James Fisher & Sons – Is a big profits recovery now underway?

It could be just the right time to now take a good look at the shares of the James Fisher & Sons (LON:FSJ) group before it announces its interim results next month.

After losing money in 2020, it is becoming very apparent that the profits are beginning to roll in again for the current year.

A leading provider in its markets

The group, which dates back to the 1840s, is today a leading provider of specialised services to the marine, oil and gas and other high assurance industries worldwide.

Over the years the company has built itself up from its origins as a ship owner and operator.

It has developed unparalleled operational expertise in the marine environment, providing comprehensive products, services and support to the oil and gas, marine renewables, shipping and defence industries. Its customers are predominantly large multinational corporations, governments and other high assurance counterparties.

Its services across several sectors

On land, it is increasingly a supplier of choice to the nuclear, construction and transportation sectors to whom it provides specialist knowledge, skills and capabilities in the most safety-critical of engineering environments.

In the oil and gas sector, it is a world leader in the provision of specialist products and support services, and in being a provider of turnkey operations to major corporations. The company is acknowledged as a trusted marine expert and innovator, offering commercial best practice based on over 170 years of operational excellence.

The company is a major engineering and technical services supplier to the nuclear sector and leads the way in design and manufacturing.

The defence sector recognises the group as a leader in submarine rescue for and provider of specialist solutions. It provides fast, safe and reliable subsea rescue services, products, engineering services and training to 80 countries and to 33 of the world’s navies including the Royal Navy, Australian, Singapore, Indian and South Korean Navies.

The group provides the renewable energy sector with integrated marine solutions. It is also an experienced project manager, delivering successful and cost effective offshore renewable energy projects.

It is an innovator and pioneer of integrated and bespoke products and services for the ports and terminals sector, that help to ensure the safe and efficient handling of international trade.

In construction, it develops innovative solutions for projects both on and offshore.

Finally, for the transport and infrastructure sectors, it is an engineering and service specialist and helps to enhance the operational safety of transportation and its associated infrastructure.

Leading international customers

As a consequence of dealing with so many sectors, it is able to boast of a broad and diversified global client base, which includes large multinational customers and governments, across all the market sectors it serves.

The list of clients includes: Airbus, BP, Chevron, ConocoPhillips, EDF Energy, ExxonMobil, Expro Group, Halliburton, Maersk Oil and Gas, Ministry of Defence, Schlumberger, Sellafield Limited, Shell, Total, and Weatherford amongst hundreds of others.

Good institutional spread

The group has a total of 50.40m shares in issue.

Significant holders include the Trustees of the Sir John Fisher Foundation (22.97%), Therapia Investments (7.41%), Schroder Investment Management (6.44%), Baillie Gifford (4.80%), Standard Life Aberdeen Investments (3.77%), Montanaro Asset Management (3.68%), Henderson Global Investors (3.41%), while Legal & General, Royal London and Fidelity each hold just over 2% of the equity.

Last year and reducing leverage

In the group’s 2020 trading year, its revenue was £518.2m (£617.1m) – of which marine support accounted for 48.13%, specialist technical 25.16%, offshore oil 15.05% and tankships 11.66%.

It recorded a pre-tax loss of £52.5m (£47.8m profit) for the last year. During that period, the group’s net gearing crept up from 64.8% to 74.4%.

However, at the beginning of July, the company announced that it had sold off Paladin, one of its two dive support vehicles for $17.3m – as part of its policy to reduce leverage through the sale of non-core assets.

Current and coming year estimates

VSA Capital in a recent note on the group has estimates of a rise in current year revenue, to end December, to £544m,.with pre-tax profits coming in around £36m. This is worth 61p per share in earnings and they forecast 20.6p in dividends per share.

For the next year, it sees £584m revenues, £51m of profits, 84p of earnings and a 27p dividend.

Ongoing strategic review

The group has undergone a strategic review, which is ongoing, and looks to be making the right moves as it strengthens its corporate framework and business model.

The group’s shares were trading at a High of 2170p just two years ago. In the last year they have been down to a Low of 735p.

They closed on Friday night at 959p, after a useful rise from 822p over a month ago.

My View

Do not be put off by that recent price recovery. The rise has not finished yet and there is still a lot more to go for over the next few months or so.

I now set a 1,200p Target Price for the next year.