High-quality business
An 18% increase in underlying 2013 pre-tax profit continues the impressive record of recent years. The underlying business is constantly being honed to maximise returns, with a steady flow of bolt-on acquisitions supplementing immediate organic growth and enhancing the longer-term potential. The re-rating over the past year is fully justified.
Ahead of expectations
Results for 2013 were ahead of market expectations, with underlying pre-tax profits up by 18% to £41.4m, building on the 15% progress delivered at the interim stage. There was double-digit profit growth in all four divisions, with about a third of the improvement contributed by acquisitions. There was a strong cash performance over the year, with the group absorbing net acquisition expenditure of £6.5m and still reducing net borrowings from £63.1m to £54.3m (gearing 30%).
Quality business – a consistent record
James Fisher & Sons (FSJ) has a consistent and impressive record; a combination of organic and acquisition-based growth has lifted Marine Services operating profits sixfold, from £6.6m to £46.6m over the past 10 years. Management continues to invest in broadening group capabilities, frequently operating in demanding environments, where the customer base is prepared to pay for effective skills and services, especially in the offshore and renewable sectors. Last year’s Divex acquisition typifies this strategy, operating in the saturation diving equipment market. Equally significant is the willingness to dispose of businesses that are perceived to have gone ex-growth. We believe that the sound recent performance has further to go.
Estimates looking conservative
Consensus pre-tax profit estimates for the current year were lifted by 5% following the 2013 results announcement. The revised expectations point to a 10.5% increase on the 2013 profit. In the light of continuing strong offshore demand and healthy order books in the subsea and nuclear businesses, we believe these estimates will prove conservative.
Valuation: Re-rating fully justified
The James Fisher share price has risen by 60% over the past 12 months, comfortably outpacing the market. The forward rating of just over 20x compares with 17.5x for the support services sector.
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