Fih Group Regulatory News (FIH)

8th June 2015

Falkland Islands Holdings plc

("FIH" or the "Group")

Final results for the year ended 31 March 2015

A copy of the Group's results are also available on the Company's website.

FIH, the AIM quoted international services group that owns essential services businesses in the Falkland Islands and the UK, is pleased to announce its final results for the year ended 31 March 2015.

Group Financial Highlights

· Group revenue increased 0.8% to £38.56 million (2014: £38.26 million)

· Profit before tax increased 14.4% to £3.89 million (2014: £3.40 million)

· Underlying pre-tax profits flat as expected (-2.4%), at £3.56 million (2014: £3.65 million)

· Reported diluted earnings per share increased by 20% to 25.3p (2014: 21.1p)

· Cash balances increased to £7.4 million (2014: £5.7 million)

· Bank borrowings reduced to £0.7 million (2014: £1.0 million)

· Net cash flow from operating activities, before capital expenditure and after tax payment, increased to a record £6.4 million (2014: £2.8 million)

· The Board is not recommending the payment of a final dividend, in line with strategy to reinvest earnings and cash to accelerate the Group's growth.

Operating Highlights

Falkland Islands Company (FIC)

· Strong performance with pre-tax profits increasing by 39.4% to £1.56 million (2014: £1.12 million)

· Increased activity due to the Spring 2015 drilling programme

· Uplift in demand for corporate rented houses, hire vehicles, agency services and construction work

· Record squid catch improved confidence and boosted government finances

Momart

· Return to more normal levels of activity, following exceptional levels of activity in the prior year

· Total revenue decreased 16.5% to £15.8 million (2014: £18.3 million)

· Underlying operating profit before tax and before amortisation of intangibles was £1.21 million (2014: £1.76 million)

· Agreement reached with the Company's landlord to construct new facilities on the East London site to increase storage capacity by 33% (Subject to receipt of final planning permission this is due to come into effect in early 2016)

· Market leader in the UK exhibitions market, involved in installation of prestigious exhibitions such as: Anselm Keifer and Rubens at the Royal Academy; Matisse at Tate Modern; Virginia Woolf at the National Portrait Gallery; and Ming at the British Museum

Portsmouth Harbour Ferry Company

· Revenues increased 4.3% to £4.3 million (2014: £4.12 million)

· Delivery of third modern ferry vessel, "Harbour Spirit" to provide improved passenger experience

· Increase in average ferry fares, to cover increased operating costs of the new ferry, coupled with new fare offerings to stimulate ferry usage

Falkland Oil & Gas Limited ('FOGL')

· Gradual divestment of shares in FOGL with sale of 7.8 million shares in March 2015 at a profit of £0.7 million

· Following the year end, in April 2015, the Group's residual holding of 5 million FOGL shares was sold at a profit of £0.4 million.

· The Group's decision to liquidate its stake in FOGL reflects the Board's decision to re-align the portfolio

Edmund Rowland, Chairman of FIH, said:

"This has been a year of significant progress across the Group, and I am pleased to be reporting an encouraging set of results.

"Momart has continued to handle a number of high-profile exhibitions in the UK and internationally in the past year, and is expected to produce renewed progress with planned strategic improvements across the business over the next financial year.

"The Portsmouth Harbour Ferry Company saw increased revenue despite reduced passenger numbers in a challenging market place. We are delighted to have taken delivery of our third modern ferry vessel, Harbour Spirit, and we anticipate that the business will benefit from the UK's forecast general economic recovery as well as the Navy's planned investment in infrastructure.

"This has been a busy year for the Falkland Islands, and we anticipate further increases in activity in the Falkland Islands Company businesses, linked to the ongoing drilling campaign and further infrastructure investment by the Falkland Islands Government.

"I am also pleased to note the two oil discoveries offshore the islands, which goes further to prove up the area as a commercial oil province.

"Overall, Falkland Islands Holdings is in a strong financial position and we are in a favourable position to accelerate the Group's growth through further investment in our existing businesses and strategic acquisitions, in line with our ongoing growth strategy.

"In the year to date, the Group's trading performance is in line with our expectations and we anticipate another year of progress".

- End -

Enquiries:

Chairman's Statement

In my first annual report as Chairman I am pleased to report that the Group achieved an encouraging trading result for the year in line with the Board's expectations. Reported pre-tax profits were ahead of the prior year by £0.5 million at £3.9 million and underlying pre-tax profits (before amortisation and non-trading items) were lower by 2.4% at £3.6 million (2014: £3.7 million). Diluted earnings per share based upon underlying profits were unchanged at 22.0p. Reported diluted earnings per share increased by 20% to 25.3p (2014: 21.1p).

As previously announced, in line with our new policy of reinvesting earnings and cash to accelerate the growth of the Group, the Board is not recommending the payment of a final dividend.

On 9 February 2015, David Hudd retired as Chairman after 13 years' service, during which the Group saw significant growth. On behalf of the Board and our shareholders, I would like to express our grateful thanks to David for his enormous contribution and wish him a happy retirement. I would also like to thank Mike Killingley who retired on 13 April 2015 after 10 years' service as a Non Executive Director.

The Group's financial position is strong and after capital expenditure of £4.7 million, cash balances at the end of the year were £7.4 million and bank borrowings £0.7 million. Net cash flow from operating activities before capital expenditure, and after the payment of tax, increased by £3.6 million to a record £6.4 million. This strong operating cash flow and healthy liquidity position (with net cash balances of £6.7 million) gives the Group significant untapped borrowing potential and the Board intends to make use of this to accelerate the Group's growth through further investment in its existing businesses and through strategic acquisitions.

