James Fisher and Sons Regulatory News (FSJ)

26 February 2019

James Fisher and Sons plc

Preliminary Results for the year ended 31 December 2018

James Fisher and Sons plc (FSJ.L) ("James Fisher" or "the Group"), the leading marine service provider, announces its results for the year ended 31 December 2018.

Highlights:

· All four divisions increased revenue and underlying operating profit;

· Strong organic† growth in revenue of 12% and underlying operating profit of 19%;

· Two submarine rescue systems delivered to the Indian navy;

· First long-term maintenance contract in Renewables;

· Strong cash conversion of 157% (2017: 57%), net debt:ebitda 1.3 times (2017: 1.7 times);

· Total dividend up 10% to 31.6p per share.

* excludes separately disclosed items (note 4)

** 2017 restated for IFRS 15 'Revenue from contracts with customers' (note 11)

† organic growth is at constant currency and adjusted for business acquisitions.

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

"James Fisher performed well in 2018 and, with a strong pipeline of opportunities at the start of 2019, the Board has a high degree of confidence for the year ahead. The Group operates across a number of sectors with a broad geographical spread which adds resilience in times of economic uncertainty and our strategy of adding complementary skills and disciplines to the Group through niche acquisitions has served us well. The unwinding of the working capital commitment for the Indian submarine rescue vehicles went to plan and with our record of strong cash generation we closed the year with a robust balance sheet. I am confident that we will deliver further progress for our shareholders in the years ahead."

For further information:

Notes:

1. James Fisher uses alternative performance measures (APMs) as key financial indicators to assess the underlying performance of the business. APMs are used by management as they are considered to better reflect business performance and provide useful additional information. APMs include underlying operating profit, underlying profit before tax, underlying diluted earnings per share, underlying return on capital employed and cash conversion. An explanation of APMs is set out in note 2 in these preliminary results.

2. Certain statements contained in this announcement constitute forward-looking statements. Forward-looking statements involve risks, uncertainties and other factors which may cause the actual results, performance or achievements of James Fisher to be materially different from future results, performance or achievements expressed or implied by such statements. Such risks, uncertainties and other factors include exchange rates, general economic conditions and the business environment. 

Chairman's Statement

I have pleasure in presenting my first full year statement to shareholders since I was appointed Chairman at the 2018 Annual General Meeting (AGM), a year which saw James Fisher produce another strong set of financial results, with growth across all four divisions which was predominately organic.

The Board remains focused on delivering the Group's established strategy which aims to deliver long-term growth in shareholder value through a mixture of organic growth supplemented by niche acquisitions across a broad international landscape.

In December, the Board received notice from Nick Henry of his intention to retire from his position as Chief Executive Officer by the end of 2019. The notice period ensures sufficient time to complete a thorough search process, which has already commenced, and to facilitate a smooth transition of responsibilities. Nick will be leaving the Group in a strong position with a clearly defined strategy that has delivered double digit growth in underlying earnings and dividends, an experienced senior management team and significant growth opportunities in the future.

Recognising that every company is now expected to make a contribution to society and engage positively with all our stakeholders I have introduced an initiative to develop a Group sustainability strategy extending from responsible sourcing to supply chain resilience, lean manufacturing, customer engagement, reputational enhancement, corporate risk through to end of life and recycling. We acknowledge the scientific body of evidence that human activity is playing a large part in changes to our climate and we accept our responsibility to address this as part of our normal business activities.

Results 

Group revenue increased 13% in 2018 to £561.5m (2017: £499.3m) and underlying operating profit was 15% higher at £62.1m (2017: £54.1m). Underlying profit before tax rose by 15% to £56.1m (2017: £48.6m) and underlying diluted earnings per share increased by 14% to 89.5p (2017: 78.7p). Statutory profit before tax and statutory diluted earnings per share were 17% and 16% higher respectively.

The Group's operating cash flow reflected a significant working capital inflow following the delivery of two deep-submergence rescue vessels to the Indian navy completing the manufacturing phase of a 25 year contract to supply and maintain a world class submarine rescue capability enhancing safety for submariners.

