Interim Results
Falkland Islands Holdings PLC
06 December 2006
6 December 2006
Falkland Islands Holdings plc
Interim Results for the six months ended 30 September 2006
Falkland Islands Holdings ('FIH'), an AIM listed company operating a range of
businesses in the Falkland Islands, and the Portsmouth Harbour Ferry Company in
the UK, announces interim results for the six months ended 30 September 2006.
Financial Highlights
• Turnover from continuing activities was £7.3 million (2005:
£7.6million)
• Underlying profits before tax were £696,000* (2005: £747,000)
• EPS on underlying profits were 5.6p (2005: 6.1p)
• Gross cash resources increased to £4.1 million (31 March 2006 £3.6m)
• No interim dividend is proposed
Operating Highlights
• Falkland Islands' businesses produced satisfactory results:
o Encouraging illex squid catches.
o West Store continued to make progress
o Homecare impacted by reduction in housing starts and increased
competition
o Insurance broking & financial services income increased
• Good results from Portsmouth Harbour Ferry Company ('PHFC') despite
the absence of maritime festivals. PHFC was also awarded a 3 year
contract to operate a water taxi service for Berkeley Homes
• Exploration investments :
o Falkland Oil & Gas now funded for 2007 and work continues to define,
and prioritise the top prospects with a view to drilling in 2008
o Falkland Gold & Minerals is now concentrating on three areas of
interest
Outlook
• Economic conditions in the Falklands expected to remain unchanged.
• Trading is expected to continue to benefit from exploration activity
and the 25th Commemoration.
• Solid performance from PHFC anticipated, despite entering slow Winter
period
• Substantial exposure to oil and minerals exploration through
shareholdings in FOGL and FGML.
• Continue to seek earnings enhancing complementary acquisitions.
* Before the amortisation of goodwill, charges for share based payments and
exceptional items.
David Hudd, Chairman of Falkland Islands Holdings plc, said:
'The Group has made satisfactory progress in the first six months. Activity on
the islands was as anticipated, whilst the improvement in illex catches in April
and May was encouraging. PHFC made a solid contribution after last year's
exceptional first half.
For the full year we anticipate a similar level of underlying profit for the
Group to that achieved in 2005/6.'
Enquiries:
Falkland Islands Holdings Tel: 01279 461 630
David Hudd, Chairman Tel: 07771 893 267
John Foster, Managing Director Tel 07710 764 556
College Hill
o Nick Elwes Tel: 020 7457 2020
Chairman's Statement and Review of Operations
Overview
We are pleased to report satisfactory interim results for the half year to 30
September 2006. Underlying profits before tax, and before the amortisation of
goodwill and charges for share based payments were in line with our expectations
at £696,000 (2005: £747,000).
Profits on ordinary activities before taxation (after goodwill amortisation,
share based payment charges and in the prior year, profits on the sale of
discontinued operations) were £549,000 (2005: £699,000). Earnings per share, on
reported profits were 4.0p per share (2005:5.2p) and earnings per share on
underlying profits before tax excluding exceptional items the amortisation of
goodwill, and share based payment charges were 5.6 p per share (2005: 6.1 p). As
in previous years no interim dividend is proposed.
Group turnover from continuing activities was down 4.4% at £7.3 million (2005:
£7.6 million).The reduction was largely accounted for by timing differences on
fleet vehicle sales in the Falklands and the absence of maritime festivals in
Portsmouth
Operations
In the Falklands the year started encouragingly with much improved illex squid
catches in April and May which had a positive impact on the fishing agency. In
retail operations sales in the Group's flagship West Store continued to make
progress but the Homecare business was impacted by a reduction in new housing
starts and increased competition. The Group's financial services operations,
insurance broking and property rental activities all performed well. Motor
vehicle sales were low in the first half with over 80% of sales expected in the
second half of the year. Underlying profits before tax from Falkland operations
fell back from £340,000 to £316,000 in the 6 months to 30 September 2006 on
turnover of £5.5 million(2005: £5.8million)
The Portsmouth Harbour Ferry Company achieved a good result and despite the
absence of the maritime festivals of 2005 generated underlying profits before
tax of £380,000 compared with £407,000 in 2005. Turnover declined by 3.7% in the
absence of the boost provided by the IFOS and Trafalgar events. However
selective fare rises in June 2006 mitigated the impact on profits. In August we
were successful in winning a 3 year contract to operate a water taxi service
across the harbour on behalf of Berkeley Homes and this made a small
contribution in the current period.
Investments
The Group also owns strategic stakes in the AIM listed exploration companies,
Falkland Oil and Gas and Falkland Gold and Minerals.
