Interim Results

Falkland Islands Holdings PLC 05 December 2007 Falkland Island Holdings Interim results for the six months ended 30 September 2007 Falkland Islands Holdings ('FIH'), an AIM quoted company operating a range of businesses in the Falkland Islands and the Portsmouth Harbour Ferry Company ('PHFC') in the UK, announces its interim results for the six months ended 30 September 2007. Financial Highlights: - Turnover from continuing activities up 3% to £7.5 million (2006: £7.3 million) - Profits before taxation rose 25% to £794,000 (2006: £634,000) - Earnings per share increased 28% to 6.4p (2006: 5p) - Equity shareholders funds at 30 September 2007, reported under IFRS for the first time were £36.9 million up from £24.7 million as at 31 March 2007 - Group's cash balances remain healthy at £4.9 million - No interim dividend proposed Operating Highlights: - Encouraging results achieved from Falklands businesses: - Better illex squid catches resulted in good growth from fishing agency and support services - Retailing operations only marginally ahead of last year; good progress made with refurbishment and reorganisation of DIY operations - General trading activity aided by increase in visitor numbers due to 25th Falklands War Commemoration - Good results from PHFC: - Revenues increased 4.8% to £1.88 million - passenger numbers up by 1.5%; the first time since 2004 that a real increase in passenger numbers has been experienced - Shareholding in Falkland Oil & Gas ('FOGL') 15 million shares (16.2%) - FOGL completed CSEM and infill 2D seismic surveys; initial results are encouraging - FOGL has concluded a farm - out agreement with BHP Billiton ('BHPB') by which BHPB will gain a 51% interest in its licences, pay 68% of costs through 2 wells and reimbursed FOGL $12.75 million in respect of previously incurred costs Outlook: - Good start to the year provides confidence for continued growth for the year to March 2008 - Increases in exploration activity and the future drilling campaign are expected to provide opportunities in the Falkland Islands - Continuing to seek suitable acquisition which will enhance shareholder value David Hudd, Chairman of Falkland Islands Holdings plc: 'The group has continued to make good progress during the period. Particularly encouraging were the improved results from the fishing agency, whilst the re-organisation of the retailing and DIY businesses should strengthen customer appeal. FOGL has continued to move forward with the completion of a successful exploration programme and the introduction of BHP Billiton as a partner. The farm-out secures the drilling of two wells on the acreage and FOGL is now funded through a significant proportion of the near term exploration programme. Your Group has a substantial stake in FOGL and will also benefit from the demand for support services in the Falklands from the exploration contractors. The Board remains confident that the Group will continue to deliver solid growth whilst also looking to identify suitable acquisitions to deliver further value for our shareholders.' 5 December 2007 Enquiries: Falkland Islands Holdings Tel: 01279 461 630 David Hudd, Chairman Tel: 07771 893 267 John Foster, Managing Director Tel 07710 764 556 Dawnay Day (NOMAD) David Floyd Tel: 020 7509 4570 College Hill Nick Elwes, Paddy Blewer Tel: 020 7457 2020 Chairman's and Managing Director's Review Overview We are pleased to report an encouraging set of interim results for your Company for the half year to 30 September 2007. Profits before taxation rose 25% to £794,000 (2006: £634,000) and turnover increased by 3% to £7.5 million (2006: £7.3 million). Earnings per share were 6.4p per share (2006: 5p) an increase of 28% compared to the first half of 2006/7. As in previous years no interim dividend is proposed. Equity shareholders' funds at 30 September 2007, reported for the first time under International Financial Reporting Standards (IFRS), were £36.9 million up £12.1 million from 31 March 2007 representing net assets per share of 436p (2006: 290p per share) Operations Falkland Islands The current period started encouragingly in the Falklands with revenues from fishing agency support services showing good growth on the previous year as a result of better illex squid catches. General trading activity was helped by an increase in the number of visitors to the Islands for the commemoration of the Falklands War. However, revenue from the Group's retailing operations were only marginally ahead as subdued local demand and competition restricted growth. In the first half, progress was made with the reorganisation