Fih Group Regulatory News (FIH)

13 Jun 2005 07:00

Falkland Islands Holdings PLC13 June 2005 13 June 2005 Falkland Islands Holdings plc Preliminary Results for the year ended 31 March 2005 Falkland Islands Holdings ("FIH"), an AIM listed company operating a range ofbusinesses in the Falkland Islands, and the Portsmouth Harbour Ferry Company inthe UK, announces preliminary results for the year ended 31 March 2005. Financial Highlights • Turnover up 15.1% to £12.8 million (2004: £11.1m)• Underlying operating profits strong, up 13.6% to £963,000 (2004: £847,000)• Profit before taxation up 6.0% to £898,000 (2004: £847,000) despite a step change in the level of central overheads, £533,000 (2004: £283,000) reflecting the increased scale of corporate activity• Basic EPS before goodwill amortisation 8.9p (2004: 9.7p)• Dividend per share increased by 4.4% to 6.0p (2004: 5.75p) Operating Highlights • Falkland Islands' operating profits increased by 13% despite third successive year of poor Illex squid catches o Previous investment in the West Store boosted sales o Hotel business underwent a significant upgrade o Vehicle sales increased • Completed acquisition of Portsmouth Harbour Ferry Company (PHFC)• Successful admission to AIM of Falkland Oil and Gas Limited ("FOGL") and Falkland Gold and Minerals Limited ("FGML") in which FIH retains 18% and 14% respectively. At the year end, the market value of FIH's interest in these exploration companies was £21.4m Outlook • A full year's contribution from PHFC which is set to benefit from its new ferry, The Spirit of Portsmouth, and increased activity around the International Festival of the Sea and the Trafalgar 200 celebrations• Exposure to oil and minerals exploration through shareholdings in FOGL and FGML• Trading in the Falklands is benefiting from the increased level of exploration activity• Continue to seek earnings enhancing complementary acquisitions David Hudd, Chairman of Falkland Islands Holdings plc, said: "This has been a year of transformation for FIH during which its scale,valuation and prospects have moved to a higher level. The acquisition of PHFChas given the Group an excellent, cash generative business in the UK whichsignificantly improves the quality of our earnings. It also represents a goodbase on which to build in the domestic maritime sector. "With a full year's contribution from PHFC, this should be another year ofprogress for FIH" Enquiries: Falkland Islands HoldingsDavid Hudd, Chairman Tel: 07771 893 267 College Hill Tel: 020 7457 2020Ben Brewerton/Jim Joseph/Nick Elwes CHAIRMAN'S STATEMENT Overview This has been a year of transformation for your Company during which its scale,valuation and prospects have moved to a higher level. The equity base has beenincreased by some 36% through the issue of new shares and the Group now has amuch larger institutional representation amongst its shareholders. The flotations of Falkland Oil and Gas (FOGL) and of Falkland Gold and Minerals(FGML) have placed a substantial value on our shareholdings and they have bothraised the required funds for major exploration programmes. A successful outcomefor either company will increase the value of our shareholdings and they bothhave the potential to transform the economy of the Falklands which would be ofenormous benefit to the Company. The acquisition in December of the Portsmouth Harbour Ferry Company (PHFC) hasgiven the Group an excellent cash generative business in the UK whichsignificantly improves the quality of the Group's earnings. We have a strongtrack record in operating essential services like these. The trading environment in the Falklands has remained subdued but with thebenefit of three months trading from PHFC a satisfactory result has beenachieved. Your Board, as a sign of its confidence in the future, is pleased to recommend a4.4% increase in the dividend from 5.75p to 6.0p. Financial summary Trading In the year to 31 March 2005 turnover rose by 15.1% to £12.8m (2004: £11.1m) andthe profit before taxation increased by 6.0% to £898,000 (2004: £847,000).Underlying profits before the amortisation of goodwill rose by 13.6% to £963,000(2004: £847,000). Basic earnings per share before goodwill amortisation were 8.9pence per share (2004: 9.7p). PHFC, which was included for 16 weeks in what is the quietest period of itsyear, accounted for turnover of £1.3m and profit before tax and goodwillamortisation of £202,000.This result was in line with our expectations butprofits declined marginally in 2004/5 caused by increased salary and fuel costsand also the impact on passenger numbers of the introduction of parking chargesin Gosport in November 2004. To offset these factors fares were increased by12.5% on 1 June 2005. Turnover in the group's core Falkland Islands business increased marginally to£11.5m (2004: £11.1m) as the group saw the benefit of an earlier investment toincrease the size of retailing space at the flagship West Store in Stanley.Vehicle sales remained strong and insurance income also improved. Conversely thefishing agency had a quiet year and the hotel incurred losses as a significantupgrade was carried out and the benefits of this investment will be felt in thecoming years. However, despite the poor fishing season, the Falkland Islandsbusinesses achieved a profit of £1,294,000 (2004: restated £1,130,000). Cash Flow Cash flow at the operating level was satisfactory at £0.8m and more closelyreflected underlying profitability than the exceptionally high levels seen in2004 which were due largely to favourable working capital movements. Tax anddividend payments totalled £0.6m in the year and were adequately covered by thenet cash flow from operating activities. During the year the group invested heavily to broaden its operating base tosecure the future development of the business. In the year to March 2005,completion of the acquisition of PHFC had a cash cost of £5.7million (£0.2million of which will be paid next year) and a further £0.6million was investedin FOGL and FGML prior to their flotations. Within the group the cost of completing the purchase of the new ferry Spirit ofPortsmouth was £1 million She entered service in June 2005 and with anestimated useful life of 30 years it will operate as both a ferry and a cruiseship in the harbour and Solent area. The cash cost of the acquisition of PHFC together with new capital expendituretotalled £7.3million and was funded largely by share placings with newInstitutional investors which raised £5.5million. The balance of £1.8m beingfunded by the draw down of loans (£1.0m) ,the issue of new shares and the use ofexisting cash resources. Investments The Group's shareholdings in FOGL and FGML are stated at cost of £900,000 in theaccounts and their market value at 31 March 2005 was £21.4 million equivalent to£2.55 per FIH share. Acquisition Control of PHFC was obtained on 9 December 2004. PHFC has operated a passengerferry service from Gosport to Portsmouth for over 125 years and its acquisitiongreatly strengthens the group's cash flow and profitability. The acquisition wasmade at a total cost of £7.5million and was funded by cash of £5.7million andthe balance by the issue of new FIH shares and loan notes. Upon acquisition, PHFC had net assets of £3.3million giving goodwill of£4.2million, which is being written off over 20 years. Balance Sheet The financial statements at 31 March 2005 reflect the acquisition of PHFC andthe further investments in the exploration companies noted above .The year endposition also reflects the strengthening of the group's Balance Sheet which sawshareholders' funds treble during the year from £3.5m to £10.9m following theexpansion of the group's capital base during the year. Tangible assets acquired with the purchase of PHFC included freehold land andbuildings with a value of £1.3m, and ferries and other fixed assets totalling£2.8m. Together with the £1.0million spent on completing the purchase of theSpirit of Portsmouth, these items largely account for the £4.9m increase intangible fixed assets in the year. Working capital levels increased in the year in part reflecting the expansion ofthe business following the acquisition of PHFC. In addition stock levelsincreased as a result of the continued expansion of the group's retailactivities in the Falklands. Other changes in working capital reflect timingdifferences and a return to debtor and creditor levels seen in earlier years. The group ended the year with a strong liquidity position and at 31 March 2005,with 90% of the new ferry paid for, the group had cash balances of £914,000 andunutilised banking facilities of £3.3million Strategic Transformation The acquisition of a good solid business in the United Kingdom complementary toour businesses in the Falklands has been an objective since the Company movedto AIM in 2003 .The acquisition of PHFC fulfilled these criteria, and althoughthe acquisition proved to be a difficult process, the purchase was finallycompleted in December . I am pleased to say that the ferry service has continued to function withoutdisruption and its financial performance has been in line with our expectations.The new ferry, Spirit of Portsmouth, was launched on May 11 and is now in fullservice. 