Operations

A strong recovery in the Group's Falkland's business, including encouraging growth from its South Atlantic Construction Company (SAtCO) Joint Venture, meant that despite the anticipated return to more normal trading levels at Momart, following the string of exceptional overseas exhibitions which boosted results in the prior year, the Group achieved strong levels of operating profits overall at £3.8 million, which is broadly equivalent to the record levels achieved in the prior year (2014: £3.9 million).

In the Falklands, activity was boosted by a record illex squid catch and preparations for the resumption of exploration drilling in Falkland's waters which recommenced in spring 2015 with a further discoveries at the Zebedee and Isobel Deep wells, a potential southern extension to the 2010 Sea Lion discovery. On the back of these positive developments the Falklands Islands Company ("FIC") saw a welcome return to growth with revenue ahead by 16.5% to a record £18.5 million (2014: £15.9 million) and operating profits increasing by 34% to £1.3 million (2014: £1.0 million).

Momart, the Group's Fine Art handling business, saw activity return to more normal levels of trading. Revenue was lower by 14% at £15.8 million (2014: £18.3 million) and operating profit, before amortisation of the intangible assets, fell back, as expected, to £1.2 million from the record levels seen in the prior year (2014: £1.8 million).

The Portsmouth Harbour Ferry Company ("PHFC") saw operating profits unchanged at just over £1.0 million, with fare increases in June 2014 offsetting a small (2%) decrease in the number of passengers using the ferry.

Falkland Oil and Gas (FOGL)

During the year the Group gradually divested its shares in FOGL with the sale of 7.8 million shares in March 2015 at a profit of £0.7 million and, following the year end, in April 2015, the Group's residual holding of 5 million FOGL shares was sold at a profit of £0.4 million. Over the course of the 11 years since FOGL's flotation in 2004, the Group generated over £8 million in cash proceeds and over £5 million in profit from its investment. The sale of shares in FOGL was implemented to augment the Group's cash resources for further investment in its future growth.

Chairman's Statement (continued)

Outlook

A continuing uplift in economic activity is anticipated in the Falklands in the first half of the new financial year, linked to the ongoing drilling campaign and further infrastructure investment by the Falkland Islands Government. Longer term sustainable growth will depend on a recovery in the oil price to a level at which oil companies can see reliable commercial returns. Although there is no guarantee that such a price recovery will occur in the near term, over a longer horizon your Board remains confident that oil development in the Islands will take place and that this will transform the prospects both for the Falklands and for FIC.

At Momart, the planned expansion of commercial storage facilities will support growth, and this together with focussed investment in sales and marketing and further strengthening of the management team, is expected to produce renewed progress. At the same time Momart will seek to develop its existing international partnerships in order to increase its global reach and reputation. Targeted acquisitions to widen both the range of art related services and increase the geographical reach of the business are also being pursued.

For PHFC, the successful delivery of its new vessel, "Harbour Spirit" will underpin its ferry service to local passengers over the long term. General economic recovery in the UK and the positive local impact of the Navy's planned investment in infrastructure to support its expanding carrier fleet should also begin to drive steady growth at the ferry over the medium term.

In the year to date, the Group's trading performance is in line with our expectations and we anticipate a satisfactory year.

In line with the strategy outlined in the Group's pre-close trading update in April 2015, the Board is also seeking to accelerate growth and increase the scale of the Group by means of strategic acquisitions using available cash resources and borrowing capacity.

Edmund Rowland

Chairman

8 June 2015

Managing Director's Strategic Report

Group Overview

I am pleased to report another good year of trading for the Group, with revenues ahead by 0.8% at £38.6 million (2014: £38.3 million) and a small but expected reduction in underlying pre-tax profits to £3.56 million (2014: £3.65 million), which remained ahead of underlying pre-tax profits in 2012-13 of £3.29 million.

In the Falklands, FIC recovered strongly buoyed by a record squid catch and increased economic activity linked to the exploration drilling programme. At Momart, trading returned to more normal levels following a bumper performance in the prior year and at PHFC revenues and profits remained stable.

Review of Operations

 Group revenue and underlying pre-tax profits are analysed below:

* Pre-tax profit before amortisation of intangibles and non-trading items but including the Group's share of the contribution from SAtCO, the Group's Joint Venture with Trant Construction in the Falkland Islands.

Falkland Islands Company ("FIC")

The Falklands had a particularly busy year. Preparations for the 2015 offshore drilling campaign saw increased corporate demand for rented houses, hire vehicles and agency services and construction work related to the new temporary dock facility, which led to a welcome recovery in revenues. The record squid catch in the early part of the year also improved confidence and boosted government finances. At the same time, general retail activity picked up and demand for new kit homes boosted house building. As a result the pre-tax contribution of the Group's Falklands business recovered strongly, with pre-tax profits increasing by £0.44 million (+39.4%) to £1.56 million (2014: £1.12 million).

Managing Director's Strategic Report (continued)

Oil developments

During the year, oil companies led by Premier Oil ("Premier") and Noble Energy progressed detailed preparations for the new round of exploration drilling, and in June 2014 the harsh environment rig, Eirik Raude, was contracted to drill six wells in Falklands' waters. The distance from the UK supply base has meant resources have been introduced into Stanley to support the rig: 75 oil workers are based onshore to co-ordinate supplies and maintenance for the rig in addition to a 25 strong helicopter support team, which air lifts the circa 120 rig workers to the platform and provides Air Sea Rescue back-up. Offshore, rig workers operate in four week shifts with 50% rotating back to the UK every two weeks on a dedicated charter aircraft. The rig is supplied by Platform Support Vessels (PSVs) in addition to a number of Emergency Rescue and Response Vessels (ERRVs) operating from the new temporary floating dock facility commissioned by Noble Energy and Premier which was completed in late 2014 by FIC's Joint Venture SAtCO. The fleet of support vessels has added a further 35 workers to oil exploration establishment.

The overall economic impact of this activity is a key driver behind the growth in FIC in the year under review and is relatively modest in comparison to the much more extensive impact that any future oil production in the Islands would have.