Dividends 

The combination of strong results and operating cash flow, supported by a robust balance sheet has led the Board to propose an increase of 10% in the final dividend to 21.3p per share (2017: 19.3p). Subject to shareholder approval at the AGM, this dividend will be paid on 10 May 2019 to shareholders on the register on 5 April 2019. The total dividend per share for the year will be 31.6p per share (2017: 28.7p) which represents a 10% increase on 2017.

Business overview

Trading was strong across the Group with Marine Support leading the way through growth in services provided to the renewables industry in the UK. Our ship-to-ship transfer operations in Brazil had another good year with further growth. Our strategic goal has been to establish the Group in the emerging maintenance market for offshore windfarms and during 2018 we were awarded our first long-term contract for maintenance services to the London Array in the Thames Estuary.

In Specialist Technical, the delivery of the two rescue submarines to the Indian navy, on schedule, was a highlight supplemented by significant contract wins for swimmer delivery vehicles and the award of a £30m contract for the design, construction and delivery in 2021 of a deep search and rescue vehicle for the South Korean navy.

Our Offshore Oil division saw a limited improvement in activity levels but there is growing momentum in the industry and we are well set to take advantage of a further upturn in the oil and gas market when this occurs. Tankships continued to trade strongly and completed the purchase of two tankers for £10.6m in line with our policy to refresh the fleet over the coming years.

In January 2019, in line with our niche acquisition policy, James Fisher announced the purchase of Martek, a UK based business which provides a range of innovative safety and calibration systems and products to the marine sector and provides a proven channel to market for the Group's related products and services. In addition, we acquired a majority interest in Murjan, based in the Kingdom of Saudi Arabia, with the balance retained by the vendor. Murjan provides near-shore marine construction and maintenance services and we will work together to secure a leadership position in that market.

The Board

Charles Rice retired on 3 May 2018 and I was appointed Chairman. As a Director of James Fisher, including six years as Chairman, Charles always gave wise counsel and I would like to express my thanks for his valuable contribution to the development of the Group.

Justin Atkinson was appointed to the Board on 1 February 2018 and succeeded me as Chairman of the Audit Committee. Justin was Chief Executive and a Director of Keller Group plc from 2004 to 2015, having formerly served as both Chief Operating Officer and Finance Director, and has significant operational and financial experience both in the UK and internationally.

On 28 February 2019, David Moorhouse will retire from the Board. David has been a Non-Executive Director of James Fisher since August 2013 and his knowledge of the marine sector has been of great benefit to the Group. On behalf of the Board, I would like to thank David for his contribution over the last five and a half years and wish him well for the future.

On 1 March 2019, Dr. Inken Braunschmidt will be appointed as a Non-Executive Director. Inken has spent a large part of her career with the utilities company RWE and is currently the Chief Innovation and Digital Officer of Halma plc. On behalf of the Board, I welcome Inken to the Group.

Our employees 

Our employees remain our most important asset and their hard work continues to be a driving force behind our consistent and strong performance. James Fisher's success is due to the combined efforts of all of our employees across the Group and I would like to thank all of our staff for their support and contribution this year.

Outlook

James Fisher performed well in 2018 and, with a strong pipeline of opportunities at the start of 2019, the Board has a high degree of confidence for the year ahead. The Group operates across a number of sectors with a broad geographical spread which adds resilience in times of economic uncertainty and our strategy of adding complementary skills and disciplines to the Group through niche acquisitions has served us well. The unwinding of the working capital commitment for the Indian submarine rescue vehicles went to plan and with our record of strong cash generation we closed the year with a robust balance sheet. I am confident that we will deliver further progress for our shareholders in the years ahead.

Chief Executive's Review

Principal Corporate Objectives

Our goal is to deliver sustainable long-term growth in underlying earnings per share and progressive dividend growth. In the last ten years, underlying earnings per share and dividends have grown by compound annual rates of 10% and 9% respectively. In 2018 underlying earnings per share grew by 14% (2017: 7%) and the total annual dividend per share grew 10% (2017: 10%).

Progress against the Group's strategy is measured by reference to financial and non-financial key performance indicators. Revenue was 13% higher in the year ended 31 December 2018 at £561.5m with increases across all four divisions. After adjusting revenue for the effect of changes in currency and businesses acquired, organic revenue growth was 12%, which was due to good growth in renewables, ship-to-ship services and some recovery in the oil & gas sector. Underlying operating margins increased 20 basis points to 11.0% (2017: 10.8%).

