Interim Results
Falkland Islands Holdings PLC
01 December 2005
1 December 2005
Falkland Islands Holdings plc
Interim Results for the six months ended 30 September 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 its unaudited interim results for the six months ended 30
September 2005.
Financial Highlights
• Turnover up 50% to £8.1 million (2004: £5.4m)
• Profit before taxation rose to £729,000 (2004: £299,000)
• Underlying profits before exceptional profits on sale of subsidiary
and goodwill amortisation rose to £747,000 (2004: £299,000 )
• EPS on underlying profits increased 91% to 6.1p (2004: 3.2p)
• No interim dividend is proposed (2004: Nil)
Operating Highlights
• Satisfactory trading in Falklands Winter half despite poor illex squid
catches
• First full contribution from Portsmouth Harbour Ferry Company ('PHFC')
also benefiting from International Festival of the Sea and new ferry
• Cargo shipping agreement set up with UK Ministry of Defence
• Ongoing exploration activity:
- Falkland Oil & Gas extending seismic activity and looking to identify 20
drillable prospects
- Falkland Gold & Minerals working through 23 identified onshore targets
• Disposal of Cobham Travel
Outlook
• Second half outlook remains positive
• Future of ferry boosted by demise of SHRT plan for tunnel under
Portsmouth Harbour
• Growth prospects in Falklands linked to recovery in illex fishing
catches
• Solid contribution expected from PHFC in quieter winter half
• Exposure to oil and minerals exploration through shareholdings in FOGL
and FGML
• Continue to seek earnings enhancing complementary acquisitions
David Hudd, Chairman of Falkland Islands Holdings plc, said:
'We have continued to make good progress in the first six months and the
performance from PHFC has been especially pleasing. Whilst the poor illex
fishing season continues to impact, the outlook for the second half remains
positive and we are optimistic of further solid contributions from our principal
trading operations.'
Enquiries:
Falkland Islands Holdings Tel: 01279 461 630
John Foster, Managing Director Tel: 07710 764 556
David Hudd, Chairman Tel: 07771 893 267
College Hill Tel: 020 7457 2020
Ben Brewerton / Nick Elwes
Chairman's Statement
Overview
We are pleased to report that Falkland Islands Holdings has continued to make
good progress in the 6 months to 30 September 2005. Profits rose sharply as the
full benefits of the acquisition of Portsmouth Harbour Ferry Company were seen
in the first half and Earnings per Share, excluding exceptional profits on the
sale of a subsidiary and the amortisation of Goodwill, increased by 91% from
3.2p in the prior period to 6.1p in the current year. As in previous years no
interim dividend is proposed.
Financials
Turnover has increased from £5.4million in the first half of last year to
£8.1million and Profits Before Tax rose from £299,000 to £729,000 in the 6
months to 30 September 2005.Underlying profits after stripping out profits from
the sale of the Cobham Travel subsidiary and before the amortisation of Goodwill
increased from £299,000 to £747,000. The profit after tax attributable to
shareholders was £461,000 compared to £201,000 last year.
Operations
Trading activity in the Falkland Islands during the winter half was
satisfactory. Turnover rose from £5.4million to £5.8million reflecting the
reopening of the Upland Goose Hotel following its refurbishment in the summer of
2004 and insurance commission which continued to grow. Profits from the Group's
Falklands business saw a small decline in the first half compared to the same
period last year with contribution lower by £30,000 at £448,000.This flat
performance reflected the generally less buoyant economic conditions in the
Islands resulting from the poor illex fishing season in 2004/5 and the sharp
increase in global vessel charter and fuel costs which saw a rise in the cost of
transporting goods to the Falklands. In September 2005 the Group moved away from
chartering its own vessels and started shipping cargo to the islands on UK
Ministry of Defence vessels. These arrangements are expected to provide an
important buffer against continuing rises in global freight and transportation
costs as well as improving the efficiency of the Group's supply chain.