In strategic terms the 2015 exploration drilling programme will help establish the "ultimate resource potential" of the North Falklands basin and, in the Southern and Eastern basin, the initial well planned at Humpback will give a strong indication of this geologically separate basin's potential. In the context of determining "resource potential" the early positive results from the Zebedee and Isobel deep wells announced by Premier in April and May 2015 were encouraging but the outcome of drilling on the remaining four wells over the course of the next four to five months remains critical in determining the extent of oil resources in Falkland's waters.

In parallel with the 2015 drilling programme, Premier has progressed its detailed planning for the development of the Sea Lion field in the North Falklands basin. The sharp fall in crude oil prices in late 2014 caused Premier to revisit its planning assumptions and since late 2014 Premier has been "engaging with its supply chain to capture lower costs" in order to offset the fall in oil prices. Premier is still progressing its Front End Engineering Design (FEED) plans for a phased development of Sea Lion and is planning to use a leased floating production storage and offloading unit ("FPSO") which will reduce its planned capital expenditure compared to the previous Tension Leg Platform solution. Premier estimates that capital expenditure prior to first oil has now reduced to $1.8 billion and further savings are being sought. Premier has also announced that cost savings are expected in the areas of drilling, subsea and fabrication. Depending on its success in driving down production costs and its expectations on the trajectory of future oil prices, the Premier Board has announced that any decision to commit to the development of Sea Lion will not take place before mid-2016 at the earliest.

Despite the current uncertainty on timing we remain optimistic that Sea Lion and other commercially significant oil reserves will be developed in Falkland's waters in due course. The FIH Group has made capital investments of over £8 million in the Falklands in the last five years and FIC remains exceptionally well placed with a broadly based, modernised business infrastructure, strong property portfolio and an experienced team to takeadvantage of the exploitation of the Falkland's oil reserves.

Managing Director's Strategic Report (continued)

Trading

Overall revenue in FIC increased by £2.63 million (+16.5%) to £18.51 million (2014: £15.88 million).

Total retail sales in FIC increased by 3.0% to £9.54 million (2014: £9.26 million).

Despite this modest overall increase, retail sales in FIC's flagship West Store, which accounts for 60% of FIC's retail activity, increased by an encouraging 6.6% helped by a sharp increase in sales of BHS sourced clothing and an improved fresh food and delicatessen offer. The Capstan gift shop on Stanley's waterfront also performed well with sales ahead by 7.5% compared to the prior year. In contrast lower margin Warehouse sales to local retailers and pubs declined by 22% as some larger operators switched to purchasing direct from the UK.

Sales at Home Living, FIC's home furnishing store, increased by 36.5% helped by continued growth in new house building however Home Builder had a quieter year, with sales restrained by preparations for a substantial expansion in the store with the conversion of warehousing into retail space to deliver a better presented and widened customer offer, including work and leisure wear, garden products and guns and ammunition as well as tools and building materials. The full benefits of this expansion will not be seen until 2015-16 with the completion of the Crozier Place redevelopment which will provide both operations with improved customer access, parking and café amenities.

Retail performance was also improved by the recruitment of an experienced retail executive from the UK, Kevin Ironside, who was instrumental in driving through improvement in gross margins and reductions in stockholding of £0.5 million.

In the automotive business, Falklands 4x4, revenues grew by 15.6% to a record £3.07 million, with strong growth in maintenance and service revenues following the acquisition of local operator "Turbo Tim". Total vehicle sales fell slightly from the prior year to 76 from 79 units (-4%).

Managing Director's Strategic Report (continued)

Revenues from third party freight and port services dropped marginally by 1.7% to £1.24 million (2014: £1.26 million) as price competition eroded increased volumes. However, Support Services revenues increased by 28.1% helped by another strong illex squid catch which boosted revenues at the Fishing Agency, a healthy increase in cruise ship passenger numbers which saw Penguin Travel income rise by 32% and further progress at the insurance agency.

Revenue from Falkland Building Services ("FBS") more than doubled to £3.0 million (2014: £1.4 million) as housing completions doubled from eight to sixteen. FBS also saw a sharp increase in the level of subcontracted labour it provided for work on the construction of the Temporary Dock Facility for Noble Energy and Premier and a Government contract to upgrade Moody Brook Road. Corporate demand for rental property rose sharply and total property rental revenue included within FBS increased to a record level of £0.36 million (2014: £0.22 million).

FBS was also engaged on internal capital projects and expenditure of £2.1 million was incurred in the year to further modernise FIC's business infrastructure to prepare it for the expected growth from oil development.

Key projects included:

· The construction of new warehouse/freezer facilities at Airport Road, East Stanley which will replace FIC's aging retail warehouse facilities and make available a prime 2 acre site on the waterfront in central Stanley;

· Refurbishment of the Company's Head Office at Crozier place, with new office space for external tenants and car parking facilities for visitors to adjacent retail stores;

· Completion of an enlarged Home Builder store, which includes a new mezzanine floor and garden centre department; and

· £0.4 million spent on the purchase and installation of 10 mobile homes for staff rental, of which nine were occupied by 31 March 2015.

In addition £0.5 million was invested in the investment property portfolio:

· £0.3 million on the purchase of a four bed-roomed detached house for rental to corporate tenants; and

· £0.2 million spent on finishing three houses in central Stanley, held for external rental

FIC's property rental portfolio now comprises 40 properties in central Stanley, which are available to let to corporate clients, private individuals and staff.

With the construction of a Temporary Dock Facility capable of supporting both oil exploration and the more limited phased approach to the proposed development of Sea Lion, plans for a new deep water port at Port William in Stanley's outer harbour have been put on hold. A revival of interest in these plans will depend upon further oil discoveries and a recovery in the oil price.

