Fih Group Regulatory News (FIH)

FIH group plc

("FIH" or the "Group")

Final Results

FIH, the AIM quoted international specialist services group with businesses in the Falkland Islands and the UK, is pleased to announce the Group's audited results for the year ended 31 March 2022 ("the period").

Significantly Improved Cash-Backed Profit as Trading Continues toMove Towards Pre-Pandemic Levels

Highlights

· Revenue increased by £7.7 million (24%) to £40.3 million (2021: £32.6 million) with trading continuing to head towards pre-pandemic levels.

· Pre-tax profit of £2.0 million (2021: £0.2 million).

· Underlying pre-tax profit of £2.3 million (2021: £0.1 million) despite COVID-related government support reducing to £0.5 million (2021: £1.8 million).

· Results underpinned by net cash flow from operating activities of £5.1 million.

· Underlying pre-tax profit of £1.8 million in the Falkland Islands Company ("FIC") is consistent with the year ended 31 March 2021, despite a second year without tourists.

· Momart and the Portsmouth Harbour Ferry Company ("PHFC") both delivered much improved performances as trading activity continued to recover. 

o  Momart delivered an underlying pre-tax profit of £0.6 million (2021: £0.5 million loss).

o  PHFC delivered an underlying pre-tax loss of £0.1 million (2021: £1.2 million loss).

· The Group balance sheet remains strong with underlying cash as at 31 March 2022 in line with prior year at £9.6 million (after adjusting for the repayment of £5.0 million CBILS loans).

· Good progress on the £17.3 million contract, awarded to FIC in November 2021, to build 70 houses for the Falkland Islands Government ("FIG") and the UK Ministry of Defence ("MOD") and further opportunities to work with FIG and the MOD are being explored.

· The value of Momart's property in Leyton has risen substantially since acquisition.

· A final dividend of 2.0 pence per share will be proposed at the Annual General Meeting, taking the total dividend for the year to 3.0 pence per share (2021: nil).

Post Year-End

· The Falkland Islands re-opened to tourists from 4 May 2022.

· John Foster stepped down as Chief Executive on 14 April 2022 and was succeeded by Stuart Munro, who was previously the Chief Financial Officer. Progress is well advanced towards securing a replacement CFO.

Stuart Munro, Chief Executive, said:

"After a challenging two years for the Group, I'm delighted to be able to report a significant improvement in pre-tax profit. Whilst this has been driven by a welcome step towards pre-COVID levels of trading activity, it is also due to the hard work of our employees and the actions taken to reduce our cost base in the early stages of the pandemic. 

The overall trading outlook remains positive. In FIC, the lifting of the ban on tourists visiting the Falkland Islands on 4 May 2022, together with a strong order book and potential opportunities for further work, all bode well for the future. As the impact of COVID hopefully continues to reduce, further improvement in activity levels is also expected at Momart and PHFC.

The improvements already delivered, together with the potential for further progress and the continuing financial strength of the Group, give me confidence for the future."

Enquiries:

Market Abuse Regulation (MAR) Disclosure

The information contained within this announcement is deemed by the Company to constitute inside information. Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

Chairman's Statement

The last two years have been extremely challenging for the Group. It is therefore gratifying to see that the decisive action taken to address the impact of the pandemic, the hard work of our employees and a significant move back towards pre-pandemic levels of trading, have resulted in an underlying pre-tax trading profit of £2.3 million, compared to a broadly break-even result in the prior year. 

I would like to take this opportunity to thank each of the Group's employees for their part in delivering such a substantial improvement.

The Falkland Islands Company ("FIC") continued to trade consistently and both Momart and The Portsmouth Harbour Ferry Company ("PHFC") delivered considerable improvements over the prior year, with Momart returning an overall underlying pre-tax profit of £0.6 million (2021: £0.5 million loss) and PHFC delivering an underlying loss of £0.1 million (2021: £1.2 million loss).

The balance sheet remains strong, with cash of £9.6 million at 31 March 2022 remaining in line with the balance at the prior year end after adjusting for the repayment of £5.0 million of CBILS loans, net bank borrowings reducing to £4.6 million (2021: £5.5 million) and net debt including lease liabilities improving to £11.7 million (2021: £13.6 million). 

Dividend

Following the payment of an interim dividend of 1.0 pence per share paid in January 2022 and reflecting the continued improvement in trading since the half year, I am pleased to announce that a final dividend of 2.0 pence per share will be proposed at our forthcoming Annual General Meeting. This will take the total dividend paid for the year ended 31 March 2022 to 3.0 pence per share (2021: nil).

Board and Governance

As part of the Board's succession planning and in line with his wishes, John Foster stepped down from his position as CEO on 14 April 2022 and was succeeded by Stuart Munro, who joined as CFO in April 2021. I would like to take this opportunity to thank John for his significant contribution to the business over the past seventeen years and to wish him well in his future endeavours. Jeremy Brade steps down at the AGM purely as a result of his long service which has been of great benefit to the Group, particularly when serving as interim Chair to handle the offers made in 2017 to acquire FIC. We thank him for his contribution and will look to appoint a replacement in due course. Additionally, progress is well advanced towards securing a CFO for the Group.

Outlook and Strategy

Group trading continues to improve as the effects of the pandemic recede. Equally importantly, FIH is in a strong financial position and has a clear plan going forward to accelerate the recovery of the businesses and generate additional value through a series of initiatives outlined in our CEO's Strategic Review.

Robin Williams

Chairman

5 July 2022

Chief Executive's Strategic Review

Overview

With trading activity continuing to head towards pre-pandemic levels, it is pleasing to report that the progress demonstrated in the Group's first half results continued in the traditionally stronger second half of the year.

