James Fisher and Sons H2 2024 Earnings Report

James Fisher and Sons EPS Results

• Actual EPS: GBX 16.90
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

James Fisher and Sons Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

James Fisher and Sons Announcement Details

• Quarter: H2 2024
• Date: 3/21/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, March 20, 2025
• Conference Call Time: 5:00AM ET

James Fisher and Sons (LON:FSJ) is a leading provider of unique marine solutions in Energy, Defence and Maritime Transport. The Group pioneers safe, innovative solutions that solve complex customer challenges for industries and governments around the world. For more information visit www.james-fisher.com

James Fisher and Sons H2 2024 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Solid turnaround progress: Completed portfolio simplification, divested noncore assets, refinanced debt into less onerous facilities, and positioned for growth in the next phase.
• Positive Sentiment: Strong FY24 financials: Adjusted revenue rose 8.6% and operating profit increased 31% to £22 million (5.4% margin), with net debt down to £61 million (1.4× EBITDA) and ROCE up to 8.2%.
• Neutral Sentiment: Energy division momentum: Pre-disposal revenue grew nearly 18% led by Well Services, bubble curtain solutions and a 60% jump in IRM, offset by decommissioning losses and a one-off contract ending in Q1 2025.
• Neutral Sentiment: Defense order book expansion: Revenue rose modestly to £18 million with the order book up 37% to $306 million, though margins remain pressured by upfront investment for scaling and new product development.
• Negative Sentiment: Maritime transport headwinds: Tankships stayed flat with 89% utilization, but the fender services business saw a 10.6% revenue drop due to weaker LNG transfers and delayed product orders.

Presentation

[Helen Nisbet, Director of Treasury and Investor Relations at James Fisher]

Good morning, everyone. Thank you for joining our presentation today. I'm Helen Nisbet, Director of Treasury and Investor Relations at James Fisher. I'm pleased to welcome those in the room and on our webcast. Before we start, I'd like to run through some housekeeping and logistics with you. Firstly, for those in the room, we're not expecting any fire drills today, so if there is an alarm, please follow the instructions and make your way to the nearest exits as indicated. Please turn all mobile phone devices off or on to silent. After the presentation, there'll be an opportunity for Q&A, both in the room and via the webcast. If you are in the webcast, please add your questions to the Q&A function. Finally, please note the disclaimer on slide two. And with that, I'll hand over to our Chief Executive Officer, Jean Vernet.

[Jean Vernet, CEO at James Fisher]

Thank you, Helen. Good morning, everyone. And thank you for joining our 2024 full year results earnings call. I'm pleased to be joined by our Chief Financial Officer, Karen Hayzen-Smith, and together we will provide an update on our full year results. I will start by going through the business highlights, and Karen will provide an overview of our 2024 financial results. I will then give a strategic update on the progress of our business turnaround and how we are positioning the company for growth, and at that point, we will conclude and turn to Q&A. We are now two years into our business turnaround, and we have made solid progress. The first phase, around focus and simplify, is nearly complete, guided by our One James Fisher operating model. Our organization now creates greater synergies and builds strength with a simplified portfolio, which is better aligned to our customer verticals.

[Jean Vernet, CEO at James Fisher]

Our leadership team is accountable, cohesive, and unified in driving execution. The divestitures we completed in 2024, at good value for shareholders, were necessary to deliver the group and strengthen our financial foundations. This allowed us to successfully refinance our debt with less onerous facilities last September. We are now on a stronger footing to move in 2025 to the next phase of our turnaround, positioning ourselves for growth in aligned markets and subsegments. We will continue to improve our safety, talent, innovation, and productivity through a focus on execution and accountability. Now, let's spend a minute on our business portfolio as it stands today and as it will drive the company going forward. Our purpose at James Fisher is to solve our customer challenges in the blue economy. Our activities serve three business verticals with growing convergence between energy and defense.

[Jean Vernet, CEO at James Fisher]

The Energy division helps our customers meet a growing global energy demand more efficiently, safely, and sustainably as they progress through their energy transition roadmap. For example, our oil and gas services make our customers' operations safer, less carbon intensive, while in offshore wind, we protect the sea life during construction, and we lower operating costs through smart monitoring and repair services of components such as high voltage cables and blades. The division in Defence supports and saves lives underwater. Thanks to our global leadership in submarine rescue, rebreathers for combat divers, and stealth mobility solutions for special forces, we deploy and serve our customers wherever they need us in the world, promoting interoperability across partner nations. Maritime Transport ensures on-time delivery of critical energy products through coastal shipping in selected geographies, but also enables ship-to-ship transfer of oil and gas third-party cargoes globally.

[Jean Vernet, CEO at James Fisher]

We have the highest reputation for safety and quality in that business, and this explains why we have some customer relationships expanded over decades. We will continue to simplify our portfolio going forward, constantly reviewing the fit of its components, while at the same time, we will focus and invest in opportunities where we can scale profitably. I will cover this with more color later, but now I will hand over to Karen, who will walk us through the financials. Over to you, Karen.

[Karen Hayzen-Smith, CFO at James Fisher]

Thank you, Jean. Good morning, everyone. I'm pleased that we've been able to end the 2024 year in a stronger position and with a positive set of results. Overall, we have continued to deliver on our key turnaround priorities. Proceeds from the sale of businesses and assets provided funds to pay down debt and strengthen our balance sheet. We refinanced our facilities on better terms in September and continued our focus on cash management, increasing profitability, and improving margins. I will start today with the headlines. Given the disposals, it's more appropriate if we consider the results adjusted for the impact of these and illustrate growth on a like-for-like basis. Revenue was up 8.6%, driven by a stronger than expected second half performance, mainly in the Energy division. Operating profit was up 31% to GBP 22 million, excluding disposals, with a margin of 5.4%.

