Final Results
Falkland Islands Holdings PLC
13 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 of
businesses in the Falkland Islands, and the Portsmouth Harbour Ferry Company in
the 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 PHFC
has given the Group an excellent, cash generative business in the UK which
significantly improves the quality of our earnings. It also represents a good
base on which to build in the domestic maritime sector.
'With a full year's contribution from PHFC, this should be another year of
progress for FIH'
Enquiries:
Falkland Islands Holdings
David Hudd, Chairman Tel: 07771 893 267
College Hill Tel: 020 7457 2020
Ben 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 been
increased by some 36% through the issue of new shares and the Group now has a
much 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 both
raised the required funds for major exploration programmes. A successful outcome
for either company will increase the value of our shareholdings and they both
have the potential to transform the economy of the Falklands which would be of
enormous benefit to the Company.
The acquisition in December of the Portsmouth Harbour Ferry Company (PHFC) has
given the Group an excellent cash generative business in the UK which
significantly improves the quality of the Group's earnings. We have a strong
track record in operating essential services like these.
The trading environment in the Falklands has remained subdued but with the
benefit of three months trading from PHFC a satisfactory result has been
achieved.
Your Board, as a sign of its confidence in the future, is pleased to recommend a
4.4% 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) and
the 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 8.9
pence per share (2004: 9.7p).
PHFC, which was included for 16 weeks in what is the quietest period of its
year, accounted for turnover of £1.3m and profit before tax and goodwill
amortisation of £202,000.This result was in line with our expectations but
profits declined marginally in 2004/5 caused by increased salary and fuel costs
and also the impact on passenger numbers of the introduction of parking charges
in Gosport in November 2004. To offset these factors fares were increased by
12.5% 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 to
increase the size of retailing space at the flagship West Store in Stanley.
Vehicle sales remained strong and insurance income also improved. Conversely the
fishing agency had a quiet year and the hotel incurred losses as a significant
upgrade was carried out and the benefits of this investment will be felt in the
coming years. However, despite the poor fishing season, the Falkland Islands
businesses 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 closely
reflected underlying profitability than the exceptionally high levels seen in
2004 which were due largely to favourable working capital movements. Tax and
dividend payments totalled £0.6m in the year and were adequately covered by the
net cash flow from operating activities.
During the year the group invested heavily to broaden its operating base to
secure 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 (£0.2
million of which will be paid next year) and a further £0.6million was invested
in FOGL and FGML prior to their flotations.
Within the group the cost of completing the purchase of the new ferry Spirit of
Portsmouth was £1 million She entered service in June 2005 and with an
estimated useful life of 30 years it will operate as both a ferry and a cruise
ship in the harbour and Solent area.
The cash cost of the acquisition of PHFC together with new capital expenditure
totalled £7.3million and was funded largely by share placings with new
Institutional investors which raised £5.5million. The balance of £1.8m being
funded by the draw down of loans (£1.0m) ,the issue of new shares and the use of
existing cash resources.
Investments
The Group's shareholdings in FOGL and FGML are stated at cost of £900,000 in the
accounts 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 passenger
ferry service from Gosport to Portsmouth for over 125 years and its acquisition
greatly strengthens the group's cash flow and profitability. The acquisition was
made at a total cost of £7.5million and was funded by cash of £5.7million and
the 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 and
the further investments in the exploration companies noted above .The year end
position also reflects the strengthening of the group's Balance Sheet which saw
shareholders' funds treble during the year from £3.5m to £10.9m following the
expansion of the group's capital base during the year.
Tangible assets acquired with the purchase of PHFC included freehold land and
buildings 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 the
Spirit of Portsmouth, these items largely account for the £4.9m increase in
tangible fixed assets in the year.
Working capital levels increased in the year in part reflecting the expansion of
the business following the acquisition of PHFC. In addition stock levels
increased as a result of the continued expansion of the group's retail
activities in the Falklands. Other changes in working capital reflect timing
differences 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 and
unutilised banking facilities of £3.3million
Strategic Transformation
The acquisition of a good solid business in the United Kingdom complementary to
our businesses in the Falklands has been an objective since the Company moved
to AIM in 2003 .The acquisition of PHFC fulfilled these criteria, and although
the acquisition proved to be a difficult process, the purchase was finally
completed in December .
I am pleased to say that the ferry service has continued to function without
disruption 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 full
service. 2005 promises to be a busy year for PHFC with the International
Festival of the Sea and Trafalgar 200 celebrations being based in Portsmouth.
In line with our undertakings to the people of Portsmouth and Gosport we have
maintained a local Board of directors for PHFC and we thank the Board members
for 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 possible
to give priority in those issues to our own shareholders but through our long
term shareholdings of 18.1% in FOGL and 14.4% in FGML shareholders will benefit
from any future success of these exploration ventures.
Both companies have made good progress in carrying out the exploration
programmes they outlined at flotation. FOGL, which raised £12 million, acquired
a 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 been
identified at flotation. This has led its Board to expand significantly the
planned exploration programme. Accordingly, the outlook for FOGL, which has an
enviable position with effectively a 90% interest in 83,000 sq km (almost 20
million acres), is exciting. Shareholders can follow developments on its website
www.FOGL.com
The substantial increase in the scale of the work programme has been funded in
May this year by a £10 million Institutional share placing in May 2005. Your
company invested £2million which marginally increased our shareholding to 18.3%.
The share price has performed well since flotation and the placing was achieved
despite recent adverse sentiment in the sector.