Revenue of £40.3 million for the year ended 31 March 2022, an increase of 24%, resulted in a pre-tax profit of £2.0 million and an underlying pre-tax profit of £2.3 million, compared to a broadly break-even result for the year ended 31 March 2021. This included £0.5 million of COVID-related support from UK and local government, which was £1.3 million less than the prior year.

FIC, the division least affected by the pandemic, delivered an underlying pre-tax profit of £1.8 million, which was consistent with the prior year. Momart and PHFC each improved their underlying pre-tax results by £1.1 million, with Momart delivering a profit of £0.6 million and PHFC a loss of £0.1 million. 

The Group results were underpinned by a net cash flow from operating activities of £5.1 million, with working capital remaining broadly in line with the prior year, despite a significant increase in trading activity. The closing cash balance of £9.6 million was in line with the balance at the prior year end, after adjusting for the repayment of £5.0 million of CBILS loans in June 2021. It also reflected £2.7 million of capital investment, some £1.2 million ahead of the prior year.

As noted previously, the Group owns the freehold of Momart's art storage warehouses in East London, which was acquired in December 2018 at a cost of £19.6 million. Indications are that the value of this property has risen substantially since acquisition.

Group Trading Results for the Year Ended 31 March 2022

A summary of the trading performance of the Group is given in the table below.

* Underlying pre-tax profit is defined as profit before tax before non-trading items.

** As in prior years, the profits reported for each operating company are stated after the allocation of head office management and plc costs which have been applied to each subsidiary on a consistent basis.

*** In the current year, non-trading items comprised £0.3 million of people-related costs including employee redundancies and compensation payable to the former Chief Executive. The net non-trading profit of £0.1 million in the prior year included £0.4 million of restructuring costs, which were offset by £0.5 million of income relating to the release of accruals where it is now probable that no future economic outflow will arise. Management consider that separate presentation of these items is appropriate to facilitate year on year comparison of performance of the Group.

Group Operating Company Performance

Falkland Islands Company

Total revenue of £21.6 million was £0.7 million ahead of the year ended 31 March 2021, with the majority of the improvement arising in Falkland Building Services ("FBS") and Support services. These improvements were offset by a reduction in Retail contribution arising from a change in sales mix and increased overheads, resulting in an underlying pre-tax profit of £1.8 million, which was in line with the prior year.

The previous year's ban on tourists visiting the Falkland Islands continued, although these restrictions were lifted on 4 May 2022, which should facilitate their return in the southern hemisphere tourist season. 

FIC Divisional Activity

Year on year Retail sales were broadly flat. A continued lack of tourist-related earnings for Falkland Islands residents, the relaxation of international restrictions allowing islanders to travel overseas, and shortages of certain products, resulted in a reduction in discretionary expenditure on home improvement and electrical items. However, this was offset by increased sales elsewhere, particularly from retail outlets that had been partially closed in the prior year.

At Falklands 4x4, vehicle sales and rental income both improved over the prior year, although this was offset by a reduction in servicing and spares revenues, leaving overall income largely unchanged. FIC has now been confirmed as the representative for Ineos for the sale of their Grenadier 4x4 vehicle in the Falkland Islands with first deliveries targeted for late 2022.

FBS revenue increased by 9.4% driven mainly by civils contracts for the Falkland Islands Government ("FIG"), including culvert and road capping works on West Falkland, together with road preparation works, drainage and paving at a mobile home park in Port Stanley. The order book remains strong and includes the £17.3 million contract to build a total of 70 houses for FIG and the UK Ministry of Defence ("MOD") over four years secured in November 2021 and a three-year road capping contract for roads on East Falkland for £1.1 million secured in May 2022.

Support Services income increased by £0.2 million to £2.5 million (2021: £2.3 million) due predominantly to increased shipping agency revenues, following the reopening of Stanley Harbour to fishing vessels.

Rental Properties. Further additions at a cost of £1.2 million (2021: £0.7 million) were made during the year to FIC's portfolio of domestic rental properties taking the total number of rented properties at 31 March 2022 to 83 (2021: 75) with a further 2 under construction. Average occupancy rates reduced during the year, due mainly to properties being held vacant for overseas employees and service providers ahead of their arrival in the Falkland Islands in line with immigration procedures. Notwithstanding this, revenue remained broadly in line with the prior year at £0.8 million.

At 31 March 2022, the total net book value of the portfolio excluding assets under construction (with buildings being fully depreciated over 50 years) was £7.2 million (2021: £5.8 million). The estimated market value of FIC's rental portfolio at 31 March 2022 was £10.1 million (2021: £8.5 million) an uplift of £3.0 million on book value giving an average value per property of £122,000 (2021: £113,000).

FIC Key Performance Indicators and Operational Drivers 

* Restated to include FIC staff in the UK.

**Includes ten mobile homes rented to staff.

***Relates to kit home sales to third parties and excludes houses built under contract for FIG.

Momart

Revenue of £15.6 million for the year ended 31 March 2022, whilst not yet back to pre-pandemic levels, was £5.3 million (52%) ahead of the prior year, with improvements in both Museum Exhibitions and Gallery Services and a consistent level of storage income. Combined with £0.4 million of pandemic-related support from UK and local government (2021: £1.4 million), this resulted in an underlying pre-tax profit of £0.6 million (2021: £0.5 million loss). 

Museum Exhibitions activity benefitted from the relaxation of COVID restrictions during the year which allowed institutions to plan a programme of events. Whilst activity levels in terms of the number of exhibitions has now returned to near pre-pandemic levels, the overall investment in exhibitions remains suppressed as institutions rely on more of their own collections, rather than extensive loans.

Commercial galleries, auction houses and private client activity also benefited from the lifting of COVID restrictions, driven mainly by the return of art fairs, which historically have been a significant part of Momart's Gallery Services business. The return of Art Basel in September (traditionally taking place in June) and Frieze London in October, contributed to a strong start to the second half of the year and both delivered record revenues as pent-up demand unwound.

