Fih Group Regulatory News (FIH)

4 Jul 2006 07:01

Falkland Islands Holdings PLC04 July 2006 Falkland Islands Holdings plc Preliminary Results for the year ended 31 March 2006 Falkland Islands Holdings ("FIH"), an AIM listed company operating a range ofbusinesses in the Falkland Islands and the Portsmouth Harbour Ferry Company ("PHFC") in the UK, announces preliminary results for the year ended 31 March2006. Financial Highlights • Turnover up 23% to £15.7 million (2005: £12.8m) • Underlying profit before taxation up 61% to £1.56m (2005 £0.97m) including a first full year contribution from PHFC • Profit before taxation, including exceptional items up to £3.1m (2005: £0.9m), • EPS on underlying profits 12.7p (2005 : 9.1p) • Basic EPS 32.6p (2005: 8.2p) • Dividend per share increased by 8.3% to 6.5p (2005: 6p) • Cash balances at year end of £3.6m (2005 £0.9m) • Cash net of borrowings at year end £0.3m (2005 £0.4m borrowings) Operating Highlights • Falkland Islands' business produced satisfactory results: o Retail sales growth helped by increased cruise ship visitors, new in store delicatessen and coffee shop o Business confidence dampened by fourth year of poor squid catches o Good progress made by Group's insurance agency o Increased competition impacted on the Upland Goose • PHFC revenues buoyed by increased activity surrounding Maritime festivals • Continued exploration progress made by FGML and FOGL Outlook • Trading in the Falklands to continue at satisfactory levels since the year end • Further growth expected from new tourist services • Stable outlook for PHFC, which lessens Group's dependence on the Falklands • Earnings enhancing complementary acquisitions continue to be sought David Hudd, Chairman of Falkland Islands Holdings plc, said: "We have made good progress during the year building a solid platform from whichto grow in the future, despite business confidence in the Islands being impactedby poor squid catches. The contribution of PHFC was also especially pleasing inits first full year under our ownership. With solid contributions from our two trading businesses we are confident thatwe can look forward to another good year, providing essential services to thelocal communities where we operate whilst continuing to offer attractive returnsfor our shareholders." 4 July 2006 Enquiries: Falkland Islands Holdings David Hudd, Chairman Tel: 07771 893 267 John Foster, Managing Director Tel 07710 764 556 College Hill (1) Nick Elwes Tel: 020 7457 2020 Chairman's and Managing Director's Review of Operations Overview We are pleased to report that the year to 31 March 2006 has been an encouragingyear for your Company and record levels of profitability have been achieved asthe group successfully consolidated its position following the strategicexpansion seen in the prior year. The Group now has two solid cash generativebusinesses providing essential services to local communities. The Falklandoperations produced a satisfactory result despite subdued levels of activity inthe Islands, while the Portsmouth Harbour Ferry Company ("PHFC") benefited fromthe maritime festivals held in 2005. Falkland Oil and Gas ("FOGL") and Falkland Gold and Minerals ("FGML") in whichthe Company has significant shareholdings of 16.3% and 14.4% respectively,continued their exploration efforts. FOGL raised a further £10 million frominvestors in May 2005 and we subscribed £2 million in that placing. We took theopportunity in February 2006 of recouping that cash outlay when we sold 1.8million shares generating proceeds of £2.4 million and a profit of £2.1 million. This transaction increased the Group's distributable reserves and providesadditional financial flexibility. At the end of the year the Group had net cashbalances of £0.3 million (2005: Borrowings £0.4 million) and the market value ofthe two investments was £23.3 million, equivalent to 278 pence per FIH share,compared with book cost of £2.6 million. The Group now has a solid operating platform and a strong cash position fromwhich to move forward and the exploration investments will provide anexceptional return in the event of a successful outcome. Your Board will seekto continue to deliver value to shareholders and as such is proposing toincrease the annual dividend by 8.3% from 6p to 6.5p. Financial Summary In the year to 31 March 2006 turnover rose by 23% to £15.7 million (2005: £12.8million) and the profit before taxation including exceptional items increased byto £3.1 million (2005: £0.9 million). Underlying profits before theamortisation of goodwill and exceptional items, including a first full yearcontribution from PHFC, rose