James Fisher struggles to find calmer waters

It’s been a tough 12 months for James Fisher (FSJ).

A year ago, the marine services company’s shares were trading at 948p and its then-chief executive Eoghan O’Lionaird had recently held a capital markets day to convince investors of the merits of its three-year turnaround strategy, aimed at hiving off less profitable bits of the business to boost margins – targeting an eventual operating margin of 10 per cent and a return on capital employed of 15 per cent.

Fast forward a year and the share price has dropped below 300p, O’Lionaird has gone, and its meagre levels of profitability have fallen further. The group’s operating margin fell to 3.3 per cent in the first six months, from 5.2 per cent in the first half of last year.

Profits were dented by the performance of its two biggest divisions – marine support and technical services.

Sales at the former dropped by 4 per cent as demand for ship-to-ship transfer services remained subdued, while the latter reversed an operating profit of £5.6mn in the same period last year into a £2.5mn loss this year – hit by £2mn of provisions on “underperforming” contracts.

The dislocation in energy markets proved a boon for both its offshore oil and tankships arms, which grew underlying operating profit by 55 per cent and 100 per cent, respectively.

Guidance on future prospects was limited, with the company saying only that it expects its full-year underlying profit to be “broadly in line” with last year which, at £28mn, was almost a third lower than 2020.

Muted prospects and a net-debt-to-cash profit ratio of 3.3-times, close to its covenant limit of 3.5-times, mean we retain our sell recommendation.

Last IC View: Sell, 414p, 10 Mar 2022