[Karen Hayzen-Smith, CFO at James Fisher]

Although the margin was up 90 basis points, it has reduced on a restated basis, given RMS Pumptools was a higher margin business. In the unadjusted position, revenue was down 11.8% overall, and operating profit was flat. Net debt was GBP 61 million on a covenant basis to give a net debt to EBITDA ratio of 1.4 at 31st of December, within our target range. Lastly, Return on Capital Employed also increased to 8.2%, which is a 160 basis point uplift, reflecting our continued focus on profitability and improvements in working capital. If we now turn to the next slide and look at the revenue bridge, where I have a few movements I would like to explain.

[Karen Hayzen-Smith, CFO at James Fisher]

Revenue declined year-on-year by GBP 68 million due to the impact of the closure of the Subtech Europe business and activities related to the sale of the Swordfish vessel in 2023, which was operating in the Inspection, Repair, and Maintenance part of the business. Revenue was also impacted by the RMS disposal from July last year and the disposal of Martek Marine. Excluding these, revenue increased by 8.6% year-on-year. On the continuing businesses, there was an 18 million increase. This is explained by Energy Services having good revenue growth, with a strong performance in Well Services and also in our Bubble Curtain product offerings. Tankships had a solid year, with defense also having an uplift in revenue.

[Karen Hayzen-Smith, CFO at James Fisher]

However, this was offset by a decline in the ship-to-ship transfer product line due to a quieter year with a lack of LNG transfers and experiencing timing delays in the sale of fender products. Moving on to operating profit, where there are also a number of moving parts. Although revenue declined significantly due to Subtech Europe and Swordfish closures, there was actually minimal impact at an operating profit level as Subtech Europe had been loss-making and the vessel activities were low margin. Excluding disposals, profit was up 31% from GBP 16.8 million to GBP 22 million. There was also a net profit impact of GBP 1.2 million from the volume changes highlighted on the previous slide, with the Energy division up, offset by Maritime Transport being down. I will also highlight a few points in the Energy division to explain some non-recurring items.

[Karen Hayzen-Smith, CFO at James Fisher]

In the year, we continued to review our asset portfolio and sold assets in the Life of Field business, generating a gain of GBP 3.5 million. This was more than offset by losses in the decommissioning business. We are focused on the turnaround of this business, which is now moving closer to a sustainable break-even position. Lastly, as highlighted at the recent trading update, 2024 benefited from additional profit on a Mozambique contract, which will not repeat in 2025, given the conclusion of the project in Q1 this year. So overall, the net impact of these three items is around GBP 3 million, non-recurring. So the next slide provides a profile of the continuing businesses following the simplification of the group and illustrates growth on a like-for-like basis.

[Karen Hayzen-Smith, CFO at James Fisher]

We achieved a target of 6% looking back over the last few years, and as we look forward, we do recognize that there are businesses that are not quite performing at their full potential or desired hurdle rates. We made progress in the year and will continue to assess our turnaround of these in 2025. Following the disposals, the profit margin is 5.4% for 2024. Therefore, we're focused on increasing this by reducing our overall cost base, and we have made savings in 2024 and will continue to do so throughout 2025 with a program now in place to accelerate our efforts. The efficiencies would be from self-help, supply chain and productivity initiatives, and driving businesses to perform at our hurdle rates, which Jean will discuss in more detail later.

[Karen Hayzen-Smith, CFO at James Fisher]

We will be balancing these actions with a desire to build capabilities to ensure we have a platform from which to grow, so if we now turn to look across the divisions, energy was restructured organizationally in the year into Energy Services, Renewables, and Inspection, Repair, and Maintenance, and overall, the Energy division had a good year with revenue up almost 18% before disposals. Energy Services benefited from projects continuing beyond the normal seasonal timeframes in the Well Services business, and there was strong activity in Bubble Curtain, which crosses both Energy Services and Renewables in our existing markets of the Middle East and Africa and newer markets of Taiwan and the U.S. Renewables now accounts for approximately 33% of Bubble Curtain revenue, up from 30% in 2023.

[Karen Hayzen-Smith, CFO at James Fisher]

We are well positioned, though, to adjust resources to take account of macro and political changes across both Energy Services and the renewable product lines. IRM delivered a 60% increase in revenue, rising from GBP 40 million to just under GBP 63 million. This growth was primarily driven by strong performance in Africa on a major port infrastructure project in Mozambique, which is nearing completion, and operating profit, excluding disposals, increased to GBP 18 million in the year, mainly from volume uplift and benefiting from the non-recurring items outlined earlier.

[Karen Hayzen-Smith, CFO at James Fisher]

The Energy division is focused on achieving synergies and efficiencies to improve productivity further across its product lines, so moving on to the Defence division, revenue increased year-on-year to GBP 18 million, driven by a good performance in submarine rescue, defense diving, and submarine platforms, together with a small increase in operating profit to just under GBP 2 million.

[Karen Hayzen-Smith, CFO at James Fisher]

The lower operating profit also reflects the continued investment in capabilities to scale the business and develop new products. And the outcomes for the year do not fully reflect the progress or the potential in defense. I'm pleased to say that the order book has seen improvement in the last quarter of 2024 and finished the year with an order book of GBP 306 million, up 37% on the prior year. This includes orders for submarine rescue services, and the largest order we have received to date is for a number of tactical diving vessels. While some procurement processes are slower than we had hoped, we anticipate growth in defense across all product lines, and the division is also focused on strengthening its service offerings in Australia and in establishing a U.S. presence.

[Karen Hayzen-Smith, CFO at James Fisher]

So if we turn to Maritime Transport, the division had a solid performance in Tankships with revenue up 5.8%. We had less vessels in the year, but managed to retain revenue at GBP 18 million. The spot market also held up well, and utilization of the fleet was 89%. The Cape Town business also had a strong year, with increased activity throughout the port. So if I strip out Martek from the figures for Fendercare shown on the slide, revenue was down 10.6% from GBP 70 million to GBP 62 million, which was a disappointing performance. The LNG market has not recovered in 2025, which is a profitable part of the business.