and refurbishment of DIY operations into two discrete profit centres: Homebuilder for building materials and supplies and Home Living for soft furnishings and household goods. In September the Gallery clothing store was also successfully re-branded as ' Basics' to offer a simpler more attractive range of clothing. These refurbishments and further planned improvements to the main West Store supermarket will strengthen customer appeal and competitiveness. Insurance broking, property rental and financial services continued to show growth on 2006. Revenue from Falklands trading operations grew by 2.9% in the first half to £5.65 million (2006: £5.49 million). Profit before tax boosted by higher margins earned by fishing agency activities increased by 59% from £259,000 to £411,000 in the 6 months to 30 September 2007. United Kingdom Results for the half year at the Portsmouth Harbour passenger ferry (PHFC) were also pleasing with steady progress being made. Despite the wet summer, overall passenger numbers were ahead by 1.5% and revenues increased by 4.8% to £1.88 million (2006: £1.80 million) in the 6 months to 30 September 2007. This was the first time since late 2004 that a real increase in total passenger numbers has been experienced over a 6 month period, reflecting increased awareness of the attractiveness of the ferry compared to alternative methods of transport. During the Summer the refurbishment of PHFC's pontoon landing stage at Portsmouth was carried out and discussions have continued with Gosport Council to finalise the design of a replacement pontoon in Gosport. The new pontoon is expected to be installed early in 2009. The continued commitment of PHFC's staff enabled the ferry to maintain its enviable reputation for reliability, achieving a remarkable 99.6% on time service in the period. In the 6 months to 30 September 2007 profits before tax at PHFC were marginally ahead at £383,000 compared to £375,000 in the comparable period. Investments & Financial Assets The Group continues to hold its strategic 16.2% shareholding (15 million shares) in the AIM listed oil exploration company, Falkland Oil and Gas (FOGL). During the period FOGL completed its Controlled Source Electro Magnetic (CSEM) Survey and also concluded its programme of 2D seismic work, with initially encouraging results. Most significantly for the future, in October FOGL concluded a farm - out agreement with the largest resources company in the world BHP Billiton (BHPB) who will become the operator of the licences from January 2008. BHPB has extensive deep sea exploration and development experience in the Gulf of Mexico, Australia and West Africa. The terms of the farm-out provide that the revised licence commitment of 2 wells will be drilled in FOGL's acreage before the expiry of the initial licence period on 31 December 2010. This will be the first drilling activity in the Falklands since the North Falklands campaign of 1998. BHPB has acquired a 51% interest in the licences and has agreed to reimburse FOGL with $12.75 million in respect of previously incurred expenditure and pay 68% of the costs of the exploration programme including two wells. As a result FOGL is now funded through a significant proportion of the near term exploration programme. After the farm-out, FIH's 16.2% shareholding now represents a 7.9% indirect interest in the licences. The market value of the Group's 15 million ordinary shares in FOGL (16.2%) at 30 September 2007 was £24.3 million (162p per share) compared to cost of £2.4 million. Balance Sheet and Cash Flow During the period the Group spent £0.5 million refurbishing and upgrading its key operating assets both in the Falklands and the UK with expenditure incurred on new in-fill housing developments in Stanley and the upgrading of the Group's retail outlets. Working capital investment increased as inventories in the Group's retail operations rose from £2.7 million to £3.2 million in the run up to Christmas. The group's pension liabilities under defined benefit schemes, shown gross before the deduction of deferred tax, fell from £2.5 million as at 31 March 2007 to £2.2 million at 30 September 2007. Interest bearing loans and liabilities were £2.6 million (31 March 2007: £2.7 million) and the Group's cash balances remained healthy at £4.9 million (£5.0 million as at 31 March 2007). Outlook In the second half of the year economic conditions in the Falklands are expected to be more subdued with continued pressure on retail margins, while in the UK ferry passenger numbers and revenues are expected to remain at a broadly similar level to last