Falklands : Falkland Islands Holdings Report
Submitted by Falkland Islands News Network (Juanita Brock) 05.07.2006 (Article Archived on 19.07.2006)
FIH Preliminary Results for the year ending 31 March 2006.
FIH REPORT
Falkland Islands Holdings PLC
04 July 2006
Falkland Islands Holdings plc
Preliminary Results for the year ended 31 March 2006 Falkland Islands Holdings ('FIH'), an AIM listed company operating a range of businesses in the Falkland Islands and the Portsmouth Harbour Ferry Company ('PHFC') in the UK, announces preliminary results for the year ended 31 March 2006.
Financial Highlights
Turnover up 23% to £15.7 million (2005: £12.8m)
Underlying profit before taxation up 61% to £1.56m (2005 £0.97m)
including a first full year contribution from PHFC
Profit before taxation, including exceptional items up to £3.1m (2005:
£0.9m),
EPS on underlying profits 12.7p (2005 : 9.1p)
Basic EPS 32.6p (2005: 8.2p)
Dividend per share increased by 8.3% to 6.5p (2005: 6p)
Cash balances at year end of £3.6m (2005 £0.9m)
Cash net of borrowings at year end £0.3m (2005 £0.4m borrowings)
Operating Highlights
Falkland Islands' business produced satisfactory results:
o Retail sales growth helped by increased cruise ship visitors, new in
store delicatessen and coffee shop
o Business confidence dampened by fourth year of poor squid catches
o Good progress made by Group's insurance agency
o Increased competition impacted on the Upland Goose
PHFC revenues buoyed by increased activity surrounding Maritime festivals
Continued exploration progress made by FGML and FOGL
Outlook
Trading in the Falklands to continue at satisfactory levels since the
year end
Further growth expected from new tourist services
Stable outlook for PHFC, which lessens Group's dependence on the Falklands
Earnings enhancing complementary acquisitions continue to be sought
David Hudd, Chairman of Falkland Islands Holdings plc, said:
'We have made good progress during the year building a solid platform from which to grow in the future, despite business confidence in the Islands being impacted by poor squid catches. The contribution of PHFC was also especially pleasing in its first full year under our ownership.
With solid contributions from our two trading businesses we are confident that we can look forward to another good year, providing essential services to the local communities where we operate whilst continuing to offer attractive returns for our shareholders.'
4 July 2006
Enquiries:
Falkland Islands Holdings
David Hudd, Chairman Tel: 07771 893 267
John Foster, Managing Director Tel 07710 764 556
College Hill
(1) Nick Elwes Tel: 020 7457 2020
Chairman's and Managing Director's Review of Operations
Overview
We are pleased to report that the year to 31 March 2006 has been an encouraging year for your Company and record levels of profitability have been achieved as the group successfully consolidated its position following the strategic expansion seen in the prior year. The Group now has two solid cash generative businesses providing essential services to local communities. The Falkland operations produced a satisfactory result despite subdued levels of activity in the Islands, while the Portsmouth Harbour Ferry Company ('PHFC') benefited from the maritime festivals held in 2005.
Falkland Oil and Gas ('FOGL') and Falkland Gold and Minerals ('FGML') in which the Company has significant shareholdings of 16.3% and 14.4% respectively, continued their exploration efforts. FOGL raised a further £10 million from investors in May 2005 and we subscribed £2 million in that placing. We took the opportunity in February 2006 of recouping that cash outlay when we sold 1.8 million shares generating proceeds of £2.4 million and a profit of £2.1 million.
This transaction increased the Group's distributable reserves and provides additional financial flexibility. At the end of the year the Group had net cash balances of £0.3 million (2005: Borrowings £0.4 million) and the market value of the two investments was £23.3 million, equivalent to 278 pence per FIH share, compared with book cost of £2.6 million.
The Group now has a solid operating platform and a strong cash position from which to move forward and the exploration investments will provide an exceptional return in the event of a successful outcome. Your Board will seek to continue to deliver value to shareholders and as such is proposing to increase the annual dividend by 8.3% from 6p to 6.5p.