Progress at FGML which raised £10million has also made a good start. Initial set
up work has included the commissioning of two drilling rigs and the
establishment of a drilling base at Goose Green. A 1500km ground magnetic survey
has now been completed and the company has completed three months of its initial
programme drilling. The results of drilling and the survey are currently being
analysed and further information will be available soon. Results will be posted
on the FGML web site www.FGML.com
Your Board views shareholdings in both these companies as long term investments
and believes that shareholders will benefit from their retention.
People
We were pleased to welcome John Foster, who joined the Board in January 2005 as
an executive director and today he succeeds Bryan McGreal as Managing Director.
John's experience over 20 years in advising, managing and investing in a variety
of companies is well fitted to our future plans. Bryan, who is now 65, will be
retiring from the Board at the Annual General Meeting. He has been with the
Group since 1987 and has been Managing Director since 1997. His shrewd judgement
and overall contribution have been of great value to shareholders and I would
like to thank him most warmly on your behalf. I am delighted that his services
will continue to be available to us as he has agreed to remain as a consultant
for a year.
We welcome to the Group the employees of PHFC and we look forward to working
with them. I would also like to express my appreciation to all our employees for
their ongoing dedication to the business.
Outlook
Our strategy is to ensure that the future of your company is not wholly
dependent upon our investments in the listed Falkland exploration companies. In
2005, with the PHFC acquisition, the first steps have been taken towards
building a meaningful business outside the Falklands. PHFC represents a good
base on which we can build in the domestic maritime sector.
The short term outlook in the Falklands remains somewhat clouded by the fallout
from the third successive year of poor Illex catches. However, the much
increased level of oil and minerals exploration activity is helping confidence
in the Islands.With a full year's contribution from PHFC where we will benefit
from the increased fares which apply from 1 June 2005, a satisfactory result
should be achieved for shareholders.
David Hudd
Chairman
10 June 2005
Group profit and loss account
for 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 before
taxation 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 share
Basic 8.0p 9.7p
Diluted 7.9p 9.4p
Basic before amortisation of goodwill 8.9p 9.7p
Dividend per ordinary share 6.0p 5.75p
Group balance sheet
as at 31 March 2005
2005 2004
£'000 £'000 £'000 £'000
Fixed assets
Intangible assets 4,136 89
Tangible assets 8,501 3,552
Investment in joint venture - share of gross assets - 189
Other investments 900 -
13,537 3,830
Current assets
Stocks 3,308 3,079
Debtors due within one year 1,788 1,336
Debtors due after one year 24 42
1,812 1,378
Cash 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 one
year (831) -
Provisions for liabilities and charges (1,895) (1,157)
Net assets 10,924 3,515
Capital and reserves
Called up share capital 838 617
Share premium account 7,061 54
Other reserves 703 703
Reserve for own shares (83) (112)
Profit and loss account 2,405 2,253
Equity shareholders' funds 10,924 3,515
Group cash flow statement
for the year ended 31 March 2005
Reconciliation of operating profit to net cash inflow from operating activities
2005 2004
£'000 £'000
Operating profit 892 860
Amortisation of goodwill 65 -
Depreciation charges 292 226
Increase 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 finance
Interest received 47 12
Interest paid (31) (25)
16 (13)
Taxation
UK Corporation tax paid (169) (101)
Overseas taxation paid (104) (207)
(273) (308)
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,243) (503)
Purchase of investments (622) (26)
Receipts from sale of tangible fixed assets 144 -
(1,721) (529)
Acquisitions
Investment 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
Financing
Repayment 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) 226
Cash (inflow)/outflow from (increase)/decrease in debt (848) 250
Change in net debt resulting from cash flows (1,574) 476
Change 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) 429 914
Overdraft - (28) (52) (80)
1,183 (726) 377 834
Debt 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 acquired
Tangible fixed assets 3,698 444 4,142
Debtors 146 - 146
Taxation recoverable 133 (116) 17
Cash at bank and in hand 429 - 429
Creditors (570) (240) (810)
Bank overdrafts (52) - (52)
Loans and finance leases (168) - (168)
Deferred taxation (452) 72 (380)
3324
Goodwill 4,201
7525
Satisfied by
Shares allotted 1,658
Cash 5,739
Loan notes 128
7,525
Notes
1. Segmental information
The table sets out information for both of the group's industry segments and
geographic 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 £'000
The tax charge based on profit for the period comprises:
UK corporation tax at 30% 226 227
Less double taxation relief (149) (106)
77 121
Overseas taxation at 25% (2004: 32.5%) 231 158
Adjustments in respect of prior periods (31) (24)
Total current tax 277 255
Deferred 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 of
business 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 issue
excluding shares held in the Employee ownership plan of 7,336,298 (2004:
6,095,037). The fully diluted earnings have been further adjusted by the
dilutive outstanding share options resulting in a weighted average number of
shares of 7,427,648 (2004:6,322,547)
5. The Financial information does not constitute the Company's statutory
accounts for the years ended 31st March 2005 or 2004 but is derived from those
accounts. Statutory accounts for 2004 have been delivered to the Registrar of
Companies, and those for 2005 will be delivered following the Company's Annual
General Meeting. The auditors have reported on those accounts; their reports
were unqualified and did not contain statements under section 237(2) or (3) of
the Companies Act 1985.
6. Copies of Falkland Islands Holdings plc annual report and financial
statements will be with shareholders in late June.
This information is provided by RNS
The company news service from the London Stock Exchange
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