by 61% to £1,560,000 (2005: £972,000). Basicearnings per share rose to 32.6 pence (2005: 8.2p). Basic earnings per share onunderlying profits increased 40% to 12.7 pence per share (2005: 9.1p). Operations Falkland Islands Retail sales on the Islands were helped by the introduction of a new in storedelicatessen and coffee shop and further expansion of the product range. Thesteady increase in the number of cruise ship visitors visiting Stanley alsohelped to boost revenues at the Capstan gift shop. However, in contrast thegroup's DIY retailing businesses suffered from the slow down in the localeconomy and a reduction in business confidence resulting from continued lowlevels of squid catches at the start of the year. After a good year in 2005, the Land Rover dealership had a more difficult yearand the numbers of vehicle sales fell although a contract to modify existing MoDvehicles helped the dealership achieve satisfactory results. The Upland GooseHotel faced fierce challenges from newly refurbished competition in Stanley andproduced a disappointing result, accordingly we have taken the decision toreduce its carrying value by £0.4 million. On a more positive note the Group's insurance agency continued to make steadyprogress, consolidating its reputation for high levels of customer service andnet rental income from FIC's portfolio of 35 commercial and residentialproperties in Stanley also moved ahead. Darwin Shipping was able to maintain itscontribution despite rising freight and fuel costs by changing from charteringits own vessels to taking space on Ministry of Defence Supply vessels which givethe added advantage of more frequent vessel sailings per year, giving improvedservice levels and choice for customers. Port Services continued to make an important contribution although profit levelsfell slightly in the face of local competition. With poor squid catches in theearly part of the financial year the Fishing Agency business only made a modestcontribution. However the Agency team were instrumental in developing a newtourist focussed business stream. This comprises Mini Bus tours for cruise linepassengers and a former London double decker Routemaster bus which now runsalong the sea front providing visitors with a unique view of Stanley. Furthergrowth is expected from these tourist services in future years. PHFC PHFC's continuing ferry revenues of £3.3 million were in line with expectations. Passenger numbers declined marginally on the previous year as the effects ofthe introduction of parking charges in Gosport were felt. However revenues werebuoyed by increased activity around Portsmouth Harbour linked to theInternational Fleet Review and Festival of the Sea in June and July 2005. In May 2005 PHFC took delivery a new ferry vessel, Spirit of Portsmouth at atotal cost of £1.9 million underlining the commitment of the Company tomodernising its fleet and maintaining the highest levels of service andpassenger safety. The cost of the ferry was substantially paid last year. Exploration Activities Falkland Gold and Minerals Limited (FGML) - FIH Shareholding 14.4% (2005 14.4%) FGML is now well into the second year of its exploration programme in theFalklands with its operational base in Goose Green. The work programme has beendesigned to establish the source of alluvial gold discovered in some of thestreams in the Islands. As most of the target areas are covered with peat, theinitial drilling targets were identified from the aero magnetic survey and thishas been followed up by focused ground magnetic surveys. By the end of May 2006, total investigative drilling totalled over 14,000m onten targets while a further 8,000m is planned on seven further targets. Inaddition, geochemical peat soil sampling will be carried out on two additionalareas of interest. It is now probable that the additional work resulting fromincreased knowledge of the subsurface terrain will extend the work programmewell into 2007 The British Geological Survey has recently completed a review of the methodologyemployed and the exploration work carried out to date. FGML is retaining theirservices to provide additional interpretative capacity as more data becomesavailable. The market value of the Group's shareholding of 11,250,000 shares in FGML(14.4%) at 31 March 2006 was £1.8 million (book value: £0.2 million). Falkland Oil and Gas (FOGL) - FIH Shareholding 16.3% (2005 18.1%) FOGL has continued to make good progress in acquiring and analysing data overtheir 79,000 sqkm licences to the South and East of the Falklands in order todefine and prioritise targets for drilling. Over the Austral Summer a further13,000 