[Karen Hayzen-Smith, CFO at James Fisher]

And although there is good market growth potential in LNG, the conditions have just not been right to drive the LNG transfers. Brazil continued to perform well, but higher vessel costs impacted profitability in an otherwise strong market.

[Karen Hayzen-Smith, CFO at James Fisher]

In addition, 2024 was impacted by product orders for fenders slipping into 2025. So overall, operating profit was down, reflecting the drop from the Martek disposals and the revenue shortfalls as I've just outlined. So let me move on to some of the other areas of the income statement. Net finance charges were down from GBP 21.3 million to GBP 17.6 million, reflecting the drop in interest costs as a result of the debt levels being reduced in the year. The tax expense on underlying profits from continuing operations for the year is GBP 6.4 million, representing an underlying effective tax rate of 28%. If we turn to the statutory reported figures, the operating profit finished the year at GBP 73 million. There is a gain of GBP 55 million arising from the disposal of assets and businesses in the year.

[Karen Hayzen-Smith, CFO at James Fisher]

We continue to incur advisory costs related to managing the revolving credit facility of GBP 3.5 million up until the refinancing in September, but a significant reduction on the prior year and should be at minimal levels as we go forward. If we can turn to the cash flow slide, I'll pick out a few points to note. Working capital continues to be well managed, and we saw a net working capital inflow of GBP 4.2 million. There was also improved cash collection, with DSO days dropping to 42 days from 45 days in the prior year. The interest paid was GBP 17.4 million, with an average interest rate of around 10% for the year, which is a GBP 20.4 million of bank interest offset by GBP 2.8 million of interest income. CapEx, including development expenditure, was GBP 31.7 million.

[Karen Hayzen-Smith, CFO at James Fisher]

This included investment in further compressors and other equipment to meet continuing demand in Energy Services and deposits on the Tankships rebuild program, together with investment in new product development in defense. Net disposal proceeds in the period of GBP 106 million related to the business and asset disposals already discussed. And this gave an overall net debt movement of around GBP 88 million, taking net debt to GBP 56 million. So continuing on the subject of debt, this shows the progress made over the last year in reducing our debt and financing costs, and the interest rate has dropped by 150 basis points to around 8.5% as planned, with significant savings in legal and other banking fees. Net debt finished the year at GBP 61 million on a covenant basis, giving a net debt to EBITDA of 1.4.

[Karen Hayzen-Smith, CFO at James Fisher]

We will seek to maintain debt within our target range, although we are expecting an increase at H1 due to the seasonality of the businesses and contract phasing. The graph on the right shows interest cover, which is 9.6 times at 31st of December, as the calculation was boosted by interest rate swap terminations, and this will drop to around five times during the year. And in support of our growing defense business, we have agreed a GBP 12.5 million general export facility this month, split GBP 7 million to fund working capital and GBP 5.5 million to allow issuance of bank guarantees. And we remain focused on working capital in managing our inventory levels and on data collection. So if I turn to the guidance for 2025, our core markets remain positive and guidance is unchanged, and as for 2024, it is weighted towards H2.

[Karen Hayzen-Smith, CFO at James Fisher]

I'll just finish on a few points of technical guidance. RMS Pumptools contributed GBP 24 million of revenue and GBP 6.8 million of EBITDA in 2024. Martek contributed GBP 7.5 million of revenue and GBP 0.7 million EBITDA. 2025 revenue should also be adjusted for the Mozambique contract concluding in Q1 2025, with a full year impact of around GBP 35 million. Capital and development expenditure is expected at similar levels to 2024 at GBP 30 million-GBP 35 million. We remain focused on affordability, payback, and meeting our hurdle rates before capital expenditure is approved. We also expect bank interest rates of around 8.5% before any base rate reductions. On tax, we're continuing to guide to an effective tax rate of 29%. Therefore, to wrap up the financial update, I would say that we had a decent second half with an overall improved 2024 performance.

[Karen Hayzen-Smith, CFO at James Fisher]

We delivered on our important turnaround actions, deleveraging and strengthening the balance sheet, improving our cash position, simplifying the business, and overall, we have stabilized the group in the year to position for growth, but there is more to do to improve our performance and increase our margins in the medium term. I'll, of course, answer any questions later, but I'll hand back to Jean to take us through the rest of the presentation.

[Jean Vernet, CEO at James Fisher]

Thank you, Karen. During our interim results, we provided an update on progress as we reached the halfway point of our business turnaround. Since then, we simplified the portfolio further for the sale completion of RMS Pumptools and Martek. One of the significant milestones achieved since our interim results was the successful refinancing of our revolving credit facility.

[Jean Vernet, CEO at James Fisher]

The group's new facilities contracted with four major banks significantly reduce administrative costs and provide increased flexibility to support the business. I'd like to thank our lenders for their trust and continued support as we enter the next chapter of our turnaround. To support simplification and delivery, we have now recruited our full executive team, implemented our One James Fisher business model, and launched a self-help program. We are also encouraged by our additional progress made with our company priorities, which underpin our business turnaround strategy, and I will cover this now. In 2024, our company priorities were exceptional safety. Although overall performance fell slightly short of our ambitions for the year, two of our three divisions achieved or surpassed their safety goals. We made positive progress through improved awareness, enhanced training, and comprehensive procedures and protocols, which we are now embedding in the 2025 objective of all employees.

[Jean Vernet, CEO at James Fisher]

Foundation for growth. As I explained earlier, we successfully refinanced our facilities, our bank facilities, and made progress towards our medium-term financial targets. And I'll talk more about the pathway forward to achieve our Underlying Operating Profit target shortly. Pipeline of talent. The pace of our five-year people strategy was impacted by our new CHRO only joining in the second half of 2024. Nevertheless, we launched an enhanced performance management process, new rewards projects, and apply informed and consistent decisions on people and talent. We value diversity and support our apprentices and cadets programs. Employee engagement. During another significant year of change, our employee engagement survey scores improved. We remain committed to strengthening our engagement, which is a key element needed to inspire and deliver as One James Fisher as a team.