Storage revenues remained broadly consistent with the prior year at £2.4 million with an 84% utilisation of storage capacity (2021: 83%).

Momart Key Performance Indicators and Operational Drivers

Note*: Due to the impact of COVID-19, meaningful data for secure forward orders was not available.

Portsmouth Harbour Ferry Company

Passenger numbers at PHFC returned to circa 80% of pre-COVID levels over the autumn, but dipped in December following Government guidance to work from home. Recovery resumed following the lifting of guidance at the end of January, and volumes were at circa 76% of pre-pandemic levels for the month ended 31 March 2022, compared to 60% for the same period last year.

Overall passenger numbers for the year ended 31 March 2022 of 1.7 million were broadly double those of the prior year, resulting in a £1.7 million increase in revenue, an underlying operating profit of £0.2 million (2021: £0.9 million loss) and an underlying pre-tax loss of £0.1 million (2021: £1.2 million loss) after financing expense. Price increases introduced in April 2022, should further improve revenue in the current year, although this is also heavily dependent on continued recovery in passenger numbers.

As noted at the half year, a "Park & Float" scheme was introduced as a six-month trial in late June, offering a combined parking and ferry fare in order to provide people not living within walking distance of the ferry with an alternative to driving around the harbour to get to Portsmouth. This received a low level of customer uptake, which is likely to have been influenced by the operation of Portsmouth Council's own subsidised park and ride scheme on the outskirts of the city, and was discontinued in December. Investigations are ongoing as to how PHFC can work in partnership with Hampshire Council as part of the development of a fully integrated transport plan for the region.

PHFC Key Performance Indicators and Operational Drivers

\* Total ferry fares divided by the total number of passengers

Trading Outlook

The overall trading outlook for the Group remains positive. In FIC, the expected return of tourism to the Falkland Islands, along with a strong order book and potential opportunities for further work with FIG and the MOD, all bode well for the future. Further progress is expected at Momart and PHFC, although the pace of recovery remains dependent on the rate of return of customer activity as the impact of COVID hopefully continues to recede. As trading levels continue to recover, the challenge for the Group will inevitably move to satisfying the growing demand. Decisive action was taken to reduce staff numbers and costs during the pandemic and their growth must continue to be carefully managed as activity increases, particularly given the high levels of inflation currently being experienced.

Group Strategy

The aim of the Board is to build a Group of greater scale providing consistent earnings growth and cash generation that will provide shareholders with both predictable capital growth and regular dividend income. To deliver this, the Group strategy has three key strands:

Build the profits of the existing businesses back to and beyond the pre-COVID position. Good progress was made in the year ended 31 March 2022, but more remains to be done. As noted above, a key challenge will be to manage costs in line with the ongoing trading recovery.

Invest in developing the existing businesses. The Board are particularly focussed on capitalising on potential opportunities for further work for FIG and the MOD, building on the £17.3 million housing contract awarded in November 2021, as well as on maximising returns from existing FIC land assets. The potential for additional opportunities arising from the development of the Sea Lion oil field will also be monitored closely. However, the Board does not rely in its planning on any such development due to the uncertain and lengthy timescales involved and the undefined nature of any benefit which might accrue to FIC.

Explore the potential for strategic acquisitions. This could provide a step change in the scale of FIH, but acquisitions will only be considered if they either add to existing activities or bring growth potential from other attractive sectors, can be secured at an appropriate price and are within the capacity of the senior executive team to integrate and optimise without negatively impacting the performance of the existing businesses. 

Financial Review

Revenue

As trading headed back to pre-pandemic levels, Group revenue increased by £7.7 million (24%) to £40.3 million. The majority of the improvement arose in Momart and PHFC, where the effects of COVID-19 had previously been felt most severely, with revenue improving by £5.3 million and £1.7 million respectively. FIC revenue improved by £0.7 million, despite the previous year's COVID-related ban on tourists visiting the Falkland Islands continuing during the year.

Underlying Operating Profit

Underlying operating profit before net finance costs increased by £2.1 million (210%) to £3.1 million (2021: £1.0 million). This was despite grant income received under furlough schemes and other government support reducing by £1.3 million to £0.5 million (2021: £1.8 million) and reflected the revenue increases noted above.

Net Financing Costs

The Group's net financing costs of £0.8 million were broadly in line with the prior year. Two UK Government-backed CBILS loans totalling £5.0 million were repaid in June 2021, but interest payments on these loans had been covered by the UK Government and therefore this had no impact on net financing costs in the year.

Reported Pre-tax Profit

The reported pre-tax result for the year ended 31 March 2022 was a profit of £2.0 million (2021: £0.2 million). Non-trading items in the current year included £0.3 million of people related costs including employee redundancies and compensation payable to the former Chief Executive. The Group's underlying profit before tax before these non-trading items was £2.3 million (2021: £0.1 million). Non-trading items in the prior year included £0.4 million of restructuring costs and £0.5 million income from the derecognition of historic liabilities, which were previously included within accruals, but are no longer enforceable. 

Taxation

Tax on current year profits has increased by £0.8 million. This is mainly due to increased profitability (£0.3 million) and the increase in UK deferred tax (£0.5 million) due to the increase in the UK corporation tax rate from 19% to 25% from 1 April 2023.

Earnings per Share

Basic and Diluted Earnings per Share ("EPS") derived from reported profits was 7.6 pence (2021: 0.1 pence). Basic and Diluted EPS derived from underlying profits was 9.5 pence (2021: 0.0 pence).

Balance Sheet

The Group's balance sheet remained strong, with total net assets growing to £40.7 million (2021: £38.9 million). Retained earnings increased by £1.1 million to £20.7 million (2021: £19.6 million) and the hedging reserve improved by £0.7 million, reflecting an increase in the fair value of hedges taken through other comprehensive income in accordance with IFRS 9.

