J
a
m
e
s
F
i
s
h
e
r
a
n
d
S
o
n
s
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
2
0
1
8
w
w
w
.
j
a
m
e
s
-
fi
s
h
e
r
.
c
o
m
James Fisher and Sons plc
Fisher House
PO Box 4
Barrow-in-Furness
Cumbria
LA14 1HR
T: 01229 615 400
F: 01229 836 761
This Report has been printed in the UK. Our printers are
environmental management system ISO 14001-accredited
and Forest Stewardship Council® (FSC®) chain of custody
certified. This paper is environmentally friendly ECF (elemental
chlorine-free) and wood free with a high content of selected
pre-consumer recycled material. The mill is fully FSC-certified.
The paper is also completely bio-degradable and recyclable.
If you have finished reading this Report and no longer wish to
retain it, please pass it on to other interested readers, return it
to James Fisher and Sons plc or dispose of it in your recycled
paper waste. Thank you.
This Annual Report is available at www.james-fisher.com
E: enquiries@james-fisher.com
Designed and produced by Perivan
Annual Report
& Accounts 2018
James Fisher and Sons plc is a leading service
provider to all sectors of the global marine industry
and a specialist supplier of engineering services to
the energy industry.
We employ 2,900 people across 19 countries. Our
companies and services have a focus on marine related
activities which operate in potentially demanding
environments where specialist skills are rewarded. Through
innovation and acquisition we have developed market-
leading businesses through our four divisions: Marine
Support, Specialist Technical, Offshore Oil and Tankships.
GOVERNANCE
Board of Directors
Corporate governance report
Audit Committee report
Nominations Committee report
Directors’ remuneration report
Directors’ report
Independent auditor’s report
36
38
45
50
52
67
70
STRATEGIC REPORT
Highlights
Chairman’s statement
Chief Executive’s review
Business model
Strategy
Sector review
Financial review
Key performance indicators
Principal risks and uncertainties
Sustainability report
Corporate responsibility
governance
1
2
4
8
9
10
18
21
22
26
34
FINANCIAL STATEMENTS
Consolidated income statement
Consolidated statement of other
comprehensive income
Consolidated and Company
statement of financial position
Consolidated and Company
cash flow statement
Consolidated statement of
changes in equity
Company statement of
changes in equity
Notes to the financial statements
Subsidiaries and associated
undertakings
Group financial record
Investor information
77
77
78
79
80
81
82
121
124
125
J
a
m
e
s
F
i
s
h
e
r
a
n
d
S
o
n
s
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
8
w
w
w
.
j
a
m
e
s
-
fi
s
h
e
r
.
c
o
m
James Fisher and Sons plc Annual Report and Accounts 2018
Investor information
Company Secretary
DBS Bank Ltd
Brokers
Jim Marsh
Registered office
James Fisher and Sons plc
Fisher House, PO Box 4
Barrow-in-Furness
Cumbria LA14 1HR
Incorporated in England under
Company no. 211475
www.james-fisher.com
Registrar
Link Asset Services
34 Beckenham Road
Beckenham
Kent BR3 4TU
Auditor
KPMG LLP
1 St Peters Square
Manchester M2 3AE
Bankers
Barclays Bank PLC
Barclays Commercial Bank
1st Floor
3 Hardman Street
Spinningfields
Manchester M3 3HF
* provisional
Investec Bank (UK) Limited
30 Gresham Street
London EC2V 7QP
Jefferies International Limited
Vintners Place
68 Upper Thames Street
London EC4V 3BJ
Financial Calendar
4 April 2019
Ex dividend date for 2018 final dividend
5 April 2019
Record date
2 May 2019
Annual General Meeting
10 May 2019
Payment of 2018 final dividend
28 August 2019*
Announcement of 2019 Half Year results
London Branch
4th Floor
Paternoster House
65 St Paul’s Churchyard
London EC4M 8AB
Handelsbanken
First Floor East
Bridge Mills
Stramongate
Kendal LA9 4UB
HSBC Bank PLC
2nd Floor
4 Hardman Square
Spinningfields
Manchester M3 3EB
Lloyds Bank PLC
8th Floor
40 Spring Gardens
Manchester M2 1EN
Santander UK PLC
2 Triton Square
Regent’s Place
London NW1 3AN
Merchant bankers
E C Hambro Rabben and Partners Ltd
32-33 St James’s Place
London SW1A 1NR
Disclaimer
This Annual Report has been prepared for the members of the Company only. The Company, its Directors, employees and agents
do not accept or assume responsibility to any other person in connection with this document and any such responsibility or liability
is expressly disclaimed. This Annual Report contains certain forward-looking statements that are subject to future events including,
amongst other matters, the economic and business circumstances occurring from time to time in the countries and markets in which
the Group operates and the availability of financing to the Group. As such the forward-looking statements involve risk and uncertainty.
Accordingly, whilst it is believed the expectations reflected in these statements are reasonable at the date of publication of this Annual
Report they may be affected by a wide range of matters which could cause actual results to differ materially from those anticipated. The
forward-looking statements will not be updated during the year. Nothing in this Annual Report should be construed as a profit forecast.
125
I
T
R
T
R
O
O
P
P
E
R
E
R
C
C
G
G
E
T
E
A
T
A
R
R
T
S
T
S
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Highlights
Revenue
£ 561.5m
Underlying operating profi t*
£ 62.1m
Underlying operating margin*
11.0%
Underlying profi t before tax*
£ 56.1m
2018
2017
2018
2017
2018
2017
2018
2017
Underlying diluted earnings per share*
89.5p
Statutory profi t before tax
£55.4m
Statutory diluted earnings per share
88.9p
Total dividend per share
31.6p
2018
2017
2018
2017
2018
2017
2018
2017
£ 561.5m
£ 62.1m
£499.3m
£ 54.1m
+13%
+15%
11.0%
10.8%
+20bps
£ 56.1m
89.5p
£55.4m
88.9p
31.6p
£48.6m
78.7p
£ 47.3m
76.9p
28.7p
+15%
+14%
+17%
+16%
+10%
• All four divisions increased revenue and underlying operating profi t;
• Strong organic † growth in revenue of 12% and underlying operating profi t of 19%;
• Two submarine rescue systems delivered to the Indian navy;
• First long-term maintenance contract in Renewables;
• Strong cash conversion of 157% (2017: 5 7%), net debt: ebitda 1.3 times (2017: 1.7 times);
• Total dividend up 10% to 31.6p per share.
* excludes separately disclosed items
† organic growth is adjusted for constant currency and business acquisitions.
2017 restated for IFRS 15 ‘Revenue from contracts with customers’
James Fisher uses alternative performance measures (APMs) as key fi nancial indicators to assess the underlying performance of the business. APMs are used by
management as they are considered to better refl ect business performance and provide useful additional information. APMs include underlying operating profi t,
underlying profi t 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.
1
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Chairman’s statement
I have pleasure in presenting my fi rst full year statement to
shareholders since I was appointed Chairman at the 2018 Annual
General Meeting (AGM), a year which saw James Fisher and Sons
plc (James Fisher) produce another strong set of fi nancial 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
Offi cer by the end of 2019. The notice period ensures
suffi cient 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 defi ned strategy that has delivered
double digit growth in underlying earnings and dividends, an
experienced senior management team and signifi cant 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 scientifi c body
of evidence that human activity is playing a large part in changes
to our climate and we accept responsibility to address this as part
of our normal business activities. Whilst recognising that there
is a huge amount to do, I am proud to present our fi rst dedicated
Sustainability report on page 26.
Results
Group revenue increased 13% in 2018 to £561.5m (2017:
£499.3m) and underlying operating profi t was 15% higher at
£62.1m (2017: £54.1m). Underlying profi t 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
profi t before tax and statutory diluted earnings per share was
17% and 16% higher respectively.
The Group’s operating cash fl ow refl ected a signifi cant working
capital infl ow 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.
2
Malcolm Paul, Chairman
Dividends
The combination of strong results and operating cash fl ow,
supported by a robust balance sheet has led the Board to
propose an increase of 10% in the fi nal 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
fi rst long-term contract for maintenance services to the London
Array windfarm 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 signifi cant 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 fl eet 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.
I
T
R
T
R
O
O
P
P
E
R
E
R
C
C
G
G
E
T
E
A
T
A
R
R
T
S
T
S
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
In November JFD successfully completed the Black
Carillon 2018 submarine rescue exercise with the Royal
Australian Navy (RAN), the 9th such exercise successfully
completed during the 12 years of the partnership between
RAN and JFD. Working closely with the RAN medics and
doctors, JFD successfully tested every aspect of the RAN’s
submarine rescue system, including the newly innovated
hyperbaric equipment suite (HES), which entered into
service in July 2018 and allows up to 88 submariners to be
treated simultaneously.
The exercise, which involved RAN Rescue Gear Ship M.V.
Stoker, Collins-class submarine HMAS SHEEAN and RAN
Escape Gear Ship M.V. Besant, simulated a real disabled
submarine scenario, encompassing the launch and
recovery of the submersible in a continuously run rescue
exercise , which tested the entire rescue operation including
mobilisation and preparations, the deep dive mating
exercise, ae romedical evacuation, transfer under pressure
(TUP) and decompression, as well as the demobilisation of
the entire system.
The RAN awarded JFD full operational verifi cation on the
whole system, including the new HES and advanced TUP
capability.
“James Fisher produced another
strong set of fi nancial results in 2018
with growth across all four divisions
which was predominantly organic.”
On 28 February 2019, David Moorhouse will retire from the
Board. David has been a Non-Executive Director of James Fisher
since August 2013 . He succeeded me as Senior Independent
Non-Executive Director last year. His knowledge of the marine
sector has been of great benefi t to the Group. On behalf of the
Board, I would like to thank David for his contribution over the last
fi ve 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 Offi cer 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 the Group’s 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 confi dence 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 confi dent that we will deliver further progress for our
shareholders in the years ahead.
Malcolm Paul
Chairman
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 Offi cer
and Finance Director, and has signifi cant operational and fi nancial
experience both in the UK and internationally.
3
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Chief Executive’s review
Nick Henry, Chief Executive Offi cer
Deliver progressive long-term growth in
underlying earnings per share
Deliver progressive dividend growth
2018
2017
2016
2015
2014
89.5
78.7
76.3
68.5
74.0
2018
2017
2016
2015
2014
31.6
28.7
26.2
23.8
22.0
Underlying earnings per share (p)
•
Underlying diluted earnings per share has grown over the
last ten years by a compound rate of 10%.
Total annual dividend per share (p)
•
The Group’s dividend policy is progressive by reference to
underlying growth and dividend cover.
Dividends have grown by a compound rate of 9% over the
last ten years and every year in each of the last 24 years.
•
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 by 10% (2017: 10%).
Carrying out our marine service operations to a high degree of safety
and integrity is the Group’s top priority and the fi rst 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
0.04 (2017: 0.1).
Progress against the Group’s strategy (page 9) is measured by
reference to fi nancial and non-fi nancial key performance indicators
set out on page 21. 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 and 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 profi t that is turned into operating cash, was
157% (2017: 57%) refl ecting 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%).
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 the 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 was until recently the largest
in the world with 175 turbines and 630 mega-watt output . 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.
4
I
T
R
T
R
O
O
P
P
E
R
E
R
C
C
G
G
E
T
E
A
T
A
R
R
T
S
T
S
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
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 effi cient offl oading operations at an offshore terminal on
the east coast of England, the activities include assisting in the safe
arrival, connection, and departure of around 110 third party tankers
each year, and 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 standards 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 signifi cantly increase dive duration time from six
to eight hours. These rebreathers are used primarily for mine
countermeasures 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.
The London Array wind farm is located in the Outer Thames
Estuary midway between the Kent and Essex coastlines,
more than 12 miles from each shore. Following a successful
tender process for operations and maintenance contracts,
James Fisher Marine Services (JFMS) has secured three
contracts on the 175 turbine, 630 MW windfarm.
JFMS has been awarded fi ve year contracts to provide
topside balance of plant services, subsea services (including
inspection of the substation and all wind turbine generators)
and high voltage (HV) management services .
EDS , acquired by James Fisher in December 2017,
will manage London Array’s HV network, including the
associated offshore transmission owner assets, on a round-
the-clock basis through its Belfast-based control centre .
In November, and under at times 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 is based near Newcastle
in New South Wales. This designs and manufactures lifesaving
recompression and hyperbaric chambers.
5
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Chief Executive’s r eview c ontinued
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. In 2018 some of this strong
cash generation was used to refresh the age profi le of the fl eet. Two
vessels were acquired in 2018 for £10.6m. The Dee Fisher, named
after the Aberdeenshire river and the Corrib Fisher, named after the
River Corrib which fl ows into Galway Bay, are both classifi ed as IMO
2 chemical tankers designed to carry clean petroleum products and
certain chemicals.
In Offshore Oil , our artifi cial 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, ScanT ech AS,
benefi ted from an improvement in the rig maintenance market but
well testing remained fl at.
Since the year end, the Group acquired Martek Holdings Limited
(Martek) for an initial consideration of £9m. Martek, which is
headquartered in the UK with an offi ce 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 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 identifi ed 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 (£m)
2018
2017
279.7
236.3
Underlying operating profi t (£m)
29.0
25.3
Underlying operating margin
10.4%
10.7%
Return on capital employed
17.3%
16.5%
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
fi rst 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
wind farm 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 fi ve-year contracts for London Array were
our fi rst signifi cant 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 signifi cantly but was offset by government
contracts in South Africa being delayed or cancelled.
Mass fl ow 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 oil and gas down-turn at the end
of 2014 were evidenced by fi ve projects completed in the Gulf of
Mexico in the second half of 2018.
Specialist Technical
Revenue (£m)
2018
2017
159.6
149.6
Underlying operating profi t (£m)
20.9
18.8
Underlying operating margin
13.0%
12.6%
Return on capital employed
18.5%
18.5%
Revenue in Specialist Technical was 7% higher in 2018 and
underlying operating profi t 11% higher with underlying operating
margins 40 basis points higher at 13%. The on schedule
assembly and delivery of two submarine rescue vessels during
the year supported another strong year for the division. 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.
6
I
T
R
T
R
O
O
P
P
E
R
E
R
C
C
G
G
E
T
E
A
T
A
R
R
T
S
T
S
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Offshore Oil
Revenue (£m)
Underlying operating profi t (£m)
Underlying operating margin
Return on capital employed
2018
61.5
5.1
8.3%
4.3%
2017
56.4
3.6
6.4%
3.0%
Offshore Oil increased revenue 9% and underlying operating
profi t grew 42% mainly due to market share gains in
RMSpumptools, our artifi cial lift completion technology business,
where demand for its products, increased its revenue by nearly
half. The rest of the division saw improved profi tability in Norway,
partly due to cost reductions in prior years and increased higher
margin rental activity. Well testing services were similar to
2017 and the division invested £6.4m for new business, mainly
focused on opportunities in the Middle East.
Tankships
Revenue (£m)
Underlying operating profi t (£m)
2018
60.7
9.9
2017
57.0
8.8
Underlying operating margin
16.3%
15.4%
Return on capital employed
37.8%
34.2%
Tankships produced another strong year with revenue up 7% and
underlying operating profi t 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 effi ciencies and additional capacity in the second half
helped to increase underlying operating profi t to £9.9m (2017:
£8.8m).
Two second hand vessels were acquired for a total of £10.6m as
part of the fl eet renewal strategy leaving three further vessels
to be refreshed over the next few years. The division’s operating
cash fl ow in the year was £14.9m (2017: £12.5m) which more
than funded its capital expenditure of £13.2m (2017: £2.4m).
7
The SEAL Carrier Swimmer Delivery Vehicles are unique
defence products manufactured by JFD in Sweden .
An eight person SEAL Carrier Swimmer Delivery Vehicle
has applications including the delivery of a six person
combat team, as a harbour patrol vessel, a raid response
anti-piracy craft and a host platform for autonomous
underwater vehicles.
SEAL Carrier Swimmer Delivery Vehicles operate in three
modes: surface, semi-submerged and submerged. They
can transit at speeds of up to 30 knots on the surface
before switching to submerged mode for covert fi nal
approach.
During 2018 JFD won and commenced a contract to supply
six SEAL Carriers worth approximately £20m.
The division won its fi rst signifi cant order for six swimmer
delivery vessels in March 201 8. It 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. It showed a steadily
improving order book as an increasing number of decommissioning
projects were released for tender compared to 2017.
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Business model
Business model
Values
Our services
and products
Our culture
Strategy
8
Our Group model comprises niche, entrepreneurial businesses with
the purpose of delivering a range of innovative products and services,
predominately to large multinational customers and governments globally,
to the highest quality and ethical standards.
James Fisher has a clear set of values that we expect all of our employees to subscribe to in all
our business activities: honesty, integrity and fairness. These values are built into our Group
Code of Ethics which provides the core principles defi ning the way in which the businesses
operate. Maintaining the highest ethical and governance standards is vital to the success of
the Group. They help us to win the trust of our customers which face developing regulatory
pressures and business challenges as they grow into existing and emerging markets. Our
values allow us to grow with our customers.
The Group provides solutions to customers through the provision of specialist equipment
supported by the detailed knowledge of our people, who are industry experts in their specifi c
operations. The equipment is often designed and assembled by our people, who then operate
it and provide through-life support to our customers. Whilst our expertise originates in the
UK, the Group provides these solutions and support internationally and focuses on servicing
less mature markets. Addressing customer demands for quality and improvement requires the
continuous development of innovative products to maintain market leadership in our areas
of service.
Our decentralised management structure encourages managers to be responsible for making
timely decisions in the best interests of their businesses but with the back-up and resources of
a larger group. Our businesses have strong, experienced management teams who are rewarded
according to the success of their businesses. An entrepreneurial culture means that decisions
are made quickly and in response to changes in the market and the competitive environment.
Innovation is a key driver to the Group’s success and differentiates the Group from its
competitors. Product and service development by the businesses is targeted through employee
engagement and empowerment to solve customer needs and problems through innovation.
The Group is focused on operational excellence and organic growth from its existing businesses.
This is supported by selective bolt-on acquisitions which broaden our product range and service
portfolio, deepen our management pool and potentially extend our geographical coverage for
our large multinational customers. Our strategy is described in more detail overleaf.
I
T
R
T
R
O
O
P
P
E
R
E
R
C
C
G
G
E
T
E
A
T
A
R
R
T
S
T
S
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Strategy
The Group’s strategy is to grow its business organically by
leveraging its existing marine skill base in areas of specialist
expertise to a global market and through investment in
people, working capital and equipment. This is supported
by selective acquisitions to broaden the product and service
range or geographical coverage. James Fisher has a range of
entrepreneurially-led businesses which are market leaders in their
specifi c operational niche. Our businesses operate in demanding
environments where strong marine service and specialist
engineering skills are valued and rewarded. We seek to provide
solutions to our customers in the less mature and fast-growing
markets where they value trusted and quality suppliers. Our niche
operations are integrated into a wider service offering to a diverse
range of end markets.
Our focus on operational excellence requires that our businesses:
• are cash-generative;
• have operating margins in excess of 10%; and
• provide returns on capital employed in excess of 15%.
Bolt-on acquisitions broaden the range of products and services
that we provide. Our acquisition strategy is focused on niche
businesses with a strong entrepreneurial culture which fi t
well with our operating style and growth strategy. As a cash-
generative Group with a strong balance sheet, businesses are
usually acquired using existing cash or borrowing resources.
The businesses acquired have a good track record and typically
need additional resources for their next growth phase. Where an
acquisition bolts on to existing businesses, we seek to optimise
shared back offi ce functions, purchasing opportunities and cross-
selling within the Group.
To deliver the Group’s strategy we have four strategic purposes, which are aligned with our key stakeholders:
Shareholders: to
grow the return to
shareholders:
Deliver long-term growth
in underlying earnings
per share, dividends
and return on capital
employed
Grow organically by
leveraging existing
specialist marine skill
base to a global market
Expand our footprint and
capabilities through bolt-
on acquisitions
Communities: to be a
good member of the
community:
Consider sustainability
in our decision-making
process
Support the communities
around us
Minimise any adverse
impact from our
operations
Employees: to bring
out and develop the
potential of our people:
Ensure the safety of all
employees
Develop individual and
organisational excellence
Support new ideas and
innovation
Customers: to develop
and deliver solutions to
our customers:
Develop our products,
service and geographical
offering in line with
customer needs
Respond rapidly to
changing customer
requirements
Provide good value and
a high level of service to
customers
For more information on stakeholder engagement, see the Sustainability report on page 26.
9
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Sector review
T
R
O
P
E
R
C
G
E
T
A
R
T
S
I
Revenue (£m)
Underlying operating profi t (£m)
2018
2017
2016
2015
2014
279.7
2018
236.3
203.6
193.0
164.2
2017
2016
2015
2014
29.0
25.3
21.0
19.4
14.2
Return on capital employed (%)
2018
2017
2016
2015
2014
17.3
16.5
13.9
14.8
21.2
10
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Marine Support
T
R
O
P
E
R
C
G
E
T
A
R
T
S
I
Our Marine Support businesses provide products, services and solutions to the global marine industry. These are
supplied to a range of end market sectors including marine, oil and gas, ports, construction and renewables.
Our principal businesses
Operations
Fendercare
End markets
Locations
Marine products and services, ship-to-ship transfers, offshore
terminal services
Marine, oil and gas, renewables and defence UK, Singapore, Australia, UAE, Brazil,
Nigeria, Ghana
JF Marine Services
Integrated marine services, including remotely operated vehicle
(ROV) systems and diving services
Marine, oil and gas, renewables, tidal power
and communications
UK, France
JF Testing Services
Products and services that measure and monitor structural
stress, instrumentation and materials testing
Marine, oil and gas, renewables, civil and
construction
UK, UAE, Singapore, Malaysia
JF Subsea Excavation
Mass-fl ow excavation services
Subtech
Marine and diving services
Oil and gas and renewables
UK, Mexico, Singapore
Oil and gas, marine and construction
South Africa, Mozambique, UAE,
Nigeria
Market drivers
Fendercare is the leading provider of pneumatic fl oating fenders
and other mooring equipment to the global marine industry. It
services commercial shipbuilding, ship refurbishment, defence, port
developments and the oil and gas markets for project applications.
Fendercare is also the leading provider of ship-to-ship services
for the transfer of crude or refi ned oil, liquefi ed natural gas or bulk
cargoes. The demand for these services is driven by the volume
of oil trading between oil majors and independent traders and
also by production where local port infrastructure is unable to
accommodate large tankers.
JF Marine Services delivers an integrated service offering that
utilises the wide range of marine skills across the Group to provide
added value to its customers. Demand for its services is driven
by the operation and maintenance activities in the marine, oil
and gas, renewables and communication sectors. This includes
the specialist provision of ROV systems and diving personnel for
underwater surveys, inspections, construction and diver support.
JF Testing Services is the leading provider of strain gauges to the
marine industry, which are used in a range of applications such as
mooring systems on ships and in ports as well as being used to
monitor the structural integrity of infrastructure in the construction
and transport sectors. The sectors serviced encompass new
shipbuilding, ship refurbishment and life extension, port
developments, and projects for the oil and gas market.
It is also a leading provider of specialist testing and monitoring
services to the construction and maintenance sectors, and designs
and manufactures testing and monitoring equipment, supporting
customers worldwide.
The market drivers for JF Testing Services are new projects in the
marine, oil and gas, infrastructure and renewables sectors, where
our niche offering and innovative products and services provide a
competitive advantage.
JF Subsea Excavation specialises in providing mass-fl ow
excavation tools and services to cover or uncover subsea pipelines
or cables. Demand for its services is driven by global cable and
pipeline projects primarily in the oil and gas, renewables and
communication sectors.
Subtech provides a range of marine services to the Middle Eastern
and Africa region. Demand for its services is driven by port
construction, diving and marine projects.
11
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Specialist Technical
Our Specialist Technical businesses supply diving equipment and services, submarine rescue vessels and through-
life rescue services and engineering solutions to the international defence market and UK nuclear decommissioning
market. The submarine rescue market is a small niche with a national navy either having its own capability or relying on
other countries. Other subsea services provided to the defence sector include diving equipment and special operation
swimmer delivery vessels. The Group also supplies saturation diving systems which are installed onto dive support
vessels and support deep subsea diving activities. James Fisher Nuclear (JFN) provides engineered solutions which
operate in hazardous environments in the nuclear industry.
Our principal businesses
Operations
JFD
End markets
Locations
Design, supply and servicing of diving and subsea equipment,
submarine rescue and special operations services
Defence, commercial and defence diving,
hyperbaric and submarine rescue
UK, Australia, Singapore, Sweden
J F Nuclear
Engineered solutions in remote handling, non-destructive testing
and calibration services
Nuclear decommissioning
UK, Germany
JFN provides engineered products and services to the nuclear
industry both in the operation of nuclear power plants and
decommissioning. Its products and services operate in hazardous
environments. The business provides instrumentation, non-
destructive testing, calibration and digital radiography to the nuclear,
aerospace and process industries. The market drivers for JFN are the
demand for its products, services and lifetime support from the UK
decommissioning industry, radiological calibration requirements and
projects within the aerospace, process and defence industries.
Market drivers
JFD is the world’s leading supplier of saturation diving systems
and related diving equipment. Its end markets are oil and gas and
defence. Saturation diving systems are both fi xed and portable.
Fixed systems are usually built into dive support vessels (DSVs).
JFD provides the equipment and the follow-on consumables,
support and maintenance to the DSV operator. The construction
and replacement of DSVs drives new build saturation diving systems
which in turn drives ancillary service and product spend. JFD’s
defence market is based on service, repair and on-going calibration
requirements, and on projects requiring specialist diving equipment.
JFD is also a leading provider of submarine rescue services. It
encompasses the ability to design, deliver and operate submarine
rescue vehicles. It has long-term service contracts with navies
providing a very niche area of capability. The driver is the tendering
of defence projects for provision of the equipment, which can then
lead to longer-term service contracts to operate the service. We
currently provide submarine rescue services to the UK, Singaporean
and Australian navies. The business also provides swimmer delivery
vessels to the special operations markets.
12
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
T
R
O
P
E
R
C
G
E
T
A
R
T
S
I
Revenue (£m)
Underlying operating profi t (£m)
2018
2017
2016
2015
2014
159.6
2018
149.6
151.8
129.4
121.5
2017
2016
2015
2014
20.9
18.8
19.9
13.9
13.3
Return on capital employed (%)
18.5
18.5
20.9
22.1
27.8
2018
2017
2016
2015
2014
13
I
T
R
T
R
O
O
P
P
E
R
E
R
C
C
G
G
E
T
E
A
T
A
R
R
T
S
T
S
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Revenue (£m)
Underlying operating profi t (£m)
2018
2017
2016
2015
2014
61.5
2018
5.1
56.4
55.1
63.0
2017
3.6
2016
4.2
2015
2014
104.9
7.4
22.4
Return on capital employed (%)
2018
2017
2016
2015
2014
4.3
3.0
3.5
6.2
6.0
14
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Offshore Oil
T
R
O
P
E
R
C
G
E
T
A
R
T
S
I
The Offshore Oil division supplies a range of services and equipment to the global oil and gas industry. This includes
the design and engineering of specialist equipment, platform maintenance and modifi cation, well testing support,
subsea operations and maintenance services. James Fisher is also established as a world leader in artifi cial lift
specialist completion technology and innovative accessory tools for electrical submersible pumps.
Our principal businesses
Operations
ScanTech AS
End markets
Design and engineering of specialist equipment, platform
maintenance and modifi cation, well testing support and subsea
operations
Oil and gas
Scantech Offshore
Locations
Norway
Provides products and services to well testing companies
Oil and gas
UK, UAE, Brazil, Australia, Malaysia
RMSpumptools
Artifi cial lift specialist completion technology and innovative
accessory tools for electrical submersible pumps
Oil and gas
UK, UAE
Fisher Offshore
Provides range of lifting equipment and services to the
marine, offshore and subsea industries
Oil and gas, marine
UK, Malaysia
Market drivers
ScanTech AS is Norway’s leading provider of ATEX (ATmospheres
EXplosives) products and support services to the energy sector.
Its products and services are supplied to the Norwegian oil and
gas market and are used for platform maintenance, well testing
or specifi c projects. Equipment is designed and certifi ed to the
NORSOK standard. The driver for the business is the operation
and maintenance spend on offshore rigs in the Norwegian sector.
Scantech Offshore is a leading provider of air compressors, steam
generators, heat suppression equipment and qualifi ed personnel
for the well testing market worldwide. It rents equipment to
large multinational oil service companies, along with qualifi ed
personnel to operate the equipment. The driver for the business
is the operation and maintenance spend on offshore rigs around
the world.
RMSpumptools is a world leader in artifi cial lift specialist
completion technology and innovative accessory tools for
electrical submersible pumps. RMSpumptools supplies products
to the global downhole oil and gas market which improve the
productivity of wells utilising electrical submersible pumps.
Fisher Offshore provides winches, hoists, cutting tools, marine
cranes and subsea hydraulic equipment to the oil and gas and
marine sectors. Its market driver is maintenance, inspection and
repair demand and subsea projects.
15
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Tankships
Our Tankships division operates a fl eet of product and chemical tankers which trade along the UK and northern
European coastline carrying petrol, diesel, gasoil, kerosene and easy chemicals/biofuels. The division performs nearly
2,000 port calls each year carrying fuel from refi neries and terminals to major coastal storage facilities. The division
also operates a port in Plymouth, UK.
Our principal businesses
Operations
JF Everard
End markets
Locations
Delivery of clean petroleum products around the
European coastline
Distribution of clean petroleum products
UK
Cattedown Wharves
Port operations
Wet and dry product distribution
UK
Market drivers
James Fisher Everard (JFE) distributes clean petroleum products
and easy chemicals under contracts with oil majors from refi neries
and terminals to storage facilities around the European coast, and to
islands. It operates a fl eet of double-hulled product/chemical tankers
with capacity ranging from 3,000mt to 13,000mt. The business
driver is the level of consumption of clean products (petrol, diesel,
gasoil and kerosene) and easy chemical/biofuels in the UK, Ireland
and northern Europe.
JFE has undertaken 37,435 voyages since the year 2000, carrying
in excess of 81. 2 million tonnes of products. This has been achieved
whilst maintaining an excellent safety record.
Shipping dramatically reduces our customers’ carbon footprint
compared to other modes of transportation. Shipping’s CO2
emissions are half that produced by road freight, and just one full
ship keeps more than 150 trucks off the roads.
The division operates Cattedown Wharves, a port in Plymouth which
provides berthing and marine services to the oil majors which own
tank farms in Plymouth. It also handles dry cargoes such as animal
feed being imported into the South West and clay being exported
from the region. The primary driver for the business is the level of
consumption of clean oil products within the South West region of
the UK.
16
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
T
R
O
P
E
R
C
G
E
T
A
R
T
S
I
Revenue (£m)
Underlying operating profi t (£m)
2018
2017
2016
2015
2014
60.7
57.0
55.5
52.6
54.3
2018
2017
2016
2015
2014
4.7
9.9
8.8
8.2
7.2
Return on capital employed (%)
2018
2017
2016
2015
2014
17
37.8
34. 2
31.9
28.5
27.2
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Financial review
Performance in 2018
The Group delivered a year of strong organic growth in revenue
and profi t. 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.
Revenue
2018
restated
change
organic
2017
Marine Support
Specialist Technical
Offshore Oil
Tankships
Group
279.7
159.6
61.5
60.7
236.3
18.4%
17.5%
149.6
56.4
57.0
6.7%
9.0%
6.5%
6.6%
11.0%
6.9%
561.5
499.3
12.5%
12.3%
Each division increased revenue during 2018 with underlying
organic growth rates ranging from 7%, to 18% in Marine Support
which led the way . Overall Group revenue increased 13% and
after adjusting for acquisitions and constant currency, underlying
organic growth was 12%.
Each division also increased its underlying operating profi t
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 profi t arising in the latter half of the
year. Statutory operating profi t was 1 6% above the 2017 result.
Underlying operating profi t
2018
restated
change
organic
2017
Marine Support
Specialist Technical
Offshore Oil
Tankships
Corporate costs
Group
29.0
20.9
5.1
9.9
(2.8)
62.1
25.3
18.8
3.6
8.8
(2.4)
54.1
14.6%
20.0%
11.2%
12.3%
41.7%
57.6%
12.5%
14.2%
14.8%
18.8%
18
Stuart Kilpatrick, Group Finance Director
Marine Support increased underlying operating profi t by 15%
with good performance in renewables and ship-to-ship services.
Specialist Technical saw strong performance from its commercial
and defence products and good progress on projects. The
Offshore Oil result was due to a high demand for its artifi cial lift
services and improved results in Norway. Tankships delivered a
13% increase in underlying operating profi t due to good vessel
utilisation and operating cost effi ciencies.
The Group’s main currency exposure is in respect of US Dollar
cash infl ows. 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 profi t by
£1.2m.
Finance charges
Net fi nance 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 defi ned benefi t
pension schemes. Interest cover, the ratio of underlying operating
profi t to the net fi nance charges (excluding pension related
charges ) was 11.1 times (2017: 11.3 times).
Taxation
Underlying profi t before taxation increased 15% to £56.1m
(2017: £48.6m) and statutory profi t 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 profi ts, tonnage tax relief on the profi ts 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 profi ts.
The Group’s tax policy, which has been approved by the Board, is
available on the Group’s website (www.james-fi sher.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
the Group’s 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
I
T
R
T
R
O
O
P
P
E
R
E
R
C
C
G
G
E
T
E
A
T
A
R
R
T
S
T
S
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Underlying Ebitda* was 14% higher at £90.5m (2017: £79.5m).
Operating cash fl ow increased to £97.6m (2017: £31.1m) in
2018 due to a working capital infl ow of £9.4m mainly due to
working capital reductions following the completion of projects,
particularly following the delivery of two submarine rescue
vessels for the Indian navy. Cash conversion, which is the ratio
of operating cash fl ow to underlying operating profi t, was 157%
(2017: 57%). Over the last three years, during the build and
delivery phase for the Indian navy, the Group has generated
£180.0m of operating cash fl ow compared to £167.0m of
underlying operating profi t, which is a cash conversion of 108%,
which is similar to the Group’s average over the last ten years.
The Group invested £12.5m (2017: £5.2m) in businesses
acquired, paying £8.9m for EDS which completed in 2017, £1. 5m
for Cowan and £ 2.1m in relation to new joint ventures.
Capital expenditure of £35.7m (2017: £24.7m) includes
£10.6m for two second hand vessels as part of the Tankships
fl eet renewal program and represents 88% of depreciation
excluding this spend (2017: 97%). 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
developed by JFN 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: 4 8%).
operates in a complex global environment and continues to
monitor the OECD’s Base Erosion Profi t 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.
Earnings per share and separately disclosed items
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).
Cash fl ow and borrowings
Summary cash fl ow
Underlying operating profi t
Depreciation & amortisation
Ebitda *
Working capital
Pension/other
Operating cash fl ow
Interest & tax
Capital expenditure
Acquisitions
Dividends
Other
Net infl ow/(outfl ow)
2018
2017
restated
£m
£m
62.1
28.4
90.5
9.4
(2.3)
97.6
(13.3)
(35.7)
(12.5)
(15.2)
(2.0)
18.9
54.1
25.4
79.5
(42.2)
(6.2)
31.1
(12.9)
(24.7)
(5.2)
(13.9)
(1.2)
(26.8)
Net borrowings at start of period
(132.5)
(105.7)
Net borrowings at end of period
(113.6)
(132.5)
* Underlying earnings before interest, tax, depreciation and
amortisation
19
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Financial review continued
Pensions
The Group operates a range of defi ned 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 defi ned benefi t
scheme and for two industry-wide defi ned benefi t 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: £3.2m gain) 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. Full details are
set out in note 33 and the reduction to the reported revenue
and underlying profi t 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 modifi ed
retrospective approach and not restate prior year fi nancial
statements. A full analysis of the impact of IFRS16 will be
completed and reported in the 2019 Half Year report.
In October 2018, JFD announced the launch of its latest
models of its highly successful Clearance Diver’s Life
Support Equipment (CDLSE) rebreather.
These are used primarily for mine countermeasures
explosive ordnance disposal and represent state-of-the-
art underwater life support technology, increasing levels
of diver safety, equipment reliability, maintainability,
operational capability and mission versatility.
Our Stealth CDLSE Mk2 builds upon the existing model,
currently deployed by 11 navies with over 600 sets in use
and with a proven track record in a range of operational
and environmental conditions. The enhancements enable
the control system to rapidly respond to changes in the life
support system and to increase signifi cantly dive duration
time from six to eight hours.
The Stealth CDLSE Mk2 can operate at depths of up to
100m, fully meets all relevant NATO requirements, and
is the only comparable rebreather on the market able to
provide this extended endurance capability.
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 . 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.
NATURE OF RISK
ASSESSMENT OF RISK
Operations based in EU countries
Very low. 0.4% of Group turnover from businesses outside of the UK and based in the EU .
Exports to customers based in the EU and the
risk of tariffs on exports and the risk of delays in
delivery due to logistical issues at ports or airports
Imports from suppliers and the potential cost of
tariffs and logistical issues at ports and airports
Low risk. 6% of revenue is delivered to EU countries.
Low – medium risk. Purchases from EU countries are not signifi cant. Purchases of spares and
consumables in the Tankships division of c. £1m per annum may be impacted. Dry docking in that
division may be carried out at EU shipyards and costs could increase by tariffs or if switched to
other locations.
Administrative risks of compliance, certifi cation,
visas for EU nationals
Low risk. We anticipate a pragmatic solution even in the event of a no-deal Brexit, although time and
costs may increase.
Currency risk
Availability of fi nance
Contractual risk
20
Medium risk. The Group’s main exposure is to the USD and following the Brexit vote, Sterling
sharply weakened against the USD. This has been benefi cial to the Group’s sales and profi ts and
there is a risk of this reversing after 29 March 2019. The Group reduces earnings volatility by taking
out forward contracts for 40%-60% of its exposure and this partly mitigates the risk.
Low risk. The ability of banks to provide fi nance and for the banking market to continue to operate
in the same manner after 29 March 2019 is expected to be unchanged.
Medium -high risk. James Fisher has a contract with the European Maritime Safety Agency (EMSA)
to deliver emergency pollution response services should an accident occur in the UK, Irish or North-
West European coast. EMSA, post-Brexit, may choose to use EU vessels or companies to provide
this service.
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Key performance indicators
T
R
O
P
E
R
C
G
E
T
A
R
T
S
I
2018
2017
2016
2015
2014
2018
2017
2016
2015
2014
2018
2017
2016
2015
2014
2018
2017
2016
2015
2014
2018
2017
2016
2015
2014
2018
2017
2016
2015
2014
62.1
54.1
50.8
45.6
51.5
Underlying operating profi t (£m)
Underlying operating profi t is after adjusting for separately disclosed items
and is the underlying profi t from operations before interest. The Group has
increased underlying profi t by a compound rate of 8% over the last
10 years.
11.0
10.8
10.9
10.4
11.6
56.1
48.6
45.8
41.2
46.9
12.2
12.0
13.0
13.5
16.5
157
57
103
95
109
37
48
41
43
31
Operating margin (%)
Operating margin is the ratio of underlying operating profi t to revenue. The
Group’s operating margin in 2018 was 11% (2017 : 10.8%).
Underlying profi t before tax (£m)
Underlying profi t before taxation is after interest and before separately
disclosed items and related taxes. Underlying profi t before taxation
increased by 15% in 2018 (2017: 6%).
Return on operating capital employed (%)
Return on operating capital employed is defi ned as underlying operating
profi t divided by average operating capital employed. Operating capital
employed comprises tangible fi xed assets, intangible fi xed assets, operating
debtors net of creditors, less provisions. The Group’s post-tax return on
operating capital employed was 12.2% in 2018 (2017: 12%).
Cash conversion (%)
Cash conversion is defi ned as the ratio of operating cash fl ow to underlying
operating profi t. Operating cash fl ow is defi ned as underlying operating
profi t, adding back depreciation and amortisation and adjusting for net
movements in working capital, pension payments and for the cash profi ts of
associates. The Group’s cash conversion was 157% in 2018 (2017: 57%)
and has averaged 107% over the last ten years.
Gearing (%)
Gearing is defi ned as the ratio of net borrowings to net assets. The gearing
of the Group at 31 December 2018 was 37% (2017: 4 8%).
2017 fi gures are restated for IFRS 15 ‘Revenue from contracts with customers’ (note 3 3)
21
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Principal risks and uncertainties
all Audit Committee meetings and twice annually presents a
summary of the Internal Audit fi ndings, recommendations, and
implementation progress. Internal Audit also implements the
annual risk evaluation process and the internal control and risk
management review questionnaire process with the individual
businesses, before their presentation to the Board.
The Board also operates a Group Risk Committee (GRC), which
meets quarterly and is attended by the Executive Directors and
the heads of the functional teams. The minutes of the GRC are
reported to the Board, and any key issues raised are discussed at
the Board. 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 key risks and risk maps prepared by trading
companies in order to monitor and report on the types of risk
within the Group and report on how effectively risk management
is performed/monitored within each business unit/trading
company. Each of the functional teams provides a report at each
GRC meeting which identifi es any matters in their functional area
which relates to the Group’s principal risks and uncertainties, or
to the individual businesses’ own risk registers. During the year,
the GRC has undertaken specifi c reviews of the Group’s approach
in the following principal risk areas: development of project
management best practice and training, on-going development of
Group-wide process and training for contract risk management,
and a review of the Group’s cyber security risks to the Group’s
own systems and the Group’s key IT suppliers.
Risk management systems
The key features of the Group’s risk management systems used to
identify and monitor material risks are as follows:
•
A risk evaluation process commences in the operating
companies with an annual exercise to identify the signifi cant
operational and fi nancial risks facing the business. Each
trading business is required to maintain an up-to-date risk
register, which identifi es key risks, assigns each a “risk score”
based on the likelihood of the identifi ed risk arising and the
potential impact on the business of an adverse outcome, both
before and after mitigation measures are taken. The risks and
their respective risk scores before and after mitigation are
reviewed at business level.
The Group’s risk management framework
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, and comprises a series of policies, processes,
procedures and organisational structures which 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 Group’s strategic
objectives.
The Board determines the Group’s policies on risk, appetite for
risk and levels of risk tolerance, and specifi cally approves: risk
management policies and plans; signifi cant insurance claims,
legal claims 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 defi ned limits of authority. These have
been communicated throughout the businesses and are well
understood by the Executive Directors, and by functional and
business leaders who have delegated authority and specifi c
responsibility for ensuring compliance with and implementing
policies at corporate, divisional and business unit level. Group
functions and operating units are each required to operate within
this control environment and in accordance with the established
policies and procedures. This includes ethics, anti-bribery and
corruption, confl icts, treasury, employment, slavery and human
traffi cking, whistleblowing, data protection, health and safety and
environment.
The Group’s trading companies are supported by Group functions.
Each functional head reports to a nominated Executive Director.
The Board retains an oversight role, receives regular reports on
key issues and has a schedule of matters specifi cally reserved
to it for decision, designed to ensure that it maintains full and
effective control over appropriate strategic, investment, fi nancial,
organisational and compliance issues. This schedule is subject to
review by the Board on an annual basis.
The Group’s Internal Audit function is supported by a co-sourcing
arrangement with a major international fi rm, and undertakes
regular reviews of the individual businesses’ operations and
their systems of internal controls. It makes recommendations
to improve controls and follows up to ensure that management
implements the recommendations made. The annual Internal
Audit plan is determined on a risk assessment basis and is
reviewed and approved by the Audit Committee. Internal
Audit’s fi ndings are reported to the individual management
team, the Executive management team, and the chairman
of the Audit Committee. The head of Internal Audit attends
22
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
T
R
O
P
E
R
C
G
E
T
A
R
T
S
I
•
•
To support this process, each trading company managing
director completes an internal control and risk management
review questionnaire on an annual basis, which is a robust
self-assessment of operational controls and compliance
with Group policies, applicable laws and regulations relating
to their business. This ensures that managing directors
identify risks and relevant mitigating strategies, and have in
place adequate control systems to identify and report any
weaknesses that require management attention.
The risk registers and annual reviews which are presented
to the GRC and Board are used by the Board in helping to
determine the Group’s principal risks and uncertainties, as well
as the areas of Internal Audit focus for the forthcoming period.
Business reporting and performance reviews
The Group operates an annual budgeting process and produces
quarterly forecasts which are reviewed and approved by the
Board. Monthly results are compared with budget and prior year,
and individual business reviews are conducted quarterly, which
include a review of fi nancial results. The businesses also compile
a three-year strategic plan.
The Executive Directors hold quarterly board meetings with each
business unit to discuss strategy, fi nancial results and forecasts,
business needs and the management of risks facing the business.
Regulatory compliance policies
As part of its internal control procedures, the Group maintains a
whistleblowing policy which encourages employees to report in
good faith any genuine suspicions of fraud, bribery or malpractice
in order to identify any problems within the Group at an early
stage. The policy is designed to ensure that any employee who
raises a genuine concern is protected. Any concerns can be raised
in the fi rst instance with the Group Finance Director or the Group
General Counsel and Company Secretary in confi dence. The Audit
Committee has overall responsibility for monitoring resulting
investigations and approving outcomes.
The Board is committed to ensuring the highest standards in all
of the Group’s business dealings and condemns corruption in all
its forms. The Group has a formal anti-bribery and corruption
statement and policy and does not tolerate or condone corruption
or bribery in any of the Group’s business dealings. This policy
has been implemented throughout the Group and is supported
by a Group-wide training and awareness programme and regular
compliance reviews through internal audit. This policy is reviewed
annually by the Board and is available on the Group’s website.
The Board has a zero-tolerance approach to any form of modern
slavery and is committed to acting in an ethical manner and with
integrity and transparency in our Group’s business dealings. The
Group has a formal slavery and human traffi cking statement and
policy which outlines the steps taken by the Group to ensure that
slavery and human traffi cking is not taking place within any part
of the Group’s business or within the Group’s supply chains. Both
the statement and the policy are available on the Group’s website.
Viability statement
The Directors have assessed the Group’s viability over a
three-year period ending 31 December 2021, which is a longer
period than the 12 month outlook required in adopting the going
concern basis of accounting. The Directors have determined
that this is the most relevant time period because it is consistent
with the Group’s planning process whereby the Board reviews
the Group’s strategy and its detailed three-year plan. This is
reviewed and considered in light of the Group’s current position
and prospects together with factors that might affect the three-
year plan. The Board carefully assesses the performance and
prospects of each business regarding entering new markets and
geographies, current and expected growth rates, prospective new
projects and the timing of such projects and the robustness of
individual business performance.
The Group’s three-year plan overlays a number of assumptions
and sensitivities which are reviewed by the Board; this includes
a review of whether additional bank facilities will be required
and available in the plan period, as well as a robust assessment
of the likely downside sensitivities aligned to the principal
risks facing the Group as set out on pages 24 and 25, and the
potential impact of those sensitivities on its business model,
future performance, solvency and liquidity over the period,
and taking into account the potential mitigating actions, and
the effectiveness of the Group’s risk management and control
systems, as well as current risk appetite. Sensitivities considered
included the potential consequence of global economic
uncertainty and adverse foreign exchange movements, on-going
bolt-on acquisitions, as well as the diverse nature of the markets
and geographies in which the Group’s businesses operate, and
their ability to react quickly to change.