Falkland Oil and Gas ('FOGL')
The key exploration objectives for FOGL in 2006/7 are to define and prioritise
the top prospects for drilling. The analysis of the results of the seismic work
carried out over the last Austral Summer has been completed and exploration work
is shortly to commence in the Falklands. That analysis continues to support the
presence of hydrocarbons in FOGL's licence area and work is now focussed on the
best prospects which will generate the targets for drilling in 2008.
TRACS International have also recently published an independent technical report
indicating that in their opinion FOGL's top 10 prospects have an unrisked
resource potential of 10 billion barrels and the risked reserves attributable to
FOGL were 863 million barrels. This report which is available on FOGL's web site
gives an indication of the huge potential upside which exists for us as
shareholders.
The Summer field work, which will start later this month, comprises a programme
of Electromagnetic logging ('CSEM') and further 2D which will be guided by the
CSEM results. CSEM is fairly new technology which has proved effective in
confirming the presence of hydrocarbons in prospects identified by positive
seismic results. The analysis of this further work will become available during
2007 and will provide the data necessary for further farm out discussions and
rig acquisition negotiations.
FOGL secured additional financing in December when RAB, their largest
shareholder, agreed to subscribe a total of £8 million for 5 year 6% convertible
loan notes. Their commitment means that FOGL will have sufficient cash to
finance the current exploration programme and additional work through 2007. The
notes are convertible into FOGL shares at 80p per share and RAB was also issued
with 6 million warrants to subscribe for new FOGL shares at 100p per share Full
exercise of these securities would increase the issued capital of FOGL by 16
million shares (17%).
The market value at 30 September 2006 of the Group's 15 million shares in FOGL
(16.3%) at 30 September 2006 was £12.1 million compared to a book value of £2.4
million.
Falkland Gold and Minerals ('FGML')
Exploration drilling and sampling have continued through the Austral winter and
efforts are now being concentrated on three distinct areas of interest known as
Target 11 (Glorious Hill) Black Shale and Target 25. They are all on the East
Falklands and within easy reach of FGML's Goose Green base.
FGML had cash balances of £5.8 million at 30 September 2006 and exploration
expenditure is continuing at a cash cost of some £150,000 per month.
The market value at 30 September 2006 of the Group's shareholding of 11,250,000
shares in FGML (14.4%) at 30 September 2006 was £ 928,000 compared to cost of
£200,000.
Balance Sheet and Cash Flow
With the new shipping arrangements with the Ministry of Defence and DHL in place
since October 2005 we were able to take advantage of the more frequent supply
schedule to reduce stock levels from £3.5 million to just over £2.7 million at
30 September 2006. As a result the Group's cash resources increased to over £4.1
million at 30 September 2006 (2005: £1.2 million) and bank loans were reduced by
£116,000 to £3.2 million.
Outlook
The Group has a strong cash position and we continue to search for suitable
opportunities to make acquisitions to increase shareholder value. Little change
is expected in economic conditions in the Falklands and for the Group
underlying profits for the full year are expected to be at a similar level to
those achieved in 2005/6.
David Hudd
John Foster
Chairman
Managing Director
UNAUDITED INTERIM CONSOLIDATED
PROFIT AND LOSS ACCOUNT
Unaudited Unaudited Audited
6 Months to 6 Months to Year ended
30 September 30 September 31 March
2006 2005 2006
As restated As restated
£'000 £'000 £'000
Turnover
Continuing operations 7,285 7,619 15,209
Discontinued operations - 527 527
7,285 8,146 15,736
Cost of sales (4,521) (5,271) (9,855)
Gross Profit 2,764 2,875 5,881
Administrative expenses (2,167) (2,101) (4,471)
Amortisation of goodwill (102) (102) (204)
Administrative expenses - exceptional costs - - (487)
Total Administrative Expenses (2,269) (2,203) (5,162)
Other Operating Income 124 78 344
Continuing operations 619 749 1062
Discontinued operations - 1 1
Group Operating profit (Note 1) 619 750 1,063
Profit on sale of discontinued operations - 84 84
Profit on sale of fixed asset investment - - 2,135
Net Interest (Note 2) (70) (135) (264)
Profit on ordinary activities before taxation 549 699 3,018
Taxation on profit on ordinary activities (208) (268) (374)
(Note 3)
Profit on ordinary activities after taxation 341 431 2,644
Earnings per share (Note 4)
- Basic 4.0p 5.2p 31.8p
- Fully diluted 4.0p 5.1p 31.3p
UNAUDITED CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
30 Sept 2006 30 Sept 2005 31 March 2006
£'000 £'000 £'000
Fixed assets
Intangible assets 3,877 4,034 3,979
