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5 Mar 2009 07:00
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5 March 2009
Falkland Islands Holdings plc
("FIH" or "The Group")
Pre Close, Trading Update - Year endedΒ 31 MarchΒ 2009
Falkland Islands HoldingsΒ PlcΒ theΒ international services Group,Β which owns essential services businesses focused on transport and logistics and which has a major shareholding in Falkland Oil and Gas ("FOGL"),Β Β announcesΒ today aΒ pre-closeΒ tradingΒ update for the year ended 31 March 2009,Β based on trading performance for the 10 monthsΒ endedΒ 31 January 2009.
Highlights:
Despite difficult market conditions, the Group has continued to trade profitably
The deteriorating commercial art market, which accounts for 15% of Group revenue, has impacted on sales and profitability at Momart
Management has taken prompt action to control costs at Momart
Anticipated exceptional charges relating to restructuring, goodwill,Β andΒ interest rate hedge
Underlying earnings per share for the year ended March 2009 will show an improvement on 2008
The Group's financial position remains strong with good cash generation, robust Balance Sheet and secure banking facilities
The Board remains positive about the Group's future prospects and plans to maintain the dividendΒ
Since theΒ announcement of theΒ Group'sΒ InterimΒ ResultsΒ for the 6 monthsΒ endedΒ 30 September 2008Β on 8Β December 2008,Β despite the difficult economic environment,Β theΒ Group's businesses haveΒ generallyΒ shown resilience and haveΒ continuedΒ to performΒ in line with the Board's expectations. HoweverΒ conditionsΒ in the commercial art marketΒ have deteriorated,Β impacting sales and profitabilityΒ at theΒ Group's specialist art logistics subsidiary, Momart. (Services to commercial art galleriesΒ historically represent about one third ofΒ Momart'sΒ turnoverΒ andΒ account forΒ approximately 15% of the Group's total revenue).Β As a resultΒ of thisΒ reductionΒ in activity,Β promptΒ action has been taken to reduceΒ headcountΒ at MomartΒ by someΒ 12%,Β resulting in exceptional restructuring charges ofΒ approximatelyΒ Β£150,000 and annualised cost savings ofΒ aroundΒ Β£500,000.
HavingΒ regard toΒ theΒ lowered expectationsΒ of Momart'sΒ futureΒ performance,Β theΒ GroupΒ hasΒ reassessedΒ the carrying value of the goodwill linked to its investment.Β As a result of this reassessmentΒ and changes in discount ratesΒ the Group nowΒ expects toΒ make an exceptional,Β non cash write down of approximatelyΒ Β£2.0millionΒ in the carrying value of its investment in Momart, in the year ended 31 March 2009.Β
As foreshadowed inΒ theΒ Interim ResultsΒ statement,Β theΒ recent sharp falls inΒ bankΒ interest rates mean that there has been a significant reduction in theΒ marketΒ value of theΒ Group's interest rate hedge. There is likely toΒ be a furtherΒ increase in the provisionΒ relating to the carrying value of the hedgeΒ ofΒ approximately Β£400,000Β in the second half of theΒ current financialΒ year. This exceptional charge has no impact on cash and will reverse, boosting profitabilityΒ inΒ future years.
The Group's financing positionΒ remainsΒ strong.Β Net borrowings at theΒ 31 March 2009Β are expected to beΒ similar toΒ net borrowings at 31 March 2008,Β with significant cash balances and unutilised bank facilities of Β£2m which are committed to March 2011.Β The Group continues to operate within itsΒ bankingΒ covenantsΒ and expects to continue to do so.
Management now expectsΒ thatΒ profit before tax,Β exceptional itemsΒ and the amortisation ofΒ intangiblesΒ ( PBTae ) (Β ieΒ profitΒ beforeΒ Β theΒ goodwillΒ impairment ,Β restructuring charge,Β the expected reduction in the market value of the Group's interest rate hedgeΒ and the normal amortisation ofΒ intangiblesΒ ("Underlying Profits"))Β Β for the year to 31 March 2009Β willΒ beΒ slightlyΒ lower thanΒ market expectationsΒ of Β£2.4m.
After taking account of the exceptional restructuring charges noted above (Β£0.15m)Β andΒ non cash charges forΒ Β the increased provision for the carrying value of the Group's interest rate hedge (Β£0.4m),Β the goodwillΒ impairmentΒ (Β£2.0m)Β and the normal amortisation of intangibles ( Β£0.4m),Β it is expected that the Group will show aΒ lossΒ before tax for the year ended 31 March 2009.Β However the BoardΒ still anticipates that underlyingΒ earnings per shareΒ for the year ended 31 March 2009 (based onΒ Underlying Profits)Β will show an improvement on 2008Β when underlying earnings per share wereΒ 16.3p.Β
Looking beyond the current financial year,Β in the near termΒ the decline in the art market will restrict the Group's ability to deliver the steady increase in profitability anticipated at the time ofΒ theΒ acquisition of Momart, although the Directors remain confident in the Group's long term potential for steady growth. Β
Annual results for the year ended 31 March 2009 are due to be announced on 12 June 2009.
David Hudd, Chairman of Falkland Islands Holdings plc, said:
"In the face ofΒ difficultΒ economicΒ conditionsΒ theΒ GroupΒ hasΒ continuedΒ to trade profitably and to generate cash. The spread and resilience of theΒ Group's operationsΒ isΒ providingΒ a real cushion against the worst effects ofΒ recession.Β
"In these marketΒ conditions,Β we believeΒ our robustΒ BalanceΒ Sheet andΒ secureΒ bank facilities will be a majorΒ source ofΒ strength.Β The BoardΒ remains positive about the futureΒ prospects of the businessΒ andΒ can confirm that it has no plans to reduce theΒ Group's dividend."
-Β EndsΒ -
Enquiries:
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Falkland Islands Holdings plc |
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David Hudd, Chairman |
Tel: 07771 893 267 |
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John Foster, Managing Director |
Tel: 01279 461 630 |
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KBC Peel Hunt |
Tel: 020 7418 8900 |
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Nominated adviser and broker to FIH |
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Matt Goode / Oliver Stratton |
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Financial Dynamics |
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Edward Westropp /GeorginaΒ BonhamΒ |
Tel: 020 7831 3113 |
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