Based on their assessment of the Group’s prospects and viability,
the Directors confi rm they have a reasonable expectation that
the Group will be able to continue to operate and to meet its
liabilities, as they fall due, for the period to 31 December 2021.
23
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Principal risks and uncertainties continued
The most signifi cant risks which the Board considers may affect our business (based on the risk evaluation process described on
pages 22 to 23) are listed below. The Board considers the Group's principal risks have not materially changed since last year.
Principal risks and uncertainties
RISK DESCRIPTION POTENTIAL IMPACT
MANAGEMENT/MITIGATION
CHANGE IN RISK
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Projects and contracts are subject to on-going review at
levels and frequencies appropriate to performance and
potential risks.
Our businesses employ industry experts to help ensure
effective project delivery and performance.
Established processes and procedures, reporting
systems, management oversight, customer engagement
and staff training and development.
➨
The volume of contracts continues
to increase with the growth of
the Group, but the risk remains
similar, and Group-wide project
management training has increased
in 2018.
➨
The risk remains unchanged and
mitigating activities have been
taking effect, including refreshing
business limits of authority, issuance
of new tender guidance, and project
management training including post-
signature contract management.
➨
The risk here has increased. Staff
turnover is marginally higher
and, as a proportion of our senior
management approach retirement
age, so succession planning
becomes more critical.
➨
No change. There have been no
major incidents through 2018.
The Group utilises internal and external professional
expertise to minimise risk in contract negotiation with
customers and partners.
All material tenders, contracts and joint ventures are
referred to their trading company board.
All contracts are subject to appropriate limits of authority
and defi ned approval processes to ensure that contracts
are reviewed and approved at appropriate levels prior to
commitment.
The most material contracts are escalated to the Board
for approval.
The project delivery and performance function (referred
to above) provides assurance on delivery.
Maintenance and development of formal programmes
for graduate recruitment, identifying and developing
talent and future leaders, management development,
appraisals, formal and informal training plans.
Appropriate remuneration incentives, including the
extension of share schemes to key individuals.
Succession and talent development is regularly
discussed at Board and trading company level. There are
several management development programmes in place
for individuals who have been identifi ed as potential
senior managers. These programmes are defi ned to
help develop and grow the capabilities and behaviours
required of senior managers so that we have potential
successors for key business roles.
The Group places a particular emphasis on operational
excellence including the health, safety and security of its
operations and the quality of services provided.
These key areas are continually monitored and reported
to the Board. Health and safety and environment are the
fi rst item s discussed at each trading company board
meeting and each meeting of the Board.
The Group maintains policies and processes to manage
safely and compliantly our operations, to protect our
workforce, to react appropriately to operational incidents
and to deal quickly and effectively with any safety or
service failings.
PROJECT DELIVERY
Group businesses may
fail to meet customer
expectations on project
delivery.
CONTRACTUAL RISK
The Group may be
exposed to increased
contractual risks as
it continues to grow,
wins larger contracts
and operates in more
geographies.
•
•
•
•
•
Signifi cant adverse
fi nancial and reputational
consequences.
Increased claims and
litigation.
Financial impact caused
by late payment, or cost
overruns.
Increased claims and
litigation.
Exposure to non-UK legal
jurisdictional uncertainty.
RECRUITMENT AND RETENTION OF KEY STAFF
The Group may fail
to attract, retain and
develop personnel of the
requisite calibre and to
plan for succession in key
leadership positions.
•
•
The Group may not be able
to maintain its existing
strong and experienced
management teams in its
operational businesses.
The Group’s delivery of its
strategic objectives depends
on recruiting and retaining
the right people in all areas of
our business.
•
HEALTH, SAFETY AND ENVIRONMENT
Group trading companies
may experience an
adverse operational
incident or failure to
maintain appropriate
levels of service delivery.
The health and safety of
our workforce and others
could be impacted by our
operations.
•
An incident may impact on
business and reputation of
the Group and the affected
business es which rely
on ensuring that a good
reputation is maintained in
the market and with their
customers.
•
Claims and regulatory action
may be taken against the
Company or the affected
business.
24
T
R
O
P
E
R
C
G
E
T
A
R
T
S
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
RISK DESCRIPTION POTENTIAL IMPACT
MANAGEMENT/MITIGATION
CHANGE IN RISK
FINANCIAL RISK
The Group is exposed
to interest rate, foreign
exchange and credit risk.
•
An increase in interest rates
or change in exchange rates
or credit restriction would
have a fi nancial impact on the
Group.
•
Demand for the Group’s
products and services may be
adversely affected.
ENERGY MARKETS
The Group is exposed
to potentially material
changes in circumstances
affecting individual market
sectors, energy prices or
changes in government
regulation or policy, due to
its signifi cant operations
across the energy sector
and its broad range of
oil and gas, nuclear and
renewables customers.
OPERATING IN EMERGING MARKETS
The Group’s increasing
activities in overseas
emerging markets and
key growth economies
with fl uctuating legislative
restrictions, embargoes,
sanctions and exchange
controls, often undertaken
in association with
local joint venture
partners, may expose
the Group to increased
risk of governance and
compliance issues.
CYBER SECURITY
Third parties could cause
harm to the Group and
its trading businesses via
digital channels.
•
•
•
•
Any signifi cant failure
to comply with laws or
regulations could lead
to penalties and other
fi nancial liabilities, as well as
reputational issues.
Where there is a jurisdictional
requirement for local
investment, the Group’s
ability to continue business
in that jurisdiction could be
adversely impacted.
Cyber-attacks could result
in fi nancial and reputational
damage by way of signifi cant
interruption to business
systems.
Phishing could result in
fi nancial and reputational
damage by way of theft or
fraud.
•
•
•
•
•
•
•
•
•
•
•
•
•
The Group maintains relationships with a small group of
banks and enters into bilateral revolving credit facilities
which spread its maturity profi le and provide fl exible
funding.
The Board discusses macro-economic issues and their
potential impact on each of these risks.
The Group’s centralised fi nance function oversees all
key strategic fi nance matters includ ing day-to-day
management of the Group’s liquidity, interest rate and
foreign exchange rate risks.
Forward currency contracts and interest rate swaps are
entered into to mitigate the risks of adverse currency or
interest rate movements.
➨
Uncertainty surrounding the UK’s
negotiations over its exit from the EU
have increased the risk in this area ,
but the Group’s profi le and mitigation
activities remain effective. A more
detailed review of the Board’s view of
the risks in relation to Brexit are set
out on page 20.
The Group has a breadth of exposure across the energy
sector and to a broad range of end markets and differing
geographies. The Group maintains close relationships
with key customers and suppliers.
Specifi cally with regard to the oil and gas sector, the
Group has limited exposure to the exploration phase and
seeks longer-term contracts for inspection, repair and
maintenance work.
➨
The strategic risks are reducing in
proportion to the wider diversity of
businesses within the Group.
Risk and internal control of overseas joint ventures is a
key area of management’s focus.
As businesses develop we monitor and review the
structure of, and reporting lines for, our overseas
operations and the relations with third parties to
ensure an appropriate form of command and control
is maintained, dependent on the particular operating
environment and the nature and size of the business.
The Group allocates additional resource to areas of
higher risk and has enhanced its internal audit reviews
for overseas businesses which are supported by external
audit companies, where appropriate.
Processes are in place that are designed to ensure that
all businesses operate in accordance with legislative
restrictions, embargoes, sanctions and exchange controls
and the Group’s policies and applicable laws.
The Group’s IT systems are defended through the use of
software protection and processes which are regularly
reviewed and tested. These defences include gateways,
fi rewalls and threat detectors.
IT security information and updates are reviewed on a
regular basis.
Accounting and banking controls are regularly appraised
to ensure they are appropriate, up-to-date and comply
with recommended practice.
➨
There has been some increase
in the risk in this area during the
year, as the Group’s organic growth
continued in emerging markets,
including in South America, the
Middle East, Asia and Africa.
➨
There have been no material security
breaches or fraud in 2018, although
the risk has marginally increased
as potential cyber-attacks become
more frequent and sophisticated.
In 2018 Group IT systems were
subjected to penetration tests and
vulnerability scans, the results of
which were satisfactory. We also
undertook a cyber risk assessment
of the Group’s systems, and of
the systems of the Group’s key IP
partner. The risk assessment was
based on GCHQ National Cyber
Security Centre’s “10 steps to cyber
security” framework. This resulted
in some additional protections being
implemented.
25
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Sustainability report
26
I
T
R
T
R
O
O
P
P
E
R
E
R
C
C
G
G
E
T
E
A
T
A
R
R
T
S
T
S
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Sustainability report
I have pleasure in presenting the fi rst dedicated James Fisher
sustainability report refl ecting the measures we are undertaking
to address this critical issue both internally within the Group and
with all our external stakeholders.
We recognise that creating a sustainable business will enable
the Group to deliver its strategy whilst remaining effi cient and
competitive. We are committed to ensuring that we are all
conscious of, and committed to, our responsibilities towards the
people, communities, businesses and environments impacted by
our business in the many different markets in which we operate.
During 2018, I launched the Group’s sustainability initiative
designed to anchor the Group’s sustainability aims around
some common principles, to provide a reporting forum for the
sustainability activities already undertaken by the Group and to
set ourselves challenging targets for the future. With the support
of our global workforce, I chair the recently created Sustainability
Committee which draws together a team of sustainability
champions from across all our business units, each of whom
will take responsibility for their local business and the initiatives
currently underway, as well as identifying opportunities to
develop our sustainability credentials in the years ahead.
Stakeholder engagement
Environment
How we engage
We are committed to conducting business in an
environmentally responsible manner. We are putting
in place processes to understand and address our
responsibilities in respect of our operational impacts
on the environment, including climate change.
Malcolm Paul, Chairman
The starting point has been to identify the connection between the
Group’s operations and strategies with the legitimate needs and
concerns of key stakeholders. Our people are our most important
asset and we have a clear commitment to their health, safety and
general wellbeing whilst providing equal opportunities to our
diverse workforce. We often operate in challenging conditions and
recognise that our work may impact on local communities and the
environment. The relationships we build with our supply chains
and our customers are fundamental to our success and we are at
the forefront of bringing innovative and technological solutions to
promote effi ciencies. Our shareholders fully expect us not only to
deliver a good fi nancial performance but also to demonstrate how
we make a positive contribution to society.
Examples of how we engage with all our stakeholders and the
initiatives we are undertaking are summarised in this report and
will form the basis for a more detailed review to be published on
the Company’s website later this year.
I am delighted with the response this initiative has already
received and the buy in from across the Group. As a team we
are determined to develop a value driven sustainable strategy
underpinned by creative solutions for the benefi t of all our
stakeholders.
Malcolm Paul
Local communities
How we engage
Every day we deliver in sustainable and responsible
ways. We encourage our businesses and individual
employees to support local communities within their
operational areas.
Employees
How we engage
We believe it is important
to dedicate time, effort and
attention to implementing
systems, ways of working and
initiatives to create conditions
in which people are eager and
empowered to contribute.
Shareholders
How we engage
The Company maintains and values regular communication with
shareholders. You can read more about shareholder engagement on
page 35. This year’s AGM will be held on 2 May 2019.
Customers and suppliers
How we engage
We believe in customer-
focused high quality product
and services solutions.
Investment in innovation adds
value to our customers. Group
companies promote human
rights, social responsibility,
trade compliance and anti-
corruption within their own
supplier base.
27
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Sustainability report continued
Structure and governance of the Sustainability Committee
United Nations Sustainable Development Goals
Membership
• Malcolm Paul, Chairman
•
Jim Marsh, Group General Counsel and Company Secretary
• Danielle Le Breton, Group Human Resources Director
•
Katy Maynard, Secretary to the Group Health and Safety
Committee
The Committee has been meeting regularly since the start of the
sustainability initiative.
Key objectives
•
Anchoring the Group’s sustainability aims around common
core principles.
•
•
Reporting on the sustainability activities undertaken by the
businesses within the Group.
Setting and reviewing progress on challenging sustainability
targets for the Group.
Key responsibilities
•
Review sustainability issues and impacts, and the integration
of sustainability into the Group’s business.
•
•
•
•
Review and report to the Board on sustainability within the
Group’s supply chain.
Annually review the activities of the Group’s community
impact initiatives.
Review reporting to shareholders and other communities
regarding sustainability activities.
Provide a forum for Group businesses to share sustainability
best practice.
28
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Employees
We only achieve what we do because of our people. This Group is a remarkable place to work because of the talent and dedication
of exceptional individuals, collaborating on engaging work. We will continue to nurture our talent through the development of all our
employees, while striving to grow the workplace of tomorrow. We aim to attract and retain the best talent, to ensure our reward and
recognition are competitive, equitable and fl exible, to engage and upskill our employees, to promote excellent performance and to
value equality and advance diversity.
2018 achievements:
T
R
O
P
E
R
C
G
E
T
A
R
T
S
I
•
•
•
•
•
•
•
Employee “wellbeing champions” have been nominated within some of our businesses, providing key contacts for employees on
wellbeing problems and initiatives, and a sustainable way to drive the local wellbeing agenda of their businesses.
We have signed and supported the “Women in Maritime” pledge, making clear our support for creating positive gender diversity
change within the organisation, and more widely, across the UK maritime sector.
We launched our fi rst Group-wide employee survey, aimed (amongst other matters) at the Group’s approach to sustainability.
The response was very encouraging with 53% of employees responding . 48% of respondents told us that they believe social and
environmental issues are integral to the strategy of their business.
A “People Development Forum” has been established, consisting of senior managers from across the Group with the aim of sharing
best practice and determining priorities in relation to employee-related matters.
We launched a “parental transitions support” programme which offers new parents access to online tools and/or coaching to
support them in the shift to combining their work and parenthood, with the aim of achieving smooth transitions for the individual
and for the business as they leave for parental leave, and as they return.
The Group has established its “Employee Value Proposition” to help defi ne the culture and purpose of our Group. This was
developed by reference to feedback through employee engagement activities, including surveys and interviews with a range of
employees across the Group. The results will be used to help us attract talent, make us an employer of choice and differentiate the
Group from our competitors.
We introduced Group talent development centres with the
aim of providing Group-level coordinated support to our
high potential employees in order to help them achieve
their potential at the earliest opportunity. The programme,
which continues to track those individuals through their
career with the Group, includes providing them with a
bespoke development plan and subsequent development
opportunities throughout the Group.
2019 goals:
•
•
•
•
To increase the retention of talent.
To continue to empower our employees and make them feel
engaged by providing clear development opportunities.
To refresh and strengthen the Group’s approach to diversity
and inclusion.
To appoint a Non-Executive Director to be responsible for the
Board’s engagement with our employees.
Two James Fisher Shipping Services offi cer trainees on
the division’s career advancement programme received
external outstanding achievement awards, recognising the
individuals’ commitment to maritime offi cer training, which
combines academic studies with practical sea time within
the fl eet.
29
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Sustainability report continued
Health and safety
It is our main priority to ensure the health, safety and welfare of our employees, contractors and visitors to the Group’s premises, as
well as all those who come into contact with the Group in its diverse activities. Our strong and proactive health and safety culture
demands high standards, personal accountability and continuous improvements in this area. That culture is set and overseen by the
Group Health and Safety Committee. Health and safety is the fi rst item on the board agenda of every business within the Group,
including the Company.
We continue to strive towards our ultimate aim of having no accidents or injuries.
2018 achievements:
•
•
•
•
•
•
•
•
Recognising the impact of mental health on our people, and on our businesses through productivity and absence, we have
introduced mental health fi rst aiders into a number of businesses to help improve early-stage support for those with mental health
issues. Many of our businesses have taken part in the “Time to Talk” day organised by the “Time to Change” social movement, which
aims to change how we all think and act about mental health problems.
Our fi rst Group-wide employee survey identifi ed that 95% of our employees recognise their personal responsibility to practice
good health and safety whilst at work.
During the year, our Tankships business James Fisher Everard (JFE) made 836 voyages and carried over 3.3 billion litres of petroleum
product without a single recordable injury or day away from work, and no product in the water.
JFE continued its on-going investment programme aimed at constant safety improvement around the fl eet, including recent
investment in improved gas detection systems, tank rescue equipment and enhanced lifting equipment.
Our principal operating companies maintain internationally recognised occupational health and safety management systems
accredited to OHSAS 18001 and management systems which are accredited to the international quality standard ISO 19001.
The Group has adopted the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013 (RIDDOR)1, and in 2018
the number of reportable incidents across the Group in 2018 was 2 (2017: 5).
The Group’s overall RIDDOR reportable frequency rate2 in 2018 was 0.04 (2017: 0. 1).
The Group recorded 4 lost time accidents (LTAs)3 in 2018 (2017: 5).
2019 goals:
• To continue to strive towards zero incidents across the Group.
•
•
To continue to drive the focus on health and safety throughout James Fisher.
To set up a “Health and Safety Hints and Tips” section on the Group intranet to share best practice.
• To introduce “Health and Wellbeing” programmes in all divisions.
• To develop the “Safe system of work” across all divisions.
•
To continue to enhance reporting near misses.
1A reportable incident under RIDDOR is a work-related injury which results in a person’s incapacitation for more than seven days.
2The RIDDOR reportable frequency rate is the number of RIDDOR reportable incidents per million hours of work.
3An LTA is an incident which causes a worker to be incapacitated for three or more consecutive days, not including the day of incident.
30
I
T
R
T
R
O
O
P
P
E
R
E
R
C
C
G
G
E
T
E
A
T
A
R
R
T
S
T
S
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Environment
We are committed to protecting the environment. As our customers aspire to increasing environmental responsibility and
achievements, all of our businesses support their efforts through continuous improvement and innovation to drive effi ciencies and
energy-saving including through our suppl y chain.
We acknowledge the scientifi c 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 business activities.
Through the analysis of the products and services we deliver, we consider our main operational impacts are in emissions and the
potential impact of handling oil-based products near water. We are committed throughout the Group to improvement in these areas, as
well as in other areas of environmental concern, including recycling and energy consumption more broadly.
2018 achievements:
•
•
•
•
•
Energy consumption was measured across the Group by recording data on the combustion of fuel and the use of electricity at its
facilities. The Group’s total greenhouse gas emissions (GHG) are set out below.
Emissions total (in thousands of metric tons)
2018
2017
CO2 equivalent from electricity consumption in facilities
CO2 from combustion of fuel at facilities and road vehicles
CO2 from combustion of fuel in vessels
Total emissions (CO2)
1.9
3.0
94.4
99.3
2.3
2.4
84.0
88.7
Emissions from the combustion of bunkers which fuel the tankers in the Tankships division amounted to 95% of the Group’s total
emissions (2017: 95%). The benefi t of sea transportation is that one 4,000 metric ton vessel can carry 150 times the volume of
fuel carried by a single road tanker, which signifi cantly reduces congestion and emissions to air. The vessel fuel consumption has
increased as there is one additional tanker compared to last year .
The Group’s carbon intensity ratio calculated against the Group’s revenue remained fl at at 0.02% (2017: 0.02%). Our Tankships division
operates a Ship Energy Effi ciency Management Plan to regulate shipping energy effi ciency and to control its marine GHG emissions.
Nearly all of our principal operating companies operate environmental management systems (EMS) certifi ed to ISO 14001
standard. This internationally recognised EMS enables a systematic approach to handling environmental issues.
Fendercare has instituted a waste management campaign using SMART targets to improve recycling activities within the business,
including:
•
fenders & hoses (key constituents of its business activities), including entering into a research programme with the University
of East Anglia to establish innovative procedures for recycling business-generated waste.
offi ce waste, including replacing disposable cups with re-usable mugs, and providing personalised steel (refi llable) water
bottles in a bid to reduce the amount of plastic that is currently being taken out to windfarms.
•
2019 goals:
•
To enable enhanced monitoring and reporting of our use of fuel,
electricity and water on a Group basis.
•
To encourage our businesses to develop their supply chains to
enhance responsible sourcing initiatives.
A team of volunteers from James Fisher worked together
with others from ScottishPower Renewables, a key
customer, to clear rubbish from a Suffolk beach as part of
the Marine Conservation Society’s “Beachwatch” beach
cleaning and litter surveying programme. The initiative
formed part of a joint commitment with our customer
to support regional community initiatives around the
development of the East Anglia O ne offshore windfarm.
31
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Sustainability report continued
Customers and suppliers
Our customers and suppliers are extremely important to us. We have followed a customer-led strategy with regards to expansion into
international markets, and we are proud to be a trusted partner of many major corporations, government agencies and other customers
around the world. We appreciate that every customer has different needs and expectations and we have developed long-lasting
relationships through active engagement with customers and suppliers over many years to help customers fi nd the product and service
solutions they need. We are committed to ensuring that legal compliance, respect for human rights and transparent business ethics are
cemented both up and down our supply chain.
2018 achievements:
•
•
•
Strong organic growth in areas consistent with Group strategy.
Establishment of cross-divisional working groups based on defi ned geographical and/or customer categories, with representatives
from numerous businesses around the Group, as well as key account managers for some of the Group’s larger clients which take
services from multiple James Fisher businesses. The fi rst phase of these initiatives have been welcomed by our customers.
Dedicated procurement manager appointments to develop working relationships with those businesses’ supply chains, ensure
quality and consistency of approach with the Group’s ethics and requirements.
2019 goals:
•
•
To continue improvements allowing us to deliver coordinated solutions and a consistent communication channel to our customers.
To support on-going supplier engagement initiatives to provide cost-savings and tendering enhancements, to embed Group
standards and policies within new relationships with suppliers and to drive support for our sustainability initiatives through our
supply chain.
Innovation and technology
The entrepreneurial culture of the Group and the decentralised business model allow for product and service innovation to move fast
in response to changes in the market and the competitive environment. Group businesses look to engage with customers in a way that
allows them to identify and help solve customer needs. Engagement with employees and suppliers allows the business to solve those
customer needs through innovation.
2018 achievements:
•
•
•
•
•
Appointment of a Group Digital Director, a new position for James Fisher, to lead a new initiative to bring coordination to the way
the Group businesses approach the collation of data and the software presentation of data for the benefi t of customers.
JFD partnered with the US Navy on the research, development, production and marketing of a highly innovative diver navigation
device. Available for both military and non-military application, this allows navigation technology to be projected on to diving mask
and offers hands-free guidance in poor visibility for divers.
JFMS partnered with the University of Exeter and the University of Strathclyde to develop new software solutions enabling energy
companies to manage the crew transfer process in a way that maximises safety and minimises costs.
JF NDT has developed digital X-Ray capability to test components in a way that increases effi ciency and quality of its service, meets
customer requirements (including Boeing and Airbus) and reduces the environmental impact of the services by reducing waste and
eliminating reliance on rare materials.
JFMS has been picked to work with marine energy developer, Minesto on the installation of the fi rst of an innovative new type of
tidal turbine for its new site in north Wales.
2019 goals:
•
To continue to increase investment and support for innovation around the Group aimed at supporting customers and product
effi ciency.
32
I
T
R
T
R
O
O
P
P
E
R
E
R
C
C
G
G
E
T
E
A
T
A
R
R
T
S
T
S
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Communit ies
The Group’s businesses are spread out all over the UK and internationally. Product and service procurement is site-specifi c which
means many of our businesses are able to procure products and services locally to support the local supply chain, and sustain local
jobs. Each business encourages and supports its employees to engage with local community projects that they care about and to make
a positive impact on their local communities.
2018 achievements:
•
•
•
•
Alongside its on-going long-term ship-to-ship project in Togo, Fendercare has partnered with the charity “Future Stars” on its
education-through-sports programme that offers weekly sports coaching sessions to underprivileged children. Fendercare’s
involvement has helped to develop the charity’s existing project, including funding coaching and physical education sessions.
As part of the national STEM initiative “Greenpower Education”, James Fisher Offshore worked closely with a school in
Aberdeenshire to help inspire young people considering a future in the marine and offshore industry by supporting them in the
building and racing of an electronic car.
Our businesses in the region provided headline sponsorship for the 2018 East Anglian Air Ambulance “Only the Brave” charity mud
race, in which many employees from a number of Group businesses took part.
Fendercare Marine Ghana have installed two manual boreholes in the Mpohor district of Ghana to ensure a long-term supply of
potable water for the local farming communities and accessible drinking water for the local community.
2019 goals:
•
•
To increase awareness of the contribution made by our employees and our companies to the community and good causes.
To develop a formal policy on CSR to outline our commitment to being a socially responsible business, both internally and
externally.
33
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Corporate responsibility governance
We have given information in the Sustainability report on pages 27 to 3 3 about how we engage with our stakeholders. Below is more
information about how we engage with our stakeholders from a corporate governance perspective.
Employees
How we engage:
Helping employees meet their potential:
Customers and suppliers:
How we engage:
Customer focus:
The Chief Executive Offi cer is responsible for employee matters,
assisted by the Group Head of Human Resources.
See page 32 summarising our focus on delivering products and
services aimed at delivering solutions to customer needs.
James Fisher is an equal opportunities employer and is fi rmly
committed to both the principle and realisation of equality.
The Group is committed to complying with all applicable laws
governing employment practices and to the prevention of
discrimination on the basis of any unlawful criteria. In addition
to complying with legislative requirements, the Group strives to
ensure that disabled employees are treated fairly and that their
training, career development and promotion needs are met.
The Board considered and re-approved the Group’s existing
health safety and environment policy in January 2019 as a
declaration of our intent and commitment.
Our strong focus on employee training, regulatory compliance
and accident reduction provides the support to allow
accountability to remain with local management who are best-
placed to ensure that their businesses comply with local laws and
regulations and specifi c needs on a day-to-day basis. The review
of health and safety performance is high on the agenda at each
Board and business board meetings, and remains a top priority
for the Group.
We recognise that the success of our business depends on
our talented workforce. Employees throughout the Group
are encouraged to participate in training and development
programmes and to obtain professional qualifi cations relevant to
their roles.
Gender diversity
Male
Female
Male
Female
2018
2017
Main Board Directors*
Senior Managers
7
64
1
11
6
61
1
11
Employees
2,218
565
2,081
564
* Dr Inken Braunschmidt was appointed on 1 March 2019, when the Board’s
gender diversity ratio will change to 75% male, 25% female.
Respect for human rights:
The Group is committed to supporting and respecting human
rights in the workplace and in the communities in which it operates
across its international business. We have implemented work
practices and policies throughout the Group which are designed
to ensure that respect for human rights is integrated into the
systems and culture of our businesses. We do not tolerate the use
of child or forced labour within our business and take all steps
possible to ensure that our suppliers and customers also uphold
internationally recognised human rights. The Modern Slavery
statement, which is available on the Group’s website, outlines steps
taken by the Group to ensure that there is transparency in the
Group and throughout our supply chains. The Group encourages
any concerns relating to modern slavery to be raised using the
procedure set out in the whistleblowing policy.
Business ethics, anti-bribery and corruption matters:
As a Group we aim to act responsibly and ethically in all of our
business dealings. Through our Code of Ethics we aim to instil the
highest standards of business behaviour across the Group and we
focus on embedding a culture of ethical compliance so that all of
our people understand the standards of ethical business practice
that are expected of them.
The Group has an established anti-bribery and corruption policy
and has introduced a compliance programme which has the
support of the Board and senior management within the Group.
The programme includes communication of the statement and
policy, training, risk assessment, monitoring and review processes.
Employees assessed to be at risk are required to complete the
training and to self-certify that they understand and agree to be
bound by its provisions.
The Group does not permit bribery, nor illegal or corrupt business
practices. On-going compliance is monitored by local compliance
offi cers who are required to report to their local boards and
to the Group Compliance Offi cer on at least a biannual basis.
The compliance offi cers are responsible for ensuring that risk
assessments, training and awareness are carried out where
appropriate and are kept up-to-date. They are also required to
monitor, record and report agency arrangements with third parties
to ensure that all our business dealings are appropriate and within
our ethical framework.
34
I
T
R
T
R
O
O
P
P
E
R
E
R
C
C
G
G
E
T
E
A
T
A
R
R
T
S
T
S
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Shareholders:
How we engage:
Regular messaging:
The Company maintains and values regular communication with
shareholders. The Annual Report and Accounts and the Group
website highlight the Group’s main achievements. Formal preliminary
announcements and interim management statements are provided
throughout the year. Investor days are held when a presentation is
provided to investors and analysts. In addition, the Company invites
regular direct communication with its shareholders as part of the
Company’s investor relations programme.
Annual General Meeting (AGM):
In May 2018, we welcomed shareholders to our AGM, which
represents an annual opportunity for the Board to meet and
communicate with both private and institutional shareholders,
and engage with their questions and involvement. At the AGM,
the Chairman provides a presentation on the performance of
the business, and holds a Q&A session, inviting challenging
questions and feedback from shareholders. Following the AGM
all attendees are invited to a seated lunch, and members of the
Board are encouraged to sit with shareholders over lunch to
discuss the business and answer questions.
Community:
How we engage:
Local business activities:
The Group’s businesses are spread out all over the UK and
internationally. Product and service procurement is site-specifi c
which means many of our businesses are able to procure products
and services locally to support the local supply chain, and sustain
local jobs. Each business encourages and supports its employees
to engage with local community projects that they care about and to
make a positive impact on their local communities.
Sir John Fisher Foundation:
The Sir John Fisher Foundation (the Foundation) is a charitable
trust founded in 1980 by Sir John Fisher (former Chairman of the
Company, and grandson of the founder) and Lady Maria Fisher with
the objective of distributing income, including from the signifi cant
shareholding in the Company retained by the Foundation’s trustees,
to charitable causes throughout the UK, but with special regard
to those based in and working for the benefi t of people living in
Barrow-in-Furness and the Furness Peninsula, where the Company is
registered and maintains its headquarters.
Environment:
How we engage:
See the Sustainability report on page 31 for more information
about how the Group works to minimise its environmental
impact. The Group has a governance structure in place to
consider carbon emissions, energy usage to minimise the impacts
of its operations on the environment.
Nearly all of our principal operating companies are ISO 14001
compliant. This internationally recognised environmental
management system enables a systematic approach to handling
environmental issues.
James Fisher acknowledges the global threat posed by climate
change and recognises the need to reduce GHG emissions. We
accept our responsibility to comply with emerging climate change
legislation and regulation, and to reduce our GHG emissions as
far as is reasonably practicable through appropriate initiatives.
Part of the Sustainability Committee’s remit includes keeping this
issue under review and we will report in more detail on this in our
2019 Annual Report.
35
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Board of Directors
Chairman
Executive Directors
Malcolm Paul
Chairman of the Board1 and
Nominations Committee +
Appointment: Malcolm was
appointed to the Board in
February 2011 and was
appointed Chairman in
May 2018.
Key strengths and experience:
•
•
Extensive business
leadership experience.
Long-term track record of
value creation and change.
Malcolm is a fellow of
the Institute of Chartered
Accountants in England and
Wales and was a founder and
former Finance Director of WSP
Group plc between 1987 and
2009. Prior to that Malcolm
was a principal at the corporate
fi nance boutique Financial
Decisions and an equity partner
at Longcrofts, Chartered
Accountants.
External appointments:
Chairman of Anthesis
Consulting Group, a private
equity backed global
sustainability consultancy.
Nick Henry
Chief Executive Offi cer
Stuart Kilpatrick
Group Finance Director
Appointment: Nick joined the
Group in February 2003 and
was appointed Chief Executive
Offi cer in December 2004.
Key strengths and experience:
• Clear strategic mindset.
• Strong leadership skills.
Nick worked for 20 years for
P&O Containers and P&O
Ports, of which 10 years
were in senior management
positions based in Singapore,
Hong Kong, Australia,
Netherlands and the Indian
Sub-Continent. Nick’s
experience encompasses a
wide range of commercial and
operational roles, including
fl eet management and
information technology.
External appointments:
Member of the Supervisory
Board of the UK Chamber
of Shipping; Non-Executive
Director of Britannia’s Gold
Limited.
Appointment: Stuart joined
the Group in July 2010 and
was appointed to the Board
as Group Finance Director in
December 2010.
Key strengths and experience:
•
•
Strong fi nancial and
commercial background.
Broad experience as
fi nance director with
international and diverse
listed companies.
Stuart is a member of
the Institute of Chartered
Accountants of England and
Wales and qualifi ed with
BDO Binder Hamlyn. He
was formerly Group Finance
Director of Empresaria Group
plc, and he previously held
senior fi nance roles with
Vodafone Group plc, Charles
Baynes plc and Elementis
Group plc.
External appointments: None.
Fergus Graham
Director, Marine Support
Division
Appointment: Fergus joined
the Group in January 2017
and was appointed to the
Board as Executive Director
with responsibility for the
Marine Support division in
March 2018.
Key strengths and experience:
•
•
Operational and
commercial experience.
Considerable knowledge
of international business
development.
Fergus worked for 19 years
for De La Rue plc, with 7 years
in general management roles.
Fergus’ experience includes
a wide range of commercial
and operational roles working
with commercial, government,
fi nancial institutions and
technology clients across
the world, as well as leading
acquisitions from initiation
through to integration.
External appointments: None.
1Malcolm Paul became Chairman after the conclusion of the AGM in May 2018, when Charles Rice stood down as Chairman. A copy of Charles’
1Malcolm Paul became Chairman after the conclusion of the AGM in May 2018, when Charles Rice stood down as Chairman. A copy of Charles’
biography is available in the Annual Report and Accounts 2017
biography is available in the Annual Report and Accounts 2017
36
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
T
R
O
E
P
C
E
N
R
A
C
N
G
R
E
E
T
V
A
O
R
G
T
S
I
Non-Executive Directors
Aedamar Comiskey
Non-Executive Director and
Chairman of the Remuneration
Committee *#+
Justin Atkinson
Non-Executive Director
and Chairman of the Audit
Committee *#+
David Moorhouse CBE
Senior Non-Executive Director
*#+
Michael Salter
Non-Executive Director *#+
Appointment: Michael was
appointed to the Board in
August 2013.
Key strengths and experience:
Signifi cant operational
•
and strategic delivery
experience through
a number of senior
management roles.
•
In-depth knowledge of
oil and gas and marine
industries.
Michael was formerly Chief
Operating Offi cer at Abbot
Group plc and earlier in his
career, CEO of Smedvig
Limited and General Manager
of Bawden Drilling UK Ltd.
External appointments: None.
Appointment: Aedamar was
appointed to the Board in
November 2014 and was
appointed chairman of the
Remuneration Committee in
May 2018.
Key strengths and experience:
Extensive global business
•
experience.
•
In-depth knowledge of
legal and governance
issues for large listed
businesses.
Aedamar is the Global Head
of Corporate and a member
of the Executive Committee at
Linklaters LLP, where she has
been a partner since 2001.
Aedamar was previously the
Senior Board Member on the
fi rm’s Partnership Board, its
governance body. Aedamar
specialises in international
and domestic mergers and
acquisitions, joint ventures and
fundraisings, and is the lead
relationship partner for many
of the fi rm’s FTSE 350 clients.
External appointments: None.
Appointment: Justin was
appointed to the Board in
February 2018 and was
appointed chairman of the
Audit Committee in May 2018.
Key strengths and experience:
Signifi cant operational and
•
fi nancial experience through
his previous and current roles.
Substantial experience on
boards of listed companies
in both executive and non-
executive roles.
•
Justin was formerly Chief
Executive Offi cer of Keller Group
plc between April 2004 and
May 2015, having previously
held the position of Group
Finance Director and Chief
Operating Offi cer. Justin was a
fi nancial manager at Reuters plc,
and trained and qualifi ed as a
chartered accountant at Deloitte
Haskins & Sells, Scotland (now
part of PwC).
External appointments: Senior
Independent Non-Executive
Director of Kier Group plc;
Senior Independent Director,
Chair of the Audit Committee
(and Chairman-elect) of Forterra
plc; Non-Executive Director and
Chair of the Audit Committee
of Sirius Real Estate Ltd and a
member of the Audit Committee
of the National Trust.
Appointment: David was
appointed to the Board
in August 2013 and was
appointed Senior Non-
Executive Director in June
2018. He will stand down from
the Board on 28 February
2019.
Key strengths and experience:
Substantial commercial,
•
fi nancial and operational
experience.
•
In-depth knowledge of
the oil and gas and marine
industries.
David was formerly Executive
Chairman of Lloyds Register
and earlier in his career, CEO
of John Brown plc, a Director
of Trafalgar House plc and
Executive Vice President
of Kvaerner where he had
particular responsibility for
their engineering and process
businesses.
External appointments: Non-
Executive Director of OAO
Sovcomfl ot; Life member
of the UK’s Foundation for
Science and Technology;
Chairman of Braemar Shipping
Services Plc.
* Audit Committee # Remuneration Committee + Nominations Committee
37
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Corporate governance report
Chairman’s introduction to Corporate governance
Good governance is at the heart of what we do both as a Board
and as a Group. As Chairman I am responsible for establishing
and embedding the culture of the Board. By setting the tone from
the top your Board aims to ensure that values and behaviours are
consistent across the Group, both in the way we behave with each
other and in the way we interact with our customers, suppliers,
shareholders, employees and communities around us. This year
we have set out in more detail in the Sustainability report (on
page 27) how we have engaged with our key stakeholders. Our
strategy as a Group is founded on meeting those high standards.
Creating the right ethical culture at James Fisher is vital to the
Group’s success.
UK Corporate Governance code
Of course the governance landscape is constantly changing.
Failures by both business and their advisors have led to a closer
look at how companies govern themselves. During 2018 various
new regulations were published that the Board has taken into
account and has acted on, where appropriate. The UK Corporate
Governance Code 2016 (the Code) is the version of the Code
which applied to the Company for 2018. During the year ended
31 December 2018 the Company has complied with all the
relevant provisions of the 2016 Code.
The UK Corporate Governance Code 2018 has applied to
the Company since 1 January 2019. We will report fully on
our application of the 2018 Code in our 2019 Annual Report
and Accounts. For information on our recent and planned
enhancement to employee engagement mechanisms, please see
page s 29 and 34 .
Culture and values
The Group’s Code of Ethics captures the long-held standards
that each member of the James Fisher workforce is expected
to adhere to in their day-to-day work. We are committed to
ensuring the highest ethical standards in our activities and in how
these impact on our relationships with our stakeholders. This is
the foundation for the Group’s values of honesty, integrity and
fairness. These values complement and augment the Group’s
corporate purpose and strategy. Our customers attach great
importance to working with a Group which is able to demonstrate
those values wherever they do business.
Diversity
This year has seen on-going focus for businesses on diversity.
The publication of the update to the Hampton-Alexander review
and the McGregor -Smith review, and the requirement for
companies to publish an annual gender pay gap report are clear
indicators of the importance of this topic. The Board and I remain
very supportive of the initiatives in this area, and are committed
to improving diversity throughout the Group. I fi rmly believe that
this should not just be in relation to gender and ethnicity, but
also in the wider sense, including diversity of thought, tenure,
age, experience, skills, geographical expertise, and educational
background. This should not be a “one and done” approach but is
something the Board will continue to keep under review. In 2018,
and up to the date of this report, the Board has:
•
•
•
Reviewed and updated the Group’s diversity policy (see
page 43 for more details).
Created and published the Board’s own diversity policy,
setting out its commitment, including in its own composition.
Approved the publication of the Group’s gender pay gap
information.
On the date of this report, the Board announced that
an additional female Non-Executive Director (Dr Inken
Braunschmidt) would join the Board with effect from 1 March
2019, resulting in 25% female representation on the Board.
Board composition
One of my responsibilities is to keep the composition of the Board
and its range of skills under review, and there have been some
important changes throughout the year. You will have already noted
the changes earlier in the year (described in more detail on page 50).
External evaluation of Board effectiveness
In September 2018, I commissioned an externally facilitated
review of the Board to provide external input into how the Board
and its Committees function, and to provide recommendations
for ways to improve their overall effectiveness. Details of the
process, outcomes and actions are described on page 42.
AGM
I would encourage all shareholders to attend the AGM, to be
held at 11.00am on Thursday 2 May 2019 at the Abbey House
Hotel, Abbey Road, Barrow-in-Furness, Cumbria, LA13 0PA, as it
provides an excellent opportunity to meet the Executive and Non-
Executive Directors .
Malcolm Paul
Chairman
25 February 2019
38
E
E
C
C
N
N
A
A
N
N
R
R
E
E
V
V
O
O
G
G
JAMES FISHER AND SONS PLC ANNUAL REPORT AND ACCOUNTS 2018
Our governance structure
The Board
Chaired by Malcolm Paul
Meets regularly, with six scheduled meetings during the year.
The Board is responsible for providing effective leadership to the Group. The Board is responsible for steering the Group’s purpose, culture and values,
for setting the Group’s strategic priorities and overseeing their delivery in a way that enables sustainable long-term growth, while maintaining a balanced
approach to risk within a framework of effective controls. It has a schedule of key matters which are reserved for its own decision-making, which is reviewed
annually and approved by the Board.
Chairman
Senior Independent Director
Non-Executive Directors
Chief Executive
Leads the Board, sets the agenda
and promotes a culture of open
debate between Executive and
Non-Executive Directors.
• Regularly meets with the Chief
Executive, the other Executive
Directors and other senior
management to stay informed.
• Provides a sounding board to
the Chair and appraises his
performance.
• Meets with Directors to review
the Chairman’s performance.
This review is then shared with
the Chairman.
• Acts as intermediary for other
• Ensures effective communication
Directors, if needed.
with our shareholders.
• Available to respond to
shareholder concerns when
contact through the normal
channels is inappropriate.
• Contribute to developing our
• Responsible for management of
strategy.
• Scrutinise and constructively
challenge the performance of
management in the execution of
our strategy.
the Group as a whole.
• Delivers strategic objectives
within the Board’s stated risk
appetite.
Nominations Committee
Audit Committee
Remuneration Committee
Chaired by Malcolm Paul
Chaired by Justin Atkinson
Chaired by Aedamar Comiskey
Meets a minimum of three times a year.
Meets a minimum of three times a year.
Meets a minimum of three times a year.
Assists the Board in its oversight and monitoring
of fi nancial reporting, reviews the Group’s
internal fi nancial controls and systems for risk
management and internal controls, monitors the
Company’s whistleblowing policies and assesses
independence and objectivity of external auditor.
Agrees the remuneration policy for Executive
Directors and other senior executives; reviews
the appropriateness and relevance of the Group’s
remuneration policy; and ensures that the
provisions of the Code relating to remuneration
are fulfi lled.
The Audit Committee report on pages 45 to 49
describes in detail the Committee’s role and
activities.
The Directors’ remuneration report on pages 52
to 66 describes in detail the Committee’s role
and activities.
Reviews the structure, size and composition of
the Board (including skills, knowledge, diversity
and experience) and recommends changes,
succession planning for Directors and senior
executives.
Identifi es and nominates candidates for approval
to the Board, to fi ll vacancies when they arise.
The Nominations Committee report on pages 50
to 51 describes in detail the Committee’s role and
activities.
Executive Committee
Consisting of the Executive Directors
Meets according to business requirements.
Empowered, under written terms of reference, to take actions relating to the
affairs of the Company in the normal course of business and of a routine
nature, subject to such limits as the Board in its discretion determines.
Disclosure Committee
Consisting of the Chairman, the Executive Directors and the Company
Secretary
Meets when necessary.
Oversees the Company’s compliance with its disclosure obligations.
Group Health and Safety Committee
Group Sustainability Committee
Group Risk Committee
Chaired by Nick Henry
Meets on a quarterly basis.
Chaired by Malcolm Paul
Meets on a regular basis.
Chaired by Nick Henry
Meets on a quarterly basis.
Discusses all health and safety issues including
incidents, mitigating actions and training
requirements and reports recordable safety
incidents to the Board.
Identifi es, monitors and coordinates the Group’s
sustainability commitments, working with
sustainability “champions” from each trading
business.
Identifi es and monitors operational risks
throughout the Group, supports the internal
control and risk management strategy and policy.
Operating Divisions
Day-to-day business delivery.
Corporate Functions
Day-to-day business delivery.
Executive Directors meet on at least a quarterly basis with managing
directors of principal businesses.
Executive Directors and heads of corporate functions meet at the Risk
Committee on a quarterly basis.
39
T
R
O
P
E
R
C
G
E
T
A
R
T
S
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Corporate governance report continued
Induction and training
In 2018 there were a number of new appointments and changes
in role. Following his appointment to the Board, Justin Atkinson
was given a detailed induction to the Group’s business which
included briefi ngs on the Group’s strategy and business model
and the Board’s activities over the last year. Induction materials
included recent Board and Committee papers and minutes of
meetings, the articles of association, matters reserved for the
Board and Committee terms of reference. Justin visited sites of
some of the Group’s larger businesses as part of his induction,
including JFD , JF Nuclear, Fendercare and JF Marine Services
(JFMS), and held meetings with senior management from key
areas of the business. This gave him insight into their businesses
and challenges. The Group General Counsel and Company
Secretary briefed Justin on core Group policies and on Board
and Committee procedures. To prepare for his role as Chair
of the Audit Committee Justin also met with the external and
internal auditors and the Group Finance Director. As an existing
employee, Fergus Graham already had a strong insight into the
business but was briefed on Board and Committee procedures.
In my new capacity as Chairman, I have written to some of our
larger shareholders. On-going training and development for
Directors is available as appropriate and is reviewed and agreed
with the Chairman annually. The Board is confi dent that all its
members have the knowledge, ability and experience to perform
the functions required of a director of a listed company.
The Non-Executive Directors regularly visit major business
centres of the Group in order to enhance their knowledge
including in relation to the services and products offered, which
in turn acts to strengthen their contribution to Board debate.
In 2018, visits included JFMS and Fendercare at their UK
headquarters, and the Non-Executive Directors also received
presentations from management on key strategic plans, including
relating to individual businesses and markets, as well as from the
Group Human Resources Director.
Topic
Strategy
Key activities and
discussions in 2018
Risk management
framework
Key priorities
for 2019
• Reviewed and approved the corporate strategy.
• Reviewed and approved a number of acquisitions.
• Reviewed and approved major capital investments.
• Reviewed fi nancial and non-fi nancial key performance
indicators (KPIs).
• Considered and approved the Group’s dividend policy.
• Financial risk
• Project delivery
• Approve the corporate strategy
and keep under review.
• Consider acquisitions as identifi ed
and determine appropriate course
of action.
• Consider further capital
investments.
• Keep fi nancial and non-fi nancial
KPIs under review.
• Keep the Group’s dividend policy
under review.
Risk and risk
management
• Carried out a robust assessment of principal key risks ,
monitored and reviewed the internal controls process, and
assessed the Group risk profi le ( see the Principal Risks
section starting on page 22 for more detail).
• Reviewed the potential impact of the EU referendum to the
business.
• Monitored compliance with key Group policies.
• Project delivery
• Operating in
emerging markets
• Contractual risk
• Review key risks and ensure that
the Group continues to develop
and embed best practice for risk
management.
• Continue to monitor compliance
with the key Group policies.
