Fih Group Regulatory News (FIH)

13 Jun 2007 07:01

Falkland Islands Holdings PLC13 June 2007 Falkland Islands Holdings plc Preliminary Results for the year ended 31 March 2007 Falkland Islands Holdings ("FIH"), an AIM listed company operating a range ofbusinesses in the Falkland Islands and the Portsmouth Harbour Ferry Company ("PHFC") in the UK, announces preliminary results for the year ended 31 March2007. Financial Highlights • Turnover up 2.6% to £15.6m (2006: £15.2m)• Underlying profit* up 11% to £1.66m (2006: £1.49m)• Operating profit up 36% to £1.5m (2006: £1.1m)• Profit on sale of investments £485,000 (2006: £2.1m)• Net cash balances of £2.2m at year end (2006: £0.3m)• Positive net operating cash flow: £2.3m (2006: £1.7m)• Basic Earnings per Share 17.2p (2006: 31.8p )• EPS on Underlying Profits 13.4p (2006: 12.2p )• Dividend increased by 7.7% to 7p (2006:6.5p) * Underlying profit is defined as profit before tax, exceptional items and the amortisation of goodwill. Operating Highlights • Falkland Islands business produced strong results - 2.5% increase in revenue to £12.2m o Underlying pre-tax contribution up £0.2m to £1.1m o Improved squid catch boosted fishing agency• Portsmouth Harbour Ferry Company - had a solid year - increase in revenue to £3.4m o Underlying pre-tax contribution £0.55m (2006 £0.63m) o Passenger numbers 3.6m (2006 3.75m) reflecting Trafalgar celebrations in 2006• Divestiture of Falklands Gold and Minerals stake for £675 000, generating £485,000 profit• Falkland Oil and Gas - (16.3% shareholding) continues to progress its exploration programme Outlook • Positive start to 2007• Potential for steady sustainable growth over the medium term David Hudd, Chairman of Falkland Islands Holdings plc, said: "We have made solid progress this year, recording pleasing increases inturnover, profit and liquidity. We continue to hold our strategic investment in Falkland Oil and Gas and awaitthe results later in the year of their current seismic and sea bed logging workand of any progress in securing a drilling rig. The Board looks to the future with confidence, and is pleased to propose afurther increase in dividend to 7 p per share." 13 June 2007 Enquiries: Falkland Islands HoldingsDavid Hudd, Chairman Tel: 07771 893 267John Foster, Managing Director Tel 07710 764 556 KBC Peel HuntPeter Joseph Tel: 020 7418 8900 Dawnay Day (NOMAD)David Floyd Tel: 020 7509 4570 College HillNick Elwes, Paddy Blewer Tel: 020 7457 2020 Chairman's Statement Overview I am pleased to report that the year to 31 March 2007 has been another year ofprogress for your Company with record levels of profitability achieved fromtrading and a useful profit from the sale of investments. Trading In the year to 31 March 2007 the Group's underlying profit (defined as profitbefore tax, exceptional items and the amortisation of goodwill), rose from £1.49million in 2006 to £1.66 million. Profit before tax after exceptional items andthe amortisation of goodwill was £1.84 million (2006: £3.0 million) After the seasonally slower first half, the businesses in the Falklandsperformed well, with strong vehicle sales and general activity was buoyed by theinterest surrounding the 25th anniversary of the war. The Portsmouth Harbourferry business had a solid year with profits only a little lower than last yearwhich benefited from the Trafalgar celebrations. Investments In January 2007 the 14.4% shareholding in Falkland Gold and Minerals was sold ata price of 6p per share. The cash proceeds of £0.7 million generated a profitover the cost of the investment of £0.5 million. The Group retains its investment of 15 million shares (16.3%) in Falkland Oiland Gas ("FOGL"). As shareholders will appreciate, your Company was activelyinvolved in the initial formation of FOGL and its subsequent admission to AIMand your Board continues to believe in the company's potential. As FOGL'slicence area is very large and unexplored, exploration is a necessarily lengthyand expensive process. FOGL is continuing to progress its exploration programmeand we intend to retain a substantial shareholding while this exploration effortcontinues. We were pleased to note that our view on the potential is shared by others asFOGL was able to raise a further £8 million in December 2006 which has been usedto finance further offshore exploration, this comprises a further 2D seismicsurvey and sea bed logging. We are awaiting the results of this work and of thecontinuing efforts to secure a drilling rig. Earnings and Dividends Earnings per share on underlying