[Jean Vernet, CEO at James Fisher]

Strong supply chain, a new cross-divisional supply chain function was established in 2024 with a central procurement function that has already achieved GBP 1 million in cost savings. This is very early stage, and we look forward to delivering much greater savings from our supply chain. Reflecting over the past two years, we have achieved quite a lot through our commitments to focus, simplify, and deliver. I would like to thank once again all our colleagues who have been driving and executing on this agenda for their hard work. We have reset the financial baseline of the business, and Karen has already covered this. In two years, the UOP margin has increased 120 basis points, and ROCE has increased by 290 basis points. We have also downsized our credit facilities and built a healthier balance sheet. The key enabler to the turnaround has been disciplined and rational investment decisions.

[Jean Vernet, CEO at James Fisher]

As Karen mentioned, we have invested about GBP 30 million in CapEx projects, delivering superior returns well above our hurdle rates while ensuring the continued modernization of our Tankships fleet. I am also encouraged by the steps we have taken to improve financial discipline and compliance across the business. This is essential to manage our risks and deliver more effectively. Overall, the hard work is paying off, and as we enter the next chapter of our turnaround, our priorities are clear, but our recovery is still early stage, and our priorities for 2025 are designed to cement and solidify our recovery. If I turn to priorities for 2025, exceptional safety remains our number one priority, embedding a culture that protects our people from harm under any circumstances. This will continue to be measured through a reduction in total recordable case frequencies, which is standard for the industry.

[Jean Vernet, CEO at James Fisher]

Customer excellence places our customers at the center of the business. Building on last year, we are implementing a commercial framework and a culture of the highest standard consistently across all our business units. A culture that enables us to bring novel solutions that solve customers' biggest challenges. This will be measured against our progress on UOP and ROCE targets. People, we will continue to execute on our five-year strategy to attract, retain, and invest in our talents and expertise. As a service technology company, our colleagues are the key agents of our success, and we will gauge progress through our engagement score. New product development, we will drive innovation and a pipeline of unique solutions that make our customers more competitive. This will be measured by our ability to introduce differentiated products and to grow revenue vitality.

[Jean Vernet, CEO at James Fisher]

Strong supply chain, building on the early progress from last year, we will continue to drive supply chain integration, building stronger strategic partnerships, driving greater efficiency, and supporting our global reach. This will be measured through our cost savings and is a key contributor to gross margin and ROCE improvements. As you can see, these priorities continue some of the long-term programs we started in 2024, complemented with new priorities which position us for growth. I'd like now to walk through our bridge to achieving 10% underlying operating performance, a key measure of our turnaround. We are acting on four levers to step up our UOP margins to 10%, with each contributing about the same amount to our targets. First, continuing to improve business performance within the portfolio. Every business unit must achieve returns above our hurdle rates, and we have seen good progress of that made in energy.

[Jean Vernet, CEO at James Fisher]

We also see additional opportunities to improve performance across the board. In addition, in 2024, we launched a self-help program. The goal is to calibrate and reshape our support functions to design an organization that better supports the business units so that when they scale, support functions drive productivity, leading to higher profit fall-through. Thirdly, defense revenue base has been subscale, and yes, we have seen green shoots of recovery driving up order pipeline at the end of 2024. A lot more needs to be achieved, and the leadership team is driving this hard. The division currently has the resources to drive this inflection in revenue, and on that basis, a step up in revenue will result in healthy fall-through to operating margins for our defense business.

[Jean Vernet, CEO at James Fisher]

Last year, we started a three-year supply chain transformation journey to integrate the function and harness an expert leaner future practice that can strategically support our business globally. This will be measured by shorter on-time delivery and will result in a lower cost base that will make us more competitive. Of course, we do not intend to stop our ascent once we get to 10% underlying operating profit. We have within the company the potential to reach higher grounds by increasing differentiation through technology, but also thanks to strong market tailwinds. I will now spend a few minutes on those markets, on the market verticals and the trends that affect us and how we position the company for growth. There are five mega trends affecting our market verticals, which are particularly relevant to energy and defense.

[Jean Vernet, CEO at James Fisher]

First, as energy demand will continue to drive to rise robustly, global warming will become worse, and decarbonization will continue to drive the demand for safe, efficient, and sustainable sources of energy. This is coupled with our second trend, the need for energy security and reliability in energy supply. Thirdly, the geopolitical environment is rapidly changing, reverting to a world governed through spheres of influence. Government spending is about to step up significantly across all our home markets, while emerging global threats are driving record levels of spending in defense, including marine warfare. Digitization, automation, and AI will accelerate in transforming how business and society operates. It will provide exciting options for us to bring greater efficiency, faster decision-making, and smarter products. Finally, we are seeing increased localization, policies moving to favor a buy-and-spend local approach, with the U.S. leading the way through higher tariffs.

[Jean Vernet, CEO at James Fisher]

Within a fast-changing world, our end markets prospects are very exciting, but we must remain vigilant to keep our three divisions aligned to these trends while continuously adapting. We are positioning the company for growth, acting upon the three levers which will lead to strategic growth. First, aligned strategic markets. Our capabilities are tailored to growth areas of future spending across the global energy and the global defense area, while Maritime Transport must build higher barriers to entry so we can preserve a predictable and attractive cash flow generation. People and capabilities. We leverage our human capital through expertise, a spirit of service, and some unique capabilities which can be deployed to customers consistently around the world. We know how to operate safely in complex and hazardous environments, and we have done so for 178 years. Innovation and technology.

[Jean Vernet, CEO at James Fisher]

We partner with customers to provide new innovative products that bring a competitive edge across a broad range of ecosystems. Our evolving product pipelines are tailored to growing markets and mega trends, including security, autonomy, and electrification. Now, let's spend a few minutes on each one of those levers. First, on the markets. Within our current business portfolio, we have identified seven subsegments across energy and defense, which have the potential to accelerate our growth and our size because they are heavily aligned to those macro trends I talked about. We have proven track records for some of these subsegments, which demonstrate that when we focus, we can deliver fast and scale operations. This includes, for example, Bubble Curtain, but also submarine rescue and tactical diving vehicles, where we invented these products and services and continue to innovate ahead of the competition.

