Final Results
Falkland Islands Holdings PLC
04 July 2006
Falkland Islands Holdings plc
Preliminary Results for the year ended 31 March 2006
Falkland Islands Holdings ('FIH'), an AIM listed company operating a range of
businesses in the Falkland Islands and the Portsmouth Harbour Ferry Company ('
PHFC') in the UK, announces preliminary results for the year ended 31 March
2006.
Financial Highlights
• Turnover up 23% to £15.7 million (2005: £12.8m)
• Underlying profit before taxation up 61% to £1.56m (2005 £0.97m)
including a first full year contribution from PHFC
• Profit before taxation, including exceptional items up to £3.1m (2005:
£0.9m),
• EPS on underlying profits 12.7p (2005 : 9.1p)
• Basic EPS 32.6p (2005: 8.2p)
• Dividend per share increased by 8.3% to 6.5p (2005: 6p)
• Cash balances at year end of £3.6m (2005 £0.9m)
• Cash net of borrowings at year end £0.3m (2005 £0.4m borrowings)
Operating Highlights
• Falkland Islands' business produced satisfactory results:
o Retail sales growth helped by increased cruise ship visitors, new in
store delicatessen and coffee shop
o Business confidence dampened by fourth year of poor squid catches
o Good progress made by Group's insurance agency
o Increased competition impacted on the Upland Goose
• PHFC revenues buoyed by increased activity surrounding Maritime festivals
• Continued exploration progress made by FGML and FOGL
Outlook
• Trading in the Falklands to continue at satisfactory levels since the
year end
• Further growth expected from new tourist services
• Stable outlook for PHFC, which lessens Group's dependence on the Falklands
• Earnings enhancing complementary acquisitions continue to be sought
David Hudd, Chairman of Falkland Islands Holdings plc, said:
'We have made good progress during the year building a solid platform from which
to grow in the future, despite business confidence in the Islands being impacted
by poor squid catches. The contribution of PHFC was also especially pleasing in
its first full year under our ownership.
With solid contributions from our two trading businesses we are confident that
we can look forward to another good year, providing essential services to the
local communities where we operate whilst continuing to offer attractive returns
for our shareholders.'
4 July 2006
Enquiries:
Falkland Islands Holdings
David Hudd, Chairman Tel: 07771 893 267
John Foster, Managing Director Tel 07710 764 556
College Hill
(1) Nick Elwes Tel: 020 7457 2020
Chairman's and Managing Director's Review of Operations
Overview
We are pleased to report that the year to 31 March 2006 has been an encouraging
year for your Company and record levels of profitability have been achieved as
the group successfully consolidated its position following the strategic
expansion seen in the prior year. The Group now has two solid cash generative
businesses providing essential services to local communities. The Falkland
operations produced a satisfactory result despite subdued levels of activity in
the Islands, while the Portsmouth Harbour Ferry Company ('PHFC') benefited from
the maritime festivals held in 2005.
Falkland Oil and Gas ('FOGL') and Falkland Gold and Minerals ('FGML') in which
the Company has significant shareholdings of 16.3% and 14.4% respectively,
continued their exploration efforts. FOGL raised a further £10 million from
investors in May 2005 and we subscribed £2 million in that placing. We took the
opportunity in February 2006 of recouping that cash outlay when we sold 1.8
million shares generating proceeds of £2.4 million and a profit of £2.1 million.
This transaction increased the Group's distributable reserves and provides
additional financial flexibility. At the end of the year the Group had net cash
balances of £0.3 million (2005: Borrowings £0.4 million) and the market value of
the two investments was £23.3 million, equivalent to 278 pence per FIH share,
compared with book cost of £2.6 million.
The Group now has a solid operating platform and a strong cash position from
which to move forward and the exploration investments will provide an
exceptional return in the event of a successful outcome. Your Board will seek
to continue to deliver value to shareholders and as such is proposing to
increase the annual dividend by 8.3% from 6p to 6.5p.
Financial Summary
In the year to 31 March 2006 turnover rose by 23% to £15.7 million (2005: £12.8
million) and the profit before taxation including exceptional items increased by
to £3.1 million (2005: £0.9 million). Underlying profits before the
amortisation of goodwill and exceptional items, including a first full year
contribution from PHFC, rose by 61% to £1,560,000 (2005: £972,000). Basic
earnings per share rose to 32.6 pence (2005: 8.2p). Basic earnings per share on
underlying profits increased 40% to 12.7 pence per share (2005: 9.1p).