40
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Topic
Governance
E
C
N
A
N
R
E
V
O
G
Key activities and
discussions in 2018
Risk management
framework
Key priorities
for 2019
• Recruitment and
retention of key
staff
• Ensure that the Company
continues to develop and embed
best practice in responsible
business behaviour.
• Maintain and enhance the Group’s
culture and values and key policies
and procedures.
• Continue to strengthen internal
controls and reporting.
• Further understanding and
planning actions in response to
new regulations over the period.
• Review the initial
recommendations from the
designated Non-Executive Director
for employees.
• Continued to focus on the composition, balance and
effectiveness of the Board, in particular with the
appointment of Malcolm Paul as Chairman, David
Moorhouse as Senior Independent Director, Justin Atkinson
and Fergus Graham.
• Reviewed the key operational roles and identifi ed gaps in
experience needed to deliver the strategy.
• Reinforced compliance with Code of Ethics, a document
which sets out the Group’s culture and values, all in
accordance with the principles of good corporate governance.
• Drafted and consulted on the remuneration policy which
was presented to shareholders for approval at the AGM in
2018.
• Engaged with our individual shareholders at the AGM.
• Engaged with institutional shareholders, investors and other
stakeholders throughout the year.
• Separate Non-Executive Director sessions held with the
Chairman to discuss leadership and other Board matters.
• Reviewed and approved the 2017 Annual Report and
Accounts. The Board agreed that, taken as a whole, the
2017 Annual Report was fair, balanced and understandable.
• Considered the impact of the UK Corporate Governance
Code 2018 and, in particular, reviewed workforce
engagement methods.
Organisational
capacity
• Monitored health and safety performance across the Group
and reviewed the lessons learned to keep our employees
and others affected by our operations safe. Regular Board
updates received on actions improving health and safety.
• Reviewed the governance framework and continued training
and awareness drives for key policies.
• Health safety and
environment
• Contractual risk
• Recruitment and
retention of key
staff
• Recruit a new Chief Executive.
• Continue to monitor senior
executive talent management and
development plans to provide
succession for all key positions.
• Continue to enhance the diversity
• Supported by the Nominations Committee, monitored
across the Group.
senior executive talent management and development plans
with succession planning for all key positions in mind.
Board
development
• Continued to focus on the composition, balance and
effectiveness of the Board. Reviewed Board composition
and discussed and acted on the recommendations of the
Nominations Committee.
• Undertook an external evaluation of the Board, its
Committees and individual Directors. Following the
evaluation an action plan was developed.
• Recruitment and
retention of key
staff
• Continue to hold meetings with
people in the senior talent pipeline
to further improve information fl ow.
• Enhance the Board’s strategic
understanding of key markets as
the Group continues to grow.
• Use Board visits to promote
understanding of markets and
the business development
opportunities they offer.
• Annual evaluation of Board
performance — to be led internally.
41
T
R
O
P
E
R
C
G
E
T
A
R
T
S
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Corporate governance report continued
Board and Committee meetings attendance
Board
Audit
Committee
Remuneration
Committee
Nominations
Committee
Total number of meetings during 2018
Executive Directors
Nick Henry
Stuart Kilpatrick
Fergus Graham
Non-Executive Directors
Malcolm Paul
Aedamar Comiskey
David Moorhouse
Michael Salter1
Justin Atkinson2
Former directors:
Charles Rice³
6
6
6
6
6
6
6
4
5
3
3
N/A
N/A
N/A
3
3
3
2
3
1
2
N/A
N/A
N/A
N/A
2
2
1
1
–
4
N/A
N/A
N/A
4
4
4
2
3
2
1. Michael Salter was unable to attend the meetings in January and February 2018 due to travel restrictions following an operation.
2.
Justin Atkinson was appointed on 1 February 2018.
3. Charles Rice ceased to be a Director on 3 May 2018.
To enable the Board to discharge its duties, the Chairman ensures
that all Directors receive accurate, timely and clear information on
all relevant matters in advance of the Board meetings, including
comprehensive fi nancial and business reports covering the
Group’s principal activities. All Directors received papers for all
meetings and had the opportunity to comment in advance of
meetings they were unable to attend.
Internal Board evaluation
At the end of each year, the Board undertakes an annual
evaluation of its own performance and that of the Remuneration,
Nominations and Audit Committees and of each individual
Director against the framework of Board effectiveness produced
by the FRC.
The 2018 performance evaluations were designed to assist the
Board in identifying strengths and weaknesses and areas for
further improving performance and required each Director to
complete in confi dence a detailed questionnaire relating to key
aspects of Board performance, and performance of the Board’s
principal Committees. The review included an analysis of the
Board’s and Committees’ performance in key areas including
corporate governance, structure and procedures, strategy, and
effectiveness, risk management and control and communications
with shareholders and other stakeholders. The results of the
evaluation were collated by the Group General Counsel and
Company Secretary and reported to the Board via the Chairman
with recommendations for further consideration and action as
appropriate.
The 2018 review concluded that the Board functions well as a
unit and provides a good balance of support and challenge to
management.
The annual review of individual Directors’ performance was
conducted internally. The Chairman’s performance was reviewed by
the other Non-Executive Directors led by the Senior Independent
Non-Executive Director and taking into account the views of the
Executive Directors. The performance of the Executive Directors
was reviewed by the Non-Executive Directors with the Chairman
in attendance. The Chairman and the Executive Directors reviewed
the performance of each of the other Non-Executive Directors.
The Board considers that each Director continues to contribute
effectively and to demonstrate commitment to the role.
External Board evaluation
In 2018, the Board determined that, in addition to the internal
evaluation, it would also undertake an externally facilitated
evaluation, it being three years since the last externally facilitated
evaluation. The Nominations Committee sought proposals from a
number of fi rms and elected to engage Independent Audit Limited
(IA) (a specialist consultancy which has no other business or
connection to the Group or individual Directors) to conduct the
evaluation. Having been provided with a comprehensive briefi ng
by the Chairman and Group General Counsel and Company
Secretary, IA conducted an evaluation process from September
2018 to January 2019, involving:
•
•
•
access to all Board and Committee papers and minutes
presented in 2018, to enhance I A ’s understanding of how the
Board and its Committees operate.
attendance and observation at the Board and Audit
Committee meetings in October 2018.
individual interviews with each Director and the Group
General Counsel and Company Secretary, for which an
interview script was developed to ensure consistency,
with bespoke questions to allow for additional information
refl ecting function, role, tenure and experience.
42
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
E
C
N
A
N
R
E
V
O
G
IA found that the Board and Committees operated well as a
cohesive and committed team, and with dedication demonstrated
by all Directors. Their report identifi ed certain challenges
facing the Board looking ahead, including managing a period of
transition in the composition of the Board, focusing on the long-
term strategy and ensuring an effective pipeline for executive
succession. An action plan has been put in place to address these
challenges.
Diversity and inclusivity
As a Board, we are highly supportive of the initiatives we have in
place to promote diversity and inclusivity beyond our board room and
throughout our business. We will achieve this aspiration by recruiting,
retaining and developing diverse and talented people and creating an
inclusive environment where everyone can be the best they can be.
Our gender diversity information can be found on page 34.
We recognise that diverse teams perform better and acknowledge
that having a diverse Board is important. We believe that
diversity on the Board goes beyond gender and includes a
variation in skills, experience and background. The Committee
believes we have a good balance of diversity amongst our Non-
Executive Directors, with several having extensive experience of
engineering, technology and other highly relevant skills derived
from serving in a range of major executive and non-executive
positions throughout their careers. We will continue to appoint on
merit whilst working hard to broaden the diversity of our talent
pool, taking on board the recommendations of the Hampton-
Alexander review and the McGregor -Smith review to improve
gender and ethnicity balance respectively in the leadership of
FTSE companies. Where possible, we use search fi rms who have
signed up to the Voluntary Code of Conduct for Executive Search
Firms which includes recommendations on gender diversity on
appointments to boards and best practice for search processes.
During 2018 the Board established a Board diversity policy
which can be found on our website. This sets out the Board’s
commitment to diversity in its own composition and the wider
workforce, and sets targets for Board composition looking ahead.
Following the appointment of Dr Inken Braunschmidt (and the
retirement of David Moorhouse) female representation on the
Board will equate to 25% of the Board. The percentage of women
amongst our senior management is 15%. In the light of this, the
Committee discussed approaches to address this in both the
shorter and longer-term.
Support
Should Directors judge it necessary to seek independent legal
advice about the performance of their duties with the Company,
they are entitled to do so at the Company’s expense. Directors
also have access to the advice and services of the Group General
Counsel and Company Secretary.
and best practice. The appointment and removal of the Group
General Counsel and Company Secretary is a matter requiring
Board approval.
Financial and business reporting
The Board considers that the Annual Report and Accounts
taken as a whole present a fair, balanced and understandable
assessment of the Group and provides the information necessary
for shareholders to assess the Group’s position and performance,
business model and strategy. More information about how this
assessment was made is set out in the Audit Committee report on
page 4 6.
The going concern assessment set out in the Directors’ report on
page 6 7; the viability statement is set out in the principal risks
section of the Strategic report on page s 8 and 9; and the Strategic
report on pages 1 to 35 sets out an explanation of the Company’s
business model and the strategy for delivering the Company’s
objectives.
Risk management and internal controls
The Board is responsible for determining the nature and extent
of the principal risks it is willing to take in achieving its strategic
objectives and for ensuring that the Company maintains
sound risk management and internal control procedures. More
information in relation to those principal risks, the Group’s
approach to mitigating them, and the risk management and
internal control procedures within the Group are set out in the
Strategic report on pages 22 to 25.
On behalf of the Board, the Audit Committee monitors the
Group’s risk management and internal control process and
reviews its effectiveness on an on-going basis. This is part of
an established process, in accordance with the Code and the
Financial Reporting Council’s (FRC) associated Guidance on Risk
Management, Internal Control and Related Financial and Business
Reporting, for the identifi cation, evaluation and management
of the signifi cant risks facing the Group, which operates and
is reviewed continually throughout the year. The Group’s
internal control systems are designed to provide the Board with
reasonable assurance as to the effective and effi cient operation
of the Group and to ensure the quality of internal and external
reporting and compliance with all applicable laws and regulations.
However, there are inherent limitations in any system of internal
control and accordingly even the most effective system can
provide only reasonable and not absolute assurance.
As part of its internal control procedures, the Group maintains
policies and processes for whistleblowing, anti-bribery and
corruption and to uphold its zero-tolerance approach to any form
of modern slavery. More information in relation to those policies
are included in the principal risks and uncertainties section of the
Strategic report on pages 22 to 25.
The Group General Counsel and Company Secretary is
responsible for advising the Board, through the Chairman, on all
governance matters and for ensuring that Board procedures are
followed, and applicable rules and regulations are complied with.
The Group General Counsel and Company Secretary also advises
the Directors on any important changes in legislation, regulation
The Board has carried out a robust assessment of the overall
effectiveness of the Group’s system of internal controls and
risk management procedures, and of the principal risks facing
the Group, including those that would threaten its business
model, future performance, solvency or liquidity. This included
a process of self-certifi cation by the management teams of each
43
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Corporate governance report continued
trading business in which they were asked to confi rm that their
businesses have complied with Group policies and procedures.
In addition, it involved reviewing the results of the work of the
Group’s internal audit function and the risk and management
processes identifi ed above.
Relations with shareholders and other stakeholders
The Company recognises the value of regular contact and
communications with all of its stakeholders, including its
shareholders, customers, suppliers, employees and the
communities who have been identifi ed as being affected by the
Group’s activities. Details in relation to the Company’s stakeholder
engagement, including specifi c engagement with its shareholders,
is set out in more detail in the section on stakeholder engagement
on page 27.
T
R
O
P
E
R
C
G
E
T
A
R
T
S
I
44
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Audit Committee report
E
C
N
A
N
R
E
V
O
G
Introduction
I am pleased to introduce the report of the Audit Committee for
the year ended 31 December 2018. This is my fi rst report as
chair of the Committee and I would like to thank Malcolm Paul,
who chaired the Committee before, for his hard work.
The Committee and the work it performs is of fundamental
importance to the Board in discharging its responsibility for
oversight and monitoring of fi nancial reporting, risk management
and internal control. I have been chairman of the Committee
since May 2018 and it is my responsibility to ensure that the
Committee fulfi ls its responsibilities in a rigorous and effective
manner. The Committee’s agenda is designed, in conjunction with
the Board’s, to ensure that all signifi cant areas of risk are covered
and to enable it to provide timely input to Board deliberations.
In line with the Code, this report seeks to focus on specifi c
aspects considered by the Committee during the year and aims
to provide assurance to you, our shareholders, that the control
environment of the Group is being properly supervised and
monitored.
I am satisfi ed that the Committee is properly constituted with
written terms of reference, which include all matters referred to in
the Code and is provided with good quality information to allow
proper consideration to be given to topics under review. I am also
satisfi ed that meetings are scheduled to allow suffi cient time for
discussion and to ensure that all matters are considered fully.
The Committee’s terms of reference, which are available on our
website, were updated in January 2019 in accordance with the
FRC Guidance on Audit Committees.
Of particular importance is the requirement to ensure that the
Group’s fi nancial reporting is fair, balanced and understandable.
We therefore review all the Group’s fi nancial reports before
publication, including where necessary alternative performance
measures, with this responsibility at the forefront of our
minds, and we are satisfi ed that they provide a fair, balanced
and understandable assessment of the Group’s position and
performance.
This year the Committee has continued to focus on reviewing
the Group’s systems of risk management and internal controls,
as well as ensuring the integrity of the Group’s public fi nancial
reporting. Whilst we do not believe that the UK’s future departure
from the EU will have a material impact on the Group we keep this
matter under constant review, and you can fi nd more information
on this on p age 20. In addition, we have reviewed and endorsed
the Group’s approach to tax transparency in all the regions of the
world in which the Group operates, and have updated our Group
tax policy statement accordingly.
During the year, changes in the Group’s revenue recognition,
particularly in respect of accounting for long-term contracts have
been implemented in accordance with IFRS 15. With IFRS 16
having taken effect from 1 January 2019, preparations were made
during the year under review. More information on IFRS 15 and 16
is set out on pages 46 and 47 in the Audit Committee report . The
Group has also implemented IFRS 9 Financial Instruments in 2018
and this has had no material impact on comparatives.
Membership
Justin Atkinson, Chairman of the Audit Committee
since May 2018 (previously chaired by
Malcolm Paul)
Aedamar Comiskey
David Moorhouse
Michael Salter
Key objectives
Since
2018
2014
2013
2013
To monitor the integrity of the Group’s reporting process and
fi nancial management and to ensure that risks are carefully
identifi ed and assessed and that sound systems of risk
management and internal control are in place.
Key responsibilities:
•
•
•
•
•
•
•
•
•
•
The accounting principles, policies and practices adopted in
the Group’s accounts.
External fi nancial reporting and associated announcements.
Managing the appointment, independence, effectiveness and
remuneration of the Group’s external auditor, including the
policy on the award of non-audit services.
Initiating and supervising a competitive tender process for the
external audit when next required.
The resourcing, plans and effectiveness of Internal Audit.
The adequacy and effectiveness of the internal control
environment.
The Group’s risk management processes and performance.
The establishment and oversight of fraud prevention
arrangements and reports under the Group’s whistleblowing
policy.
The Group’s compliance with the 2016 and 2018 UK Corporate
Governance Code (the Code).
The provision of advice to the Board on whether the Annual
Report and Accounts, when taken as a whole, is fair, balanced
and understandable and provides all the necessary information
for shareholders to assess the Company’s performance,
business model and strategy.
Meets three times a year.
Audit Committee composition
The Board is satisfi ed that Justin Atkinson (and formerly Malcolm
Paul who chaired the Committee until May 2018) has signifi cant
and relevant fi nancial experience. Both are chartered accountants
who formerly served as fi nance directors of FTSE 250 companies.
Justin Atkinson is a member of the audit committees of three
other UK listed companies, and is audit chairman of two of
45
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Audit committee report continued
those committees. The members of the Committee collectively
have broad fi nancial, commercial, professional and technical
experience and as a whole are considered to have competence
relevant to the sectors in which the Group operates. Committee
attendance is shown on page 42.
The Committee had three scheduled meetings during the year
in February, August and October, on dates to coincide with the
fi nancial reporting cycle. The Group Chairman, Chief Executive
Offi cer, Group Finance Director, the Group General Counsel and
Company Secretary, the internal auditor and senior members of
the fi nance team attend each meeting by invitation together with
representatives of the auditor, including the reporting partner.
At each scheduled meeting the Committee provides the
opportunity to discuss matters privately with the auditor and
the internal auditor. In addition, the chairman of the Committee
holds regular meetings with the KPMG audit reporting
partner to discuss matters related to the Group. Details of the
Committee’s specifi c responsibilities and how it exercises those
responsibilities are set out in the remainder of this report. The
Board and the members of the Committee separately review the
performance of the Audit Committee each year and are satisfi ed
that the Committee discharges its duties and responsibilities in
accordance with its terms of reference.
Financial reporting
The Committee’s primary responsibility in relation to the
Group’s fi nancial reporting is to review and challenge where
necessary, with both senior management and the auditor, the
appropriateness of the Group’s Interim Statement and Annual
Report and Accounts, with particular focus on:
control and audit issues arising to enable the Committee to
review the Interim Statement and recommend it to the Board. The
November meeting reviewed the planning memorandum for the
annual audit, including proposed scope and key risks, together
with an indication of the proposed audit fee, which was subject
to subsequent agreement. In addition, the meeting considered a
detailed report from internal audit on their work for the year and
approved the internal audit programme for 2019.
Fair, balanced and understandable
In making its assessment the Board has taken into account its own
knowledge of the Group, the markets in which the Group operates,
its strategy and performance in the year, a review of content of the
Annual Report and Accounts and other periodic fi nancial statements
and announcements, together with the recommendation of the
Audit Committee. Key considerations include ensuring that there
was consistency between the accounts and the narrative provided
in the front half of the Annual Report and Accounts, and that there
was an appropriate balance between the reporting weaknesses,
diffi culties and challenges (in particular with reference to the
Group’s principal risks and uncertainties, as set out on page 22), as
well as successes, in an open and honest manner.
Signifi cant issues and accounting judgements
The Committee has a primary responsibility to review the integrity
of the Annual Report and Accounts and the Interim Statement of
the Company, which includes the review and discussion of papers
prepared by management and takes account of the views of the
auditor. The key areas reviewed in the 2018 fi nancial year are as
follows:
whether suitable accounting policies have been adopted and
properly applied;
IFRS 15 Revenue Recognition – Revenue from Contracts with
Customers
•
•
•
•
the clarity of disclosures and compliance with fi nancial
reporting standards and relevant fi nancial and governance
reporting requirements;
whether management has made appropriate estimates
and judgements in material areas or where there has been
discussion with or issues raised by the auditor; and
whether the Annual Report and Accounts taken as a whole
is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s
position and performance, business model and strategy.
To facilitate its fi nancial reporting responsibility, the Committee
received reports from the Company’s auditor, KPMG, at each
of the scheduled Committee meetings. The fi rst meeting in
February 2018 considered the accounting, fi nancial control
and audit issues reported by the auditors that fl owed from their
audit work and reviewed the fi nancial statements and specifi c
disclosures, including the viability and going concern statements,
for recommendation to the Board. In addition to standard agenda
items, the February meeting also received evaluations of the
external and internal audit process and reviewed the procedures
and outputs for the identifi cation, assessment and reporting
of risk. The August meeting received a review by the auditor of
the Half Year results and considered the accounting, fi nancial
46
The introduction of IFRS 15 Revenue Recognition – Revenue from
Contracts with Customers (IFRS 15) with effect from 1 January
2018 has changed the basis of revenue recognition on long-term
contracts from a stage of completion to delivery against identifi ed
performance obligations. Prior to its application, the Group
accounted for long-term contracts by estimating the percentage
stage of completion based on costs incurred to date compared to
the estimated total contract costs. Revenue is now recognised when
control over the goods or services passes to the customer and for
long-term contracts on completion of performance obligations.
In adopting IFRS 15, the results for 2017 have been restated and
full details are set out in note 33. For the majority of the Group’s
revenue such as the delivery of services, products and equipment
rental, the implementation of IFRS 15 has had no material impact
as revenue continues to be recognised at the point in time when
the performance obligation is met. Long-term contracts, which
often span a year end and primarily relate to Specialist Technical
and Marine Support, are recognised on completion of performance
obligations identifi ed from the contract.
The Committee reviewed the recognition of revenue and profi t on
signifi cant long-term contracts to ensure revenue was recognised
in the correct accounting period and that judgements made
by management were reasonable and in accordance with the
requirements of IFRS 15. Where appropriate, matters arising were
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
E
C
N
A
N
R
E
V
O
G
discussed with senior management and KPMG in their capacity
as auditors, and the Committee concluded that the fi nancial
statements recognised revenue and profi ts in accordance with the
Group’s accounting policy.
IFRS 16 Leases
IFRS 16, which became effective on 1 January 2019, brings
operating leases onto the balance sheet as a ‘right of use’ asset
which is amortised, and a corresponding liability established
for the total lease obligation. In accounting periods prior to
1 January 2019, operating lease costs were charged to the
income statement on a straight-line basis over the period of the
lease. In future years, this charge will be replaced by amortisation
of right of use assets and an imputed interest cost based on
the operating lease obligation. As at 31 December 2018 the
Group had £38.2m (2017: £36.8m) of future obligations under
operating leases.
Goodwill valuation
The Committee considered the Group’s carrying value of goodwill
and impairment reviews based on underlying assumptions,
together with the achievability of long-term forecasts and the
discount rates applied to forecast cash fl ows. Senior management
provided detailed analysis to determine the sensitivity of the
outcome to changes in key assumptions and we are satisfi ed that
the judgements made are both reasonable and appropriate.
Acquisition accounting
The level of judgement involved in determining acquisition
fair values and the valuation of acquired intangible assets
is a potential risk to the Group. The Committee considered
the fair value and accounting policy adjustments made to
each acquisition and assessments in respect of contingent
consideration provisions. These were discussed separately with
the Group Finance Director and the Company’s auditor, and the
Committee concluded that acquisitions had been accounted for in
accordance with the Group’s accounting policies.
Operations in overseas jurisdictions with uncertain legislation
Due to the diverse nature of the territories in which the
Group operates often with local partners, there is an inherent
commercial and fi nancial risk arising from operating in these
locations. This is particularly prominent in the Group’s operations
in emerging markets, due to a potentially more uncertain
legislative, political and regulatory environment. The Committee
received regular updates on the operational and fi nancial
performance of the Group’s business operations in these
territories together with the assessment of areas where specifi c
judgements have been necessary.
The Committee considered the matters set out above and how
they were tested and reviewed, including the judgements and
disclosures and representations made.
Going concern
The Committee reviewed the appropriateness of the going
concern assumption on page 67 in preparing the fi nancial
statements. This included a review of papers prepared by
senior management in relation to the Group’s internal budgets,
forecasts of future performance, available fi nancing facilities
and facility headroom. Taking account of possible changes that
may impact trading performance and other factors that might
affect availability, we expect the Group to maintain the necessary
headroom under its borrowing facilities for the forthcoming year.
We are satisfi ed that the going concern basis of preparation
continues to be appropriate in preparing the fi nancial statements.
Viability statement
The Committee reviewed the Company’s viability statement set
out on page 23 and in particular took care to understand the
analysis which was prepared by management, and supports
the Board’s view that the Company will be able to continue
in operation and meet its liabilities as they fall due over the
period assessed. The analysis included a review of the Group’s
three-year plan which overlays a number of assumptions and
sensitivities, including the need for and availability of additional
bank facilities, an assessment of the likely downside sensitivities
aligned to the Group’s principal risks, and the potential impact
of those sensitivities on its business model, future performance,
solvency and liquidity over the period, and taking into account
the potential mitigating actions, and the effectiveness of the
Group’s risk management and control systems, as well as current
risk appetite. Sensitivities considered included the potential
consequence of global economic uncertainty and adverse foreign
exchange movements, on-going bolt-on acquisitions, as well as
the diverse nature of the markets and geographies in which the
Group’s businesses operate, and their ability to react quickly to
change.
Risk management and internal controls
The Board has overall responsibility for the Group’s risk
management and internal control systems. The Audit Committee
is responsible for monitoring and reviewing the effectiveness
of these systems and the Group’s internal audit function. We
received regular reports throughout the year from the Group Risk
Committee and we have reviewed the Group’s systems of risk
management and internal controls, including fi nancial, operational
and compliance controls, and have concluded that the systems
are sound and effective. Reports on material internal control
failings are referred to the Committee for review and oversight
to ensure that appropriate and timely actions are identifi ed and
completed. During the year there were no material instances of
internal control failure brought to the attention of the Committee.
Anti-bribery and corruption
We have an established anti-bribery and corruption policy aimed
at ensuring adherence to the associated legal and regulatory
requirements. The policy includes sections in relation to:
•
•
•
the Group’s zero tolerance approach to payment of bribes.
the reasonableness and proportionality of offering or receipt
of gifts or hospitality.
the appointment and management of third parties who are
engaged to assist with our sales and marketing activities,
including approval via procedures which include appropriate
47
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Audit committee report continued
internal and external due diligence and authorisation. The
Group tracks its agent relationships and reports them back to
the Board on a regular basis.
•
•
the Group’s condemnation of facilitation payments.
The Group has anti-bribery and corruption training in place which
is provided on induction, and each business maintains a training
log for its people which is reported back to the Committee via
internal audit twice annually.
Whistleblowing
The Group maintains a whistleblowing policy which encourages
and allows our people to report any activities which may
constitute a crime (including bribery/corruption), a failure to meet
legal/regulatory obligations, a fraud, an endangerment to anyone’s
health and safety, damage to the environment, or a breach of the
Code of Ethics. Reports can be made anonymously. Investigations
are carried out by the Group Finance Director and Group
General Counsel and Company Secretary, with reference to the
Chairman. Reports on whistleblowing complaints are referred to
the Committee for review to ensure that appropriate and timely
actions have been identifi ed and completed. During the year two
matters were raised under the whistleblowing process, both of
which were investigated and recommendations agreed with the
Audit Committee were adopted.
The responsibilities and processes for risk management are
described in more detail on page 22.
External audit performance
The Committee continually assesses the performance of the
auditor, KPMG, from the initial planning stage when they receive
and discuss the audit plan and proposed strategy, approach,
objectives, signifi cant risk areas and other areas of focus, drawing
on input from the Group’s senior management, until conclusion of
the audit. The Committee conducts annually a formal assessment
of the auditor’s performance based on its own experience and
that of the Group’s senior management. This process includes the
use of questionnaires which focus on the quality and ability of the
audit teams, the robustness of the audit process and the quality
of communication and governance, including the independence
of the audit fi rm. The results of the review are considered by the
Committee and discussed with the auditor who provides input
on the preparedness of the Group’s own fi nance teams and the
conclusions are reported to and discussed by the Board.
For the 2018 audit, the Committee considered that the
performance of the auditor, including their interaction with the
Company, senior management and the Committee, was good. The
Committee was also satisfi ed that KPMG provided an effective
audit and remain independent and objective.
During the year, the Committee considered the FRC’s Audit
Quality Review (AQR) team’s review of the Group’s audit by KPMG
for the year ended 31 December 2017. The Review took into
account areas considered to be higher risk by KPMG and the
Audit Committee, the FRC’s own knowledge and experience of
audits of similar entities, and the signifi cance of an area in the
context of the fi nancial statements. The review included, but was
not limited to, the following:
48
T
R
O
P
E
R
C
G
E
T
A
R
T
S
I
At Group level: (A) how the audit work was scoped; the
instructions issued to individuals performing audit work
on fi nancial information relating to Group subsidiaries
(component auditors); the extent of KPMG’s involvement in
component auditors’ work; KPMG’s evaluation of component
auditors’ work; and how issues reported by component
auditors were followed up and resolved; (B) how KPMG
dealt with certain aspects of ethics, independence, quality
control and completion relevant to the audit; (C) the quality
of communications with the Audit Committee; and (D) the
following specifi c areas: (i) recoverability of Group intangible
assets; and (ii) Group operations in overseas jurisdictions
with uncertain legislation.
•
At subsidiary level: revenue recognition within certain Group
businesses.
The conclusion of the FRC ’s AQR team’s review was discussed
with KPMG. None of its fi ndings were considered to be of
suffi cient signifi cance to be included in its fi nal report.
In compliance with the Statutory Audit Services for Large
Companies Market Investigation (Mandatory Use of Competitive
Tender Processes and Audit Committee Responsibilities)
Order 2014 and other regulations, the Company undertook a
competitive tender for audit services in 2016 following which
KPMG were appointed.
Audit Committee evaluation
Every year the Group conducts an internal evaluation of the Board
and its Committees and this year an external evaluation was also
undertaken. The Audit Committee was considered to work well
with thorough debate, and good coverage of the key issues, and
to be well chaired and managed, with good coverage of its remit
and good interface between meetings with the Executive and
fi nance function. Details of the evaluations and the results are set
out in more detail on p age 42.
Internal audit
The Committee is responsible for reviewing the work carried
out by the internal audit department which considers, reviews
and reports on key commercial, fi nancial and control risks
across the Group. The internal audit function undertake their
work in accordance with an annual programme approved by the
Committee. During 2018 we continued to engage the services of
PricewaterhouseCoopers to support our internal audit resources,
particular at overseas offi ces. The scope of each internal audit
review is agreed by the Committee in consultation with the
internal auditor to ensure that key areas for each business are
addressed.
In 2018, 19 internal audits were undertaken, of which 11 were
in the UK and 8 overseas (2017: 25). The internal audit reports
were presented to the Committee for review and shared with
senior managers for action, as well as being provided to the
auditor for information. The Internal Auditor is responsible to the
Committee for ensuring that all required actions are followed up
and completed in a timely manner.
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
The effectiveness of the Group’s internal audit function is
continually reviewed and a formal review is undertaken annually
by the Board and the Committee. Following the fi nal 2018 review,
the Committee recommended and the Board concluded that the
Group’s internal audit process was appropriate and effective.
Non-audit services
The Committee accepts that certain non-prohibited work is
best undertaken by the auditor and to safeguard the auditor’s
objectivity and independence the Committee has a long-standing
policy on engagement of the auditor for non-audit services,
which includes a requirement for Audit Committee approval
if the permitted services exceed a threshold of £50,000. The
Committee reviews the policy annually and recommends it to the
Board for approval. In accordance with EU Audit Regulations and
standards published by the FRC in June 2016, the Committee
has not engaged the auditor on matters restricted by those
Regulations and standards, and fees from permitted work
(including the Half Year report) have been pre-approved by the
Committee.
KPMG were not instructed to carry out any prohibited non-audit
services during 2018.
Conclusion
The Committee operates in an open manner, has clear and
concise channels of communication with the Board and, should
it be necessary, I would be available to meet with investors. I will
also be available to answer any questions at the AGM.
Justin Atkinson
Chairman of the Audit Committee
25 February 2019
E
C
N
A
N
R
E
V
O
G
49
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Nominations Committee report
The principal duties of the Nominations Committee, which I
now chair, are to make recommendations to the Board on the
structure, size, composition and balance of the Board and on the
appointment, re-appointment and retirement of any Director.
In January 2018, Charles Rice announced his intention to retire
as a Director of James Fisher at the AGM. At that time it was the
recommendation of the Nominations Committee that I should
succeed him as Chairman of the Group. In line with our policy I
took no part in this succession process. At the same time, it was
also announced that Justin Atkinson would be joining the Board
as an independent Non-Executive Director.
In March 2018, Fergus Graham, who joined James Fisher in
January 2017, was promoted to the role of Executive Director of
the Group with special responsibility for James Fisher’s Marine
Support Division.
Following the 2018 AGM in May 2018 I became Chairman.
David Moorhouse was appointed as Senior Independent
Director, Aedamar Comiskey was appointed as Chairman of the
Remuneration Committee and Justin Atkinson was appointed
Chairman of the Audit Committee in my place.
In December 2018, Nick Henry announced his intention to retire
as Chief Executive Offi cer of the Group by the end of 2019. The
Nominations Committee is leading a search for Nick’s successor
with the help of an external adviser and an announcement in this
regard will be made in due course.
In February 2019, the Group announced the impending
retirement of David Moorhouse and the intended appointment on
1 March 2019 of Dr Inken Braunschmidt as a new independent
Non-Executive Director.
The Nominations Committee unanimously recommends the
election or re-election of each of the Directors at the 2019 AGM.
David Moorhouse is not seeking re-election. In making this
recommendation we have evaluated each Director in terms of
their performance, commitment to the role and their capacity to
discharge their responsibilities in an effective manner given their
other time commitments and responsibilities.
Our objective is to ensure that the Board is balanced with
the Directors having a broad range of knowledge, skills and
background to ensure they work together effectively as a team for
the benefi t of the Company as a whole.
We always appoint people we consider the best for the role,
however we recognise that diversity adds a broader perspective
to Board discussions. The appointment of Inken will increase the
number of women on the Board to two.
Board composition and diversity
There were eight Directors on the Board as at 31 December 2018,
comprising the Non-Executive Chairman (who was considered
independent on appointment), the Chief Executive Offi cer, the
Group Finance Director, an Executive Director responsible for the
Marine Support Division, and four independent Non-Executive
Directors. The names and biographical details of the members of
the Board are set out on pages 36 and 37.
The Board functions effectively and effi ciently and is considered
to be of an appropriate size in view of the scale of the Group and
the diversity of its businesses. The Board carried out an internal
and external Board evaluation during the year and you can read
more about this on page s 42 and 43. The Board considers that
each Director demonstrates the knowledge, ability and experience
required to perform the functions of a director of the listed
company and is of the calibre necessary to support and develop
the Company’s long-term strategy and success. The Board
further considers that no individual or small group of individuals
dominates the Board’s decision-making.
Membership
Malcolm Paul (following Charles Rice’s departure in
May 2018) Chair of the Nominations Committee
Justin Atkinson
Aedamar Comiskey
David Moorhouse
Michael Salter
Key objectives
Since
2011
2018
2015
2013
2013
Reviewing the composition of the Board and succession planning.
Key responsibilities
•
•
•
to regularly review the structure, size and composition of
the Board (including skills, knowledge, independence and
experience) and recommend changes;
succession planning for Directors and senior executives of
both the Company and the operating businesses; and
identifying and nominating for approval to the Board,
candidates for Board positions.
The terms of reference are available on the Group’s website and
were updated in January 2019.
Meets three times a year.
The importance of diversity, including gender, in the Board’s
composition is recognised and during 2018 the Board agreed
and published (on the Group website) its own Board diversity
policy setting out its aims to ensure an appropriate diversity
of skills, experience and knowledge, as well as gender and
ethnic diversity, refl ecting the Hampton-Alexander and the
McGregor- Smith review recommendations. Please see page 43
for more detail about how the Board has approached diversity in
its own composition. The Committee acknowledges that diversity
is not solely in relation to gender: ethnicity, age, educational and
professional backgrounds are also important and diversity in
senior management and across the entire workforce is supported
and encouraged.
50
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Alongside the Board diversity policy, the Group has its own
established diversity policy with the purpose of ensuring that
the Group benefi ts from a diverse workforce and has a working
environment where all employees are encouraged to realise their
full potential and where there is an open atmosphere of trust,
honesty and respect. The diversity policy is available on the
Group website as part of the Group policies document.
During 2018, two Group companies (not the Company) were
required by regulation to publish their gender pay gap. At the
same time, the Company voluntarily published a Group-wide
gender pay gap report, which is available on the Group website
and gives information on the Group’s gender pay gap, along with
descriptions of the initiatives being undertaken to narrow the gap.
More information about our employees, the Group’s employment
policies, the Group’s gender pay gap report, and the Group’s
commitment to equal opportunities and diversity can be found
in the Sustainability report on page 29 and the Corporate
responsibility governance report on page 34.
Malcolm Paul
Chairman of the Nominations Committee
25 February 2019
E
C
N
A
N
R
E
V
O
G
Appointments to the Board and succession
planning
The Committee leads the process for Board appointments and
makes recommendations to the Board. Appointments are made
on merit, against objective criteria, with due regard to the benefi ts
of diversity on the Board, including gender. The Committee
adopts a formal, rigorous and transparent procedure for the
appointment of new Directors to the Board, working with Korn
Ferry, an independent executive search consultant which has no
connection to the Company other than in assisting and facilitating
in the search for senior management. A specifi cation for the roles
was agreed by the Committee, setting out the skills, experience
and attributes required. The appointment process is set out
below, using Justin Atkinson’s appointment as an example.
•
•
•
•
Identify Using the agreed brief, the Chairman appraised
a diverse list of potential candidates which was prepared
against the key competencies and experience required for the
role, from which a shortlist was produced.
Interview The shortlisted candidates were interviewed by
the Chairman and CEO. The preferred candidate met with
members of the Committee following which the Committee
met to discuss feedback.
Select The Committee recommended the appointment of
Justin Atkinson as a Non-Executive Director of the Company
to the Board. It was also agreed that he be appointed as
Chairman of the Audit Committee.
Appoint Justin Atkinson’s appointment took effect in
February 2018.
The Committee continues to evaluate the balance of skills and
experience on the Board and is satisfi ed that plans are in place for
orderly succession for appointments to the Board to maintain that
balance whilst ensuring progressive renewal of the Board.
Board diversity
Board tenure
Board skills matrix
Female
6-9 years
0-3 years
Male
Operations
Engineering
3-6 years
Finance
Marine
Legal/
Governance
51
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Directors’ remuneration report
Annual statement
Introduction by Aedamar Comiskey, Chair of the
Remuneration Committee
On behalf of the Board, and the Remuneration Committee, I am
pleased to present the Directors’ Remuneration report for the
year ended 31 December 2018. This is my fi rst report as Chair of
the Committee and I would like to thank Malcolm Paul, who has
chaired the Committee for just over four years, for his hard work
during this period.
This report is comprised of two parts, namely:
•
•
Remuneration policy report – which provides a summary of
the remuneration policy for which shareholder approval was
obtained at the 2018 AGM and which will continue to apply
without amendment for the forthcoming year; and
Annual report on remuneration – which sets out payments
and awards made to the Directors and details the link
between Company performance and remuneration for 2018,
and how the remuneration policy will operate for 2019.
Accordingly, at our 2019 AGM, one remuneration-related
resolution will be presented, being the normal annual advisory
vote on our Directors’ Remuneration report (i.e. this annual
statement and the annual report on remuneration).
Membership
Aedamar Comiskey, Chairman of the
Remuneration Committee since May 2018
Justin Atkinson
David Moorhouse
Michael Salter
Key objectives
Since
2014
2018
2013
2013
Our objective is to have a fair, equitable and competitive total
reward package that supports our vision; and to ensure the
rewards are performance-based and encourage long-term
shareholder value creation.
Key responsibilities:
• Designing the remuneration policy.
•
Implementing the remuneration policy.
• Ensuring the competitiveness of reward.
• Designing the incentive plans.
• Setting incentive targets and determining award levels.
• Overseeing all share awards across the Group.
Meets three times a year.
1 2017 restated for IFRS 15 ‘Revenue from contracts with customers’
Work of the Committee during 2018
The Committee’s main activities during the year (full details of
which are set out in the relevant sections of this report) included:
•
•
•
Reviewing and agreeing the changes to the remuneration
policy in advance of the 2018 AGM;
Consulting on the policy changes with major investors and
representative bodies;
Agreeing the performance against the targets for the 2017
annual bonus awards;
• Setting the targets for the 2018 annual bonus;
•
•
•
Agreeing the performance against the targets for the 2015
LTIP awards and determining vesting levels; and
Agreeing the award levels and performance targets for the
2018 LTIP awards. No changes were made in respect to the
metrics and targets compared to the 2017 LTIP awards; and
Agreeing the Chairman’s fee and Executive Directors’ base
salary increases from 1 January 2019.
The Committee is satisfi ed that the remuneration policy operated
as intended in terms of Group performance and quantum
(see below). No discretion has been applied in relation to
remuneration outcomes.
Pay and performance in 2018
James Fisher delivered a strong performance in 2018. The key
performance measures for the 2018 fi nancial year were as follows:
• Underlying profi t before tax £56.1m (2017: £48.6m1); and
• Underlying diluted earnings per share 89.5p (2017: 78.7p 1).
Each year the performance of the Executive Directors is assessed
against a range of fi nancial and personal objectives which are
aligned with the delivery of the Group’s strategy and objectives.
By incentivising and rewarding performance that delivers our
objectives we ensure that pay is tied to performance and value
delivered to shareholders.
Consistent with 2017, the Executive Directors’ potential maximum
level of bonus in 2018 was 100% of base salary, with 70% based
on meeting the Group’s fi nancial objectives and 30% based on
individual achievement and personal objectives. The Group’s
fi nancial targets for the year ended 31 December 2018 were fully
achieved and therefore 100% of this element of bonus was awarded.
The Remuneration Committee concluded that personal objectives
were partially met. As a result, a combined bonus of 91% of base
salary was approved for each Executive Director, of which the fi rst
70% of salary will be paid in cash and the balance will be awarded in
shares, to be deferred for three years.
Awards under the LTIP granted in 2016 will vest on 6 April 2019
at a currently estimated 100% of the maximum, with 100% of
the earnings per share performance targets (70% of awards) over
the three years to 31 December 2018 vesting and an estimated
100% vesting against the total shareholder return (TSR) targets
(30% of awards) measured over the three years from 6 April
52
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
2015. This is an indicative LTIP vesting result based on an
estimate of TSR as at 11 January 2019. The fi nal vesting result
will be determined based on the actual TSR on 5 April 2019.
The current remuneration policy was originally approved by
shareholders at the 2018 AGM and will continue to apply without
amendment for the forthcoming year.
Further detail of the targets and achievement against them is set
out in the Annual report on remuneration on pages 60 and 61.
2019 remuneration
T
R
O
E
P
C
E
N
R
A
C
N
G
R
E
E
T
V
A
O
R
G
T
S
I
Stakeholder feedback
The new three-year remuneration policy was well received by
shareholders and representative bodies in the run up to the 2018
AGM and no changes were made to the proposals during the
consultation exercise.
The Committee was pleased to note the very high levels of
shareholder support for both the advisory vote on our Directors’
remuneration report and the remuneration policy report.
However, following a review of the feedback received around
the 2018 AGM, a number of enhancements have been made to
the disclosures presented in the Annual report on remuneration,
particularly in respect of the annual bonus targets and awards.
Engagement with the workforce in respect of remuneration will be
considered as part of the Board’s approach to broader workforce
engagement, which is being developed and formalised in light of
the new UK Corporate Governance Code.
Remuneration policy for 2019
Executive remuneration consists of a base salary, pension
contribution, benefi t provision and, subject to performance
conditions, an annual bonus plan, part paid in cash and part
deferred into shares, and shares awarded under an LTIP. Incentive
pay is subject to malus and clawback provisions and, post-
vesting, Executive Directors are required to retain 50% of the net
of tax shares awarded until they have satisfi ed the Company’s
share ownership guidelines.
The Committee considers that the remuneration policy remains
appropriate and that it satisfi es the Committee’s objective to
operate a remuneration structure which successfully promotes
the long-term success of the Group and fully aligns the interests
of the Executive Directors with those of our shareholders.
Annual pay awards across the Group are determined on a country
and sectoral basis, to ensure that pay levels are fair and refl ect
local market and industry conditions. Individual merit awards are
made where appropriate. Average salary awards across our UK
businesses therefore ranged between 1.26% and 3.76% for 2019.
With effect from 1 January 2019, Nick Henry’s base salary
remained unchanged at £492,000, Stuart Kilpatrick’s base salary
was increased by 2.5% to £317,750, and Fergus Graham’s base
salary was increased by 2.5% to £281,875. Any increases are
consistent with the guidelines applied to the general workforce
this year.
All other elements of the Executive Directors’ remuneration
packages are proposed to remain unchanged. The annual bonus
maximum opportunity and LTIP awards will be 100% and 125%
of base salary respectively. 70% of the annual bonus will be
determined by underlying profi t before tax targets and 30% on
personal measures, with the LTIP awards being determined as to
70% by earnings per share targets and 30% by TSR.
With effect from 1 January 2019, the fees payable to the
Chairman and Non-Executive Directors were increased by 2.5%.
I hope you will join me in supporting the resolution in respect of
this year’s Directors’ remuneration report at the AGM on 2 May
2019.
Aedamar Comiskey
Chairman of the Remuneration Committee
25 February 2019
53
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Directors’ remuneration report continued
Remuneration policy report
Overview of Directors’ remuneration policy
James Fisher and Sons plc operates in a competitive
international environment. To continue to compete successfully,
the Committee considers that it is essential that the level of
remuneration and benefi ts achieves the objective of attracting,
retaining, motivating and rewarding the necessary high calibre
of individuals at all levels of the business. The Company
therefore sets out to provide competitive remuneration to all of
its employees, appropriate to the business environment in those
countries in which it operates.
The remuneration strategy is designed not only to align with the
Company’s fundamental values of honesty, integrity and fairness,
but also to support the Company’s corporate strategy, as a
signifi cant contributor to competitive advantage.
A cohesive reward structure with a timely pay review process,
consistently applied to all employees, with links to corporate
performance is seen as critical in ensuring all employees can
associate with, and are focused on, the attainment of the
Company’s strategic goals. Accordingly, the remuneration
package for the Executive Directors is normally reviewed
annually. Where an Executive Director’s responsibilities change
during the course of a year, the Committee will consider whether
a review is appropriate, outside of the annual process.
Executive remuneration reviews are based upon the following
principles:
•
•
•
total rewards should be set at appropriate levels to refl ect the
competitive market in which the Company operates, and to
provide a fair and attractive remuneration package;
reward elements should be designed to reinforce the link
between performance and reward. The majority of the total
remuneration package should be linked to the achievement of
appropriate performance targets; and
Executive Directors’ incentives should be aligned with the
interests of shareholders. This is achieved through setting
performance targets to reward increase in shareholder
value and through the Committee’s policy to encourage
shareholding by Executive Directors.
How the Executive Directors’ remuneration policy relates to
the wider Group
The remuneration policy set out within this report provides an
overview of the structure that operates for the senior executives
in the Group. Employees below executive level have a lower
proportion of their total remuneration made up of incentive-
based remuneration, with remuneration driven by market
comparators and the impact of the role of the employee in
question. Long-term incentives are reserved for those judged as
having the greatest potential to infl uence the Group’s earnings
growth and share price performance. The Remuneration
Committee considers pay and conditions across the workforce
when reviewing and setting the Executive Director remuneration
policy. The Committee does not currently consult with employees
on this matter at the current time. However engagement with
the workforce in respect of remuneration will be considered as
part of the Board’s approach to broader workforce engagement,
which is being developed and formalised in light of the new UK
Corporate Governance Code.
How shareholders’ views are taken into account
The Committee takes an active interest in shareholder views
on our remuneration policy and is mindful of the views of
shareholders and other stakeholders. Major shareholders and
representative bodies were consulted at the start of 2018 in
respect of the proposed changes to the remuneration policy put
forward at the AGM and all major shareholders were supportive.
However, following the feedback received around the 2018 AGM,
a number of enhancements have been made to the disclosures
presented in the Annual report on remuneration, particularly in
respect of the annual bonus targets and awards.