profits rose by 10% to 13.4p per share (200612.2p) and EPS calculated on all earnings including profits on the sale ofinvestments were 17.2p per share (2006: 31.8p). Reflecting the continued confidence of your Board in the future of the Companyit is proposed to increase the annual dividend by 7.7% from 6.5p to 7.0p pershare. Net assets The Group has a solid base of well established trading businesses and goodliquidity position. At 31 March 2007 the Group had net cash balances of £2.2million (2006: £0.3 million) and shareholders funds of £14.1 million at historiccost (2006: £12.9 million).This includes the investment in FOGL at a cost of£2.4m which compares to a market value at the year end of £13.0 million (2006cost £2.4 million; market value £21.5 million). On this basis the net assetvalue per share at 31 March 2007 was £2.92 (2006 £4.00) People The Group continues to move forward because of the commitment of all its staffand we are fortunate to have the services of a highly professional workforcemany of whom have worked for the Company for many years. Their passion indelivering a high quality service to their customers underpins the strength ofthe Group and I would like to thank them all for their efforts in producinganother successful year of growth. Outlook The new financial year has started in promising fashion and we are well placedto build on the solid progress seen in recent years. David L Hudd June 13 2007 Managing Director's Business Review Falkland Islands Holdings ("FIH") owns two trading businesses: the FalklandIslands Company in the Falkland Islands, which provides a wide range ofessential goods and services to the Islanders; and in the UK, the PortsmouthHarbour Ferry Company ("PHFC") which provides the vital passenger service acrossthe mouth of Portsmouth Harbour. Both have been established for well over 100years and both have a history of consistent profitability and cash generation. Group Performance In the year to 31 March 2007 turnover from continuing activities in the Group'strading businesses rose by 2.6% to £15.6 million (2006: £15.2 million). Progresswas seen at both businesses. The Falklands recovered from a sluggish start, andrevenue increased by 2.5% from £11.9 million to over £12.2 million. Revenue atPHFC increased to £3.4 million (2006: £3.3 million), a satisfactory performancegiven the absence of the maritime festivals which boosted revenue in 2005/6. Revenue Year ended 31 March 2007 2006 Change £m £m % Falklands 12.2 11.9 2.5%Gosport Ferry 3.4 3.3 3.0%Total 15.6 15.2 2.6% Underlying Profits A healthy 11% increase in underlying profits (defined as profit before tax, theamortisation of goodwill and exceptional items) was achieved in the year to 31March 2007 to £1.66 million (2006: £1.49 million) with a strong performance fromthe group's Falkland business and a solid contribution in the UK from the ferryoperations at Portsmouth Harbour. Year ended 31 March 2007 2006 £m £m Falkland Islands - FIC 1.10 0.86Gosport Ferry - PHFC 0.56 0.63Underlying Profit 1.66 1.49 Amortisation (0.20) (0.20)Exceptional costs (0.11) (0.49)Profit on sale of investments 0.49 2.22Profit Before Tax 1.84 3.02 Exceptional Items During the year the decision was taken to close the Falkland Islands definedbenefit pension scheme in respect of future service for existing members and inconsultation with the employees it was agreed to move to a defined contributionbasis. The effect of this is a significant reduction in the exposure of theGroup to further increases in pension liabilities. In the current year thesechanges have resulted in a one off exceptional charge of £105,000. Profit on the sale of Investments On January 12th 2007 FIH sold its entire shareholding in Falkland Gold andMinerals ("FGML"). The sale of its 14.4% holding at 6p per share generated netcash proceeds of £675,000 and a profit on sale of £485,000. Profit before Tax After taking account of charges for the amortisation of goodwill, theexceptional pension charge and profits on the sale of investments, which inaggregate represent a net credit of £176,000, the Group's profit before tax forthe year was £1.84 million (2006: £3.0 million). Group Structure In operational terms the Group structure was unchanged during the year. During the year the Group sold its entire investment in FGML, but retained itsshareholding in FOGL, holding 15 million shares (16.3%) in this AIM-listedexploration company. Portsmouth Harbour Ferry Company PHFC performed well in the year despite the absence of the Trafalgar 200celebrations and