In its second year of operation, FIC's construction joint venture, the South Atlantic Construction Company, ("SAtCO") made further progress winning additional infrastructure contracts from FIG and completing the construction of a new floating dock (TDF) in Stanley Harbour to support the 2015 exploration drilling programme. In addition SAtCO has leased its heavy lift crane to Premier and its associates for the duration of the current drilling programme. In the year to 31 March 2015 SAtCO increased its revenues from £0.1 million to £0.6 million and its profit before tax to £0.49 million (2014: £0.10 million). All staff involved in construction activities were contracted directly from parent companies FIC and Trant Construction and at 31 March 2015 SAtCO had no permanent employees.

Managing Director's Strategic Report (continued)

FIC Key Performance Indicators and Operational Drivers

Portsmouth Harbour Ferry Company ("PHFC")

2014-15 saw another steady performance from PHFC with revenues increasing by 4.3% despite a 2.1% decline in passenger numbers. Profit before tax, after pontoon lease interest charges, was unchanged at £0.8 million.

After increases in like for like passenger numbers in the first quarter, passenger volumes slipped into decline with the closure in summer 2014 of the BAE Systems shipyard in Portsmouth, which involved the loss of 1,000 jobs. A further adverse effect on passenger volumes came from the introduction of a heavily subsidised Park & Ride scheme by Portsmouth City Council in August 2014 which, coupled with cheaper fuel, encouraged increased car usage.

Managing Director's Strategic Report (continued)

Ferry fares increased by an average of 6% in June 2014, bringing the total cost of an adult return to £3.10. This above inflationary rise was introduced to cover the increased operating costs linked to the arrival of the new ferry. Discounted fares for regular customers were maintained (£1.45 per ferry journey for adults), and lower tariffs for seniors and children (£2.10 return), which reinforce the value for money and convenience offered by the ferry service compared to bus and car travel.

Both weekend and weekday traffic declined by 2.1% compared to the prior year.

To stimulate ferry usage a number of new fare offerings were introduced during the year, including discounted family fares over the Christmas holiday period with return fares for a family of 5 for £5. Additionally, in association with Gosport Borough Council, a joint ferry and car parking ticket was introduced in November 2014 offering return ferry travel and all day car-parking for regular users for less than £3 per day. From August 2014 a discounted ticket was also introduced for all military personnel in the Dockyard and at the same time PHFC joined the newly launched Solent Go electronic travel card scheme, which offers discounted travel across bus and ferry services throughout the Solent region.

In March 2015 PHFC took delivery of a third modern ferry vessel "Harbour Spirit" which was built in Croatia at a cost of £3.2 million. The cost of the new vessel has been substantially financed by a 10 year bank loan, drawn down in April 2015. With improved passenger seating, increased space for cycles and better facilities for the disabled, Harbour Spirit will underpin PHFC's service to passengers well into the middle of this century. Once fully commissioned, Harbour Spirit will replace one of PHFC's 1966 vintage vessels, Portsmouth Queen and her sister ship Gosport Queen will be retained as a back-up. With three new ferry vessels built since 2002 and an estimated service life of over 30 years, no further significant vessel expenditure is anticipated for over 15 years.

Average fares per passenger journey increased by 6.8% to £1.41 (2014: £1.32).

Ferry reliability was again outstanding with on time departures running at 99.8% (2014: 99.7%).

Looking ahead, the outlook for passenger growth is positive as the Naval Base expands to support the Royal Navy's new aircraft carriers. The first of these, Queen Elizabeth II, is expected to arrive in Portsmouth in 2017.

PHFC Key Performance Indicators and Operational Drivers

Managing Director's Strategic Report (continued)

Momart

Momart, the Group's art handling and logistics business, saw a return to more normal levels of activity following the string of exceptional overseas exhibitions which boosted results in the prior year. Total revenue for the year decreased by 13.7% to £15.8 million (2014: £18.3 million) while underlying operating profit reduced by 32.1% to £1.24 million (2014: £1.83 million).

Finance costs were reduced in the year as borrowings were repaid. Underlying profit before tax before amortisation of intangibles was £1.21 million (2014: £1.76 million).

Exhibitions

After an exceptional year in 2013-14 which included an unusual sales mix of high added value contracts for overseas clients, Momart's museum exhibition activity fell back to more normal levels and Exhibitions revenue of £8.7 million was comparable to the level seen in 2012-13 of £9.0 million. This decline is not unusual, given the fragmented and irregular nature of client projects which vary significantly in both technical content and added value between years. There was also an adverse mix effect seen in the increase in work subcontracted to overseas agents from mainstream UK clients and at the same time a much lower level of specialist overseas work handled directly by Momart. Both changes contributed to lower margins and a decline in Exhibition profitability.

Although the order book of large exhibition contracts was lower at 31 March 2015, (down £0.6 million at £3.26 million) an inflow of contracts early in the new financial year saw this deficit eliminated.

Despite the modest decline in underlying activity, Momart continued to be a market leader in the UK, and was involved in the installation of a number of prestigious and high profile exhibitions including Anselm Keifer and Rubens at the Royal Academy, Matisse at Tate Modern, Virginia Woolf at the National Portrait Gallery and Ming at the British Museum.

Managing Director's Strategic Report (continued)

Gallery Services

Gallery Services revenues were 6.5% lower in 2014-15 at £5.21 million (2014: £5.57 million). Competition in the core UK market increased and the level of low added value work from smaller galleries reduced. At the same time there was good progress with prestigious blue chip clients such as Christies, White Cube, Gagosian and Sadie Coles, and Momart continued to win healthy levels of work from world renowned UK artists, Damien Hirst and Antony Gormley.