year. However, the good start seen in the first half gives us confidence that the Group will continue to make progress and will return a solid result for the year to 31 March 2008. Looking further ahead, increases in exploration activity and future drilling provide opportunities for many of our business units in the Falklands. In addition, the agreement recently reached with the Falkland Islands Government to exchange the racecourse, which has been in Company ownership for over 100 years, for other land including 15 acres with potential for housing development offers exciting possibilities as demand for housing increases. With Shareholders funds of over £36 million and net cash balances of £2.3 million your Company is in a strong financial position going forward. We are seeking to capitalise on our financial strength and continue to look at suitable acquisitions in order to enhance shareholder value further. David Hudd John Foster Chairman Managing Director Falkland Island Holdings plc Interim Report 2007 Unaudited Interim Consolidated Income Statement FOR THE 6 MONTHS ENDED 30 SEPTEMBER 2007 Notes 6 months to 6 months to Year ended 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000 Revenue 3 7,530 7,285 15,618 Cost of sales (4,438) (4,521) (9,531) Gross profit 3,092 2,764 6,087 Pension scheme restructuring costs (105) Other administrative expenses (2,412) (2,184) (4,623) Administrative expenses (2,412) (2,184) (4,728) Other operating income 148 124 338 Operating profit 828 704 1,697 Finance income 129 103 205 Finance expense (95) (121) (236) Net bank interest 34 (18) (31) Profit on disposal of financial investment 485 Pension scheme net financing cost (68) (52) (124) Net financing (costs) / income (34) (70) 330 Profit before tax 794 634 2,027 Taxation 4 (258) (208) (394) Profit attributable to equity holders of 536 426 1,633 the parent Earnings per share 5 Basic 6.4p 5.0p 19.4p Diluted 6.0p 5.0p 19.2p Falkland Island Holdings plc Interim Report 2007 Unaudited Consolidated Balance Sheet AT 30 SEPTEMBER 2007 Notes 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000 Non-current assets Intangible assets 3,979 3,979 3,979 Property, plant and equipment 6,539 6,325 6,268 Investment properties 1,562 1,604 1,588 Financial assets - investments in quoted 6 24,300 13,650 12,900 companies Other financial assets 30 46 45 Deferred tax assets 576 671 648 Total non-current assets 36,986 26,275 25,428 Current assets Inventories 3,160 2,751 2,678 Trade and other receivables 2,253 1,328 2,384 Other financial assets 139 92 133 Cash and cash equivalents 4,890 4,160 4,959 Total current assets 10,442 8,331 10,154 TOTAL ASSETS 47,428 34,606 35,582 Current liabilities Interest bearing loans and borrowings (542) (499) (542) Income tax payable (847) (520) (570) Trade and other payables (4,041) (2,473) (4,247) Total current liabilities (5,430) (3,492) (5,359) Non-current liabilities Interest bearing loans and liabilities (2,074) (3,193) (2,191) Pension liabilities (2,246) (2,589) (2,517) Deferred tax liabilities (744) (855) (744) Total non-current liabilities (5,064) (6,637) (5,452) TOTAL LIABILITIES (10,494) (10,129) (10,811) Net assets 36,934 24,477 24,771 Capital and reserves Called up share capital 847 847 847 Share premium account 7,206 7,206 7,206 Other reserves 703 703 703 Retained earnings 6,332 4,681 5,535 Financial assets revaluation reserve 21,846 11,040 10,480 Equity shareholders' funds 7 36,934 24,477 24,771 Falkland Island Holdings plc Interim Report 2007 Unaudited Consolidated Cash Flow FOR THE 6 MONTHS ENDED 30 SEPTEMBER 2007 Cash Flow Statement 6 months to 6 months to Year ended 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000 Profit for the period 536 426 1,633 Adjusted for: Depreciation 239 234 468 Net financing costs 34 70 (330) Gain on sale of investment properties (10) - - Equity-settled share-based payment 68 45 101 expenses Income tax expense 258 208 394 Operating profit before changes in working 1,125 983 2,266 capital and provisions (Increase) / decrease in trade and other 140 371 (725) receivables (Increase) / decrease in inventories (482) 356 429 Increase / (decrease) in trade and other (272) (1,004) 316 payables Increasein provisions and employee 11 17 17 benefits Cash generated from operations 522 723 2,303 Interest paid (95) (51) (236) Income taxes paid (53) (338) Net cash from operating activities 427 619 1,729 Cash flows from investing activities Acquisition of property, plant and (494) (116) (282) equipment Costs incurred in restructuring investment (34) holdings Proceeds from sale of investment 20 properties Proceeds from