The 6 months to 30 September 2005 saw the first full contribution of £580,000
from the Group's main UK trading subsidiary, Portsmouth Harbour Ferry Company
('PHFC'). PHFC performed well in the summer period. Underlying passenger numbers
were slightly lower than in the previous year following the introduction of car
parking charges in Gosport in November 2004; however profitability benefited
from an increase in ferry fares in June 2005 and in particular from the
additional ferry and cruising activity linked to the Trafalgar celebrations and
the International Festival of the Sea in June and July 2005. The company's
pleasure cruising activity also performed well, helped by the interest
surrounding these events and also by the commissioning in June of the company's
new vessel, the Spirit of Portsmouth which operates as a cruise boat in the
summer and a ferry in the winter. In July the Group was successful in selling
its non core Cobham Travel subsidiary at a premium to Net Assets.
On 29 November 2005 the Department for Transport issued a statement confirming
that it would not provide support for Hampshire County Council's longstanding
plans for a Rapid Transit Scheme incorporating a tunnel under Portsmouth
harbour. This announcement is seen very positively by your Board and effectively
removes the threat of the SHRT, opening the door for alternative public
transport schemes that will work in harmony with the existing ferry services
provided by PHFC.
Investments
The Group also owns strategic stakes in the AIM listed exploration companies,
Falkland Oil and Gas and Falkland Gold and Minerals.
Falkland Oil and Gas ('FOGL')
Offshore exploration work is continuing in the Falklands basin with the 2D
seismic survey progressing whilst interpretation, analysis and mapping of that
data is carried out in the UK.
The current 2D survey which has been extended to cover 15,000km is concentrated
on the large number of leads revealed by the previous survey of 9,450km which
was completed in May 2005. This survey is now 60% complete and is anticipated to
be finished by the end of January and the data will be processed in the first
half of 2006. Interpretation and mapping is being progressed as the data becomes
available and this will form the basis of a 3D seismic programme in the most
prospective areas. The objective remains to identify around 20 drillable
prospects.
Discussions have commenced to introduce potential farm-out partners in order to
share the costs and accelerate the exploration of this large area.
The market value of the Group's shareholding of 16,803,000 shares in FOGL
(18.3%) at 30 September 2005 was £18.9million compared to a book value of
£2.7million.
Falkland Gold and Minerals ('FGML')
Onshore the two drilling rigs operated by FGML are working their way through the
23 targets identified by the aeromagnetic survey carried out in 2004. To date
seven have been completed and the results have added considerably to FGML's
understanding of the geology of the Islands.
The selection of the remaining drilling targets is being enhanced by ground
geophysics and soil sampling and the current expectation is that the initial
drilling programme will be completed by the end of 2006. The expectation is that
at that stage FGML will have available cash balances of some £5.5million to
carry out the further work required.
The market value of the Group's shareholding of 11,250,000 shares in FGML
(14.4%) at 30 September 2005 was £ 2.2million compared to a book value of
£0.2million.
Balance Sheet and Cash Flow
In the half year to September the group drew down a £2 million bank loan to help
finance the acquisition of its new ferry vessel Spirit of Portsmouth and spent
£0.2 million to fit out the new boat. In the period the group also subscribed £2
million for new shares in FOGL in that Company's share placing in May 2005 to
increase the scope of its oil exploration programme. Cash Flow from the Group's
Operating Activities was healthy at £465,000.As at 30 September 2005 the Group
had net borrowings of £2.4million (£0.4m March 2005),Cash balances of
£1.2million (£0.9m March 2005) and unutilised borrowing facilities of £2million.
Outlook
In the second half of the year economic conditions in the Falklands are expected
to remain flat. Growth will be limited in the absence of a significant recovery
in illex fishing catches although some progress is expected as a result of
increased numbers of cruise ship visitors to the Falklands and other summer
activity. In the UK, for PHFC the winter months are quieter with less tourist
activity in the Gosport and Portsmouth area and this provides a natural balance
to the normally stronger second half seen in the Falklands. Overall the outlook
for the second half remains positive and we remain cautiously optimistic that
further solid contributions will be delivered from both the group's principal
trading operations.