Storage

Storage revenues increased by 1.3% to £1.86 million (2014: £1.83 million) despite work to create a dedicated new storage area for the Royal Academy which necessitated closure of a significant section of the warehouse during the last quarter of the financial year. Adjusting for this, Momart's storage facilities once again operated at full capacity. The lack of storage space to offer to new commercial clients has proved an effective barrier to growth and accordingly detailed plans have been agreed with the company's landlord to construct new facilities on the company's existing East London site to increase capacity by 33% and to offer improved client reception and viewing facilities. Subject to the receipt of final planning permission this increased capacity is due to come on stream in early 2016.

Momart Key Performance Indicators and Operational Drivers

Managing Director's Strategic Report (continued)

FOGL investment

Details of the Group's shareholding in FOGL at 31 March 2015 are set out below:

In April 2015, the Group disposed of its remaining 5 million shares in Falkland Oil and Gas for £1.4 million, an average share price of 28 pence, generating a profit on disposal of £0.4 million.

Trading outlook

The medium term outlook for the Group remains positive and in the near term increased activity in the Falkland Islands linked to the 2015 drilling programme should ensure another strong trading performance in the new financial year.

In the Falklands, we look forward to another year of progress. The remaining four exploration wells will be drilled in the first half of the new financial year and any further discoveries will add to business confidence. Falkland Government finances have been bolstered by the record squid catches of recent years and the increased taxation inflows linked to oil company operations. This incremental government income should allow increased spending on capital and infrastructure projects which in turn will further stimulate the economy. Despite the currently weakened oil price, the Board believes the longer term prospects for the development of oil production in the Falkland Islands remain very good and that FIC is well placed to fully benefit from the dramatic growth in the economy that would result.

At PHFC, the recent arrival of a new modern ferry provides a solid foundation for the long term future of the business although in the near term the increased operating costs linked to the new vessel will place a drag on profits.

At Momart, despite the quieter year seen in 2014-15, improved management information systems, further investment in increased storage space, a strengthened management team and more focussed marketing provide a strong platform from which to develop the business. In addition growth will be accelerated by selective acquisitions. Underlying growth prospects in this high quality business remain sound.

With bank borrowings reduced to £0.7 million (2014: £1.0 million) and cash on hand of £7.4 million (2014: £5.7 million), together with significant further borrowing capacity, the Group has significant capacity to exploit opportunities over the medium term, in line with its growth strategy.

Managing Director's Strategic Report (continued)

Financial Review

Summary income statement

*Underlying operating profit excludes amortisation and non-trading items but includes £0.18 million (2014: £0.04 million) of the Group's share of the results of the SAtCO joint venture.

Revenue and underlying operating profit

Group revenue rose 0.8% to £38.56 million, however underlying operating profit decreased 2.3% to £3.76 million in the year ended 31 March 2015. These variances are discussed in more detail above in the Review of Operations.

Non-trading items

Non-trading items comprise a £0.71 million gain on the sale of 7,825,000 Falkland Oil and Gas shares, offset against a £0.24 million termination payment due to the retiring Chairman, David Hudd, and a fall in the amortisation charge to £0.14 million on the intangible assets (2014: £0.31 million) due to certain customer relationships, together with the five year Director service contracts, having been fully amortised in April 2014. Following a review of the useful life of the Momart brand name, which is now expected to have an indefinite useful life, amortisation ceased on 30 September 2013, therefore the prior year included a six month charge of £0.07 million, but no charge has been included in the current year.

The prior year included a further gain of £0.06 million on the transfer of the Portsmouth Harbour Ferry pension scheme, which was transferred to Legal and General on 7 March 2013.

Net financing costs

The Group's net financing costs remain relatively little changed to the prior year at £0.2 million, with the fall in interest income on reduced bank deposits being offset by a decrease in bank interest payable as £1.0 million of bank loans were repaid. In March 2015, a £0.7 million loan was drawn down secured against vessels in Portsmouth.

Underlying pre-tax profit

The Group's reported underlying pre-tax profits of £3.56 million, slightly down on the prior year, (2014: £3.65 million).

Managing Director's Strategic Report (continued)

Reported pre-tax profit

After the £0.7 million gain on the sale of 7,825,000 shares in Falkland Oil and Gas, and charges of £0.1 million for the amortisation of intangible assets (2014: £0.3 million), and the £0.2 million payment on the retirement of the former Chairman, reported Profit Before Tax for the Group increased by 14.4% to £3.89 million (2014: £3.40 million).

Taxation

The Group pays corporation tax on its UK earnings at 21% and on earnings in the Falkland Islands at 26%. The Falklands Islands Company Limited has been granted a foreign branch exemption, and as a result no longer pays UK corporation tax in respect of FIC and will gain the full benefit of the tax deductibility in the Falkland Islands of expenditure on commercial and industrial buildings. The effective tax rate on underlying profits is 23.2% (2014: 24.7%).

Earnings per share

Fully diluted Earnings per Share ("EPS") derived from underlying profits, remained at 22.0 pence (2014: 22.0p), as the fall in the underlying profit before tax has been offset by a fall in the taxation on underlying profit, due to the tax rates on profits earned in the UK falling to 21% from 23% in the prior year.

Balance sheet

The Group's Balance Sheet remains strong. Total net assets increased to £36.7 million from £35.4 million in the prior year.

Retained earnings after the payment of tax and dividends increased by £1.5 million to £16.3 million (2014: £14.8 million). Bank borrowings were reduced to £0.7 million (2014: £1.0 million), due to repayment in the year of all liabilities at 31 March 2014, together with the drawdown of a £0.7 million loan in the Ferry business in March 2015, and the Group had cash balances of £7.4 million (2014: £5.7 million).

The carrying value of intangible assets at £12.2 million has not fallen from the £12.2 million at 31 March 2014, due to investment in computer software offsetting the amortisation charge.

The net book value of property, plant and equipment increased by £3.0 million to £19.6 million (2014: £16.6 million) after capital investment of £4.1 million, including £2.1 million in the Falkland Islands. This has been offset against a £1.1 million depreciation charge in the year.

