and equipment During the six months ended 30 June 2006 the Group acquired assets,including investment in vessels with a cost of £2.160m (2005 £4.373m). Assets with a net book value of £0.278m (excluding vessels) (2005£0.110m), were disposed of resulting in a net gain on disposal of £0.185m (2005£0.017m). 7 Deficit in defined benefit pension schemes The Group operates two defined benefit schemes and has an obligationto make payments in respect of the funding deficit of the Merchant NavyOfficers' Pension Fund. The decrease in the pension liability in the periodarises mainly from changes in the actuarial assumptions, in particular anincrease of 0.5% in the discount rate used for valuation of the defined benefitschemes administered on behalf of the Group. In addition the company has madespecial payments totalling £1.6m into the James Fisher & Sons Public LimitedCompany Pension Fund for Shore Staff, as referred to in the Group's 2005 annualreport. 8 Share based payment In March 2006 awards were granted under the Long Term Incentive Plan(LTIP), and the 2005 Executive Share option scheme (ESOS). In the case of the LTIP the exercise price of the option is £nil.The options vest if the increase in the company's diluted earnings per ordinaryshare over the performance period is at least equal to the rate of inflationplus 9%. If the performance target is not met over the three year contractualperiod for performance the option lapses. In the case of the ESOS the exercise price is equal to the averagemiddle market price for the three dealing days prior to the date of grant, being£4.68. The options vest depending on the Company's total shareholder returnrelative to a comparator group of companies selected from the FTSE Small Capindex at the date of grant. If performance over a three year period is in theupper quartile 100% of the options will vest. If performance is at the bottom ofthe median quartile 40% will vest. The amount vesting will decrease on astraight line basis between the median and upper quartile. If performance isbelow the median quartile no shares will vest. The options lapse if theseconditions are not met during the performance period. The fair value of options granted during the six months ended 30 June 2006 wasestimated at the date of grant using the following assumptions: LTIP ESOS Dividend yield 2.00% 2.00%Expected volatility N/A 24.2%-29.2%Risk free interest rate N/A 4.41%Expected life of option (years) 3 6.5Share price at date of grant (£) 4.485 4.64 Options granted (number of shares) 66,742 124,573Estimated fair value of option at date of grant (£) 4.22 1.039 9 Reconciliation of net debt 1 January Acquisitions Cash Other Exchange 30 June 2006 Flow Non Cash Movement 2006 £000 £000 £000 £000 £000 £000Cash in hand and at bank 9,725 - 384 - (11) 10,098Short term deposits - - - - - -Cash and cash equivalents 9,725 - 384 - (11) 10,098Debt due after 1 year (42,795) - - 12,055 - (30,740)Debt due within 1 year (6,363) - 10,609 (12,055) 35 (7,774) (49,158) - 10,609 - 35 (38,514)Net debt (39,433) - 10,993 - 24 (28,416) 1 January Acquisitions Cash Other Exchange 30 June 2005 Flow Non Cash Movement 2005 £000 £000 £000 £000 £000 £000Cash in hand and at bank 8,045 - (2,144) - (26) 5,875Short term deposits 2,000 - (2,000) - - -Cash and cash equivalents 10,045 - (4,144) - (26) 5,875Debt due after 1 year (38,572) - - (2,738) (46) (41,356)Debt due within 1 year (8,179) (1,300) (4,750) 2,738 (47) (11,538) (46,751) (1,300) (4,750) - (93) (52,894)Net debt (36,706) (1,300) (8,894) - (119) (47,019) 10 Taxation The group has entered the UK tonnage tax regime under which tax onits ship owning and operating activities is based on the net tonnage of vesselsoperated. Any income and profits outside the tonnage tax regime are taxed underthe normal tax rules of the relevant tax jurisdiction. The tax charge is made up as follows: Unaudited Unaudited Audited six months ended six months ended Year ended 30 June 2006 30 June 2005 31 December 2005 £000 £000 £000Current tax:UK tonnage tax (13) (11) (24)UK corporation tax (580) (436) (514) (593) (447) (538) Tax (under)/over provided in previous years (118) (44) 327Foreign tax (469) (260) (567)Total current tax (1,180) (751) (778)Deferred tax:Group deferred tax 45 (5) 21Total taxation expense included in group income (1,135) (756) (757)statement Share of joint ventures' current tax (40) (36) (72) The total tax charge in the income statement is allocated as follows: Unaudited Unaudited Audited six months ended six months ended Year ended 30 June 2006 30 June 2005 31 December 2005 £000 £000 £000Taxation expense reported in group income statement (1,133) (753) (754)Taxation attributable