David Hudd John Foster
Chairman Managing Director
UNAUDITED INTERIM CONSOLIDATED
PROFIT AND LOSS ACCOUNT
Unaudited 6 Months Unaudited 6 Months Audited Year ended
To 30 September 2005 To 30 September 2004 31 March 2005
As restated As restated
£'000 £'000 £'000
Turnover 8,146 5,415 12,754
Cost of sales (5,271) (3,779) (8,708)
Gross Profit 2,875 1,636 4,046
Administrative expenses (2,173) (1,365) (3,345)
Other Operating Income 78 100 291
Group Operating profit 780 371 992
Share of results of associated undertakings (22) -
Total Operating profit 780 349 992
Profit on sale of subsidiary 84
Profit on ordinary activities before interest 864 349 992
(Note 1)
Net Interest (Note 2) (135) (50) (85)
Profit on ordinary activities before taxation 729 299 907
(Note 3)
Taxation on profit on ordinary (268) (98) (306)
activities (Note 4)
Profit on ordinary activities after taxation 461 201 601
(Note 8)
Dividends paid - - 369
Earnings per share (Note 5)
- Basic 5.5p 3.2p 8.2p
- Fully diluted 5.4p 3.1p 8.1p
Underlying Profit Before Tax 30 September 2005 30 September 2004 31 March 2005
£'000 £'000 £'000
Profit before taxation (as above) 729 299 907
Add Amortisation of Goodwill 102 65
Less profit on sale of Subsidiary (84)
Profit Before Tax, Amortisation and Profit on 747 299 972
Sale of Subsidiary
Earnings per share before sale of subsidiary and 6.1p 3.2p 9.0p
goodwill amortisation
UNAUDITED CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
30 September 2005 30 September 2004 31 March 2005
As restated As restated
£'000 £'000 £'000
Fixed assets
Intangible assets 4,034 - 4,136
Tangible assets 8,520 3,461 8,501
Investments (Note 6) 2,900 1,828 900
15,454 5,289 13,537
Current assets
Stocks 3,519 2,947 3,308
Debtors 1,553 1,430 1,812
Cash at bank and in hand 1,222 181 914
6,294 4,558 6,034
Creditors: amounts falling due within
one year (4,989) (3,101) (5,419)
Net current assets 1,305 1,457 615
Total assets less current liabilities 16,759 6,746 14,152
Creditors: amount falling due after
more than one year (2,964) (603) (831)
Provision for liabilities and charges (882) (377) (882)
Net pension scheme liabilities (Note 7) (1,714) (1,376) (1,648)
Net Assets 11,199 4,390 10,791
Capital and reserves
Called up share capital 838 654 838
Share Premium account 7,061 927 7,061
Other Reserves 703 703 703
Reserve for own shares (83) (112) (83)
Profit and loss account (Note 8) 2,680 2,218 2,272
11,199 4,390 10,791
UNAUDITED CONSOLIDATED CASH FLOW
for the six months ended 30 September 2005
Unaudited 6 months to Unaudited 6 months to Audited Year to
30 September 2005 30 September 2004 31 March 2005
£'000 £'000 £'000
Cash flow from operating activities 465 (763) 777
Returns on investment and
Servicing of finance
Interest received 14 8 47
Interest paid (94) (8) (31)
Taxation
UK Corporation tax (82) - (169)
Overseas taxation paid 0 - (104)
Capital Expenditure
Purchase of tangible fixed assets (242) (36) (1,243)
Purchase of intangible fixed assets - - (622)
Disposal of fixed assets 5 1 144
Acquisitions
Investment in joint venture (679)
Investment in subsidiary undertakings (5,556)
Sale of subsidiary undertaking 158
Purchase of investments (2,000) (935)
Equity dividends paid - - (372)
Cash (Outflow) / Inflow before financing (1,776) (2,412) (7,129)
Financing
Shares issued 910 5,472
Repayment of secured loan (102) - (279)
Sale of own shares 112
Share options exercised 98
New secured loan 2,409 500 1,000
Increase / (Decrease) in cash 531 (1,002) (726)
Statement of Recognised Gains and Losses
6 months to 6 months to Year ended
30 September 30 September 31 March
2005 2004 2005
£'000 £'000 £'000
Profit for the period after taxation 461 201 601
Actuarial (loss) / gain 0 38 (51)
Tax on actuarial (loss) / gain (53) (12) 17
Total gains and losses recognised in the 408 227 567
period
Prior year adjustment FRS 17 (Note 1) (635)
Prior year adjustment re FRS 21 502
Total gains and losses recognised since last 275
annual report
The prior year adjustment in relation to FRS21 relates to the requirement to
recognise dividends as paid, previously they were recognised on a proposed basis.
