Shares in UK’s James Fisher & Sons dive on trading update
By Rob Griffin
10:56, 25 October 2021
Shares in James Fisher & Sons plummeted today after the British provider of marine engineering services warned it had endured a difficult start to the year.
In a trading update, it outlined a number of problems it was facing and revealed management was reviewing its cost base and balance sheet.
The news went down badly in the markets with the company’s share price sinking 33% to £5.22 by late morning in London.
Trading within covenants
The FTSE All-Share company said it continued to trade within its banking covenants and had headroom of about £100m ($137.7m) against its revolving credit facilities at the end of September 2021.
It now anticipates underlying operating profit for the full year, before separately disclosed items, to be in the range of £27m to £32m.
“In response to the latest short-term trading outlook, management is performing a detailed review of the Group’s cost base and balance sheet,” it stated.
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Divestment of assets
The board expects revenue to be materially offset by the challenges it faces with customer demand and the “safe mobilisation” of teams to work sites.
Separately, it’s looking to “advance at pace” the divestment of non-core businesses and assets aimed at generating significant proceeds over the next year.
It plans to use the subsequent funds raised to reduce net debt and financial leverage, as well as to simplify the overall business.
The statement also confirmed that the board remains confident in its strategy to deliver sustainable, profitable growth from the available market opportunities.
The company said its Fendercare ship-to-ship transfer business continued to improve – but below the rate previously expected.
It highlighted “growing evidence” of market shifts in some of these key territories, which has prompted further investigation.
“The management team is conducting a detailed review of locations and trading partners to ensure that the business has the optimal mix of each,” it stated.
The update also revealed the company had reached an impasse in negotiations over a £2m long-term project and doesn’t expect a resolution this year.
In addition, customers of its marine contracting, decommissioning and nuclear businesses have further delayed projects in recent weeks.
They were due to start – and, in some cases – finish in 2021. “The continuing challenges presented by the global pandemic, particularly in the safe mobilisation of teams to work sites, have influenced customer decision-making processes,” it added.
Increased bad debt risk
Adding to the problems has been the “recent deterioration” in the condition of a financially distressed customer that has increased bad debt risk by around £2m.
Elsewhere, the Tankships division experienced a poor month in September. As a result, it has a more cautious outlook for the full year.
Meanwhile, the company said that revenue in the quarter ended 30 September was 7.6% higher than Q3 2020 and 8.7% higher than Q2 of 2021. Year-to-date revenue is 3.9% below the prior year.
Read more: James Fisher share price plummets as group posts profit loss
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