Directors’ remuneration policy
The table overleaf summarises the remuneration policy approved
by shareholders at the 2018 AGM.
54
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Element
Base salary
Purpose & link to
strategy
Designed to attract, retain,
motivate and reward the
necessary high calibre of
individuals to the Board.
Pensions
To offer competitive
retirement benefi ts.
Performance
targets
Not applicable.
E
C
N
A
N
R
E
V
O
G
Not applicable.
Operation
Maximum
Base salaries are a fi xed annual sum
normally effective 1 January and payable
monthly in cash.
Salaries are reviewed each year,
normally effective 1 January and
recognising the individual’s performance
and experience, developments in the
relevant employment market and having
regard to the Group’s performance
as well as comparing each Executive
Director’s base salary to market data.
Executive Directors are eligible to
join the Group’s defi ned contribution
scheme, receive a company
contribution into a personal pension
scheme or be paid a cash supplement
in lieu of pension.
No prescribed maximum salary or
salary increase.
Salaries are set for each Executive
Director within a range around
the market median for similar
positions in appropriate comparator
companies.
The Committee is also guided by the
general increase for the employee
population although increases
may be higher or lower than this to
recognise, for example, an increase
in the scale, scope or responsibility
of an individual and/or performance.
Up to a maximum of 15% of base
salary although the Committee
will aim to reduce pension
contributions, as a percentage
of salary, for new joiners to the
Board, where possible. The level of
provision for new Directors will be
subject to negotiation at the time
of the appointment, having regard
to the pensions applicable to the
other senior management within
the Group.
Benefi ts
To offer competitive
benefi ts.
Annual bonus
To incentivise and reward
the Executive Directors to
deliver annual fi nancial and
operational targets.
LTIP
To align the interests of the
Executive Directors with
the Group’s long- term
performance, strategy
and the interests of
shareholders.
Provision of a company car or cash
alternative, life assurance and
healthcare insurance. Other benefi ts
may be provided where appropriate.
These benefi ts do not form part of
pensionable earnings.
Payable on the achievement of fi nancial
and personal objectives and non-
pensionable.
The fi rst 70% is payable in cash.
Bonus in excess of 70% of basic salary
is subject to deferral into shares, with
awards vesting after three years, subject
to normal good/bad leaver provisions,
but no further performance targets.
Dividend equivalent payments may be
awarded (in cash or shares).
Malus and clawback provisions operate.
Annual grant of share awards. Non-
pensionable.
A two-year post-vesting holding period
will be applied to awards granted to
Executive Directors after the 2018
AGM.
Dividend equivalent payments may be
awarded (in cash or shares).
Malus and clawback provisions operate.
No prescribed maximum.
Not applicable.
Up to 100% of base salary.
Up to 200% of base salary.
Awards above 125% will be
subject to stretch targets.
Majority of the
bonus potential is
based on a fi nancial
target derived from
the annual plan;
Minority of the
bonus potential is
based on individual
achievement and
personal objectives.
Sliding scale relative
to EPS and/or TSR
growth targets.
25% of an award
vests at threshold
increasing to
100% vesting at
maximum.
Share
ownership
Sharesave
To ensure alignment
between the interests of
Executive Directors and
shareholders.
Executive Directors are required to
retain half of the shares vesting after
tax under the LTIP until the guidelines
are met.
200% of base salary for all
Executive Directors.
Not applicable.
To encourage share
ownership and align the
interests of all-employees
and shareholders.
An all-employee share plan.
As per prevailing HMRC limits.
Not applicable.
55
T
R
O
P
E
R
C
G
E
T
A
R
T
S
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Directors’ remuneration report continued
Element
Non-
Executive
Directors
Purpose & link to
strategy
Operation
Maximum
To provide fees to refl ect
the time commitment and
responsibilities of each
role in line with those
provided by similarly sized
companies.
Fixed annual fee, paid monthly in
cash reviewed annually; Committee
determines the Chairman’s fees.
The Chairman and Executive Directors
determine fees for the other Non-
Executive Directors.
No prescribed maximum fee or
fee increase, although fees are
limited by the Company’s Articles
of Association.
The Board/Committee is guided by
market rates, time commitments
and responsibility levels.
Performance
targets
Not applicable.
Notes:
(1)
The choice of the performance metrics applicable to the annual bonus refl ect the Committee’s belief that any incentive compensation should be appropriately
challenging and tied to the delivery of both fi nancial and personal objectives;
(2)
(3)
TSR and EPS performance conditions are selected by the Remuneration Committee on the basis that they reward the delivery of long-term returns to shareholders
and the Group’s fi nancial growth, and are consistent with the Company’s objective of delivering superior levels of long-term value to shareholders. The TSR
performance condition is monitored by an independent advisor whilst EPS growth is derived from the audited fi nancial statements;
The Committee operates its share plans in accordance with the plan rules and the Listing Rules and the Committee, consistent with market practice, retains
discretion over a number of areas relating to the operation and administration of the plans (e.g. treatment of awards for leavers, change of control, adjustments to
performance targets);
(4)
Consistent with HMRC legislation, the all-employee arrangement does not have performance conditions; and
(5)
In approving the Directors’ remuneration policy, authority is given to the Company to honour any past commitments entered into with current or former Directors
including the vesting of share awards granted in the past.
Malus and clawback provisions
Malus and clawback provisions operate in respect of the annual bonus (cash and deferred shares) and LTIP awards, with Committee
discretion to apply them in the event of (i) misstatement of results; (ii) an error in determining the share award; or (iii) gross
misconduct. The Committee may decide to operate the malus and clawback provisions within a three-year period commencing on the
date that the cash part of any annual bonus is paid (for cash and deferred share bonus awards), and within a three-year period of any
LTIP vesting date.
Potential value of 2019 remuneration package for Executive Directors
0
0
0
£
’
£2,250
£2,000
£1,750
£1,500
£1,250
£1,000
£750
£500
£250
£0
Share price growth
Long-term incentive
Annual bonus
Fixed Pay
£1,977
16%
£1,669
37%
31%
29%
25%
£1,116
28%
22%
£562
100%
50%
34%
28%
£1,279
£1,081
16%
37%
31%
29%
25%
34%
29%
£723
27%
22%
51%
£366
100%
£948
37%
30%
33%
£1,124
16%
31%
25%
28%
£631
28%
22%
50%
£314
100%
Minimum
On-target Maximum Maximum
with share
price growth
Chief Executive Officer
Minimum On-target Maximum Maximum
with share
price growth
Minimum On-target Maximum Maximum
with share
price growth
Group Finance Director
Executive Director
Minimum performance is based on fi xed pay only (comprising basic salary and pension from 1 January 201 9 and the estimated value of benefi ts for 201 9);
Target performance is based on fi xed pay plus 50% of the maximum values used for the Company’s incentive arrangements;
Maximum performance is based on: (a) a maximum annual bonus of 100% of base salary; and (b) an LTIP award of 125% of basic salary (presented at face value);
In illustrating potential reward opportunities, the following assumptions have been made:
(1)
(2)
(3)
(4) No dividend reinvestment has been assumed; and
(5)
Consistent with the new disclosure requirements, the maximum performance with share price growth scenario assumes a 50% share price increase over three
years in respect of the LTIP awards.
56
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Approach to recruitment
New Executive Directors will be appointed on remuneration
packages with the same structure and elements set out in the
Directors’ remuneration policy table. On-going incentive pay will
be limited to:
• Maximum annual bonus of 100% of salary;
• Up to 200% of salary LTIP award; and
• Participation in the Sharesave.
For external appointments, the Committee may offer additional
cash or share-based elements to replace deferred or incentive
pay forfeited by an executive when leaving a previous employer.
It would seek to ensure, where possible, that these awards would
be consistent with awards forfeited in terms of vesting periods,
expected value and performance conditions. Shareholders will be
informed of any such payments as soon as practicable following
the appointment.
For an internal appointment, any variable pay element awarded
in respect of the prior role may be allowed to pay out according
to its original terms. In addition, any other on-going remuneration
obligations existing prior to appointment may continue, provided that
they are put to shareholders for approval at the earliest opportunity.
For external and internal appointments, the Committee may agree
that the Company will meet certain relocation and incidental
expenses as appropriate.
Loss of offi ce
The Committee has considered remuneration for Executive Directors
leaving the Company and is committed to applying a consistent and
equitable approach to ensure the Company is equitable but pays no
more than necessary. The loss of offi ce policy is in line with market
practice and will be dependent on whether deemed a ‘good leaver’
or ‘bad leaver’. The ‘good leaver’ policy includes:
•
•
•
payment in lieu of notice equal to one year’s basic salary
or, if termination is part way through the notice period, the
amount of salary relating to any unexpired notice to the date
of termination. There is an obligation on Directors to mitigate
any loss which they may suffer if the Company terminates
their service contract;
bonus payments for the period worked may be made, subject
to the original performance targets, at the discretion of
the Committee. Any such payments would be made on the
normal payment date;
vesting of share scheme awards is not automatic and the
Committee retains the discretion to prevent awards from
lapsing depending on the circumstances of the departure
and the best interests of the Company. For a ‘good leaver’:
(i) deferred bonus awards will normally vest in full at the
normal vesting date (although may vest earlier, including
at cessation); and (ii) LTIP awards will normally vest at the
normal vesting date (although may vest earlier, including at
cessation) subject to performance against the performance
targets and LTIP awards will normally be pro-rated. ‘Good
leaver’ reasons are death, injury, illness or disability,
redundancy, retirement, transfer of business resulting in
cessation of the individual’s employment within the Group
E
C
N
A
N
R
E
V
O
G
and any other reason at the Committee’s discretion. No
compensation is paid for summary dismissal, save for any
statutory entitlements; and
•
Executive Directors will also be entitled to a payment in
respect of accrued but untaken annual holiday entitlements
on termination.
Post employment shareholding policy
Following the publication of the new UK Corporate Governance
Code, the Remuneration Committee has formalised its post
cessation shareholding policy for Executive Directors as follows:
•
•
•
Unvested deferred annual bonus and LTIP awards will be
treated in line with the good leaver/bad leaver provisions
explained in the Remuneration policy;
Any LTIP awards which vested pre-cessation but which are
still subject to the two-year holding period will need to be
retained by the individual (either on a post-tax basis or as
unexercised awards), post cessation, until the relevant two-
year holding period has expired; and
No restrictions will apply in respect of own shares held,
irrespective of whether those shares are held as part of the
shareholding guideline or not.
Service contracts
It is the Board’s policy that Executive Directors are employed on
contracts subject to no more than 12 months’ notice from either
side. The Board recognises however that it may be necessary in
the case of new executive appointments to offer an initial longer
notice period, which would subsequently reduce to 12 months
after the expiry of the initial period. The service agreements
do not have a fi xed term. If it becomes necessary to consider
termination of a service contract, the Committee will have regard
to all the circumstances of the case, including mitigation, when
determining any compensation to be paid. Details of the current
service contracts are as follows:
Contract date
Notice period
Nick Henry
1 December 2006
12 months
Stuart Kilpatrick
1 July 2010
12 months
Fergus Graham
26 February 2018
12 months
The Executive Directors are permitted to serve as non-executive
directors of other companies, provided the appointment is fi rst
approved by the Remuneration and Nominations Committees.
Directors are allowed to retain their fees from such appointments.
During the period, Nick Henry served on the Board of Britannia’s
Gold Limited as a Non-Executive Director. He receives no fees.
The Executive Directors held no other appointments.
Non-Executive Directors do not have service contracts but have a
letter of appointment setting out their terms and conditions. Non-
Executive Directors are appointed each year for up to 12 months
and are entitled to one month’s prior written notice of early
termination for which no compensation is payable. Details of the
letters are set out below:
57
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Directors’ remuneration report continued
Date of
appointment
Letter of
appointment
Malcolm Paul
1 February 2011
1 January 2019
Aedamar Comiskey
1 November 2014
1 January 2019
David Moorhouse
1 August 2013
1 January 2019
Michael Salter
1 August 2013
1 January 2019
Justin Atkinson
1 February 2018
1 January 2019
Annual report on remuneration
Remuneration Committee
The Committee members have no personal fi nancial interest
other than as shareholders, in the matters to be decided. They
have no confl icts of interest arising from cross-directorships with
the Executive Directors, nor from being involved in the day-to-day
business of the Company.
The Committee operates under clear written terms of reference
and confi rms that its constitution and operation comply with
the applicable provisions of the UK Corporate Governance
Code (prevailing at the date this report is signed) in relation
to Directors’ remuneration policy and practice and that it has
applied the Code throughout the year. The Committee’s terms of
reference include:
•
•
•
•
to determine and agree with the Board the framework and
policy for Executive Directors and senior managers;
to review the appropriateness and relevance of the
remuneration policy;
to agree the measures and targets for any performance related
bonus and share schemes of the Executive Directors; and
to determine within the terms of the policy the total individual
remuneration package of the Executive Directors and
selected senior management immediately below Board.
In light of the changes to the UK Corporate Governance Code,
the Committee’s terms of reference have been extended to allow
for an extended remit over senior management pay remuneration
and workforce remuneration policies.
Advisers to the Remuneration Committee
In undertaking its responsibilities, the Committee seeks
independent external advice as necessary. To this end, FIT
Remuneration Consultants LLP (FIT) acted as the principal
external advisers to the Committee during the fi nancial year. The
Committee is comfortable that the FIT team provide independent
remuneration advice to the Committee and do not have any other
connections with James Fisher and Sons plc that may impair their
independence. FIT is a founding member and signatory of the
Code of Conduct for Remuneration Consultants, details of which
can be found at www.remunerationconsultantsgroup.com.
During the year, FIT provided independent advice on a wide
range of remuneration matters including the Remuneration policy
review and the Board changes. FIT provides no other services to
the Company. The fees paid to FIT in respect of work carried out
for the year under review were £15,000.
Non-Executive Directors
For 2019, the Non-Executive Directors’ fees are set out below, all
of which are payable in cash.
2019
£
2018
£
Chairman
205,000
200,000
Other Non-Executive Director fees:
Basic fee
53,300
52,000
Additional fee for Audit Committee
chair
Additional fee for the chair of
Remuneration Committee
Additional fee for the Senior
Independent Director
12,000
12,000
8,000
8,000
8,000
8,000
58
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Information subject to audit
Total remuneration earned by the Executive Directors
Base salary
Benefi ts(2)
Pension(3)
Bonus in cash
Bonus in deferred shares
Total short-term remuneration
LTIP – performance
LTIP – share appreciation
Dividend equivalents
LTIP – total(4)
Total remuneration
E
C
N
A
N
R
E
V
O
G
Nick Henry
Stuart Kilpatrick
Fergus Graham(1)
2018
£000
492
14
56
345
103
1,010
536
313
40
889
1,899
2017
£000
447
14
51
313
79
904
88
29
5
122
1,026
2018
£000
2017
£000
310
11
37
217
65
640
359
210
27
596
300
11
35
210
53
609
59
20
3
82
2018
£000
275
9
23
193
58
558
–
–
–
–
1,236
691
558
2017
£000
–
–
–
–
–
–
–
–
–
–
–
(1) From appointment to the Board on 1 March 2018.
(2) Benefi ts comprised a cash allowance in lieu of car and medical insurance.
(3) Pension contributions may be paid into personal pension plans, the Company pension scheme or taken as a separate cash allowance, subject to income tax.
(4)
The value presented for the 2016 LTIP awards (vesting in April 2019 based on three-year EPS performance to 31 December 2018 and TSR performance to
5 April 2019) is based on an estimated value at vesting. The 2015 LTIP values (vested in April 2018 based on three-year EPS performance to 31 December
2017 and TSR performance to April 2018) were estimates last year, using a share price based on the three-month average share price to 31 December 2017.
The table above has been restated for the actual pre-tax value of these awards (based on the share price calculated in accordance with prevailing tax legislation)
and the value of dividend equivalents as at vesting on 6 April 2018.
Annual bonus awards for 2018
The maximum annual bonus for Executive Directors was 100% of base salary, with 70% based on fi nancial objectives and 30% based
on individual achievement and personal objectives. The fi rst 70% of any bonus award is paid in cash and the balance is awarded in
shares and deferred for three years (with dividend equivalents and malus and clawback provisions applying).
The bonuses awarded were as follows:
Financial (note 1)
Personal (note 2)
Total
% of this part achieved (max 100%)
% of salary (max 70% of salary)
% of this part achieved (max 100%)
% of salary (max 30% of salary)
% achieved (max 100%)
% of salary (max 100% of salary)
Nick
Henry
100%
70%
70%
21%
91%
91%
Stuart
Kilpatrick
Fergus
Graham
100%
70%
70%
21%
91%
91%
100%
70%
70%
21%
91%
91%
The split between cash and deferred shares (any bonus over 70% of salary is deferred into shares for three years) is as follows:
Cash
Deferred
% of salary delivered in cash
% of salary delivered in deferred shares
70%
21%
59
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Directors’ remuneration report continued
Details of the actual performance against the targets are as follows:
Note 1 - Financial objectives (70% of maximum):
Performance measure
Performance target
Assessment against targets
Adjusted profit before tax target
Minimum threshold £51m
Maximum £56m
Actual performance
£56.1m
Note 2 - Personal objectives (30% of maximum):
Threshold starts at 0% and increases to 100%
of this element of the bonus at maximum target
performance.
100% of this part of the bonus achieved
70% of salary.
Nick Henry
Objectives
1
2
3
4
5
Set, communicate and lead key management priorities
Deliver balanced growth, both organically and by
acquisitions
Focus on geographic expansion
Develop the management structure, including
succession planning
Monitor and manage the Group’s risk profi le
Total
Stuart Kilpatrick
Objectives
1
2
3
4
5
Lead fi nancial reporting and oversee fi nancial risk
management
Oversee internal audit and Group support staff
Manage acquisitions and their delivery in a timely
manner
Maintain relationships with Group’s advisors
Manage the Group’s fi nancial controls
Total
Weighting
(% of salary) Committee assessment
Award
(% of salary)
6% Nick delivered an excellent performance
by the Group driven principally by organic
growth . Potential acquisitions were
delayed until the year end, but good work
in expanding overseas operations. Further
work is required to enhance the internal
management structure.
6%
6%
6%
6%
30%
5%
4%
4%
4%
4%
21%
Weighting
(% of salary) Committee assessment
Award
(% of salary)
Stuart has overseen a very good fi nancial
performance by the Group. Tight control
has been exercised over working capital
management and cash fl ow. The delivery
of planned acquisitions has been slower
than expected. Further work is required to
strengthen the global reporting structure and
succession plans.
6%
6%
6%
6%
6%
30%
5%
4%
4%
4%
4%
21%
Fergus Graham (N.B. targets were set prior to promotion to the Board)
Objectives
Weighting
(% of salary) Committee assessment
Award
(% of salary)
1
2
3
4
5
Develop key account and commercial management, and
customer relationships with JFMS customers
Produce a strategic plan for renewables
Reinforce the discipline of gatepost review of projects
Drive business development in Brazil
Improve graduate development scheme and mid-career
graduate management recruitment
Total
6%
6%
6%
6%
6%
30%
Fergus has performed well, delivering a
strong performance by the Marine Support
division for which is he is responsible.
Strategic plans for new business
opportunities remain in progress. Business
development across a wide range of markets
is being pursued.
5%
4%
4%
4%
4%
21%
Vesting of 2016 LTIP awards
The LTIP values included in the table below relate to awards granted on 21 March 2016 which vest on 6 April 2019 dependent on
EPS and TSR performance. EPS is measured over the three-year period ended 31 December 2018 while TSR is measured over the
three-year period from 6 April 2016. Therefore the fi gures set out below for the LTIP vesting are indicative, based on an estimate of TSR
as at January 2019.
Under the EPS performance target (70% of awards) which uses a sliding scale, 25% of this part of an award vests where growth of
diluted earnings per share of RPI plus 9% is achieved over the three-year performance period, increasing pro-rata to full vesting where
growth of RPI plus 18% is achieved.
60
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Performance target
Base EPS
EPS at year end
EPS growth
Threshold RPI
+9%
Maximum RPI
+18%
Vesting %
Underlying diluted EPS
68.5p
89.5p
30.7%
18.6%
27.6%
100%
Under the TSR performance target (30% of awards) which uses a sliding scale, 25% of this part of an award vests for median TSR
increasing pro-rata to full vesting for upper quartile TSR, measured against the constituents of the FTSE 250 excluding investment
trusts. The estimated three-year performance based on TSR calculations to 11 January 201 9 is as follows:
Performance target
TSR v FTSE 250 (excluding investment trusts)
Median
TSR
TSR
18.4%
Upper Quartile
TSR
James Fisher
TSR
Vesting %
52.1%
78.5%
100%
As a result of EPS (70% of awards) and TSR (30% of awards) performance, the gross value of LTIP share awards expected to vest on
6 April 2019 are as follows:
E
C
N
A
N
R
E
V
O
G
Share price at
date of grant(3)
Share price at
31 December
2018(3)
Proportion to
vest Shares to vest
Performance
element(1)
£000
Share
appreciation
element(2)
£000
Dividend
equivalents
£000
Nick Henry
Stuart Kilpatrick
1,094p
1,094p
1,734p
1,734p
100%
100%
48,950
32,832
536
359
313
210
40
27
(1) The performance element represents the face value of awards that will vest on 6 April 2019.
(2) The share appreciation element represents the value due to the change in share price from the date of award to 31 December 2018.
(3)
The share price at grant is based on a fi ve-day average immediately prior to the date of grant and the share price at 31 December 2018 is based on
Total
£000
889
596
a three-month average.
LTIP awards granted in 2018
LTIPs granted on 4 April 2018
Nick Henry
Stuart Kilpatrick
Fergus Graham
Proportion of
salary
Maximum shares
awarded
Share price at date
of grant(1)
Exercise price at
grant
125%
125%
125%
40,739
25,669
22,770
1,509.6p
1,509.6p
1,509.6p
-
-
-
(1) The share price at date of grant is based on a fi ve-day average prior to the date of grant.
Vesting of the 2018 LTIP award is subject to achievement of performance targets over a three-year period with 70% of the award
based on EPS targets and 30% based on TSR targets. EPS target performance is measured over the three-year period ending on 31
December 2020. The EPS element of the award vests if EPS growth at least equals the RPI increase over the period plus 9%. At the
threshold level, 25% of the EPS element of the award will vest. Full vesting is achieved if EPS growth is greater than or equal to 18%
in excess of the RPI increase over the vesting period. The TSR element of the award is subject to the Company’s TSR performance
relative to the FTSE 250 index excluding investment trusts, over the three-year period from 6 April 2018. If at the end of the period the
Company ranks in the upper quartile, all of the TSR element of the award will vest. If the ranking is at median level, 25% of TSR element
of the award will vest. No element of the TSR part of the award will vest for performance below the median. For intermediate ranking,
a proportionate part of each award will vest reducing on a straight-line basis. Any part of the award that does not vest at the end of a
performance period will lapse immediately.
Deferred bonus awards granted in 2018 in respect of 2017 annual bonus
Awards granted on 5 April 2018
Nick Henry
Stuart Kilpatrick
Proportion of
salary(1)
TSR
Shares awarded
Share price at date
of grant(2)
Exercise price at
grant
17.75%
17.75%
5,259
3,527
1,509.6p
1,509.6p
-
-
(1)
(2)
Relates to the annual bonus awarded in respect of 2017 , whereby any award in excess of 70% of salary was deferred into shares for 3 years with vesting based
on continued service (i.e. no further performance conditions apply between grant and vesting).
The share price at date of grant was based on the average of the closing middle-market quotations during the period of fi ve dealing days from the date of the
announcement of the 201 8 results and prior to the date of grant .
61
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Directors’ remuneration report continued
Aligning pay with performance (unaudited)
The following graph shows the total shareholder return compared to the FTSE 250 and the FTSE Small Cap indices excluding
investment trusts:
Growth in the value of £100 holding over ten years
Total Shareholder Return Index
Source: Thomson Reuters
)
d
e
s
a
b
e
r
(
)
£
(
e
u
a
V
l
600
500
400
300
200
100
0
31 Dec 08
31 Dec 09
31 Dec 10
31 Dec 11
31 Dec 12
31 Dec 13
31 Dec 14
31 Dec 15
31 Dec 16
31 Dec 17
31 Dec 18
This graph shows the value, by 31 December 2018, of £100 invested in James Fisher and Sons plc on 31 December 2008, compared with the value of £100
invested in the FTSE 250 and FTSE SmallCap Indices on the same date.
The other points plotted are the values at intervening financial year-ends.
James Fisher and Sons plc
FTSE 250
FTSE SmallCap
Remuneration of highest paid Executive Director compared with growth in underlying diluted earnings per
share
2018
2017
2016
2015
2014
2013
2012
2011(1)
2010 (1)
2009 (1)
Annual change - underlying diluted EPS
(pence)
Salary, pensions and benefi ts (£000)
Annual performance bonus (£000)
Short-term remuneration (£000)
Share schemes (£000)
14%
562
448
1,010
889
Actual bonus as a percentage of the max
LTIP vesting as a percentage of the max
ESOS vesting as a percentage of the max
91%
100%
-
7%
11%
(7)%
13%
18%
15%
16%
13%
512
392
904
109
492
429
921
183
492
97
589
318
907
471
287
758
728
439
263
702
691
355
210
565
781
399
268
667
534
1,486
1,393
1,346
1,201
381
256
637
124
761
88% 100%
23% 100% 100% 100% 100% 100%
5%
380
77
457
90
547
30%
15%
47% 100% 100% 100% 100% 100% 100% 100%
-
45%
-
100% 100% 100%
40%
-
60%
CEO total remuneration (£000)
1,899
1,013
1,104
(1) 2009-2011 represent the remuneration of former Executive Chairman, Tim Harris. 2012-2018 represent Nick Henry’s remuneration.
62
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Percentage change in CEO’s remuneration
The table below shows the percentage change in salary, benefi ts and annual bonus earned between the year ended 31 December
2017 and the year ended 31 December 2018 for the Chief Executive Offi cer compared to the average earnings of all of the Group’s
other UK employees. The Committee chose the Group’s UK employees for pay comparison with the Chief Executive Offi cer as the most
meaningful comparator group.
E
C
N
A
N
R
E
V
O
G
2018
2017
% change
Salary
Chief Executive Offi cer (£000)
UK employee average (£000)
Benefi ts
Chief Executive Offi cer (£000)
UK employee average (£000)
Annual bonus
Chief Executive Offi cer (£000)
UK employee average (£000)
Average number of UK employees
Relative importance of remuneration (unaudited)
Total employee remuneration
Total dividends paid
492
39
14
1
448
8
1,631
2018
£m
141
15
447
37
14
1
391
10.5
1,572
2017
£m
125
14
10.1
5.4
-
-
14.6
( 24.0)
3.75
change
£m
16
1
Interests in shares
The interests of Directors and their connected persons in ordinary shares as at 31 December 2018, including any interests in share
options and shares provisionally awarded under the LTIP and ESOS are as follows:
Beneficial
number
Unvested LTIP
number
Unvested
deferred
bonus shares
Vested but
unexercised
share options
ESOS
number
13,000
228,942
39,158
-
3,150
-
124,417
81,793
22,770
-
-
13,243
8,882
-
-
-
161,438
69,961
-
-
Exercised
during
the year
number
At
31 December
2017
number
-
26,314
-
-
-
5,000
198,669
36,503
-
-
Malcolm Paul
Nick Henry
Stuart Kilpatrick
Fergus Graham
Justin Atkinson
(1)
Between 31 December 2018 and 1 8 March 2019, there were no changes to the Directors’ shareholdings other than a sale of 2,750 shares by Nick Henry on
14 March 2019;
(2)
No Director has an interest in the preference shares of the Company, or in the shares of any subsidiary or associated undertaking;
(3)
The Directors’ interests stated above include any shares held by their connected persons ; and
(4) Aedamar Cominsky, David Moorhouse and Michael Salter had no interests in ordinary shares as at 31 December 2018.
Against the 200% of salary guideline and based on the share price and prevailing base salary levels as at 31 December 2018, Nick
Henry held shares equivalent to 807% of his base salary, Stuart Kilpatrick held shares equivalent to 219% of his base salary, and Fergus
Graham held no shares .
63
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Directors’ remuneration report continued
Executive Directors’ interest in options over shares
At 31 December 2018
number
Exercise price
Date from
which exercisable
Expiry date
Nick Henry
Stuart Kilpatrick
Total
56,753
49,105
48,305
7,275
161,438
32,808
32,274
4,879
69,961
231,399
410p
522p
567p
1,409p
522p
567p
1,409p
19.03.13
30.03.14
09.04.15
10.04.17
30.03.14
09.04.15
10.04.17
19.03.20
30.03.21
09.03.22
10.04.24
30.03.21
09.03.22
10.04.24
All options relate to the 2005 ESOS scheme. The 2005 ESOS expired in April 2015 and was not renewed. The last awards were made
on 10 April 2014. Options over 26,314 (2017: 20,138) shares were exercised by Nick Henry during the year and gains made of
£277,744 (2017: £181,235). As at 1 8 March 2019, being the last practical date prior to the publication of this report, there were no
changes to Directors’ options under the ESOS.
Executive Directors’ interest in share awards
Nick
Henry
Stuart
Kilpatrick
LTIP
LTIP
LTIP
LTIP
Deferred Bonus
Deferred Bonus
LTIP
LTIP
LTIP
LTIP
Deferred Bonus
Deferred Bonus
Fergus Graham
LTIP
Total
1 January
2018
number
Granted
during year
number
Vest ing during
year
number
Laps ing
during year
number
31 December
2018
number
45,433
48,950
34,728
-
7,984
-
137,095
30,473
32,832
23,292
-
5,355
-
91,952
-
-
229,047
-
-
-
40,739
-
5,259
45,998
-
-
-
25,669
-
3,527
29,196
22,770
22,770
97,964
(7,469)
-
-
-
-
-
(7,469)
(5,009)
-
-
-
-
-
(5,009)
-
-
(12,478)
(37,964)
-
-
-
-
-
(37,964)
(25,464)
-
-
-
-
-
(25,464)
-
-
(63,428)
-
48,950
34,728
40,739
7,984
5,259
137,660
-
32,832
23,292
25,669
5,355
3,527
90,675
22,770
22,770
251,105
Vesting date
6 April 2018
6 April 2019
6 April 2020
6 April 2021
9 March 2020
4 April 2021
6 April 2018
6 April 2019
6 April 2020
6 April 2021
9 March 2020
4 April 2021
6 April 2021
A two-year holding period applies to awards granted after the 2018 AGM. The schemes above are not tax-advantaged for HM Revenue
and Customs purposes. As at 1 8 March 2019, being the last practical date prior to the publication of this report, there were no changes
to the Executive Directors’ interest in LTIP and Deferred Bonus Share awards.
Sourcing of shares and dilution
The Remuneration Committee has regard to the limits on dilution advised by the Investment Association and contained in the relevant
share plan rules and reviews the number of shares committed and headroom available under share incentive schemes in accordance
with these dilution limits.
On vesting, the awards of shares under the LTIP are satisfi ed by the shares held by the James Fisher and Sons plc Employee Share
Trust (Trust). During the year the Trust purchased 38,373 ordinary shares on the open market (2017: 71,243) and at 31 December
2018 the Trust held 28,630 ordinary shares (2017: 27,620).
64
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Share price during the fi nancial year
The middle market price of one ordinary share in the Company during the fi nancial year ranged from 1,360p to 1,940p and at
31 December 2018 was 1,734p.
Non-Executive Directors’ remuneration
E
C
N
A
N
R
E
V
O
G
Charles Rice2
Malcolm Paul3
Aedamar Comiskey4
David Moorhouse5
Michael Salter
Justin Atkinson6
Total fees
20181
£000
82
156
57
57
52
55
2017
£000
237
71
51
51
51
-
(1) The fee increase for 2019 was 2.5% (2% in 2018).
(2) Charles Rice stepped down from the Board on 3 May 2018.
(3) Malcolm Paul became Chairman of the Board on 3 May 2018. The Chairman’s fee was set at £200,000 per annum on appointment.
(4)
The amount received in 2018 includes a pro rated payment in respect of Chairman of the Remuneration Committee fee of £8,000 per annum.
(5) The amount received in 2018 includes a pro rated payment in respect of Senior Independent Director fee of £8,000 per annum.
(6)
Justin Atkinson was appointed to the Board on 1 February 2018. The amount received in 2018 includes a pro rated payment in respect of Chairman of the
Audit Committee fee of £12,000.
Shareholder voting
The Company is committed to on-going shareholder dialogue and takes an active interest in voting outcomes. Where there are
substantial votes against resolutions including in relation to Directors’ remuneration, the Company seeks to understand the reasons for
any such vote and will report any actions in response to it. Voting at the 2018 AGM was by a show of hands. The following table refl ects
the valid proxy voting instructions received for the 2018 AGM in respect of the Directors’ remuneration report for the year ended
31 December 2017 and the remuneration policy:
For
Against
Total votes cast (excluding withheld votes)
Total votes withheld
Total votes cast (including withheld votes)
3 May 2018 Annual General Meeting
Remuneration Report
3 May 2018 Annual General Meeting
Remuneration Policy
Total number of
votes
% of votes cast
Total number of
votes
% of votes cast
39,508,991
1,242,303
40,751,294
621,275
41,372,569
96.95%
3.05%
40,478,854
872,992
41,351,846
20,723
41,372,569
97.89%
2.11%
Implementation of the remuneration policy for 2018
With effect from 1 January 2019, Nick Henry’s base salary was £492,000, Stuart Kilpatrick’s base salary was £317,750, and Fergus
Graham’s base salary was £281,875.
Malcolm Paul’s fee as Chairman, which was set at £200,000 p.a. from the 2018 AGM was increased to £205,000 with effect from
1 January 2019.
Any increases are consistent with the guidelines applied to the general workforce this year.
The maximum bonus opportunity continues to be set at 100% of base salary. The proposed fi nancial target levels have been set to be
challenging and appropriately demanding. 70% of the annual bonus will be determined by adjusted profi t before tax targets and 30%
by personal objectives. The targets are commercially sensitive but it is envisaged that disclosure of the targets and performance against
targets will be set out in the 2019 Directors’ remuneration report.
65
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Directors’ remuneration report continued
Awards under the 2015 LTIP will be granted to the Executive Directors over shares worth 125% of base salary with 70% of the award
based on EPS growth targets and 30% based on relative TSR targets. The performance period for the EPS element of the award will
run for three years from 1 January 2019 with 25% of the EPS element of the award vesting for EPS growth at least equal to the RPI
increase over the period plus 9% rising on a straight-line basis to maximum vesting for EPS growth greater than or equal to 18% in
excess of the RPI increase over the vesting period. For the TSR element (measured against the constituents of the FTSE 250 excluding
investment trusts), the performance period will be three years from 6 April 2019 with full vesting if the Company ranks in the upper
quartile and 25% of the TSR element vesting for ranking median with straight-line vesting in between.
Aedamar Comiskey
Chair of the Remuneration Committee
25 February 2019
66
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Directors’ report
The Directors submit their report together with the audited
fi nancial statements of the Group for the year ended
31 December 2018.
The Strategic report, which includes our Sustainability report
on page 26, Board of Directors biographies on page s 36 and
37, the Corporate governance report on page 38, the Audit
Committee report on page 45, the Nominations Committee
report on page 50 and the Directors’ Remuneration report on
page 52 all form part of the Directors’ report. The Directors’
report and Strategic report comprise the ‘management reports’
and the Directors’ report fulfi ls the requirements of the Corporate
Governance Statement for the purposes of the Financial Services
Authority’s Disclosure and Transparency Rules.
We have chosen, in accordance with the Act, to include certain
information in our Strategic report or fi nancial statements that
would otherwise be required to be disclosed in the Directors’
report. This is as follows:
Subject matter
Location
Page
Important events since the fi nancial
year end
Strategic report
Likely future developments in the
business
Strategic report
Research and development
Sustainability report
Employee involvement
Sustainability report
Greenhouse gas emissions
Sustainability report
Use of fi nancial instruments
Note 26
6
3
32
29
31
102
Going concern
The Group’s business activities, together with the factors likely
to affect its future development, the fi nancial position of the
Group and a description of the principal risks and uncertainties
are set out in the Strategic report on pages 22 to 25. The
Group’s primary sources of funding are bilateral revolving credit
facilities with a core group of banks, which totalled £225m at
31 December 2018 (2017: £225m). Compliance with banking
covenants is tested half yearly for the ratio of net debt: earnings
before interest, tax, depreciation and amortisation (Ebitda) and
interest cover. No breaches in covenants occurred during the year.
The Group meets its day-to-day working capital requirements
through operating cash fl ows, with borrowings in place to fund
acquisitions and capital expenditure. The Group had £92.4m
(2017: £71.8m) of undrawn committed facilities as at 31
December 2018. The Group’s forecasts and projections, taking
account of reasonable changes in trading performance, confi rm
that the Group should be able to operate within the level of its
current banking facilities.
The Group uses cash fl ow forecasts derived from budgets,
forecasts and medium-term planning to identify headroom under
the covenant tests. After making enquiries, and having evaluated
E
C
N
A
N
R
E
V
O
G
the on-going trading of the businesses, the Directors have
reasonable expectation that the Group has adequate resources
to continue to operate for a period considered to be at least 12
months from the date of this report. Accordingly, the Directors
consider it appropriate to continue to adopt the going concern
basis of accounting in preparing the Annual Report and Accounts.
Results and dividends
The Group’s profi t after tax for the fi nancial year was £45.3m
(2017 restated: £39.4m). The results are shown fully in the
consolidated fi nancial statements on pages 77 to 120, and
discussed in the Financial review on pages 18 to 20.
The Directors recommend a fi nal dividend of 21.3p per share
(2017: 19.3p) making a total dividend of 31.6p per share for
the year (2017: 28.7p). Subject to shareholders’ approval at the
AGM, the fi nal dividend will be paid on 10 May 2019 to ordinary
shareholders who are on the register at the close of business on
5 April 2019.
Post balance sheet events
On 8 January 2019 the Group acquired the entire share capital
of Martek Holdings Limited (Martek), for an initial net cash
consideration of £9.0m, with potential further consideration of up
to £1.0m subject to a profi t target for the year ending 28 February
2020.
On 8 January 2019 we announced that the Group had acquired
60% of the share capital of Murjan Al-Sharq (MSMC), for an initial
cash consideration of £4.1m, with potential further consideration
of up to £4.5m subject to a profi t target for the year ending
31 December 2019.
Share capital
Details of the share capital of the Company and the shares held
by the Company’s Employee Share Trust are set out in note 27 on
page 108. The rights and obligations attaching to the shares are
set out in the Company’s Articles of Association (Articles). Copies
of the Articles may be obtained from the Group General Counsel
and Company Secretary, and are available for inspection at the
Company’s registered offi ce during normal business hours.
As at 31 December 2018, 50,263,911 ordinary shares of 25p
each have been issued, are fully paid up and are listed on the
London Stock Exchange.
67
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Directors’ report continued
Substantial shareholders
Information provided to the Company pursuant to the Financial
Conduct Authority’s (FCA) Disclosure Guidance and Transparency
Rules (DTRs) is published on a Regulatory Information Service
and on the Company’s website. As at 31 December 2018, the
following information has been received, in accordance with
DTR5, from holders of notifi able interests in the Company’s
issued share capital.
Ordinary
shares
held
Nature
%
of holding
Rowland Hart Jackson*
8,824,413
17.56
Direct
Schroders plc
4,970,246
Therapia Investments Ltd *
3,732,221
Standard Life Aberdeen plc
3,178,455
Montanaro Asset Management
Limited
1,855,000
* Trustee of the Sir John Fisher Foundation
9.88
7.43
6.32
3.68
Indirect
Direct
Indirect
Direct
Purchase of own shares
At the 2018 AGM, the Company was given authority to purchase
up to 2,510,027 of its ordinary shares until the date of its next
AGM. No purchases were made during the year and up to the date
of this report by the Company.
Directors
The biographies of the current Board of Directors are set out on
pages 3 6 and 3 7. Changes in the composition of the Board are
provided in more detail in the Nominations Committee report on
page 50.
Powers of Directors
The powers of the Directors are determined by the Company’s
Articles, the Companies Act 2006 and in certain circumstances
(including in relation to the issuing or buying back by the
Company of its shares) the authority given by the Company
in general meeting. The Directors will be seeking to renew the
authorities granted to them in prior years at the forthcoming
AGM. The Directors are authorised to issue and allot ordinary
shares, to disapply statutory pre-emption rights and to make
market purchases of the Company’s shares. Any shares
purchased may be cancelled or held as treasury shares.
Directors’ and offi cers’ liability insurance
The Company maintains an appropriate level of directors’ and
offi cers’ liability insurance. The Directors and offi cers of the
Company and its subsidiaries are indemnifi ed against liability to
third parties and, to the extent permitted by section 236 of the
Companies Act 2006, the Directors may be granted indemnity by
the Company pursuant to the Company’s Articles.
68
Directors’ confl ict of interest
Under the Companies Act 2006, a director must avoid a situation
where a direct or indirect confl ict of interest may occur. The Board
has adopted established procedures to address the management
of any potential and actual confl icts of interest. A review of
confl icts which have been authorised has been undertaken by the
Board, which concluded that any confl icts had been appropriately
authorised, no circumstances existed which would necessitate
that any prior authorisation be revoked or amended, and the
authorisation process continued to operate effectively.
Additional information for shareholders
The Articles may only be amended by a special resolution at a
general meeting of the shareholders.
No political donations were made during the year. Details of
the Group’s involvement in charitable initiatives in set out on
page s 33 and 35.
Details of Group subsidiaries can be found on pages 121 to 123.
Signifi cant agreements – change of control
The Company is a guarantor of all of the Group’s bilateral bank
facilities which upon a change of control could be withdrawn.
The Singapore Submarine Rescue Service Agreement made between
James Fisher Singapore Pte Ltd. and First Response Marine Pte Ltd.
dated 17 October 2008 may terminate upon a change of control of
the Company or James Fisher Singapore Pte Ltd.
The rules of the Company’s LTIP, ESOS and Sharesave schemes
set out the consequences of a change of control on the rights of
participants under those schemes. Participants are generally able
to exercise their options on a change of control, provided that the
relevant performance conditions have been satisfi ed.
There are no agreements between the Company and its Directors
or employees providing for compensation for loss of offi ce or
employment (whether through resignation, purported redundancy
or otherwise) that arise in the event of a change of control of
the Company.
Information required by UK listing rule 9.8.4
There are no disclosures to be made under listing rule 9.8.4.
Disclosure of information to the Auditor
Each Director in offi ce at the date of approval of this Directors’
report confi rms that:
•
•
so far as the Director is aware, there is no relevant audit
information of which the Company’s auditors is unaware; and
the Director has taken all the steps that he/she ought to have
taken as a director to make him/herself aware of any relevant
audit information and to establish that the Company’s auditor
is aware of that information.
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Directors’ responsibility statement
The Directors are responsible for preparing the Annual Report
and Accounts and the Group and parent Company fi nancial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and parent
Company fi nancial statements for each fi nancial year. Under that
law they are required to prepare the Group fi nancial statements
in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU) and
applicable law and have elected to prepare the parent Company
fi nancial statements on the same basis.
Under company law the Directors must not approve the fi nancial
statements unless they are satisfi ed that they give a true and
fair view of the state of affairs of the Group and parent Company
and of their profi t or loss for that period. In preparing each of the
Group and parent Company fi nancial statements, the Directors
are required to:
•
•
•
•
•
select suitable accounting policies and then apply them
consistently;
make judgements and estimates that are reasonable, relevant
and reliable;
state whether they have been prepared in accordance with
IFRSs as adopted by the EU;
assess the Group and parent Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern; and
use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to
cease operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are suffi cient to show and explain the parent
Company’s transactions and disclose with reasonable accuracy
at any time the fi nancial position of the parent Company and
enable them to ensure that its fi nancial statements comply with
the Companies Act 2006. They are responsible for such internal
control as they determine is necessary to enable the preparation
of fi nancial statements that are free from material misstatement,
whether due to fraud or error, and have general responsibility for
taking such steps as are reasonably open to them to safeguard
the assets of the Group and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic report, Directors’ report,
Directors’ Remuneration report and corporate governance
statement that complies with that law and those regulations.
E
C
N
A
N
R
E
V
O
G
The Directors are responsible for the maintenance and
integrity of the corporate and fi nancial information included
on the Company’s website. Legislation in the UK governing the
preparation and dissemination of fi nancial statements may differ
from legislation in other jurisdictions.
Responsibility statement of the Directors in respect
of the annual fi nancial report
Each of the Directors confi rms that to the best of his or her
knowledge:
•
•
the fi nancial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair
view of the assets, liabilities, fi nancial position and profi t or
loss of the Company and the undertakings included in the
consolidation taken as a whole; and
the Strategic report and Directors’ report includes a fair
review of the development and performance of the business
and the position of the issuer 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 consider the Annual Report and Accounts, taken
as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group’s
position and performance, business model and strategy.
Signed on behalf of the Board of Directors
N P Henry
Chief Executive Offi cer
25 February 2019
S C Kilpatrick
Group Finance Director
69
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Independent auditor’s report
1 Our opinion is unmodifi ed
We have audited the fi nancial statements of James Fisher and Sons plc ( the Company ) for the year ended 31 December 2018 which
comprise the Consolidated Income Statement, the Consolidated Statement of Other Comprehensive Income, the Consolidated and
Company Statement of Financial Position, the Consolidated and Company Cash Flow Statement, the Consolidated Statement of
Changes in Equity, the Company Statement of Changes in Equity and the related notes, including the accounting policies in note 31.
In our opinion:
•
•
•
•
the fi nancial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at
31 December 2018 and of the Group’s profi t for the year then ended;
the Group fi nancial statements have been properly prepared in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU);
the parent Company fi nancial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as
applied in accordance with the provisions of the Companies Act 2006; and
the fi nancial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards
the Group fi nancial statements, Article 4 of the IAS Regulation.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) ( ‘ISAs (UK) ’) and applicable law. Our
responsibilities are described below. We believe that the audit evidence we have obtained is a suffi cient and appropriate basis for
our opinion. Our audit opinion is consistent with our report to the Audit Committee.
We were fi rst appointed as auditor by the Directors on 30 June 2008. The period of total uninterrupted engagement is for the 11
fi nancial years ended 31 December 2018. We have fulfi lled our ethical responsibilities under, and we remain independent of the
Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities.
No non-audit services prohibited by that standard were provided.
2 Key audit matters: including our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most signifi cance in the audit of the fi nancial
statements and include the most signifi cant assessed risks of material misstatement (whether or not due to fraud) identifi ed by us,
including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the
efforts of the engagement team. We summarise below the key audit matters in arriving at our audit opinion above, together with our
key audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These
matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our
audit of the fi nancial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion,
and we do not provide a separate opinion on these matters.
The impact of uncertainties due to UK exiting the European Union on our audit
Refer to page 20 ( Financial review), page 11 4 (accounting policy) and page 89 (fi nancial disclosures)
The risk: Unprecedented levels of uncertainty
All audits assess and challenge the reasonableness of estimates, in particular as described in revenue recognition and valuation of
intangible assets, below, and related disclosures and the appropriateness of the going concern basis of preparation of the fi nancial
statements (see below). All of these depend on assessments of the future economic environment and the Group’s future prospects
and performance.
