British Territories in the South Atlantic Ocean.
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Chairman’s Interim Statement For the six months ended 30 September 2003
Review of results As we anticipated, the first half of the year produced lower profits than last year. Profit before tax fell to £300,000 (2002: £421,000) on turnover 7% lower at £4.9m (2002: £5.3m).Earnings per share were 3.2p (2002: 4.6p) . The fall in profit was attributable to reduced shipping revenues, in the aftermath of the poor fishing season in 2001/2 which we referred to at the time of the announcement of our year end results. However, activity levels have now been restored and a satisfactory result is anticipated for the year. The directors are not recommending payment of an interim dividend but, in the absence of unforeseen events, they would anticipate paying a final dividend of not less than 5.5p in respect of the year ended 31 March 2004. Cash generation remains strong and the Group maintained net cash balances of £452,000, the same level as at 31 March 2003. Capital expenditure of approximately £389,000, primarily relating to the West Store redevelopment, was financed from cash flow. Operations Operating profits declined to £304,000 from £435,000. Retailing profits were maintained despite the disruption resulting from the extensive building work at the West Store. Management services, the fishing agency and the automotive operations, produced results comparable to last year. The shortfall in profits was largely attributable to the decline in shipping activities and a disappointing result from the Upland Goose Hotel. Three voyages were completed in the period (2002:3). However, bulk freight cargoes were at low levels reflecting the reduction in infrastructure and capital spending by the Islanders which followed the 2001/2 fishing results. Shipping costs were significantly higher as a result of increased bunkering costs and the decline of sterling against the euro. Occupancy levels at the Upland Goose were lower this year ; the hotel benefited last year from increased visitor numbers linked to the 20th anniversary of the 1982 conflict. Developments The West Store extension and fit out was completed in July at an overall cost of £550,000. The extension provides a 65% increase in the food hall floor area. The introduction of the Waitrose own label range, which was one of the key drivers in the decision to carry out the development, has proved popular with customers. For the first time the Falklands has a store offering a comprehensive range of products in surroundings comparable to retail food outlets in the UK. The Group has successfully concluded an agreement to act as agents for Caribbean Alliance Insurance Company (CAIC) which is replacing Royal & Sun Alliance (RSA) as the main provider of insurance cover for the Islands.CAIC is a former subsidiary of RSA and the approval of the Falklands Government has been secured for the change. CAIC specialises in providing insurance cover for island communities. We believe that their appointment will lead to a significant increase in the range of insurance products for our clients. Given the forecast shortage of available housing in Stanley, the Group is in the process of drawing up plans to utilise some of its landbank for housing development. Any such developments will be subject to planning and other necessary approvals. Exploration Activities Both the oil and gas and the mineral exploration licences have been the subject of much activity over the last 6 months and your directors remain committed to ensuring that the Company participates in future exploration activity. The Hydrocarbon oil and gas consortium, in which the Group has a 20% interest, has completed the reprocessing and analysis of some 1,000km of the 4,460 km of seismic data which was purchased last year. Several large leads have been identified which the consortium believes warrant further investigation and it is likely that additional seismic will be shot in 2004/5. The Group intends to limit its capital expenditure on this oil and gas exploration activity through the introduction of a farm-in partner and is in discussion with a number of potential partners. The Onshore mineral Joint venture, in which the Group holds a 33% interest, has a prospecting licence covering the whole of the Falkland Islands. Discussions are continuing on the future work programme with potential joint venture partners. Outlook The Falklands economy has recovered from the uncertainty earlier in the year and the trading performance of the Group has improved since the end of the first half. The Group is pursuing a number of new developments which your Board believes will generate long term growth. The board is confident that the Group will achieve a satisfactory result for the year.
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