The Group's cash conversion, which measures the proportion of underlying operating profit that is turned into operating cash, was 157% (2017: 57%) reflecting the reversal of the working capital invested in the last two years to assemble and deliver two submarine rescue vessels to the Indian navy. The Group's post-tax return on capital employed, which is our key indicator of shareholder value increased to 12.2% (2017: 12.0%).

Carrying out our marine service operations to a high degree of safety and integrity is the Group's top priority and the first agenda item on every business board meeting. The safety performance of our operations at sea has continued to be at an industry leading level. The Group's lost time incident frequency (LTIF) which measures the number of lost time incidents per million working hours reduced to 0.4 (2017: 1.0).

Strategic progress

During the year, the Group has extended its presence in and the range of services provided to, the offshore wind industry. In June, we completed a contract worth in excess of £30m to provide an integrated package of marine support services to the Galloper windfarm, and work has commenced on marine support services for other offshore windfarms being constructed in the UK.

Our long term strategic aim has been to position the Group to provide an integrated package of maintenance and inspection services to the offshore wind industry. In October, three contracts were signed with London Array, which with 175 turbines and 630 mega-watt output was until recently the largest in the world. The contracts are for topside maintenance, subsea services, including inspection of the substation and all wind turbine generators, and high voltage and cable maintenance and inspection services. This involves EDS, the specialist high voltage engineering services company which was acquired in December 2017 and has a market leading capability in high voltage offshore installation, cable monitoring and repairs.

In June we were awarded a 10 year integrated marine services contract to supply offshore terminal support services for the UK operations of an international energy company. Supporting the safe and efficient offloading operations at an offshore terminal on the east coast of England, the activities include assisting in the arrival, connection, and departure of around 110 third party tankers each year along with specialist diving services and buoy maintenance. 

The Group is the global leader in the design and operation of submarine rescue systems, Services are currently run for the UK/Nato, Singapore and Australian navies. In 2018, our business, JFD, delivered two of our third generation, free-swimming submarine rescue vessels to the Indian navy under a contract worth £193m and in 2020 we will commence a 25 year service agreement to manage the rescue service and maintain the vessels.

JFD is also an industry leader in the design and delivery of high quality diving equipment to the military and commercial diving markets. In 2018 our Cobra bailout rebreather for the commercial market was launched. This increases safety and is becoming the standard for the industry, and recently won the subsea industry award for Innovation in Safety. Our Stealth Clearance Diver Life Support Equipment (CDLSE) rebreather, currently deployed by 11 navies with over 600 sets in use, was upgraded to enable the control system to rapidly respond to changes in the life support system and to significantly increase dive duration time from six to eight hours. These rebreathers are used primarily for mine countermeasure explosive ordnance disposal and represent a new benchmark in underwater life support technology, increasing levels of diver safety, equipment reliability, maintainability, operational capability and mission versatility.

Our nuclear decommissioning business, JF Nuclear, has been investing in a brand new range of radiation protection instruments that are designed to be robust, reliable and easy to use and provide accurate and actionable data. These new products which monitor site contamination and give clearances where appropriate, are supported with comprehensive through-life support.

In November, and at times under challenging weather conditions, JFD partnered with the Royal Australian Navy to conduct the annual Black Carillon exercise which tests Australia's submarine rescue system in a series of scenarios designed to replicate a real-life submarine rescue emergency. Importantly, the exercises demonstrated the world-class capability of the fully-integrated system that JFD provides to the Australian Government which includes a submarine rescue vehicle, a transfer-under-pressure chamber and a hyperbaric equipment suite to ensure that submariners receive the best possible medical treatment once they are back on the water's surface.

We invested further in our submarine rescue services in Australia with the acquisition of Cowan, which designs and manufactures lifesaving recompression and hyperbaric chambers and is based near Newcastle in New South Wales.

The strategy for our Tankships division continues to be to provide capacity to match the demands from our customers for distribution contracts around the UK, Irish and North European coasts. This is a mature and cash generative business, and in 2018 some of this strong cash generation was used to refresh the age profile of the fleet. Two vessels were acquired for £10.6m. The Dee Fisher, named after the Aberdeenshire river and the Corrib Fisher, named after the River Corrib which flows into Galway Bay, are both classified as IMO 2 chemical tankers designed to carry clean petroleum products and certain chemicals.