sale of investments - 675 Interest received 129 21 205 Net cash from investing activities (379) (95) 598 Cash flow from financing activities Repayment of secured loan (117) (116) (532) Repayment of loan notes - (43) Issue of ordinary share capital 151 151 Dividends paid - (545) Net cash from financing activities (117) 35 (969) Net increase in cash and cash equivalents (69) 559 1,358 Cash and cash equivalents at start of 4,959 3,601 3,601 period Cash and cash equivalents at end of period 10 4,890 4,160 4,959 Falkland Island Holdings plc Interim Report 2007 Unaudited Consolidated Statement of Recognised Income and Expense FOR THE 6 MONTHS ENDED 30 SEPTEMBER 2007 6 months to 6 months to Year ended 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000 Change in fair value of equity securities 11,366 (9,619) (10,179) available for sale PHFC pension scheme gain 48 (7) 43 FIC pension scheme gain 145 2 88 Actuarial gain / (loss) on pension schemes 193 (5) 131 Net income / (expense) recognised directly 11,559 (9,624) (10,048) in equity Profit for the period 536 426 1,633 Total recognised income and expense for 12,095 (9,198) (8,415) the period Falkland Island Holdings plc Interim Report 2007 Notes to the Unaudited Interim Statements 1. Basis of preparation To date Falkland Islands Holdings plc has prepared its primary financial statements under UK Generally Accepted Accounting Principles ('UK GAAP'). For accounting periods starting from 1 April 2007 onwards, in accordance with AIM rules, the Group is required to prepare its consolidated financial statements in accordance with International Accounting Standards ('IAS') and International Financial Reporting Standards as adopted by the European Union ('adopted IFRS'). These interim financial statements are the first published results under adopted IFRS. The Group's first Annual Report under adopted IFRS will be for the year ending 31 March 2008. The date for the transition to IFRS was 1 April 2006, being the start of the period of comparative information. On 31 October 2007 the Group published an analysis of the impact of adopting IFRS from 1 April 2006. This news release is available from the Group's website at www.fihplc.com. This included income statement, balance sheet and opening balance sheet reconciliations, as well as details of the accounting policies applied in restating its financial statements for the year ended 31 March 2007 and the six months ended 30 September 2006. The financial statements have been prepared in accordance with accounting policies the Group expects to follow when the first annual IFRS financial statements are prepared for the year ending 31 March 2008. This interim financial information has been prepared on the basis of the recognition and measurement requirements of IFRS in issue that are endorsed by the EU and effective (or available for early adoption) at 31 March 2008 or are expected to be endorsed and effective (or available for early adoption) at 31 March 2008. 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 IFRS that will be effective (or available for early adoption) in the annual financial statements for the year ending 31 March 2008 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 2008. The Interim Report was approved by the Board on 4 December 2007. Section 240 Statement The comparative figures for the financial year ended 31 March 2007 are not the Company's statutory accounts for that financial year. Those accounts, which were prepared under UK GAAP, 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 237(2) or (3) of the Companies Act 1985. Falkland Island Holdings plc Interim Report 2007 Notes to the Unaudited Interim Statements 2. Adoption of International Financial Reporting Standards ('IFRS') The Board has adopted IFRS for the first time. A document entitled 'Restatement of primary financial information for 2006/7 under International Financial Reporting Standards', detailing the impact of adoption on the Company's financial statements, is available on the Company's website. The impact on the income statement is as follows: 6 months to Year ended 30 September 31 March 2006 2007 £'000 £'000 Profit after tax previously reported under UK GAAP 341 1,446 Add: write-back of goodwill amortization 102 204 Less: accrual for holiday pay (17) (17) Profit after tax restated under adopted IFRS 426 1,633 3. Revenue and profit analysis 6 months to 30 September Year ended 31 March 2007 2006 2007 Falklands Ferry Total Falklands Ferry Total Falkland Ferry Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Turnover 5,646 1,884 7,530 5,487 1,798 7,285 12,256 3,362 