International Festival of the Sea, which boosted revenues andprofits in the prior year. In August 2006 the company was successful in winninga contract from Berkeley Homes to provide water taxi services from its newresidential development overlooking the harbour at Royal Clarence Yard to thecompany's pontoon at Portsea. The service, which runs during peak times 5 days aweek, does not directly compete with PHFC's core ferry services which operatefrom Gosport. During the year leisure cruising and private hire servicescontinued, but revenues from cruising were disappointing so this activity hasnow been scaled back, allowing PHFC to focus on core ferry operations andincreasing availability for corporate hire. During the year ended 31 March 2007 PHFC carried nearly 3.6 million passengersacross the harbour, although passenger numbers were marginally lower than theexceptionally high figures seen during the maritime celebrations in 2005. As in the prior year, fares were increased on 1 June 2006, with normal dailyadult return fares increased by 11% to £2.00. This enabled the company to freezefares for regular users and to hold the price of 10 trip tickets at £8.00 or 80peach way. In addition, to reinforce the value for money offered to ourpassengers, 10 trip concessionary fares for children and seniors were frozen at£4.40 or 44p per trip. With overall passenger numbers down on the prior year,the fare increases seen in June 2006 produced a modest overall increase inpassenger revenues. 2006/7 saw continued inflationary pressures on operating costs and particularlylarge increases were seen in fuel prices over the year. After the allocation ofhead office costs, the underlying profit before tax of the ferry operationsamounted to £0.55 million (2006: £0.63 million). The ferry pontoon at the Gosport terminus is coming to the end of its usefullife and the pontoon owners Gosport Borough Council are moving ahead with plansto replace the existing pontoon with a new structure before the end of 2008.The financing of the replacement pontoon remains under discussion butmaintenance of the existing arrangements, with a nominal rent payable by theferry company, would allow PHFC to continue to provide this essential servicesafely and reliably, whilst still providing excellent value for money topassengers. Local residents are aware of the benefits of the service PHFC offers. The ferrytrip is not only significantly shorter than the land journey around the north ofthe harbour, but with ever increasing petrol costs it is also significantlycheaper. The ferry is also a more environmentally friendly means of transport:with a carbon footprint per passenger less than 3% of that of a car. In May 2007PHFC ran a special offer highlighting the ferry's green credentials to encouragemore car drivers to leave their car at home and instead make their journey onthe Gosport ferry. Falklands Operations Total revenue in the Group's Falklands businesses in the year to 31 March 2007increased by 2.5% to £12.2 million (2006: £11.9 million). In the Islands the general economic backdrop was helped initially by a betterIllex squid catch in the early part of the financial year. Retailing remainedcompetitive, but in Stanley increased tourist activity associated with the 25thanniversary of the Falklands War helped provide a boost to the group's otheroperations, particularly the Capstan and Gift shop, Penguin Travel and theUpland Goose Hotel. Significant fleet vehicle sales boosted results in thesecond half of the year. After allocating head office costs, which are integral to the management andoperation of the group's Falklands business activities, underlying profit beforetax and exceptional items rose from £ 0.9 million to £1.1 million. Retailing - Sales £9.8 million (2006: £9.4 million) Retailing is the most important business activity undertaken by the Group in theFalklands and accounts for over 80% of turnover. In the year to 31 March 2007 overall retail sales increased by 4.2% to £9.8million and the bulk of the increase was accounted for by the company'sautomotive dealership. Sales at the flagship West Store continued to move ahead although competitionfrom local independent retailers, and the subdued economic conditions, meantthat like for like sales growth was restricted to 0.4%. Sales at the Capstangift shop were helped by the continued growth in the number of cruise shipvisitors and revenues increased by 3.3% compared to the prior year. At theGroup's DIY business, Homecare, trading conditions were more difficult with asluggish housing