In Offshore Oil our artificial lift business, which provides mechanical and electrical services for oil production, had a strong year with revenue well ahead of 2017. The degree of market recovery in the other businesses was mixed. Our Norwegian business, Scantech AS, benefited from an improvement in the rig maintenance market but well testing remained flat.

Since the year-end, the Group acquired Martek Marine for an initial consideration of £9m. Martek, which is headquartered in the UK with an office in Singapore, provides a range of innovative safety and calibration systems and products to the marine sector and aligns with the similar businesses in the Group. After establishing our Subtech business in the country, the Group acquired a 60% interest in Murjan, a Saudi Arabian based company, which provides near-shore marine services, for an initial consideration of £4.1m.

The Group's senior leadership team held their annual meeting in September to discuss strategic plans for their businesses and for the Group over the medium-term. Our senior team was strengthened in Marine Support during the year from a combination of internal promotion and external recruitment. Succession planning is one of the key challenges identified by the Board and delegated to the Executive Directors to manage. The Group continues to have a good track record of retaining key management post acquisition and plans are in place for business leaders who may retire in the next two to three years.

Divisional performance

Marine Support revenue was 18% higher driven by strong organic growth from across all the sectors in which the division operates. In addition, EDS was acquired in December 2017 which provides high voltage services to the offshore wind industry in the installation, monitoring and repairs of cables.

Revenue from offshore renewables increased by over 30%. The first half of the year saw the completion of the two year Galloper Windfarm project 27 miles off the coast of Suffolk, UK. In the second half of the year work commenced on the East Anglia One windfarm construction, which will continue into 2020. Our renewables business has established itself as the leading integrated marine services provider to the offshore wind sector and the award of three, five year contracts for London Array were our first significant maintenance awards.

Ship-to-ship transfer operations around the world continued to perform well with further growth in the number of operations in Brazil and the commencement of operations in Chile. The order book for diving and pipeline maintenance contracts in the Middle East and Africa grew significantly but was offset by government contracts in South Africa being delayed or cancelled.

Mass flow excavation services completed 36 projects around the globe in 2018, of which around one third were in the offshore wind sector. Improved market conditions in the oil and gas sector, which has been slow since the downturn in 2015, were evidenced by five projects completed in the Gulf of Mexico in the second half of 2018.

Revenue in Specialist Technical was 7% higher in 2018 and underlying operating profit 11% higher with underlying operating margins 40 basis points higher at 13%. The assembly and delivery of two submarine rescue vessels during the year to schedule supported another strong year for the division and we were pleased to announce a further submarine rescue vessel order in October worth £30m for the South Korean navy, due for delivery in 2021.

The division won its first significant order for six swimmer delivery vessels in March 2018 and commenced a mid-life upgrade of the submarine rescue equipment for the Singapore navy supporting our long-term contract to operate its submarine rescue service.

Our nuclear decommissioning business continued to develop its range of radiation protection instruments and showed a steadily improving order book as an increasing number of decommissioning projects were released for tender compared to 2017.

Tankships produced another strong year with revenue up 7% and underlying operating profit up 13%. Vessel utilisation continued to be strong throughout 2018 and the division had one additional vessel from July compared to the prior year. Improved vessel operating efficiencies and the additional capacity in the second half increased underlying operating profit to £9.9m (2017: £8.8m).

Two second hand vessels were acquired for a total of £10.6m as part of the fleet renewal strategy leaving three further vessels to be refreshed over the next few years. The division's earnings before interest, tax and depreciation in the year were £13.5m (2017: £12.1m) which more than funded its capital expenditure of £13.2m (2017: £2.4m).

Financial review

Performance in 2018

The Group delivered a year of strong organic growth in revenue and profit. Organic growth adjusts for the impact of businesses acquired in current or prior year and for constant currency which removes the impact of changes in exchange rates between the comparative periods.

Each division also increased its underlying operating profit during the year which resulted in a 15% increase for the Group to £62.1m (2017: £54.1m). Constant currency organic growth was 19%. Underlying operating margins increased from 10.8% to 11.0%. Trading was again second half weighted with 60% (2017: 62%) of underlying operating profit arising in the latter half of the year. Statutory operating profit was 16% above the 2017 result.