Operations
Falkland Islands
Retail sales on the Islands were helped by the introduction of a new in store
delicatessen and coffee shop and further expansion of the product range. The
steady increase in the number of cruise ship visitors visiting Stanley also
helped to boost revenues at the Capstan gift shop. However, in contrast the
group's DIY retailing businesses suffered from the slow down in the local
economy and a reduction in business confidence resulting from continued low
levels of squid catches at the start of the year.
After a good year in 2005, the Land Rover dealership had a more difficult year
and the numbers of vehicle sales fell although a contract to modify existing MoD
vehicles helped the dealership achieve satisfactory results. The Upland Goose
Hotel faced fierce challenges from newly refurbished competition in Stanley and
produced a disappointing result, accordingly we have taken the decision to
reduce its carrying value by £0.4 million.
On a more positive note the Group's insurance agency continued to make steady
progress, consolidating its reputation for high levels of customer service and
net rental income from FIC's portfolio of 35 commercial and residential
properties in Stanley also moved ahead. Darwin Shipping was able to maintain its
contribution despite rising freight and fuel costs by changing from chartering
its own vessels to taking space on Ministry of Defence Supply vessels which give
the added advantage of more frequent vessel sailings per year, giving improved
service levels and choice for customers.
Port Services continued to make an important contribution although profit levels
fell slightly in the face of local competition. With poor squid catches in the
early part of the financial year the Fishing Agency business only made a modest
contribution. However the Agency team were instrumental in developing a new
tourist focussed business stream. This comprises Mini Bus tours for cruise line
passengers and a former London double decker Routemaster bus which now runs
along the sea front providing visitors with a unique view of Stanley. Further
growth is expected from these tourist services in future years.
PHFC
PHFC's continuing ferry revenues of £3.3 million were in line with expectations.
Passenger numbers declined marginally on the previous year as the effects of
the introduction of parking charges in Gosport were felt. However revenues were
buoyed by increased activity around Portsmouth Harbour linked to the
International Fleet Review and Festival of the Sea in June and July 2005.
In May 2005 PHFC took delivery a new ferry vessel, Spirit of Portsmouth at a
total cost of £1.9 million underlining the commitment of the Company to
modernising its fleet and maintaining the highest levels of service and
passenger safety. The cost of the ferry was substantially paid last year.
Exploration Activities
Falkland Gold and Minerals Limited (FGML) - FIH Shareholding 14.4% (2005 14.4%)
FGML is now well into the second year of its exploration programme in the
Falklands with its operational base in Goose Green. The work programme has been
designed to establish the source of alluvial gold discovered in some of the
streams in the Islands. As most of the target areas are covered with peat, the
initial drilling targets were identified from the aero magnetic survey and this
has been followed up by focused ground magnetic surveys.
By the end of May 2006, total investigative drilling totalled over 14,000m on
ten targets while a further 8,000m is planned on seven further targets. In
addition, geochemical peat soil sampling will be carried out on two additional
areas of interest. It is now probable that the additional work resulting from
increased knowledge of the subsurface terrain will extend the work programme
well into 2007
The British Geological Survey has recently completed a review of the methodology
employed and the exploration work carried out to date. FGML is retaining their
services to provide additional interpretative capacity as more data becomes
available.
The market value of the Group's shareholding of 11,250,000 shares in FGML
(14.4%) at 31 March 2006 was £1.8 million (book value: £0.2 million).
Falkland Oil and Gas (FOGL) - FIH Shareholding 16.3% (2005 18.1%)
FOGL has continued to make good progress in acquiring and analysing data over
their 79,000 sqkm licences to the South and East of the Falklands in order to
define and prioritise targets for drilling. Over the Austral Summer a further
13,000 km of 2D seismic was acquired bringing the total recorded by FOGL to
22,450 km.
The scale of the opportunity for FOGL is such that it became clear to the FOGL
board that it was necessary to increase management resources in the UK to cope
with the work load. In January 2006, Tim Bushell joined as Chief Executive
succeeding John Armstrong who had served as Executive Chairman since the
formation of the Company. At the same time John, who will remain on the board,
was succeeded as Executive Chairman by Richard Liddell. Tim is a qualified
geologist and has spent the last 10 years developing the exploration and
production interests of Paladin Resources in Norway. Prior to this he was
responsible for LASMO's South Atlantic interests which included the exploration
campaign in the North Falklands Basin in 1998.