km of 2D seismic was acquired bringing the total recorded by FOGL to22,450 km. The scale of the opportunity for FOGL is such that it became clear to the FOGLboard that it was necessary to increase management resources in the UK to copewith the work load. In January 2006, Tim Bushell joined as Chief Executivesucceeding John Armstrong who had served as Executive Chairman since theformation of the Company. At the same time John, who will remain on the board,was succeeded as Executive Chairman by Richard Liddell. Tim is a qualifiedgeologist and has spent the last 10 years developing the exploration andproduction interests of Paladin Resources in Norway. Prior to this he wasresponsible for LASMO's South Atlantic interests which included the explorationcampaign in the North Falklands Basin in 1998. Discussions are continuing with possible partners while further analysis andinterpretation of data continues. The current short term objective is to planand contract for the exploration effort over the next Austral Summer. The technical data continues to indicate that a major new petroleum provincecould lie within the license area. In February 2006 in order to provide the Group with additional financialflexibility FIH sold 1.8 million shares in FOGL generating proceeds of £2.4million and a profit of £2.1 million. The market value of the Group's remainingshareholding of 15 million shares at 31 March 2006 was £21.5 million (bookvalue: £2.4 million). People On 10 June 2005 John Foster, was appointed Managing Director succeeding BryanMcGreal who had been with the group since 1987. John is a Chartered Accountantwith wide commercial and financial experience and has held directorships in anumber of UK listed companies. On 31 March 2006 Tony Knightley retired from the Board after many years with theGroup first as Company Secretary and then latterly as Finance Director. TheBoard would like to thank Tony for his contribution to FIH. FIH's GroupFinancial Controller Mike West was appointed Company Secretary on 1 April 2006. On 26 July 2005, Mike Killingley was appointed as a non executive director tothe Board of FIH. Mike is also Chairman of the PHFC board, is a former Partnerwith KPMG and is Chairman of Beale Plc and Conder Environmental PLC. Finally we would like to thank the staff and employees of the FIH group both inthe Falklands and in the UK for their contribution and hard work over the pastyear. As a group focused on providing essential services to local customers thecare and dedication shown by our staff in delivering these services underpinsthe continued success of your Company. Outlook As we noted last year our strategy is to ensure that the future of your Companyis not wholly dependent upon our investments in the listed Falkland explorationcompanies. The PHFC acquisition was the first step towards building ameaningful business outside the Falklands and we remain keen to identify UKbased companies for acquisition, subject to them enhancing the underlying valueof FIH shares. As we start the new financial year the general backdrop to trading in theFalklands has improved and this should help underpin modest growth in thecurrent year. The outlook for PHFC also remains stable although the absence ofthe maritime festivals this summer will mean that the contribution from theferry business will fall back from the record levels seen in 2005/6. Prospects for the Falklands over the medium term remain positive as expenditureon oil and mineral exploration activities continues. Overall, we remainconfident that the Group's solid level of underlying profitability will bemaintained in the current year. David Hudd John FosterChairman Managing Director 4 July 2006 Group profit and loss accountfor the year ended 31 March 2006 2006 2005 As restated Notes £'000 £'000 Turnover Continuing operations 15,209 12,206 Discontinued operations 527 548 1, 2 Turnover 15,736 12,754 2 Cost of sales (9,855) (8,708) 2 Gross profit 5,881 4,046 Administrative expenses (4,401) (3,280) Amortisation of goodwill (204) (65) 3 Administrative expenses - exceptional costs (487) - 2 Total administrative expenses (5,092) (3,345) 2 Other operating income 344 291 Operating profit before exceptional items and amortisation of 1,824 1,057 goodwill Amortisation of goodwill (204) (65) Exceptional costs (487) - Group operating profit 1,133 992 Continuing operations 1,132 995 Discontinued operations 1 (3) 2 Group operating profit 1,133 992 Profit on sale of discontinued operation 84 - Profit on sale of fixed asset investment 2,135 - 4 Net interest expense (264) (85) Profit on ordinary activities before taxation 3,088 907 