The Group's main currency exposure is in respect of US Dollar cash inflows. In 2018, the average GBP:USD rate was £1:$1.33 (2017: £1:$1.30) and net of forward contracts which are used to reduce earnings volatility, the effect of on average, a 2% strengthening in Sterling was to reduce operating profit by £1.2m.

Net finance charges were £0.5m higher at £6.0m (2017: £5.5m) as higher borrowings from funding project working capital increased interest by £0.7m which was partly offset by a reduction of £0.2m in notional interest on legacy defined benefit pension schemes. Interest cover, the ratio of underlying operating profit to the net finance charges, excluding pension related charges, was 11.1 times (2017: 11.3 times).

Taxation

Underlying profit before taxation increased 15% to £56.1m (2017: £48.6m) and statutory profit before taxation was £55.4m (2017: £47.3m). The underlying tax charge for the year of £10.5m (2017: £8.3m) represents an underlying effective tax rate (ETR) of 18.7% (2017: 17.2%). The ETR is impacted by the geographical mix of profits, tonnage tax relief on the profits of its tanker operations and expenses disallowed for tax. The Group operates in 19 countries so its ETR is a blend of national tax rates applied to locally generated profits.

The Group's tax policy, which has been approved by the Board, is available on the Group's website (www.james-fisher.co.uk). 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. Our tax objectives are to comply with all applicable tax laws and regulations, including the timely submission of all tax returns and tax payments and to undertake all dealings with local tax authorities in a professional and timely manner. The Group operates in a complex global environment and continues to monitor the OECD's Base Erosion Profit Shifting initiatives as part of its tax risk management. We seek to comply with local transfer pricing legislation in each relevant jurisdiction and to involve external tax advisers, where appropriate, to identify any changes to pricing policies and related documentation.

Underlying diluted earnings per share increased by 14% to 89.5 pence per share (2017: 78.7 pence). Statutory diluted earnings per share was 88.9 pence per share (2017: 76.9 pence).

The Directors' consider that the alternative performance measures described in note 2 assist an understanding of the underlying trading performance of the businesses. These measures exclude separately disclosed items which comprise gains or losses on the sale of businesses, asset impairments and acquisition related charges or income. The net separately disclosed expense after tax was £0.3m (2017: £0.9m).

Capital expenditure of £35.7m (2017: £24.7m) includes £10.6m for two second hand vessels as part of the Tankships fleet renewal program and represents 88% of depreciation excluding this spend (2017: 115%). To support the integrated marine services contract won in June, two small vessels were acquired for £2.4m, and the Group spent £2.5m for a remotely operated vehicle for submarine rescue services in Singapore. Capital expenditure includes £6.1m of development expenditure which relates to a new range of radiation protection instruments and new product development in our Specialist Technical business, JFD.

After paying dividends of £15.2m in the year, net borrowings decreased by £18.9m in the year and by £31.1m since 30 June 2018 to £113.6m (2017: £132.5m). At 31 December 2018, the ratio of net borrowings to underlying earnings before interest, tax, depreciation and amortisation (Ebitda) was 1.3 times (2017: 1.7 times) and the Group had £92.4m (2017: £71.8m) of undrawn committed banking facilities. The ratio of net borrowings including bonds and guarantees, to Ebitda was 1.9 times (2017: 2.2 times). Net gearing, the ratio of net debt to equity, was 37% (2017: 47%).

The Group operates a range of defined contribution schemes for current employees and contributed £4.3m (2017: £3.7m) into those schemes in the year. The Group has an obligation of £16.1m (2017: £19.8m) for its own closed defined benefit scheme and for two industry-wide defined benefit schemes. This decreased primarily due to contributions of £5.4m (2017: £4.6m), which was partly offset by an actuarial loss of £1.1m (2017: gain of £3.2m) following the triennial valuation of the Merchant Navy Ratings Pension Fund.