Financial Summary
In the year to 31 March 2006 turnover rose by 23% to £15.7 million (2005: £12.8 million) and the profit before taxation including exceptional items increased by to £3.1 million (2005: £0.9 million). Underlying profits before the amortisation of goodwill and exceptional items, including a first full year contribution from PHFC, rose by 61% to £1,560,000 (2005: £972,000). Basic earnings per share rose to 32.6 pence (2005: 8.2p). Basic earnings per share on underlying profits increased 40% to 12.7 pence per share (2005: 9.1p).
Operations
Falkland Islands
Retail sales on the Islands were helped by the introduction of a new in store delicatessen and coffee shop and further expansion of the product range. The steady increase in the number of cruise ship visitors visiting Stanley also helped to boost revenues at the Capstan gift shop. However, in contrast the group's DIY retailing businesses suffered from the slow down in the local economy and a reduction in business confidence resulting from continued low levels of squid catches at the start of the year.
After a good year in 2005, the Land Rover dealership had a more difficult year and the numbers of vehicle sales fell although a contract to modify existing MoD vehicles helped the dealership achieve satisfactory results. The Upland Goose Hotel faced fierce challenges from newly refurbished competition in Stanley and produced a disappointing result, accordingly we have taken the decision to reduce its carrying value by £0.4 million.
On a more positive note the Group's insurance agency continued to make steady progress, consolidating its reputation for high levels of customer service and net rental income from FIC's portfolio of 35 commercial and residential properties in Stanley also moved ahead. Darwin Shipping was able to maintain its contribution despite rising freight and fuel costs by changing from chartering its own vessels to taking space on Ministry of Defence Supply vessels which give the added advantage of more frequent vessel sailings per year, giving improved service levels and choice for customers.
Port Services continued to make an important contribution although profit levels fell slightly in the face of local competition. With poor squid catches in the early part of the financial year the Fishing Agency business only made a modest contribution. However the Agency team were instrumental in developing a new tourist focussed business stream. This comprises Mini Bus tours for cruise line passengers and a former London double decker Routemaster bus which now runs along the sea front providing visitors with a unique view of Stanley. Further growth is expected from these tourist services in future years.
PHFC
PHFC's continuing ferry revenues of £3.3 million were in line with expectations.
Passenger numbers declined marginally on the previous year as the effects of the introduction of parking charges in Gosport were felt. However revenues were buoyed by increased activity around Portsmouth Harbour linked to the International Fleet Review and Festival of the Sea in June and July 2005. In May 2005 PHFC took delivery a new ferry vessel, Spirit of Portsmouth at a total cost of £1.9 million underlining the commitment of the Company to modernising its fleet and maintaining the highest levels of service and passenger safety. The cost of the ferry was substantially paid last year.
Exploration Activities
Falkland Gold and Minerals Limited (FGML) - FIH Shareholding 14.4% (2005 14.4%) FGML is now well into the second year of its exploration programme in the Falklands with its operational base in Goose Green. The work programme has been designed to establish the source of alluvial gold discovered in some of the streams in the Islands. As most of the target areas are covered with peat, the initial drilling targets were identified from the aero magnetic survey and this has been followed up by focused ground magnetic surveys.
By the end of May 2006, total investigative drilling totalled over 14,000m on ten targets while a further 8,000m is planned on seven further targets. In addition, geo-chemical peat soil sampling will be carried out on two additional areas of interest. It is now probable that the additional work resulting from increased knowledge of the subsurface terrain will extend the work programme well into 2007
The British Geological Survey has recently completed a review of the methodology employed and the exploration work carried out to date. FGML is retaining their services to provide additional interpretative capacity as more data becomes available.
The market value of the Group's shareholding of 11,250,000 shares in FGML (14.4%) at 31 March 2006 was £1.8 million (book value: £0.2 million).
Falkland Oil and Gas (FOGL) - FIH Shareholding 16.3% (2005 18.1%) FOGL has continued to make good progress in acquiring and analysing data over their 79,000 sqkm licences to the South and East of the Falklands in order to define and prioritise targets for drilling. Over the Austral Summer a further 13,000 km of 2D seismic was acquired bringing the total recorded by FOGL to 22,450 km.