Discussions are continuing with possible partners while further analysis and
interpretation of data continues. The current short term objective is to plan
and contract for the exploration effort over the next Austral Summer.
The technical data continues to indicate that a major new petroleum province
could lie within the license area.
In February 2006 in order to provide the Group with additional financial
flexibility FIH sold 1.8 million shares in FOGL generating proceeds of £2.4
million and a profit of £2.1 million. The market value of the Group's remaining
shareholding of 15 million shares at 31 March 2006 was £21.5 million (book
value: £2.4 million).
People
On 10 June 2005 John Foster, was appointed Managing Director succeeding Bryan
McGreal who had been with the group since 1987. John is a Chartered Accountant
with wide commercial and financial experience and has held directorships in a
number of UK listed companies.
On 31 March 2006 Tony Knightley retired from the Board after many years with the
Group first as Company Secretary and then latterly as Finance Director. The
Board would like to thank Tony for his contribution to FIH. FIH's Group
Financial Controller Mike West was appointed Company Secretary on 1 April 2006.
On 26 July 2005, Mike Killingley was appointed as a non executive director to
the Board of FIH. Mike is also Chairman of the PHFC board, is a former Partner
with KPMG and is Chairman of Beale Plc and Conder Environmental PLC.
Finally we would like to thank the staff and employees of the FIH group both in
the Falklands and in the UK for their contribution and hard work over the past
year. As a group focused on providing essential services to local customers the
care and dedication shown by our staff in delivering these services underpins
the continued success of your Company.
Outlook
As we noted last year our strategy is to ensure that the future of your Company
is not wholly dependent upon our investments in the listed Falkland exploration
companies. The PHFC acquisition was the first step towards building a
meaningful business outside the Falklands and we remain keen to identify UK
based companies for acquisition, subject to them enhancing the underlying value
of FIH shares.
As we start the new financial year the general backdrop to trading in the
Falklands has improved and this should help underpin modest growth in the
current year. The outlook for PHFC also remains stable although the absence of
the maritime festivals this summer will mean that the contribution from the
ferry business will fall back from the record levels seen in 2005/6.
Prospects for the Falklands over the medium term remain positive as expenditure
on oil and mineral exploration activities continues. Overall, we remain
confident that the Group's solid level of underlying profitability will be
maintained in the current year.
David Hudd John Foster
Chairman Managing Director
4 July 2006
Group profit and loss account
for the year ended 31 March 2006
2006 2005
As restated
Notes £'000 £'000
Turnover
Continuing operations 15,209 12,206
Discontinued operations 527 548
1, 2 Turnover 15,736 12,754
2 Cost of sales (9,855) (8,708)
2 Gross profit 5,881 4,046
Administrative expenses (4,401) (3,280)
Amortisation of goodwill (204) (65)
3 Administrative expenses - exceptional costs (487) -
2 Total administrative expenses (5,092) (3,345)
2 Other operating income 344 291
Operating profit before exceptional items and amortisation of 1,824 1,057
goodwill
Amortisation of goodwill (204) (65)
Exceptional costs (487) -
Group operating profit 1,133 992
Continuing operations 1,132 995
Discontinued operations 1 (3)
2 Group operating profit 1,133 992
Profit on sale of discontinued operation 84 -
Profit on sale of fixed asset investment 2,135 -
4 Net interest expense (264) (85)
Profit on ordinary activities before taxation 3,088 907
Taxation (374) (306)
Profit on ordinary activities after taxation for the financial year 2,714 601
As restated
5 Earnings per share
Basic 32.6p 8.2p
Diluted 32.2p 8.1p
Proposed dividend per ordinary share 6.5p 6.0p
Group balance sheet
as at 31 March 2006
As restated
Notes 2006 2005
£'000 £'000 £'000 £'000
Fixed assets
Intangible assets 3,979 4,136
Tangible assets 8,042 8,501
Investments 2,610 900
14,631 13,537
Current assets
Stocks 3,107 3,308
Debtors due within one year 1,789 1,788
Debtors due after one year 48 24
1,837 1,812
6 Cash at bank and in hand 3,601 914