Bank loans reduced to £14.2 million (2021: £20.1 million) as a result of the £5.0 million CBILS loans repayment in June 2021 and scheduled loan repayments of £0.9 million. The Group's cash balances reduced by £5.0 million to £9.6 million (2021: £14.6 million) reflecting the repayment of the £5.0 million CBILS loans. Overall net debt improved by £1.9 million to £11.7 million (2021: £13.6 million).

The Group's outstanding lease liabilities totalled £7.1 million (2021: £8.1 million) with £5.2 million of the balance (2021: £5.8 million) relating to the 50-year leases from Gosport Borough Council for the Gosport Pontoon and associated ground rent, which run until June 2061.

The carrying value of intangible assets remains unchanged from the prior year at £4.2 million following an annual impairment review which indicated that no impairment was required at Momart.

The net book value of property, plant and equipment decreased by £1.3 million to £39.1 million (2021: £40.4 million) with additions of £1.4 million being offset by depreciation charges of £2.2 million and a net reduction of £0.4 million on right of use assets following a lease modification relating to the Gosport pontoon ground rent.

At 31 March 2022, the Group had 83 (2021: 75) completed investment properties, comprising commercial and residential properties in the Falkland Islands, which are held for rental. Two properties were under construction at 31 March 2022 (2021: 7). In addition, FIC held 400 acres of land in and around Stanley, including 18 acres zoned for industrial development and 25 acres of prime mixed-use land, and a further 300 acres of undeveloped land outside Stanley.

The net book value of the investment properties and undeveloped land of £8.2 million (2021: £7.1 million) has been reviewed by the directors of FIC resident in the Falkland Islands. At 31 March 2022 the fair value of this property portfolio, including undeveloped land, was estimated at £12.5 million (2021: £11.1 million), an uplift of £4.3 million on net book value. FIC's 83 houses and flats had an estimated fair value of £10.1 million (2021: £8.5 million). The value of FIC's 700 acres of land was estimated at £2.2 million (2021: £2.2 million). The properties under construction at 31 March 2022 were valued at cost of £0.2 million (2021: £0.5 million).

Deferred tax assets relating to future pension liabilities stood at £0.7 million (2021: £0.7 million). This balance relates to the deferred tax benefit of expected future pension payments in the FIC unfunded scheme calculated by applying the 26% Falkland Islands' tax rate to the pension liability.

Inventories, which largely represent stock held for resale and work in progress at FIC increased by £0.8 million to £6.7 million at 31 March 2022 (2021: £5.9 million). This was mainly due to an increase in housebuilding related stock and work in progress at FIC as a result of the timing of deliveries and the phasing of the related works.

Trade and other receivables increased by £2.0 million to £7.9 million at 31 March 2022 (2021: £5.9 million) due mainly to increased sales activity in Momart towards the end of the year.

Trade and other payables increased by £3.2 million to £10.0 million at 31 March 2022 (2021: £6.8 million) reflecting increased trading activity in Momart before year end and an increase in amounts received in advance of service delivery in FIC.

At 31 March 2022, the liability due in respect of the Group's only defined benefit pension scheme, in FIC, was £2.6 million (2021: £2.8 million). This pension scheme, which was closed to new entrants in 1988 and to further accrual in 2007, is unfunded and liabilities are met from operating cash flow. A decrease in the liability largely arose as a result of an increase in interest rates on relevant corporate bonds and has been fed through reserves in accordance with IAS 19. Eleven former employees receive a pension from the scheme at 31 March 2022 and there are three deferred members.

The Group's deferred tax liabilities, excluding the pension asset at 31 March 2022, were £3.9 million (2021: £3.1 million) with the increase due largely to the change in the UK Corporation tax rate from 19% to 25% effective 1st April 2023.

Cash Flows

Net cash inflow from operating activities of £5.1 million was £1.4 million more than the prior year inflow of £3.7 million. The increase was principally due to a £2.2 million increase in underlying EBITDA, which was partly offset by the working capital improvement in the prior year not being repeated in the year ended 31 March 2022. Overall, working capital remained in line with the prior year, despite the increase in trading activity.

The Group's operating cash flow can be summarised as follows:

Financing and Investing Activities

During the year, the Group invested £2.7 million of capital expenditure, comprising £1.2 million of investment property, £1.4 million on fixed asset property, plant and equipment and £0.1 million on computer software.

The £6.6 million of bank and lease liabilities repayments in the year included the £5.0 million CBILS loans repaid in June 2021. The £5.4 million of bank and lease liabilities drawn down in the prior year included £5.0 million CBILS drawn down in June 2020 and the funding of vehicles in Momart of £0.4 million.

Risk Management, Principal Risks and Impact

The Board is ultimately responsible for setting the Group's risk appetite and for overseeing the effective management of risk. The Group faces a diverse range of risks and uncertainties which could have an adverse effect on results if not managed. The principal risks facing the Group have been identified by the Board and the mitigating actions agreed with senior management and are discussed in the following table:

Stuart Munro

Chief Executive

5 July 2022

Board of Directors and Secretary

Robin Williams, Non-executive Chairman

Robin joined the Board in September 2017. He has a wide breadth of corporate experience, gained at a range of quoted and private businesses as well as from an early career in investment banking. He is currently also Chairman at Keystone Law Group plc. Robin qualified as an accountant in 1982 after graduating in engineering science from the University of Oxford. He worked in corporate finance for ten years before leaving the City in 1992 to co-found the packaging business, Britton Group plc. In 1998, he moved to Hepworth plc, the building materials group, and since 2004 he has focused on non-executive work in public, private and private equity backed businesses. His financial background provides the experience required as Chairman of the Group to review and challenge decisions and opportunities. Robin is a member of the Audit and Remuneration Committees and is Chairman of the Nominations Committee.