[Jean Vernet, CEO at James Fisher]

Across all these seven segments on the slide, we differentiate and see opportunities for sustainable growth against the underlying markets. We have set four key criteria that will allow us to select and scale this business. If you see on the slide across Bubble Curtain, Well Services, and Defence, and all the defence segments, our experience and attractive market share puts us in an excellent position to embrace the secular inflection points we see in these markets. In the case of offshore wind, power generation, the cable, the blades, and O&M services, the market is extremely fragmented and nascent, but these present also a unique opportunity. I believe that the new technologies which we are developing at pace for this market to solve the massive challenges of the offshore wind industry will be a strong driver of our growth.

[Jean Vernet, CEO at James Fisher]

I will provide more color shortly on two examples of those seven segments. Of course, in Maritime Transport, we are already investing in the modernization of our fleet to meet long-term demand for significantly more efficient and sustainable tankers. If I turn to people and capabilities, when it comes to the second lever, we are a service technology company at heart. We employ nearly 1,900 people globally across 23 countries in most major operating regions. We differentiate ourselves by being a trusted advisor with deep expertise working in complex and hazardous environments for our customers. This is demonstrated through credibility, superior service, and our ability to innovate. Energy is an excellent example of this, where we pivoted our oil and gas expertise in air compression for the emerging offshore wind market, and I will illustrate this in a minute.

[Jean Vernet, CEO at James Fisher]

In defense, we continue to lead the industry through customer intimacy and understanding. Our ability to translate this observation into bespoke products or services is what makes our name in defense. In Maritime Transport, where reliability is paramount, customers trust our ability to deliver because of our safe, professional, and diligent care from our seafarers on every voyage every single day for 178 years. Our employee engagement score is a key measure of employee satisfaction. If I turn to innovation and technology, innovation and technology are key elements of our success to our success. Following the appointment of our new Chief Technology Officer in early 2024, we developed and embedded a new product development engine to be deployed across the entire company. This is key to building a continuous pipeline of new products that address the evolving needs, always keeping in mind reliability, efficiency, and sustainability.

[Jean Vernet, CEO at James Fisher]

By leveraging partnerships with customers, academia, and our supply chain, we can deliver an agile, innovative pipeline. Our technology effort is guided by our business strategy and can be directed organically and complemented at times through partnering with smaller entrepreneurial companies to co-develop early-stage technologies. In 2025, we are making this partnership approach to third-party technology methodical through the launch of a corporate venture capital practice. This will be measured through vitality, our revenue generated by the technology invested. Now, let me illustrate how we combine expertise, technology, and partnership using the example of bubble curtains. With offshore wind set to build another additional 120 gigawatts by 2030, excluding China, the industry was looking for a solution that would reduce environmental noise pollution to protect the sea life during pile-driving operations.

[Jean Vernet, CEO at James Fisher]

Six years ago, through a strategic partnership, James Fisher led the way in advanced compressed air solution designed for Big Bubble Curtains. This technology is proven to be the most effective method for reducing underwater noise by up to 95%, with our compressors designed to reduce carbon emission by up to 40% compared to standard compressors. This has been a steep learning curve from understanding the market opportunities and positioning ourselves in the customer value chain through improving operational delivery and efficiency in the field. Over five years ago, we are now winning repeat business and are a global market leader. I'll walk you through the timeline in a little more detail. The timeline shows our agile business model pivoting into growing nascent markets, scaling our operations through quick decision-making and engineering expertise.

[Jean Vernet, CEO at James Fisher]

This all started with an idea in 2018, and we scaled operations up to 2024. We have listened to the customer pain points and have provided a solution that reduces customer costs to deploy through reducing vessel requirements, resulting in approximately 30% cost saving while being more efficient. We are proud of this product offering as it is truly sustainable and plays an important role to protect our marine environment around the world. Looking forward, it is easy to move this product globally as it is vessel-agnostic, which is a differentiation versus competition. Market tailwinds combined with a growing adoption of sea life protection policies across nations give us confidence in its further potential for growth across Northeast Asia, Northern Europe, and North America, where we are already the market leader. If I move now to defense, let's talk about another example, submarine rescue.

[Jean Vernet, CEO at James Fisher]

Firstly, it is worth noting some of our statistics. We are responsible for four out of five of the world's fly-away rescue systems. We have delivered five out of six of the world's free-swimming rescue vehicles, and we have 40 years of expertise in the industry delivering for navies with year-on-year contract renewals. Our customers depend on rescue readiness. These systems and their teams must be ready to deploy at short notice any day of the year. We deliver 98% availability supported by our locally based, globally deployable teams. This availability is well above most naval vessels and systems. Submarine rescue is one of the areas we have selected to grow the business as trends show significant inflection growth in the size of the submarine fleets and the need for more interoperability between partner nations.

[Jean Vernet, CEO at James Fisher]

We also see an increasing convergence between submarine rescue and deep diving as navies develop new ways to protect critical underwater infrastructures. We have differentiated ourselves from others as we have looked for ways to continuously improve our services through technology, for example, enhancing our digital communication tools and upgrading our digital monitoring of casualties' health to ensure that the injured submariners receive proper care as soon as possible. To invest in these growth opportunities, we must apply rigor with our use of funds. And I will now talk about how we achieve this through our capital allocation framework. Our financial discipline, the financial discipline we implemented over the past two years, enabled us to have a much better handle on managing our free cash flows. We also have designed an organization that puts capital allocation at the center of business decisions.