8,545 6,034
Creditors: amounts falling due within one year (4,797) (5,419)
Net current assets 3,748 615
Total assets less current liabilities 18,379 14,152
Creditors: amounts falling due after more than one (2,765) (831)
year
Provisions for liabilities and charges (853) (882)
Net Pension Scheme liabilities (1,909) (1,648)
Net assets 12,852 10,791
Capital and reserves
Called up share capital 838 838
Share premium account 7,064 7,061
Other reserves 703 703
Revenue reserves 4,247 2,189
7 Equity shareholders' funds 12,852 10,791
Group cash flow statement
for the year ended 31 March 2006
Reconciliation of operating profit to net cash inflow from operating activities
As restated
2006 2005
£'000 £'000
Operating profit 1,133 992
Profit on sale of fixed assets (12) -
Amortisation of goodwill 204 65
Depreciation charges 838 292
(Increase) / decrease in stocks 201 (229)
Increase in debtors (12) (256)
Decrease in creditors and provisions (687) (87)
Net cash inflow from operating activities 1,665 777
Cash flow statement
2006 2005
£'000 £'000 £'000 £'000
Cash flow from operating activities 1,665 777
Returns on investments and servicing of finance
Interest received 38 47
Interest paid (203) (31)
(165) 16
Taxation
UK Corporation tax paid (250) (169)
Overseas taxation paid (141) (104)
(391) (273)
Capital expenditure and financial investment
Purchase of tangible fixed assets (505) (1,243)
Purchase of investments (2,000) (622)
Receipts from sale of tangible fixed assets 15 144
Receipts from sale of investment 2,427 -
(63) (1,721)
Acquisitions
Sale of subsidiary undertaking 178 -
Investment in subsidiary undertaking - (5,556)
178 (5,556)
Dividends paid on shares classified in shareholders' funds (502) (372)
Cash inflow/(outflow) before financing 722 (7,129)
Financing
Repayment of secured loan (524) (279)
Repayment of Loan Notes (43) -
Issue of ordinary share capital 3 5,472
New secured loan 2,609 1,000
Sale of own shares - 112
Share options exercised - 98
Cash flow from financing 2,045 6,403
Increase/(decrease) in cash in the year 2,767 (726)
Consolidated statement of total recognised gains and losses
for the year ended 31 March 2006
As restated
2006 2005
£'000 £'000 £'000 £'000
Profit for the year 2,714 601
Actuarial loss on pension schemes
PHFC Scheme (loss) (88) -
FIC Scheme gain / (loss) 57 (57)
(31) (57)
Movement on deferred tax asset relating to pension (123) 17
scheme
Total recognised gains and losses relating to the 2,560 567
financial year
Prior year adjustment - FRS 17 (635)
Total gains and losses recognised since last annual 1,925
report
Notes to the Financial Statements
for the year ended 31 March 2006
1. Segmental information
The table sets out information for both of the group's industry segments and
geographic areas of operation.
General Trading Ferry Services
in the Falkland in the United Kingdom Total
Islands
As restated As restated As restated
2006 2005 2006 2005 2006 2005
£'000 £'000 £'000 £'000 £'000 £'000
Turnover - continuing 11,902 11,468 3,307 738 15,209 12,206
operations
Discontinued operations
- Cobham Travel - - 527 548 527 548
11,902 11,468 3,834 1,286 15,736 12,754
Segment operating profit 670 987 463 5 1,133 992
Segment operating profit before
amortisation of goodwill and
exceptional items 1,105 987 719 70 1,824 1,057
Interest payable (212) (79) (52) (6) (264) (85)
Underlying profit before tax
before amortisation of goodwill
and exceptional items 893 908 667 64 1,560 972
Goodwill amortisation - - (204) (65) (204) (65)
Exceptional costs (435) - (52) - (487) -
Profit on sale of fixed asset
investments 2,135 - - 2,135 -
Profit on sale of discontinued - - 84 - 84 -
operations
Group profit before taxation 2,593 908 495 (1) 3,088 907
Net assets 8,941 7,650 3,911 3,141 12,852 10,791
2. Analysis of continuing and discontinued operations
As restated
2006 2005
Continuing Discontinued Total Continuing Discontinued Total
£'000 £'000 £'000 £'000 £'000 £'000
Turnover 15,209 527 15,736 12,206 548 12,754
Cost of sales (9,384) (471) (9,855) (8,212) (496) (8,708)
Gross profit 5,825 56 5,881 3,994 52 4,046
Administrative expenses (5,034) (58) (5,092) (3,286) (59) (3,345)
Other operating income 341 3 344 287 4 291
Operating profit/(loss) 1,132 1 1,133 995 (3) 992
3. Exceptional costs
2006 2005
£'000 £'000
Compensation for loss of office 105 -
Impairment of fixed assets 382 -
487 -
A payment of £105,000 was made to a director as compensation for loss of office.
