US Edition James Fisher
£14.39+49p
Questor says BUY
JAMES FISHER and Sons, the deep sea diving and marine engineering specialist, started life in the 19th century as a Barrow-in-Furness-based shipping company that transported goods around the coastal waters of the UK. The company has retained its Cumbrian base of operations but has expanded its horizons to provide diving and technical assistance to the oil and gas industry across the world.
The company yesterday reported full-year results that were ahead of market expectations, leading to a round of broker upgrades which sent shares up by more than 2pc.
The company said that, in the year ended December, revenue had increased 14pc to £414m. The reported pre-tax profit numbers showed little progress, being largely flat at £46.3m. However, once the impact of one-off profits for selling parts of the business last year and other costs are removed, underlying pre-tax profits increased 18pc to £41.4m.
Nick Henry, chief executive, said the strong performance during the year was down to the company’s ability to take expertise from Norwegian oil fields and export it across the world.
Offshore oil projects in West Africa and Brazilian waters helped to drive a 19pc increase in revenues and a 15pc increase in underlying operating profit to £19.7m in the offshore oil operations.
While other oil and gas services groups have been hit hard by budget cuts in exploration activity and a production slowdown from the North Sea, James Fisher has avoided this by having little exposure to exploration and North Sea projects.
The company has also expanded its underwater diving expertise. The purchase of Divex last year for £20.8m brought advanced “saturation” techniques, which allow divers to go deeper underwater for longer. This service is in strong demand as it reduces costs for oil companies undertaking maintenance and repairs on their offshore oil rigs.
The Specialist Technical division, which includes Divex and also carries out submarine rescue work, reported underlying operating profit up 55pc to £8.5m.
James Fisher’s results were also boosted by contracts in West Africa. Oil extracted from the heart of Africa has to be transported down navigable rivers in shallow draft vessels. It then has to be transferred to supertankers moored off the coast. The company is expert at ensuring the ship-to-ship oil transfer in choppy waters is carried out without spillage.
The marine operations division, which includes ship transfer, reported underlying operating profits had slipped by £1m to £1.3m during the full year.
The company also reported an excellent cash-flow performance. Cash generated from operating activities was £53.3m, up from £48.1m in the year before. That more than covered the £25m spent on buying new businesses and also easily covered the £9.1m paid out in dividends.
The increase in cash meant net debt fell by £8.8m during the year to end at £54.3m. That is almost half the level two years ago.
This set of results meant house broker N+1 Singer upgraded forecasts by 6pc for this year and next. The broker also estimates investors will be rewarded with double digit dividend increases for the next two years.
Questor recommended buying the shares last August (Buy, £10.57, August 21) as they looked cheap. The shares have since delivered gains of 35pc, almost three times that of the wider market. They now trade on a not so cheap 19.5 times forecast earnings, falling to 18.3 times next year.
The balance sheet is strong and could fund a bigger acquisition this year which could push shares higher.
Given this encouraging result, we retain that recommendation. Buy.