Questor share tips: James Fisher has battled, but the tide is turning

James Fisher
455p +0.5p
Questor says BUY

James Fisher shares have been very volatile since they first tipped by Questor in August last year – and they are close to the price they were tipped.

The group is a specialist marine business that can perform highly technical tasks such as submarine rescues. The group was established in 1847 customers include Chevron and Shell.

Yesterday's interim results yesterday showed a remarkable improvement in the "problem child" area of the business – marine oil. This unit of the business – which is its fleet of oil tankers that transport crude and refine products – returned to profit in the first six months of the year. This is welcome news and Questor expects a slow and steady recovery that should boost earnings significantly over the medium term.

The profit was not spectacular – at £657,000 – but it represents a significant turnaround from the £2.3m loss made in the second half of the year. It is also an earlier return to profit than some analysts and been expecting.

The main reasons for this was a slight increase in the contract volumes carried, an improvement in spot rates and the group's cost-saving programme.

Of course, it will be some time until this side of the business returns to its previous role as a cash cow for the business, but it is something that is likely to happen.

Fisher's main attraction, however, is its high-margins specialty business. Business in nuclear decommissioning has been slow in the first half, but the company expects to see an improvement in the next few years.

In the six months to June 30, revenues rose 1pc to £131.6m. Pre-tax profits were little changed at £13m, but were up 4pc to £13.5m once acquisition costs are stripped out. The interim dividend was raised by 5pc to 5.04p and this will be paid on November 4. New investors need to buy the shares before October 6 to qualify for this payment.

The shares were first recommended at 455p on August 16 last year and they are now up less than 1pc compared with a market up 12pc.

Trading on a December 2010 earnings multiple of 10.1 times, falling to 9.8 in 2011, the shares are a buy.