Taxation (374) (306) Profit on ordinary activities after taxation for the financial year 2,714 601 As restated 5 Earnings per share Basic 32.6p 8.2p Diluted 32.2p 8.1p Proposed dividend per ordinary share 6.5p 6.0p Group balance sheetas at 31 March 2006 As restated Notes 2006 2005 £'000 £'000 £'000 £'000 Fixed assets Intangible assets 3,979 4,136 Tangible assets 8,042 8,501 Investments 2,610 900 14,631 13,537 Current assets Stocks 3,107 3,308 Debtors due within one year 1,789 1,788 Debtors due after one year 48 24 1,837 1,812 6 Cash at bank and in hand 3,601 914 8,545 6,034 Creditors: amounts falling due within one year (4,797) (5,419) Net current assets 3,748 615 Total assets less current liabilities 18,379 14,152 Creditors: amounts falling due after more than one (2,765) (831) year Provisions for liabilities and charges (853) (882) Net Pension Scheme liabilities (1,909) (1,648) Net assets 12,852 10,791 Capital and reserves Called up share capital 838 838 Share premium account 7,064 7,061 Other reserves 703 703 Revenue reserves 4,247 2,189 7 Equity shareholders' funds 12,852 10,791 Group cash flow statementfor the year ended 31 March 2006 Reconciliation of operating profit to net cash inflow from operating activities As restated 2006 2005 £'000 £'000 Operating profit 1,133 992 Profit on sale of fixed assets (12) - Amortisation of goodwill 204 65 Depreciation charges 838 292 (Increase) / decrease in stocks 201 (229) Increase in debtors (12) (256) Decrease in creditors and provisions (687) (87) Net cash inflow from operating activities 1,665 777 Cash flow statement 2006 2005 £'000 £'000 £'000 £'000 Cash flow from operating activities 1,665 777 Returns on investments and servicing of finance Interest received 38 47 Interest paid (203) (31) (165) 16 Taxation UK Corporation tax paid (250) (169) Overseas taxation paid (141) (104) (391) (273) Capital expenditure and financial investment Purchase of tangible fixed assets (505) (1,243) Purchase of investments (2,000) (622) Receipts from sale of tangible fixed assets 15 144 Receipts from sale of investment 2,427 - (63) (1,721) Acquisitions Sale of subsidiary undertaking 178 - Investment in subsidiary undertaking - (5,556) 178 (5,556) Dividends paid on shares classified in shareholders' funds (502) (372) Cash inflow/(outflow) before financing 722 (7,129) Financing Repayment of secured loan (524) (279) Repayment of Loan Notes (43) - Issue of ordinary share capital 3 5,472 New secured loan 2,609 1,000 Sale of own shares - 112 Share options exercised - 98 Cash flow from financing 2,045 6,403 Increase/(decrease) in cash in the year 2,767 (726) Consolidated statement of total recognised gains and lossesfor the year ended 31 March 2006 As restated 2006 2005 £'000 £'000 £'000 £'000 Profit for the year 2,714 601 Actuarial loss on pension schemes PHFC Scheme (loss) (88) - FIC Scheme gain / (loss) 57 (57) (31) (57) Movement on deferred tax asset relating to pension (123) 17 scheme Total recognised gains and losses relating to the 2,560 567 financial year Prior year adjustment - FRS 17 (635) Total gains and losses recognised since last annual 1,925 report Notes to the Financial Statementsfor the year ended 31 March 2006 1. Segmental information The table sets out information for both of the group's industry segments andgeographic areas of operation. General Trading Ferry Services in the Falkland in the United Kingdom Total Islands As restated As restated As restated 2006 2005 2006 2005 2006 2005 £'000 £'000 £'000 £'000 £'000 £'000 Turnover - continuing 11,902 11,468 3,307 738 15,209 12,206 operations Discontinued operations - Cobham Travel - - 527 548 527 548 11,902 11,468 3,834 1,286 15,736 12,754 Segment operating profit 670 987 463 5 1,133 992 Segment operating profit before amortisation of goodwill and exceptional items 1,105 987 719 70 1,824 1,057 Interest payable (212) (79) (52) (6) (264) (85) Underlying profit before tax before amortisation of goodwill and exceptional items 893 908 667 64 1,560 972 Goodwill amortisation - - (204) (65) (204) (65) Exceptional costs (435) - (52) - (487) - Profit on sale of fixed asset investments 2,135 - - 2,135 - Profit on sale of discontinued - - 84 - 84 - operations Group profit before taxation 2,593 908 495 (1) 3,088 907 Net assets 8,941 7,650 3,911 3,141 12,852 10,791 2. Analysis of continuing and discontinued operations As restated 2006 2005 Continuing Discontinued Total Continuing Discontinued Total £'000 £'000 £'000 £'000 £'000 £'000Turnover 15,209 527 15,736 12,206 548 12,754 Cost of sales (9,384) (471) (9,855) (8,212) (496) (8,708) Gross profit 5,825 56 5,881 3,994 52 4,046 Administrative expenses (5,034) (58) (5,092) (3,286) (59) (3,345) Other operating income 341 3 344 287 4 291 Operating profit/(loss) 1,132 1 1,133 995 (3) 992 3. Exceptional costs 2006 2005 £'000 £'000 Compensation for loss of office 105 -Impairment of fixed assets 382 - 487 - A payment of £105,000 was made to a director as compensation for loss of office. Following a disappointing period of trading, a decision was taken to write downthe carrying value of the Upland Goose Hotel. 