Fih Group Regulatory News (FIH)

3rd December 2010

Falkland Islands Holdings plc

("FIH" or "the Group")

Results for the six months ended 30 September 2010

FIH, the AIM quoted international services group which owns essential services businesses focused on transport and logistics, and which has a major shareholding in AIM quoted oil exploration company Falkland Oil and Gas Limited, is pleased to announce results for the six months ended 30 September 2010.

Financial Highlights

·; Turnover of £14.4 million (H1 2009: £13.8 million)

·; Reported profit before tax of £0.9 million (H1 2009: £1.2 million)

·; Underlying profit before tax* of £1.15 million (H1 2009: £1.17 million)

·; Diluted earnings per share on underlying earnings of 8.9p (H1 2009: 9.2p)

·; Interim dividend maintained at 4.0p per share (H1 2009: 4.0p per share)

·; Net borrowings of £2.3 million at 30 September 2010 (31 March 2010: £1.5 million)

·; Net interest charges reduced to £0.13m (H1 2009: £0.27 million)

·; Interest cover increased to over 9.9x (H1 2009: 5.3x)

*Underlying profit before tax is defined as profit before tax, amortisation and non-trading items.

Operating Highlights

Falkland Islands Company

·; Strong growth

·; Retail sales from the expanded West Store increased by 23% to £4.4 million (H1 2009: £3.5 million)

·; Automotive sales including vehicle hire increased by 17%

·; Property portfolio increased with completion of nine houses

·; Increase in demand for support services for oil exploration

Portsmouth Harbour Ferry Company

·; Profits marginally down on unchanged turnover

·; New pontoon agreement reached with local council with completion expected Spring 2011

Momart

·; Revenue from exhibitions fell by 30% in challenging trading conditions

·; Revenues from commercial galleries and artists rose by 38%

·; Overall revenues declined by 7.6%

·; Management team strengthened with new Managing Director and Finance Director

·; Key exhibition highlights included: Damien Hirst in Monaco, Shanghai Expo by the British Museum, V&A and Science Museum

Falkland Oil & Gas Limited ('FOGL') (in which FIH holds a strategic interest)

·; FOGL and partner BHP Billiton drilled first well - Toroa

·; No reservoired hydrocarbons found but important geological and technical information obtained

·; Falkland Islands Government has extended the licence term for the Northern Licence area containing the Loligo prospect for a further twelve months to December 2011

·; BHP Billiton is looking for a suitable rig to drill the Loligo prospect.

David Hudd, Chairman of Falkland Islands Holdings plc, said:

"The results for the first half of the current financial year were satisfactory, with a strong performance from FIC following an increase in economic activity in the Falkland Islands and the extension of the West Store. Trading conditions in the UK were more challenging leading to a reduction in both revenues and profits at Momart. PHFC saw a modest decline in profits on unchanged revenues.

"Overall results are in line with our expectations and we are pleased to propose a maintained interim dividend of 4.0p per share.

"For the second half of the year, we anticipate the continuation of the trends seen in the first half, with pressure on profits in the UK being offset by a strong performance in the Falkland Islands."

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Enquiries:

Copies of the Interim Report will be available on the Company's website www.fihplc.com

Chairman's and Managing Director's Review

Overall the Group's results for the six months to 30 September 2010 were satisfactory. Despite challenging economic conditions in the UK, strong growth in the Group's Falkland Islands business resulted in Group turnover increasing by 3.8% to £14.35 million (2009: £13.82 million). Pre-tax profits (before amortisation and non-trading items) were in line with our expectations at £1.15 million (2009: £1.17 million).

After amortisation and in the absence of the non-trading credits seen in the prior year of £0.25 million, reported profits before tax were £0.95 million (2009: £1.22 million). Diluted earnings per share based on reported earnings were 6.7p (2009: 9.7p) and EPS based on underlying earnings were 8.9p (2009: 9.2p).

The Board is proposing an unchanged interim dividend of 4.0p per share (2009: 4.0p per share) which will be paid on 28 January 2011 to shareholders on the register at the close of business on 17 December 2010.