Notes to the interim Statement to 30 September 2005:
1. Adoption of FRS17
The Board has adopted FRS17 'Retirement Benefits' for the first time. The
impact on the profit and loss account is as follows:
6 Months ended 6 Months ended Year ended
30 September 2005 30 September 2004 31 March 2005
£'000 £'000 £'000
Increase in pension provision 59 62 120
Current service cost (9) (10) (20)
Impact on operating profit 50 52 100
Net financing costs (55) (47) (91)
Total FRS 17 adjustments (5) 5 9
2. Interest
The net interest cost includes the net financing cost of the group's defined
benefit pension schemes as shown in Note 1.
3. Segmental information
6 Months ended 6 Months ended Year ended
30 September 2005 30 September 2004 31 March 2005
£'000 £'000 £'000
Turnover
General trading in the Falkland Islands 5,753 5,415 11,468
Ferry Services 2,393 1,286
8,146 5,415 12,754
Profit before taxation head office costs
and goodwill amortisation
General trading in the Falkland Islands 448 478 1,303
Ferry Services 580 202
1,028 478 1,505
Head office costs (281) (179) (533)
Profit before sale of subsidiary and goodwill 747 299 972
amortisation
Profit on sale of Subsidiary 84
Profit before goodwill amortisation 831 299 972
Goodwill amortisation (102) (65)
Group profit before taxation 729 299 907
4. Taxation
The taxation charge has been estimated at 32.0% (2004: 32.5%)
5. Earnings per share
Earnings per share has been calculated on profit after tax of £461,000 (2004:
£201,000) based on the weighted average number of shares in issue, excluding
shares held in the Employee Share Ownership Plan of 8,324,063 (2004: 6,300,702).
The fully diluted earnings have been further adjusted by the dilutive
outstanding share options resulting in a weighted average number of shares of
8,459,491 (2004: 6,397,703).
6. Investments
The investments are stated at cost. The market value of these investments was as
follows:
30 September 2005 31 March 2005
£'000 £'000
Falkland Gold and Minerals Limited 2,194 4,246
Falkland Oil and Gas Limited 18,903 17,123
21,097 21,369
7. Pension Scheme Liabilities
The fair value of the scheme assets and the present value of the scheme
liabilities were as follows:
30 September 30 September 31 March
2005 2004 2005
£'000 £'000 £'000
Deficit at the beginning of the period (2,431) (2,063) (2,063)
Current service costs (9) (10) (20)
Cash pension contributions 47 43 84
Net financing cost (55) (47) (91)
Actuarial (loss)/gain 38 (51)
Acquisition of subsidiary (290)
Deficit at end of period (2,448) (2,039) (2,431)
Deferred tax 734 663 783
Net pension scheme deficit (1,714) (1,376) (1,648)
8. Prior Year Adjustments
30 September 2004 31 March 2005
£'000 £'000
Prior year adjustments
Operating Profit 52 100
Interest (47) (91)
Tax on profit on ordinary activities 5 3
Adjustment in respect of FRS 21 18 520
28 532
Profit previously reported 173 69
Restated profit transferred to reserves 201 601
Actuarial gain/(loss) net of tax 26 (34)
Other recognised gains and losses 26 (34)
Increase in net pension liability (577) (635)
Reduction in shareholder funds (577) (635)
There are no prior period movements in the current period as all adjustments in
respect of FRS 17 and FRS 21 have been reflected in the opening position.
