James Fisher and Sons : Document

In this Report, we outline progress made in 2023 on our journey to returning to sustainable, profitable growth.

ENHANCING PROTECTING

CONNECTING

ENERGY

Supporting the energy transition through responsible energy provision and innovative renewable energy solutions

Read more on page 20

DEFENCE

Protecting lives and assets on and under the oceans, in the most sensitive and challenging environments

Read more on page 24

MARITIME TRANSPORT

Leading the way in targeted coastal maritime shipping and global oil and natural gas ship-to-ship transfers

Read more on page 28

Managed

7.9 GW

of offshore wind throughout 2023

Harnessing

Supporting175+

OUR 2023 REPORTING SUITE

Sustainability Report

Our website

Please visit www.james-fisher.comfor further information.

CONTENTS

WHO WE ARE

We are a global engineering services company. From our origins as a ship owner and operator, we've evolved to provide the expertise and innovative technology our customers need in the harshest of environments across Energy, Defence and Maritime Transport.

GUIDED BY OUR VALUES

Pioneering spirit

We respond innovatively to our customers' current and future needs. We think creatively and challenge conventional thinking.

Integrity

We do the right thing. We treat others as we'd like to be treated, listening respectfully and speaking honestly. We build relationships based on trust and fairness.

Energy

We love what we do and take pride in our work - delivering exceptional results for our stakeholders. We are empowered to take the right decisions quickly.

Resilience

We are accountable and courageous, facing into difficult situations. We are tenacious, seeking feedback to learn and develop.

WHAT WE DO

Our vision

To harness the international, blue economy space, providing technically advanced solutions that enhance, protect and connect.

Our purpose

Pioneering safe, trusted and sustainable solutions for complex problems, in harsh environments.

Our mission

Provide innovative marine solutions to our customers in Energy, Defence and Maritime Transport.

Organisation in transformation

1 JAMES FISHER

Committed to portfolio simplification

3 MARKETS

Countries worldwide

~25

Employees

2,041

• Digital efficiency solutions

OUR HEADLINE FIGURES

Revenue -

continuing operations (£m)

£496.2M

2022: £478.1m

Underlying operating profit - continuing operations* (£m)

£29.6M

2022: £26.4m

Profit/(loss) before tax - continuing operations (£m)

£(39.9)M

2022: £14.5m

Cash from operating activities (£m)

MARITIME TRANSPORT

• Fleet management
• Berthing and marine services
• Oil ship-to-ship services
• Liquefied Natural Gas ship-to-ship services
• Mooring and safety products

• James Fisher Tankships
• Cattedown Wharves
• JF Fendercare
• Martek Marine

£37.8M

2022: £44.5m

Net borrowings (£m)

£201.1M

2022: £185.8m

Read more on our key performance indicators on page 12

• Excludes adjusting items.
  James Fisher uses alternative performance measures (APMs) to assess the underlying performance of the business. An explanation of APMs is set out in Note 2 of the financial statements and explanation and reconciliation.

There is no argument with the fact that 2023 was a turbulent year for James Fisher but it was also one that has begun to reposition the Company's future growth. In late 2022, we began a transformation programme to build a stronger, more sustainable business focused on improved operational and financial performance. We have made good early progress under the energetic leadership of our CEO, Jean Vernet, centred around streamlining the portfolio, simplifying the divisional structure and driving a culture of accountability and results. This has sharpened the focus of the Company and facilitated the launch of "One James Fisher", which looks to capture the customer and efficiency synergies that exist in the business.

We are focusing the Company on businesses where we have competitive advantage and can deliver superior customer value through, for example, digitalisation or innovation, while exiting businesses where we cannot deliver profit and growth.

To this end, we took the decision to close Subtech Europe in December, given the scale of its losses over the past few years. From a capital allocation perspective, we believe that focusing our investment on higher potential areas of growth is the best route forward for James Fisher in the long-term.

Addressing our debt

Our biggest challenge remains that we have too much debt and our progress will continue to be hampered while this is the case, due to very high finance costs and the associated restrictions on how we can operate. The refinancing and ongoing management of our banking group has taken a significant amount of senior management time and remains a critical short-term priority. We have demonstrated that we can generate cash from operations and carefully selected asset disposals as evidenced by underlying net borrowings* reducing from £203 million in 2019 to £149.8 million at the end of 2023. However, the reduction in profitability over that time has meant that our leverage* remains too high. Generating strong cash

flow to reduce debt, while at the same time improving profitability, will reduce leverage and this remains our key priority as we enter 2024. We remain grateful for the support of our banks during this challenging period.

The first stage of any turnaround is stabilisation and despite all the challenges, our underlying financial performance improved slightly during the year, with Underlying Operating Profit (UOP)* growing from £26.4 million in 2022 to £29.6 million in 2023. This, combined with the small increase in underlying net borrowings from £142.1 million at the end of 2022 to £149.8 million at the end of 2023, means that our leverage as measured by underlying net borrowings divided by underlying operating profit before interest, tax, depreciation and amortisation, adjusted for impacts of IFRS 16*, remained relatively flat at 2.75x in 2023 (2022: 2.70x). That said, the recently announced sale of RMSpumptools, due to complete in the early second half of 2024, will help to reduce our net borrowings further and move us closer to our desired medium-term leverage range

of 1.0 to 1.5x.