market and customers experimenting with internet purchasingfrom UK suppliers, particularly for higher value items. Sales at Homecare were5.9% lower in the year, although it was encouraging to note that the performancerecovered towards the end of the year with double digit increases in sales beingseen as the product range was refreshed and improved. At its automotivedealership, FIC had a very successful year with unit vehicles sales increasingby 120%. Other Activities - Sales £2.4 million (2006: £2.5 million) Overall sales in the company's other activities fell slightly in the year to£2.4 million. Low margin stevedoring at the Stanley floating port FIPAS wasscaled back, and the volume of third party freight carried by Darwin Shippingfell, but the overall change in the mix of revenue was positive, and thecontribution to group profits from other activities increased during the year. The Fishing Agency had a better year with a recovery in the squid catch inSpring 2006 leading to a healthy increase in the number of fishing vesselsrequiring support services from FIC. The Illex squid catch was the best for 4years and revenue from Agency activities increased by over 35% boostingprofitability. FIC's insurance agency, property rental activities and stevedoring services allsaw growth in the year. Darwin Shipping continued to work with the UK Ministryof Defence, chartering space on its supply vessels and with a tight control ofcosts and more efficient management of container rentals, despite a declinerevenues Darwin had another solid year. The Upland Goose Hotel continues to face strong local competition and is lossmaking during the quiet winter period, but this year increased number ofvisitors over the summer months linked to Falklands 25, helped lift revenues andsaw the hotel move closer to a break even position for the year. These positivefactors are unlikely to continue in the medium term, and given the recenthistory of losses at the hotel, the Group will be considering its future overthe next 12 months. Falkland Oil and Gas (FOGL) The Group continues to hold a strategic stake in FOGL of 15 million sharesrepresenting a 16.3% interest. At 31 March 2007 the market value of thisshareholding was £13.0 million (2006: £21.5 million). During the year FOGL made further progress with its programme of exploration. InNovember 2006 TRACS International completed an independent review of what itconsiders to be the Company's top ten prospects and reported that FOGL had netprospective resources in excess of 10 billion barrels. The existence ofcommercial quantities of oil or gas can only be determined by drilling, butduring the year FOGL made good progress in raising further funds to continuewith its exploration programme, with the issue of £8 million of convertible loannotes in December 2006. FOGL has also completed the third phase of its 2D seismic programme, acquiring afurther 9,950km of detailed infill seismic data, and early indications are thatit will provide a much higher definition of FOGL's best prospects. Thisprogramme was supplemented in February 2007 when the company commenced aprogramme of Closed Source Electro Magnetic ("CSEM") surveying, a new technologydesigned to reduce risk and help highlight the best prospects for drilling. Thefirst phase, which covered 6 prospects, has been completed and the second phaseis expected to be completed by the end of July 2007. Once processing of thedata from both surveys is complete the results will be integrated, a processwhich will take several months. If the results are positive this will then leadto the determination of a shortlist of the best prospects for drilling. In parallel with the exploration programme FOGL has continued discussions withpotential farm-in partners and rig owners. The objective remains a drillingprogramme commencing in 2008. Trading Outlook for 2007/8 With a stable economic climate in the UK and in the Falklands the prospects forfurther steady growth over the medium term are good. In the current year theFalklands businesses have started well with squid catches in April and Mayexceeding 2006. In Portsmouth, ferry passenger numbers have been boosted by therecent sunny spring weather and are ahead year-on-year. Although cost pressuresexist in both businesses, with further investment in our infrastructure plannedfor the current year, the foundations are in place for another solidperformance. John FosterManaging Director13 June 2007 Group profit and loss accountFOR THE YEAR ENDED 31 MARCH 2007 As Restated 2007 2006 Notes £'000 £'000 Turnover 1 Continuing operations 15,618 15,209 Discontinued operations - 527 Turnover 15,618 15,736 Cost of sales (9,531) (9,855) Gross profit 6,087 5,881 Administrative expenses (4,606) (4,471) Amortisation of goodwill (204) (204) Administrative expenses - exceptional costs (105) (487) Total administrative expenses (4,915) (5,162) Other operating income 338 344 Continuing operations 1,510 1,062 Discontinued operations - 1 Group operating profit 1,510 1,063 Profit on sale of discontinued operation 84 Profit on sale of fixed asset investment 485 2,135 Bank interest receivable 205 38 Bank interest payable (236) (194) Pension schemes net financing cost (124) (108) Profit on ordinary activities before taxation 1,840 3,018 Taxation (394) (374) Profit on ordinary activities after taxation for the 1,446 2,644 financial year 2 Earnings per share Basic 17.2p 31.8p Diluted 17.1p 31.3p Proposed dividend per ordinary share 7.0p 6.5p In both the current and preceding year, there was no material difference betweenresults reported in the profit and loss account and the result on an unmodifiedhistorical cost basis. Group balance sheetAT 31 MARCH 2007 2007 2006 Notes £'000 £'000 £'000 £'000 Fixed assets Intangible assets 3,775 3,979 Tangible assets 7,856 8,042 Investments 2,420 2,610 14,051 14,631 Current assets Stocks 2,678 3,107 Debtors due within one year 2,517 1,789 Debtors due after one year 45 48 2,562 1,837 3 Cash at bank and in hand 4,959 3,601 10,199 8,545 Creditors: amounts falling due (5,310) (4,797) within one year Net current assets 4,889 3,748 Total assets less current 18,940 18,379 liabilities Creditors: amounts falling due (2,191) (2,765) after more than one year Provisions for liabilities (744) (853) Net assets excluding pension 16,005 14,761 liabilities Net pension scheme liabilities (1,869) (1,909) Net assets 14,136 12,852 Capital and reserves Called up share capital 847 838 Share premium account 7,206 7,064 Other reserves 703 703 Revenue reserves 5,380 4,247 Equity shareholders' funds 14,136 12,852 Group Cash Flow StatementFOR THE YEAR ENDED 31 MARCH 2007 Reconciliation of operating profit to net cash inflow from operating activities As restated 2007 2006 £'000 £'000 Operating profit 1,510 1,063Profit on sale of fixed assets - (12)Amortisation of goodwill 204 204Depreciation and impairment charges 468 838Decrease in stocks 429 201(Increase) in debtors (725) (12)Increase / (Decrease) in creditors and provisions 316 (687)Provision for share-based payments 101 70Net cash inflow from operating activities 2,303 1,665 Cash Flow Statement 2007 2006 £'000 £'000 £'000 £'000 Cash flow from operating activities 2,303 1,665Returns on investments and servicing offinanceInterest received 205 38Interest paid (236) (203) (31) (165)TaxationUK corporation tax paid (162) (250)Overseas taxation paid (176) (141) (338) (391)Capital expenditure and financialinvestmentPurchase of tangible fixed assets (282) (505)Purchase of investments (2,000)Receipts from sale of tangible fixed 15assetsReceipts from sale of investments 675 2,427 393 (63)Acquisitions and disposalsSale of subsidiary undertaking - 178 - 178Dividends paid (545) (502)Cash inflow before financing 1,782 722Financing Repayment of secured loan (532) (524)Repayment of loan notes (43) (43)Issue of ordinary share capital 151 3New secured loan 2,609Sale of own shares Cash flow from financing (424) 2,045Increase in cash in year 1,358 2,767 Reconciliation of cash flow to movement in net funds / (debt) 2007 2006 £'000 £'000 Increase in cash in the year 1,358 2,767Cash outflow / (inflow) from movement in 575 (2,042)debt 1,933 725Change in net debt resulting from cash 1,933 725flowsNet (debt) / funds at start of year 293 (432) Net funds at end of year 2,226 293 Group Cash Flow Statement - continuedFOR THE YEAR ENDED 31 MARCH 2007 Analysis of changes in net funds As at As at 1 April 31 March 2006 Cash flows 2007 £'000 £'000 £'000 Cash at bank and in hand 3,601 1,358 4,959 Debt due within one year (542) 0 (542)Debt due after one year (2,766) 575 (2,191) Net funds at end of year 293 1,933 2,226 Consolidated Statement of Total Recognised Gains and LossesFOR THE YEAR ENDED 31 MARCH 2007 As restated 2007 2006 £'000 £'000 £'000 £'000 Profit for the year 1,446 2,644PHFC scheme gain / (loss) 61 (88)FIC scheme gain 118 57 Actuarial gain / (loss) on pension schemes 179 (31)Movement on deferred tax asset relating (48) (123) to pension schemesActuarial gain / (loss) on pension schemes 131 (154)net of taxTotal recognised gains and losses relating 1,577 