Restatement of Profit and Loss account reserves
30 September 30 September 31 March
2005 2004 2005
£'000 £'000 £'000
Opening balance as previously reported 2,405 2,253 2,253
Prior year adjustment FRS17 (635) (613) (613)
Prior year adjustment FRS21 502 351 351
2,272 1,991 1,991
Retained profit for the period 461 201 601
Other gains and losses (53) 26 (34)
Sale of own shares as previously reported 83
Dividends Paid (369)
Closing balance 2,680 2,218 2,272
9. Reconciliation of movement in shareholder funds
30 September 30 September 31 March
2005 2004 2005
£'000 £'000 £'000
Opening shareholder funds as previously reported 10,924 3,515 3,515
Prior year adjustment re FRS 17 (635) (613) (613)
Prior year adjustment re FRS 21 502 351 351
Opening shareholder funds as restated 10,791 3,253 3,253
Profit for the period 461 201 601
Dividends paid 0 (369)
Issue of shares 910 7,228
Sale of own shares 112
Other recognised gains and losses (53) 26 (34)
Net addition to shareholder funds 408 1,137 7,538
Closing shareholder funds 11,199 4,390 10,791
10. The interim report has been prepared on the basis of the accounting policies
set out in the group's 2005 Annual Report as amended.
11. The results for the year ended 31 March 2005 as shown in the
statement do not constitute statutory accounts but are an abridged version of
the Company's 2005 accounts as amended which have filed with the Registrar of
Companies and upon which the audit report was unqualified and did not contain a
statement under Section 237 (2) or (3) of the Companies Act 1985. The Interim
Report was approved by the Board on 1 December 2005.
NOTES TO THE UNAUDITED CONSOLIDATED CASH FLOW
For the six months ended 30 September 2005
Unaudited 6 Unaudited 6 Audited Year
Months Months ended
to 30 September to 30 September 31 March
2005 2004 2005
As restated As restated
£'000 £'000 £'000
Reconciliation of net cash flow to
movement in net debt
Increase / (Decrease) in cash in the 531 (1,002) (726)
period
Cash outflow from decrease in debt 102 - -
Cash inflow from increase in debt (2,409) (500) (848)
Movement in net debt in period (1,776) (1,502) (1,574)
Change in net debt resulting from (143) 209
(disposals) / acquisitions
(1,919) (1,502) (1,365)
Net (debt) / cash at start of period (432) 933 933
Net (debt) cash at end of period (2,351) (569) (432)
Reconciliation of operating profit to
operating cash flows
Group operating profit 780 349 992
Amortisation of goodwill 102 65
Depreciation charges 210 126 292
(Increase) / Decrease in stocks (211) 132 (229)
Decrease / (Increase) in debtors 94 (52) (256)
(Decrease) in creditors and provisions (510) (1,318) (87)
Net cash inflow from operating activities 465 (763) 777
Analysis of change in net debt
As at 31 March Cash Other non-cash As at
2005 Flows changes Disposals 30 September 2005
£'000 £'000 £'000 £'000
£'000
Cash at bank and in hand 914 451 (143) 1,222
Overdraft (80) 80 0
Debt due within one year (435) 102 (276) (609)
Debt due after one year (831) (2,409) 276 (2,964)
Total (432) (1,776) 0 (143) (2,351)
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