Changes to Accounting Standards

IFRS 15 'Revenue from contracts with customers' was effective from 1 January 2018 and resulted in a restatement of the results for the year ended 31 December 2017. Details are set out in note 11 and the reduction to the reported revenue and underlying profit before taxation was £6.1m and £1.7m respectively. The Group will implement IFRS16 'Leases' from 1 January 2019 which will bring operating leases onto the balance sheet. The Group expects to adopt the modified retrospective approach and not restate prior year financial statements. A full analysis of the impact of IFRS16 will be completed and reported in the 2019 half year report.

Risk management

The Board is ultimately responsible for the management of risk in the Group. Our internal control and risk management framework is regularly monitored and reviewed by the Board and the Audit Committee. The framework comprises a series of policies, processes, procedures and organisational structures. These are designed to ensure that the level of risk to which the Group is exposed is consistent with the Board's risk appetite and the Company's strategic objectives.

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; 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, functional and business leaders who have delegated authority and specific responsibility for ensuring compliance with and implementing policies at corporate, divisional and business unit level. During the year, limits of authority for each business were reviewed by the Executive within each management team, and were refreshed. Group functions and operating units are each required to operate within this control environment and in accordance with the established policies and procedures covering areas including health and safety, ethics, anti-bribery and corruption, conflicts, treasury, employment, anti-slavery and human trafficking, whistleblowing, data protection and environment.

The Group's trading companies are supported by Group functions for finance, treasury, taxation, internal audit, insurance, legal and company secretarial, human resource and payroll and information systems functions; the functional heads report to a nominated Executive Director. The Board retains an oversight role, receives regular reports on key issues and has a schedule of matters specifically reserved for its decision designed to ensure 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 Board also operates a Group Risk Committee (GRC), which meets quarterly and is chaired by the Chief Executive Officer, Nick Henry, with representation from functional heads including finance, human resources, legal and company secretarial, information services, insurance and internal audit. The main responsibilities of the GRC are to identify and monitor operational risks and ensure that those risks are being actively managed throughout the Group; to support the Group's Internal Control and Risk Management strategy and policy and to review reports on principal and emerging risks prepared by trading companies in order to monitor and report on the types of risk within the Group and through provision of their functional services report on how effectively risk management is performed/monitored within each business unit/trading company. The minutes of the GRC are reported to the Board.

Principal and emerging risks

The most significant risks that the Board considers may affect our business (based on the risk evaluation process described above) are listed below. The Board considers that the Group's principal risks have not materially changed, since last year. Through the Executives analysis of risks with each business board (as described above), the Board has also considered whether any of the risks identified could represent an emerging risk, being a saturation or trend that could significantly impact the Group's strategy, financial strength, competitive position or reputation within the next five years. The Group's decentralised business model and geographical spread helps to mitigate the impact of each principal risk.

· Project delivery

· Contractual risk

· Recruitment and retention of key staff

· Health, safety and environment

· Financial risk

· Energy markets

· Operating in emerging markets

· Cyber security

Brexit

On 29 March 2017, the United Kingdom invoked Article 50 of the Treaty on European Union (EU) which began the member state's withdrawal, commonly known as Brexit, from the EU. The Board continues to monitor the progress of the UK's proposed exit from the EU which is scheduled to happen on 29 March 2019. In addition, and in view of the time scale, the Group has been assessing the implications and potential mitigating actions of a no-deal scenario.

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 2018.

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; and

• 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.

The Directors of James Fisher and Sons plc and their respective responsibilities are set out in the 2017 Annual Report and Accounts. The responsibility statement was approved by the Board on 25 February 2019 and signed on its behalf by:

CONSOLIDATED INCOME STATEMENT

for the year ended 31 December 2018

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

for the year ended 31 December 2018

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 at 31 December 2018

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 31 December 2018

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2018

Other reserve movements

NOTES TO THE PRELIMINARY RESULTS

1. General information

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 consolidated financial statements comprise the financial statements of the Company, its subsidiary undertakings and its interest in associates and jointly controlled entities (together referred to as the Group), for the year ended 31 December 2018. The Company's shares are listed on the London Stock Exchange. The Company and consolidated financial statements were approved for publication by the Directors on 25 February 2019.

The Group and Company financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), adopted by the European Union (adopted IFRS). The financial statements are prepared on a going concern basis and on an historical cost basis, modified to include revaluation to fair value of certain financial instruments. As permitted by section 408 of the Companies Act 2006, a separate income statement and related notes for the holding company have not been presented in these financial statements. The profit after taxation in the Company was £39.6m (2017: £54.2m). The Group and Company financial statements are presented in Sterling and all values are rounded to the nearest million pounds (£m) except when otherwise indicated.

