James Fisher & Sons : Final Results

3 March 2015

James Fisher and Sons plc

Preliminary Results for the year ended 31 December 2014

James Fisher and Sons plc (FSJ.L) ("James Fisher"), the leading marine service provider, announces its results for the year ended 31 December 2014.

* underlying profit excludes separately disclosed items

• Revenue of Marine Service divisions (Marine, Offshore & Specialist Technical) up 11%

• Strong profit growth atSpecialist Technical and Offshore Oil

• Enhanced order book at Specialist Technical

• Strong cash conversion at 109%; balance sheet gearing of 31% (2013: 30%)

• Dividend raised for 20th consecutive year to22.0p (2013: 20.0p)

• Acquisition of Subtech announced today

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

"The Group had a further year of consistent growth with underlying operating profit increasing by 11% to £51.5m and underlying diluted earnings per share increasing by 13%. The strong result underlines our broad geographic spread and range of specialist services across diverse marine sectors. James Fisher is well placed to invest organically and to take advantage of further acquisition opportunities. Looking forward to 2015 we believe the Group continues to be well placed to provide further growth and value for our shareholders."

For further information:

Chairman's Statement

Year ended 31 December 2014

Group Results and Dividend

I am pleased to report that James Fisher and Sons plc continued to progress in 2014 achieving a strong overall result with Group revenue increasing by 8% to £444.8m and underlying profit before tax up 13% to £46.9m. Underlying diluted earnings per share was 74.0 pence, an increase of 13% over 2013.

Three of the Group's four divisions achieved a strong financial performance. Specialist Technical increased its profit by over 50% with the combined Divex and Defence businesses performing well and our Nuclear business continuing to build its contract order book. Offshore Oil had another successful year boosted by substantial equipment sales to Brazil as well as a generally strong performance across all sectors other than Norway which slowed in the second half. Tankships maintained the positive trend of recent years with a further improvement in contract utilisation rates. The strength of these three divisions outweighed a lower result in Marine Support where volumes in the ship to ship transfer market were down and trading at the division's Australian and Brazilian subsidiaries was weak. A combination of fixed cost reductions and some firming of volumes placed this division on a better footing by year end.

Cash conversion in 2014 remained strong at 109% and year-end balance sheet gearing was 31% compared to 30% at 31 December 2013.

The continued good progress of the Group has led the Board to propose a 10% increase in the final dividend to 14.9 pence per share which together with the 7.1 pence interim will bring the total dividend for the year to 22.0 pence per share (2013: 20.0 pence). This will be the 20th consecutive year that the Group has increased the dividend paid to its shareholders.

Strategic Developments

The Group continues to apply a consistent strategy of investing in niche businesses which operate in demanding environments where their strong marine service and specialist engineering skills are valued and rewarded. All divisions have a broad international presence with growth in recent years coming principally from new markets in Africa, Asia and the Far East. The strong cash flow generated by the Group has been reinvested in both organic projects and bolt-on acquisitions. This has helped strengthen the market presence and product range of our companies, providing a stronger platform for further development. This enhanced operational capability shows through in the increased size of contracts being won, often for multi-year periods.

During 2014, the Group made three bolt-on acquisitions for an initial gross consideration of £13.9m. In January, Subsea Vision Ltd, an operator of underwater remotely operated vehicles (ROVs) was acquired to strengthen our Marine Support division's survey and underwater handling capability. In March, Defence Consulting Europe AB (Sweden) was acquired to reinforce our presence in the swimmer delivery vehicle segment of our Specialist Technical defence business. Testconsult Limited joined the Group in June to complement our existing Strainstall business in stress monitoring and testing both offshore and on land. Since the year end a further two acquisitions have been completed: National Hyperbaric Centre Limited in Aberdeen, which will strengthen Divex's market leading position in the saturated diving sector and Subtech Group Holdings (Pty) Limited of South Africa, announced today, which will greatly enhance our marine project capability in the growing markets of Southern Africa. These acquisitions demonstrate our continued ability to find sensibly priced businesses which reinforce our market presence and capability while enhancing their own growth prospects via their access to the capital resources and international network of the James Fisher Group.