Stuart Munro, Chief Executive

Stuart joined the Board on 28 April 2021 as Chief Financial Officer before taking over as Chief Executive on 14 April 2022. He qualified as a chartered accountant with Ernst & Young and worked as a divisional finance director in number of UK companies including Balfour Beatty, Alfred McAlpine Infrastructure Services and FirstGroup as well as Transport for London. From 2015 until joining FIH group, Stuart provided strategic, financial and operational consultancy to a number of medium sized Private Equity backed services companies across a variety of sectors.

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 and has worked in UK private equity for over 20 years. He has led several successful acquisitions and public-to-private transactions. Previously, Jeremy was with the Foreign and Commonwealth Office (FCO) and prior to that, he was an army officer. Using his experience of acquisitions and various corporate transactions, Jeremy brings a wealth of knowledge and expertise on restructuring, funding and transforming companies. Jeremy is a member of the Nominations, Audit and Remuneration Committees and holds a number of other non-executive directorships including one at Fulcrum Utility Services Limited.

Robert Johnston, Non-executive Director

Robert joined the Board on 13 June 2017; he is an experienced non-executive director and investment professional and has served on the boards of several quoted companies in both North America and in UK, including Fyffes PLC and Supremex Inc. Robert has been the Chief Strategy Officer and Executive Vice President at The InterTech Group, Inc. and has over 20 years of experience in various financial and strategic roles. He is the principal representative of the Jerry Zucker Revocable Trust. Robert brings experience on many transactions at both the corporate and asset level, including debt and equity, and his experience in the banking sector will prove invaluable to developing the Group. Robert represents the Company's largest shareholder, "The Article 6 Marital Trust, created under the First Amended and Restated Jerry Zucker Revocable Trust dated 4-2-07", which has a beneficial holding of 3,596,553 ordinary Shares, representing 28.7% of the Company's issued share capital.

He is currently on the boards of Colabor Group Inc, Corning Natural Gas Holding Corp, Supremex Inc. (where he is Chairman), Circa Enterprises Inc., Swiss Water Decaffeinated Coffee Inc and RGC Resources Inc. Robert is a member of the Nominations and Audit Committees and is Chairman of the Remuneration Committee.

Dominic Lavelle, Non-executive Director

Dominic joined the Board on 1 December 2019; Dominic brings to FIH a wide breadth of corporate experience. Most recently, Dominic was Chief Financial Officer of SDL plc from 2013 to 2018. He has over 15 years' experience as a UK plc Main Board Director and has been Finance Director/Chief Financial Officer of seven UK publicly traded companies including Mothercare plc, Alfred McAlpine plc, Allders plc and Oasis plc. His experience, in both permanent roles and turnaround and restructuring projects across several business sectors is a great benefit to the Group, particularly with the various business streams operated by FIC.

After graduating in Civil and Structural Engineering from the University of Sheffield in 1984, Dominic trained with Arthur Andersen and qualified as a chartered accountant in 1989. He is currently senior independent non-executive director and Chair of the Audit Committee of the AIM quoted Fulcrum Utility Services Limited and a director of Steenbok Newco 10 SARL, a wholly owned subsidiary of the Steinhoff Group. Dominic is a member of the Nominations and Remuneration Committees and is Chair of the Audit Committee.

Iain Harrison, Company Secretary

Iain Harrison joined the Company in April 2019. Iain has a BSc in Mathematics from Edinburgh University and qualified as a Chartered Accountant in Scotland in 1993. He has previously worked at RBS group and Heriot Watt University and was Company Secretary at Dawson International plc from 2003-2004.

Corporate Governance Statement

Dear Shareholder,

As Chairman of the Company, I am responsible for leading the Board in applying good corporate governance and the Board is committed to appropriate governance across the business, both at an executive level and throughout its operations. The Board strives to ensure that the objectives of the business, the principles and risks are underpinned by values of good governance throughout the organisation.

The FIH group plc Board values include embedding a culture of ethics and integrity, and the adoption of higher governance standards, to maintain its reputation by fostering good relationships with employees, shareholders and other stakeholders to deliver long term business success.

In 2018 the AIM Rules for Companies were updated to acknowledge a change in investor expectations toward corporate governance for companies admitted to trading on AIM, and the Board, took the decision to adopt the revised Quoted Companies Alliance Corporate Governance Code 2018 (the "QCA Code") which they believe is the most appropriate recognised governance code for the Company.

The QCA Code has ten principles of corporate governance that the Company has complied with as set out on the Company's website www.fihplc.com in the Corporate Governance section.

The Board is aware of the need to protect the interests of minority shareholders, and balancing those interests with those of any more substantial shareholders, including those interests of the Jerry Zucker Revocable Trust, a major shareholder holding circa 29% of the issued share capital and voting rights, which are represented on the Board by the non-executive director, Robert Johnston.

Beyond the Annual General Meeting, the Chief Executive offers to meet with all significant shareholders after the release of the half year and full year results and the Chairman is available throughout. The Chief Executive and the Chairman are the primary points of contact for the shareholders and are available to answer queries over the phone or via email from shareholders throughout the year.

Business Model and Strategy

The Group's strategy is to continue to develop the potential of its existing companies: to fill storage capacity and make further progress at Momart, to maintain the strong cash flow from PHFC and to invest in FIC to take full advantage of the longer-term growth opportunities in the Falkland Islands. While doing this, management are also alert to the benefits of a well-judged complementary acquisition that would give increased scale and growth potential for the Group and enhance the liquidity of FIH shares.