The consolidated financial statements and those of the Company have been prepared in accordance with IFRS adopted by the EU as at 31 December 2018 and are applied in accordance with the provisions of the Companies Act 2006.

Financial information

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2018 or 2017. The financial information for 2018 is derived from the statutory accounts for 2018 which have been delivered to the registrar of companies. The auditor has reported on the 2018 accounts; their report was (i) unqualified4, (ii) did not include a reference to any matters to which the auditor 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 statutory accounts for 2018 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the registrar of companies in due course.

2. Alternative performance measures

The Group uses a number of alternative (non-Generally Accepted Accounting Practice (non-GAAP)) performance 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-underlying in nature. The following non-GAAP measures are referred to in this Preliminary announcement.

2.1 Underlying operating profit and underlying profit before taxation

Underlying operating profit is defined as operating profit before separately disclosed items (Note 4) which include acquisition related income and expense, asset impairments or other non-underlying items.

2.2 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 6.

2.3 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.

2.4 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 plus dividends from joint venture undertakings.

2.5 Underlying earnings before interest, tax, depreciation and amortisation (Ebitda)

Underlying Ebitda is defined as the underlying operating profit before interest, tax, depreciation and amortisation.

2.6 Underlying dividend cover

Underlying dividend cover is the ratio of underlying diluted earnings per share to the total dividend per share.

2. Alternative performance measures (continued)

Return on capital employed for the Group is calculated as follows:

3. Segmental information

The Group has four operating segments reviewed by the Board: Marine Support, Specialist Technical, Offshore Oil and Tankships. These operating segments form the basis of the primary segmental disclosures below.

The Board assess the performance of the segments based on underlying 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 and 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 liabilities. Point in time revenue includes services provided over periods of up to seven days.

3. Segmental information (continued)

4. Separately disclosed items

In order for a better understanding of the underlying performance of the Group certain items are disclosed separately as set out in note 2. Separately disclosed items are as follows:

The adjustment to the provision for contingent consideration is based on the most recent business forecasts and relates to a business acquired in 2015.

5. Taxation

The total tax charge in the income statement includes a further £0.1m (2017: £0.2m) which is stated within the share of post-tax results of joint ventures.

Reconciliation of effective tax rate

The Group falls under the UK tonnage tax regime on its ship owning and operating activities and a charge is based on the net tonnage of vessels operated. Profits for these activities are not subject to corporation tax. The tax on the Group's profit before tax differs from the theoretical amount that would arise using the rate applicable under UK corporation tax rules as follows:

6. Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year, after excluding 28,630 (2017: 27,620) ordinary shares held by the James Fisher and Sons plc Employee Share Ownership Trust (ESOT), as treasury shares. Diluted earnings per share are calculated by dividing the net profit attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

At 31 December 2018, nil options (2017: 105,840) were excluded from the diluted weighted average number of ordinary shares calculation as their effect would be anti-dilutive. The average market value of the Company's shares for purposes of calculating the dilutive effect of share options was based on quoted market prices for the period during which the options were outstanding.

Weighted average number of shares

Underlying earnings per share

To provide a better understanding of the underlying performance of the Group, underlying earnings per share on continuing activities is reported as an alternative performance measure (note 2). Underlying profit is as follows:

Earnings per share

 7. Dividends paid and proposed

A final dividend in respect of the year ended 31 December 2018 of 21.3p per share (2017: 19.3p) is proposed.

8. Retirement benefit obligations

The Group and Company defined benefit pension scheme obligations relate to the James Fisher and Sons plc Pension Fund for Shore Staff (Shore staff), the Merchant Navy Officers Pension Fund (MNOPF) and the Merchant Navy Ratings Pension Fund (MNRPF). The financial statements incorporate the latest full actuarial valuations of the schemes which have been updated to 31 December 2018 by qualified actuaries using assumptions set out in the table below. The Group's obligations in respect of its pension schemes at 31 December 2018 were as follows:

9. Reconciliation of net debt

Net debt comprises interest bearing loans and borrowings less cash and cash equivalents.