James Fisher & Sons – a player in the Blue Economy, with growing demands from the Defence Sector, this group’s shares at 323p are a cracking portfolio ‘must’, brokers TP 466p

20.03.2025

After seeing this morning’s Final Results announcement from James Fisher & Sons (LON:FSJ) and talking with the group’s CEO and CFO – I have to admit that I am very impressed with what they have done to date in turning around the whole business.

As I have stated before, I have followed this company for decades and witnessed its progress through various pits and troughs.

But now, having undergone its second year of transformation, following various disposals, clearing down a mass of debt, while also securing fresh banking facilities at cheaper cost – well its Management is doing the right things, as far as I can see.

On the face of it the group’s shares may look expensive while the transformation process is proceeding – but if I was a fund manager, I would make sure that the shares of James Fisher, now 325p, were being added to my portfolio.

This is now whizz-bang money overnight stock, but instead a very sensible play within the ‘Blue Economy’.

The Business

The group operates through three main segments – Energy, Defence and Maritime Transport.

Energy – made up 48% of group sales – aimed at driving offshore energy forward – it provides responsible energy and innovative renewable energy solutions, in the shift to a more sustainable future.

The group provides services to the energy and renewables markets including compressor services in the Oil and Gas markets and ‘bubble curtains’ for Offshore Wind, Inspection Repair and Maintenance, Commissioning, Cable & Blade maintenance and support into Renewables and Subsea & De-commissioning Services.

Its clients include BP, Chevron, Total, Shell, Schlumberger and EDF Energy amongst many others.

Its market drivers are with both oil and gas and offshore wind demand being set to increase through the next decade aligned to energy demand, with forecasts that oil and gas capital expenditure increasing over the 2024-2028 period, while seeing exponential growth in offshore wind.

Defence – 18% of sales – aimed at enabling mission critical success – it provides submarine rescue, special operations, and life support systems.

The main business lines within Defence are Submarine Rescue, Defence Diving, Special Forces Vehicles, Submarine Platforms, and Commercial Diving and Hyperbaric Systems.

Its clients include the US Navy, the Royal Australian Navy, Technip FMC, and Subsea7.

Market drivers - the US is seen as being the largest defence market, while Europe and Asia Pacific are accelerating aligned to NATO.

Maritime Transport – some 34% of 2024 sales – aimed at shaping the future of maritime – it provides services for coastal shipping and ship-to-ship transfer.

Its clients include The Ministry of Defence, Total Energies, Phillips66, BP and Shell.

Its market drivers are seen with global vessel supply tightening with demand for mid-sized remaining high in NW Europe, as well as the big push for carbon reduction commitments prior to Net Zero 2025.

The 2024 Results

For the year to end-December 2024 the group reported that its underlying results saw a drop of 11.8% in its revenues to £437.7m (£496.2m), while showing a 43.4% improvement in its pre-tax profits at £11.9m (£8.3m), with its earnings coming out at 16.9p (11.4p), an uplift of 48.2%.

Importantly, its net debt fell 61.1% to £56.1m (£144.2m).

Management Comment

CEO Jean Vernet stated that:

"I am encouraged by our 2024 performance, ending the year in a stronger financial position and with our business better positioned to take advantage of supportive end markets.

We delivered underlying operating profit in line with our upgraded expectations and have significantly deleveraged the Group. 

The disposals provided funds to pay down our debt, re-finance our facilities on improved terms and strengthened our balance sheet as a result - providing a stable platform for growth with a more resilient capital structure.

As we complete the second year of our business turnaround, I am pleased with the implementation of the One James Fisher model.

We have an aligned organisation that can capitalise on our collective strength, with world-leading capabilities that will help us generate sustainable growth.

As we move into the next chapter of the turnaround, we will continue to utilise our people, expertise and innovation to address our customers' biggest challenges, across the geographies in which we operate.

February 2025 year-to-date trading was in line with management expectations. Subject to geopolitical uncertainties, the Board remains confident on delivering further progress this year, working towards our medium-term financial targets of 10% underlying operating profit margin and 15% ROCE."

Analyst View

Gert Zonneveld, at Investec, rates the group’s shares as a Buy, looking for a Target Price of 466p.

As the Transformation Process endures, the Investec estimate for the next three years looks very encouraging.

The analyst sees a slightly lower revenue of £431m (£437.7m) for this year to end-December, with pre-tax profits of £11.9m (£11.9m), but with earnings increasing to 16.2p (10.5p) per share.

For the 2026 year the estimate is £452m revenues, £18.2m profits, earnings of 25.2p and paying a dividend of 3.0p (nil) per share.

In 2027 some £474.2m of revenues could see £23.6m of profits, 32.7p earnings and a 6.0p per share dividend.

In My View

I believe that the market will be slow to recognise the impact that the Defence Sector will have on this group as it moves forward over the next few years.

I particularly like its involvement in those ‘bubble curtains’, submarine rescue, and its special forces stealth TDV craft speedboats.

As the group’s ‘Operating at Sea’ theme is pursued, I consider that the group’s shares will move ahead as the transformation process continues to show benefits.

Advanced submarine rescue vehicle

At just 323p its shares are a good purchase for sensible portfolios.