The Board

Michael Everard retired from his Non-Executive position on the Board in April after seven years of service - I would like to thank Michael for his contribution during that time and for his help in shaping the integration of the FT Everard business into the Group. In November 2014, I was delighted to welcome Aedamar Comiskey to the Board as a Non-Executive. Aedamar is a partner in Linklaters LLP and brings wide commercial and international experience, adding further strength to the Board in these areas.

Staff

The growth of James Fisher and the increasing complexity of its operations require a corresponding step-up in the management and staff development activities of the Group. A senior management development programme commenced in 2014 together with a skills focused training programme across our businesses. Increased attention to the graduate programme will see over 40 new graduates join the Group this year. These training and development programmes help build coherence across the Group's operations as well as enhancing the skills and capability of our staff. We intend to invest further in this area as we go forward.

The continued growth of the Group reflects the dedication and professionalism of our staff, many of whom work away from home in demanding environments. On behalf of the Board, I would like to thank all our staff for the tremendous commitment they have shown throughout the year and for the success which they have achieved. The development of James Fisher over the past decade has been remarkable and bears testament to their effort.

Outlook

Performance in 2014, where the Group has delivered a strong overall result despite a downturn in one sector, underlines our broad geographical spread and range of specialist services. The Group is not overly dependent on any one regional market or business sector.

In 2015, we expect some slowing in our Offshore Oil division as a result of the recent reduction in oil prices, particularly as this division benefitted from some major one-off contracts last year. However, our businesses in this division are focused on the production and development sectors rather than on exploration and appraisal. Demand in these sectors is driven primarily by the volume of production and is less sensitive to cut-backs in capital investment budgets. Our businesses' geographical focus is mainly on areas of the world where production levels are forecast to grow in the medium term. Therefore, while we have seen some softening in Norway and Aberdeen, our larger international businesses continue to show resilience.

Our other three divisions are well placed. Specialist Technical has a strong order book which is substantially underpinned by its Nuclear and Defence businesses. It has demonstrated its ability to win major contracts and we would hope for further significant contract wins in these sectors in 2015. Tankships has performed well in recent years and now has a well-balanced contract base to its business. Marine Support disappointed in 2014 but we would expect to see recovery in 2015 boosted by its project businesses and a firmer STS market.

The Group has strong cash flow and a conservatively geared balance sheet. This puts James Fisher in a good position both to continue to invest organically and to be alert for further incremental acquisition opportunities.

We therefore look forward to 2015 with measured confidence and believe that we continue to be well placed to provide further growth and value for our shareholders.

Chief Executive's Review

2014 Results

The Group had a further year of consistent growth with underlying operating profit increasing by 11% to £51.5m and underlying diluted earnings per share increasing by 13%. Our Specialist Technical and Offshore Oil divisions produced strong growth, whereas the result in our Marine Support division was lower following several years of strong growth and impacted by strong sterling compared to the US Dollar. Tankships produced an improved result as a consequence of reducing capacity in recent years.

In 2014 the Group completed 3 further bolt-on acquisitions for total consideration of £13.9m whilst organic growth represented 80% of the increase in underlying operating profit As part of our buy and build strategy, the Group invested £32.2m (2013: £24.9m) in capital expenditure. The majority was spent within Offshore Oil on equipment for multi-year rental contracts.

Business model and strategy

The Group has pursued a consistent strategy over the past decade of growing its marine service businesses (Marine Support, Specialist Technical and Offshore Oil) by concentrating on niche high value services which have been marketed internationally. Over the past 5 years revenue has increased by a compound growth rate of 17% in these service businesses. The Group has acquired 10 privately owned businesses during this period and organic growth has accounted for around 60% of the growth in underlying operating profit.