[Jean Vernet, CEO at James Fisher]

This is guided by simplicity and focus, avoiding distractions, with more time to spend on the most promising of our opportunities. In the capital allocation pecking order, organic investment is first. We invest GBP 30 million-GBP 35 million a year on CapEx in opportunities with complex economics, with strong business rationales that support better delivery to customers, minimizing the risk we cannot control and therefore enhancing our growth potential. We will not discard opportunistic small bolt-on investment, but with higher hurdle rates on business rationales and financial metrics. Our second priority is to use the funds to maintain a conservative capital structure. You saw our progress in 2024 to rebalance our debt over equity, and our leverage is now within an acceptable range. We will closely monitor to stay within that range and continue to optimize by controlling our cost of debt. Priority number three, dividends.

[Jean Vernet, CEO at James Fisher]

Although the company is healthier than we were three years ago, we are unable to reinstate a dividend in 2024, but we are committed to doing so as soon as we are confident that we have regained a predictable and repeatable annual return in excess of our investment needs. In conclusion, I'm encouraged by 2024 performance, ending the year in a stronger financial position and winning our business better position for growth. We are delivering on our business turnaround strategy, and while much remains to be done, we are moving forward. We have reduced our leverage significantly, which allowed us to refinance the debt under improved terms. This provides a stable capital structure from which to grow the business and execute on our strategy.

[Jean Vernet, CEO at James Fisher]

We are progressing towards our strategic financial target of 10% UOP and 15% ROC through a combination of improved business unit performance in the portfolio, self-help, and the rebound of the defense business and continued supply chain integration. Once we have reached our financial hurdle rates, there is no reason to stop there, supported by the market tailwinds of energy and security, but also driven by innovation. Market conditions remain supportive, but we are also mindful of the near-term geopolitical and macroeconomic uncertainties. Our February year-to-date trading was in line with management expectation, and we remain confident about making further progress this year. We have a passion to succeed, and we are committed to achieving these strategic ambitions. Our purpose and mission remains unchanged to harness the blue economy through the provision of safe, innovative solutions that solve our customers' complex challenges.

[Jean Vernet, CEO at James Fisher]

Now we have concluded our presentation, and I'll turn now back to Helen for Q&A.

[Helen Nisbet, Director of Treasury and Investor Relations at James Fisher]

So we'll now take questions from in the room first. Please raise your hand, wait for the microphone, and start by introducing yourself and the company that you're from.

[Helen Nisbet, Director of Treasury and Investor Relations at James Fisher]

Karen, over to you to moderate the Q&A.

[Karen Hayzen-Smith, CFO at James Fisher]

Okay. Robin, you're going first.

[Karen Hayzen-Smith, CFO at James Fisher]

Morning all, Speakman at Shore Capital. Firstly, congratulations on the achievements you've made. There's clearly been a lot going on in the business. I wanted to ask firstly about the margins in defense. It's clearly still a weak area. I'm guessing it's not all about scaling up. There are other things you need to do as well, and I just wondered to get a bit more color on that and perhaps talk a little bit about adjacent markets that you might be looking to go into in defense.

[Karen Hayzen-Smith, CFO at James Fisher]

Underwater is obviously an interesting area. Secondly, just you mentioned hurdle rates throughout the presentation. Just give us a bit more color on the sort of hurdle rates for different forms of investment, organic to acquisitive, with the balance sheet now in good shape. Thanks.

[Jean Vernet, CEO at James Fisher]

All right. So Karen, you want to take the margin part?

[Karen Hayzen-Smith, CFO at James Fisher]

Yeah, I'll take the margin part first. So yeah, so you're right. You'll have seen that the margin in defense is pretty low at the moment, and there's a few reasons for that. The business has historically had much higher profits, and over the last few years, we've been starting to invest more for growth going forward, and the areas that we're looking at, as Jean outlined earlier, such as new product capabilities. So we're looking to launch new products over the next few years.

[Karen Hayzen-Smith, CFO at James Fisher]

We are also looking, as you say, wider within the organization around how we do things. There are opportunities for how the business is structured, how it works with the other divisions, how it manufactures its projects to introduce efficiencies into the manufacturing process. There's actually quite a lot of different areas where I think we can improve margins in defense. In addition, as it embarks on some of the contracts that are entered into, there's a lot of supply chain opportunities as well. The point that Jean mentioned earlier on the slide is that, as I said, historically, it had higher revenue and profits. With that, we anticipate that there's probably about GBP 20 million or so of revenue that it could earn with its existing cost base.

[Karen Hayzen-Smith, CFO at James Fisher]

And that's why we would see an uptick in the margin when that revenue starts to come through from the new contracts, but also the ability to go beyond that with the additional efficiencies and synergies that we would make. Do you want to pick up the market point?

[Jean Vernet, CEO at James Fisher]

So I guess the punchline here is there's a lot of moving parts. So we are saving costs. We want to improve margin on the things that are inefficient to make them more efficient. But this is offset by what we have to position for growth. We mentioned investment in new technology. I would complement this with the fact that we are broadening our customer engagement beyond our traditional large customers in emerging markets such as Northeast Asia, North America, which we didn't touch.

[Jean Vernet, CEO at James Fisher]

So all in all, the cost looks like the same, but the nature of the cost is different and is much more productive to future growth. I would add self-criticism here that I think over the past decades, JFD has been complacent in not replenishing their normal order backlog, and we have been suffering from that. So those two things in combination leads us to say that the coming out of this lower subscale revenue is a bigger order backlog, right? So in terms of adjacent market, we have to be on the same time, you're right. On one hand, you're right because there's a lot of new technology coming at play to play, but there's also a lot of new demands from our customers about interchangeability, standardization, interoperability between the various navies. So it would be very easy to get distracted into adjacent market.

[Jean Vernet, CEO at James Fisher]

So the marching orders is first, let's prove that what we do today can be on its best to drive the growth while partnering for the moment, partnering with people who are already in those adjacent markets so we don't create more competition in those adjacent markets when we have not yet proven that we can grow in our core markets. But we are very, very attuned to the interplay across adjacent markets. We're just not going to invest in those adjacent markets for now. Yeah.