The Group owns investment properties comprising commercial and residential properties in the Falkland Islands held for rental, together with approximately 400 acres in and around Stanley. This includes 18 acres for industrial development, 25 acres of prime mixed-use land and 300 acres which is adjacent to the site proposed for a new port.

Managing Director's Strategic Report (continued)

During the year, the net book value of investment property increased £0.3 million to £3.7 million (2014: £3.4 million) due to £0.5m of additions, offset against £0.2 million of depreciation. These properties are all situated in the Falkland Islands, and the £0.5 million additions include £0.3 million for the purchase of a four bedroomed property on Biggs Road, Stanley and further development of residential properties to increase the Group's portfolio.

The Group owns 40 investment properties, which are mainly houses, in Stanley. These are all held at depreciated cost. The net book value of these properties and undeveloped land of £3.7 million (2014: £3.4 million) has been reviewed by the Directors resident in the Falkland Islands and at 31 March 2015 the fair value of this property portfolio was estimated at £7.3 million (2014: £6.3 million). If oil development proceeds, the value of all these properties is expected to increase significantly.

The Group's residual 1.0% shareholding in FOGL was sold in April 2015 for proceeds of £1.4 million, resulting in a profit of £0.4 million. This transaction will be reported in the results for the year ending 31 March 2016.

Deferred tax assets relating to future pension liabilities increased to £0.8 million (2014: £0.6 million). These assets now only include the deferred tax on the FIC unfunded scheme calculated by applying the 26% Falklands tax rate to the pension liability.

Inventories, which largely represents stock held for resale in the Falkland Islands, decreased by £1.3 million to £5.4 million at 31 March 2015 (2014: £6.7 million). The decrease largely relates to stock held in the Falkland Islands, where better stock controls have been implemented during the year.

Trade and Other Receivables decreased by £1.7 million to £5.3 million at 31 March 2015, due to the decreased activity and improved debtor collection at Momart. Average debtor days outstanding fell to 36.0 (2014: 47.0) due to new procedures introduced at Momart to speed up the collection of debtors.

Outstanding finance lease liabilities totalled £5.1 million (2014: £5.2 million). £4.9 million (2014: £4.9 million) of the finance leases balance is in respect of the 50 year lease from Gosport Borough Council for the Gosport Pontoon.

Corporation tax due for payment within the next 12 months is £0.03 million (2014: £0.4 million). This is lower than the £0.8 million total charge for taxation on underlying profit, as £0.4 million of this charge relates to deferred tax. The £0.4 million current tax charge includes £0.1 million, which relates to adjustments to prior years, and has already been paid by 31 March 2015, and in addition £0.3 million of the 2015 tax charge had already been paid in instalments by 31 March 2015. The effective tax rate on underlying profits was 23.2% (2014: 24.7%).

Trade and other payables decreased from £11.0 million to £10.2 million at 31 March 2015 as the prior year reflected increased trading activity at Momart at the year end, which has not been repeated in the March 2015 year.

At 31 March 2015 the liability due in respect of the Group's defined benefit pension schemes was £2.9 million (2014: £2.5 million). The increased liability is due principally to lower medium term interest rates used to discount the schemes future liabilities. The pension scheme in the Falkland Islands, which was closed to new entrants in 1988 and to further accrual in 2007, is unfunded and liabilities are met from operating cash flow.

The net deferred tax liabilities, excluding the pension asset at 31 March 2015, were £2.0 million and increased £0.4 million from the prior year (2014: £1.6 million), largely due to the delivery of the new vessel for Portsmouth Harbour Ferry. £1.7 million of this balance arises on property, plant and equipment, and is principally due to the new vessel and also to properties in the Falklands, where capital allowances of 10% are available on the majority of the FIC properties. With such assets depreciated over 20-50 years a timing difference arises on which deferred tax is provided.

Net assets per share were 295p at 31 March 2015 (2014: 285p). 

Managing Director's Strategic Report (continued)

Cash flows

Operating cash flow

Net cash flow from operating activities increased from £2.8 million last year to £6.4 million, due to continued strong cash flow from trading and an increased focus on reducing working capital across the group.

The Group's Operating Cash Flow can be summarised as follows:

Managing Director's Strategic Report (continued) 

Financing outflows

During the year the Group paid dividends of £1.4 million (2014: £1.4 million) and made fixed asset investments of £4.7 million of expenditure to strengthen the Group's operating base, including final payments of £1.3 million (2014: £1.8 million) in respect of the new vessel for Gosport ferry; £2.6 million was invested in Stanley with £0.5 million of expenditure on investment land and buildings, £0.7 million on plant and machinery, £0.3 million spend on the new Homebuilder/Garden Centre store, £0.4 million spent on the purchase of ten mobile homes for rental to staff, £0.1 million spend on finalising the refurbishment of the Stanley head office and £0.6 million building on the new retail warehouse and freezer facilities at Airport Road.

Scheduled loan repayments of £1.4 million (2014: £1.4 million) were made, including £0.3 million of payments to Gosport Council on the 50 year pontoon finance lease, £0.1 million of repayments on hire purchase leases for trucks at Momart and £1.0 million of bank loan repayments which repaid all the bank loans outstanding at 31 March 2014. In March 2015, the Group drew down a further £0.7 million bank loan secured against the Spirit of Gosport and the Spirit of Portsmouth, which were delivered to PHFC in 2002 and 2005 respectively.

John Foster

Managing Director

8 June 2015

Board of Directors and Company Secretary

Edmund Rowland Chairman

Edmund was appointed to the Board on 16 April 2013, and became Chairman on 9 February 2015. He currently serves as a Director of Blackfish Capital Management, a specialist asset manager based in London and as Chief Executive Officer of Banque Havilland S.A (London Branch), previously having gained experience in London and Hong Kong, as an analyst and investment manager with BNP Paribas S.A and Blackfish. He has broad experience of principal investing in both equity and credit capital markets, with a focus on special situations. He sits on the board of Banque Havilland (Monaco) SAM and Certus Trust Limited.