In addition, we are required to consider the other information presented in the Annual Report including the principal risks disclosure
and the viability statement and to consider the Directors’ statement that the Annual Report and fi nancial statements taken as a
whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position
and performance, business model and strategy.
Brexit is one of the most signifi cant economic events for the UK and at the date of this report its effects are subject to
unprecedented levels of uncertainty of outcomes, with the full range of possible effects unknown.
70
T
R
O
E
P
C
E
N
R
A
C
N
G
R
E
E
T
V
A
O
R
G
T
S
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Our response:
We developed a standardised fi rm-wide approach to the consideration of the uncertainties arising from Brexit in planning and
performing our audits. Our procedures included:
1.
2.
Our Brexit knowledge – We considered the Directors’ assessment of Brexit-related sources of risk for the Group’s business
and fi nancial resources compared with our own understanding of the risks. We considered the Directors’ plans to take action to
mitigate the risks.
Sensitivity analysis – When addressing valuation of intangible assets and other areas that depend on forecasts, we compared
the Directors’ analysis to our assessment of the full range of reasonably possible scenarios resulting from Brexit uncertainty and,
where forecasts cash fl ows are required to be discounted, considered adjustments to discount rates for the level of remaining
uncertainty.
3.
Assessing transparency – As well as assessing individual disclosures as part of our procedures on revenue recognition and
valuation of intangible assets we considered all of the Brexit related disclosures together, including those in the Strategic report,
comparing the overall picture against our understanding of the risks.
Our results: We found the resulting estimates and related disclosures of Brexit and disclosures in relation to going concern to
be acceptable. However, no audit should be expected to predict the unknowable factors or all possible future implications for a
company and this is particularly the case in relation to Brexit.
Revenue recognition and long -term contracts £561.5m (2017 restated: £499.3m), Contract assets £46.9m (2017: £87.8m)
and Contract Liabilities £5.2m (2017:£5.0m) Risk vs 2017: ◄►
Refer to page 46 (Audit Committee report), page 11 6-118 (accounting policy) and page 85 (fi nancial disclosures)
The risk: Subjective estimates
The contractual arrangements that underpin the measurement and recognition of revenue by the Group can be complex, with
signifi cant subjective estimates involved in the assessment of current and future fi nancial performance. In particular, where services
rendered are provided through long-term contracts and are not completed at the balance sheet date and output measures cannot
be estimated reliably, revenue is recognised in proportion to the stage of completion of the transaction measured by reference to an
input measure, such as physical progress, attributable man hours and costs incurred measured against the expected outcome. The
stage of completion is estimated by the Group and includes certain judgements as contracts may run over a number of accounting
periods and include forecasts in relation to future costs including labour and materials which are not yet known. In addition
variations and claims can lead to uncertainty over the total contract price.
The effect of these matters is that, as part of our risk assessment, we determined that revenue recognition in relation to long -term
contracts have a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than our materiality
for the fi nancial statements as a whole, and possibly many times that amount.
Our response: Our audit procedures included:
1.
2.
3.
4.
5.
6.
Methodology choice: assessing whether the revenue recognition methodology applied was consistent with accounting
standards.
Test of details: selecting the contracts for substantive audit procedures based on qualitative factors, such as commercial
complexity and life of contract, and quantitative factors, such as fi nancial signifi cance and profi tability that we considered to be
indicative of risk.
Input assessment: agreeing, for the sample above, observable inputs used in the calculations of costs incurred, such as direct
costs, labour charges and document delivery records to source data, including customer acceptance acts and countersigned
agreements, including testing the allocation of costs incurred to contracts.
Historical comparisons: assessing the reliability of the Group’s forecasts of costs to complete by considering historical accuracy
of their forecasts on completed contracts.
Enquiries: discussions with operational management for the sample above regarding their expectations for contracts, and
comparing these to the forecasts used for the accounting.
Our business understanding: assessing, for the sample above, whether the subjective estimates made by the Group over the
stage of completion and estimates over cost to complete, including specifi c output measures and costs incurred, are consistent
with our understanding of contract activities and performance. This involved comparing assumptions to a variety of information
as appropriate, including correspondence with customers, historical outcomes and operational management views. For
contracts in the sample above that have signifi cant estimation in the total contract price due to variations and claims, assessing
the assumptions made by the Directors in light of the Group’s historical experience on similar contracts and correspondence
with customers.
7.
Assessing transparency: assessing the appropriateness of the Group’s disclosures in respect of revenue from construction
contracts.
71
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Independent auditor's report continued
Our results: We found revenue recognition from construction contracts acceptable (2017: acceptable).
Valuation of intangible assets, £197.5m (2017: £199.2m) and Parent Company investment in subsidiaries, £ 400.1m (2017:
£409.2m) 2017: Risk vs 2017: ◄►
Refer to page 47 (Audit Committee report), page 11 4 (accounting policy) and page 89 (fi nancial disclosures)
The risk: Forecast based valuation
Goodwill and intangible assets in the Group and Parent Company investment in subsidiaries are the most quantitatively signifi cant
items on the Group and Parent Company balance sheet respectively, and their recoverability is subjective due to the inherent
uncertainty involved in forecasting and discounting future cash fl ows.
This is considered to be one of the areas that had the greatest effect on our overall Group and Parent Company audits due to their
materiality in the context of the Group and Parent Company fi nancial statements and due to the inherent signifi cant judgements
involved in the impairment test.
The effect of these matters is that, as part of our risk assessment for audit planning purposes, we determined that the recoverable
amount of intangibles had a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than
our materiality for the fi nancial statements as a whole. In conducting our fi nal audit work, we reassessed the degree of estimation
uncertainty in respect of the carrying amount of intangible assets to be less than that materiality. The fi nancial statements (note 12)
disclose the sensitivity estimated by the Group.
Our response: Our audit procedures included:
1.
2.
Historical comparisons: assessing the reasonableness of the budgets by considering the historical accuracy of previous
forecasts.
Our sector experience: assessing whether assumptions used, in particular those relating to forecast revenue growth, profi t
margins and maintenance capital expenditure, refl ect our knowledge of the business and industry, including known or probable
changes in the business environment.
3.
Benchmarking assumptions: challenging the key inputs used in the impairment test, in particular discount rates, by comparing
them to externally derived data, including available sources for comparable companies.
4. Sensitivity analysis: performing breakeven analysis on the key assumptions noted above.
5.
Our sector experience: challenging the Group’s assessment of the recoverability of capitalised development costs by
assessing the technical feasibility and future profi tability of the related assets, including comparing the Group’s estimates to our
understanding of project progress and performance to date. Where the headroom is considered lower, we have obtained the
discounted cash fl ow workings from the Group and challenged the inputs within these.
6.
Assessing transparency: assessing whether the Group’s disclosures about the sensitivity of the outcome of the impairment
assessment to changes in key assumptions refl ected the risks inherent in the valuation of goodwill.
Our results: We found the resulting estimate of the recoverable amount of Group intangible assets and Parent Company
investments in subsidiaries to be acceptable. (2017: acceptable).
Group operations in overseas jurisdictions and where uncertain legislation can exist, Risk vs 2017: ◄►
Refer to page 47 (Audit Committee report), page 11 7 (accounting policies) and page 1 0 9 (fi nancial disclosures).
The risk: breach of laws and regulations resulting in omitted exposures.
The Group is a multinational and has operations in a number of less developed markets, including countries in South America, South
East Asia and Africa. Operating in these territories presents increased operational and fi nancial risks both due to the need to comply
with potentially uncertain regulatory and legislative environments, including legislation relating to tax and where local regulations in
those markets are different from laws and regulations that govern the Group as a whole. Breaches of compliance or inappropriate
assumptions over provisioning for the uncertain legislation could have a signifi cant effect on the results and fi nancial position of the
Group and is one of the judgemental areas our audit is focused on.
Our response: Our audit procedures included:
1.
Inspection and enquiry: considering the Group’s exposure to potential breaches of legislation by making appropriate enquiry
of the Group in relation to compliance with laws and regulations and the existence and status of any known or suspected
signifi cant legal matters. We inspected reports returned by overseas locations to identify actual and potential non-compliance
and heightened risks to compliance with laws and regulations, both those specifi c to the Group’s business and those relating to
the conduct of the business generally. Where signifi cant or potential matters were identifi ed we made enquiries of the Group’s
legal counsel and legal representative.
2.
Test of detail: for any matters or potential matters identifi ed review of underlying correspondence and documentation, including
formal confi rmations and discussion with external lawyers, where relevant.
72
E
C
N
A
N
R
E
V
O
G
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
3.
Sector experience: where we considered heightened risks were present, using our experience of procedures adopted by
multinational groups to provide assurance that their global components comply with laws and regulations, we undertook
additional procedures in relation to the Group’s oversight of control of such arrangements which included inspecting the bi-
annual self-reporting by local management and testing a sample of reported 3rd party relationships against Group policy. We
inspected underlying agreements as considered necessary.
4.
Assessing transparency: assessing the appropriateness of the Group’s disclosures in respect of provisions, and contingencies
disclosed.
Our results: We considered the contingency disclosures made to be acceptable (2017: acceptable).
3 Our application of materiality and an overview of the scope of our audit
The materiality for the Group fi nancial statements as a whole was set at £2.5m (2017: £2.2m), determined with reference to a
benchmark of Group profi t before tax of £55.9m (2017 restated: £47.3m), of which it represents 4.5% (2017: 4.7%).
The materiality for the Parent company fi nancial statements as a whole was set at £0.7m (2017: £0.7m), determined with reference
to a benchmark of gross assets of £426.2m (2017: £436m), of which it represents 0.2% (2017: 0.2%).
We report to the Audit Committee any corrected or uncorrected identifi ed misstatements exceeding £0.1m (2017: £0.1m), in
addition to other identifi ed misstatements that warranted reporting on qualitative grounds.
Of the Group’s 122 (2017: 188) reporting components, we subjected 19 (2017: 34) to full scope audits for Group purposes.
The number of reporting components appears to have reduced signifi cantly in the period, however this is due to some larger
divisions reporting as a sub consolidated unit.
We conducted reviews of fi nancial information (including enquiry) at a further 5 (2017: 12) non-signifi cant components to obtain
further coverage. These components were not individually fi nancially signifi cant enough to require an audit for Group reporting
purposes.
The components within the scope of our work accounted for the following percentages of the Group’s results:
Number of
components
Group revenue
before tax Group total assets
Group profi t
Audits for Group reporting purposes
19 (2017: 36)
83% (2017: 86%)
77% (2017: 77%)
74% (2017: 84%)
Reviews of fi nancial information
(including enquiry)
5 (2017: 12)
8% (2017: 4%)
3% (2017: 9%)
6% (2017: 6%)
Total
24 (2017: 48)
91% (2017: 90%)
80% (2017: 86%)
80% (2017: 90%)
The remaining 9% of total Group revenue, 20% of Group profi t before tax and 20% of total Group assets is represented by 103
reporting components, none of which individually represented more than 10% of any of total Group revenue, Group profi t before
tax or total Group assets. For these residual components, we performed analysis at an aggregated Group level to re-examine our
assessment that there were no signifi cant risks of material misstatement within these.
The Group audit team instructed component auditors as to the signifi cant areas to be covered, including the relevant risks detailed
above and the information to be reported back. The Group audit team approved the component materialities, which ranged from
£0.1m to £1.5m (2017: £0.1m to £1.0m), having regard to the mix of size and risk profi le of the Group across the components. The
work on 17 (2017: 15) of the 24 (2017: 48) components was performed by component auditors and the rest, including the audit of
the Parent Company, was performed by the Group audit team.
Telephone conferences were held with these component auditors at the locations which were not audited directly by the Group
audit team. At these conferences, the fi ndings reported to the Group audit team were discussed in more detail, and any further work
required by the Group audit team was then performed by the component auditor.
4 We have nothing to report on going concern
The Directors have prepared the fi nancial statements on the going concern basis as they do not intend to liquidate the Company or
the Group or to cease their operations, and as they have concluded that the Company’s and the Group’s fi nancial position means
that this is realistic. They have also concluded that there are no material uncertainties that could have cast signifi cant doubt over
their ability to continue as a going concern for at least a year from the date of approval of the fi nancial statements ( the going concern
period ).
Our responsibility is to conclude on the appropriateness of the Directors’ conclusions and, had there been a material uncertainty
related to going concern, to make reference to that in this audit report. However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were
73
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Independent auditor's report continued
made, the absence of reference to a material uncertainty in this auditor’s report is not a guarantee that the Group and the Company
will continue in operation.
In our evaluation of the Directors’ conclusions, we considered the inherent risks to the Company’s business model, including the
impact of a disorderly Brexit and analysed how those risks might affect the Company’s fi nancial resources or ability to continue
operations over the going concern period. We evaluated those risks and concluded that they were not signifi cant enough to require
us to perform additional audit procedures.
Based on this work, we are required to report to you if:
•
we have anything material to add or draw attention to in relation to the Directors’ statement in note 1 to the fi nancial statements
on the use of the going concern basis of accounting with no material uncertainties that may cast signifi cant doubt over the
Company’s use of that basis for a period of at least twelve months from the date of approval of the fi nancial statements; or
•
the related statement under the Listing Rules set out on page 68 is materially inconsistent with our audit knowledge.
We have nothing to report in these respects, and we did not identify any going concern as a key audit matter.
5 We have nothing to report on the other information in the Annual Report
The Directors are responsible for the other information presented in the Annual Report together with the fi nancial statements. Our
opinion on the fi nancial statements does not cover the other information and, accordingly, we do not express an audit opinion or,
except as explicitly stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our fi nancial statements audit work,
the information therein is materially misstated or inconsistent with the fi nancial statements or our audit knowledge. Based solely on
that work we have not identifi ed material misstatements in the other information.
Strategic report and Directors’ report
Based solely on our work on the other information:
• we have not identifi ed material misstatements in the Strategic report and the Directors’ report;
•
•
in our opinion the information given in those reports for the fi nancial year is consistent with the fi nancial statements; and
in our opinion those reports have been prepared in accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our fi nancial statements audit, we have nothing material to add or draw attention to in
relation to:
•
•
•
the Directors’ confi rmation within the viability statement that they have carried out a robust assessment of the principal risks
facing the Group, including those that would threaten its business model, future performance, solvency and liquidity;
the principal risks and uncertainties disclosures describing these risks and explaining how they are being managed and
mitigated; and
the Directors’ explanation in the viability statement of how they have assessed the prospects of the Group, over what period
they have done so and why they considered that period to be appropriate, and their statement as to whether they have a
reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the
period of their assessment, including any related disclosures drawing attention to any necessary qualifi cations or assumptions.
Under the Listing Rules we are required to review the viability statement. We have nothing to report in this respect.
Our work is limited to assessing these matters in the context of only the knowledge acquired during our fi nancial statements
audit. As we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent
with judgements that were reasonable at the time they were made, the absence of anything to report on these statements is not a
guarantee as to the Group’s and Company’s longer-term viability.
Corporate governance disclosures
We are required to report to you if:
•
we have identifi ed material inconsistencies between the knowledge we acquired during our fi nancial statements audit and the
Directors’ statement that they consider that the Annual Report and fi nancial statements taken as a whole is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Group’s position and performance,
business model and strategy; or
74
T
R
O
E
P
C
E
N
R
A
C
N
G
R
E
E
T
V
A
O
R
G
T
S
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
•
the section of the Annual Report describing the work of the Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
We are required to report to you if the Corporate Governance Statement does not properly disclose a departure from the eleven
provisions of the UK Corporate Governance Code specifi ed by the Listing Rules for our review.
We have nothing to report in these respects.
6 We have nothing to report on the other matters on which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if, in our opinion:
•
•
adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or
the parent Company fi nancial statements and the part of the Directors’ remuneration report to be audited are not in agreement
with the accounting records and returns; or
•
certain disclosures of Directors’ remuneration specifi ed by law are not made; or
• we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
7 Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 69, the Directors are responsible for: the preparation of the fi nancial
statements including being satisfi ed that they give a true and fair view; such internal control as they determine is necessary to
enable the preparation of fi nancial statements that are free from material misstatement, whether due to fraud or error; assessing
the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern;
and using the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the fi nancial statements as a whole are free from material
misstatement, whether due to fraud or other irregularities (see below), or error, and to issue our opinion in an auditor’s report.
Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK)
will always detect a material misstatement when it exists. Misstatements can arise from fraud, other irregularities or error and are
considered material if, individually or in aggregate, they could reasonably be expected to infl uence the economic decisions of users
taken on the basis of the fi nancial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
Irregularities – ability to detect
We identifi ed areas of laws and regulations that could reasonably be expected to have a material effect on the fi nancial statements
from our general sector experience, through discussion with the Directors and other management (as required by auditing
standards), and from inspection of the Group’s regulatory and legal correspondence and discussed with Directors the policies and
procedures regarding compliance with laws and regulations. We communicated identifi ed laws and regulations throughout our team
and remained alert to any indications of non-compliance throughout the audit. This included communication from the Group to
component audit teams of relevant laws and regulations identifi ed at Group level.
The potential effect of these laws and regulations varies considerably.
Firstly, the Group is subject to laws and regulations that directly affect the fi nancial statements including fi nancial reporting
legislation (including related companies legislation), distributable profi ts legislation and taxation legislation and we assessed the
extent of compliance with these laws and regulations as part of our procedures on the related fi nancial statement items.
Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a
material effect on amounts or disclosures in the fi nancial statements, for instance through the imposition of fi nes or litigation or the
loss of the Group’s licence to operate. We identifi ed the following areas as those most likely to have such an effect: health and safety,
anti-bribery, employment law and certain aspects of company legislation recognising the multinational and operational nature of the
Group’s activities. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations
to enquiry of the Directors and other management and inspection of regulatory and legal correspondence, if any. Through these
procedures we identifi ed transactions with increased risk of non-compliance and considered the effect as part of our procedures
on the related fi nancial statement items. Further detail in respect of Group operations in overseas jurisdictions with uncertain
legislation is set out in the key audit matter disclosures in section 2.
75
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Independent auditor's report continued
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material
misstatements in the fi nancial statements, even though we have properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-compliance with laws and regulations (irregularities) is from the events
and transactions refl ected in the fi nancial statements, the less likely the inherently limited procedures required by auditing
standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of irregularities, as these
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible
for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.
8 The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for
the opinions we have formed.
Mike Barradell (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 St Peters Square
Manchester
M2 3AE
25 February 2019
76
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Consolidated income statement
for the year ended 31 December 2018
Year ended
31 December 2018
Year ended
31 December 2017
restated
Before
separately
disclosed
items
£m
Separately
disclosed
items
£m
561.5
(394.9)
166.6
(106.4)
1.9
–
62.1
(6.0)
56.1
(10.5)
45.6
45.2
0.4
45.6
–
–
–
–
–
(0.7)
(0.7)
–
(0.7)
0.4
(0.3)
(0.3)
–
(0.3)
Notes
4
15
5
4
7
8
10
10
Before
separately
disclosed
items
£m
499.3
(346.6)
152.7
(100.3)
1.7
–
54.1
(5.5)
48.6
(8.3)
40.3
39.8
0.5
40.3
Separately
disclosed
items
£m
–
–
–
–
–
(1.3)
(1.3)
–
(1.3)
0.4
(0.9)
(0.9)
–
(0.9)
Total
£m
561.5
(394.9)
166.6
(106.4)
1.9
(0.7)
61.4
(6.0)
55.4
(10.1)
45.3
44.9
0.4
45.3
pence
89.5
88.9
Total
£m
499.3
(346.6)
152.7
(100.3)
1.7
(1.3)
52.8
(5.5)
47.3
(7.9)
39.4
38.9
0.5
39.4
pence
77.5
76.9
Group revenue
Cost of sales
Gross profit
Administrative expenses
Share of post -tax results of joint ventures
Acquisition related income and (expense)
Operating profit
Net finance expense
Profit before taxation
Income tax
Profit for the year
Attributable to:
Owners of the Company
Non-controlling interests
Earnings per share
Basic
Diluted
Consolidated statement of other comprehensive income
for the year ended 31 December 2018
Profit for the year
Items that will not be classified to the income statement
Actuarial (loss)/gain in defined benefit pension schemes
Fair value adjustment to financial asset
Tax on items that will not be reclassified
Items that may be reclassified to the income statement
Exchange differences on foreign currency net investments
Effective portion of changes in fair value of cash flow hedges
Effective portion of changes in fair value of cash flow hedges in joint ventures
Net changes in fair value of cash flow hedges transferred to income statement
Deferred tax on items that may be reclassified
Total comprehensive income for the year
Owners of the Company
Non-controlling interests
Year ended
31 December
2018
£m
Year ended
31 December
2017
restated
£m
45.3
39.4
Notes
21
26
15
8
(1.1)
(0.9)
0.2
(1.8)
1.3
(4.0)
0.2
0.1
0.5
(1.9)
41.6
41.2
0.4
41.6
3.2
–
(0.2)
3.0
(7.5)
7.8
(0.2)
(0.9)
(1.0)
(1.8)
40.6
40.1
0.5
40.6
77
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Consolidated and Company statement of fi nancial position
at 31 December 2018
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investment in joint ventures
Investments in subsidiaries
Other investments
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Provisions and liabilities and charges
Current tax
Loans and borrowings
Net current assets
Total assets less current liabilities
Non-current liabilities
Provisions and liabilities and charges
Retirement benefit obligations
Cumulative preference shares
Loans and borrowings
Deferred tax liabilities
Net assets
Equity
Called up share capital
Share premium
Treasury shares
Other reserves
Retained earnings
Equity attributable to owners of the Company
Non-controlling interests
Total equity
Group
Company
31 December
2018
£m
Notes
31 December
2017
restated
£m
31 December
2018
£m
31 December
2017
£m
12
13
14
15
16
16
9
17
18
19
20
8
24
20
21
27
24
9
27
171.4
26.1
145.4
8.2
–
1.4
3.7
174.6
24.6
132.5
7.1
–
2.3
4.3
356.2
345.4
44.9
186.2
18.6
249.7
47.2
199.3
20.3
266.8
–
–
4.5
–
400.1
1.4
2.9
408.9
–
4.7
15.4
20.1
(132. 2)
(133.5)
(11.2)
(2.6)
(8.7)
(10. 1)
(153.6)
96.1
452.3
(6.0)
(16.1)
(0.1)
(122.0)
(1.7)
(145.9)
306.4
12.6
25.9
(0.4)
(0.9)
267.8
305.0
1.4
306.4
(4.8)
(8.5)
(0.4)
(147.2)
119.6
465.0
(11.5)
(19.8)
(0.1)
(152.3)
(2.3)
(186.0)
279.0
12.6
25.7
(0.4)
1.0
238.9
277.8
1.2
279.0
–
0.1
(15.5)
(26.6)
(6.5)
402.4
–
(10.5)
(0.1)
(121.9)
–
(132.5)
269.9
12.6
25.9
(0.4)
(0.5)
232.3
269.9
–
269.9
–
–
5.3
–
409.2
2.3
2.8
419.6
–
6.2
12.2
18.4
(10.8)
–
(1.4)
(11.9)
(24.1)
(5.7)
413.9
(13.7)
(0.1)
(152.1)
–
(165.9)
248.0
12.6
25.7
(0.4)
2.5
207.6
248.0
–
248.0
The consolidated fi nancial statements were approved by the Board of Directors on 2 5 February 2019 and signed on its behalf by:
N P Henry
Chief Executive Offi cer
78
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Consolidated and Company cash fl ow statement
for the year ended 31 December 2018
Profit before tax
Adjustments to reconcile profit before tax to net cash flows
Depreciation and amortisation
Acquisition costs charged
Loss/(profit) on disposal of fixed assets
Transferred from hedging reserve to income statement
Adjustment to provision for contingent consideration
Net finance expense/(income)
Share of post -tax results of joint ventures
Share based payments
Decrease/(increase) in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Defined benefit pension cash contributions less service cost
Cash generated from operations
Cash outflow from acquisition costs
Income tax (payments)/receipts
Cash flow from operating activities
Investing activities
Dividends from joint venture undertakings
Proceeds from the disposal of property, plant and equipment
Finance income
Acquisition of subsidiaries, net of cash acquired
Net loans advanced to subsidiaries
Investment in joint ventures and other investments
Acquisition of property, plant and equipment
Development expenditure
Cash flows (used in)/from investing activities
Financing activities
Proceeds from the issue of share capital
Finance costs
Net purchase of own shares by Employee Share Ownership Trust
Capital element of finance lease repayments
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Dividends paid to minority interest
Cash flows (used in)/from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at 1 January
Net foreign exchange differences
Cash and cash equivalents at 31 December
Group
Company
31 December
2018
£m
Notes
31 December
2017
restated
£m
55.4
31.0
0.7
0.3
0.1
(2.6)
6.0
( 1.9)
1.4
2.6
12.5
( 4.0)
(5.3)
96.2
(0.2)
(8.6)
87.4
1.4
2.8
0.2
(10.2)
–
(2.1)
(32.4)
(6.1)
(46.4)
0.2
(4.9)
(0.9)
(0.2)
121.1
(142.5)
(14.9)
(0.3)
(42.4)
(1.4)
20.3
(0.3)
18.6
47.3
28.7
1.0
(0.9)
(1.5)
(1.7)
5.5
(1.7)
0.9
(2.3)
(43.1)
1.9
(4.4)
29.7
(0.8)
(8.0)
20.9
1.4
2.6
0.4
(2.6)
–
(0.6)
(23.1)
(4.2)
(26.1)
0.1
(5.3)
(0.9)
(0.1)
95.4
(70.4)
(13.5)
(0.4)
4.9
(0.3)
21.8
(1.2)
20.3
23
11
25
31 December
2018
£m
31 December
2017
£m
39.7
53.8
1.1
–
–
0.1
–
(1.8)
–
1.4
–
2.0
(3.7)
(5.1)
33.7
–
(0.3)
33.4
–
–
6.7
–
10.9
–
(0.3)
–
17.3
0.2
(4.6)
(1.0)
–
–
(27.5)
(14.9)
–
(47.8)
2.9
12.2
0.3
15.4
1.1
0.2
–
(1.5)
–
(0.3)
–
0.9
–
1.6
(8.9)
(4.0)
42.9
(0.2)
1.9
44.6
–
–
4.8
–
(46.1)
–
(0.9)
–
(42.2)
0.1
(4.4)
(0.9)
–
21.3
–
(13.5)
–
2.6
5.0
7.4
(0.2)
12.2
79
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Consolidated statement of changes in equity
for the year ended 31 December 2018
Capital
Attributable to equity holders of parent
Share
capital
£m
Share
premium
£m
Retained
earnings
£m
Other
reserves
£m
Treasury
shares
£m
Total
shareholders
equity
£m
Non-
controlling
interests
£m
2.8
–
2.8
(1.8)
–
–
–
–
–
–
–
1.0
(1.9)
–
–
–
–
–
–
–
–
(0.6)
–
(0.6)
–
–
–
–
(1.5)
0.5
–
1.2
(0.4)
–
–
–
–
–
(0.7)
0.5
–
0.2
257.3
(5.9)
251.4
40.1
(13.5)
0.9
(0.3)
(1.5)
0.5
0.2
–
277.8
41.2
(14.9)
–
1.4
0.2
(0.7)
(0.2)
0.2
–
1.0
–
1.0
0.5
(0.4)
–
0.1
–
–
–
–
1.2
0.4
(0.3)
0.1
–
–
–
–
–
–
Total
equity
£m
258.3
(5.9)
252.4
40.6
(13.9)
0.9
(0.2)
(1.5)
0.5
0.2
–
279.0
41.6
(15.2)
0.1
1.4
0.2
(0.7)
(0.2)
0.2
–
(0.9)
(0.4)
305.0
1.4
306.4
Translation
reserve
£m
Hedging
reserve
£m
6.5
(7.5)
(1.0)
1.3
0.3
(3.7)
5.7
2.0
(3.2)
(1.2)
Total
£m
2.8
(1.8)
1.0
(1.9)
(0.9)
12.5
–
12.5
25.6
–
25.6
–
–
–
–
–
–
0.1
–
12.6
–
–
–
–
–
–
–
–
–
12.6
–
–
–
–
–
–
0.1
–
25.7
–
–
–
–
–
–
–
0.2
–
25.9
217.0
(5.9)
211.1
41.9
(13.5)
0.9
(0.3)
–
–
–
(1.2)
238.9
43.1
(14.9)
–
1.4
0.2
–
(0.7)
–
(0.2)
267.8
At 1 January 2017 as reported
Implementation of IFRS 15
At 1 January 2017 restated
Total comprehensive income restated
Contributions by and distributions to owners:
Ordinary dividends paid
Share based payments
Acquisition
Purchase of shares by ESOT
Sale of shares by ESOT
Arising on the issue of shares
Transfer
Balance at 31 December 2017
Total comprehensive income
Contributions by and distributions to owners:
Ordinary dividends paid
Acquisition
Share based payments
Tax effect of share based payments
Purchase of shares by ESOT
Sale of shares by ESOT
Arising on the issue of shares
Transfer
At 31 December 2018
Other reserve movements
Other reserves
At 1 January 2017
Other comprehensive income
At 31 December 2017
Other comprehensive income
At 31 December 2018
80
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Company statement of changes in equity
for the year ended 31 December 2018
At 1 January 2017
Total comprehensive income
Contributions by and distributions to owners:
Ordinary dividends paid
Share based compensation
Purchase of shares by ESOT
Sale of shares by ESOT
Arising on the issue of shares
Transfer on disposal of shares
At 31 December 2017
Total comprehensive income
Contributions by and distributions to owners:
Ordinary dividends paid
Share based compensation
Tax effect of share based compensation
Purchase of shares by ESOT
Sale of shares by ESOT
Arising on the issue of shares
Transfer on disposal of shares
At 31 December 2018
Capital
Share
capital
£m
12.5
Share
premium
£m
25.6
–
–
–
–
–
0.1
–
12.6
–
–
–
–
–
–
–
–
12.6
–
–
–
–
–
0.1
–
25.7
–
–
–
–
–
–
0.2
–
25.9
Retained
earnings
£m
166.9
54.5
Hedging
reserves
£m
(4.6)
7.1
(13.5)
0.9
–
–
–
(1.2)
207.6
38.9
(14.9)
1.4
0.2
–
(0.7)
–
(0.2)
–
–
–
–
–
–
2.5
(3.0)
–
–
–
–
–
–
–
Treasury
shares
£m
(0.6)
–
–
–
(1.5)
0.5
–
1.2
(0.4)
–
–
–
–
(0.7)
0.5
–
0.2
Total
equity
£m
199.8
61.6
(13.5)
0.9
(1.5)
0.5
0.2
–
248.0
35.9
(14.9)
1.4
0.2
(0.7)
(0.2)
0.2
–
232.3
(0.5)
(0.4)
269.9
81
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Notes to the fi nancial statements
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 fi nancial statements comprise the fi nancial statements of the Company, its subsidiary undertakings and its interest in associates and jointly controlled
entities (together the Group), for the year ended 31 December 2018. The Company and consolidated fi nancial statements were approved for publication by the
Directors on 25 February 2019.
The Group and Company fi nancial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), adopted by the European
Union (adopted IFRS). The fi nancial statements are prepared on a going concern basis and on an historical cost basis, modifi ed to include revaluation to fair value
of certain fi nancial 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 fi nancial statements. The profi t after taxation in the Company was £39.6m (2017: £54.2m). The Group and Company fi nancial
statements are presented in Sterling and all values are rounded to the nearest million pounds (£m) except when otherwise indicated.
The consolidated fi nancial 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.
2 Alternative performance measures
The Group uses a number of alternative (non-Generally Accepted Accounting Practice (non-GAAP)) performance measures which are not defi ned 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 signifi cant in size or non-underlying in nature. The
following non-GAAP measures are referred to in this Annual Report and Accounts.
2.1 Underlying operating profi t and underlying profi t before taxation
Underlying operating profi t is defi ned as operating profi t before separately disclosed items ( note 5) which include acquisition related income and expense, asset
impairments, adjustments to contingent consideration or other non-recurring items.
2.2 Underlying earnings per share
Underlying earnings per share (EPS) is calculated as the total of underlying profi t before tax, less income tax, but excluding the tax impact on separately disclosed
items included in the calculation of underlying profi t less profi t 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 10.
2.3 Capital employed and Return on Capital Employed (ROCE)
Capital employed is defi ned 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 defi ned as the underlying operating profi t,
divided by average capital employed. The key performance indicator, Group post-tax ROCE, is defi ned as underlying operating profi t, less notional tax, calculated by
multiplying the effective tax rate by the underlying operating profi t, divided by average capital employed.
2.4 Cash conversion
Cash conversion is defi ned as the ratio of operating cash fl ow to underlying operating profi t. Operating cash fl ow 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 defi ned as the underlying operating profi t 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.
Underlying operating profit and underlying profit before taxation
Operating profit
Separately disclosed items before taxation
Underlying operating profit
Net finance expense
Underlying profit before taxation
2018
£m
61.4
0.7
62.1
(6.0)
56.1
2017
£m
52.8
1.3
54.1
(5.5)
48.6
82
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
2 Alternative performance measures continued
Return on capital employed for the Group is calculated as follows:
Capital employed
Net assets
Less cash and short-term deposits
Plus borrowings
Capital employed
Underlying operating profit
Notional tax at the effective tax rate
Average capital employed
Return on average capital employed
Cash conversion
Cash generated from operations
Dividends from joint venture undertakings
Operating cash flow
Underlying operating profit
Cash conversion
Underlying Ebitda
Underlying operating profit
Underlying depreciation and amortisation
Underlying Ebitda
Underlying dividend cover
Underlying earnings per share
Dividends per share
Underlying dividend cover (times)
2018
£m
306.4
(18.6)
132.2
420.0
62.1
(11.6)
50.5
413.1
12.2%
96.2
1.4
97.6
62.1
157%
62.1
28.4
90.5
pence
89.5
31.6
2.8
2017
£m
279.0
(20.3)
152.8
411.5
54.1
(9.3)
44.8
374.8
12.0%
29.7
1.4
31.1
54.1
57%
54.1
26.7
80.8
pence
78.7
28.7
2.7
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. Their principal activities are set out in the Strategic report on pages 10 to 17 .
The Board assess the performance of the segments based on underlying operating profi t. 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 benefi t 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.
Year ended 31 December 2018
Segmental revenue
– point in time
– over time
Inter-segmental sales
Revenue
Underlying operating profit
Acquisition costs
Amortisation of acquired intangibles
Adjustment to provision for contingent consideration
Operating profit
Net finance expense
Profit before tax
Income tax
Profit for the year
Assets and liabilities
Segmental assets
Investment in joint ventures
Total assets
Segmental liabilities
Other segmental information
Capital expenditure
Depreciation and amortisation
Marine
Support
£m
Specialist
Technical
£m
Offshore
Oil
£m
Tankships
£m
Corporate
£m
279.7
1.0
(1.0)
279.7
29.0
(0.5)
(1.2)
2.6
29.9
252.5
4.2
256.7
(73.9)
182.8
8.6
11.3
49.5
111.1
(1.0)
159.6
20.9
(0.2)
(0.5)
–
20.2
145.9
3.0
148.9
(48.4)
100.5
5.2
5.7
62.7
–
(1.2)
61.5
5.1
–
(0.9)
–
4.2
130.0
1.0
131.0
(12.7)
118.3
6.4
10.4
–
60.7
–
60.7
9.9
–
–
–
9.9
44.3
–
44.3
(16.0)
28.3
13.2
3.6
–
–
–
–
(2.8)
–
–
–
(2.8)
25.0
–
25.0
(148.5)
(123.5)
–
–
Total
£m
391.9
172.8
(3.2)
561.5
62.1
(0.7)
(2.6)
2.6
61.4
(6.0)
55.4
(10.1)
45.3
597.7
8.2
605.9
(299.5)
306.4
33.4
31.0
83
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Notes to the fi nancial statements continued
3 Segmental information continued
Year ended 31 December 2017
Segmental revenue
– point in time
– over time
Implementation of IFRS
Segmental revenue restated
Inter-segmental sales
Revenue
Underlying operating profit
Implementation of IFRS 15
Underlying operating profit restated
Acquisition costs
Adjustment to provision for contingent consideration
Amortisation of acquired intangibles
Operating profit
Net finance expense
Profit before tax
Income tax
Profit for the year
Assets and liabilities
Segmental assets restated
Investment in joint ventures
Total assets
Segmental liabilities restated
Other segmental information
Capital expenditure
Depreciation and amortisation
Geographic information
Marine
Support
£m
Specialist
Technical
£m
Offshore
Oil
£m
Tankships
£m
Corporate
£m
237.5
–
–
237.5
(1.2)
236.3
24.5
0.8
25.3
(0.7)
(1.4)
0.9
24.1
234.4
4.1
238.5
(77.8)
160.7
15.7
10.2
40.5
115.8
(6.1)
150.2
(0.6)
149.6
21.1
(2.3)
18.8
(0.3)
(0.3)
0.8
19.0
179.1
3.0
182.1
(57.6)
124.5
2.8
5.0
56.6
–
–
56.6
(0.2)
56.4
3.8
(0.2)
3.6
–
(0.3)
–
3.3
131.4
–
131.4
(13.9)
117.5
2.0
9.6
–
57.0
–
57.0
–
57.0
8.8
–
8.8
–
–
–
8.8
32.2
–
32.2
(8.1)
24.1
2.4
3.3
–
–
–
–
–
–
(2.4)
–
(2.4)
–
–
–
(2.4)
28.0
–
28.0
(175.8)
(147.8)
0.3
0.6
Total
£m
334.6
172.8
(6.1)
501.3
(2.0)
499.3
55.8
(1.7)
54.1
(1.0)
(2.0)
1.7
52.8
(5.5)
47.3
(7.9)
39.4
605.1
7.1
612.2
(333.2)
279.0
23.2
28.7
Geographical revenue is determined by the location in which the product or service is provided. Where customers receive the product or service in one geographical
location for use or shipment to another it is not practicable for the Group to identify this and the revenue is attributed to the location of the initial shipment. The
geographical allocation of segmental assets and liabilities is determined by the location of the attributable business unit.
United Kingdom
Rest of Europe
Middle East, Africa
& Americas
Asia Pacific
Total
2018
£m
2017
£m
2018
£m
2017
£m
2018
£m
2017
£m
2018
£m
2017
£m
2018
£m
2017
£m
Segmental revenue
– point in time
– over time
Inter-segmental sales
Group revenue
Segmental assets
Investment in joint ventures
Segmental liabilities
92.4
133.0
(3.0)
222.4
391.5
0.1
(240.7)
150.9
72.1
138.2
(2.0)
208.3
412.0
0.2
(282.5)
129.7
43.5
11.5
–
55.0
53.9
1.3
(6.5)
48.7
34.7
9.0
–
43.7
54.5
0.2
(5.9)
48.8
124.6
107.1
1.7
(0.2)
126.1
76.6
0.9
(24.5)
53.0
0.7
–
107.8
68.2
(0.2)
(17.8)
50.2
131.4
26.6
–
158.0
75.7
5.9
(27.8)
53.8
120.7
18.8
–
139.5
70.4
6.9
(27.0)
50.3
391. 9
172.8
(3.2)
561.5
597.7
8.2
(299.5)
306.4
334.6
166.7
(2.0)
499.3
605.1
7.1
(333.2)
279.0
84
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
4 Revenue and operating charges
Revenue disclosed in the income statement comprises of goods and services of £450.4m (2017: £388.8m), rental income of £35.4m (2017: £34.9m) and
construction contract income of £75.7m (2017: £75.6m).
Operating charges refl ected within operating profi t include:
Research and development costs
Net foreign currency (gains)/ losses
Cost of inventories recognised as an expense
Impairment losses on amortised cost financial assets
Operating lease rentals:
property
vessels
other
Auditor’s remuneration comprises the following:
Audit of the financial statements of the parent
Local statutory audits of subsidiaries
Total fees payable to Group auditor
2018
£m
0.5
(0.6)
80.3
1.2
4.7
7.2
0.5
12.4
2018
£m
0.2
0.6
0.8
2017
£m
0.7
1.1
82.6
1.8
5.4
7.1
0.5
13.0
2017
£m
0.1
0.6
0.7
5 Separately disclosed items
In order for a better understanding of the underlying performance of the Group certain items are disclosed separately ( note 2). Separately disclosed items are as
follows:
Acquisition related income and (expense):
Costs incurred in acquiring businesses
Amortisation of acquired intangibles
Adjustment to provision for contingent consideration
Separately disclosed items before taxation
Tax on separately disclosed items
2018
£m
2017
£m
(0.7)
(2.6)
2.6
(0.7)
0.4
(0.3)
(1.0)
(2.0)
1.7
(1.3)
0.4
(0.9)
The adjustment to the provision for contingent consideration is based on the most recent business forecasts and relates to a business acquired in 2015.
6 Group employee costs
(a) Staff costs including Directors’ remuneration were as follows:
Wages and salaries
Social security costs
Pension costs
Share based compensation
The monthly average number of persons including Executive Directors employed by the Group was:
Technical and administrative
Seafarers
2018
£m
124.5
10.8
4.3
1.4
141.0
2018
Number
2,604
262
2,866
2017
£m
110.6
9.6
3.7
0.9
124.8
2017
Number
2,460
264
2,724
85
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Notes to the fi nancial statements continued
6 Group employee costs continued
The Directors’ remuneration and their interest in shares of the Company are set out in the Directors ’ remuneration report on pages 52 to 66. The amount charged
against operating profi t in the year in respect of Director short-term remuneration was £ 2.1m (2017: £1.4m) in respect of emoluments and £0.1m (2017: £0.1m)
in respect of pension contributions to defi ned contribution schemes. The charge for share based payments in respect of Directors was £0.8m (2017: £0.6m) and
aggregate gains under the exercise of options was £0.3m (2017: £0.2m).
(b) Compensation of key management to the Group
Short-term employee benefits
Share based payments
Key management personnel include the Board of Directors of the Company and other senior members of the management team.
7 Net fi nance expense
Finance income:
Interest receivable on short-term deposits
Finance expense:
Bank loans and overdrafts
Interest element of cash flow hedges
Net interest on pension obligations
Unwind of discount on contingent consideration
Net finance expense
8 Taxation
(a) The tax charge is based on profi t for the year and comprises:
Current tax:
UK corporation tax
Overseas tax
Adjustment in respect of prior years:
UK corporation tax
Overseas tax
Total current tax
Deferred tax:
Origination and reversal of temporary differences:
UK corporation tax
Overseas tax
Total taxation on profit for the year
2018
£m
2.4
0.8
3.2
2017
£m
2.3
0.6
2.9
2018
£m
2017
£m
0.2
(5.4)
–
(0.5)
(0.3)
(6.2)
(6.0)
2018
£m
(2.2)
(9.3)
1.0
0.1
(10.4)
(0.3)
0.6
(10.1)
0.4
(4.4)
(0.5)
(0.7)
(0.3)
(5.9)
(5.5)
2017
£m
(3.1)
(6.8)
(0.2)
0.8
(9.3)
0.7
0.7
(7.9)
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.
(b)
Income tax on comprehensive income
Current tax:
Current tax on foreign exchange losses on internal loans
Current tax on contributions to defined benefit pension schemes
Current tax relating to derivatives
Current tax relating to share based payments
Deferred tax:
Deferred tax on actuarial loss on defined benefit pension schemes
Deferred tax relating to derivatives
Deferred tax relating to share based payments
86
2018
£m
2017
£m
(0.3)
0.8
–
0.3
(0.6)
0.5
(0.1)
0.6
0.5
0.8
0.1
0.1
(1.0)
(1.0)
(0.1)
(0.6)
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
8 Taxation continued
(c) 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. Profi ts
for these activities are not subject to corporation tax. The tax on the Group’s profi t before tax differs from the theoretical amount that would arise using the rate
applicable under UK corporation tax rules as follows:
Profit before tax
Tax arising from interests in joint ventures
Tax on profit at UK statutory tax rate of 19% (2017: 19.25%)
Tonnage tax relief on vessel activities
Expenses not deductible for tax purposes
Over provision in previous years
Current tax
Deferred tax
Higher tax rates on overseas income
Research and development relief
Non-taxable income
Impact of change of rate
Losses not recognised
Other
2018
£m
55.4
0.1
55.5
10.5
(1.5)
0.3
(1.1)
0.5
2.2
(0.4)
(0.9)
(0.2)
0.8
–
10.2
2017
£m
47.3
0.2
47.5
9.1
(1.0)
0.2
(0.6)
–
0.8
(0.3)
(0.3)
0.1
0.8
(0.7)
8.1
The effective rate on profi t before income tax from continuing operations is 18.2% (2017: 16.9%). The effective income tax rate on the underlying profi t before tax is
18.7% (2017: 17.2%). Over provision in previous years arose due to the timing in which certain transactions have been accounted for, rather than any correction.
At 31 December 2018, the Group had unrecognised tax losses of £11.1m (2017: £10.2m). A deferred tax asset has not been recognised in respect of these losses
due to the uncertainty relating to their future recovery.
9 Deferred tax
Deferred tax at 31 December relates to the following:
Deferred tax assets
Retirement benefits
Share based payments
Derivative financial instruments
Losses carried forward
Temporary differences
Deferred tax liabilities
Property, plant and equipment
Intangible assets
Derivative financial instruments
Net deferred income tax asset
Group
Company
2018
£m
2017
£m
2018
£m
2017
£m
2.3
1.0
0.2
3.6
1.8
8.9
(3.1)
(3.8)
–
(6.9)
2.0
2.8
0.9
–
3.1
2.3
9.1
(2.7)
(4.0)
(0.4)
(7.1)
2.0
1.4
1.0
0.1
–
0.3
2.8
0.1
–
–
0.1
2.9
1.9
0.9
–
–
0.4
3.2
0.1
–
(0.5)
(0.4)
2.8
Deferred tax assets and liabilities included in the consolidated balance sheet have been analysed according to the net exposures in each tax jurisdiction.
87
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Notes to the fi nancial statements continued
9 Deferred tax continued
The gross movement on the deferred income tax account is as follows:
Balance at 1 January
Charged to comprehensive income
Charged to equity
Credited to income statement
Transfer from current taxation
Exchange adjustments
Acquisition of subsidiaries
Balance at 31 December
Group
Company
2018
£m
2.0
(0.1)
(0.1)
0.3
–
–
(0.1)
2.0
2017
£m
3.5
(2.0)
(0.1)
1.4
0.4
(0.1)
(1.1)
2.0
2018
£m
2.8
–
(0.1)
0.2
–
–
–
2.9
2017
£m
4.3
(1.7)
(0.1)
0.3
–
–
–
2.8
At 31 December 2018, the Group has no recognised deferred income tax liability (2017: £nil) in respect of taxes that would be payable on the unremitted earnings
of certain of the Company’s subsidiaries. No deferred income tax liability has been recognised in respect of this temporary timing difference due to the foreign
profi ts exemption, the availability of double taxation relief and the ability to control the remittance of earnings.