Tangible assets 7,929 8,520 8,042
Investments (Note 5) 2,610 2,900 2,610
14,416 15,454 14,631
Current assets
Stocks 2,751 3,519 3,107
Debtors 1,466 1,553 1,837
Cash at bank and in hand 4,160 1,222 3,601
8,377 6,294 8,545
Creditors: amounts falling due (3,442) (4,989) (4,797)
within one year
Net current assets 4,935 1,305 3,748
Total assets less current 19,351 16,759 18,379
liabilities
Creditors: amounts falling due (3,193) (2,964) (2,765)
after more than one year
Provision for liabilities and (855) (882) (853)
charges
Net assets excluding pension 15,303 12,913 14,761
liabilities
Net pension scheme liabilities (1,918) (1,714) (1,909)
Net Assets 13,385 11,199 12,852
Capital and reserves
Called up share capital 847 838 838
Share Premium account 7,207 7,061 7,064
Other Reserves 703 703 703
Revenue Reserves 4,628 2,597 4,247
Equity shareholders' funds 13,385 11,199 12,852
UNAUDITED CONSOLIDATED CASH FLOW
for the six months ended 30 September 2006
Unaudited Unaudited Audited
6 months to 6 months to Year to
30 Sept 2006 30 Sept 2005 31 March 2006
£'000 £'000 £'000
Cash flow from operating 722 465 1,665
activities (Note 9)
Returns on investment
and servicing of finance
Interest received 21 14 38
Interest paid (51) (94) (203)
Taxation
UK Corporation tax (53) (82) (250)
Overseas taxation paid - - (141)
Capital Expenditure
Purchase of tangible (116) (242) (505)
fixed assets
Purchase of investments - (2,000) (2,000)
Receipts from sale of - 5 15
tangible fixed assets
Receipts from sale of - - 2,427
investment
Acquisitions
Sale of subsidiary - 158 178
undertaking
Dividends paid - - (502)
Cash (Outflow) / Inflow 523 (1,776) 722
before financing
Financing
Shares issued 152 - 3
Repayment of secured (116) (102) (524)
loan
Repayment of loan notes - - (43)
New secured loan - 2,409 2,609
Increase in cash (Note 9) 559 531 2,767
Consolidated Statement of
Total Recognised Gains and
Losses
Unaudited Unaudited Audited
6 months to 6 months to Year ended
30 September 30 September 31 March
2006 2005 2006
£'000 £'000 £'000
Profit for the period 341 431 2,644
after taxation
Actuarial (loss) / gain (7) - (31)
Tax on actuarial (loss) / - (53) -
gain
Movement on deferred tax 2 - (123)
asset relating to pension
scheme
Total gains and losses 336 378 2,490
recognised in the period
Prior year adjustment FRS 20 (70)
Total gains and losses 266
recognised since last
annual report
Falkland Islands Holdings plc
Segmental information
Six months to 30 September 2006
General trading in Ferry services in Total Total
the the
Falkland Islands United Kingdom Falklands Ferry Total
6 months to 6 months to 6 months to Year Ended
30 September 30 September 30 September 31 March
2006 2005 2006 2005 2006 2005 2006
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Turnover
- continuing 5,487 5,753 1,797 1,866 7,284 7,619 11,902 3,307 15,209
operations
Discontinued
operations
-Cobham Travel - - - 527 - 527 - 527 527
5,487 5,753 1,797 2,393 7,284 8,146 11,902 3,834 15,736
Segment
operating
profit before
exceptional 351 395 268 355 619 750 1,043 507 1,550
items
Exceptional - - - - - - (435) (52) (487)
costs
Segment 351 395 268 355 619 750 608 455 1,063
operating
profit
Profit on sale - - - - - - 2,135 - 2,135
of fixed asset
investments
Profit on sale
of discontinued
operations - - - 84 - 84 - 84 84
Net Interest (75) (82) 5 (53) (70) (135) (212) (52) (264)
Payable
Group profit 276 313 273 386 549 699 2,531 487 3,018
before taxation
Net assets 11,754 7,394 1,631 3,805 13,385 11,199 8,941 3,911 12,852
General trading in Ferry services in Total Total
the the
Falkland Islands United Kingdom Falklands Ferry Total
6 months to 30 6 months to 6 months to Year Ended
September 30 September 30 September 31 March
Underlying 2006 2005 2006 2005 2006 2005 2006
Profit Before
Tax
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Segment profit 276 313 273 386 549 699 2,531 487 3,018
before tax as
above
FRS 20 Charge 40 27 5 3 45 30 62 8 70
re share
options
Amortisation of - - 102 102 102 102 - 204 204
goodwill
Exceptional - - - - - - 435 52 487
costs
Profit on sale
of fixed asset
investments - - - - - - (2,135) - (2,135)
Profit on sale
of discontinued
operations - - - (84) - (84) - (84) (84)
Underlying 316 340 380 407 696 747 893 667 1,560
Profit Before
Tax
EPS on
Underlying PBT
- basic 5.6p 6.1p 12.7p
- fully diluted 5.6p 6.0p 12.5p
Notes to the Interim Statement to 30 September 2006
1. Adoption of FRS 20
The Board has adopted FRS 20 'Share Based Payments' for the first time. The
impact on the profit and loss account is as follows:
6 Months to 6 Months to Year ended
30 September 30 September 31 March
2006 2005 2006
£'000 £'000 £'000
Increase in administrative 45 30 70
expenses
Decrease in operating 45 30 70
profit and profit
transferred to reserves
Total FRS 20 adjustments 45 30 70
2. Interest
In addition to bank interest payable, the net interest cost includes the net
financing cost of the Company's defined benefit pension schemes.