4. Net interest expense As restated 2006 2005 £'000 £'000 Interest receivable 38 47Expected return on pension scheme assets 9 - 47 47 Interest payable on bank loans (194) (41)Interest cost on pension scheme liabilities (117) (91) (264) (85) 5. Earnings per share As restated 2006 2005 £'000 £'000Profits are calculated as follows:Profit on ordinary activities after taxation for the financial year 2,714 601 The profits above form the basis of calculating the basic and diluted earningsper share. 2006 2005 Basic earnings per share 32.6p 8.2pDiluted earnings per share 32.2p 8.1p Earnings per share on underlying profits before amortisation of goodwill,exceptional items and disposals 2006 2005 £'000 £'000 Underlying profit before tax (note 2) 1,560 972Less: tax thereon (504) (306) Underlying profit after tax 1,056 666 2006 2005 Earnings per share on underlying profit before amortisation of goodwill, 12.7p 9.1pexceptional costs and disposalsDiluted earnings per share on underlying profit before amortisation of goodwill, 12.5p 9.0pexceptional costs and disposals 2006 2005 Number Number Allotted called up and fully paid - Ordinary shares of 10p each 8,380,066 7,391,715Less: shares held under ESOP (note 21) (55,417) (55,417) Average number of shares in issue excluding ESOP 8,324,649 7,336,298Maximum dilution re share options 109,736 91,350 Diluted weighted average number of ordinary shares in issue 8,434,385 7,427,648 The additional calculation of earnings per share is given in order to provide amore meaningful comparison of underlying performance. The calculation of basic, pre amortisation and underlying earnings per share isbased on the weighted average number of ordinary shares in issue during theyear, excluding shares held by the Employee Share Ownership Plan, of 8,324,649(2005: 7,336,298). The calculation of fully diluted earnings per share is basedon the ordinary shares in issue plus the dilutive effect of outstanding sharesoptions, resulting in a weighted average number of shares of 8,434,385 (2005:7,427,648). 6. Net debt Group Company 2006 2005 2006 2005 The bank loans, overdrafts and unsecured loan notes £'000 £'000 £'000 £'000 are repayable as follows: Within one year (542) (515) (342) (343) Between one and two years (542) (389) (342) (343) Between two and five years (1,590) (442) (790) (442) Over five years (634) - - - (3,308) (1,346) (1,474) (1,128) Cash/(overdraft) 3,601 914 1,055 (180) Net funds/(debt) 293 (432) (419) (1,308) The Group's financial instruments comprise cash and borrowings and arisedirectly from its operations. The principal function of these financialinstruments is to fund the Group's operations. Cash at bank is money on call orshort term deposit. This together with cash in hand is used to fund theday-to-day operations. The Group has an unutilised overdraft facility of £2.3million. 7. Reconciliation of movement in shareholders' funds Group Company 2006 2005 2006 2005 £'000 £'000 £'000 £'000 Opening shareholders' funds as previously reported 10,924 3,515 15,258 6,713 Prior year adjustment - FRS 17 (635) (613) - - Prior year adjustment - FRS 21 502 351 (363) (307) Opening shareholders funds as restated 10,791 3,253 14,895 6,406 Profit for the financial year 2,714 601 2,733 1,518 Dividends on shares classified in shareholders' (502) (369) (502) (369) funds Other recognised gains and losses (154) (34) - - Issue of shares 3 7,228 3 7,228 Sale of own shares - 112 - 112 12,852 10,791 17,129 14,895 8. Statutory information The financial information does not constitute the Company's statutory accountsfor the years ended 31 March 2006 and 2005 but is derived from those accounts.Statutory accounts for 2005 have been delivered to the Registrar of Companies,and those for 2006 will be delivered following the Company's Annual GeneralMeeting. The auditors have reported on those; their reports were unqualifiedand did not contain statements under section 237(2) or (3) of the Companies Act1985. Copies of Falkland Islands Holdings plc annual report and financial statementswill be with shareholders in mid July. This information is provided by RNS The company news service from the London Stock Exchange