15,618 Segment net assets 4,448 8,186 12,634 3,039 7,789 10,828 4,012 7,859 11,871 Investments 24,300 24,300 13,650 13,650 12,900 12,900 Group net assets 28,748 8,186 36,934 16,689 7,789 24,477 16,912 7,859 24,771 Segment operating profit 416 412 828 334 370 704 1,105 592 1,697 Net interest income / (expense) (5) (29) (34) (75) 5 (70) (115) (40) (155) Segment profit before tax 411 383 794 259 375 634 990 552 1,542 Profit on sale of fixed asset investments 0 0 485 485 Group profit before tax 411 383 794 259 375 634 1,475 552 2,027 Falkland Island Holdings plc Interim Report 2007 Notes to the Unaudited Interim Statements 4. Taxation The taxation charge has been estimated to be 32% (2006: 32%) 5. Earnings per share Earnings per share has been calculated on profit after tax of £536,000 (2006: £426,000) based on the weighted average number of shares in issue, excluding shares held in the Employee Share Ownership Plan of 8,433,998 (2006: 8,417,143). The diluted earnings have been further adjusted to assume the full exercise of share options in issue, to the extent that they are dilutive. 6. Financial assets - investments in quoted companies (a) At fair value The Group has an investment in the AIM quoted company Falklands Oil and Gas Limited ('FOGL'). 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000 FOGL share price 162p 85p 86p Investments stated at fair value: Falkland Oil and Gas Limited 24,300 12,750 12,900 Falkland Gold and Minerals Limited - 900 - Investments at fair value: 24,300 13,650 12,900 An unrealized gain of £11,366,000 has been recognized in the period and transferred to the Revaluation Reserve as a component of shareholders' funds. (b) At cost On 7 September 2007 Falkland Islands Holdings plc transferred its entire interest in FOGL to Erebus Limited, a fully-owned subsidiary incorporated in the Falkland Islands. £'000 £'000 £'000 Prior to adoption of IFRS the Group carried investments at cost: Falkland Oil and Gas Limited 2,454 2,420 2,420 Falkland Gold and Minerals Limited - 190 - Investments at historic cost 2,454 2,610 2,420 7. Reconciliation of movement in shareholders' funds 30 September 30 September 31 March 2007 2006 2007 £'000 £'000 £'000 Opening shareholders' funds previously 24,771 33,479 33,479 reported(1) Profit for the period 536 426 1,633 Dividends paid - - (545) Issue of shares - 9 9 Share-based payments 68 45 101 Unrealized gain / (loss) on fixed asset 11,366 (9,619) (10,179) investments Premium on shares issued in the year net - 142 142 of expenses Other recognised gains and losses 193 (5) 131 Net addition to / (reduction in) 12,163 (9,002) (8,708) shareholders' funds Closing shareholders' funds 36,934 24,477 24,771 (1) As restated for reporting under IFRS in the 'Restatement of primary financial information for 2006/7 under International Financial Reporting Standards' available on the Company's website. 8. The interim report has been prepared on the basis of the accounting policies set out in the Group's 'Restatement of primary financial information under International Financial Reporting Standards' available on the Company's website. Falkland Island Holdings plc Interim Report 2007 Notes to the Unaudited Interim Statements 9. Analysis of change in debt As at As at 1 April Cash 30 September 2007 flows 2007 £'000 £'000 £'000 Cash at bank and in hand 4,959 (69) 4,890 Debt due within one year (542) (542) Debt due after one year (2,191) 117 (2,074) Net funds / (debt) at end of period 2,226 48 2,274 Falkland Island Holdings plc Interim Report 2007 Company Information Directors Registered Office David Hudd Kenburgh Court Chairman 133 - 137 South Street Bishop's Stortford John Foster Hertfordshire CM23 3HX Managing Director T: 01279 461630 F: 01279 461631 Leonard Licht E: admin@fihplc.com Senior Independent Non-Executive Director Registered number 03416346 Sir Harry Solomon Non-Executive Director Chairman of the Remuneration Committee Mike Killingley Non-Executive Director Chairman of the Audit Committee Company Secretary James Ivins Senior Staff in the Falkland Islands Senior Staff at the Portsmouth Harbour Ferry Company Roger Spink, Director and General Manager Paul Fuller, Director and General Manager David Castle, Retailing Director Rhett Gibson, Senior Skipper Ana Crowie, Financial Controller Christine Waters, Financial Controller T: +500 27600 T: 02392 524551 E: fic@horizon.co.fk E: admin@gosportferry.co.uk W: www.the-falkland-islands-co.com W: www.gosportferry.co.uk This information is provided by RNS The company news service from the London Stock Exchange

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