2005 promises to be a busy year for PHFC with the InternationalFestival of the Sea and Trafalgar 200 celebrations being based in Portsmouth. In line with our undertakings to the people of Portsmouth and Gosport we havemaintained a local Board of directors for PHFC and we thank the Board membersfor their contribution. Exploration Activities The flotations of FOGL and FGML in the last quarter of 2004 raised a total of£22million from institutions and the public. Unfortunately it was not possibleto give priority in those issues to our own shareholders but through our longterm shareholdings of 18.1% in FOGL and 14.4% in FGML shareholders will benefitfrom any future success of these exploration ventures. Both companies have made good progress in carrying out the explorationprogrammes they outlined at flotation. FOGL, which raised £12 million, acquireda further 50,000 sq km acreage shortly after flotation and since then 2D seismic surveys have identified over 130 leads, compared with just 8 which had beenidentified at flotation. This has led its Board to expand significantly theplanned exploration programme. Accordingly, the outlook for FOGL, which has anenviable position with effectively a 90% interest in 83,000 sq km (almost 20million acres), is exciting. Shareholders can follow developments on its websitewww.FOGL.com The substantial increase in the scale of the work programme has been funded inMay this year by a £10 million Institutional share placing in May 2005. Yourcompany invested £2million which marginally increased our shareholding to 18.3%.The share price has performed well since flotation and the placing was achieveddespite recent adverse sentiment in the sector. Progress at FGML which raised £10million has also made a good start. Initial setup work has included the commissioning of two drilling rigs and theestablishment of a drilling base at Goose Green. A 1500km ground magnetic surveyhas now been completed and the company has completed three months of its initialprogramme drilling. The results of drilling and the survey are currently beinganalysed and further information will be available soon. Results will be postedon the FGML web site www.FGML.com Your Board views shareholdings in both these companies as long term investmentsand believes that shareholders will benefit from their retention. People We were pleased to welcome John Foster, who joined the Board in January 2005 asan executive director and today he succeeds Bryan McGreal as Managing Director.John's experience over 20 years in advising, managing and investing in a varietyof companies is well fitted to our future plans. Bryan, who is now 65, will beretiring from the Board at the Annual General Meeting. He has been with theGroup since 1987 and has been Managing Director since 1997. His shrewd judgementand overall contribution have been of great value to shareholders and I wouldlike to thank him most warmly on your behalf. I am delighted that his serviceswill continue to be available to us as he has agreed to remain as a consultantfor a year. We welcome to the Group the employees of PHFC and we look forward to workingwith them. I would also like to express my appreciation to all our employees fortheir ongoing dedication to the business. Outlook Our strategy is to ensure that the future of your company is not whollydependent upon our investments in the listed Falkland exploration companies. In2005, with the PHFC acquisition, the first steps have been taken towardsbuilding a meaningful business outside the Falklands. PHFC represents a goodbase on which we can build in the domestic maritime sector. The short term outlook in the Falklands remains somewhat clouded by the falloutfrom the third successive year of poor Illex catches. However, the muchincreased level of oil and minerals exploration activity is helping confidencein the Islands.With a full year's contribution from PHFC where we will benefitfrom the increased fares which apply from 1 June 2005, a satisfactory resultshould be achieved for shareholders. David Hudd Chairman 10 June 2005 Group profit and loss accountfor the year ended 31 March 2005 Continuing operations Total Total Acquisitions 2005 2004 £'000 £'000 £'000 £'000 Turnover 11,468 1,286 12,754 11,082 Cost of sales (7,910) (798) (8,708) (7,762) Gross profit 3,558 488 4,046 3,320 Administrative expenses (3,091) (354) (3,445) (2,743)Other operating income 287 4 291 283 Operating profit 754 138 892 860 Net interest expense 7 (1) 6 (13) Profit on ordinary activities beforetaxation 761 137 898 847 Taxation (247) (62) (309) (255) Profit on ordinary activities after taxation 514 75 589 592 Dividends (520) (351) (Loss)/retained profit 69 241 Earnings per shareBasic 8.0p 9.7pDiluted 7.9p 9.4pBasic before amortisation of goodwill 8.9p 9.7p Dividend per ordinary share 6.0p 5.75p Group balance sheetas at 31 March 2005 2005 2004 £'000 £'000 £'000 £'000Fixed assetsIntangible assets 4,136 89Tangible assets 8,501 3,552Investment in joint venture - share of gross assets - 189 Other investments 900 - 13,537 3,830 Current assetsStocks 3,308 3,079Debtors due within one year 1,788 1,336Debtors due after one year 24 42 1,812 1,378Cash at bank and in hand 914 1,183 6,034 5,640 Creditors: amounts falling due within