2,490to financial year Notes to the Financial StatementsFOR THE YEAR ENDED 31 MARCH 2007 1. Segmental information 2007 2006 General Ferry Total General Ferry Total trading services trading services Falklands Portsmouth Falklands Portsmouth £'000 £'000 £'000 £'000 £'000 £'000 Turnover- continuing operations 12,256 3,362 15,618 11,902 3,307 15,209Discontinued operations 527 527- Cobham Travel 12,256 3,362 15,618 11,902 3,834 15,736Net assets 9,998 4,138 14,136 8,941 3,911 12,852 Segment operating profit 1,122 388 1,510 637 426 1,063Profit on sale of fixed 485 485 2,135 2,135asset investmentsProfit on sale of 84 84discontinued operations Net interest expense (115) (40) (155) (212) (52) (264) Group profit before tax 1,492 348 1,840 2,560 458 3,018 Underlying profit beforetax: Group profit before tax 1,492 348 1,840 2,560 458 3,018Goodwill amortisation - 204 204 204 204Exceptional costs 105 105 435 52 487Profit on sale of fixed (485) (485) (2,135) (2,135)asset investmentsProfit on sale of (84) (84)discontinued operations Underlying profit before 1,112 552 1,664 860 630 1,490tax Underlying profit before tax is presented to illustrate the Group's tradingprofit before tax, goodwill amortisation, exceptional items, profit on the saleof fixed asset investments and discontinued operations. Notes to the Financial Statements - continuedFOR THE YEAR ENDED 31 MARCH 2007 2. Earnings per share The calculation of basic earnings per share is based on profits on ordinaryactivities after taxation, and the weighted average number of shares in issue inthe period, excluding shares held under the Employee Share Ownership Plan('ESOP'). The calculation of diluted earnings per share is based on profits on ordinaryactivities after taxation, and the weighted average number of shares in issue inthe period, excluding shares held under ESOP, adjusted to assume the full issueof share options in issue, to the extent that they are dilutive. As restated 2007 2006 £'000 £'000 Profit on ordinary activities after taxation 1,446 2,644 The profits above form the basis of calculating the basic and diluted earningsper share. As restated 2007 2006 Number Number Weighted average number of shares in issue 8,466,060 8,380,066 Less: shares held under ESOP (48,917) (55,417) Average number of shares in issue excluding ESOP 8,417,143 8,324,649 Maximum dilution with regard to share options 30,927 109,736 Diluted weighted average number of ordinary shares 8,448,070 8,434,385 Basic earnings per share 17.2p 31.8pDiluted earnings per share 17.1p 31.3p To provide a comparison of earnings per share based on underlying performance,the calculation below sets out basic and diluted earnings per share based onprofits before amortisation of goodwill and exceptional items. Earnings per share on underlying profitability 2007 2006 £'000 £'000Underlying profit before tax (see note 1) 1,664 1,490Less: tax thereon (532) (477)Underlying profit after tax 1,132 1,013 Increase 2007 2006Underlying performance basic earnings per 10.5% 13.4p 12.2pshare (pence)Underlying performance diluted earnings 11.5% 13.4p 12.0pper share (pence) 3. Borrowings, derivatives and other financial instruments Group 2007 2006 £'000 £'000The bank loans, overdrafts and unsecured loan notesare repayable as follows:Within one year (542) (542)Between one and two years (499) (542) Between two and five years (1,054) (1,590)Over five years (638) (634) (2,733) (3,308) Cash 4,959 3,601 Net funds / (debt) 2,226 293 The Group's financial instruments comprise cash and borrowings and arisedirectly from its operations. The principal function of these financialinstruments is to fund the Group's operations. Cash at bank is the money oncall or short term deposit. This together with cash in hand is used to fund theday-to-day operations. The Group has an unutilised overdraft facility of £2.0million. 4. Statutory Information The financial information does not constitute the Company's statutory accountsfor the years ended 31 March 2007 and 2006 but is derived from those accounts.Statutory accounts for 2006 have been delivered to the Registrar of Companies,and those for 2007 will be delivered following the Company's Annual GeneralMeeting. The auditors have reported on those; their reports were unqualified anddo not contain statements under section 237(2) or 237(3) of the Companies Act1985. Copies of the Falkland Islands Holdings plc annual report and financialstatements will be with shareholders in late-June. This information is provided by RNS The company news service from the London Stock Exchange