[Karen Hayzen-Smith, CFO at James Fisher]

Okay. And you want to say the hurdle rate one? Yeah. So just before talking about the hurdle rates, I think it's important to maybe just mention the processes that we're putting around the investment committee in deciding what we invest in, what contracts we enter into, CapEx decisions, etc. And we're very disciplined in that approach now.

[Karen Hayzen-Smith, CFO at James Fisher]

And that covers areas such as ensuring that we don't enter into contracts with significant risk and ensuring that there is a reward-risk balance when we are making decisions. The hurdle rate, so we have the 15% ROCE that we want to adhere to. And obviously, we ensure that when we're looking at contracts that they are meeting our margin and our ROCE targets, but also ensuring that they are manageable from a cash perspective as well. We've done a lot there. So in some of the contracts that we enter into, have margins well in excess of that 10%. And that's where our focus is to continue to ensure that we manage those within the hurdle rates we've got, but also manage the risks quite carefully.

[Gert Zonneveld, Analyst at Investec]

Good morning, Gert Zonneveld from Investec. Just a couple of questions, if that's okay. Firstly, on the bubble curtains, not sure if you've disclosed this in the past, but how much of your GBP 20 million revenues comes from North America? And the second question related to that is, are you concerned about the potentially difficult outlook for offshore wind in the U.S. over the medium term?

[Jean Vernet, CEO at James Fisher]

Right. So we don't go that granular in our reporting. The thing, though, is the U.S. market was, for us, a real example where, because we are so ahead of competition entering into these markets, our reputation preceded us. And that was complemented by our ability to actually bring a level of quality of service and contribution to the customer productivity that became very well known in that market. So we ended up winning a very large share of the opportunities. It's too early to say, really, about the impact of the new administration.

[Jean Vernet, CEO at James Fisher]

I think so far, our plans for 2025 are solid, are committed. What happens beyond 2025 is anybody's guess. In the end, I've always said that the energy transition is going to be messy. Three years ago, when I arrived, everybody thought oil and gas was dead. I never believed that. Today, there is a little bit of a different perception. At the end of the day, my strong belief, I mean, you can observe it through science, climate is changing. So this will come back with a vengeance at some point. And we're in both areas, right? But specifically for offshore wind, we have other markets that are emerging, Northeast Asia in particular. We have the U.K., which is now going to require noise abatement solution by policy. So those equipments can be used in different places of the world. So I'm not too concerned about that.

[Gert Zonneveld, Analyst at Investec]

One more, if that's okay.

[Jean Vernet, CEO at James Fisher]

Yep.

[Gert Zonneveld, Analyst at Investec]

Which is on the defense order book, which increased quite significantly. Any chance of giving us a little bit more color on maybe the composition of that order book in terms of, is it mainly service contracts? Is it equipment deliveries? And also maybe a few words on timings as to when you might expect to deliver that order book in the coming years?

[Jean Vernet, CEO at James Fisher]

Yeah. So again, we don't really want to go too granular on the components because our customers ask us to keep this very quiet. Overall, it's fairly balanced between our various product lines, i.e., submarine rescue, diving. They all perform pretty well. TDVs. What we are really working at balancing is OEM 30%, service 60%. That's where I would like to go, right? So that balance is sometimes put off when we have a lot of new orders.Obviously, the OEM parts comes first. But that should be what the model, right? So I'll turn to you on the did you want what was the second part of your question?

[Gert Zonneveld, Analyst at Investec]

Maybe the timings in terms of how long it will take to deliver the order book?

[Karen Hayzen-Smith, CFO at James Fisher]

Yeah. Yeah. The mix, actually, and it just follows on from the point that Jean mentioned. So obviously, some of those contracts that have come in have the OEM part of it and the product delivery, which you would expect based on the sort of proportions that Jean has mentioned, that that would be over a one-two horizon as they come in, as the products are delivered to customers. And then obviously, the service element has a longer tail. And obviously, as more contracts come in, you'll see that mix through the years as we go forward.

[Alex Brooks, Managing Director at Canaccord Genuity]

Thanks very much. Alex Brooks at Canaccord Genuity. A couple of questions. Firstly, probably Karen, can you walk me through a bit how the Tankships renewal program will work, particularly kind of on the funding side and how it was? Obviously, you've put down some capital for that in the past 12 months. And my second question is, you've got this group of focus areas. What proportion of revenue are they today? And what would a kind of blue skies thing look like? What's the ambition there over whatever timeframe you think is appropriate?

[Jean Vernet, CEO at James Fisher]

Okay. Yeah. So if I may, I'll start answering the second part of the question, and then we'll come back to the first one. I think the way I look at it is not so much the proportion of what it is today versus the baseline. I look at this going forwards.The reason we presented these seven subsegments, they will constitute a large part of our uptick, of our growth going forward, right? It's not an exact science because some of those segments are more risky than others by nature, but I would expect those seven segments to drive probably 90% of the growth. It's not a science. It's just a model of the mid- to long-term growth. Now, but the baseline, the baseline, like for example, the tankship business will grow, but not at similar rates. It's a more stable business.

[Karen Hayzen-Smith, CFO at James Fisher]

Okay. Yeah. Alex, on the tankship, you will have seen the renewal program that's coming through with the four orders already in place that will come in 2026, 2027. So our funding method for those is really a sale and lease-back arrangement. Those tend to work with a small deposit that we pay. And then we pay for the lease payment over varying terms. And as you know, we have certainty, a good level of certainty on the contract revenues associated with those flows with our customers.

[Alex Brooks, Managing Director at Canaccord Genuity]

So your plan from H2, Karen, is there more upside on working capital?

[Jean Vernet, CEO at James Fisher]

You mean downside?