The Group's finances remain robust. At 30 September 2010 the Group had net borrowings of £2.3 million (31 March 2010: £1.5 million) including cash balances of £2.3 million (31 March 2010: £3.8 million). In the six months to 30 September 2010 the net finance charges payable by the Group, including charges in respect of pension liabilities, fell to £0.13 million (2009: £0.27 million).

Operating Review

Falkland Islands Company (FIC)

FIC generated increased operating profits of £0.59 million (2009: £0.51 million). After the allocation of finance charges and interest, profits before tax increased by 17% to £0.55 million (2009: £0.47 million).

FIC showed strong growth over the period with revenue increasing by 18.4% to £6.5 million (2009: £5.5 million) boosted by the extension of the West Store and oil exploration activity. Retail sales, which are the largest driver of profits, increased by 23.6% to £4.4 million as the benefits of the 2009 expansion programme flowed through. Results from the new Electrical Store which opened in November 2009 were particularly encouraging, as were the results from the newly extended Right Lines general store at the military base at Mount Pleasant. Automotive sales including vehicle hire increased by 17%.

Property rental income on FIC's portfolio of 30 investment properties also increased and will be further boosted by the recent completion of nine of the 12 units at our Marmont Row sea front site in central Stanley. The remaining three units will be completed by the end of the financial year. Profits from property sales were £0.04 million (2009: £0.27 million), with just one house sale during the period. Further property sales are planned for the second half but our longer term aim remains both to increase the size and to improve the quality of FIC's portfolio of rental property assets.

FIC also owns a number of centrally located sites in Stanley with potential for residential or commercial development including an attractive water front site at the East Jetty where cruise ship visitors disembark which is well situated for future leisure and visitor amenities. FIC's 38 acre site at Dairy Paddock, with planning permission for 350 homes, could also be developed over the longer term. We are currently developing the strategy for the phased development of these sites.

As previously reported, the Islands suffered from another poor illex squid catch in Spring 2010. However, increased shipping agency and stevedoring work related to oil exploration and excellent loligo squid catches helped generate an improved performance. Net income from insurance and travel services continued to improve.

Shipping costs to the Islands were increased substantially with effect from 1 April 2010 and these increased tariffs led to reduced volumes for our shipping company, Falkland Island Shipping (formerly Darwin Shipping). Third party freight revenues fell by 33% in the period; however buoyant consumer demand allowed some of the increased freight charges on internal supplies to be passed on. As a result, the reduction in the overall contribution from FIC's shipping operations was not material.

Continuation of exploration activity is now expected through much of 2011 but the successful drilling by Rockhopper Exploration of its Sea Lion prospect, and the announcement yesterday by Desire Petroleum of an oil discovery at Rachel North, have increased the probability that there will be commercial oil production in the Islands. It is evident that, in the event of oil production, the Falklands economy and the finances of its government would be transformed. FIC is well placed to take advantage of any future growth in the economy with its long established infrastructure and broad range of commercial activities.

Portsmouth Harbour Ferry Company (PHFC)

Passenger numbers continued to be affected by the economic downturn with particular impact evident on discretionary weekend travel. Total passengers carried fell by 3.2% to 1.82 million (2009: 1.88 million). However, we were able to offset the impact of these volume declines by fare increases and, as a result, ferry revenues for the half year were unchanged at £2.03 million. Cost inflation, particularly in fuel, led to overheads increasing marginally and in consequence PHFC operating profits fell to £0.41 million (2009: £0.46 million). After the allocation of interest charges and finance costs, PHFC's profits before tax were £0.38 million (2009: £0.40 million).

Reliability and safety remain fundamental to the ferry's success and in the half year only 20 ferry sailings out of over 35,000 failed to depart on schedule (2009: 37) representing a reliability level of over 99.9%.