Risk Management

The Board has overall responsibility for the systems of risk management and internal control and for reviewing their effectiveness. The internal controls are designed to manage rather than eliminate risk and provide reasonable but not absolute assurance against material misstatement or loss. The key risks of the Group are presented in the Chief Executive's Strategic Report.

The Board has determined that an internal audit function is not justified due to the small size of the Group and its administrative function and the high level of director review and authorisation of transactions.

A Directors' and Officers' Liability Insurance policy is maintained for all directors and each director has the benefit of a Deed of Indemnity.

Director Independence

The Board considers itself sufficiently independent. The QCA Code suggests that a board should have at least two independent non-executive directors. The Board has considered each non-executive director's length of service and interests in the share capital of the Group and consider that Mr Williams, Mr Brade, Mr Johnston and Mr Lavelle are independent of the executive management and free from any undue extraneous influences which might otherwise affect their judgement. All Board members are fully aware of their fiduciary duty under company law and consequently seek at all times to act in the best interests of the Company as a whole.

Whilst the Company is guided by the provisions of the QCA Code in respect of the independence of directors, it gives regard to the overall effectiveness and independence of the contribution made by directors to the Board in considering their independence, and does not consider a director's period of service in isolation to determine this independence. The Board acknowledges that Robert Johnston, who joined the Board on 13 June 2017, represents the Company's largest shareholder, "The Article 6 Marital Trust, created under the First Amended and Restated Jerry Zucker Revocable Trust dated 4-2-07", (the "Zucker Trust"), which has a beneficial holding of 3,596,553 ordinary Shares, representing circa 29% of the Company's issued share capital. The Board has considered Mr Johnston's independence, given his representation of this shareholding and all Board members have satisfied themselves that they consider Mr Johnston to be independent. This is as a consequence of (i) the fact that Mr Johnston has considerable international investment expertise, and (ii) that the shareholding of his employer in FIH represents only a small part of its wider portfolio, but nonetheless aligns him with the interests of FIH shareholders generally.

Jeremy Brade's tenure, at over the suggested nine years for PLC directors, is not the determining factor in his independence, which the Board judges in relation to his contribution and depth of knowledge of the Group's operations and history. In view of his long service, Jeremy will step down from the Board at the AGM in 2022. All directors retire by rotation and are subject to election by shareholders at least once every three years. Any non-executive directors who have served on the Board for at least nine years are subject to annual re-election.

Time Commitment of Directors

Stuart Munro, Chief Executive of the company, is the only full-time executive director. Robin Williams, Jeremy Brade, Robert Johnston and Dominic Lavelle have all been appointed on service contracts for an initial term of three years. Overall, it is anticipated that non-executive directors spend 10-15 days a year on the Group's business after the initial induction, which includes a trip to the Group's subsidiary in the Falkland Islands. However, the non-executive directors and the Chairman in particular, spend significantly more time than this on the business of the Group.

All directors are expected to attend all Board meetings, the Annual General Meeting and any extraordinary general meetings. Non-executive directors are expected to devote additional time in respect of any ad hoc matters, such as significant investment opportunities, responding to market changes, consideration of any business acquisitions, and any significant recruitment or corporate governance changes.

Skills and Qualities of Each Director

The Board recognised the importance of having directors with a diverse range of skills, experience and attributes, which we have across our current Board. Each Board member contributes a different skill set based on their own experience, which is discussed in detail in the "Board of Directors and Secretary".

Board Meetings

The Board meets frequently throughout the year to consider strategy, corporate governance matters, and performance. Prior to each meeting, all directors receive appropriate and timely information. Since the last annual report was published on 6 July 2021 there have been eight Board meetings. Robin Williams, Stuart Munro, Robert Johnston and Dominic Lavelle have attended all meetings. Jeremy Brade has attended eight meetings. John Foster attended six out of the seven meetings held up prior to him ceasing to be a director on 14 April 2021.

The Remuneration committee has met twice since 6 July 2021 to review executive base pay and bonus structure, as well as the issue of grants under the Long Term Incentive Plan and all members of the committee were in attendance. There have also been two Audit Committee meetings since 6 July 2021, which were attended by all members of the committee. The Nominations Committee meets on an ad hoc basis to consider Board composition and succession and met a number of times during the year to consider the succession of the Chief Executive role and the future shape of the Board.

Board Directors

The Board comprises Robin Williams, the non-executive Chairman, Stuart Munro, the full time Chief Executive, and three other non-executive directors, Jeremy Brade, Robert Johnston and Dominic Lavelle.

Details of How Each Director Keeps Their Skill Set Up to Date

The Board as a whole is kept abreast by the Company's lawyers with developments of governance, and by WH Ireland, the Company's Nominated Adviser, of updates to AIM regulations. The Group's auditors, KPMG, meet with the Board as a whole twice a year and keep the Board updated with any regulatory changes in finance and accounting.

Any External Advice Sought by the Board

RSM Tenon, the Group's tax advisors ensure compliance with taxation law and transfer pricing and the Company's lawyers advised on a number of areas.

Internal Advisory Responsibilities

The Chief Executive helps keep the Board up to date on areas of new governance and liaises with the Nominated Adviser on areas of AIM requirements, and with the Company's lawyers on areas such as Modern Slavery, Data Protection and other legal matters. He also liaises with the Company's tax advisers with regards to tax matters and with the Group's auditors with respect to the application of current and new accounting standards, and on the status on compliance generally around the Group. The Chief Executive has frequent communication with the Chairman and is available to other members of the Board as and when required.

Board Performance Effectiveness

The directors have considered the effectiveness of the Board, committees and individual performance, and this was discussed by the Board in the April 2022 meeting. The Board meets formally five times a year with update Board meetings held in between these meetings as required. There is a strong flow of communication between the directors, in particular the relationship between the Chief Executive and Chairman, who have regular additional calls or meetings. The agenda for the formal meetings are set with the consultation of both the Chief Executive and Chairman, and wherever possible, papers are circulated a week in advance of the meetings, giving directors ample time to review the documentation and enabling an effective meeting. Resulting actions are tracked as matters arising and followed up at subsequent Board meetings to ensure that they have been addressed.