Following a disappointing period of trading, a decision was taken to write down
the carrying value of the Upland Goose Hotel.
4. Net interest expense
As restated
2006 2005
£'000 £'000
Interest receivable 38 47
Expected return on pension scheme assets 9 -
47 47
Interest payable on bank loans (194) (41)
Interest cost on pension scheme liabilities (117) (91)
(264) (85)
5. Earnings per share
As restated
2006 2005
£'000 £'000
Profits are calculated as follows:
Profit on ordinary activities after taxation for the financial year 2,714 601
The profits above form the basis of calculating the basic and diluted earnings
per share.
2006 2005
Basic earnings per share 32.6p 8.2p
Diluted earnings per share 32.2p 8.1p
Earnings per share on underlying profits before amortisation of goodwill,
exceptional items and disposals
2006 2005
£'000 £'000
Underlying profit before tax (note 2) 1,560 972
Less: tax thereon (504) (306)
Underlying profit after tax 1,056 666
2006 2005
Earnings per share on underlying profit before amortisation of goodwill, 12.7p 9.1p
exceptional costs and disposals
Diluted earnings per share on underlying profit before amortisation of goodwill, 12.5p 9.0p
exceptional costs and disposals
2006 2005
Number Number
Allotted called up and fully paid - Ordinary shares of 10p each 8,380,066 7,391,715
Less: shares held under ESOP (note 21) (55,417) (55,417)
Average number of shares in issue excluding ESOP 8,324,649 7,336,298
Maximum dilution re share options 109,736 91,350
Diluted weighted average number of ordinary shares in issue 8,434,385 7,427,648
The additional calculation of earnings per share is given in order to provide a
more meaningful comparison of underlying performance.
The calculation of basic, pre amortisation and underlying earnings per share is
based on the weighted average number of ordinary shares in issue during the
year, excluding shares held by the Employee Share Ownership Plan, of 8,324,649
(2005: 7,336,298). The calculation of fully diluted earnings per share is based
on the ordinary shares in issue plus the dilutive effect of outstanding shares
options, resulting in a weighted average number of shares of 8,434,385 (2005:
7,427,648).
6. Net debt
Group Company
2006 2005 2006 2005
The bank loans, overdrafts and unsecured loan notes £'000 £'000 £'000 £'000
are repayable as follows:
Within one year (542) (515) (342) (343)
Between one and two years (542) (389) (342) (343)
Between two and five years (1,590) (442) (790) (442)
Over five years (634) - - -
(3,308) (1,346) (1,474) (1,128)
Cash/(overdraft) 3,601 914 1,055 (180)
Net funds/(debt) 293 (432) (419) (1,308)
The Group's financial instruments comprise cash and borrowings and arise
directly from its operations. The principal function of these financial
instruments is to fund the Group's operations. Cash at bank is money on call or
short term deposit. This together with cash in hand is used to fund the
day-to-day operations. The Group has an unutilised overdraft facility of £2.3
million.
7. Reconciliation of movement in shareholders' funds
Group Company
2006 2005 2006 2005
£'000 £'000 £'000 £'000
Opening shareholders' funds as previously reported 10,924 3,515 15,258 6,713
Prior year adjustment - FRS 17 (635) (613) - -
Prior year adjustment - FRS 21 502 351 (363) (307)
Opening shareholders funds as restated 10,791 3,253 14,895 6,406
Profit for the financial year 2,714 601 2,733 1,518
Dividends on shares classified in shareholders' (502) (369) (502) (369)
funds
Other recognised gains and losses (154) (34) - -
Issue of shares 3 7,228 3 7,228
Sale of own shares - 112 - 112
12,852 10,791 17,129 14,895
8. Statutory information
The financial information does not constitute the Company's statutory accounts
for the years ended 31 March 2006 and 2005 but is derived from those accounts.
Statutory accounts for 2005 have been delivered to the Registrar of Companies,
and those for 2006 will be delivered following the Company's Annual General
Meeting. The auditors have reported on those; their reports were unqualified
and did not contain statements under section 237(2) or (3) of the Companies Act
1985.
Copies of Falkland Islands Holdings plc annual report and financial statements
will be with shareholders in mid July.
This information is provided by RNS
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