3. Taxation
The taxation charge has been estimated at 32.0% (2005: 32.0%)
4. Earnings per share
Earnings per share has been calculated on profit after tax of £341,000 (2005:
£431,000) based on the weighted average number of shares in issue, excluding
shares held in the Employee Share Ownership Plan of 8,453,324 (2005: 8,324,063).
The fully diluted earnings have been further adjusted by the dilutive
outstanding share options resulting in a weighted average number of shares of
8,470,867 (2005: 8,459,491).
5. Investments
The Group has investments in AIM quoted businesses, Falkland Oil & Gas Limited
(FOGL) and Falkland Gold & Minerals Limited.
The investments are stated
at cost.
30 September 30 September 31 March
2006 2005 2006
£'000 £'000 £'000
FGML 200 200 200
FOGL 2,410 2,700 2,410
2,610 2,900 2,610
30 September 30 September 31 March
The market value of the 2006 2005 2006
investments was:
£'000 £'000 £'000
FGML 928 2,194 1,800
FOGL 12,113 18,903 21,500
13,041 21,097 23,300
The market value per FIH 30 September 30 September 31 March
share of these investments
was
2006 2005 2006
Pence / share Pence / share Pence / share
FGML 11 26 21
FOGL 143 226 257
154 252 278
6. Reconciliation of movement in shareholder funds
30 September 30 September 31 March
2006 2005 2006
£'000 £'000 £'000
Opening shareholder funds as 12,852 10,791 10,791
previously reported
Profit for the period 341 431 2,644
Dividends paid - - (502)
Issue of shares 152 - 3
Provision for share based 45 30 70
payments
Other recognised gains and (5) (53) (154)
losses
Net addition to shareholder 533 408 2,061
funds
Closing shareholder funds 13,385 11,199 12,852
7. The interim report has been prepared on the basis of the accounting policies
set out in the Group's 2006 Annual Report as amended.
8. The results for the year ended 31 March 2006 as shown in the statement do not
constitute statutory accounts but are an abridged version of the Company's 2006
accounts as amended which have been filed with the Registrar of Companies and
upon which the audit report was unqualified and did not contain a statement
under Section 237 (2) or (3) of the Companies Act 1985. The Interim Report was
approved by the Board on x December 2006.
9. Notes to the Unaudited Consolidated Cash Flow
Reconciliation of net cash flow to movement in net debt
Unaudited Unaudited Audited
6 Months to 6 Months to Year ended
30 September 30 September 31 March
2006 2005 2006
£'000 £'000 £'000
Increase in cash in the period 559 531 2,767
Cash outflow from decrease in 116 102 -
debt
Cash inflow from increase in - (2,409) (2,042)
debt
Movement in net debt in period 675 (1,776) 725
Change in net debt resulting - (143) -
from acquisitions
Net cash/(debt) at start of 293 (432) (432)
period
Net (debt) / cash at end of 968 (2,351) 293
period
Reconciliation of operating
profit to operating cash flows
Group operating profit 619 750 1,063
Profit on sale of fixed assets - - (12)
Amortisation of goodwill 102 102 204
Depreciation & impairment 234 210 838
charges
(Increase) / decrease in stocks 356 (211) 201
(Increase) / decrease in 371 94 (12)
debtors
(Decrease) in creditors & (1,005) (510) (687)
provisions
Provision for share-based 45 30 70
payments
Net cash inflow from operating 722 465 1,665
activities
Analysis of change in net debt
As at As at
1 April Cash 30 September
2006 Flows 2006
£'000 £'000 £'000
Cash at bank and in hand 3,601 559 4,160
Debt due within one year (542) 116 (426)
Debt due after one year (2,766) - (2,766)
Total 293 675 968
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