one year (5,921) (4,798) Net current assets 113 842 Total assets less current liabilities 13,650 4,672 Creditors: amounts falling due after more than oneyear (831) - Provisions for liabilities and charges (1,895) (1,157) Net assets 10,924 3,515 Capital and reservesCalled up share capital 838 617Share premium account 7,061 54Other reserves 703 703Reserve for own shares (83) (112)Profit and loss account 2,405 2,253 Equity shareholders' funds 10,924 3,515 Group cash flow statementfor the year ended 31 March 2005 Reconciliation of operating profit to net cash inflow from operating activities 2005 2004 £'000 £'000 Operating profit 892 860Amortisation of goodwill 65 -Depreciation charges 292 226Increase in stocks (229) (221)(Increase)/Decrease in debtors (256) 337(Decrease)/Increase in creditors and provisions 13 542 Net cash inflow from operating activities 777 1,744 Cash flow statement 2005 2004 £'000 £'000 £'000 £'000 Cash flow from operating activities 777 1,744 Returns on investments and servicing of financeInterest received 47 12Interest paid (31) (25) 16 (13)TaxationUK Corporation tax paid (169) (101)Overseas taxation paid (104) (207) (273) (308)Capital expenditure and financial investmentPurchase of tangible fixed assets (1,243) (503)Purchase of investments (622) (26)Receipts from sale of tangible fixed assets 144 - (1,721) (529)AcquisitionsInvestment in Joint Ventures - (83)Investment in subsidiary undertaking (5,556) - (5,556) (83) Equity dividends paid (372) (335) Cash (outflow)/inflow before financing (7,129) 476 FinancingRepayment of secured loan (279) (250)Issue of ordinary share capital 5,472 -Additional secured loan 1,000 -Share options exercised 98 Sale of own shares 112 - 6,403 (250) (Decrease)/increase in cash (726) 226 Reconciliation of cash flow to movement in net funds 2005 2004 £'000 £'000 (Decrease)/increase in cash in the year (726) 226Cash (inflow)/outflow from (increase)/decrease in debt (848) 250 Change in net debt resulting from cash flows (1,574) 476Change in net debt resulting from acquisitions 209 -Net cash at start of year 933 457 Net cash at end of year (432) 933 Analysis of changes in net funds As at As at 31 31 March March 2004 Cash flows Acquisitions 2005 £'000 £'000 £'000 £'000 Cash at bank and in hand 1,183 (698) 429 914Overdraft - (28) (52) (80) 1,183 (726) 377 834Debt due within one year (250) (97) (88) (435)Debt due after one year - (751) (80) (831) 933 (1,574) 209 (432) Purchase of subsidiary Fair value Book value adjustments Total £'000 £'000 £'000 Net assets acquiredTangible fixed assets 3,698 444 4,142Debtors 146 - 146Taxation recoverable 133 (116) 17Cash at bank and in hand 429 - 429Creditors (570) (240) (810)Bank overdrafts (52) - (52)Loans and finance leases (168) - (168)Deferred taxation (452) 72 (380) 3324Goodwill 4,201 7525 Satisfied byShares allotted 1,658Cash 5,739Loan notes 128 7,525 Notes 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 Islands in the United Kingdom Total 2005 2004 2005 2004 2005 2004 £'000 £'000 £'000 £'000 £'000 £'000 Turnover 11,468 11,082 1,286 - 12,754 11,082 Segment Operating profit before head office costs 1,287 1,143 203 - 1,490 1,143 Segment profit before taxation and head office costs 1,294 1,130 202 - 1,496 1,130 Head office costs (533) (283) Goodwill amortisation (65) - Group profit before taxation 898 847 Net assets 7,783 3,515 3,141 - 10,924 3,515 2. Taxation 2005 2004 £'000 £'000The tax charge based on profit for the period comprises:UK corporation tax at 30% 226 227Less double taxation relief (149) (106) 77 121Overseas taxation at 25% (2004: 32.5%) 231 158Adjustments in respect of prior periods (31) (24) Total current tax 277 255Deferred taxation 32 - 309 255 3. The Directors recommended a dividend of 6.0p per share (2004:5.75p)payable on 3rd November 2005 to shareholders on the register at close ofbusiness on 7th October 2005. 4. Earnings per share has been calculated on profit after tax of £589,000(2004:£592,000) and based on the weighted average number of shares in issueexcluding shares held in the Employee ownership plan of 7,336,298 (2004:6,095,037). The fully diluted earnings have been further adjusted by thedilutive outstanding share options resulting in a weighted average number ofshares of 7,427,648 (2004:6,322,547) 5. The Financial information does not constitute the Company's statutoryaccounts for the years ended 31st March 2005 or 2004 but is derived from thoseaccounts. Statutory accounts for 2004 have been delivered to the Registrar ofCompanies, and those for 2005 will be delivered following the Company's AnnualGeneral Meeting. The auditors have reported on those accounts; their reportswere unqualified and did not contain statements under section 237(2) or (3) ofthe Companies Act 1985. 6. Copies of 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