Edmund is a member of the Remuneration Committee.

John Foster Managing Director

John joined the Board in 2005. He is a Chartered Accountant and previously served as Finance Director for software company Macro 4 plc and toy retailer, Hamleys plc. Prior to joining Hamleys, he spent three years in charge of acquisitions and disposals at FTSE 250 company Ascot plc and before that worked for nine years as a venture capitalist with a leading investment bank in the City.

Jeremy Brade Non-executive Director

Jeremy joined the Board in 2009. He is a Director of Harwood Capital Management where he is the senior private equity partner. Jeremy has served on the boards of several private and publicly listed international companies. Formerly Jeremy was a diplomat in the Foreign and Commonwealth Office, and before that an Army officer. He is Chairman of the Remuneration Committee.

Carol Bishop Company Secretary

Carol Bishop joined the Company in December 2011. She is a Chartered Accountant and has previously worked for London Mining plc, an AIM listed company as Group Reporting manager. Prior to this she spent three years at Hanson plc and six years at the Peninsular and Oriental Steam Navigation Company.

Directors' Report

The Directors present their annual report and the financial statements for the Company and for the Group for the year ended 31 March 2015.

Results and dividend

The Group's result for the year is set out in the Group Income Statement. The Group profit for the year after taxation amounted to £3,144,000 (2014: £2,633,000). Basic earnings per share on underlying profits were 22.1p (2014: 22.2p).

It is the Board's considered view that the Group can best take full advantage of existing and emerging opportunities by maximising the reinvestment of profits and suspending dividend payments in order to accumulate resources to build a much more substantial group with greater critical mass in its respective markets. We believe this more focused long term approach will have more appeal for existing and prospective investors and offer much greater shareholder liquidity. The Board is confident that this new approach and focus will lead to more certain capital growth and greater overall returns for shareholders in the long term. Therefore dividend payments have been suspended in line with the increased focus of investment and long term growth.

Dividends paid during the year comprise a dividend of 7.5p per share in respect of the previous year ended 31 March 2014 and an interim dividend of 4.0p per share in respect of the current year.

Principal activities

The business of the Group during the year ended 31 March 2015 was general trading in the Falkland Islands, the operation of a ferry across Portsmouth Harbour and the provision of international arts logistics and storage services. The principal activities of the Group are discussed in more detail in the Managing Director's Strategic Report and should be considered as part of the Directors' Report for the purposes of the requirements of the enhanced Directors' Report guidance.

The principal activity of the Company is that of a holding company.

Directors

On 9 February 2015, the Chairman, David Hudd resigned from the Board and was succeeded on the same day by Edmund Rowland, the Non-Executive Deputy Chairman.

On 13 April 2015, Mike Killingley, the Senior Non-Executive retired from the Board after ten years' service.

Directors' interests

The interests of the Directors in the issued shares and share options over the shares of the Company are set out below under the heading 'Directors' interests in shares'. During the year no Director had an interest in any significant contract relating to the business of the Company or its subsidiaries other than his own service contract.

Health and safety

The Group is committed to the health, safety and welfare of its employees and third parties who may be affected by the Group's operations. The focus of the Group's effort is to prevent accidents and incidents occurring by identifying risks and employing appropriate control strategies. This is supplemented by a policy of investigating and recording all incidents.

Employees

The Board is aware of the importance of good relationships and communication with employees. Where appropriate, employees are consulted about matters which affect the progress of the Group and which are of interest and concern to them as employees. Within this framework, emphasis is placed on developing greater awareness of the financial and economic factors which affect the performance of the Group. Employment policy and practices in the Group are based on non-discrimination and equal opportunity irrespective of age, race, religion, sex, colour and marital status. In particular, the Group recognises its responsibilities towards disabled persons and does not discriminate against them in terms of job offers, training or career development and prospects. If an existing employee were to become disabled during the course of employment, every practical effort would be made to retain the employee's services with whatever retraining is appropriate. The Group's pension arrangements for employees are summarised in note 24.

Directors' Report (continued)

Corporate Governance

As an AIM company, Falkland Islands Holdings plc is not required to comply with the UK Corporate Governance Code (the 'Code') which applies only to fully listed UK companies and adherence to which requires the commitment of significant resources and cost. However high standards of Corporate Governance are a key priority of the Board and details of how the Company addresses key governance issues are set out in the Corporate Governance section of its website by reference to the 12 principles of Corporate Governance developed by the Quoted Companies Alliance.

The Board has established Audit, Remuneration, Nominations, and AIM Rules Compliance Committees and the Company receives regular feedback from its external auditors on the state of its internal controls. The Board attaches great importance to providing shareholders with clear and transparent information on the Group's activities, strategy and financial position. Details of all shareholder communications are provided on the Group's website. The Board holds regular meetings with larger shareholders and regards the annual general meeting as a good opportunity to communicate directly with shareholders via an open question and answer session.

Share capital and substantial interests in shares

During the year no share capital was issued. Further information about the Company's share capital is given in note 26. Details of the Company's executive share option scheme and employee ownership plan can be found in note 25.

The Company has been notified of the following interests in 3% or more of the issued ordinary shares of the Company as at 31 March 2015.

Payments to suppliers

The policy of the Company and each of its trading subsidiaries, in relation to all its suppliers, is to settle the terms of payment when agreeing the terms of the transaction and to abide by those terms, provided that it is satisfied that the supplier has provided the goods or services in accordance with agreed terms and conditions. The Group does not follow any code or standard payment practice. As a holding company, the Company had no trade creditors at either 31 March 2015 or 31 March 2014.

Charitable and political donations

Charitable donations made by the Group during the year amounted to £28,030 (2014: £23,709), largely to local community charities in Gosport and the Falkland Islands. There were no political donations in the year (2014: nil).