to discontinued activities (2) (3) (3)Total tax expense (1,135) (756) (757) Deferred income taxThe gross movement on the deferred income tax account is asfollows: Unaudited Unaudited Audited six months ended six months ended Year ended 30 June 2006 30 June 2005 31 December 2005 £000 £000 £000Balance at 1 January 1,197 1,391 1,391 Included in statement of recognised income and expense (1,054) 780 123Credited/(charged) to income statement 45 (5) 21Exchange differences (1) - -Acquired with subsidiaries - (341) (338)Balance at period end 187 1,825 1,197 At 30 June 2006 the group has no recognised or unrecognised deferredincome tax liability (2005 £nil) in respect of taxes that would be payable onthe unremitted earnings of certain of the group's subsidiaries and jointventures. The group has no liability to additional taxation should such amountsbe remitted due to the availability of double taxation relief. 11 Share Capital During the interim period 110,423 ordinary shares of 25p wereallotted on the exercise of share options for an aggregate cash consideration of£0.149m. 12 Earnings per share Basic earnings per share is calculated by dividing the profitattributable to equity holders of the company by the weighted average number ofordinary shares in issue during the period, after excluding ordinary sharespurchased by the employee share ownership trust and held as treasury shares. Diluted earnings per share is calculated by dividing the net profit attributableto ordinary equity holders of the parent by the weighted average number ofordinary shares that would be issued on conversion of all the dilutive potentialordinary shares into ordinary shares. The calculation of basic and diluted earnings per share are based on thefollowing profits and numbers of shares: six months ended six months ended Year ended 30 June 2006 30 June 2005 31 December 2005 £000 £000 £000Profit/(loss) attributable to equity 9,155 5,496 (2,197)holders(Profit)/loss attributable to discontinued (1,856) (2,348) 12,889activitiesProfit on continuing activities attributable to 7,299 3,148 10,692equity holders Weighted average number of shares 30 June 2006 30 June 2005 31 December 2005 Number of Number of Number of shares shares sharesFor basic earnings per ordinary share* 49,017,748 48,725,767 48,797,076Exercise of share options and LTIPs+ 427,898 463,183 430,920For diluted earnings per ordinary share 49,445,646 49,188,950 49,227,996 * Excludes 395,657 (2005 510,237) shares owned by the James Fisher andSons Public Limited Company Employee Share Ownership Trust. + Share options and LTIPs have been excluded from the calculation ofdiluted earnings per share for the year ended 31 December 2005 as they areantidilutive, but have been included in the calculation of diluted earnings perordinary share on continuing activities. 30 June 2006 30 June 2005 31 December 2005 £000 p £000 p £000 p Basic earnings/(loss) per share ontotal operations 9,155 18.68 5,496 11.28 (2,197) (4.50) (Profit)/loss attributable todiscontinued activities (1,856) (3.79) (2,348) (4.82) 12,889 26.41 Basic earnings per share on profiton continuing operations 7,299 14.89 3,148 6.46 10,692 21.91 Diluted earnings per share 9,155 18.52 5,496 11.17 (2,197) (4.50) Diluted earnings per share onprofit on continuing operations 7,299 14.76 3,148 6.40 10,692 21.72 The earnings per ordinary share on continuing operations before separatelydisclosed items is shown to highlight the underlying earnings trend and iscalculated using the number of shares outlined in the table above. 30 June 2006 30 June 2005 31 December 2005 £000 p £000 p £000 pBasic earnings per share on profiton continuing operations 7,299 14.89 3,148 6.46 10,692 21.91Adjustments:Exchange (gain)/loss on loan (35) (0.07) 93 0.19 130 0.27conversionLoss on ship disposals 24 0.05 1,449 2.98 1,617 3.31Pension benefit curtailment(including tax effect of £216,000) - - - - (1,784) (3.65)Adjusted basic earnings per shareon profit on continuing operations 7,288 14.87 4,690 9.63 10,655 21.84 Diluted earnings per share onprofit on continuing operations 7,299 14.76 3,148 6.40 10,692 21.72Adjustments:Exchange (gain)/loss on loan (35) (0.07) 93 0.19 130 0.26conversionLoss on ship disposals 24 0.05 1,449 2.95 1,617 3.28Pension benefit curtailment(including tax effect of £216,000) - - - - (1,784) (3.62)Adjusted diluted earnings per shareon profit on continuing operations 7,288 14.74 4,690 9.54 10,655 21.64 13 Reconciliation of movements in equity For the six months ended 30 June 2006 Capital Reserves Share Share retained Other Treasury Total capital premium earnings reserves shares £000 £000 £000 £000 £000 £000At 1 January 2006 12,345 23,960 