Our strategic aim is to deliver long term growth in earnings per share. This is reflected in a 13% increase in 2014 and a compound annual growth rate (cagr) over the last five years of 15%. The proposed 10% increase to the annual dividend in 2014 will be the 20th consecutive year of dividend increases and a cagr since 1995 of 14% per annum.

Major strategic developments during 2014 have been the merger of our submarine rescue business with Divex, which was acquired in 2013. A combined manufacturing facility was acquired in January 2014 which was substantially operational by the end of the first quarter. This facility significantly increases the efficiency of our project build capability.

Our Nuclear decommissioning business continued to progress and further invested in Deeside and consolidated its headquarters into new premises in Preston in early 2015.

Our Scantech Offshore business increased its assembly capability with a new purpose built facility in Great Yarmouth, UK. The business successfully completed the supply of equipment to Brazil in the first half of 2014 following a successful tender for a major well testing contract. Sales of its 'Pyro Sentry' fire detection product made significant progress in 2014 and we supplied our weak link bail safety equipment to a project in Australia with a potential second order expected in early 2015.

Our Specialist Technical division completed the development of its 'Cobra' rebreather for the subsea market which offers divers a fully independent breathing system which lasts four times longer than existing technology. We have developed further products for the renewables sector which are expected to bear traction in coming years.

Marine Support

Marine Support had a slower start to the year. The first quarter saw lower market activity for ship-to-ship operations in South-East Asia. Whilst activity picked up in the second quarter, volumes at the end of the year reflected the current surplus of oil on the global market. The division also had pressure on margins since it has significant exposure to the effect of strong Sterling compared to the US Dollar.

Subsea Vision was acquired in January 2014 for £2.2m. Subsea Vision is an operator of remotely operated vehicles (ROVs) used for inspection in support of floating production, storage and offloading (FPSO) operations. This broadened our range of services in this market and the company has traded well in its first year with the Group.

The renewables market provided further contract growth in the support and maintenance of offshore wind farms. In addition a contract was secured from Meygen to install four tidal energy turbines in the Pentland Firth in Scotland, which should be completed in 2015. This is the initial phase of the first commercial tidal energy project.

In August the three naval corvettes which James Fisher has managed on behalf of Luerssen for the past seven years in Barrow-in-Furness, were delivered to the Indonesian navy. This represented a successful completion to this challenging project in UK waters.

Structural monitoring services continued to grow, particularly in South East Asia and the Middle East. In the UK the contract for the new Forth Bridge has made good progress but slippage in our project delivery milestones means that the benefit will now fall predominantly into 2015.

In June, Testconsult was acquired for £8.7m. Testconsult provides monitoring, instrumentation and testing services in the UK. In some areas of the UK, Testconsult were a competitor of our Strainstall Monitoring business. However, their combination will extend the range of services provided by the Group and will provide opportunities for the international expansion of Testconsult's services through our bases in Singapore, Malaysia and the Middle East.

Specialist Technical

Specialist Technical produced another strong set of results with revenue increasing by 48% and underlying operating profit by 56%. This reflected growth in James Fisher Defence, Divex and James Fisher Nuclear. The order book for each company grew significantly during the year, although some opportunities to provide hyperbaric reception facilities to the Russian navy are currently not possible due to EU sanctions.

The merger of James Fisher Defence and Divex was completed during the year, with consolidation of offices in Glasgow, Singapore and Perth (Australia). The management team has been strengthened during this process. The new company (JFD) has a strong order book and made good progress with the design and production of saturated diving system projects. In August a further contract was awarded by Keppel Singmarine to supply an 18 man saturation diving systemfor the BP Exploration Shah Deniz II Project in the Caspian Sea. The vessel is being built in Singapore and will be completed in Baku, Azerbaijan in 2017.