Deferred tax credited to the income statement in the year ending 31 December 2018 relates to the following:
Deferred tax assets
Deferred tax liabilities:
Property, plant and equipment
Intangible assets
Other items
Deferred income tax credit
Group
2018
£m
(0.8)
0.4
(0.4)
0.5
(0.3)
2017
£m
(0.5)
(0.5)
(0.2)
(0.2)
(1.4)
10 Earnings per share
Basic earnings per share is calculated by dividing the profi t 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 profi t 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
Basic weighted average number of shares
Potential exercise of share based payment schemes
Diluted weighted average number of shares
Underlying earnings per share
2018
Number of
shares
2017
Number of
shares
50,210,684
50,163,144
299,374
391,640
50,510,058
50,554,784
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).
Profit attributable to owners of the Company
Adjustments:
Separately disclosed items
Tax on separately disclosed items
Underlying profit attributable to owners of the Company
Earnings per share
Basic earnings per share
Diluted earnings per share
Underlying basic earnings per share
Underlying diluted earnings per share
88
2018
£m
44.9
0.7
(0.4)
45.2
pence
89.5
88.9
90.0
89.5
2017
£m
38.9
1.3
(0.4)
39.8
pence
77.5
76.9
79.3
78.7
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
11 Dividends paid and proposed
Declared and paid during the year
Equity dividends on ordinary shares:
Final dividend for 2017
Interim dividend for 2018
2018
pence per
share
2017
pence per
share
2018
£m
2017
£m
19.3
10.3
17.6
9.4
9.7
5.2
14.9
8.8
4.7
13.5
A fi nal dividend in respect of the year ended 31 December 2018 of 21.3p per share (2017: 19.3p) is proposed.
12 Goodwill
Group
At 1 January 2017
Acquisitions
Transfer to other intangibles
Exchange differences
At 31 December 2017
Acquisitions
Transfer
Exchange differences
At 31 December 2018
Marine
Support
£m
66.2
15.6
(1.3)
(0.3)
80.2
(2.9)
2.1
(1.5)
77.9
Specialist
Technical
£m
41.7
–
–
–
41.7
1.0
(2.1)
0.2
40.8
Offshore
Oil
£m
46.8
–
(4.3)
(0.1)
42.4
–
–
–
42.4
Tankships
£m
10.3
–
–
–
10.3
–
–
–
10.3
Total
£m
165.0
15.6
(5.6)
(0.4)
174.6
(1.9)
–
(1.3)
171.4
Goodwill acquired through business combinations has been allocated for impairment testing purposes to cash generating units (CGU’s) of which there are 13 in
total. The recoverable amount of these units has been assessed based on value in use calculations using cash projections based on 3 year plans approved by the
Board together with projections derived from those plans for the next 2 years. A terminal value of cash fl ows beyond that date has been calculated at a growth rate
in line with management’s long-term expectations for the relevant market, using a growth rate in the range 2.0% to 4.6%. The key assumptions used in the value in
use calculations include gross margin, discount rate, infl ation of overheads and payroll and growth rates. For presentation purposes the CGU’s are grouped into the
appropriate division.
Growth estimates are based on the levels achieved in the current and historic periods adjusted for management expectations of the impact of management actions
and the future development of the relevant market. Short-term growth rates for turnover are based on the 3 year plan and allow for signifi cant growth in project
based activities. These growth rates vary depend ent on the market conditions in which the CGU operates. Direct costs are expected to increase in line with turnover.
Discount rates applied to cash projections refl ect management’s estimate of the return required from the business to refl ect the cost of funds plus an appropriate
risk premium. This has been determined with reference to the CGU’s weighted average cost of capital (WACC) adjusted for risks specifi c to each CGU’s cash fl ows.
The range of pre-tax discount rates used was 5.7% to 6.7% (2017: 6.1% to 7.1%). Effective tax rates of between nil% and 35% (2017: nil% and 30%) dependent
upon which jurisdiction the operations are forecast to take place in have been assumed as estimated long-term rates.
Based on the value in use calculations set out above no impairment of the goodwill of the cash generating units was identifi ed.
Sensitivity to impairment
The Directors have carried out sensitivity analysis to determine the impact on the carrying value of goodwill of a change in discount rate, revenue growth and
terminal value growth and identifi ed that the discount rate would need to be increased to 12% to give rise to an impairment to goodwill of any of the CGU’s.
89
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Notes to the fi nancial statements continued
13 Other intangible assets
Group
Cost:
At 1 January 2017
Additions
Transfer
At 31 December 2017
Additions
Exchange differences
At 31 December 2018
Amortisation:
At 1 January 2017
Charge for the period
At 31 December 2017
Charge for the period
At 31 December 2018
Net book value at 31 December 2018
Net book value at 1 January 2018
Net book value at 1 January 2017
Development
costs
£m
Intellectual
property
£m
Customer
relationships
£m
14.2
4.2
–
18.4
6.1
0.2
24.7
5.0
2.3
7.3
3.0
10.3
14.4
11.1
9.2
5.1
–
2.7
7.8
0.8
–
8.6
1.0
0.5
1.5
1.0
2.5
6.1
6.3
4.1
7.2
4.1
2.9
14.2
0.5
(0.1)
14.6
5.0
2.0
7.0
2.0
9.0
5.6
7.2
2.2
Total
£m
26.5
8.3
5.6
40.4
7.4
0.1
47.9
11.0
4.8
15.8
6.0
21.8
26.1
24.6
15.5
Customer relationships relate to items acquired through business combinations which are amortised over their estimated useful economic life. Development costs
relate to new products developed by the Group and intellectual property represents amounts purchased or acquired relating to technology in the Group’s activities.
Based on an assessment of value in use, there are no indications that any impairment of these assets has arisen during the period.
14 Property, plant and equipment
Group
Cost:
At 1 January 2017
Additions
Transfer
Reclassifications
Acquisitions
Disposals
Exchange differences
At 31 December 2017
Additions
Transfer
Reclassifications
Acquisitions
Disposals
Exchange differences
At 31 December 2018
Depreciation and impairment:
At 1 January 2017
Provided during the year
Reclassifications
Disposals
Exchange differences
At 31 December 2017
Provided during the year
Transfer
Disposals
Exchange differences
At 31 December 2018
Net book value at 31 December 2018
Net book value at 1 January 2018
Net book value at 1 January 2017
90
Assets
under
construction
£m
Freehold
& leasehold
property
£m
Plant &
equipment
£m
Vessels
£m
76.4
4.6
–
0.7
–
(0.5)
(0.5)
80.7
16.1
–
–
–
(4.7)
0.2
92.3
52.2
4.9
0.3
(0.4)
(0.3)
56.7
5.2
–
(3.4)
0.2
58.7
33.6
24.0
24.2
2.1
8.6
–
(1.6)
–
(0.1)
(0.1)
8.9
3.5
–
(7.4)
–
(0.2)
–
4.8
–
–
–
–
–
–
–
–
–
–
4.8
8.9
2.1
32.9
1.1
–
(0.7)
–
–
(0.3)
33.0
0.8
–
–
–
–
0.4
34.2
7.2
1.6
0.1
(0.1)
–
8.8
1.6
–
–
0.1
10.5
23.7
24.2
25.7
168.1
8.9
2.3
1.6
1.7
(3.1)
(2.5)
177.0
13.0
9.7
7.4
0.1
(8.1)
(0.1)
199.0
89.1
16.2
(0.4)
(1.7)
(1.6)
101.6
18.6
2.2
(6.7)
–
115.7
83.3
75.4
79.0
Total
£m
279.5
23.2
2.3
–
1.7
(3.7)
(3.4)
299.6
33.4
9.7
–
0.1
(13.0)
0.5
330.3
148.5
22.7
–
(2.2)
(1.9)
167.1
25.4
2.2
(10.1)
0.3
184.9
145.4
132.5
131.0
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
14 Property, plant and equipment continued
Property, plant and equipment held under leasing arrangements
The carrying value of plant and equipment held under fi nance leases and hire purchase contracts at 31 December 2018 was £0.4m (2017: £0.5m). Included in
vessels are assets with a cost of £6.8m (2017: £6.7m) and accumulated depreciation of £6.7m (2017: £6.3m) which relate to assets held under operating leases.
Included in property, plant and equipment is aggregate interest capitalised of £0.8m (2017: £0.8m).
Company
Cost:
At 1 January 2017
Additions
At 31 December 2017
Additions
At 31 December 2018
Depreciation:
At 1 January 2017
Provided during the year
At 31 December 2017
Provided during the year
At 31 December 2018
Net book value at 31 December 2018
Net book value at 1 January 2018
Net book value at 1 January 2017
Freehold &
leasehold
property
£m
Plant &
equipment
£m
Vessels
£m
9.2
0.6
9.8
–
9.8
5.7
0.6
6.3
0.5
6.8
3.0
3.5
3.5
2.1
0.2
2.3
–
2.3
1.2
0.1
1.3
0.1
1.4
0.9
1.0
0.9
2.7
0.1
2.8
0.3
3.1
1.5
0.5
2.0
0.5
2.5
0.6
0.8
1.2
Total
£m
14.0
0.9
14.9
0.3
15.2
8.4
1.2
9.6
1.1
10.7
4.5
5.3
5.6
15 Investment in subsidiaries, associates and joint arrangements
Details of the Group’s joint ventures and associated undertakings are set out on pages 121 to 123. The Group’s share of the assets, liabilities and trading results of
these joint venture entities at 31 December 2018, which are accounted for under the equity accounting method, are as follows:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Loans to associate
Revenue
Cost of sales
Administrative expenses
Operating profit
Net finance expense
Profit before taxation
Income tax
Profit after tax
Segmental analysis of profit after tax:
Marine Support
Specialist Technical
Movement on investment in joint ventures:
At 1 January
Acquisitions
Profit for the period
Transfer from creditors
Dividends received
Share of fair value losses on cash flow hedges
At 31 December
There are no capital commitments or contingent liabilities in respect of the Group’s interests in joint ventures.
2018
£m
17.0
19.3
(6.1)
(24.0)
2.0
8.2
14.9
(12.4)
(0.6)
1.9
0.3
2.2
(0.3)
1.9
1.5
0.4
1.9
7.1
2.1
1.9
(1.7)
(1.4)
0.2
8.2
2017
£m
25.5
19.0
(16.8)
(22.6)
2.0
7.1
11.5
(9.5)
0.6
2.6
(0.7)
1.9
(0.2)
1.7
1.1
0.6
1.7
6.4
0.6
1.7
–
(1.4)
(0.2)
7.1
91
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Notes to the fi nancial statements continued
16 Financial assets
Other investments
Group
At 1 January
Additions
Fair value adjustment
At 31 December
Company
At 1 January
Additions
Fair value adjustment
At 31 December
2018
£m
2017
£m
2.3
–
(0.9)
1.4
2.3
–
(0.9)
1.4
1.4
0.9
–
2.3
1.4
0.9
–
2.3
Other investments which are in unquoted entities, and held at fair value and subject to annual review include a 17.2% (2017: 17.2%) equity interest in ordinary
shares in SEML De Co-operation Transmanche, an unlisted company incorporated in France, whose main activity is a port and ferry operator. In addition, the Group
has a 50% interest in JFD Domeyer GmbH, a company incorporated in Germany which provides in-service support and aftermarket services to the German navy in
the operation and control of that business and an interest in Britannia’s Gold Limited (BGL). The fair value adjustment relates to the carrying value of BGL.
Investments
Company
Cost
At 1 January 2017
Additions
Disposal
Recapitalisation
Repayments
At 31 December 2017
Additions
Transfer to subsidiary
Disposal
Repayments
At 31 December 2018
Amount provided
At 1 January 2017
At 31 December 2017
At 31 December 2018
Net book value at 31 December 2018
Net book value at 31 December 2017
A list of subsidiary undertakings is included on pages 121 to 123.
17 Inventories
Work in progress
Raw materials and consumables
Finished goods
Subsidiary undertakings
Shares
£m
166.7
0.2
(1.8)
7.4
(0.2)
172.3
0.7
(25.9)
(2.5)
–
144.6
0.4
0.4
0.4
144.2
171.9
Loans
£m
196.7
100.2
–
(7.4)
(52.2)
237.3
72.0
25.9
–
(79.3)
255.9
–
–
–
255.9
237.3
Total
£m
363.4
100.4
(1.8)
–
(52.4)
409.6
72.7
–
(2.5)
(79.3)
400.5
0.4
0.4
0.4
400.1
409.2
Group
2018
£m
5.0
11.9
28.0
44.9
2017
£m
7.2
6.6
33.4
47.2
Inventories are stated net of impairment provisions of £4.0m (2017: £3.1m). During the year £nil (2017: £nil) was charged to the income statement to write down
inventories to net realisable value.
92
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
18 Trade and other receivables
Trade receivables
Amounts owed by group undertakings
Amounts owed by joint venture undertakings
Other non-trade receivables
Contract assets
Prepayments
Group
Company
2018
£m
115.8
–
1.6
14.0
46.9
7.9
186.2
2017
£m
83.9
–
4.3
13.0
87.8
10.3
199.3
2018
£m
2017
£m
–
1.8
–
2. 4
–
0. 5
4.7
–
1.3
–
4.3
–
0.6
6.2
Of the above, other non-trade receivables of £2.5m (2017: £1.1m) are expected to be recovered in more than one year. Retentions relating to construction
contracts included in trade receivables are £0.1m (2017: £0.3m). Included within the trade and other receivables balances is £22.3m (2017: £8.3m) in relation to
construction contracts in progress. The movement in contract assets is due to the phasing of projects with regards to the timing of milestone payments.
19 Trade and other payables
Trade payables
Amounts owed to group undertakings
Amounts owed to joint venture undertakings
Taxation and social security
Other payables
Accruals
Contract liabilities
20 Provisions and other liabilities and charges
At 1 January 2017
Acquisitions
Paid
(Credited)/charged to income statement
Unwinding of discount
At 1 January 2018
Fair value adjustment (note 23)
Paid
Credited to income statement
Foreign exchange
Unwinding of discount
At 31 December 2018
Analysis of total provisions
Current liability
Non-current liability
Contingent consideration – other liability
Group
Company
2018
£m
50.0
–
–
8.1
9.9
59. 0
5.2
132. 2
2017
£m
48.4
–
0.2
4.5
16.0
59.4
5.0
133.5
2018
£m
0.8
3.7
–
0.2
2.8
3.7
–
11.2
Contingent
consideration
£m
Warranty
£m
6.8
8.8
(1.5)
(1.6)
0.3
12.8
(3.1)
(1.0)
(2.6)
(0.4)
0.3
6.0
1.4
–
–
2.1
–
3.5
–
–
(0.9)
–
–
2.6
2018
£m
2.6
6.0
8.6
2017
£m
0.4
5.9
–
0.2
1.2
3.1
–
10.8
Total
£m
8.2
8.8
(1.5)
0.5
0.3
16.3
(3.1)
(1.0)
(3.5)
(0.4)
0.3
8.6
2017
£m
4.8
11.5
16.3
Contingent consideration are further potential amounts payable for acquisitions made by the Group which is contingent on achieving profi t targets in future years.
Warranty – provision
This provision is based on managements assessment of the previous history of claims, and expenses incurred and an estimate of future obligations on goods
supplied where a warranty has been provided to the customer.
93
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Notes to the fi nancial statements continued
21 Retirement benefi t obligations
The Group and Company defi ned benefi t pension scheme obligations relate to the James Fisher and Sons plc Pension Fund for Shore Staff ( Shore staff), the
Merchant Navy Offi cers Pension Fund (MNOPF) and the Merchant Navy Ratings Pension Fund (MNRPF). The fi nancial statements incorporate the latest full actuarial
valuations of the schemes which have been updated to 31 December 2018 by qualifi ed 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:
Shore staff
MNOPF
MNRPF
Shore staff
Group
Company
2018
£m
(4.6)
(5.1)
(6.4)
(16.1)
2017
£m
(5.8)
(6.8)
(7.2)
(19.8)
2018
£m
(4.6)
(3.6)
(2.3)
(10.5)
2017
£m
(5.8)
(5.0)
(2.9)
(13.7)
The assets of this scheme are held in a separate trustee administered account and do not include any of the Group’s assets. The scheme was closed to new members
in October 2001 and closed to future accrual on 31 December 2010. The most recent actuarial valuation was as at 31 July 2016. It is valued every three years
following which defi cit contributions and the repayment period are subject to agreement between the Company and the Trustees. Estimated contributions to the
scheme in 2019 are £1.6m.
MNOPF
The MNOPF is an industry-wide pension scheme which is accounted for as a defi ned benefi t scheme. It is valued every three years and defi cits have typically been
funded over a ten year period. The most recent triennial actuarial valuation of the scheme was as at 31 March 2018 and no additional defi cit funding was requested
by the Trustees. The respective share of the Group and Company in the net retirement benefi t obligation of the MNOPF are 3.2% (2017: 3.2%) and 1.6% (2017:
1.6%) respectively. Disclosures relating to this scheme are based on these allocations. The liability recognised represents the discounted value of committed cash
fl ows. Information supplied by the trustees of the MNOPF has been reviewed by the Company’s actuaries. The principal assumption in the review is the discount
rate on the scheme’s liabilities which was 2.90% (2017: 2.50%). The disclosures below relate to the Group’s share of the assets and liabilities within the MNOPF.
Estimated contributions to this scheme in 2019 are £1.9m.
MNRPF
The MNRPF is an industry-wide pension scheme which is accounted for as a defi ned benefi t scheme. The most recent actuarial valuation of the MNRPF was at 31
March 2017 and the Group and Company have recognised a liability based on the discounted value of expected cash contributions. The share of the Group and the
Company in the net retirement benefi t obligation of the MNRPF are 2.20% and 0.79% respectively. The principal assumption in the MNRPF valuation is the discount
rate on the schemes liabilities which was 2.90% (2017: 2.50%). Subject to any changes arising out of the actuarial valuation as at 31 March 2018, estimated
contributions to this scheme are £5.1m in 2019.
Actuarial assumptions
The schemes’ assets are stated at their market values on the respective balance sheet dates. The overall expected rates of return on assets refl ect the risk-free rate
of return plus an appropriate risk premium based on the nature of the relevant asset category. The principal assumptions used in updating the latest valuations for
each of the schemes were:
Inflation (%)
Rate of increase of pensions in payment – Shore staff (%)
Discount rate for scheme liabilities (%)
Expected rates of return on assets (%)
Post-retirement mortality: (years)
Shore staff scheme
Current pensioner at 65
Current pensioner at 65
Future pensioner at 65
Future pensioner at 65
2018
3.19
3.04
2.90
2.90
20.7
22.6
21.8
23.9
2017
3.15
3.05
2.50
2.50
20.9
22.7
21.9
24.0
male
female
male
female
The post-retirement mortality assumptions allow for the expected increase in longevity. The “current” disclosures above relate to assumptions based on longevity (in
years) following retirement at the balance sheet date, with “future” being that relating to a member who is currently 45 years old.
Sensitivities
The key sensitivities on the major schemes may be summarised as follows:
Shore staff scheme
Key measure
Discount rate
Rate of inflation
Rate of mortality
94
Change in assumption
Change in deficit
Decrease of 0.25%
Increase by 0.25%
Increase in life expectancy
of 1 year
Increase by 2.9%
Increase by 1.3%
Increase by 4.1%
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
21 Retirement benefi t obligations continued
MNOPF
Key measure
Discount rate
MNRPF
Key measure
Discount rate
Change in assumption
Change in deficit
Decrease of 0.25%
Increase by 0.4%
Change in assumption
Change in deficit
Decrease of 0.25%
Increase by 0.1%
In determining the discount rate, assumptions have been made in relation to corporate bond yields and the expected term of liabilities. As noted above, a change in
discount rate applied has a signifi cant impact on the value of liabilities.
(a) The assets and liabilities of the schemes at 31 December are:
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
As at 31 December 2018
Gilts/corporate bonds
Other investments
Cash or liquid assets
Fair value of scheme assets
Present value of scheme liabilities
Net pension liabilities recognised in the balance
sheet
As at 31 December 2017
Equities
Gilts/corporate bonds
Other investments
Cash or liquid assets
Fair value of scheme assets
Present value of scheme liabilities
Net pension liabilities recognised in the balance
sheet
Group
Company
Shore
staff
£m
–
53.2
0.1
53.3
MNOPF
£m
MNRPF
£m
34.8
63.3
5.6
103.7
12.4
11.4
1.1
24.9
Total
£m
47.2
127.9
6.8
181.9
Shore
staff
£m
–
53.2
0.1
53.3
MNOPF
£m
MNRPF
£m
17.6
32.0
2.9
52.5
4.3
3.9
0.4
8.6
(57.9)
(108.8)
(31.3)
(198.0)
(57.9)
(56.1)
(10.9)
Total
£m
21.9
89.1
3.4
114.4
(124.9)
(4.6)
(5.1)
(6.4)
(16.1)
(4.6)
(3.6)
(2.3)
(10.5)
Group
Company
Shore
staff
£m
4.7
–
51.0
0.4
56.1
(61.9)
MNOPF
£m
MNRPF
£m
–
57.4
43.7
7.7
108.8
(115.6)
1.9
25.3
1.1
0.9
29.2
(36.4)
Total
£m
6.6
82.7
95.8
9.0
194.1
(213.9)
Shore
staff
£m
4.7
–
51.0
0.4
56.1
MNOPF
£m
MNRPF
£m
–
29.0
22.1
3.9
55.0
0.6
8.9
0.4
0.3
Total
£m
5.3
37.9
73.5
4.6
(61.9)
(60.0)
10.2
(13.1)
121.3
(135.0)
(5.8)
(6.8)
(7.2)
(19.8)
(5.8)
(5.0)
(2.9)
(13.7)
The MNOPF and the MNRPF contributions paid by the Group are not refundable in any circumstances and the balance sheet liability refl ects an adjustment for
any agreed defi cit recovery contributions in excess of defi cit determined using the Group’s assumptions. Other investments in the Shore staff scheme comprise
diversifi ed growth funds, liability driven investments, absolute return and private equity market funds.
(b) Expense recognised in the income statement
Year ended 31 December 2018
Expenses
Interest cost on benefit obligation
Return on scheme assets
Group
Company
Shore
staff
£m
0.1
1.5
(1.4)
0.2
MNOPF
£m
MNRPF
£m
–
2.9
(2.7)
0.2
–
0.9
(0.7)
0.2
Total
£m
0.1
5.3
(4.8)
0.6
Shore
staff
£m
0.1
1.5
(1.4)
0.2
MNOPF
£m
MNRPF
£m
–
1.5
(1.4)
0.1
–
0.3
(0.3)
–
Total
£m
0.1
3.3
(3.1)
0.3
The actual return on the Shore staff plan assets is £(0.4)m.
95
Group
Company
MNOPF
£m
MNRPF
£m
–
3.1
(2.9)
0.2
–
1.0
(0.8)
0.2
Total
£m
0.1
5.8
(5.1)
0.8
Shore
staff
£m
0.1
1.7
(1.4)
0.4
MNOPF
£m
MNRPF
£m
–
1.5
(1.3)
0.2
–
0.4
(0.3)
0.1
Group
Company
Total
£m
0.1
3.6
(3.0)
0.7
Total
£m
13.7
0.3
(3.7)
0.2
10.5
Total
£m
19.6
0.7
(3.4)
(3.2)
13.7
Shore
staff
£m
5.8
0.2
(1.7)
0.3
4.6
Shore
staff
£m
10.1
0.4
(1.5)
(3.2)
5.8
Shore
staff
£m
61.9
0.1
1.5
0.3
1.0
(2.7)
(4.2)
57.9
MNOPF
£m
MNRPF
£m
5.0
0.1
(1.5)
–
3.6
2.9
–
(0.5)
(0.1)
2.3
Company
MNOPF
£m
MNRPF
£m
6.3
0.2
(1.5)
–
5.0
3.2
0.1
(0.4)
–
2.9
Company
MNOPF
£m
MNRPF
£m
60.0
–
1.5
13.1
–
0.3
Total
£m
135.0
0.1
3.3
(3.9)
(1.9)
(5.5)
–
–
–
–
(1.5)
56.1
(0.6)
10.9
1.0
(2.7)
(6.3)
124.9
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Notes to the fi nancial statements continued
21 Retirement benefi t obligations continued
Year ended 31 December 2017
Expenses
Interest cost on benefit obligation
Return on scheme assets
The actual return on the Shore staff plan assets is £3.9m.
(c) Movements in the net defi ned benefi t liability
Year ended 31 December 2018
As at 1 January 2018
Expense recognised in the income statement
Contributions paid to scheme
Remeasurement gains and losses
Year ended 31 December 2017
As at 1 January 2017
Expense recognised in the income statement
Contributions paid to scheme
Remeasurement gains and losses
Shore
staff
£m
0.1
1.7
(1.4)
0.4
Shore
staff
£m
5.8
0.2
(1.7)
0.3
4.6
Shore
staff
£m
10.1
0.4
(1.5)
(3.2)
5.8
MNOPF
£m
MNRPF
£m
7.2
0.2
(1.8)
0.8
6.4
6.8
0.2
(1.9)
–
5.1
Group
MNOPF
£m
MNRPF
£m
8.5
0.2
(1.9)
–
6.8
8.2
0.2
(1.2)
–
7.2
Total
£m
19.8
0.6
(5.4)
1.1
16.1
Total
£m
26.8
0.8
(4.6)
(3.2)
19.8
(d) Changes in the present value of the defi ned benefi t obligation are analysed as follows:
Year ended 31 December 2018
As at 1 January 2018
Expenses
Interest cost
Remeasurement loss/(gain):
Actuarial loss/(gain) arising from scheme
experience
Actuarial loss arising from changes in demographic
assumptions
Actuarial gain arising from changes in financial
assumptions
Net benefits paid out
Shore
staff
£m
61.9
0.1
1.5
0.3
1.0
(2.7)
(4.2)
57.9
Group
MNOPF
£m
115.6
–
2.9
MNRPF
£m
36.4
–
0.9
Total
£m
213.9
0.1
5.3
(7.8)
(4.2)
(11.7)
–
–
–
–
(1.9)
108.8
(1.8)
31.3
1.0
(2.7)
(7.9)
198.0
96
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
21 Retirement benefi t obligations continued
Year ended 31 December 2017
As at 1 January 2017
Expenses
Interest cost
Remeasurement (gain)/loss:
Actuarial (gain)/loss arising from scheme
experience
Actuarial gain arising from changes in demographic
assumptions
Actuarial loss arising from changes in financial
assumptions
Net benefits paid out
Group
Company
Shore
staff
£m
64.2
0.1
1.7
(1.4)
(1.0)
1.8
(3.5)
61.9
MNOPF
£m
112.6
–
3.1
MNRPF
£m
36.0
–
1.0
1.8
0.6
–
–
(1.9)
115.6
–
–
(1.2)
36.4
Total
£m
212.8
0.1
5.8
1.0
(1.0)
1.8
(6.6)
213.9
Shore
staff
£m
64.2
0.1
1.7
(1.4)
(1.0)
1.8
(3.5)
61.9
MNOPF
£m
MNRPF
£m
55.3
–
1.5
13.0
–
0.4
4.7
0.2
–
–
(1.5)
60.0
–
–
(0.5)
13.1
(e) Changes in the fair value of the plan assets are analysed as follows:
Year ended 31 December 2018
As at 1 January 2018
Return on scheme assets recorded in interest
Remeasurement loss:
Return on plan assets excluding interest income
Contributions by employer
Net benefits paid out
Year ended 31 December 2017
As at 1 January 2017
Return on scheme assets recorded in interest
Remeasurement loss:
Return on plan assets excluding interest income
Contributions by employer
Net benefits paid out
Group
Company
Shore
staff
£m
56.1
1.4
(1.7)
1.7
(4.2)
53.3
Shore
staff
£m
54.2
1.5
2.4
1.5
(3.5)
56.1
MNOPF
£m
108.8
2.7
MNRPF
£m
29.2
0.7
(7.8)
1.9
(1.9)
103.7
(5.0)
1.8
(1.8)
24.9
Group
MNOPF
£m
104.0
2.9
1.8
2.0
(1.9)
108.8
MNRPF
£m
27.8
0.7
0.7
1.2
(1.2)
29.2
Total
£m
194.1
4.8
(14.5)
5.4
(7.9)
181.9
Total
£m
186.0
5.1
4.9
4.7
(6.6)
194.1
Shore
staff
£m
56.1
1.4
(1.7)
1.7
(4.2)
53.3
Shore
staff
£m
54.2
1.5
2.4
1.5
(3.5)
56.1
MNOPF
£m
MNRPF
£m
55.0
1.4
(3.9)
1.5
(1.5)
52.5
10.3
0.3
(1.9)
0.5
(0.6)
8.6
Company
MNOPF
£m
MNRPF
£m
49.0
1.3
4.7
1.5
(1.5)
55.0
9.7
0.3
0.3
0.4
(0.4)
10.3
Total
£m
132.5
0.1
3.6
3.5
(1.0)
1.8
(5.5)
135.0
Total
£m
121.4
3.1
(7.5)
3.7
(6.3)
114.4
Total
£m
112.9
3.1
7.4
3.4
(5.4)
121.4
97
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Notes to the fi nancial statements continued
21 Retirement benefi t obligations continued
(f) History of experience gains and losses
Shore staff
Fair value of scheme assets
Defined benefit obligation
Deficit in scheme
Remeasurement (loss)/gain:
Return on plan assets excluding interest income
Remeasurement (loss)/gain on scheme liabilities
MNOPF
Group
Fair value of scheme assets
Defined benefit obligation
Deficit in scheme
MNOPF
Company
Fair value of scheme assets
Defined benefit obligation
Deficit in scheme
MNRPF
Group
Fair value of scheme assets
Defined benefit obligation
Deficit in scheme
MNRPF
Company
Fair value of scheme assets
Defined benefit obligation
Deficit in scheme
2018
£m
53.3
(57.9)
(4.6)
(1.7)
(0.3)
2018
£m
103.7
(108.8)
(5.1)
2018
£m
52.5
(56.1)
(3.6)
2017
£m
56.1
(61.9)
(5.8)
2.4
1.4
2017
£m
108.8
(115.6)
(6.8)
2017
£m
55.0
(60.0)
(5.0)
2018
£m
24.9
(31.3)
(6.4)
2018
£m
8.6
(10.9)
(2.3)
2016
£m
54.2
(64.3)
(10.1)
6.5
–
2016
£m
104.0
(112.5)
(8.5)
2016
£m
49.0
(55.3)
(6.3)
2017
£m
29.2
(36.4)
(7.2)
2017
£m
10.2
(13.1)
(2.9)
2015
£m
50.8
(59.4)
(8.6)
(1.3)
(0.1)
2015
£m
83.9
(93.6)
(9.7)
2015
£m
39.5
(46.9)
(7.4)
2016
£m
27.8
(36.0)
(8.2)
2016
£m
9.7
(12.9)
(3.2)
2014
£m
53.8
(64.3)
(10.5)
3.5
0.4
2014
£m
80.1
(91.4)
(11.3)
2014
£m
37.7
(46.3)
(8.6)
2015
£m
20.7
(29.3)
(8.6)
2015
£m
7.5
(10.6)
(3.1)
The cumulative amount of actuarial gains and losses relating to all schemes recognised since 1 January 2004 in the Group and Company statement of
comprehensive income is a loss of £51.4m (2017: £50.3m).
(g) Defi ned contribution schemes
The Group operates a number of defi ned contribution schemes. The pension charge for the year for these arrangements is equal to the contributions paid and was
£4.3m (2017: £3.7m). During the year the Company contributed £0.4m (2017: £0.3m) into defi ned contribution schemes.
98
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
22 Share based payments
The Company operates a Long-Term Incentive Plan (LTIP) in respect of Executive Directors and certain senior employees and details of these are set out in the
Director’s remuneration report on pages 52 to 66. The Company also operates a Sharesave scheme (Sharesave) for eligible employees which is HM Revenue and
Customs approved.
Long-Term Incentive Plan (LTIP)
The Group recognises an expense for these benefi ts provided to employees and the amount charged in respect of equity-settled share based payments was £1.4m
(2017: £0.9m) (Company £0.9m (2017: £0.6m)). The Company has granted conditional awards in the form of options over shares or conditional rights to have
shares transferred to certain employees under the LTIP scheme over 373,582 (2017: 377,100) ordinary shares of 25p each.
The weighted average exercise prices (WAEP) and movements in share options during the year are as follows:
Group
Outstanding at 1 January
Granted during the year
Forfeited during the year
Exercised
Outstanding at 31 December
Exercisable at 31 December
2018
Number
564,652
38,002
(21,085)
(146,016)
435,553
305,507
WAEP
£7.07
£16.31
£14.52
£5.45
£8.06
£5.53
2017
Number
678,122
40,684
(61,940)
(92,214)
564,652
420,132
nil options
2018
Number
377,100
140,778
(131,818)
(12,478)
2017
Number
358,625
105,840
(48,883)
(38,482)
373,582
377,100
–
–
WAEP
£7.09
£15.67
£13.73
£6.57
£7.07
£5.09
The weighted average share price at the date of exercise for the options exercised was £16.49 (2017: £16.69). For the share options outstanding at 31 December
2018, the weighted average remaining contractual life is 2 years and 2 months (2017: 2 years and 7 months). The weighted average fair value of options granted
during the year was £11.74 (2017: £10.94). The range of exercise prices for options outstanding at the end of the year was £6.02 – £16.31 (2017: £3.54 – £15.67).
Company
Outstanding at 1 January
Granted during the year
Forfeited during the year
Exercised
Outstanding at 31 December
Exercisable at 31 December
2018
Number
432,442
1,024
(654)
(116,930)
315,882
304,993
WAEP
£5.35
£16.31
£13.95
£4.10
£5.83
£5.52
2017
Number
528,922
6,563
(37,004)
(66,039)
432,442
420,303
WAEP
£5.84
£15.67
£14.76
£4.94
£5.35
£5.09
nil options
2018
Number
249,813
97,769
(82,348)
(12,478)
2017
Number
230,017
69,238
(19,058)
(30,384)
252,756
249,813
–
–
The weighted average share price at the date of exercise for the options exercised was £16.14 (2017: £16.64). For the share options outstanding at 31 December
2018, the weighted average remaining contractual life is 2 years and 0 months (2017: 2 years and 11 months). The weighted average fair value of options granted
during the year was £13.49 (2017: £12.85). The range of exercise prices for options outstanding at the end of the year was £6.02 – £16.31 (2017: £3.54 – £15.67).
The fair value of share based payments has been estimated using the Black-Scholes model for the Sharesave and the earnings per share (EPS) element of the LTIP.
The fair value of share based payments relating to the total shareholder return (TSR) element of the LTIP has been estimated using the Monte Carlo model.
The inputs to the models used to determine the valuations fell within the following ranges:
Dividend yield (%)
Expected life of option (years)
Share price at date of grant
Expected share price volatility (%)
Risk-free interest rate (%)
Sharesave
2018
1.8%
3 – 7.22
2017
1.6%
3 – 7.22
£15.12 – £15.34
£15.94 – £16.67
30%
0.94% – 1.12%
30%
0.17%
All employees, subject to the discretion of the Remuneration Committee, may apply for share options under an employee save as you earn plan which may from
time to time be offered by the Company. An individual’s participation is limited so that the aggregate price payable for shares under option at any time does not
exceed the statutory limit. Options granted under the plans will normally be exercisable if the employee remains in employment and any other conditions set by the
Remuneration Committee have been satisfi ed. Options are normally exercisable at the end of the related savings contract but early exercise is permitted in certain
limited circumstances. The performance period will not normally be less than three and a half years or greater than seven and a half years. Awards were made under
this scheme on 5 April 2018.
99
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Notes to the fi nancial statements continued
23 Business combinations
Year ended 31 December 2018
On 19 February 2018, the Group acquired the entire share capital of Cowan Manufacturing P ty Limited (Cowan) for consideration of A$2.6m (£1.5m) in cash.
Cowan, based in New South Wales, Australia, manufactures, installs and provides in-service support of transportable recompression chamber systems and other
life support equipment for the global defence market. The acquisition which joined the Specialist Technical division, broadens the Group’s offering to the Australian
navy and further enhances capability within the defence and commercial diving sectors.
The fair values of the assets and liabilities acquired are set out below:
Cowan
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Cash and short -term deposits
Trade and other payables
Deferred tax
Fair value of net assets acquired
Goodwill
Cash consideration
Book
value
£m
–
0.1
0.2
0.1
0.2
(0.5)
–
0.1
Fair
value
adjustments
£m
0.5
–
–
–
–
–
(0.1)
0.4
Total
£m
0.5
0.1
0.2
0.1
0.2
(0.5)
(0.1)
0.5
1.0
1.5
1.5
Fair value adjustments of £2.9m were made to goodwill and to net assets of £0.2m, relating to the acquisition of EDS HV Group Limited (EDS) in December 2017
mainly in relation to contingent consideration (note 20) . None of the goodwill is expected to be deductible for income tax purposes. The reduction in goodwill
primarily relates to the revision of the estimated contingent consideration payable on the acquisition of EDS.
Cash flow in respect of business combinations
Cash paid
Cash and short-term deposits acquired
Acquisition of business net of cash acquired
Acquisition costs
The cash paid in respect of the other acquisition relates to EDS .
Contribution to Group results
Cowan
£m
Other
acquisition
£m
1.5
(0.2)
1.3
0.2
1.5
8.9
–
8.9
–
8.9
Total
£m
10.4
(0.2)
10.2
0.2
10.4
The business acquired during the period contributed £0.1m to the Group’s profi t after tax and £2.2m of revenues. If these businesses had been acquired at the start
of the fi nancial year, the contribution to Group profi t after tax would have been £0.2m with revenue of £2.8m.
24 Loans and borrowings
Group
Company
2018
£m
121.9
0.1
122.0
2017
£m
152.1
0.2
152.3
2018
£m
121.9
–
121.9
Group
Company
2018
£m
–
10.0
0.1
10.1
2017
£m
–
0.2
0.2
0.4
2018
£m
15.5
–
–
15.5
2017
£m
152.1
–
152.1
2017
£m
11.9
–
–
11.9
Non-current liabilities
Bank loans
Finance leases
Current liabilities
Overdrafts
Bank loans
Finance leases
100
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
24 Loans and borrowings continued
Bank loans
Loans analysed by currency are repayable as follows:
Year ended 31 December 2018
Currency
Due within one year
Due between one and two years
Due between two and five years
Year ended 31 December 2017
Currency
Due within one year
Due between one and two years
Due between two and five years
GBP
£m
10.0
84.3
28.8
123.1
GBP
£m
0.2
39.2
106.5
145.9
Group
Company
USD
£m
–
0.7
8.1
8.8
Total
£m
10.0
85.0
36.9
131.9
GBP
£m
10.0
84.3
28.8
123.1
USD
£m
–
0.7
8.1
8.8
Group
Company
USD
£m
–
–
6.4
6.4
Total
£m
0.2
39.2
112.9
152.3
GBP
£m
–
39.2
106.5
145.7
USD
£m
–
–
6.4
6.4
Total
£m
10.0
85.0
36.9
131.9
Total
£m
–
39.2
112.9
152.1
The interest rates charged during the year ranged from 1.4% to 2.4% (2017: 1.4% to 2.1%). There were no loans secured against the assets of the Group or
Company in the current or prior period.
Obligations under fi nance leases and hire purchase contracts
Group
The minimum future lease payments due under fi nance leases and hire purchase contracts are as follows:
Future minimum payments due:
Within one year
Within two to five years
Present value of minimum lease payments is analysed as follows:
Within one year
Within two to five years
Company
The Company does not have any outstanding fi nance lease commitments.
Group
2018
£m
2017
£m
0.1
0.1
0.2
0.1
0.1
0.2
0.2
0.2
0.4
0.2
0.2
0.4
101
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Notes to the fi nancial statements continued
25 Reconciliation of net debt
Net debt comprises interest bearing loans and borrowings less cash and cash equivalents.
Group
Cash in hand and at bank
Debt due after 1 year
Debt due within 1 year
Finance leases
Net debt
Cash in hand and at bank
Debt due after 1 year
Debt due within 1 year
Finance leases
Net debt
26 Financial instruments
Capital management
1 January
2018
£m
20.3
(152.2)
(0.2)
(152.4)
(0.4)
(132.5)
1 January
2017
£m
21.8
(124.4)
(3.0)
(127.4)
(0.1)
(105.7)
Cash
flow
£m
(1.4)
31.2
(9.8)
21.4
0.2
20.2
Cash
flow
£m
(0.3)
(27.8)
2.8
(25.0)
0.1
(25.2)
Other
non -cash
£m
Exchange
movement
£m
31 December
2018
£m
–
(0.4)
–
(0.4)
(0.1)
(0.5)
(0.3)
(0.6)
–
(0.6)
0.1
(0.8)
18.6
(122.0)
(10.0)
(132.0)
(0.2)
(113.6)
Other
non -cash
£m
Exchange
movement
£m
31 December
2017
£m
–
(0.8)
–
(0.8)
(0.4)
(1.2)
(1.2)
0.8
–
0.8
–
(0.4)
20.3
(152.2)
(0.2)
(152.4)
(0.4)
(132.5)
The primary objective of the Group’s capital management policy is to maintain a strong credit rating and covenant ratios in order to be able to support the continued
growth of its trading businesses and to increase shareholder value. The Group meets its day-to-day working capital requirements through operating cash fl ows, with
borrowings in place to fund acquisitions and capital expenditure. At 31 December 2018, the Group had £92.4m (2017: £71.8m) of undrawn committed facilities
none of which expire within twelve months.
The Group is required under the terms of its loan agreements to maintain covenant ratios in respect of net debt to Ebitda and net interest costs to underlying
earnings before interest . The Group met its covenant ratios for the year ended 31 December 2018. The Directors have prepared forecasts of the cash fl ows for the
subsequent eighteen-month period which indicate that, taking into account the factors noted above, the Group will meet its covenant requirements for this period.
The total amount that it is able to borrow under existing revolving credit facilities is limited to a maximum of £225m (2017: £225m).
The Group manages its capital structure so as to maintain investor, supplier and market confi dence and to provide returns to shareholders that will support the
future development of the business. Capital is monitored by measuring the gearing ratio which is net debt divided by capital. Net debt comprises interest bearing
loans and borrowings less cash and cash equivalents. Capital represents net equity attributable to the equity holders of the parent. Return on capital employed is
also monitored. The Group’s dividend policy is based on the expected growth in sustainable income streams after making provision for the retention of capital to
invest in growth and acquisitions. In evaluating growth investment opportunities the Group has a target of a 15% pre-tax return on the capital invested.
Interest bearing loans and borrowings
Less cash and cash equivalents
Net debt
Equity attributable to the equity holders of the parent
Gearing ratio
The Group has exposure to the following fi nancial risks:
(a) Credit risk
2018
£m
132.2
(18.6)
113.6
305.0
37.2%
2017
£m
152.8
(20.3)
132.5
277.8
4 7.7%
Credit risk is the risk of fi nancial loss to the Group if a customer or counterparty to a fi nancial instrument fails to meet its contractual obligations. These arise
principally from the Group’s receivables from customers and from cash balances held with fi nancial institutions. The carrying amount of fi nancial assets represents
the maximum credit exposure. There are no signifi cant concentrations of credit risk within the Group. The Group’s exposure to credit risk is infl uenced mainly by the
individual characteristics of each customer and the industry and country in which each customer operates. The Group has a number of large customers including
Government agencies in the UK and overseas, major oil companies and other multinational corporations. The ten largest customers of the Group accounted for
approximately 26% of Group revenue (2017: 20%). No customer accounted for more than 4% (2017: 3%) of Group revenue. New customers are subject to
creditworthiness checks and credit limits are subject to approval by senior management. Goods are sold subject to retention of title clauses so that in the event of
non-payment the Group may have a secured claim.
102
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
26 Financial instruments continued
The maximum exposure to credit risk at the reporting date was:
Receivables
Cash and cash equivalents
Interest rate swaps used for hedging:
Assets
Forward exchange contracts used for hedging:
Assets
Group
Company
2018
£m
176.0
18.6
2017
£m
186.7
20.3
1.5
1.1
0.1
196.2
2.3
210.4
2018
£m
2.6
9.9
1.5
0.1
14.1
2017
£m
2.3
12.2
1.1
2.3
17.9
Trade receivables are non-interest bearing and are generally on 30 to 60 days terms. At 31 December the value of trade debtors outstanding was:
Not past due
Past due
Not yet due
Overdue 1 to 30 days
Overdue 31 to 60 days
Overdue 61 to 90 days
Overdue more than 90 days
The movement in the provision for impairment of trade receivables is as follows:
Balance at 1 January
On acquisition of subsidiaries
Provided in the year
Recoveries
Write-offs
Group
2018
2017
gross
£m
49.1
70.1
119.2
allowance
£m
–
(3.4)
(3.4)
gross
£m
48.5
39.0
87.5
allowance
£m
–
(3.6)
(3.6)
Group
Company
gross
2018
£m
49.1
27.0
9.4
19.1
14.6
119.2
gross
2017
£m
48.5
15.2
6.8
5.5
11.5
87.5
gross
2018
£m
gross
2017
£m
–
–
–
–
–
–
–
–
–
–
–
–
Group
Company
2018
£m
3.6
–
1.2
–
(1.4)
3.4
2017
£m
1.5
1.2
1.8
(0.2)
(0.7)
3.6
2018
£m
2017
£m
–
–
–
–
–
–
–
–
–
–
–
–
The Group considers that the trade receivables that have not been provided against and are past due by more than 30 days are collectable based on historic
payment behaviour and extensive analysis of underlying customers’ credit ratings. Based on historic default rates, the Group believes that apart from the amounts
included in the table above, no impairment allowance is necessary in respect of trade receivables. The material balances over 90 days are in respect of specifi c
contracts or markets where the balance is considered recoverable, except to the extent that they are already provided, and there is no material impact on expected
credit losses.
(b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its fi nancial obligations as they fall due. The Group manages its cash resources and borrowings to
ensure that it will have suffi cient liquidity to meet its liabilities as they fall due but in a manner designed to maximise the benefi t of those resources whilst ensuring
the security of investment resources. The Group forecasts the profi le of its cash requirements on a monthly basis and ensures that suffi cient facilities are available
to meet peak requirements which occur at predictable times in the year. The Group manages the maturity profi le of its borrowings by maintaining a regular
dialogue with its lenders and ensuring that it commences the renegotiation of facilities suffi ciently early to allow a comprehensive review of its requirements before
completion.
The Group’s revolving credit facilities extend over several accounting periods and fall due for renewal in different accounting periods ensuring that the Group
negotiations with individual lenders follow an orderly process which does not expose the Group to the possibility of a signifi cant reduction in available facilities in
any single period. At 31 December 2018, the Group had £92.4m (2017: £71.8m) of undrawn committed bank facilities.