Given our current financial position the Board is unable to recommend paying a final dividend for 2023. I recognise that this may be disappointing, but the Board remains committed to reintroducing a sustainable and progressive dividend policy when appropriate.

Delivering our strategy

The turnaround strategy has three main elements: Focus, Simplify and Deliver. We are clearly still in the foothills of executing this strategy, but we have made some good early progress in terms of focusing and simplifying our portfolio of businesses and laying the foundations of operational performance improvement. Building a strong leadership team is key to this and the Board is pleased that the Executive Committee Team is now in place, combining existing James Fisher talent as well as experienced new hires who bring a fresh perspective. The job of this team is to position James Fisher to take advantage of the potential of operating in the "Blue Economy".

Headline financial performance during the year was disappointing with a high level of "one-off" costs. We have had several years of one-offs, which have had a material impact on profitability and more importantly, cash. These costs are the inevitable consequence of any turnaround process amplified by a very challenging refinancing process brought on by our bank covenant challenges. The underlying financial performance during 2023 was more encouraging with revenue from continuing operations, excluding the discontinued nuclear business, growing by 3.8% from £478.1 million to £496.2 million whilst UOP from continuing operations rose by 12.1% from £26.4 million to £29.6 million in 2023.

There was particularly encouraging progress in the Energy Division where revenue grew by 9.9% to £266.5 million with standout performance in the well testing and intervention and artificial lift Product Lines. By contrast, performance in the North Sea Inspection Repair and Maintenance and offshore oil businesses remained challenging. Revenue in the Maritime Transport Division fell by 6.0% but the focus on efficiency together with mixed benefits, saw the underlying operating profit grow by 23.9% with both tankship and ship-to-ship transfer services performing well. While the performance of the Defence business improved in both revenue and underlying operating profit terms, extended procurement timelines meant that the recovery in this business was slower than expected. However, the potential of our Defence Division remains encouraging, and the team is focused on delivering the solutions needed for customers in a number of diverse underwater applications.

A key measure for any business is the profit that is generated from its asset base. Hence the importance of our Return on Capital Employed (ROCE) measure*, which is a key incentive metric for our Executive team. ROCE grew from 5.3% to 6.6% which is clearly still too low, and a combination of careful capital allocation and margin improvement is required to make this number more respectable. Underlying operating margin*, a key driver of ROCE, improved from 5.5% in 2022 to 6.0% in 2023.

Key pillars of future success

Our commitment to safety, people, good governance and sustainability, particularly carbon reduction, is central to the future success of James Fisher. The focus on safety may not have delivered the year-on-year improvement that we were hoping for but the sharpened emphasis and training on safety will make the workplace safer for our employees in years to come. This is particularly important given the challenging environments in which we work.

Employee engagement remained flat on the previous year in what is an unprecedented period of change for the Company. We will continue to address areas of concern for our employees and in particular focus on improving communication and talent development across the business.

Our sustainability commitment remains front and centre with carbon emission reduction at the heart of our strategy. Maritime Transport accounts for nearly 70% of our emissions and it was with great pleasure that we commissioned the first two dual-fuel vessels, and with orders for a further two placed during the year, our fleet replacement programme is well underway.

One James Fisher

In the meantime, we need to continue to put a strong foundation in place. Our One James Fisher programme, which is a key element of transformation, will play a pivotal role in improving all aspects of our business, helping it become both more agile in terms of our customer interaction and more efficient in all our other processes. Like any transformation programme, progress will at times be frustratingly slow, but I am convinced that this will help position the Company for growth once we overcome our current financial challenges.

Central to our success is our management team. To this end, I am delighted to welcome Karen Hayzen-Smith to the Board in the role of Chief Financial Officer. Karen has tremendous experience, and I am sure she will play a vital role in our turnaround in the years to come.

I would also like to take this opportunity to pay tribute to the efforts of her predecessor, Duncan Kennedy, who joined at the same time as me in 2021 and has had to face some of the most severe challenges that any company could face. This he did with both energy and good humour. I also welcome as an Independent Non-Executive Director, Shian Jastram, who brings invaluable international experience in the renewables sector, and I thank outgoing Independent Non-Executive Director, Aedamar Comiskey, for her stand-out service in that role. The last few years have been challenging and the Board and I will miss Aedamar's wise counsel and support.

James Fisher has its heritage in the shipyards of Scotland and the North of England, and I am proud that we continue to be a significant employer in these and other areas, such as East Anglia, where economic conditions have been difficult in recent years. Many of our employees work in harsh environments and I pay tribute to their courage and dedication. Indeed, I would like to thank everyone across the organisation for their hard work and commitment in 2023.

Outlook

Having laid the foundations for transformation over the last twelve months, our efforts will continue this year. Business turnaround is a complex process, always taking longer than you expect, but the Board has confidence in the long-term potential of James Fisher and despite the ongoing financial challenges, believe that we are making some early progress in achieving the vision of One James Fisher. This will enable us to play a role in realising the potential of the Blue Economy and hopefully, in time, reward the patience of our investors.

Angus Cockburn

Chairman

• Alternative Performance Measures (APMs) are defined in Note 2 of the financial statements.