In November, a five year contract was signed with the Royal Australian Navy for the provision of submarine escape and rescue capability. This consolidates into one of the contracts already held by JFD and also extends the scope of the contract to include submarine escape training and hyperbaric reception. The contract has options to extend to 2024. In March the acquisition in Sweden ofDefence Consulting Europe AB (DCE) for £3.7m was completed. DCE provides a range of specialist swimmer delivery vehicles which are complementary to those developed by JFD. This broadens our range of equipment in this niche market.

In February 2015 the acquisition of the National Hyberbaric Centre (NHC) in Aberdeen was completed for an initial cash consideration of £3.5m. NHC provide hyperbaric reception, testing and training services to the subsea industry and this further consolidates our industry leading position to the global market.

Our Nuclear business had a good year of growth and is now established as a specialist tier 2 supplier to the UK nuclear power industry. Further contract gains in monitoring services and non-destructive testing were supplemented by an improved order book from decommissioning. At the end of the year aconsortium led by M+W Group, of which we represent 25%, was awarded a £150.0m decommissioning contract by Sellafield Limited for the design and delivery of a purpose built nuclear waste store by 2017.

Offshore Oil

The Offshore Oil division had another excellent year, producing strong growth with revenue increasing by 6% and profit by 14%. This was principally as a result of success in winning long term contracts of 3-4 years in Latin America, Africa and South East Asia. Our downhole and subsea tooling company RMSpumptools also saw further sales growth from these markets. This growth was partly driven by our investment in research and development in recent years.

The performance in the first half was boosted by a contract for the sale of equipment for the Brazilian market which represented a one-off benefit. This was announced last year.

The Norwegian market since May 2014 has been particularly disrupted by the restructuring of the industry there which has affected our customers and delayed decisions on new projects. Our business in Aberdeen has relocated equipment to Malaysia to support growth in South East Asia and further reduced our exposure to the North Sea market.

Further capital expenditure of £16.6m was invested in the division during the year. The majority of this was to support the long term contract gains which will drive organic growth in future years.

Tankships

Tankships produced an encouraging result with profits increasing by 47%. This reflected the benefits of reducing capacity in previous years which improved utilisation and further reduced the proportion of cargo fixed on the spot market where rates remain suppressed. The capacity is geared towards supporting the distribution contracts held. The level of demand under these contracts has remained stable. The financial result also benefited from the continuation of charters for two vessels for the whole year for the Ministry of Defence.

In December 2014 m.v. Humber Fisher was sold for £2.1m. This vessel had been chartered out over the past 2 years to Turkey to reduce capacity in the UK market. This further reduces the capital employed in the Tankships division to 8% of the Group's assets.

Financial Review

James Fisher reported further strong progress in 2014 with an 8% increase in revenue and an 11% uplift in underlying operating profit. Underlying operating profit increased in three divisions, Offshore Oil, Specialist Technical and Tankships which more than offset a lower result from Marine Support. Cash conversion was 109% which compares to an average of 119% over the last 5 years and the Group's return on operating capital employed after tax remained strong at 17% (2013: 17%).

Revenue in the Group's marine service divisions (Marine Support, Offshore Oil and Specialist Technical) increased by 11% to £391.3m in the year. Tankships revenue was lower than 2013 in line with our continued strategy to reduce capacity. Overall, Group revenue increased by 8% to £444.8m. Underlying percentage increases after adjusting for the impact of exchange rates and businesses acquired were similar to those reported above.

The Group is exposed to fluctuations in exchange rates, primarily in respect of US Dollar transactions and the translation of business results in Norwegian Kroner and the Australian Dollar. The table below sets out average exchange rates in 2014 and 2013:

Group underlying operating profit increased by 11% in the year to £51.5m and after adjusting for the impact of exchange rates and businesses acquired, increased by 15%. The underlying operating profit of the marine services businesses rose by 7% to £49.9m in 2014. After excluding the impact of businesses acquired and exchange rate changes the increase was 11%.