103
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Notes to the fi nancial statements continued
26 Financial instruments continued
The following are the contractual maturities of fi nancial liabilities, including interest payments:
Year ended 31 December 2018
Group
Non-derivative financial liabilities
Unsecured bank loans
Finance lease liabilities
Trade and other payables
Contingent consideration
Derivative financial liabilities
Interest rate swaps used for hedging
Outflow on forward exchange contracts used for hedging
Year ended 31 December 2017
Group
Non-derivative financial liabilities
Unsecured bank loans
Finance lease liabilities
Trade and other payables
Contingent consideration
Derivative financial liabilities
Interest rate swaps used for hedging
Outflow on forward exchange contracts used for hedging
Year ended 31 December 2018
Company
Non-derivative financial liabilities
Unsecured bank loans
Trade and other payables
Derivative financial liabilities
Interest rate swaps used for hedging
Outflow on forward exchange contracts used for hedging
Year ended 31 December 2017
Company
Non-derivative financial liabilities
Unsecured bank loans
Trade and other payables
Derivative financial liabilities
Interest rate swaps used for hedging
Outflow on forward exchange contracts used for hedging
104
Carrying
amount
£m
Contractual
cash flows
£m
Within 1
year
£m
131.9
0.2
126.6
6.0
(1.4)
2.2
265.5
(140.2)
(0.2)
(126.6)
(6.0)
0.6
(50.4)
(322.8)
(13.9)
(0.1)
(126.6)
–
0.1
(50.4)
(190.9)
Carrying
amount
£m
Contractual
cash flows
£m
Within 1
year
£m
152.3
0.4
136.5
12.8
(0.7)
(2.3)
299.0
(163.0)
(0.4)
(136.5)
(12.8)
(0.8)
(35.2)
(348.7)
(4.0)
(0.2)
(136.5)
(1.3)
(0.3)
(35.2)
(177.5)
Carrying
amount
£m
Contractual
cash flows
£m
Within 1
year
£m
131.9
5.3
(1.4)
2.2
138.0
(140.2)
(5.3)
0.6
(50.4)
(195.3)
(13.9)
(5.3)
0.1
(50.4)
(69.5)
Carrying
amount
£m
Contractual
cash flows
£m
Within 1
year
£m
152.1
4.5
(0.7)
(2.3)
153.6
(162.9)
(4.5)
(0.8)
(35.2)
(203.4)
(3.9)
(4.5)
(0.3)
(35.2)
(43.9)
1 – 2
years
£m
(87.4)
(0.1)
–
–
0.2
–
(87.3)
1 – 2
years
£m
(43.0)
(0.2)
–
–
(0.1)
–
(43.3)
2 – 5
years
£m
(38.9)
–
–
(6.0)
0.3
–
(44.6)
2 – 5
years
£m
(116.0)
–
–
(11.5)
(0.4)
–
(127.9)
1 – 2
years
£m
2 – 5
years
£m
(87.4)
(38.9)
–
–
0.2
–
(87.2)
1 – 2
years
£m
(43.0)
–
(0.1)
–
(43.1)
0.3
–
(38.6)
2 – 5
years
£m
(116.0)
–
(0.4)
–
(116.4)
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
26 Financial instruments continued
(c) Foreign exchange risk
The Group is exposed to foreign currency risks on sales, purchases, cash and borrowings denominated in currencies other than Sterling. These transactional
exposures are mainly to movement in the US Dollar and the Euro. The Group uses forward exchange contracts to hedge its transactional exposures. Most forward
exchange contracts have maturities of less than one year after the balance sheet date. Forward exchange contracts which qualify as effective cash fl ow hedges are
stated at fair value. The principal translation exposures relate to the Norwegian Kroner.
The Group’s exposure to foreign currency transactional risk in its principal currencies was as follows based on notional amounts:
Trade receivables
Cash at bank and in hand
Unsecured bank loans
Trade payables
Gross balance sheet exposure
Forecast sales
Forecast purchases
Gross exposure
Forward exchange contracts
Net exposure
31 December 2018
USD
m
34.5
6.7
(11.2)
(5.9)
24.1
EUR
m
2.3
(0.2)
–
(2.7)
(0.6)
153.1
12.3
(44.8)
(14.5)
132.4
(2.8)
(64.2)
–
NOK
m
0.1
0.2
–
(0.8)
(0.5)
–
(0.1)
(0.6)
–
68.2
(2.8)
(0.6)
SGD
m
–
2.8
–
AUD
m
0.1
–
–
NGN
m
71.0
117.3
–
(0.2)
(0.2)
(36.3)
USD
m
35.8
7.6
(8.7)
(7.8)
2.6
–
(0.1) 152.0
26.9
–
86.1
125.0
EUR
m
3.2
2.2
–
(2.8)
2.6
11.1
(0.1)
(0.1)
(59.8)
(44.5)
(13.6)
2.5
–
2.5
(0.2) 178.3
107.4
–
–
(55.6)
(0.2) 178.3
51.8
0.1
–
0.1
31 December 2017
NOK
m
SGD
m
0.1
0.3
–
(1.0)
(0.6)
–
(2.2)
(2.8)
–
–
–
–
(0.1)
(0.1)
–
(0.2)
(0.3)
–
AUD
m
–
NGN
m
90.9
0.1
533.6
–
–
0.1
–
–
(2.5)
622.0
215.0
(0.3)
(15.0)
(0.2) 822.0
–
–
(2.8)
(0.3)
(0.2) 822.0
Changes in the level of exchange rates will have an impact on consolidated earnings. The following table shows the impact on earnings of a 5% strengthening in the
exchange rate in the Group’s key currencies against Sterling. The obverse movements would be of the same magnitude. These amounts have been calculated by
applying changes in exchange rates to the Group’s foreign currency profi ts and losses and to fi nancial instruments denominated in foreign currency.
US Dollar
Norwegian Kroner
Euro
Singaporean Dollar
Australian Dollar
(d)
Interest rate risk
2018
2017
Equity
£m
Income
statement
£m
Equity
£m
Income
statement
£m
(2.4)
(0.1)
–
(0.1)
(0.3)
(2.9)
(4.3)
–
(0.1)
0.1
(0.2)
(4.5)
(1.8)
(0.1)
(0.1)
(0.5)
(0.3)
(2.8)
(3.3)
0.1
0.1
(0.5)
(0.3)
(3.9)
The Group uses interest rate swaps to convert interest rates on certain borrowings from fl oating rates to fi xed rates to hedge exposure to fl uctuations in interest
rates. The interest rate profi le of the Group’s fi nancial assets and liabilities are set out in the table below:
Fixed rate instruments
Financial liabilities
Variable rate instruments
Financial assets
Financial liabilities
Group
Company
2018
£m
2017
£m
2018
£m
2017
£m
(0.1)
(0.1)
(0.1)
(0.1)
18.6
(131.9)
(113.3)
20.3
(152.3)
(132.0)
9.9
(137.4)
(127.5)
12.2
(164.0)
(151.8)
Where hedging criteria are met the Group classifi es interest rate swaps as cash fl ow hedges and states them at fair value. Over the longer-term permanent changes
in interest rates would have an impact on consolidated earnings. At 31 December 2018, a general increase of one percentage point would have had the following
impact:
Variable rate instruments
Interest rate swap
Cash flow sensitivity
2018
Income
statement
£m
2017
Income
statement
£m
(1.1)
0.8
(0.3)
(1.3)
0.8
(0.5)
105
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Notes to the fi nancial statements continued
26 Financial instruments continued
(e) Fair values
There are no material differences between the book value of fi nancial assets and liabilities and their fair value other than set out below:
Group
Liabilities carried at amortised cost
Unsecured bank loans
Trade and other payables
Finance leases
Preference shares
Company
Liabilities carried at amortised cost
Overdrafts
Unsecured bank loans
Trade and other payables
Preference shares
2018
2017
Note
24
19
24
27
24
24
19
27
Carrying
value
£m
(131.9)
(126.6)
(0.2)
(0.1)
(258.8)
(15.5)
(131.9)
(5.3)
(0.1)
(152.8)
Fair
value
£m
(128.1)
(126.6)
(0.3)
(0.1)
(255.1)
(15.5)
(128.1)
(5.3)
(0.1)
(149.0)
Carrying
value
£m
(152.3)
(136.5)
(0.4)
(0.1)
(289.3)
(11.9)
(152.1)
(4.5)
(0.1)
(168.6)
Fair
value
£m
(145.6)
(136.5)
(0.5)
(0.1)
(282.7)
(11.9)
(145.5)
(4.5)
(0.1)
(162.0)
Fair value has been determined by reference to the market value at the balance sheet date or by discounting the relevant cash fl ows using current interest rates for
similar instruments. The fair value of the fi nancial assets has been assessed by the Directors with reference to the current prospects of the investments and risks
associated with those prospects.
Fair value hierarchy
The Group classifi es fair value measurement using a fair value hierarchy that refl ects the signifi cance of inputs used in making measurements of fair value. The fair
value hierarchy has the following levels:
(a) Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities ;
(b)
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices); and
(c) Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Financial instruments carried at fair value are as set out below:
Level 2
Level 3
2018
£m
2017
£m
2018
£m
2017
£m
0.1
1.5
1.6
(2.3)
(0.1)
–
2.3
1.1
3.4
–
(0.4)
–
(128.1)
(0.3)
(130.8)
(129.2)
(145.6)
(0.5)
(146.5)
(143.1)
–
–
–
–
–
–
–
–
–
–
(6.0)
(12.8)
–
–
(6.0)
(6.0)
–
–
(12.8)
(12.8)
Group
Financial assets measured at fair value
Forward exchange contracts – cash flow hedges
Interest rate swaps – cash flow hedges
Financial liabilities measured at fair value
Forward exchange contracts – cash flow hedges
Interest rate swaps – cash flow hedges
Contingent consideration
Financial liabilities not measured at fair value
Unsecured bank loans
Finance leases
106
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
26 Financial instruments continued
Company
Financial assets measured at fair value
Forward exchange contracts – cash flow hedges
Interest rate swaps – cash flow hedges
Financial liabilities measured at fair value
Forward exchange contracts – cash flow hedges
Interest rate swaps – cash flow hedges
Financial liabilities not measured at fair value
Unsecured bank loans
Level 2
2018
£m
2017
£m
0.1
1.5
1.6
(2.3)
(0.1)
2.3
1.1
3.4
–
(0.4)
(128.1)
(130.5)
(128.9)
(145.5)
(145.9)
(142.5)
There have been no transfers between categories during the period. The fair value of interest rate swap contracts and forward exchange contracts are calculated
by management based on external valuations received from the Group’s bankers and is based on forward exchange rates and anticipated future interest yields
respectively.
Fair value hedges – Group and Company
At 31 December 2018 and 31 December 2017 the Group did not have any outstanding fair value hedges.
Cash fl ow hedges – Group and Company
Note 31.3 (d) describes the Group’s approach to hedge accounting following the introduction of IFRS 9.
Forward contracts and interest rate swaps are included within ‘ trade and other payables or t rade and other receivables ’ in the Statement of Financial Position , in
‘effective portion of changes in fair value of cash fl ow hedges ’ in the consolidated statement of other comprehensive income (OCI), and in ‘Administrative expenses ’
within the Income Statement.
At 31 December 2018, the Group and Company held forward currency contracts designated to hedge future commitments in US Dollars and Swedish Krone. The
terms of the contracts are as follows:
Sell
US$ 64 .2m
Buy
SEK 83 .5m
SEK 5 .6m
Maturity
Exchange
rate
Fair value
£m
January 2019 – December 2019
1.35
(2.2)
January 2019 – December 2019
January 2020 – December 2020
11.39
11.23
0.1
-
At 31 December 2017, the Group and Company held forward currency contracts designated to hedge future commitments in US Dollars. The terms of the contracts
are as follows:
Sell
US$ 47.6m
Maturity
Exchange
rate
Fair value
£m
January 2018 – December 2018
1.28
2.3
The foreign exchange contracts have been negotiated to match the expected profi le of receipts. At 31 December 2018, these hedges were assessed to be highly
effective and an unrealised loss of £4.3m (2017: gain £6.0m) relating to the hedging instruments is included in equity.
Interest rate swaps
The Group and Company entered into interest rate swap contracts in respect of Sterling denominated debt to swap a variable rate liability for a fi xed rate liability.
These instruments have been allocated against the Group and Company debt in the tables shown above. Details of the contracts and their fair values at 31
December are set out below:
Sterling interest rate swaps
Amount
2018
£m
81.0
2017
£m
81.0
Fixed rate
Fair value
30 January 2019 to 31 October 2022 0.47% – 3.71%
Maturity
%
2018
£m
1.4
2017
£m
0.7
In respect of the interest rate swaps a cost of £0.2m was recognised in the income statement, and £0.7m gain in the OCI . A cost of £0.1m was recognised in the
income statement and £4.3m in the OCI relating to forward contracts.
107
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Notes to the fi nancial statements continued
27 Share capital
Group and Company
Allotted, called up and fully paid
In millions of shares
In issue at 1 January
Exercise of share options
In issue at 31 December
Issued share capital
25p Ordinary shares
2018
50.2
0.1
50.3
2018
£m
12.6
2017
50.2
–
50.2
2017
£m
12.6
£1 Cumulative
Preference shares
2018
2017
0.1
–
0.1
2018
£m
0.1
0.1
–
0.1
2017
£m
0.1
The preference shareholders are entitled to receive 3.5% cumulatively per annum, payable in priority to any dividend on the ordinary shares. The ordinary
shareholders are entitled to receive dividends as declared from time to time by the Directors.
Shares all carry equal voting rights of one vote per share held. They also have the right to attend and speak at general meetings, exercise voting rights and appoint
prox ies. Neither type of share is redeemable. In the event of a winding-up order the amount receivable in respect of the cumulative preference shares is limited to
their nominal value. The ordinary shareholders are entitled to an unlimited share of the surplus after distribution to the cumulative preference shareholders.
Treasury shares
28,630 (2017: 27,620) ordinary shares of 25p
2018
£m
0.4
2017
£m
0.4
The Company has an established Employee Share Ownership Trust, the James Fisher and Sons plc Employee Share Ownership Trust, to meet potential obligations
under share option and long-term incentive schemes awarded to employees. The market value of these shares at 31 December 2018 was £0.5m (2017: £0.4m).
The trust has not waived its right to receive dividends.
In the year ended 31 December 2018, 63,370 (2017: 18,128) ordinary shares with an aggregate nominal value of £15,843 (2017: £4,532) were issued to satisfy
awards made under the Company’s Executive Share Option Scheme at an option prices of 354p and 410 p (2017: 354p) per share giving rise to total consideration
of £245,142 (2017: £64,173 ).
During the year the Trust purchased 38,373 (2017: 71,243) of the Company’s shares in the market at an average cost per share of £15.67 (2017: £16.38) and a
total cost of £601,397 (2017: £1,166,653 ).
28 Commitments and contingencies
Operating leases
The Group has entered into leases on certain properties, vessels, plant and motor vehicles. These leases have a life of between one and ten years and are renewable
at the option of the lessee. The future minimum rentals payable under non-cancellable operating leases at 31 December are as follows:
Within one year
After one year but not more than five years
After five years
Capital commitments
At 31 December, capital commitments for which no provision has been made in these accounts amounted to:
Group
Company
2018
£m
11.2
18.3
8.7
38.2
2017
£m
12.5
17.3
7.0
36.8
2018
£m
–
1.0
0.6
1.6
2017
£m
–
1.5
0.5
2.0
Group
Company
2018
£m
0.5
2017
£m
0.3
2018
£m
–
2017
£m
–
108
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
28 Commitments and contingencies continued
Contingent liabilities
(a)
(b)
(c)
In the ordinary course of the Company’s business, counter indemnities have been given to banks in respect of custom bonds, foreign exchange commitments
and bank guarantees.
A Group VAT registration is operated by the Company and 25 Group undertakings in respect of which the Company is jointly and severally liable for all amounts
due to HM Revenue & Customs under the arrangement.
A guarantee has been issued by the Group and Company to charter parties in respect of obligations of a subsidiary, James Fisher Everard Limited, in respect of
charters relating to seven vessels. The charters expire between 2019 and 2024.
(d)
Subsidiaries of the Group have issued performance and payment guarantees to third parties with a total value of £56.2m (2017: £44.6m).
(e)
(f)
(g)
(h)
The Group is liable for further contributions in the future to the MNOPF if additional actuarial defi cits arise or if other employers liable for contributions are not
able to pay their share. The Group and Company remains jointly and severally liable for any future shortfall in recovery of the defi cit.
The Group has given an unlimited guarantee to the Singapore navy in respect of the performance of First Response Marine Pte Ltd, its Singapore joint venture,
in relation to the provision of submarine rescue and related activities.
In the normal course of business, the Company and certain subsidiaries have given parental and subsidiary guarantees in support of loan and banking
arrangements.
The Group operates in multinational and less developed markets which presents increased operational and fi nancial risk in both complying with potentially
uncertain regulatory and legislative (including in relation to tax) environments and where local practice in those markets may be inconsistent with laws and
regulations that govern the Group. Given this risk, from time to time, concerns are raised and investigated regarding the potential for non-compliance with the
legal and regulatory framework applicable to the Group.
In preparing the consolidated fi nancial statements, judgements and estimates are required to be made in respect of any matters under active considerations
at that time. This may include matters in areas such as relevant exchange control regulations, compliance with relevant laws and regulations, the impact of
political instability, tax legislation and overall operating environments. Any changes impacting the assumptions underlying those estimates or judgements may
give rise to a liability. The Directors consider the possibility of any liability arising in the future cannot currently either be excluded or quantifi ed and therefore no
provision has been included within the fi nancial statements of the Company and the Group for any such matters.
(i)
The Company and its subsidiaries may be parties to legal proceedings and claims which arise in the ordinary course of business, and can be material in value.
Appropriate provision has been made in these accounts where, in the opinion of the Directors, liabilities may materialise.
29 Related party transactions
Transactions with related parties
FCM businesses
The Group has interests of between 40% and 50% in several joint ventures providing ship-to-ship transfer services in Northern Europe and Asia through its wholly
owned subsidiary, Fender Care Marine Services Limited.
First Response Marine
The Group holds through James Fisher Marine Services Limited (JFMS) a 50% interest in First Response Marine Pte Ltd (FRM). FRM provides submarine rescue
services to the Singapore government under a 20 -year service contract which commenced in March 2009. Included in the contract is the provision of a submarine
rescue vessel acquired by FRM from JFMS. FRM subcontracts part of the provision of the submarine rescue service to JFMS and its subsidiary James Fisher
Singapore Pte Ltd. JFMS has also provided a loan to FRM of £2.0m to support its day-to-day operations. The loan which is included in the Group balance sheet
as part of the investment in joint ventures is interest bearing and is repayable at the end of the project. Interest charged in the period amounted to £0.1m (2017:
£0.1m). Dividends received or receivable during the period included in the results of the Group are £0.6m (2017: £0.6m).
JFD Domeyer
The Group, through JFD Limited has a 50% stake in JFD Domeyer GmbH, an entity which provides in-service support and aftermarket services to customers in
Germany. Details of equipment sales to this entity are set out in the table below.
Eurotestconsult
The Group through JF Testing Services Limited, has a 50% stake in Eurotestconsult Limited, an entity which provides testing services to customers in Europe. Details
of service sales and recharges for labour and subcontractor works to this entity are set out in the table below.
Wuhu Divex Diving Systems
The Group, through JFD Limited, has a 49% stake in Wuhu Divex Diving System Ltd, an entity which manufactures advanced diving systems for the Chinese market.
Details of equipment sales are set out in the table below.
109
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Notes to the fi nancial statements continued
29 Related party transactions continued
Britannia’s Gold Limited
The Group have an interest in Britannia’s Gold Limited (BGL) which was granted in exchange for marine services provided to BGL in 2017. The Group’s Chief
Executive Offi cer, Nick Henry, is a non executive Director of BGL.
Details of the transactions carried out with related parties are shown in the table below:
FCM businesses
First Response Marine
JFD Domeyer
Eurotestconsult
Wuhu Divex Diving Systems
BGL
Services to
related
parties
£m
Sales to
related
parties
£m
Purchases
from
related
parties
£m
Amounts
owed by
parties
£m
Amounts
owed to
parties
£m
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
–
–
5.6
3.4
–
–
–
0.2
–
–
3.0
4.2
0.2
0.2
–
–
0.6
0.8
0.4
1.2
6.2
0.7
–
–
–
0.8
–
–
–
–
–
–
–
–
–
–
0.5
0.4
0.9
1.7
0.1
0.1
–
0.1
0.1
2.0
–
–
–
0.2
–
–
–
–
–
–
–
–
–
–
No allowance for expected credit losses for bad debts has been made in respect of these balances (2017: £nil). No bad debts arose during the period relating to
these transactions (2017: £nil).
All transactions with related parties are priced on an arms length basis on terms equivalent to those provided to wholly external parties.
Company
The Company has entered into transactions with its subsidiary undertakings primarily in respect of the provision of accounting services, fi nance and the provision of
share options to employees of subsidiaries.
The amount outstanding from subsidiary undertakings to the Company at 31 December 2018 was £255.9m (2017: £237.3m). Amounts owed to subsidiary
undertakings by the Company at 31 December 2018 totalled £3.7m (2017: £5.9m).
The Company has had no expense in respect of bad or doubtful debts of subsidiary undertakings in the year (2017: £nil).
30 Post balance sheet events
On 8 January 2019, we announced that the Group acquired the entire share capital of Martek Holdings Limited (Martek), for an initial net cash consideration of
£9.0m, with potential further consideration of up to £1.0m subject to a profi t target for the year ending 28 February 2020.
On 8 January 2019, we announced that the Group acquired 60% of the share capital of Murjan Al-Sharq (MSMC), for an initial cash consideration of £4.1m, with
potential further consideration of up to £4.5m subject to a profi t target for the year ending 31 December 2019. Both Martek and MSMC will be included in the
Group’s Marine Support division.
31 Signifi cant accounting policies
The Group has adopted IFRS15 ‘Revenue from contracts with customers’ and restated its comparatives accordingly, which is set out in note 33. The Group
has adopted IFRS 9 ‘Financial Instruments’ which has had no impact on comparatives. Otherwise, the principal accounting policies, which have been applied
consistently throughout the year and the preceding year, are set out below.
31.1
Basis of preparation of the consolidated fi nancial statements
The results of subsidiaries are consolidated for the periods from or to the date on which control has passed. Control exists when the Company controls an investee
when the investor is exposed, or has rights, to variable returns from its involvement with the investees and has the ability to affect those returns through its power
over the investee. Acquisitions are accounted for under the purchase method of accounting from the acquisition date, which is the date on which control is passed
to the Group. The fi nancial statements of subsidiaries are prepared for the same reporting period as the Parent Company, using consistent accounting policies. All
intra-group balances, transactions, income and expenses are eliminated in the consolidated fi nancial statements.
Payment for the future services from employees or former owners are expensed. Any payments to employees or former owners in respect of the acquisition of the
business are capitalised. This is carefully managed during the acquisition process so that former owners and/or employees do not receive any incentive payments
during an earn-out period.
Joint arrangements
A joint arrangement is an arrangement over which the Group and one or more third parties have joint control. These joint arrangements are in turn classifi ed as:
•
•
Joint ventures whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities; and
Joint operations whereby the Group has rights to the assets and obligations for the liabilities relating to the arrangement.
Any investment in joint ventures is carried in the balance sheet at cost plus the Group’s post acquisition share in the change in net assets of the joint ventures, less
any impairment provision. The income statement refl ects the Group’s share of the post-tax result of the joint ventures. The Group’s share of any changes recognised
by the joint venture in other comprehensive income are also recognised in other comprehensive income.
110
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
31 Signifi cant accounting policies continued
Non-controlling interests
Non-controlling interests represent the proportion of profi t or loss and net assets not held by the Group and are presented separately in the income statement and
in the consolidated statement of fi nancial position. On the acquisition of non-controlling interests, the difference between the consideration paid and the fair value
of the share of net assets acquired is recognised in equity. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling
interests even if doing so causes the non-controlling interests to have a defi cit balance.
Company investments in subsidiaries and joint ventures
In its separate fi nancial statements the Company recognises its investments in subsidiaries and joint ventures at cost. Income is recognised from these investments
when its right to receive the dividend is established.
31.2
Foreign currency
Group
The fi nancial statements of subsidiary undertakings are prepared in their functional currency which is the currency of the primary economic environment in which
they operate. For the purpose of the consolidated fi nancial statements, the results and fi nancial position of each entity are translated into UK Sterling, which is the
Group’s presentational currency.
(i)
Foreign currency transactions in functional currency
Transactions in currencies other than the entities functional currency are initially recorded at rates of exchange prevailing on the date of the transaction. At each
subsequent balance sheet date:
(i)
Foreign currency monetary items are retranslated at rates prevailing on the balance sheet date and any exchange differences recognised in the income
statement;
(ii)
Non-monetary items measured at historical cost are not retranslated; and
(iii) Non-monetary items measured at fair value are retranslated using exchange rates at the date the fair value was determined. Where a gain or loss is recognised
directly in equity, any exchange component is also recognised in equity and conversely where a gain or loss is recognised in the income statement, any
exchange component is recognised in the income statement.
(ii) Net investment in foreign operations
Exchange differences arising on monetary items forming part of the Group’s net investment in overseas subsidiary undertakings which are denominated in the
functional currency of the subsidiary undertaking are taken directly to the translation reserve and subsequently recognised in the consolidated income statement
on disposal of the net investment. Exchange differences on foreign currency borrowings to the extent that they are used to provide an effective hedge against Group
equity investments in foreign currency are taken directly to the translation reserve.
(iii) Translation from functional currency to presentational currency
The assets and liabilities of operations, where the functional currency is different from the Group’s presentational currency are translated at the period end exchange
rates. Income and expenses are translated at the average exchange rate for the reporting period. All other exchange differences on transactions in foreign currencies
are recorded at the rate ruling at the date of the transaction.
Resulting exchange differences are recognised in the consolidated statement of other comprehensive income. Tax charges and credits attributable to exchange
differences included in the reserve are also dealt with in the translation reserve.
Company
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies
are retranslated at the rate of exchange ruling at the balance sheet date. Exchange differences arising on settlement of monetary items or on the retranslation of
monetary items at rates different from those at which they were initially recognised are taken to the income statement.
All exchange differences on assets and liabilities denominated in foreign currencies are taken to the income statement, other than investments in foreign operations
and foreign currency borrowings used to hedge those investments, where exchange differences are taken to the translation reserve.
31.3
Financial instruments
IFRS 9 Financial Instruments became effective on 1 January 2018. This standard replaces IAS 39 and introduced new requirements for classifying and measuring
fi nancial instruments and put in place a new hedge accounting model that is designed to be more closely aligned with how entities undertake risk management
activities when hedging fi nancial and non-fi nancial risk exposures. IFRS 9 has been implemented prospectively from 1 January 2018 and the impact on the Group
has not been material. The key areas of focus for the Group under IFRS 9 are:
•
•
•
Expected credit losses being recognised on trade debtors and contract assets recognised under IFRS 15;
Hedge accounting and related hedge documentation; and
Re-classifi cation of assets held for sale as other investments, with these being fair valued at each reporting period.
(a) Financial assets
Trade receivables and debt securities issued are initially recognised when they are originated. All other fi nancial assets and fi nancial liabilities are initially recognised
when the Group becomes a party to the contractual provisions of the instrument.
A fi nancial asset, other than a trade receivable without a signifi cant fi nancing component, or fi nancial liability is initially measured at fair value plus transaction costs
that are directly attributable to its acquisition or issue. A trade receivable without a signifi cant fi nancing component is initially measured at the transaction price.
111
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Notes to the fi nancial statements continued
31 Signifi cant accounting policies continued
Policy applicable from 1 January 2018
A fi nancial asset is measured at amortised cost if it is not designated as fair value through the profi t and loss account (FVTPL) and it is held to collect contractual
cash fl ows with contractual terms that give rise on specifi ed dates to cash fl ows that are solely payments of principal and interest on the principal amount
outstanding.
A debt investment is measured at fair value through other comprehensive income (FVOCI) if it is not designated as at FVTPL, and it is held with the objective of
collecting contractual cash fl ows and selling fi nancial assets with contractual terms that give rise on specifi ed dates to cash fl ows that are solely payments of
principal and interest on the principal amount outstanding.
On initial recognition of an equity investment not held for trading, the Group can irrevocably elect, on an investment by investment basis, to present subsequent
changes in the investment’s fair value in OCI.
All fi nancial assets not classifi ed as measured at amortised cost or FVOCI, as described above, including derivative fi nancial instruments are measured at fair value
through profi t and loss.
Financial assets at fair value through profi t and loss, including any interest or dividend income, are recognised in the profi t and loss.
Financial assets at amortised cost are valued using the effective interest method with the amortised cost reduced by any impairment losses, with interest income,
foreign exchange gains or losses, impairment and de-recognition gains or losses recognised in profi t or loss.
Debt investments are measured at fair value with interest income calculated using the effective interest method with any foreign exchange gains and losses, or
impairments, taken through the profi t and loss. Other net gains or losses, and those on de-recognition accumulated through the OCI, are re-classifi ed in the profi t or
loss.
Equity investments are measured at fair value with dividends recognised through the profi t and loss. Other net gains or losses, are recognised in the OCI, and are
never re-classifi ed in the profi t or loss.
Before 1 January 2018 the Group classifi ed its fi nancial assets into one of the following categories:
•
•
•
•
Financial assets, except those designated as hedging instruments, at FVTPL, measured at fair value with any changes therein, including any interest or dividend
income, recognised in profi t or loss ;
Held-to-maturity fi nancial assets measured at amortised cost using the effective interest method ;
Loans and receivables measured at amortised cost using the effective interest method ; or
Available-for-sale fi nancial assets measured at fair value, with changes therein (excluding impairment losses, interest income and foreign currency differences
on debt instruments) recognised in OCI and accumulated in the fair value reserve. On de-recognition, the gain or loss accumulated in equity is re-classifi ed to
profi t or loss.
(b) Financial liabilities
Financial liabilities are classifi ed as measured at amortised cost or FVTPL. A fi nancial liability is classifi ed as at FVTPL if it is classifi ed as held for trading, it is a
derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest
expense, are recognised in profi t or loss.
Other fi nancial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense, foreign exchange gains and losses, and
any gain or loss on de-recognition are recognised in profi t or loss.
(c) De-recognition
The Group de-recognises a fi nancial asset when the contractual rights to the cash fl ows from that asset expire, or it transfers the rights to receive the contractual
cash fl ows in a transaction in which substantially all of the risks and rewards of ownership of the fi nancial asset are transferred.
The Group de-recognises a fi nancial liability when its contractual obligations are discharged or cancelled, or expire. On de-recognition of a fi nancial liability, the
difference between the carrying amount extinguished and the consideration paid is recognised in profi t or loss.
(d) Derivative fi nancial instruments and hedge accounting
The Group holds derivative fi nancial instruments to hedge its foreign currency and interest rate risk exposures. Derivatives are initially measured at fair value.
Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognised in profi t or loss. The Group designates certain
derivatives as hedging instruments to hedge the variability in cash fl ows associated with highly probable forecast transactions arising from changes in foreign
exchange rates and interest rates and certain derivatives and non -derivative fi nancial liabilities as hedges of foreign exchange risk on a net investment in a foreign
operation.
At inception of designated hedging relationships, the Group documents the risk management objective and strategy for undertaking the hedge and the economic
relationship between the hedged item and the hedging instrument, including whether the changes in cash fl ows of the hedged item and hedging instrument are
expected to offset each other.
The appropriate level of hedging is monitored by Group Treasury and the Group Board. As part of this review process the following are assessed:
•
•
•
the hedging effectiveness to determine that there is an economic relationship between the hedged item and the hedging instrument;
the hedge ratio; and
that the hedged item and instrument are not intentionally weighted to create hedge ineffectiveness.
112
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
31 Signifi cant accounting policies continued
Cash fl ow hedges
When a derivative is designated as a cash fl ow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in OCI and
accumulated in the hedging reserve. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profi t or loss.
The Group designates only the change in fair value of the spot element of forward exchange contracts as the hedging instrument in cash fl ow hedging relationships.
For all hedged forecast transactions, the amount accumulated in the hedging reserve is re-classifi ed to profi t or loss in the same period or periods during which the
hedged expected future cash fl ows affect profi t or loss.
Cash and short-term deposits included in the statement of fi nancial position comprise cash at bank and in hand and short-term deposits with an original maturity of
three months or less from the original acquisition date. Cash and cash equivalents included in the cash fl ow statement comprise cash and short-term deposits, net of
bank overdrafts.
If the hedged future cash fl ows are no longer expected to occur, then the amounts that have been accumulated in the hedging reserve and the cost of hedging
reserve are immediately re-classifi ed to profi t or loss.
Net investment hedges
When a derivative instrument or a non derivative fi nancial liability is designated as the hedging instrument in a hedge of a net investment in a foreign operation, the
effective portion of, for a derivative, changes in the fair value of the hedging instrument or, for a non -derivative, foreign exchange gains and losses is recognised in
OCI and presented in the translation reserve within equity.
Any ineffective portion of the changes in the fair value of the derivative or foreign exchange gains and losses on the non derivative is recognised immediately in profi t
or loss. The amount recognised in OCI is re-classifi ed to profi t or loss as a re-classifi cation adjustment on disposal of the foreign operation.
(e) Expected credit losses
IFRS 9 introduced a new model for the recognition of impairment losses – the expected credit loss (ECL) model. ECL is the expected value decrease in an asset.
The expected credit loss model constitutes a change from the previous IAS 39 incurred loss model. The key difference between incurred and expected is the
requirement to consider forward looking scenarios. Credit risk is the risk of fi nancial loss of the Group if a customer or counterparty to a fi nancial instrument fails
to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investments in debt securities. The carrying amounts of
fi nancial assets and contract assets represent the maximum credit exposure.
31. 4
Intangible assets
Intangible assets, excluding goodwill arising on a business combination, are stated at cost or fair value less any provision for impairment.
Intangible assets assessed as having fi nite lives are amortised over their estimated useful economic life and are assessed for impairment whenever there is an
indication that they are impaired. Amortisation charges are on a straight-line basis and recognised in the income statement. Estimated useful lives are as follows:
Development costs
Intellectual property
Patents and licences
Other intangibles
5 years or over the expected period of product sales, if less
3 to 20 years
5 years or over the period of the licence, if less
5 years
(a) Goodwill arising on a business combination
Goodwill arising on the acquisition of a subsidiary represents the excess of the aggregate of the fair value of the consideration over the aggregate fair value of the
identifi able assets, liabilities and contingent liabilities acquired. Goodwill is initially recognised at cost and is subsequently measured at cost less any accumulated
impairment losses.
Costs related to an acquisition, other than those associated with the issue of debt or equity securities incurred in connection with a business combination are
expensed to the income statement. The carrying value of goodwill is reviewed annually for impairment but more regularly if events or changes in circumstances
indicate that it may be impaired. When an impairment loss is recognised it is not reversed in a subsequent accounting period, even if the circumstances which led to
the impairment cease to exist.
(b) Acquired intangible assets
Intangible assets that are acquired as a result of a business combination including but not limited to customer relationships, supplier lists, patents and technology
and that can be separately measured at fair value on a reliable basis are recorded initially at fair value and amortised over their expected useful life. Amortisation is
expensed to the consolidated income statement.
31.5
Property, plant and equipment
Property, plant and equipment is stated at cost, less accumulated depreciation and any provision for impairment losses. Refi t costs relating to vessels are capitalised
when incurred and depreciated over their estimated useful economic life of 30 months. Cost comprises expenditure incurred during construction, delivery and
modifi cation. Where a substantial period of time is required to bring an asset into use, attributable fi nance costs are capitalised and included in the cost of the
relevant asset.
Depreciation is provided to write off the cost of property, plant and equipment to their residual value in equal annual instalments over their estimated useful lives, as
follows:
Freehold property
Leasehold improvements
Plant and equipment
Vessels
40 years
25 years or the period of the lease, if shorter
Between 5 and 20 years
Between 10 and 25 years
No depreciation is charged on assets under construction.
Residual values of vessels are set initially at 20% of purchase cost or fair value at acquisition, which the Directors believe to be an approximation of current residual
values. Residual values and estimated remaining lives are reviewed annually by the Directors and adjusted if appropriate to refl ect the relevant market conditions
and expectations, obsolescence and normal wear and tear.
113
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Notes to the fi nancial statements continued
31 Signifi cant accounting policies continued
31.6
Impairment of tangible and intangible assets
At each reporting date the Group assesses whether there are any indications that an asset has been impaired. If any indication exists, an estimate of the recoverable
amount of the asset is made which is determined as the higher of its fair value less costs to sell and its value in use. These calculations are determined for an
individual asset unless that asset does not generate cash infl ows independently from other assets, in which case its value is determined as part of that group of
assets. To assess the value in use, estimated future cash fl ows relating to the asset are discounted to their present value using a pre-tax discount rate that refl ects
current market assessment of the time value of money and risks specifi c to the asset. Where the carrying amount of the asset exceeds its recoverable amount, the
asset is considered to be impaired and is written down to its recoverable amount. Impairment losses are recognised in the income statement.
(a) Impairment of goodwill
Goodwill acquired in a business combination is allocated against the appropriate combination of business units deemed to obtain advantage from the benefi ts
acquired with the goodwill. These are designated as cash generating units (CGU). Impairment is then assessed by comparing the recoverable amount of the
relevant CGU with the carrying value of the CGU’s goodwill. Recoverable amount is measured as the higher of the CGU’s fair value less cost to sell and the value in
use. Where the recoverable amount of the CGU is less than its carrying amount including goodwill, an impairment loss is recognised in the income statement. An
impairment loss for goodwill is not reversed in a subsequent period.
(b) Impairment of tangible and other intangible assets
If any indication of a potential impairment exists, the recoverable amount is estimated to determine the extent of any impairment loss. Assets are grouped together
for this purpose at the lowest level for which there are separately identifi able cash fl ows.
(c) Research and development costs
Research expenditure is expensed in the income statement as incurred.
Expenditure on development which represents the application of research to the development of new products or processes is capitalised provided that specifi c
projects are identifi able, technically feasible, and the Group has suffi cient resources to complete development. The useful life of projects meeting the criteria for
capitalisation is determined on a project by project basis. Capitalised development expenditure is measured at cost and amortised over its expected useful life on a
straight-line basis. Other development costs are recognised in the income statement as incurred.
If an event occurs after the recognition of an impairment that leads to a decrease in the amount of the impairment loss previously recognised the impairment loss is
reversed. The reversal is recognised in the income statement to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.
31.7
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost includes all costs incurred in bringing each product to its present location and condition.
Raw materials, consumables stores and fi nished goods for sale are stated at purchase cost on a fi rst in fi rst out basis. Work in progress and fi nished goods are stated
at the cost of direct materials and labour plus attributable overheads allocated on a systematic basis based on a normal level of activity. Net realisable value is based
on estimated selling price less the estimated costs of completion and sale or disposal.
31.8 Taxation
Corporation tax is provided on taxable profi ts from activities not qualifying for tonnage tax relief and is recognised in the income statement except to the extent that
it relates to items recognised directly in equity or in other comprehensive income.
Current tax is the expected corporation tax payable or receivable in respect of the taxable profi t for the year using tax rates enacted or substantively enacted at the
balance sheet date, less any adjustments to tax payable or receivable in respect of previous years.
Deferred tax is recognised in respect of all temporary differences between the carrying amounts of assets and liabilities included in the fi nancial statements and the
amounts used for tax purposes, that will result in an obligation to pay more, a right to pay less or to receive more tax, with the following exceptions:
•
•
No provision is made where a deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction which is not a business
combination that at the time of the transaction affect neither accounting nor taxable profi t; and
No provision is made for deferred tax that would arise on all taxable temporary differences associated with investments in subsidiaries and interests in joint
ventures where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary difference will not reverse in the
foreseeable future.
Deferred tax assets are recognised only to the extent that the Directors consider that it is probable that there will be suitable taxable profi ts from which the future
reversal of the underlying temporary differences and unused tax losses and credits can be deducted.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which the asset is expected to be realised or liability
settled, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
Deferred tax arising on actuarial gains and losses relating to defi ned benefi t pension funds is recorded in other comprehensive income. Where the cash contributions
made to the schemes exceed the service costs recognised in the income statement the current tax arising is recorded in other comprehensive income.
31.9
Leases
A lease arrangement under which substantially all the risks and rewards of ownership rest with the lessee are classifi ed as fi nance leases and capitalised at the
inception of the lease at the lower of the fair value of the related item or the present value of the minimum lease payments.
Lease payments are apportioned between fi nance charges and a reduction in the lease liability so as to achieve a constant rate of interest on the remaining balance
of the liability. Finance charges are expensed to the income statement.
Capitalised leased assets are depreciated over the shorter of the lease term and the estimated useful life of the asset. All other leases are classifi ed as operating
leases and rentals payable are charged to the income statement on a straight -line basis over the lease term.
In preparation for the adoption of IFRS 16, ‘Leases’, in the fi nancial statements for the year ending 31 December 2019, management are in the process of assessing
the potential impact.
114
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
31 Signifi cant accounting policies continued
31.10 Pension plans
(i) Defi ned contribution schemes
Pre-determined contributions paid to a separate privately administered pension plan are recognised as an expense in the income statement in the period in which
they arise. Other than this contribution the Group has no further legal or constructive obligation to make further contributions to the scheme.
(ii) Defi ned benefi t schemes
A defi ned benefi t scheme is a pension plan under which the amount of pension benefi t that an employee receives on retirement is defi ned by reference to factors
including age, years of service and compensation. The schemes are funded by payments determined by periodic actuarial calculations agreed between the Group
and the trustees of trustee-administered funds.
The cost of providing benefi ts is determined using the projected unit credit method, which attributes entitlement to benefi ts to the current period (current service
cost) and to current and prior periods (to determine the present value of the defi ned benefi t obligation). Current service costs are recognised in the income
statement in the current year. Past service costs are recognised in the income statement immediately. When a settlement (which eliminates all obligations for
benefi ts already accrued) or a curtailment (which reduces future obligations as a result of a reduction in future entitlement) occurs, the obligation and related plan
assets are re-measured using current actuarial assumptions and any gain or loss is recognised in the income statement.
The interest element of the defi ned benefi t charge is determined by applying the discount rate to the net defi ned benefi t liability at the start of the period and
is recognised in the income statement. A liability is recognised in the statement of fi nancial position which represents the present value of the defi ned benefi t
obligations at the balance sheet date, less the fair value of the scheme assets and is calculated separately for each scheme.
The defi ned benefi t obligations represent the estimated amount of future benefi ts that employees have earned in return for their services in current and prior
periods, discounted at a rate representing the yield on a high quality corporate bond at the balance sheet date, denominated in the same currency as the obligations,
and having the same terms to maturity as the related pension liability, applied to the estimated future cash outfl ows arising from these obligations. When the
calculation results in a benefi t to the Group, the recognised asset is limited to the total of any unrecognised past service costs and the present value of economic
benefi ts available from any future refunds from the plan or reductions in future contributions to the plan.
When the benefi ts of a plan are improved, the portion of the increased benefi t related to past service by employees is recognised in profi t or loss on a straight-
line basis over the average period until the benefi ts become vested. To the extent that the benefi ts vest immediately, the expense is recognised immediately
in the income statement. Actuarial gains and losses on experience adjustments and changes in actuarial assumptions are recognised in the statement of other
comprehensive income.
31.11 Share based payments
Executive share option schemes are operated under which options are granted to employees of the Group. An expense is recognised in the income statement with a
corresponding credit to equity in respect of the fair value of employee services rendered in exchange for options granted, which is determined by the fair value of the
option at the date of grant. The amount is expensed over a specifi ed period until the options can be exercised (the vesting period).
The fair value of an option is determined by the use of mathematical modelling techniques, including the Black-Scholes option pricing model and the Binomial
model. Non-market vesting conditions (such as profi tability and growth targets) are excluded from the fair value calculation but included in assumptions about the
number of options that are expected to become exercisable.
An estimate is made of the number of options that are expected to become exercisable at each balance sheet date. Any adjustments to the original estimates are
recognised in the income statement (and equity) over the remaining vesting period with any element of any adjustments relating to prior periods recognised in the
current period. No expense is recognised for awards that do not ultimately vest except for awards where vesting is conditional upon a market condition (such as total
shareholder return of the Group relative to an index). These are treated as vested irrespective of whether or not the market condition is satisfi ed, provided that all
other performance conditions are satisfi ed.
In addition to failure by the employee to exercise an option in accordance with the exercise period allowed by the scheme, an award made to an employee under a
share option scheme is deemed to lapse when either the scheme is cancelled by the Company, or when an employee, who continues to qualify for membership of
a scheme, ceases to pay contributions to that scheme. In these circumstances the full remaining unexpired cost of the award is expensed in the period in which the
option lapses.
Where the exercise of options is satisfi ed by the issue of shares by the Company, the nominal value of any shares issued from the exercise of options is credited to
share capital with the balance of the proceeds received, net of transaction costs, credited to share premium.
31.12 Short-term employee benefi ts
The Group recognises a liability and an expense for short-term employee benefi ts, including bonuses, only when contractually or constructively obliged.
31.13 Share capital and reserves
Ordinary shares are classifi ed as equity. Costs attributable to the issue of new shares are deducted from equity from the proceeds.
(a) Treasury shares
Shares issued by the Company which are held by the Company or its subsidiary entities (including the Employee Share Ownership Trust (ESOT)), are designated as
treasury shares. The cost of these shares is deducted from equity. No gains or losses are recognised on the purchase, sale, cancellation or issue of treasury shares.
Consideration paid or received is recognised directly in equity.
115
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Notes to the fi nancial statements continued
31 Signifi cant accounting policies continued
(b) Employee Share Ownership Plan (ESOP)
Company shares are held in an ESOP. The fi nance costs and administration costs relating to the ESOP are charged to the income statement. Dividend income arising
on own shares is excluded in arriving at profi t before taxation and deducted from aggregate dividends paid.
The Group maintains the following reserves:
Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of operations whose fi nancial statements are denominated in foreign
currencies as well as from the translation of liabilities that hedge the Company’s net investment in a foreign subsidiary.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash fl ow hedging instruments related to hedged transactions
that have not yet occurred.
31.14 Revenue recognition
IFRS 15 ‘Revenue from contracts with customers’ – accounting policy applied since 1 January 2018
Following the adoption of IFRS 15, the Group’s accounting policy in respect of revenue is as follows:
Revenue represents income derived from contracts for the provision of goods and services by the Company and its subsidiary undertakings to customers in
exchange for consideration in the ordinary course of the Group’s activities.
Performance obligations
Upon approval by the parties to a contract, the contract is assessed to identify each promise to transfer either a distinct good or service or a series of distinct goods
or services that are substantially the same and have the same pattern of transfer to the customer. Goods and services are distinct and accounted for as separate
performance obligations in the contract if the customer can benefi t from them either on their own or together with other resources that are readily available to the
customer and they are separately identifi able in the contract.
Transaction price
At the start of the contract, the total transaction price is estimated as the amount of consideration to which the Group expects to be entitled in exchange for
transferring the promised goods and services to the customer, excluding sales taxes. Variable consideration, such as price escalation, is included based on the
expected value or most likely amount only to the extent that it is highly probable that there will not be a reversal in the amount of cumulative revenue recognised.