The scale of the opportunity for FOGL is such that it became clear to the FOGL board that it was necessary to increase management resources in the UK to cope with the work load. In January 2006, Tim Bushell joined as Chief Executive succeeding John Armstrong who had served as Executive Chairman since the formation of the Company. At the same time John, who will remain on the board, was succeeded as Executive Chairman by Richard Liddell. Tim is a qualified geologist and has spent the last 10 years developing the exploration and production interests of Paladin Resources in Norway. Prior to this he was responsible for LASMO's South Atlantic interests which included the exploration campaign in the North Falklands Basin in 1998.
Discussions are continuing with possible partners while further analysis and interpretation of data continues. The current short term objective is to plan and contract for the exploration effort over the next Austral Summer. The technical data continues to indicate that a major new petroleum province could lie within the license area.
In February 2006 in order to provide the Group with additional financial flexibility FIH sold 1.8 million shares in FOGL generating proceeds of £2.4 million and a profit of £2.1 million. The market value of the Group's remaining shareholding of 15 million shares at 31 March 2006 was £21.5 million (book value: £2.4 million).
People
On 10 June 2005 John Foster, was appointed Managing Director succeeding Bryan McGreal who had been with the group since 1987. John is a Chartered Accountant with wide commercial and financial experience and has held directorships in a number of UK listed companies.
On 31 March 2006 Tony Knightley retired from the Board after many years with the Group first as Company Secretary and then latterly as Finance Director. The would like to thank Tony for his contribution to FIH. FIH's Group m Financial Controller Mike West was appointed Company Secretary on 1 April 2006. On 26 July 2005, Mike Killingley was appointed as a non executive director to the Board of FIH. Mike is also Chairman of the PHFC board, is a former Partner with KPMG and is Chairman of Beale Plc and Conder Environmental PLC. Finally we would like to thank the staff and employees of the FIH group both in the Falklands and in the UK for their contribution and hard work over the past year. As a group focused on providing essential services to local customers the care and dedication shown by our staff in delivering these services underpins the continued success of your Company.
Outlook
As we noted last year our strategy is to ensure that the future of your Company is not wholly dependent upon our investments in the listed Falkland exploration companies. The PHFC acquisition was the first step towards building a meaningful business outside the Falklands and we remain keen to identify UK based companies for acquisition, subject to them enhancing the underlying value of FIH shares.
As we start the new financial year the general backdrop to trading in the Falklands has improved and this should help underpin modest growth in the current year. The outlook for PHFC also remains stable although the absence of the maritime festivals this summer will mean that the contribution from the ferry business will fall back from the record levels seen in 2005/6. Prospects for the Falklands over the medium term remain positive as expenditure on oil and mineral exploration activities continues. Overall, we remain confident that the Group's solid level of underlying profitability will be maintained in the current year.
David Hudd John Foster
Chairman Managing Director
4 July 2006
Some notes:
A payment of £105,000 was made to a director as compensation for loss of office. Following a disappointing period of trading, a decision was taken to write down the carrying value of the Upland Goose Hotel.
The additional calculation of earnings per share is given in order to provide a
more meaningful comparison of underlying performance. The calculation of basic, pre amortisation and underlying earnings per share is based on the weighted average number of ordinary shares in issue during the year, excluding shares held by the Employee Share Ownership Plan, of 8,324,649 (2005: 7,336,298). The calculation of fully diluted earnings per share is based n the ordinary shares in issue plus the edilutive effect of outstanding shares potions resulting in a weighted average number of shares of 8,434,385 (2005:7,427,648).
The Group's financial instruments comprise cash and borrowings and arise directly from its operations. The principal function of these financial instruments is to fund the Group's operations. Cash at bank is money on call or hort term deposit. This together with cash in hand is used to fund the ay-to-day operations. The Group has an unutilised overdraft facility of £2.3 million
The financial information does not constitute the Company's statutory accounts for the years ended 31 March 2006 and 2005 but is derived from those accounts. Statutory accounts for 2005 have been delivered to the Registrar of Companies, and those for 2006 will be delivered following the Company's Annual General Meeting. The auditors have reported on those; their reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act1985. Copies of Falkland Islands Holdings plc annual report and financial statements will be with shareholders in mid July.
This information is provided by the Falkland Islands Company
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