Disclosure of information to auditor

The Directors who held office at the date of this Directors' Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditor is unaware; and each Director has taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

Auditor

A resolution proposing the re-appointment of KPMG LLP will be put to shareholders at the Annual General Meeting.

Annual General Meeting

The Company's Annual General Meeting will be held at the London offices of FTI Consulting, 200 Aldersgate, London, EC1A 4HD at 10.00 a.m. on 8 September 2015. The Notice of the Annual General Meeting and a description of the special business to be put to the meeting are considered in a separate Circular to Shareholders which accompanies this document.

Directors' Report (continued)

Details of Directors' remuneration and emoluments

The remuneration of non-executive Directors consists only of annual fees for their services both as members of the Board and of Committees on which they serve.

An analysis of the remuneration and taxable benefits in kind (excluding share options) provided for and received by each Director during the year to 31 March 2015 and in the preceding year is as follows:

None of the Directors of the Company receive any pension contributions or benefit from any Group pension scheme.

\* The Remuneration Committee has decided to split the Managing Director's bonus for the year into an equal split of deferred shares and cash, with the shares requiring a service condition to remain in employment for up to three years. Therefore for the year ended 31 March 2015, John Foster has been awarded a cash bonus of £60,000 and a further £60,000 of deferred shares, to be issued at the share price at the close of business on 9 June 2015. These deferred shares will be provided at no cost to him in three equal tranches over the next three years.

The Executive Directors participate in annual performance related bonus arrangements. The Managing Director had the potential during the year of earning up to 100% of his salary. The bonuses are subject to the achievements of specified corporate and personal objectives.

Directors' interests in shares

As at 31 March 2015, the share options of executive Directors may be summarised as follows:

The mid-market price of the Company's shares on 31 March 2015 was 276.5 pence and the range in the year was 264.8 pence to 366.3 pence.

The Directors' options extant at 31 March 2015 totalled 162,884 and represented 1.3% of the Company's issued share capital, in addition David Hudd has been granted a six month period from his retirement date in which to exercise his 154,966 options. The 409,348 remaining options are held by 48 other employees of the Group including subsidiary directors and senior management. Under the Company's executive share option scheme, executive Directors and senior executives have been granted options to acquire ordinary shares in the Company after a period of three years from the date of the grant. All outstanding options have been granted at an option price of not less than market value at the date of the grant. The exercise of options is subject to various performance conditions, which have been determined by the remuneration committee after discussion with the Company's advisors.

Directors' Report (continued)

In addition to the share options set out above, the interests of the Directors, their immediate families and related trusts in the shares of the Company according to the register kept pursuant to the Companies Act 2006 were as shown below:

\* The shareholdings above include all Shares held in the Company's share incentive plan in which the Directors have a beneficial interest.

**Edmund Rowland is a Director of Blackfish Capital Management Limited, the fund manager of Blackfish Capital Alpha Fund SPC - Blackfish Talisman Fund which holds 2,500,000 shares. He does not hold any shares directly in the Company.

Share Incentive Plan

In November 2012, the Company implemented an HMRC approved Share Incentive Plan (SIP) available to employees of the Group, which enables UK and Falklands staff to acquire shares in the Company through monthly purchases of up to £150 per month or 10% of salary, whichever is lower. For every three shares purchased by the employee, the Company contributes one free matching share. These shares are placed in trust and if they are left in trust for at least five years, they can be removed free of UK income tax and national insurance contributions. During the years ended 31 March 2015 the Company purchased £600 of matching shares (2014: £500) for Mr D Hudd and £600 of matching shares (2014: £500) for Mr J Foster.

Statement of Directors' responsibilities in respect of the Annual Report, Directors' Report, Strategic Report and the Financial Statements

The Directors are responsible for preparing the Annual Report, Directors' Report, Strategic Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year. As required by the AIM Rules of the London Stock Exchange, they are required to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the Parent Company financial statements on the same basis.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of their profit or loss for that period. In preparing each of the Group and Company financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· state whether they have been prepared in accordance with IFRSs as adopted by the EU; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Parent Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors confirm, to the best of their knowledge that:

· these financial statements, prepared in accordance with IFRS, as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation as a whole; and

· the management report, which comprises the Chairman's Statement and the Managing Director's Strategic Report, includes a fair review of the development and performance of the business and of the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Approved by the Board and signed on its behalf by:

Carol Bishop

Company Secretary

8 June 2015

Kenburgh Court

133-137 South Street

Bishop's Stortford

Hertfordshire

CM23 3HX

Independent Auditor's Report To The Members Of Falkland Islands Holdings Plc

We have audited the financial statements of Falkland Islands Holdings plc for the year ended 31 March 2015 which comprise the Group Income Statement, the Group Statement of Comprehensive Income, the Group and Parent Company Balance Sheets, the Group and Parent Company Cash Flow Statements, the Group and Parent Company Statements of Changes in Equity and the related notes.

The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

As explained more fully in the Directors' Responsibilities Statement the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's website at www.frc.org.uk/auditscopeukprivate.

In our opinion:

· the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 31 March 2015 and of the group's profit for the year then ended;

· the group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;

· the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and

· the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

In our opinion the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

· adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

· the parent company financial statements are not in agreement with the accounting records and returns; or

· certain disclosures of directors' remuneration specified by law are not made; or

· we have not received all the information and explanations we require for our audit.

Wayne Cox

Senior Statutory Auditor

8 June 2015

For and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

St Nicholas House

Park Row

Nottingham

NG1 6FQ 

These financial statements were approved by the Board of Directors on 8 June 2015 and were signed on its behalf by:

J L Foster

Director

These financial statements were approved by the Board of Directors on 8 June 2015 and were signed on its behalf by:

J L Foster

Director

Registered company number: 03416346