Board Performance Evaluation

In 2022, the Chairman conducted an effectiveness review by means of a questionnaire, with comment on the Chairman passed to Jeremy Brade as the Senior Independent Director at that time. The outcome of the appraisal is that the Board has been effective in discharging its duties during the year. The review was conducted in March 2022 and discussed at the April 2022 Board meeting, with useful conclusions in the areas of major shareholder representation on the Board, the content of briefings to the Board prior to meetings, the development of strategy and the presentation of recommendations to the Board. The frequency of meetings was reviewed as the recovery from the pandemic became more visible and the Board has put in place a more structured programme of interaction with operating management.

Robin Williams

Chairman

5 July 2022

Audit Committee Report

The Audit Committee comprises the four non-executive directors: Jeremy Brade, Robert Johnston, Dominic Lavelle and Robin Williams, and is chaired by Dominic Lavelle. The Audit Committee reviews the external audit activities, monitors compliance with statutory requirements for financial reporting and reviews the half year and annual financial statements before they are presented to the Board for approval. The Audit Committee also keeps under review the scope and results of the audit and its cost effectiveness and the independence and objectivity of the Auditor and the effectiveness of the Group's internal control systems.

The Committee meets twice a year to review both the year end and half year results and KPMG, the Company's auditors, attend both of these meetings in person. It is the Audit Committee's role to provide formal and transparent arrangements, to consider how to apply financial reporting under IFRS, the Companies Act 2006, and the requirements of the QCA Code and also to maintain an appropriate relationship with the independent auditor of the Group.

The current terms of reference of the Audit Committee were reviewed and updated in January 2018.

Effectiveness of the External Audit Process

The Audit Committee is committed to ensuring that the external audit process remains effective on a continuing basis as set out below:

· Reviewing the independence of the incumbent auditor;

· Considering if the audit engagement planning, including the team quality and numbers is sufficient and appropriate;

· Ensuring that the quality and transparency of communications with the external auditors are timely, clear, concise and relevant and that any suggestions for improvements or changes are constructive;

· Exercising professional scepticism, including but not limited to, looking at contrary evidence, the reliability of evidence, the appropriateness and accuracy of management responses to queries, considering potential fraud and the need for additional procedures and the willingness of the auditor to challenge management assumptions; and

· Feedback is provided by the external auditor twice a year to the Audit Committee, after the full year audit and half year review, with one-to-one discussions held beforehand between the Chair of the Audit Committee and the audit firm partner.

External Auditor

The external auditor (KPMG LLP) was appointed in 1997. The current audit engagement partner has been in place since the audit for the year ended 31 March 2021 and will step down after the audit for the year ended 31 March 2025. The analysis of the auditor's remuneration is shown in note 6. Tax advisory services are provided by RSM UK Tax and Accounting Limited. 

Non-audit Services Provided by the External Auditor

The Audit Committee keeps the appointment of external auditors to perform non-audit services for the Group under continual review, receiving a report at each Audit Committee meeting. In the year ended 31 March 2022, there were no non-audit fees paid to KPMG LLP (2021: £nil).

Emerging Risks

The risk management approach is subject to continuous review and updates in order to reflect new and developing issues which might impact business strategy. Emerging or topical risks are examined to understand their significance to the business. Risks are identified and monitored through risk registers at the Group level and discussed at each Board meeting to consider new threats.

Areas of Judgement and Estimation

In making its recommendation that the financial statements be approved by the Board, the Audit Committee has taken account of the following significant issues and judgements involving estimation:

Impairment Testing

The Group tests material goodwill annually for impairment, or more frequently if there are indications that goodwill and/or indefinite life assets might be impaired. An impairment test is a comparison of the carrying value of the assets of a CGU, based on a value-in-use calculation, to their recoverable amounts. Impairment is necessary when the recoverable amount is less than the carrying value.

Impairment testing of the tangible assets of PHFC and the goodwill and intangible assets of Momart have been carried out in the current year with no impairment charge being deemed necessary and there being adequate headroom in the impairment assessments.

Inventory Provisions

An inventory provision is booked when the realisable value from sale of the inventory is estimated to be lower than the inventory carrying value, or where the stock is slow-moving, obsolete or damaged, and is therefore unlikely to be sold. The quantification of the inventory provision requires the use of estimates and judgements and if actual future demand were to be lower or higher than estimated, the potential amendments to the provisions could have a material effect on the results of the Group.

Defined Benefit Pension Liabilities

A significant degree of estimation is involved in predicting the ultimate benefit payments to pensioners in the FIC defined benefit pension scheme. Actuarial assumptions have been used to value the defined benefit pension liability (see note 23). Management have selected these assumptions from a range of possible options following consultations with independent actuarial advisers. The actuarial valuation includes estimates about discount rates and mortality rates, and the long-term nature of these plans, make the estimates subject to significant uncertainties.

There are eleven pensioners currently receiving a monthly pension under the scheme and three deferred members.

Dominic Lavelle

Independent Non-executive Director

5 July 2022Directors' Report

The directors present their annual report and the financial statements for the Company and for the Group for the year ended 31 March 2022.

Results and Dividend

As set out in the Group Income Statement, the Group profit for the year after taxation amounted to £947,000 (2021: £9,000). Basic earnings per share on underlying profits were 9.5 pence (2021: 0.0 pence).

With the Group's recovery further underpinned by the continued profit improvement in the second half of the year, the Board is pleased to announce that a final dividend of 2.0 pence per share will be recommended for approval at the Annual General Meeting. Together with the interim dividend of 1.0 pence paid on 14 January 2022, the proposed dividend will take the total dividend for the year ended 31 March 2022 to 3.0 pence per share (2021: nil).

