James Fisher's new chief steadies the ship

In recent years, marine services group James Fisher & Sons (FSJ) has been lost at sea. There have been conflicting views on how to change course, and as a wave of debt threatened to subsume it, business units (and a fair few senior officers) have been jettisoned along the way.

Better news arrived last week, when the 175-year-old business agreed a new deal with lenders that will give it more time to right itself. The size of the credit facility has been cut by £37.5mn to £210mn, but maturity extensions have given new chief executive Jean Vernet an additional 18 months to steer the group out of trouble.

The first steps of his deleveraging plan have already been taken with the sale of three non-core business units for at least £18.5mn and the Swordfish dive support vessel for $24mn (£19.8mn) in December.

Perhaps even more significant was the sale of its lossmaking nuclear decommissioning arm in March for a nominal sum of £3 to turnaround specialist Rcapital.

The disposal, and the renegotiation of banking facilities, meant results for 2022 were delayed but they show some signs of progress. Vernet, who joined in September from Smiths Group (SMIN), is transforming “a collection of disparate businesses into a group with a more coherent structure and purpose”, chairman Angus Cockburn said. It now consists of three divisions: energy, defence and maritime transport, with leaders in each that have been picked for their “commercial acumen”, according to Vernet.

This is clearly needed. Including the £20.6mn of impairments and losses from its disposed units, the group made a statutory pre-tax loss for the third year in a row. Even on an adjusted basis, its operating margin remained "weak", slipping to 5.5 per cent, from 6.3 per cent.

Vernet praised the “genuine expertise in complex and unconventional facets of maritime life” within the group but acknowledged the need to rebuild both profitability and credibility, given years of missed targets.

These have driven James Fisher's share price down by around 85 per cent from its pre-pandemic level of over 2,000p a share and on FactSet consensus earnings forecasts of 37p for 2023 (which is more than double last year's level) the shares trade well below their five-year average, at just nine times earnings.

Yet given the number of businesses offloaded in recent years, such historic comparisons are moot and we think Vernet needs to demonstrate that repairs have held up before investors get back on board. Sell.

Last IC View: Sell, 295p, 7 Sep 2022