[Karen Hayzen-Smith, CFO at James Fisher]

Yeah. I mean, as we outlined in the presentation, we've been working quite hard on working capital. And that's across all areas of working capital, whether it is on the inventory levels, the debt collection levels. It's something that we always push quite hard at. But as I highlighted earlier, the DSO days is 42 days now, which I think is reasonable. We have a range of payment terms, as you would expect, on that, but we'll continue to focus on cash collection. And as I say, on some of the larger contracts, we like to ensure that we try and get those contracts as close to cash neutral or cash positive as we can so we're not managing large outflows of cash.

[Jean Vernet, CEO at James Fisher]

Yeah. I will complement this with, when we talk about supply chain, our first order of business is to cut costs or to be more efficient on costs, to eliminate waste, increase our gross margin. But there is also a direct impact on inventory and WIP, right? So that's another part of the metrics.

[Karen Hayzen-Smith, CFO at James Fisher]

Yeah. Whether there's other areas such as consignment stocks, there are other avenues we can look at. Gerald?

[Gerald Khoo, Transport Analyst at Panmure Liberum]

Morning. Gerald Khoo from Panmure Liberum. A couple for me if I can. Firstly, you talked about future reinstatement of dividends.

[Gerald Khoo, Transport Analyst at Panmure Liberum]

I was just wondering whether you could go into a little bit more detail as to what you see as the sort of key catalyst, the key hurdles that you have to clear before that might come back onto the agenda. Is it a case of leverage? Is it a case of free cash flow generation? What is it that we should be thinking about in terms of being sort of the hurdle that needs to be cleared or the catalyst? And secondly, on defense, I think you talked about, was it GBP 20 million of revenue on the existing cost base? Can you just clarify that? With the OEM sort of wins, that when you talk about the cost base, there's still going to be cost of sales, as in if you're manufacturing something, you've still got.

[Jean Vernet, CEO at James Fisher]

We mean fixed costs. Fixed costs. So then the fall-through is just attributed to the variable cost, which leads you to much higher fall-through than our average because it's just incremental. But you want to take the dividend question?

[Karen Hayzen-Smith, CFO at James Fisher]

Sure. Yeah. So we haven't got specific metrics to go through today. But what I would say is that before reinstating the dividend, we'd want to ensure that we were in a sustainable position. So we've obviously just come out of the hard part of the turnaround. 2024 was all about stabilizing the business. We're going into 2025, positioning ourselves for growth. And I would like to see us having a more sustainable profit level before we look at dividends. And as we outlined in the capital allocation, our focus is on organic investment to drive that higher revenue and profitability. And then we would consider the dividends after that.

[Alex Paterson, Analyst at Peel Hunt]

Yes. Hi. It's Alex Paterson. Oh, sorry.

[Alex Paterson, Analyst at Peel Hunt]

Alex Paterson from Peel Hunt. A couple from me, please. If I think about your defense business, you were talking about the GBP 20 million of revenue with the current fixed cost. If you saw a flurry of orders coming in for some of the more capital-intensive businesses that you've got, how easy would you be able to deliver those? Do you need to sort of scale up further? And what are the constraints around that? And how straightforward would that be? Then just looking at some of the other areas of the business, if I think about the subsea cables, there's sort of more interest in using those as listening devices and protecting them. Across your energy and defense businesses, are there opportunities there to do that? Is that something that you can do? And how would you monetize that?

[Jean Vernet, CEO at James Fisher]

Yeah. So those two are very relevant and interesting questions, which we think a lot about every day. On the scale part, scaling part, we want to make James Fisher a company which is able to scale, right? And that means we've got to be able to deliver repeatedly, consistently at volume. So we've initiated at the beginning of 2024 a lot of pilots with JFD around new technology development and supply chain, right? Because the question you just mentioned are typically the constraints to growth when you are disorganized. So we have done essentially JFD has a one-year heads-up versus the other division on that front because specifically for that purpose. So it's still a work in progress, but a lot of our growth opportunities are calling on those two constraints.

[Jean Vernet, CEO at James Fisher]

I think the team has been making really superb progress to make an operating model which is much more mature than what you would see in a larger company, right? So I wouldn't say we are done with our efforts, but I think we are in good shape to tackle the orders coming at us. In terms of your second question, which was the cables. The cables, yeah. So this is, for me, one of the many examples of the convergence between energy and defense. First, those energy or transmission infrastructure or in many of the vulnerable oceans of the world, whether it's the Baltic, the North Sea, Taiwan, North America, North East Coast. And the technology that we have been testing with our customers about prognostics on cable, i.e., predicting when and where cable will break, allow us to actually see a lot of other things.

[Jean Vernet, CEO at James Fisher]

These are like all the traffic subsea, the traffic at surface. This is something which is particularly important to both markets. Some countries like Germany now require, when they award a tender for offshore wind, a security plan, a protection plan from the developers. This, for me, is one very good example of the convergence between the two and how we have crossovers in our R&D between energy and defense, which is an example of the synergies I was pointing out. I believe the other part of this, the reason it's of great interest to us is the way these markets are scaling is amazing, right? Actually, that's why we have JFR, so the power generation part of offshore wind as one of those high-growth potential. It's just very new. The market is not used to that, right?

[Jean Vernet, CEO at James Fisher]

But we've shown with Bubble Curtain that we can succeed, so why not there, right? We have all the talent to succeed.

[Karen Hayzen-Smith, CFO at James Fisher]

Any more questions in the room before we move to the line? No? No questions on that? Okay.

[Jean Vernet, CEO at James Fisher]

Well, thank you very much for your time and for joining our call today for those on the line. And have all a very good day. Thank you.

Participants

Analysts

• Alex Paterson, Analyst at Peel Hunt
• Helen Nisbet, Director of Treasury and Investor Relations at James Fisher
• Jean Vernet, CEO at James Fisher
• Analyst
• Karen Hayzen-Smith, CFO at James Fisher
• Gerald Khoo, Transport Analyst at Panmure Liberum
• Gert Zonneveld, Analyst at Investec
• Alex Brooks, Managing Director at Canaccord Genuity