Principal Activities

The business of the Group during the year ended 31 March 2022 was general trading in the Falkland Islands, the operation of a passenger 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 Chief Executive'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

Stuart Munro was appointed as a director on 28 April 2021 and John Foster resigned as a director on 14 April 2022.

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 their 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, gender identity, sexual orientation, 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 23.

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 £29,000 of trade creditors at 31 March 2022 (2021: nil).

Share Capital and Substantial Interests in Shares

During the year, 4,915 shares were issued following the exercise of options. Further information about the Company's share capital is given in note 25. Details of the Company's executive share option scheme can be found in note 24.

The Company has been notified of the following interests in 3% or more of the issued ordinary shares of the Company as at 5 July 2022:

Charitable and Political Donations

Charitable donations made by the Group during the year amounted to £16,214 (2021: £7,654), these were largely paid to local community charities in the Falkland Islands. There were no political donations in the year (2021: nil).

Disclosure of Information to the External 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 external 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 external auditor is aware of that information.

External Auditor

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

Greenhouse Gas Emissions

The 2018 Regulations introduced requirements under Part 15 of the Companies Act 2006 for large unquoted companies to disclose their annual energy use and greenhouse gas emissions, and related information. However, the Group has applied the option permitted to exclude any energy and carbon information relating to its subsidiary which the subsidiary would not itself be obliged to include if reporting on its own account. This applies to all subsidiaries within the Group. FIH group plc itself consumes less than 40MWh and, as a low energy user, is not required to make the detailed disclosures of energy and carbon information but is required to state, in its relevant report, that its energy and carbon information is not disclosed for that reason. FIH group plc's annual energy use and greenhouse gas emissions, and related information has not been disclosed in this annual report as it is a low energy user.

Statement by the Directors in Performance of their Statutory Duties in Accordance with s172(1) Companies Act 2006

As an experienced Board, our intention is to behave responsibly and we consider that we, both as individuals and as a collective Board, as representatives of FIH group plc and the Group as a whole, during the year ended 31 March 2022, have acted in good faith, to promote the success of the Company for the benefit of its members as a whole, having regard to the wider stakeholders as set out in s172 of the Companies Act. In the Falkland Islands and in Gosport/Portsmouth (where PHFC provide the ferry service), the subsidiaries of the Group work closely with local government and local communities and Momart, is an active and founding member of several art communities and its employees give talks at conferences, sharing their experiences on the import and export of art work. The details of the Group's interaction with its wider stakeholders is as follows:

Annual General Meeting

The Company's Annual General Meeting will be held on 19 September 2022. 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.

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 2022 and in the preceding year is as follows:

* Appointed 28 April 2021

The Chief Executive, Stuart Munro, participates in an annual performance related bonus arrangement, with the potential during the year to earn up to 60% of his salary. The bonuses are subject to the achievement of specified corporate and personal objectives and are payable in cash. 

John Foster participated in an annual performance related bonus arrangement, with the potential during the year of earning up to 100% of his salary. Any bonus is subject to the achievement of specified corporate and personal objectives and is normally split into equal parts of deferred shares and cash, with the shares requiring a service condition to remain in employment for up to three years. The bonus for the year ended 31 March 2022 is payable wholly in cash.

Given the impact of COVID-19 on the Group's finances, no bonus was paid for the year ended 31 March 2021.

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

Directors' Interests in Shares

Full details of historic awards of deferred shares to John Foster are provided in note 24 Employee benefits: share based payments. During the year ending 31 March 2022, 9,273 nil cost options (2021: 12,488) were exercised by him and the remaining 3,591 nil cost share options were forfeited on his resignation on 14 April 2022.

During the year, Stuart Munro was granted 55,814 LTIP share options in December 2021 at an exercise price of 10 pence. The exercise of the LTIP awards is subject to achieving share price performance and earnings targets which have been determined by the remuneration committee, after discussion with the Company's advisers.

The directors' options extant at 31 March 2021 related to John Foster and totalled 12,864 nil cost options.

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:

* Robert Johnston holds 57,500 shares in his own name, and as he is also the representative of the Company's largest shareholder, "The Article 6 Marital Trust, created under the First Amended and Restated Jerry Zucker Revocable Trust dated 4-2-07", which holds 3,596,553 Shares, Robert Johnston is interested in 3,654,053 Shares in total, representing 29.2 per cent. of the Company's 12,519,900 total voting rights.

Approved by the Board and signed on its behalf by:

Iain Harrison

Company Secretary

5 July 2022

Kenburgh Court

133-137 South Street

Bishop's Stortford

Hertfordshire

CM23 3HX

Statement of Directors' Responsibilities in Respect of the Annual Report and the Financial Statements

The directors are responsible for preparing the Annual Report, Strategic Report, Directors' Report, and the Group and Company 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. Under the AIM Rules of the London Stock Exchange, they are required to prepare the Group financial statements in accordance with UK-adopted international accounting standards and applicable law and they 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 parent Company and of the Group's profit or loss for that period. In preparing each of the Group and parent Company financial statements, the directors are required to: 

· select suitable accounting policies and then apply them consistently; 

· make judgements and estimates that are reasonable, relevant and reliable; 

· state whether they have been prepared in accordance with UK-adopted international accounting standards; 

· assess the Group and parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and 

· use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so. 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and 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. 

Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report and a Directors' Report that complies with that law and those regulations.

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 accompanying notes form part of these Financial Statements.

The accompanying notes form part of these Financial Statements.

These financial statements, of which the accompanying notes form part, were approved by the Board of directors on 5 July 2022 and were signed on its behalf by:

S I Munro

Director