Discussions have been concluded with Gosport Borough Council for a modern and cost effective replacement for the existing pontoon at Gosport. Contractors have been appointed and installation is now planned for Spring 2011. The new pontoon, with a capital cost of approximately £5 million, will be commissioned by Gosport Council and then leased at a commercial rent to PHFC for a period of 50 years. We intend to recoup the increased costs through increases in passenger fares. The installation of this new landing stage and the security of tenure which comes with the lease will underpin the continued operation of PHFC for many years.

Momart

After the modest recovery in performance in 2009/10, trading conditions worsened in the first half of the current year with a decline in work from UK and international institutions. Revenue from exhibitions fell by 30% in the period to £2.6 million as institutional spending fell.

The impact of this was partially mitigated by a healthy increase in revenues from services to commercial galleries and artists. Confidence amongst commercial art buyers and gallery owners has now recovered sharply from the nadir seen in late 2008 and Gallery Services revenues increased by over 38% in the period to £2.5 million (2009: £1.8 million). Revenues from art storage activities were unchanged at £0.67 million as capacity was fully utilised. Additional space is now being sought.

Overall, Momart's revenues for the period fell by 7.6% to £5.8 million (2009: £6.3 million).

Since the period end the management team at Momart has been strengthened with the recruitment of a new Managing Director and Finance Director. With these two new appointments the company has a well balanced team with a strong blend of experience in art, logistics, international development, finance and marketing.

Operating profits in the period fell to £0.28 million (2009: £0.47 million). Underlying profit before tax (after the allocation of interest charges and finance costs) was £0.21 million (2009: £0.30 million).

Notable exhibitions in the first half included Damien Hirst in Monaco, the Quilts exhibition at the V&A, the Maharaja exhibition travelling from London to Munich and a number of works taken to the Shanghai Expo on behalf of the British Museum, V&A and Science Museum.

FOGL

The Group continues to own 12 million shares, representing an 8.4% stake, in the AIM quoted oil and gas exploration company Falkland Oil and Gas Limited (FOGL). At 30 September 2010, the market value of the holding was £14.9 million or 124.5p per FIH share (31 March 2010: £15.5 million or 129.5p per FIH share). The historic cost of the FOGL stake is £1.9 million or 16p per FIH share.

In July 2010, FOGL's operating partner BHP Billiton (BHP) completed drilling on the Toroa prospect in its Southern licences and reported that no reservoired hydrocarbons were present. However, FOGL was able to announce that the well had yielded important further information. Although BHP decided to withdraw from the Southern licences, FOGL elected to enter Phase II and now holds a 100% interest. These licences are contiguous with those of Borders & Southern Petroleum which has a two well drilling commitment.

In the Northern licence area, BHP remains as operator and has a 51% equity interest to FOGL's 49%. In October 2010 the Falkland Islands Government agreed to extend Phase I of the Northern Licences by one year to 15 December 2011. The outstanding work commitment in Phase I is to drill one exploration well.

Our policy remains to continue to hold a significant stake in FOGL through the initial drilling phase in order to provide FIH shareholders with material exposure to the potential upside.

Balance Sheet and Cash Flow

At 30 September 2010 the Group had net borrowings of £2.3 million (31 March 2010: £1.5 million) including cash balances of £2.3 million (31 March 2010: £3.8 million).

Outlook

The UK economy remains subdued with the impact of the Government's recent spending review still to be felt. In the near term, Momart faces continuing challenges as institutional budgets are reduced but the resilience of the global commercial art market should offer opportunities as might any restructuring of government backed institutions. At PHFC, the economic situation makes it unlikely that passenger numbers will increase materially in the short term. However, the forthcoming installation of a new pontoon underpins the future of the business for the long term.

In the Falklands the outlook is positive with the momentum generated by oil exploration set to continue in 2011.

With net borrowings of only £2.3 million and interest cover of almost 10 times, the Group is securely financed and therefore well placed to capitalise on future opportunities.

For the second half of the year we anticipate the continuation of the trends experienced in the first half with pressure on profits in the UK being offset by a strong performance in the Falkland Islands.