38,030 178 (1,184) 73,329 Total recognised income and - - 13,432 48 - 13,480expense in the periodOrdinary dividends paid - - (2,796) - - (2,796) Share-based compensation - - 263 - - 263expense Arising on the issue of 28 121 - - - 149shares Purchase less sale of shares - - - - (233) (233) Transfer on disposal of - - (263) - 263 -shares At 30 June 2006 12,373 24,081 48,666 226 (1,154) 84,192 Other reserves Translation Hedging Total reserve reserve £000 £000 £000At 1 January 2006 212 (34) 178 Cash flow hedges:Transferred to the income statement - (4) (4)Fair value losses in the - 52 52periodShare of fair value gains of joint - (17) (17)venturesRecognised income in the period including the effect of net 17 - 17investment hedgesAt 30 June 2006 229 (3) 226 For the six months ended 30 June 2005 Capital Reserves Share Share retained Other Treasury Total capital premium earnings reserves shares £000 £000 £000 £000 £000 £000At 1 January 2005 12,305 23,810 48,151 72 (1,212) 83,126 Total recognised income and - - 2,206 (293) - 1,913expense in the periodOrdinary dividends paid - - (2,412) - - (2,412) Share-based compensation - - 201 - - 201expense Arising on the issue of 40 150 - - - 190shares Transfer on disposal of - - (96) - 96 -shares At 30 June 2005 12,345 23,960 48,050 (221) (1,116) 83,018 Other reserves Translation Hedging Total reserve reserve £000 £000 £000At 1 January 2005 177 (105) 72 Cash flow hedges:Transferred to the income statement - (40) (40)Fair value losses in the - (163) (163)periodShare of fair value losses of joint - (67) (67)venturesRecognised income in the period including the effect of net investment (23) - (23)hedgesAt 30 June 2005 154 (375) (221) For the year ended 31 December 2005 Capital Reserves Share Share retained Other Treasury Total capital premium earnings reserves shares £000 £000 £000 £000 £000 £000At 1 January 2005 12,305 23,810 48,151 72 (1,212) 83,126 Total recognised income and - - (6,605) 106 - (6,499)expense in the periodOrdinary dividends paid - - (3,927) - - (3,927)Share-based compensation - - 432 - - 432expense Purchase less sale of shares - - - - 7 7 Arising on the issue of 40 150 - - - 190shares Transfer on disposal of - - (21) - 21 -sharesAt 31 December 2005 12,345 23,960 38,030 178 (1,184) 73,329 Other reserves Translation Hedging Total reserve reserve £000 £000 £000At 1 January 2005 177 (105) 72 Cash 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 investment 35 - 35hedgesAt 31 December 2005 212 (34) 178 14 Interim Dividend A dividend for the six months ended 30 June 2006 on the preference shares wasdeclared on 30 June 2006. The interim dividend of 3.47p (2005 3.10p) per 25pordinary share is payable on 1 November 2006 to those shareholders on theregister of the company at the close of business on 9 October 2006. The dividendrecognised in the reconciliation of movements in equity in note 13 is the finaldividend for 2005 of 5.69p paid on 12 May 2006. The proposed interim dividendhas not been recognised in this report. 15 Interim Report The interim report is to be sent to all shareholders in earlySeptember. Copies of the interim report will also be available from ourregistered office at: Fisher House, PO Box 4, Barrow in Furness, Cumbria, LA141HR. Independent review report to James Fisher and Sons Public Limited Company Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006 which comprises Group Income Statement, GroupStatement of Recognised Income and Expense, Group Balance Sheet and Group CashFlow Statement, and the related notes 1 to 15. We have read the otherinformation contained in the interim report and considered whether it containsany apparent misstatements or material inconsistencies with the financialinformation. This report is made solely to the company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the company, for our work,for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4'Review of interim financial information' issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of makingenquiries of group management and applying analytical procedures to thefinancial information and underlying financial data, and based thereon,assessing whether the accounting policies and presentation have beenconsistently applied, unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with International Standards on Auditing (UK and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly we donot express an audit opinion on the financial information. Review conclusion On the basis of our review, we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. Ernst & Young LLP Manchester 29th August 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
James Fisher and Sons