Divisional results

Marine Support revenue was 4% lower as ship to ship transfers decreased, particularly in South East Asia and West Africa and sales of marine products suffered from challenging market conditions in certain regions. In addition, the effect of exchange rate changes reduced marine support revenue by around 4%. These factors more than offset growth in marine service project revenue and the renewables sector together with the contribution from businesses that were acquired in the year.

Offshore Oil revenue increased by 6% after a particularly strong first half which benefitted from one-off equipment sales into the Brazilian market. Organic growth after adjusting for the impact of currency translation was 13%. Underlying operating profit increased by 14% with a particularly strong contribution from Scantech Offshore, a leading supplier of zone II equipment to the well testing market.

Specialist Technical increased revenue and underlying operating profit by 48% and 57% respectively. A strong contribution from saturation diving systems projects, an improved contribution from our Defence business and further progress at JF Nuclear all contributed to the performance in 2014.

An 11% reduction in revenue from the Tankships division reflected on average two fewer vessels in operation. Improved vessel utilisation and a higher proportion of contract cargoes improved underlying operating profit by 47% to £4.7m.

Interest & taxation

Net interest was £0.5m lower than previous year as the overall cost of borrowing reduced. Although interest rates were broadly similar, the margin above those rates at which the Group borrows was lower.

The effective tax rate on underlying profit before tax was 19.2% (2013: 18.6%) The rate is lower than the standard UK rate of 21.5% due to its Tankships' operations which are taxed on a tonnage basis rather than on profitability and adjustments in respect of previous years.

The Group's tax policy has been approved by the Board and shared with the UK tax authorities. Whilst the Group has a duty to shareholders to seek to minimise its tax burden, its tax policy is to do so in a manner which is consistent with its commercial objectives, meets its legal obligations and its code of ethics. We aim to manage our tax affairs in a responsible and transparent manner and with regard for the intention of the legislation rather than just the wording itself.

Earnings per share and dividends

Underlying diluted earnings per share increased by 13% in the year to 74.0p per share (2013: 65.6p) in line with the increase in underlying profit before taxation. Diluted earnings per share after separately disclosed items increased by 5% to 79.2p per share (2013: 75.7p).

The Board are recommending a 10% increase to the final dividend for the year to 14.90p per share (2013: 13.54p), which makes a total for the year of 22.0p per share (2013: 20.0p). The final dividend will be paid on 8 May 2015 to shareholders on the register on 10 April 2015. Dividend cover based on the ratio of underlying earnings per share divided by the dividend per share was 3.4 times (2013: 3.3 times).

Separately disclosed items

The Group consistently discloses certain items that are included within the income statement which it considers assists in gaining a clear understanding of the underlying trading performance of the businesses. These items comprise gains or losses on the sale of businesses, material impairments, costs incurred in making business acquisitions, adjustments to contingent consideration provisions and the amortisation of acquired intangible assets.

In 2014, provisions for contingent consideration were revised mainly in respect of Divex where the period to achieve certain orders expired on 31 December 2014. As a result £4.1m was released to the income statement. Statutory operating profit, which is after separately disclosed items, rose by 20% to £53.9m (2013: £44.9m) and profit before tax on the same basis was 7% higher at £49.2m (2013: £46.2m).

Cash flow and borrowings

The Group continued its track record of cash generation with cash conversion, the ratio of underlying operating cash to underlying operating profit of 109% (2013: 134%). This was lower than prior year due to a working capital outflow of £11.9m (2013: inflow of £7.7m) which was partly offset by lower contributions to legacy pension schemes. As a result the cash flow from operating activities was £49.7m (2013: £53.3m).

Investing activities was an outflow of £39.1m (2013: £25.6m) comprised net cash outflows on businesses acquired of £11.3m and capital expenditure, net of assets sold of £28.6m (2013: £22.7m) as the Group continued to invest in both organic opportunities and bolt-on businesses into its existing marine service activities. Financing activity outflows of £15.8m (2013: £17.6m) included dividend payments of £10.3m (2013: £9.1m).