The transaction price does not include estimates of consideration resulting from contract modifi cations, such as change orders, until they have been approved by
the parties to the contract. The total transaction price is allocated to the performance obligations identifi ed in the contract in proportion to their relative stand-alone
selling prices where appropriate. Given the bespoke nature of many of the Group’s products and services, which are designed and/or manufactured under contract
to the customer’s individual specifi cations, there are typically no observable stand-alone selling prices. In such cases, stand-alone selling prices are typically
estimated based on expected costs plus contract margin consistent with the Group’s pricing principles.
Revenue and profi t recognition
Revenue is recognised as performance obligations are satisfi ed as control of the goods and services is transferred to the customer.
For each performance obligation within a contract, the Group determines whether it is satisfi ed over time or at a point in time. Performance obligations are satisfi ed
over time if one of the following criteria is satisfi ed:
•
•
•
the customer simultaneously receives and consumes the benefi ts provided by the Group’s performance as it performs;
the Group’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or
the Group’s performance does not create an asset with an alternative use to the Group and it has an enforceable right to payment for performance completed to
date.
Contracts that satisfy the over time criteria primarily occur in the Group’s Specialist Technical business, either because the customer simultaneously receives and
consumes the benefi ts provided by the Group’s performance as it performs (typically services or support contracts) or the Group’s performance does not create an
asset with an alternative use and it has an enforceable right to payment for performance completed to date (typically production contracts).
For each performance obligation to be recognised over time, the Group typically recognises revenue using an input method, based on costs incurred in the period.
Revenue and attributable margin are calculated by reference to reliable estimates of transaction price and total expected costs, after making suitable allowances for
technical and other risks. Revenue and associated margin are therefore recognised progressively as costs are incurred.
If the over time criteria for revenue recognition are not met, revenue is recognised at the point in time that control is transferred to the customer, which is usually
when legal title passes to the customer and the business has the right to payment, for example, on delivery.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised immediately as an expense.
Bid costs
All pre-contract bidding costs which are incurred irrespective of whether the contract is awarded relating to the design, manufacture or operation of assets or the
provision of services are expensed when incurred.
Warranty costs
Provision is made for warranties offered with products where it is probable that an obligation to transfer economic benefi ts to the customer in future will arise.
This provision is based on management’s assessment of the previous history of claims and probability of future obligations arising on a product by product basis.
Provisions for warranty costs are set out in note 20.
116
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
31 Signifi cant accounting policies continued
Revenue – operating lease rental income
Revenue is measured at the fair value of consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognised in the
income statement on a straight -line basis over the period of the hire.
31.15 Other investments
Other investments are recognised at the lower of carrying amount and fair value less costs to sell. Impairment losses on initial classifi cation as held for sale are
included in profi t or loss, as are any gains and losses on subsequent remeasurement.
31.16 Intra-group fi nancial instruments
Where the Company enters into fi nancial guarantee contracts to guarantee the indebtness of other companies within the Group, the Company considers these to
be insurance arrangements and accounts for them as such. In this respect the Company treats the guarantee contract as a contingent liability until such time as it
becomes probable that the Company will be required to make a payment under the guarantee.
32 Signifi cant accounting judgements and estimates
In preparing these consolidated fi nancial statements, management has made judgements, estimates and assumptions that affect the application of the Group’s
accounting policies and the reported amount of assets, liabilities, income and expenses. The outcome may differ from these estimates.
Estimates and underlying assumptions are reviewed and revised on an on-going basis.
(a) Judgements
Information about judgements made in applying accounting policies that have the most signifi cant effects on the amounts recognised in the consolidated fi nancial
statements is included below:
Impairment of goodwill
Goodwill, which is set out in note 12, of £171.4m (2017: £174.6m) is tested annually for any permanent impairment in accordance with the accounting policy
in note 31.6. The value in use of the Group’s cash generating units (CGU) requires assumptions about future levels of demand, gross margins and cost infl ation.
Inherent uncertainty involved in forecasting and discounting future cash fl ows is a key area of judgement. If indicators of impairment exist the carrying value of
goodwill is compared to its recoverable amount which represents the higher of the net present value of the CGU’s forecast cash fl ow and its carrying value. The
assessment also includes sensitivity analysis to identify the range of outcomes and the validity of underlying assumptions. In the current year it is not expected that
there is a risk of material misstatement based on these assessments.
Business combinations
Business combinations are set out in note 23 and the Group makes an assessment of the fair values of the assets and liabilities arising in a business combination
and of any related contingent consideration. Judgement is applied in assessing appropriate fair values of the assets and liabilities required, identifying any intangible
assets of the acquired business and in estimating the likelihood of contingent targets being achieved during the relevant period. The outcome of contingent
consideration arrangements depends on a number of factors outside the control of the business including, but not limited to competition, general economic
conditions and the availability of resources within the business to meet its obligations to its customers. The Group regularly assesses the likelihood of the targets
being achieved during the performance period and makes appropriate adjustments to the provision for contingent consideration through the income statement. The
Group uses a discounted cash fl ow analysis to assess the value of contingent consideration.
Revenue
Revenue is set out in notes 4 and 31.14. Revenue is recognised when the signifi cant risks and rewards of ownership have been transferred to the customer, the
amount of revenue can be measured reliably and recovery of the consideration is probable. The timing of the performance obligations will vary depending on the
terms of the sales agreement, the evaluation of the specifi c risks associated with the performance of the contract (for example design, construction and testing) or
generally accepted practice where there are no specifi c arrangements in the contract. Areas of judgement relate to construction contract accounting and specifi cally
estimating the stage of completion and forecast outturn of the contract.
Income taxes
Taxation is set out in notes 8, 9 and 31.8. The Group is subject to income taxes in several jurisdictions. Signifi cant judgement is required in determining the provision
for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The
Group recognises liabilities for anticipated tax risk issues based on estimates of whether additional taxes will be due. Where the fi nal tax outcome of these matters
is different from the amounts that were initially recorded, such difference will impact the income tax and deferred tax provisions in the period in which such
determination is made.
The Group has entered the UK tonnage tax regime under which tax on its ship owning and operating activities is based on the net tonnage of vessels operated.
Income and profi ts outside this regime are taxed under normal tax rules. This means that it is necessary to make estimates of the allocation of some income and
expenses between tonnage and non-tonnage tax activities. These estimates are subject to agreement with the relevant tax authorities and may be revised in future
periods.
Operating in overseas jurisdictions
The Group operates in emerging markets which increases contractual, operational and fi nancial risk with potentially uncertain or changing regulatory and political
environments. This is referred to in the Group’s principal risks and uncertainties on page 25 and in note 26. In preparing the consolidated fi nancial statements the
management form a judgement about the risk of exchange control regulations, political stability, potential changes to tax regimes and operating environments.
117
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Notes to the fi nancial statements continued
32 Signifi cant accounting judgements and estimates continued
(b) Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a signifi cant risk of resulting in a material adjustment to the carrying amounts of assets and
liabilities within the year ending 31 December 2019 is included in the following notes:
•
•
•
Note 9 – recognition of deferred tax assets, and the availability of future taxable profi t against which tax losses carried forward can be used;
Notes 12 and 13 – impairment test of intangible assets and goodwill: key assumptions underlying recoverable amounts, including the recoverability of
development costs; and
Note 23 – Business combinations.
33 Changes in signifi cant accounting policies
A. IFRS 15 ‘Revenue from contracts with customers’
The Group adopted IFRS 15 on 1 January 2018 using the fully retrospective method, utilising the practical expedients available:
a)
b)
c)
d)
e)
Expedient 1 – Contracts started and completed in the same annual reporting period. An entity need not restate completed contracts that begin and end in the
same annual reporting period ;
Expedient 1A – Further, an entity can elect not to restate contracts that are completed contracts at the beginning of the earliest period presented ;
Expedient 2 – That allows an entity to use the transaction price at the date on which the contract was completed, rather than estimating the variable
consideration amounts in each comparative reporting period ;
Expedient 3 – An entity need not separately evaluate the effect of contract modifi cations before the start of the earliest reporting period presented; and
Expedient 4 – An entity does not need to disclose for reporting periods presented before the date of initial application:
– Amount of the transaction price allocated to remaining performance obligations; and
– An explanation of when it expects to recognise the revenue.
Two revenue streams were identifi ed as requiring Group policy change to align with IFRS 15. These were the rendering of services and delivery of construction
contracts.
The main revenue streams within the Group are:
Sale of goods
Revenue is recognised when a customer obtains control of the goods. Based on the Group’s assessment, the application of IFRS 15 has not resulted in a signifi cant
impact.
Construction contracts
Under IFRS 15 performance obligations in contracts with customers are identifi ed and the total contract value is allocated to each of the performance obligations
identifi ed. Revenue is recognised as each performance obligation is satisfi ed.
For some of the goods that the Group provides, the customer controls all of the work in progress as the products are manufactured, or the goods manufactured
are of a specialised nature. The revenue from these contracts will be recognised as the products are manufactured. Revenue and some associated costs, for these
contracts are recognised over time i.e. before the goods are delivered to the customers’ premises.
Rendering of services
The Group is involved in providing a range of services including submarine rescue services. The transfer of control is assumed to pass to the customer on delivery of
the goods or completion of the provision of the relevant services. Under IFRS 15, the total consideration in the service contracts is allocated to all services based on
their stand-alone prices. The stand-alone selling prices are determined based on the list prices at which the Group sells such services in separate transactions.
The impact due to these changes is set out below. Line items that are not affected by the changes have not been included. As a result, the sub-totals and totals
disclosed cannot be recalculated from the numbers provided.
Year ended 31 December 2017
Reported
£m
Adjustments
£m
Restated
£m
505.4
(350.9)
154.5
(100.4)
1.7
(1.3)
54.5
(5.5)
49.0
(8.3)
40.7
(6.1)
4.3
(1.8)
0.1
–
–
(1.7)
–
(1.7)
0.4
(1.3)
499.3
(346.6)
152.7
(100.3)
1.7
(1.3)
52.8
(5.5)
47.3
(7.9)
39.4
Revenue
Cost of sales
Gross profit
Administrative expenses
Share of post -tax results of joint ventures
Acquisition related income and (expense)
Operating profit
Net finance expense
Profit before taxation
Income tax
Profit for the period
118
I
S
T
T
R
N
O
E
P
M
E
E
R
T
A
C
T
G
S
E
L
T
A
A
C
R
N
T
S
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
33 Changes in signifi cant accounting policies continued
The main impact of IFRS 15 is within Specialist Technical on long-term contracts. Under IAS 11, revenue under long-term contracts was recognised using the
percentage of completion method. The Group has determined that, within Specialist Technical, the performance obligations identifi ed in a number of contracts will
satisfy the criteria in IFRS 15 for recognition over time. As result under IFRS 15, it is no longer deemed appropriate to recognise signifi cant work in progress as an
asset on the Group’s balance sheet and consequently the Group will recognise revenue based on costs incurred refl ecting the continuous transfer of the benefi t of
the Group’s performance to the customer.
Non-current assets
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Total assets
Current liabilities
Trade and other payables
Net assets
Year ended 31 December 2017
Reported
£m
Adjustments
£m
Restated
£m
3.2
52.1
201.9
618.6
(132.7)
286.2
1.1
(4.9)
(2.6)
(6.4)
(0.8)
(7.2)
4.3
47.2
199.3
612.2
(133.5)
279.0
The impact on the Group’s retained earnings at 31 December 2016 is a reduction of £5.9m relating to the elimination of bid costs (£0.4m), rendering of services
(£1.0m), recognition of revenue over time (£5.2m) offset by deferred taxation (£0.7m).
The impact was to reduce the 2017 basic earnings per share by 1.9p, and the diluted earnings per share by 1.8p.
IFRS 15 Revenue from contracts with customers – accounting policy applied since 1 January 2018
Following the adoption of IFRS 15, the Group’s accounting policy in respect of revenue is as follows:
Revenue represents income derived from contracts for the provision of goods and services by the Company and its subsidiary undertakings to customers in
exchange for consideration in the ordinary course of the Group’s activities.
Performance obligations
Upon approval by the parties to a contract, the contract is assessed to identify each promise to transfer either a distinct good or service or a series of distinct goods
or services that are substantially the same and have the same pattern of transfer to the customer. Goods and services are distinct and accounted for as separate
performance obligations in the contract if the customer can benefi t from them either on their own or together with other resources that are readily available to the
customer and they are separately identifi able in the contract.
Transaction price
At the start of the contract, the total transaction price is estimated as the amount of consideration to which the Group expects to be entitled in exchange for
transferring the promised goods and services to the customer, excluding sales taxes. Variable consideration, such as price escalation, is included based on the
expected value or most likely amount only to the extent that it is highly probable that there will not be a reversal in the amount of cumulative revenue recognised.
The transaction price does not include estimates of consideration resulting from contract modifi cations, such as change orders, until they have been approved by
the parties to the contract. The total transaction price is allocated to the performance obligations identifi ed in the contract in proportion to their relative stand-alone
selling prices where appropriate. Given the bespoke nature of many of the Group’s products and services, which are designed and/or manufactured under contract
to the customer’s individual specifi cations, there are typically no observable stand-alone selling prices. In such cases, stand-alone selling prices are typically
estimated based on expected costs plus contract margin consistent with the Group’s pricing principles.
Revenue and profi t recognition
Revenue is recognised as performance obligations are satisfi ed as control of the goods and services is transferred to the customer.
For each performance obligation within a contract, the Group determines whether it is satisfi ed over time or at a point in time. Performance obligations are satisfi ed
over time if one of the following criteria is satisfi ed:
•
•
•
the customer simultaneously receives and consumes the benefi ts provided by the Group’s performance as it performs;
the Group’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or
the Group’s performance does not create an asset with an alternative use to the Group and it has an enforceable right to payment for performance completed to
date.
Contracts that satisfy the over time criteria primarily occur in the Group’s Specialist Technical business, either because the customer simultaneously receives and
consumes the benefi ts provided by the Group’s performance as it performs (typically services or support contracts) or the Group’s performance does not create an
asset with an alternative use and it has an enforceable right to payment for performance completed to date (typically production contracts).
For each performance obligation to be recognised over time, the Group typically recognises revenue using an input method, based on costs incurred in the period.
Revenue and attributable margin are calculated by reference to reliable estimates of transaction price and total expected costs, after making suitable allowances for
technical and other risks. Revenue and associated margin are therefore recognised progressively as costs are incurred.
If the over time criteria for revenue recognition are not met, revenue is recognised at the point in time that control is transferred to the customer, which is usually
when legal title passes to the customer and the business has the right to payment, for example, on delivery.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised immediately as an expense.
119
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Notes to the fi nancial statements continued
33 Changes in signifi cant accounting policies continued
Bid costs
All pre-contract bidding costs which are incurred irrespective of whether the contract is awarded relating to the design, manufacture or operation of assets or the
provision of services are expensed when incurred.
B. IFRS Financial Instruments
IFRS 9 ‘Financial Instruments’ became effective on 1 January 2018. This standard replaces IAS 39 and introduces new requirements for classifying and measuring
fi nancial instruments and puts in place a new hedge accounting model that is designed to be more closely aligned with how entities undertake risk management
activities when hedging fi nancial and non-fi nancial risk exposures. IFRS 9 has been implemented prospectively from 1 January 2018 and the impact on the Group
has been not been material. The key areas of focus for the Group under IFRS 9 are:
•
•
•
Expected credit losses being recognised on trade debtors and contract assets recognised under IFRS 15;
Hedge accounting and related hedge documentation; and
Re-classifi cation of assets held for sale as other investments, with these being fair valued at each reporting period.
Expected Credit Loss
Note 31.3 (e) describes the expected ECL. The Group has not historically suffered signifi cant levels of write offs and a review has concluded that the current level of
provision is considered appropriate.
Hedge accounting
The Group has elected to adopt the new General Hedge Accounting Model under IFRS 9 which requires that hedge accounting relationships are in line with its
management objectives and strategy.
The Group uses forward exchange contracts to hedge against the variability in cash fl ows in foreign exchange rates relating to sales and receivables. Only the change
in fair value of the spot element of the forward contracts is designated as the hedging instrument in cash fl ow hedging relationships. The effective portion of changes
in fair value of hedging instruments is held in a cash fl ow hedge reserve as a separate component of equity.
Re-classifi cation of assets held for sale as other investment
Following the transition to IFRS 9, in respect of the interest in Britannia’s Gold Limited (BGL) and SEML De Co-operation Transmanche the Group has elected to
present subsequent changes to the fair value of these investments in the consolidated OCI . The investments are not part of the Group’s core operational activities.
The investments are in unquoted entities and held at fair value ( see note 16).
These investments were previously classifi ed as “Available for Sale” investments.
No dividends were received in the period in respect of these investments. In relation to the interest in BGL a fair value adjustment was made through the OCI during
the year.
Transition
The Group has taken the exemption not to restate comparative periods. All hedging relationships designated under IAS 39 met the conditions to apply hedge
accounting under IFRS 9.
34 Standards issued but not yet effective
The Group is required to adopt IFRS 16 ‘Leases’ from 1 January 2019, and has performed an initial assessment of the estimated impact that initial application of
IFRS 16 will have on its consolidated fi nancial statements. The actual impacts of adopting the standard on 1 January 2019 may change because the new accounting
policies are subject to change until the Group presents its fi rst fi nancial statements that include the date of application.
IFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the
underlying asset and a lease liability representing its obligation to make lease payments. There are recognition exemptions for short-term leases and leases of low-
value items. Lessor accounting remains similar to the current standard – i.e. lessors continue to classify leases as fi nance or operating leases.
IFRS 16 replaces existing leases guidance, including IAS 17 ‘Leases’, and IFRIC 4 ‘Determining whether an Arrangement contains a Lease’.
Leases in which the Group is a lessee
The Group will recognise new right-of-use assets and liabilities for some its offi ces, operating leases of warehouse, vessels and factory facilities (see note 28). The
nature of expenses related to those leases will now change because the Group will recognise a depreciation charge for right-of-use assets and interest expense on
lease liabilities. The interest charge will be higher in the earlier years of the lease term, but the total expense recognised in the Income Statement over the life of the
lease will be unaffected by this new standard. It will, however, result in the timing of leases expense recognition being accelerated for leases currently accounted for
as operating leases.
Previously, the Group recognised operating lease expense on a straight-line basis over the term of the lease, and recognised assets and liabilities only to the extent
that there was a timing difference between lease payments and the expense recognised. There will be no impact on cash fl ows, but the presentation of the Cash
Flow Statement will change with an increase in cash infl ows from operating activities offset by an increase in cash outfl ows from fi nancing activities.
The Group plans to apply IFRS 16 initially on 1 January 2019, using the modifi ed retrospective approach. Therefore, the cumulative effect of adopting IFRS 16
will be recognised with no restatement of comparative information. The Group plans to apply the practical expedient to grandfather the defi nition of a lease on
transition. This means that it will apply IFRS 16 to contracts entered into before 1 January 2019 and identifi ed as leases in accordance with IAS 17 and IFRIC 4.
At 31 December 2018 the Group has operating lease commitments of £38.2m, and the initial recognition of asset and liability is not expected to exceed this.
120
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Subsidiaries and associated undertakings
Subsidiary undertakings
Address
Name of company
Marine Support
Buchan Technical Services Limited Barrow-in-Furness1
Clariden Holdings SA
EDS HV Group Limited
EDS HV Management Limited
EDS HV Services Limited
Electricity Distribution Services
Limited
F.C.N. Limited
80 Broad Street, Monrovia, Liberia
Barrow-in-Furness1
Barrow-in-Furness1
Barrow-in-Furness1
Barrow-in-Furness1
c/o Trident Trust, Trident Chambers, Road
Town, Tortola, British Virgin Islands
Group
percentage
of equity
capital
100%
100%
100%
100%
100%
100%
100%
Fender Care (Changshu) Limited Room 1211, Building 4, Huifeng Times
100%
Plaza, No 22 Huanghe Road, Changshu City,
Jiangsu, 215500, China
Rua 01 S/N, Lote 115, Quadra 01, Balneario
das Garcas, Rio de Janeiro, 28890-000, Brazil
Barrow-in-Furness1
6 Pioneer Place, 627705, Singapore
28 Irish Town, Gibraltar
11 Aduemi Close, North Kaneshie, Accra,
Ghana
Barrow-in-Furness1
6 Pioneer Place, 627705, Singapore
Barrow-in-Furness1
Al Batinah Region, PO Box 37, Sohar, 327
Barrow-in-Furness1
Fender Care do Brasil Comercio E
Servicos Navais Ltda
Fender Care Limited
Fender Care Marine (Asia Pacifi c)
Pte Ltd
Fender Care Marine (Gibraltar)
Limited
Fendercare Marine Ghana
Limited
Fender Care Marine Ltd
Fender Care Marine Products
(Asia Pacifi c) Pte Limited
Fender Care Marine Services
Group Limited
Fender Care Marine Sohar LLC
Fender Care Marine Solutions
Limited
Fendercare Australia Pty Ltd
23 Sparks Road, Henderson WA 6166,
Australia
Rua 01 S/N, Lote 115, Quadra 01, Balneario
das Garcas, Rio de Janeiro, 28890-000, Brazil
Fendercare Servicos Marinhos do
Brasil Ltda
Foresight HV Operations Limited Second Floor, Sketrick House, Jubilee Road,
Newtownards, Northern Ireland, BT23 4YH
Barrow-in-Furness1
Hughes Marine Engineering
Limited
Hughes Sub Surface Engineering
Limited
Barrow-in-Furness1
Insight Marine Projects Limited
James Fisher Fender Care Limited Barrow-in-Furness1
Barrow-in-Furness1
James Fisher Marine Services
Limited
James Fisher MFE Limited
James Fisher MIMIC Limited
James Fisher Ocean Team Limited Rooms 1318-19, 13/F, Hollywood Plaza, 610
Barrow-in-Furness1
Barrow-in-Furness1
Barrow-in-Furness1
Nathan Road, Mongkok, Kowloon, Hong
Kong
Gabriel Mancera 1041 Del Valle, Benito
Juarez, 03100, Ciudad de Mexico, D.F.,
Mexico
Rua 01 No 223, Quadra 02, Lote 146-part,
Balneario das Garcas, Brazil
21559 Provincial Boulevard, Katy TX 77450,
United States
Gabriel Mancera 1041 Del Valle, Benito
Juarez, 03100, Ciudad de Mexico, D.F.,
Mexico
133 Cecil Street, #16-01, Keck Seng Tower,
Singapore, 069535
Barrow-in-Furness1
Unit D, Zone 5, Clonminam Business Park,
Portlaoise, County Laois, Ireland
James Fisher Personnel S.A.
de C.V.
James Fisher Servicos
Empresariais Ltda
James Fisher Subsea Excavation
Incorporated
James Fisher Subsea Excavation
Mexico S.A. de C.V.
James Fisher Subsea Excavation
Pte Limited
James Fisher Subsea Limited
James Fisher Testing Services
(Ireland) Limited
1
2
Fisher House, PO Box 4, Barrow-in-Furness, Cumbria, LA14 1HR
North Meadows, Oldmeldrum, Aberdeenshire, AB51 0GQ
100%
100%
100%
100%
70%
100%
100%
100%
70%
100%
100%
100%
100%
100%
100%
100%
100%*
100%
100%
100%
60%
100%
100%
100%
100%
100%
100%
100%
Name of company
Marine Support
James Fisher Testing Services
Limited
JCM Scotload Ltd
Address
Barrow-in-Furness1
Barrow-in-Furness1
JF STS (Guernsey) Ltd
Load Test Sdn Bhd
Maritime Engineers (Asia Pacifi c)
Pte Ltd
Maritime Engineers Pty Ltd
Mojo Maritime France
Mojo Maritime Limited
Namibia Subtech Diving and
Marine (Proprietary) Limited
Osiris Marine Services Limited
Osiris Underwater Engineering
Services Limited
Prolec Limited
Rotos 360 Limited
Scotload Ltd
Strainstall Engineering Services
Limited
Strainstall Group Limited
Strainstall Malaysia Sdn Bhd
Strainstall Middle East Limited
Strainstall Singapore Pte Ltd
Strainstall UK Limited
Subtech (Pty) Ltd
4th Floor, West Wing, Trafalgar Court, Admiral
Park, St Peter Port, Guernsey, GY1 2JA
Ground Floor 8, Lorong Universiti B, Section
16, 46350 Petaling Jaya Selangor Darul
Ehsan, Malaysia
1 North Bridge Road, #06-15, High Street
Centre, Singapore 179094
23 Sparks Road, Henderson, WA 6166,
Australia
3 rue de France Comte, CS50311, Hauts de
Quimpcanpoix, 5103, Cherbourg, France
Barrow-in-Furness1
Shop 48, Second Floor, Old Power Station
Complex, Armstrong Street, Windhoek,
Namibia
Barrow-in-Furness1
Barrow-in-Furness1
Barrow-in-Furness1
Barrow-in-Furness1
Oldmeldrum²
Barrow-in-Furness1
Barrow-in-Furness1
Ground Floor, 8, Lorong Universiti B, Section
16, 46350 Petaling Jaya Selangor Darul
Ehsan, Malaysia
Vistra (Cayman), Grand Pavilion, Hibiscus
Way, 802 West Bay Road, PO Box 31119,
Grand Cayman, KY1-1205, Cayman Islands
50 Raffl es Place, #06-00 Singapore Land
Tower, Singapore, 048623
Barrow-in-Furness1
Warehouse 1, 20 Rustic Close, Briardene,
Durban, 4051, South Africa
Rua da Educacao, No.38, Matola,
Mozambique
Subtech (Pty) Ltd – Mozambique
branch
Subtech Core Innovation (Pty) Ltd 20 Rustic Close, Briardene, KwaZulu-Natal,
Subtech Diving & Marine
Tanzania Limited
Subtech Group Holdings (Pty) Ltd 20 Rustic Close, Briardene, KwaZulu-Natal,
4014, South Africa
The Slipway Road, Msasani Peninsula, Dar Es
Salaam, United Republic of Tanzania
Subtech Marine (Pty) Limited
Subtech Middle East Saudi
Company
Subtech Norte Lda
Subtech Offshore
Subtech South Africa (Pty) Ltd
4051, South Africa
PO Box 90757, Shop 48, Old Power Station
Complex, Armstrong Street, Windhoek,
Namibia
Offi ce 102, Al Jazira Building, Al Khobar,
Saudi Arabia
Rua da Educacao, No.38, Matola,
Mozambique
Ocra (Mauritius) Limited, Level 2, Max City
Building, Remy Ollier Street, Port Louis,
Mauritius
Warehouse 1, 20 Rustic Close, Briardene,
Durban, 4051, South Africa
Barrow-in-Furness1
80 Broad Street, Monrovia, Liberia
Testconsult Limited
Vision Marine Ltd
* held by the Parent Company (all other subsidiaries are held by an intermediate subsidiary)
** consolidated as subsidiary undertakings
100%
100%
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
F
I
I
Group
percentage
of equity
capital
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%*
100%
100%
100%
100%
100%
100%
49%
100%
100%
70%
95%
100%
100%
90%
121
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Subsidiaries and associated undertakings continued
Name of company
Specialist Technical
Cowan Manufacturing Pty
Limited
Divex Asia Pacifi c Pty Ltd
Divex FZE
Address
BDO Tax (WA) Pty Ltd, ‘BDO’, 38 Station
Street, Subiaco, WA6008, Australia
54 Bushland Ridge, Bibra Lake WA 6163,
Australia
PO Box 261749, Jebel Ali Free Zone, Dubai,
United Arab Emirates
Oldmeldrum²
Barrow-in-Furness1
Divex Limited
Harsh Environment Systems
Limited
Barrow-in-Furness1
Hatch Holdings Limited
High Technology Sources Limited Barrow-in-Furness1
Barrow-in-Furness1
Inspection Holdings Limited
Barrow-in-Furness1
James Fisher (Ro-Ro) Limited
Via Giulio Caccini, 100198, Rome, Italy
James Fisher Defence Italy
Barrow-in-Furness1
James Fisher Defence Limited
Suite 808, 1220 North Market Street,
James Fisher Defence North
Wilmington DE 19801, United States
America Limited
Rindovagen, Rindo Vastra, 185 41 Vaxholm,
James Fisher Defence Sweden
Sweden
Aktiebolag
Barrow-in-Furness1
James Fisher NDT Limited
Name of company
Offshore Oil
James Fisher Air Supply Norway
Limited
James Fisher and Sons (Seafl oor
Dynamex) Limited
James Fisher Marine Services
Malaysia Ltd
James Fisher Marine Services
Middle East Limited FZCO
James Fisher Norway AS
James Fisher Offshore Limited
James Fisher Offshore Malaysia
Sdn Bhd
JF Singapore Holdings PTE Ltd
Monyana Engineering Services
Limited
Pump Tools Limited
Name of company
Tankships
Cattedown Wharves Limited
Everard (Guernsey) Ltd
F.T. Everard Shipping Limited
F.T.Everard & Sons Limited
James Fisher (Crewing Services)
Limited
James Fisher (Guernsey) Limited
James Fisher (New Zealand)
Limited
1
2
Address
Barrow-in-Furness1
Barrow-in-Furness1
Level 1, Lot 7, Block F, Sanguking Commercial
Building Jalan Patau-Patau, 87000 Labuan
FT, Malaysia
PO Box 371072, Dubai, United Arab Emirates 100%
100%
Finnestadsvingen 23, 4029 Stavanger,
Norway
Oldmeldrum²
Room A, Ground Floor, Lot 7, Block F,
Saguking Commercial Building Jalan Patau-
Patau, 87000 Labuan FT, Malaysia
160 Robinson Road, #17-01, SBF Center,
Singapore, 068914
Oldmeldrum²
Oldmeldrum²
Address
100%*
100%*
100%
100%
100%
100%
Group
percentage
of equity
capital
Barrow-in-Furness1
4th Floor, West Wing, Trafalgar Court, Admiral
Park, St Peter Port, Guernsey, GY1 2JA
Barrow-in-Furness1
Barrow-in-Furness1
Barrow-in-Furness1
100%
50%
100%
100%*
100%*
4th Floor, West Wing, Trafalgar Court, Admiral
Park, St Peter Port, Guernsey, GY1 2JA
Level 10, 34 Shortland Street, Auckland
1010, New Zealand
100%***
100%*
Fisher House, PO Box 4, Barrow-in-Furness, Cumbria, LA14 1HR
North Meadows, Oldmeldrum, Aberdeenshire, AB51 0GQ
Group
percentage
of equity
capital
100%
100%
100%
100%
100%
100%
100%
100%
100%*
100%
100%
100%
100%
100%
Group
percentage
of equity
capital
100%
100%*
Name of company
Specialist Technical
James Fisher Nuclear GmbH
James Fisher Nuclear Limited
James Fisher Rumic Limited
James Fisher Singapore Pte Ltd
James Fisher Technologies LLC
JF Nuclear Limited
JFD Australia Pty Ltd
JFD Limited
JFD Singapore Pte Ltd
JFD South Africa (Pty) Limited
Lexmar Sat Systems PTE Ltd
NDT (Inspection & Testing)
Limited
Raygen Limited
Remac Limited
Address
Group
percentage
of equity
capital
Uwestraße 12, 22525 Hamburg, Germany
Oldmeldrum²
Barrow-in-Furness1
19 Loyang Lane, Singapore 508929
Units 1 and 2, 1234 Sherman Drive,
Longmont CO 80501, Colorado
Barrow-in-Furness1
BDO, 38 Station Street, Subiaco WA 6008,
Australia
Oldmeldrum²
19 Loyang Lane, Singapore, 508929
c/o Mazars, Mazars House, Rialto Road,
Grand Moorings Precinct, Century City, Cape
Town, SA 7441, South Africa
19 Loyang Lane, Singapore, 508929
Barrow-in-Furness1
Barrow-in-Furness1
Barrow-in-Furness1
80%
100%
100%*
100%
51%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Name of company
Offshore Oil
Return To Scene Limited
RMSPumptools FZE
RMSPumptools Limited
SC177590 Limited
Scan Tech AS
Scan Tech Personell AS
Address
Barrow-in-Furness1
1-153, THUB, Dubai Silicon Oasis, Dubai,
United Arab Emirates
Barrow-in-Furness1
Oldmeldrum²
Finnestadsvingen 23, 4029 Stavanger,
Norway
Finnestadsvingen 23, 4029 Stavanger,
Norway
Scan Tech Produckt Personell AS Finnestadsvingen 23, 4029 Stavanger,
Scantech Offshore do Brasil
Comercio E Servicos Ltda
Scantech Offshore Limited
Scantech Offshore Pty Ltd
Scantech Offshore UK Limited
Solmead Limited
Solvapli Limited
Strata Oil Tools Limited
Norway
R 01 223, Lote 146 Quadra 02, Balneario das
Garcas, Rio das Ostras, 28.898-268, Brazil
Barrow-in-Furness1
23 Sparks Road, Henderson WA 6166,
Australia
Oldmeldrum²
Oldmeldrum²
Oldmeldrum²
Oldmeldrum²
Address
Name of company
Tankships
James Fisher (Shipping Services)
Limited
James Fisher Crewing (CY)
Limited
James Fisher Everard Limited
Onesimus Dorey (Shipowners) Ltd 4th Floor, West Wing, Trafalgar Court, Admiral
115 Griva Digeni, Trident Centre, Limassol,
3101, Cyprus
Barrow-in-Furness1
Barrow-in-Furness1
Scottish Navigation Company
Limited
Park, St Peter Port, Guernsey, GY1 2JA
Oldmeldrum²
Group
percentage
of equity
capital
100%
100%
100%
100%*
100%
100%
100%
100%
100%*
100%
100%
100%
100%
100%
Group
percentage
of equity
capital
100%*
100%
100%
100%*
100%
* held by the Parent Company (all other subsidiaries are held by an intermediate subsidiary)
** consolidated as subsidiary undertakings
122
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
F
I
I
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Name of company
Holding Companies
James Fisher (Aberdeen) Limited
James Fisher and Sons Nigeria Limited
Address
Barrow-in-Furness1
7th Floor, 1 Kingsway Road, Falomo,
Ikoyi, Lagos, Lagos State, Nigeria
James Fisher Holdings UK Limited
Barrow-in-Furness1
James Fisher Hong Kong Limited
Level 17, Silvercord Tower 2, 30
Canton Road, Tsim Sha Tsui, Kowloon,
Hong Kong
Group
percentage
of equity
capital
100%*
99%*
100%*
100%
Name of company
Holding Companies
James Fisher Subtech Group Limited Barrow-in-Furness1
Address
James Fisher Tankships Holdings Limited Barrow-in-Furness1
JF Australia Holding Pty Ltd
54 Bushland Ridge, Bibra Lake, WA 6163
JF Nordvik Limited
12 Castle Street, St Helier, Jersey, JE2 3RT
James Fisher Nuclear Holdings Limited Barrow-in-Furness1
100%*
JF Overseas Limited
Barrow-in-Furness1
James Fisher Properties Limited
Oldmeldrum2
100%
Group
percentage
of equity
capital
100%*
100%*
100%
100%*
100%*
Associated undertakings and signifi cant holdings in undertakings other than subsidiary undertakings
Name of company
Marine Support
Asteria Navigation Inc
Eurotestconsult Limited
Eurotestconsult UK Limited
FC Viking Sdn.Bhd
Fender Care Benelux B.V.
Fender Care Marine LLC
Address
80 Broad Street, City of Monrovia, County of
Mosterrado, Liberia
Unit D, Zone 5, Clonminam Industrial Estate,
Portlaoise, County Laois, Ireland
Ruby House, 40A Hardwick Grange,
Woolston, Warrington, Cheshire, WA1 4RF
Suite 6.01, 6th Floor, Plaza See Hoy Chan
Jalan Raja Chulan, 50200, Kuala Lumpur,
Malaysia
Torontostraat 20, 3197 KN , Rotterdam
Botlek, Netherlands
Fujairah Port, PO Box 5198, Fujairah, United
Arab Emirates
Fender Care Middle East LLC
Fender Care Marine Services LLC G013, GH-1, Industrial City of Abu Dhabi
(ICAD-1), Mussafeh, PO Box 45628, Abu
Dhabi, United Arab Emirates
Plot 146/16, Emirates Industrial City, Sajja
Industrial Area, PO Box 25896, Sharjah,
United Arab Emirates
E-LOB Offi ce No. E-69G-20, PO Box 51602,
Hamriyah Free Zone - Sharjah, United Arab
Emirates
Fendercare Marine (M) SDN BHD 5-2 Jalan 109E, Desa Business Park, Taman
Fender Care Omega (Middle
East) FZC
Group
percentage
of equity
capital
45%
50%
50%
49%
50%
49%**
49%**
49%**
50%
49%
Desa Off Jalan Klang Lama, 58100 Kuala
Lumpur, Wilayah Persekutuan, Malaysia
Address
Group
percentage
of equity
capital
16 Benoi Road, 629889, Singapore
Konsul-Smidt-Str. 15, 28217, Bremen,
Germany
50%
50%
Address
Group
percentage
of equity
capital
Jåttåvågveien 7, 4020 Stavanger
25%
Name of company
Specialist Technical
First Response Marine Pte Ltd
JFD Domeyer GmbH
Name of company
Offshore Oil
Pleat Mud Coolers AS
Name of company
Marine Support
Fendercare Marine Omega
India Private Limited
James Fisher (Angola) Limitada
Address
Group
percentage
of equity
capital
JA 1104-1106 DLF Tower-A, Jasole District
Centre, New Delhi, 11044, India
67 Rua Damiao de Gois, Alvalade, Borough,
District of Maianga, Ingombota Municipality,
Angola
50%
49%*
James Fisher Angola UK Limited Barrow-in-Furness1
James Fisher Nigeria Limited
34 Awolowo Road, Ikoyi, Lagos, Nigeria
Lome Offshore Services Inc
Silvertide Navigation Inc
Strainstall Laboratories WLL
Strainstall Middle East LLC
Strainstall Saudi Arabia Limited
Strainstall Testing Lab LLC
Subtech Offshore Services
Nigeria Limited
Work Boat Services Inc
Trust Co Complex, Ajeltake Road, Majouro,
Marshall Islands
80 Broad Street, City of Monrovia, County of
Mosterrado, Liberia
PO Box 2255, Offi ce #2, Property No.25,
Tariq Bin Ziyad Street, Al Ghanim, Doha,
Qatar
PO Box 111007Jebel Ali Industrial Area 1,
Dubai, United Arab Emirates
PO Box 30124, Riyadh 11372, Saudi Arabia
PO Box 62579, Abu Dhabi, United Arab
Emirates
Plot 15, Block 110, Henry Ojogho Crescent,
Off Road 69, Lekki Phase 1, Lagos, Nigeria
Trust Co Complex, Ajeltake Road, Majouro,
Marshall Islands
50%
49%
45%
45%
49%**
49%**
49%**
49%**
49%
45%
Name of company
Specialist Technical
Wuhu Divex Diving System
Limited
Address
Group
percentage
of equity
capital
No.58 Yongchang Road, Jiujiang District,
Wuhu City, Anhui Province, PR China
49%
1
2
Fisher House, PO Box 4, Barrow-in-Furness, Cumbria, LA14 1HR
North Meadows, Oldmeldrum, Aberdeenshire, AB51 0GQ
* held by the Parent Company (all other subsidiaries are held by an intermediate subsidiary)
** consolidated as subsidiary undertakings
123
J ames F isher and S ons plc A nnual R eport and A ccounts 2018
Group fi nancial record
For the fi ve years ended 31 December
T
R
O
P
E
R
C
G
E
T
A
R
T
S
I
2018
£m
279.7
159.6
61.5
60.7
561.5
29.0
20.9
5.1
9.9
(2.8)
62.1
(6.0)
56.1
(0.7)
55.4
(10. 1)
4 5.3
197.5
145.4
9.6
9 6.3
( 6.0)
(16.1)
(6.7)
420.0
113. 6
306.4
4 20.0
2017
restated
£m
236.3
149.6
56.4
57.0
499.3
25.3
18.8
3.6
8.8
(2.4)
54.1
(5.5)
48.6
(1.3)
47.3
(7.9)
39.4
199.2
132.5
9.4
109.5
(12.8)
(19.8)
(6.5)
411.5
132.5
279.0
411.5
2016
£m
203.6
151.8
55.1
55.5
466.0
21.0
19.9
4.2
8.2
(2.5)
50.8
(5.0)
45.8
(0. 9)
44.9
(6.8)
38.1
180.5
131.0
7.8
86.3
(9.2)
(26.8)
(5.6)
364.0
105.7
258.3
364.0
2015
£m
193.0
129.4
63.0
52.5
437.9
19.3
13.9
7.4
7.2
(2.2)
45.6
(4. 4)
41.2
5.0
46.2
(5.5)
40.7
156.5
127.6
7.7
68.1
(14.5)
(27.0)
(4.1)
314.3
93.9
220.4
314.3
2014
£m
164.1
121.5
104.9
54.3
444.8
14.2
13.3
22.4
4.7
(3.1)
51.5
(4. 6)
46.9
2. 3
49.2
(8. 7)
40.5
127.1
116.6
10.6
49.5
(9.1)
(21.8)
(6.4)
266.5
62.3
204.2
266.5
pence
pence
pence
pence
pence
89.5
88.9
90.0
89.5
36.1
11. 0%
12.2%
37.2%
2.5
77.5
76.9
79.3
78.7
28.7
10. 8%
1 2.0%
47.7%
2. 7
79.4
78.7
76.9
76.3
26.2
10.9%
13.0%
41.0%
2.9
79.7
79.2
69.0
68.5
23.8
10.4%
13.5%
43.0%
2.9
80.2
79.2
74.9
74.0
22.0
11.6%
16.5%
30.7%
3.4
Revenue
Marine Support
Specialist Technical
Offshore Oil
Tankships
Underlying operating profit
Marine Support
Specialist Technical
Offshore Oil
Tankships
Corporate costs
Net finance costs
Underlying profit before taxation
Separately disclosed items
Profit before taxation
Taxation
Profit after taxation
Intangible assets
Property, plant and equipment
Investment in associates and joint ventures
Working capital
Contingent consideration
Retirement benefit obligations
Taxation
Capital employed
Net borrowings
Equity
Earnings per share
Basic
Diluted
Underlying basic
Underlying diluted
Dividends per share
Other key performance indicators
Operating margin (%)
Return on capital employed (post -tax) (%)
Net gearing (%)
Dividend cover (times)
124
James Fisher and Sons plc is a leading service
provider to all sectors of the global marine industry
and a specialist supplier of engineering services to
the energy industry.
We employ 2,900 people across 19 countries. Our
companies and services have a focus on marine related
activities which operate in potentially demanding
environments where specialist skills are rewarded. Through
innovation and acquisition we have developed market-
leading businesses through our four divisions: Marine
Support, Specialist Technical, Offshore Oil and Tankships.
GOVERNANCE
Board of Directors
Corporate governance report
Audit Committee report
Nominations Committee report
Directors’ remuneration report
Directors’ report
Independent auditor’s report
36
38
45
50
52
67
70
STRATEGIC REPORT
Highlights
Chairman’s statement
Chief Executive’s review
Business model
Strategy
Sector review
Financial review
Key performance indicators
Principal risks and uncertainties
Sustainability report
Corporate responsibility
governance
1
2
4
8
9
10
18
21
22
26
34
FINANCIAL STATEMENTS
Consolidated income statement
Consolidated statement of other
comprehensive income
Consolidated and Company
statement of financial position
Consolidated and Company
cash flow statement
Consolidated statement of
changes in equity
Company statement of
changes in equity
Notes to the financial statements
Subsidiaries and associated
undertakings
Group financial record
Investor information
77
77
78
79
80
81
82
121
124
125
J
a
m
e
s
F
i
s
h
e
r
a
n
d
S
o
n
s
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
8
w
w
w
.
j
a
m
e
s
-
fi
s
h
e
r
.
c
o
m
James Fisher and Sons plc Annual Report and Accounts 2018
Investor information
Company Secretary
DBS Bank Ltd
Brokers
Jim Marsh
Registered office
James Fisher and Sons plc
Fisher House, PO Box 4
Barrow-in-Furness
Cumbria LA14 1HR
Incorporated in England under
Company no. 211475
www.james-fisher.com
Registrar
Link Asset Services
34 Beckenham Road
Beckenham
Kent BR3 4TU
Auditor
KPMG LLP
1 St Peters Square
Manchester M2 3AE
Bankers
Barclays Bank PLC
Barclays Commercial Bank
1st Floor
3 Hardman Street
Spinningfields
Manchester M3 3HF
* provisional
Investec Bank (UK) Limited
30 Gresham Street
London EC2V 7QP
Jefferies International Limited
Vintners Place
68 Upper Thames Street
London EC4V 3BJ
Financial Calendar
4 April 2019
Ex dividend date for 2018 final dividend
5 April 2019
Record date
2 May 2019
Annual General Meeting
10 May 2019
Payment of 2018 final dividend
28 August 2019*
Announcement of 2019 Half Year results
London Branch
4th Floor
Paternoster House
65 St Paul’s Churchyard
London EC4M 8AB
Handelsbanken
First Floor East
Bridge Mills
Stramongate
Kendal LA9 4UB
HSBC Bank PLC
2nd Floor
4 Hardman Square
Spinningfields
Manchester M3 3EB
Lloyds Bank PLC
8th Floor
40 Spring Gardens
Manchester M2 1EN
Santander UK PLC
2 Triton Square
Regent’s Place
London NW1 3AN
Merchant bankers
E C Hambro Rabben and Partners Ltd
32-33 St James’s Place
London SW1A 1NR
Disclaimer
This Annual Report has been prepared for the members of the Company only. The Company, its Directors, employees and agents
do not accept or assume responsibility to any other person in connection with this document and any such responsibility or liability
is expressly disclaimed. This Annual Report contains certain forward-looking statements that are subject to future events including,
amongst other matters, the economic and business circumstances occurring from time to time in the countries and markets in which
the Group operates and the availability of financing to the Group. As such the forward-looking statements involve risk and uncertainty.
Accordingly, whilst it is believed the expectations reflected in these statements are reasonable at the date of publication of this Annual
Report they may be affected by a wide range of matters which could cause actual results to differ materially from those anticipated. The
forward-looking statements will not be updated during the year. Nothing in this Annual Report should be construed as a profit forecast.
125
J
a
m
e
s
F
i
s
h
e
r
a
n
d
S
o
n
s
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
2
0
1
8
w
w
w
.
j
a
m
e
s
-
fi
s
h
e
r
.
c
o
m
James Fisher and Sons plc
Fisher House
PO Box 4
Barrow-in-Furness
Cumbria
LA14 1HR
T: 01229 615 400
F: 01229 836 761
This Report has been printed in the UK. Our printers are
environmental management system ISO 14001-accredited
and Forest Stewardship Council® (FSC®) chain of custody
certified. This paper is environmentally friendly ECF (elemental
chlorine-free) and wood free with a high content of selected
pre-consumer recycled material. The mill is fully FSC-certified.
The paper is also completely bio-degradable and recyclable.
If you have finished reading this Report and no longer wish to
retain it, please pass it on to other interested readers, return it
to James Fisher and Sons plc or dispose of it in your recycled
paper waste. Thank you.
This Annual Report is available at www.james-fisher.com
E: enquiries@james-fisher.com
Designed and produced by Perivan
Annual Report
& Accounts 2018