Condensed Interim Consolidated Income Statement

FOR THE 6 MONTHS ENDED 30 SEPTEMBER 2010

See note 5 for an analysis of earnings per share on underlying profit (defined as profit after tax before amortisation and non-trading items).

Condensed Consolidated Balance Sheet

AT 30 SEPTEMBER 2010

Condensed Consolidated Cash Flow Statement

FOR THE 6 MONTHS ENDED 30 SEPTEMBER 2010

Condensed Consolidated Cash Flow Statement (continued)

FOR THE 6 MONTHS ENDED 30 SEPTEMBER 2010

Condensed Consolidated Statement of Comprehensive Income

FOR THE 6 MONTHS ENDED 30 SEPTEMBER 2010

Condensed Consolidated Statement of Changes in Shareholders' Equity

FOR THE 6 MONTHS ENDED 30 SEPTEMBER 2010

Notes to the Unaudited Interim Statements

1 Basis of preparation

This interim financial information comprises the condensed consolidated balance sheets at 30 September 2010, 30 September 2009 and 31 March 2010 and condensed consolidated statements of income, comprehensive income, cash flows and changes in shareholders' equity for the periods then ended and related notes of Falkland Islands Holdings plc (hereinafter 'the interim financial information').

The interim financial information has been prepared in accordance with the accounting policies set out in the Group's 2010 financial statements. As permitted, these interim financial statements have been prepared in accordance with AIM rules and not in accordance with IAS34 'Interim Financial Reporting'.

The adopted International Financial Reporting Standards ('IFRS') that will be effective (or available for early adoption) in the annual financial statements for the year ending 31 March 2011 are still subject to change and to additional interpretations and therefore cannot be determined with certainty. Accordingly, the accounting policies for that annual period will be determined finally only when the annual financial statements are prepared for the year ending 31 March 2011.

The Interim Report was approved by the Board on 3 December 2010.

Section 245 Statement

The comparative figures for the financial year ended 31 March 2010 are not the Company's full statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditor was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498 (2) or 498 (3) of the Companies Act 2006.

2 Segmental revenue and profit analysis

2 Segmental revenue and profit analysis (continued)

2 Segmental revenue and profit analysis (continued)

3 Finance income and expense

4 Taxation

The taxation charge has been estimated to be 28.5% (2009: 28.5%)

5 Earnings per share

Earnings per share has been calculated on profit after tax of £632,000 (6 months to September 2009: £883,000; Year to 31 March 2010: £5,256,000) based on the weighted average number of shares in issue, excluding shares held in the Employee Share Ownership Plan, of 9,133,396 (6 months to 30 September 2009: 9,027,084; Year to 31 March 2010: 9,032,271). The diluted earnings have been further adjusted to assume the full exercise of share options in issue, to the extent that they are dilutive.

Earnings per share on underlying profit

To provide a comparison of earnings per share on underlying performance, the table below sets out basic and diluted earnings per share based on profits after tax before amortisation and non-trading items ('underlying profit after tax'):

6 Financial assets - available for sale equity securities

(a) At fair value

The Group has an investment of 12,000,000 (2009:15,000,000) shares in the AIM quoted company Falkland Oil and Gas Limited ('FOGL').

6 Financial assets - available for sale equity securities (continued)

7 Employee benefits

The Company has elected to follow precedent and decided not to revalue its pension obligations at the half-year end. The Group's principal pension obligation, the Falkland Islands Company Limited Pension Scheme, is unfunded and therefore not subject to valuation volatility as a result of stock market fluctuations. At 31 March 2010 the Group's other pension fund, The Portsmouth Harbour Ferry Company Plc (1975) Retirement Scheme, showed a net deficit of £161,000.

Since the 30 September 2010 The Portsmouth Harbour Ferry Company has made special payments to deferred members of the PHFC Retirement Scheme to fund their transfer out of the Defined Benefit Scheme. Based on current value of the assets and liabilities of the scheme this should result in a significant reduction of the pension fund net deficit reported at 31 March 2011.

8 Analysis of change in debt