Net borrowings increased in the year by £8.0m to £62.3m (2013: £54.3m). Free cash flow, which is before expenditure on acquisitions or returns to shareholders was £15.8m (2013: £27.2m) and represented 42% of adjusted profit after tax (2013: 82%).

At 31 December 2014, the ratio of net borrowings (including guarantees) to earnings before interest, tax, depreciation and amortisation (EBITDA) was 1.0 times (2013: 1.0 times). Net gearing, the ratio of net debt to equity, was 31% (2013: 30%). At 31 December 2014, the Group had £82.5m (2013: £68.8m) of undrawn committed banking facilities.

Pensions

The majority of the Group's pension arrangements are defined contribution arrangements where the Company's liability is limited to the contributions it agrees on behalf of each employee. The Group has a small number of legacy defined benefit schemes and as a consequence of its history in shipping is required to contribute to industry-wide Merchant Navy Pension Funds.

During the year, the Group made contributions to defined benefit schemes of £4.7m. Total defined benefit pension deficits at 31 December 2014 were £21.8m (2013: £23.1m). The annual instalment on pension schemes in 2015 is estimated at £3.5m.

As reported previously, following a Court process in 2010 and 2011, the trustees of the ratings fund (MNRPF) were given permission to extend the requirement for deficit contributions beyond current employers to both current and past employers. On 25 February 2015, the trustees of the MNRPF received ratification from the Court on its proposed methodology for future deficit contributions. The extent to which James Fisher will be required to make additional contributions is expected to be clarified therefore during 2015.

Annual Financial Report

In accordance with Disclosure and Transparency Rule (DTR) 6.3.5, the following additional information is required to be made through a Regulatory Information Service: Principal risks and uncertainties; and Directors' responsibility statement. The information below, which is summarised and extracted from the 2014 Annual Report and Accounts that is to be published in April 2015, is included solely for the purpose of complying with DTR 6.3.5 (2) and the requirements it places on issuers on external communications.

Risk management

The Board is ultimately responsible for the management of risk in the Group. The Board determines the Group's policies on risk, appetite for risk and levels of risk tolerance and specifically approves: risk management policies and plans; significant insurance and/or legal claims and/or settlements; major acquisitions, disposals and capital expenditures; and the Group budget, forecast and three year plan. The Board has put in place a documented organisational structure with strictly defined limits of authority from the Board to operating units that have been communicated throughout the businesses and are well understood by the Executive Directors, the management team and business leaders who have delegated authority and specific responsibility for ensuring compliance with and implementing policies at corporate, divisional and business unit level. Each operating unit is required to operate within this control environment and in accordance with established policies and procedures which includes ethical, anti-bribery and corruption, treasury, employment, health and safety and environmental issues. The Board retains an oversight role and has a schedule of matters specifically resolved to it for decision thus ensuring that it maintains full and effective control over appropriate strategic, investment, financial, organisational and compliance issues. This schedule is subject to review by the Board on an annual basis.

The following is a summary of the principal risks and uncertainties agreed by the Board: contractual risk, recruitment and retention of key staff, reputational risk for operational incidents, financial risk of interest rates, foreign exchange and credit risk, energy risk and operations in emerging markets. A full description of these risks and the mitigation actions taken by the Company will be provided in the 2014 Annual Report.

Directors' responsibility statement

The following is an extract of the full statement prepared in connection with the Company's Annual Report and Accounts for the year ended 31 December 2014. The full text of the Directors' responsibility statement will be in the 2014 Annual Report and Accounts.

The Directors of the Company confirm that to the best of their knowledge:

· the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

· the management report which comprises the Strategic report and the Directors' report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

· the Annual Report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.

CONSOLIDATED INCOME STATEMENT

for the year ended 31 December 2014

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2014

CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION

at 31 December 2014

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 31 December 2014

CONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITY