FIH Group Plc
Annual Report 2012

Plain-text annual report

Falkland Islands Holdings plc Annual Report 2012 Contents 1 Financial Highlights 2 Chairman’s Statement 4 Managing Director’s Business Review 10 Managing Director’s Financial Review 14 Board of Directors and Secretary 15 Directors’ Report 19 Independent Auditor’s Report 20 Consolidated Income Statement 21 Consolidated Statement of Comprehensive Income 22 Consolidated Balance Sheet 23 Company Balance Sheet 24 Consolidated Cash Flow Statement 25 Company Cash Flow Statement 26 Consolidated Statement of Changes in Shareholders’ Equity 27 Company Statement of Changes in Shareholders’ Equity 28 Notes to the Financial Statements 68 Directors and Corporate Information Financial Highlights FOR THE YEAR ENDED 31 MARCH 2012 Turnover from continuing operations Profit before tax Underlying profit before tax* Diluted earnings per share before goodwill amortisation and non-trading items Dividend per share Cash flow from operations Net asset value per share *Defined as profit before tax, amortisation and non-trading items. FALKLAND ISLANDS HOLDINGS PLC 1 2012 £m 34.11 2.84 3.23 26.2p 11.0p 4.61 317p 2011 £m 31.84 2.33 2.73 20.6p 9.5p 0.82 332p Change % 7.1 21.9 18.3 27.2 15.8 462.2 (4.5) Turnover (£m) from continuing operations 32.25 31.84 29.22 34.11 17.21 Underlying profit before tax* (£m) 3.23 2.69 2.73 2.31 2.01 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Diluted earnings per share (pence) before goodwill amortisation and non-recurring items Dividend per share (pence) 26.2 11.00 21.7 20.6 18.8 17.1 9.00 9.50 8.00 8.00 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2 ANNUAL REPORT 2012 Chairman’s Statement David Hudd Chairman I am delighted to report that Falkland Islands Holdings performed very well in the year ended 31 March 2012 with our three businesses achieving good results as the Group’s spread of interests proved resilient in difficult economic conditions. We achieved strong growth with underlying diluted earnings per share up 27% to a record 26.2p per share. This represents a compound annual growth rate of 9.2% over the last 10 years. Underlying pre-tax profits increased for the eighth successive year by 18.3% to a new high of £3.23 million (2011: £2.73 million). The financial position remains strong with minimal net debt; at the year-end bank borrowings were £3.0 million while bank deposits totalled £2.8 million. We are pleased to recommend an increased final dividend of 7p per share which makes a total dividend of 11p per share, a 15.8% increase on the Group’s 2011 dividend of 9.5p. Operations Momart was the largest contributor to the Group’s increase in underlying profits before interest with an 80% improvement. The international art market continued to strengthen and the benefit of improvements made to the operating procedures and cost structures at the business flowed through. At the Portsmouth Harbour Ferry Company (PHFC), we were delighted with the opening of the new pontoon terminal and its positive impact on the overall quality of service, giving another robust performance with profits increasing, despite the impact of the new pontoon on costs and fares. Excluding property sales, The Falkland Islands Company maintained its profit level. This was achieved despite significant inflation and increased staff costs as additional management was recruited. On behalf of the Board and shareholders I would like to express thanks to all our colleagues who have contributed to an excellent year for the Group. FALKLAND ISLANDS HOLDINGS PLC 3 potential opportunities ahead and has begun in-depth preparatory work on the investment opportunities available to us. We are strengthening our management in the Falklands and we will commit the capital required to bring these projects to completion. At PHFC we are exposed to the fragility of customers’ discretionary travel spend. Nevertheless, as an essential service PHFC will continue to generate good cash flow and profits. To continue to improve the service we intend to order a new ferry later this year to be operational in early 2014. For Momart we anticipate another good year as the international art market remains buoyant and we continue to experience strong demand for our services. The Group’s businesses remain robust with market leading positions that will continue to generate good cash flow and profits. For the current year, trading has been satisfactory and in line with the Board’s expectations. David Hudd Chairman 6 June 2012 Falkland Oil and Gas (“FOGL”) We were pleased to support FOGL’s fund raising in January 2012 by subscribing for a further 2 million ordinary shares at 43p each. The lock-in agreement preventing share sales which we entered into in April 2011 has now expired. We currently own 14 million shares with a book cost of £2.8 million; at 31 March 2012 these shares had a market value of £9.0 million which had increased to £12.8 million at 1 June 2012. FOGL’s two well drilling campaign with the Leiv Eiriksson rig is now expected to commence in July 2012 and to continue for approximately three months. The first well to be drilled, Loligo, has the potential to be one of the highest impact exploration wells being drilled in the world this year, with mean recoverable prospective resources of 4.7 billion barrels. A positive drilling result would have a dramatic impact on the FOGL share price and that of your Company. However, whatever the outcome of FOGL’s exploration activities, your Board remains focused on increasing the long term profitability of the Group. Outlook In the Falkland Islands the Sea Lion discovery in the north Falkland basin has confirmed the existence of commercially exploitable hydrocarbons. To the south, the Darwin well recently drilled by Borders & Southern Petroleum has proved the existence of a working hydrocarbon system and supports the prospectivity of the south Falkland basin. Both outcomes make further exploration work certain. Having traded in the Falkland Islands for 160 years we have a unique portfolio of assets and businesses whose prospects will be transformed if hydrocarbons are exploited. Your Board is taking a strategic approach to the 4 ANNUAL REPORT 2012 Managing Director’s Business Review John Foster Managing Director Group Overview I am pleased to report another successful year for the Group, with a 7.1% increase in revenues to £34.1 million and an 18.3% increase in underlying pre tax profits to £3.23 million (2011: £2.73 million). Group underlying operating profits (before amortisation and financing costs) rose by 21.8% to £3.57 million (2011: £2.93 million). Review of operations A summary of Group revenue and operating profit by business is shown below: Group revenue Year ended 31 March 2012 £m 2011 £m Change % Falkland Islands Company 14.98 14.92 Portsmouth Harbour Ferry 4.16 3.73 Momart Total 14.97 13.19 34.11 31.84 0.4 11.5 13.5 7.1 Group underlying operating profit Year ended 31 March Falkland Islands Company Portsmouth Harbour Ferry Momart Total 2012 £m 1.52 1.09 0.96 3.57 2011 £m Change % 1.61 0.79 0.53 2.93 (5.6) 38.0 81.1 21.8 Group revenue 2012 Underlying operating profit 2012 Momart 44% FIC 44% PHFC 12% 2011 2011 Momart 41% FIC 47% PHFC 12% Momart 27% PHFC 31% Momart 18% PHFC 27% FIC 42% FIC 55% FALKLAND ISLANDS HOLDINGS PLC 5 A new Range Rover Evoque pictured alongside The Falklands War Memorial in Stanley. FIC revenues 2012 Property sales 2% Other services 25% Motor 10% Retail 63% Property sales 3% Other services 19% Motor 13% Retail 65% Each of the Group’s businesses is reviewed in detail below: Falkland Islands Company (“FIC”) FIC had a satisfactory year with a small decline in profits from £1.61 million to £1.52 million on revenues 0.4% higher at £14.98 million. The prior year result included profits on property sales of £0.2 million whereas there were negligible such profits in 2012. Underlying profits generated from core trading activities were maintained despite increased costs from the recruitment of additional management personnel. Oil exploration activity continued during 2011/12 and total revenue remained at the record levels seen in the prior year (some 20% higher than 2009 /10 revenues). However, tourist activity declined as cruise ship visits were 10% lower than last year largely as a result of poor weather. Non oil activity was subdued compared to the strong growth experienced in the prior year as household budgets were constrained by pay settlements below inflation, which in the Falkland Islands reached 8%; as a consequence overall retail spending fell. FIC operating results Year ended 31 March Revenues Retail Motor Freight Support services Property sales 2012 £m 2011 £m Change % 9.45 1.57 1.12 2.61 0.23 9.72 1.91 0.69 2.15 0.45 (2.8) (17.8) 62.3 21.4 (48.9) Total FIC revenue 14.98 14.92 0.4 Underlying FIC operating profit Underlying operating profit margin (%) 1.52 1.61 (5.6) 10.1 10.8 (6.5) 2011 Despite the success of the enlarged and modernised supermarket at the MPA military base which opened in November and added £0.15 million to sales, market conditions remained tough and overall Retail sales fell by 2.8% to £9.45 million. Although a range of new offers were sourced from the UK, core grocery sales from the West Store food hall fell by 2.6% and DIY revenues were down 5.8%. Revenue from the Capstan gift shop was 10.3% lower in line with the reduction in the number of cruise ship visitors. 6 ANNUAL REPORT 2012 Managing Director’s Business Review CONTINUED In the absence of any large military orders Motor revenues declined by 18% to £1.57 million with total vehicle sales of 47 units compared to 78 last year. ferry operating profits, before pontoon lease finance costs of £0.2 million, rose by £0.3 million to £1.09 million (2011: £0.79 million). Revenues from third party freight were up 62% to £1.12 million largely due to an increase in northbound traffic to the UK resulting from the demobilisation of the Ocean Guardian drilling rig in December 2011. Following the confirmation of Rockhopper’s Sea Lion discovery, sales of residential property were halted. After one house sale early in the year FIC now retains nine of its twelve Marmont Row properties and these are let to oilfield services companies. In addition FIC has a rental portfolio of a further 31 properties and these are currently let to corporate clients, private customers and staff. Support services achieved a 21% increase in revenues largely as a result of a much improved Illex fishing season in the early part of the year. The other business units, insurance broking, stevedoring and Penguin Travel, produced results similar to last year. Portsmouth Harbour Ferry Company (“PHFC” ) PHFC delivered another robust performance with revenues rising by 11.5% reflecting the increase in fares and mild winter weather, which more than offset the substantial increase in operating costs following the June 2011 installation of the new pontoon at Gosport. As a result PHFC operating results Year ended 31 March Revenues Ferry fares Cruising and Other revenue Total PHFC revenue Underlying PHFC operating profit Underlying operating profit margin (%) 2012 £m 2011 £m Change % 3.97 0.19 4.16 3.59 0.14 3.73 10.6 35.7 11.5 1.09* 0.79 38.0 26.2 21.2 23.6 Passenger carried (000s) 3,328 3,400 (2.1) * Operating profit is shown before charging finance lease interest of £0.2 million relating to the new Pontoon. Annual passenger numbers saw a further modest decline over the course of the year of 2.1% compared to a fall of 2.7% last year. The rate of decline fell during the year from an initial 4.1% in the first half to 2.1% for the year as a whole reflecting relatively mild The new Gosport Pontoon installed June 2011. FALKLAND ISLANDS HOLDINGS PLC 7 2012 £m 2011 £m Change % Momart operating results Year ended 31 March Revenues Museums and public exhibitions Commercial gallery services Storage 7.05 6.30 1.62 6.67 5.00 1.52 5.7 26.0 6.6 13.5 Total Momart revenue 14.97 13.19 Underlying Momart operating profit Underlying operating profit margin (%) 0.96 0.53 81.1 6.4 4.0 60.0 Momart revenues 2012 Storage 11% Commercial gallery services 42% Museums and public exhibitions 47% 2011 Storage 12% Commercial gallery services 38% Museums and public exhibitions 50% in the second half (£3.6 million vs £3.4 million in H1) although the absolute level of sales did not match the high levels seen in H2 last year of £4.0 million (which were boosted by the Gauguin exhibition at Tate Modern). For the year as a whole overall Exhibition revenues increased by 5.7%, with notable exhibitions including The Cult of Beauty at the V&A, Lucian Freud at the National Portrait Gallery and Gerhardt Richter and the Damien Hirst retrospective, both at Tate Modern. weather conditions compared to the snow and ice of the prior year. The trend experienced last year of reductions in weekend discretionary travel has continued and weekend volumes were lower by 4.1% whereas daily commuting was less affected and passenger numbers declined by just 1.6%. The new pontoon with a capitalised lease cost of £5.0 million brought additional operating and finance costs of £0.4 million per annum. To meet these costs, ferry fares were increased by an average of 17.5% from the installation date and after absorbing the decline in passenger numbers of 2.1%, core ferry revenues rose by 10.6%. Cruise revenues saw a small increase to £0.19 million (2011: £0.14 million) and a corresponding small increase in contribution as well as providing a valued service to the local community. The pontoon which is held on an extendable 50 year lease from Gosport Borough Council secures PHFC’s position as harbour ferry operator for the long term and also significantly improves the passenger experience at Gosport providing a modern, safe and welcoming gateway to the ferry. After the summer 2011 fare increases, with adult return ticket prices of £2.70 (£1.35 per crossing), discounted fares for regular customers, and lower tariffs for seniors and children (£1.80 return), the ferry service continues to offer excellent value for money. With 99.9% of its annual 70,000 sailings departing on time PHFC maintained its outstanding reliability record. This together with an exemplary safety record is the cornerstone of the success of the ferry service and is founded on the very high levels of commitment and expertise of the ferry’s staff, which we salute. Momart I am delighted to report that Momart, the Group’s art handling and logistics business, continued the recovery seen in the first half and produced a much improved performance for the year. Helped by the strength of the commercial art market, total revenue increased by 13.5% to £15.0 million (2011: £13.2 million) and underlying operating profit rose by £0.43 million (81%) to £0.96 million (2011: £0.53 million). Exhibitions As expected, Exhibition revenues and margins improved substantially following the introduction of a more flexible pricing policy designed to defend market share and deliver the sales volume necessary to adequately cover fixed overheads. Exhibition sales saw a continued increase 8 ANNUAL REPORT 2012 Managing Director’s Business Review CONTINUED Gallery Services In Gallery Services the good growth seen in the first half (+28%) continued into the second half with further increases of 25% compared to H2 in 2010 /11. For the year as whole, having increased by nearly 30% in 2010/11, sales increased further, this year by 26%, to a record level of £6.3 million (2011: £5.0 million). The global commercial art market has continued to show strong growth and record auction sales confirm the attractiveness of art as an alternative investment to financial assets. Momart with its established reputation for technical excellence and the highest levels of service has continued to win new contracts from a demanding global clientele. During the year the company was successful in winning a number of important international contracts such as the simultaneous display of Damien Hirst’s spot paintings at 11 Gagosian galleries worldwide. The company’s reputation and standing with galleries, artists, auction houses and collectors has been enhanced by these successful high profile contracts which have reinforced Momart’s established presence at the major international fairs including Art Basel, Frieze London and Miami Basel. The underlying operating profit from Gallery Services increased by over 30% in the year and has been the principal factor in the substantial increase in profitability seen in the year. Storage Storage revenues increased by 6.6% to £1.62 million. Momart’s storage facilities are now close to their maximum capacity, accordingly plans are being progressed for their expansion although this will not come on stream until the next financial year. FOGL investment The Group owns 14 million shares (4.4% of the issued share capital) in AIM quoted Falkland Oil and Gas Limited (“FOGL”) which is solely engaged in exploration in the Falkland Islands. FOGL has the largest licence area of the five listed exploration companies which currently totals 49,000 sq km. FOGL’s two well drilling programme is expected to commence in a few weeks and will take some 3 months to complete. The recent discovery of condensate by Borders & Southern Petroleum in their Darwin well augurs well for the prospectivity of similar features in FOGL’s southern area which are not being drilled in this campaign. Momart installing a large artwork in the Sculpture Garden at Frieze Artfair 2011. FALKLAND ISLANDS HOLDINGS PLC 9 to enable the Group to take advantage of the opportunities which are emerging as the Falklands move towards oil production. The Group’s financial position remains strong with bank borrowings reduced to £3.0 million at 31 March 2012, while cash balances were £2.8 million. In the medium term the outlook is positive and we are confident of further growth at Momart and steady progression at PHFC. In the Falklands the Group is well placed to take advantage of the transformational change which now seems increasingly likely. John Foster Managing Director 6 June 2012 The Leiv Eiriksson rig. Details of the Group’s shareholding in FOGL are set out below: 31 March Number of shares held FOGL share price (bid price) Market value of holding Cost Book cost per share 2012 14m 64.5p £9.03m £2.8m 20.0p The market value of the shareholding on 1 June 2012 was £12.78 million. Trading outlook In the coming year we expect to see a slowing of the growth seen in 2011/12. PHFC will be constrained by weakened consumer demand in the UK, and at Momart we anticipate that the rate of growth will slow as capacity is fully utilised. In the Falkland Islands local demand will be soft pending increased activity from oil explorers and our cost base will increase as we invest further in strengthening the management team. In the second half of the year we will be commencing the development of our property assets 10 ANNUAL REPORT 2012 Managing Director’s Financial Review Summary income statement Earnings per share Year ended 31 March 2012 £m 2011 £m Group revenue 34.11 31.84 Underlying operating profit 3.57 2.93 Net financing costs (0.33) (0.20) Change % 7.1 21.8 65.0 Underlying profit before tax Less: Amortisation of intangibles Profit before tax as reported 3.24 2.73 18.7 (0.40) (0.40) – Year ended 31 March Underlying profit before tax Taxation on underlying profit 2012 £m 2011 £m Change % 3.24 2.73 18.7 (0.82) (0.82) – Underlying profit after tax 2.42 1.91 26.7 Diluted average number of shares in issue (thousands) 9,239 9,237 – Effective underlying tax rate 25.3% 30.1% (15.9) 2.84 2.33 21.9 Diluted EPS 26.2p 20.6p 27.2 Revenue and underlying operating profit Group revenue and underlying operating profit rose to £34.1 million and £3.57 million respectively in the year ended 31 March 2012. These are discussed in more detail above in the Review of Operations. Net financing costs The Group’s net financing costs increased to £0.33 million from £0.20 million due principally to the £0.19 million of interest on the finance lease for the new Gosport Pontoon. This increase in finance costs was partially offset by a decrease in bank interest payable reflecting the £1.0 million reduction in bank loans. Underlying pre-tax profit With the underlying operating profit increase of £0.64 million to £3.57 million partially offset by an increase in financing costs, the Group’s underlying pre-tax profits (“PBT”) grew by £0.51 million (18.3%) to £3.23 million. Reported pre-tax profit After charging £0.4 million for the amortisation of intangible assets (2011: £0.4 million) reported profit before tax for the Group increased by 21.9% to £2.84 million (2011: £2.33 million). Taxation The Group pays corporation tax on its UK and Falkland Islands’ earnings at 26%. The reduction in UK corporation tax rate from 28% to 26% and then 24% (from 2012/13) has generated a deferred tax credit of £0.2 million (7.0%) in the current year reducing the effective tax charge to 20.5%. Fully diluted Earnings per Share (“EPS”) derived from underlying profits, increased by 27.2% to 26.2p (2011: 20.6p). This reflected the lower effective tax rate. Balance sheet The Group’s Balance Sheet remains strong. Total net assets decreased marginally from £30.6 million in the prior year to £29.5 million as at 31 March 2012 due to a fall in the market value of the Group’s investment in FOGL, but retained earnings after the payment of tax and dividends increased by £1.1 million to £13.3 million (2011: £12.2 million). Bank borrowings fell to £3.0 million (2011: £4.0 million) and the Group had UK cash balances of £2.8 million (2011: £2.1 million). The carrying value of intangible assets was reduced by annual amortisation charges of £0.4 million to £12.7 million as at 31 March 2012 (2011: £13.1 million) (see note 11). The net book value of property, plant and equipment increased by £5.4 million to £12.9 million (2011: £7.5 million) after capital investment of £6.2 million, including £5.0 million applicable to the new Gosport Pontoon (see note 12). The Group owns investment properties comprising commercial and residential properties in the Falkland Islands held for rental together with 670 acres of undeveloped land. At 31 March 2012 the net book value of these assets after the transfer of the shopping complex at Mount Pleasant into operating properties was £1.5 million (2011: £1.7 million). There is a restricted market for freehold land in the Falklands, and the Directors have had regard to this in estimating the value of these assets and at 31 March 2012 estimate that the fair value of this property portfolio was £3.9 million (31 March 2011: £4.2 million). The Group shareholding in FOGL is described above in the Managing Director’s Business Review. FALKLAND ISLANDS HOLDINGS PLC 11 Cash flows Operating cash flow Net cash flow from operating activities increased from £0.8 million last year to £4.6 million, primarily due to the reversal of cash outflows into working capital seen in the prior year when the Falkland Islands experienced substantial growth. This followed more effective management of stock, receivables and creditors. The Group’s Operating Cash Flow can be summarised as follows: Year ended 31 March Underlying PBT Depreciation Interest payable EBITDA Share based payments Decrease/(increase) in working capital Deferred tax assets relating to future pension liabilities increased marginally to £0.59 million (2011: £0.55 million). Non-property related inventories decreased from £4.2 million to £4.0 million at 31 March 2012 largely representing stock held for resale in the Group’s retail operations in the Falkland Islands. Property related inventories are shown at cost and represent expenditure incurred to complete the conversion of Marmont Row back into a terrace of heritage cottages. After the sale of one property at the start of the year, the total cost of completed properties at 31 March 2012 was £1.0 million (2011: £1.2 million). Trade and other receivables were reduced by £0.2 million to £5.6 million as at 31 March 2012. Average debtor days outstanding were 57.7 (2011: 56.3). Outstanding finance leases totalled £5.3 million (2011: £0.2 million). The increase in finance leases is largely represented by £4.9 million in respect of the Gosport Pontoon. Corporation tax due for payment within the next 12 months is £0.5 million (2011: £0.6 million). Tax paid Other Net cash flow from operating activities Proceeds from shares issued under option schemes Less: Dividends paid Capital expenditure Net bank interest paid Purchase of 2 million FOGL shares Loan repayments Increase in hire purchase debtors Financing draw down loans Net outflows from financing etc. Net cash flow Cash balance b/fwd Cash balance c/fwd Trade and other payables increased from £8.3 million to £8.8 million at 31 March 2012 reflecting increased trading activity. At 31 March 2012 the liability due in respect of the Group’s defined benefit pension schemes was £2.5 million (2011: £2.1 million) as a result of the decline in long term interest rates used to discount future liabilities. The pension scheme in the Falkland Islands, which was closed to new entrants and to further accrual in 2007 is unfunded and liabilities are met as they fall due from operating cash flow. The net present value of the liability in respect of this scheme increased by £0.3 million to £2.4 million. At PHFC following an enhanced cash offer made to eligible deferred members last year the scheme’s net deficit has almost been eliminated; net liabilities at 31 March 2012 were £0.06 million (2011: £0.02 million). The net deferred tax liabilities at 31 March 2012 decreased by £0.3 million to £1.1 million (2011: £1.4 million) due principally to reductions in the current and future rates of UK Corporation Tax announced in the Budget on 26 March 2012. Net assets per share were 317p at 31 March 2012 (2011: 332p) reflecting a lower carrying value of the Group’s holding in FOGL at the year end. 2012 £m 2011 £m 3.2 1.1 0.3 4.6 0.1 2.7 0.9 0.2 3.8 0.2 0.8 (2.0) (0.9) (1.0) – (0.2) 4.6 0.8 0.3 0.3 (0.9) (1.3) (0.1) (0.9) (1.1) (0.2) 0.3 (3.9) 0.7 2.1 2.8 (0.8) (0.8) (0.1) – (1.1) – – (2.5) (1.7) 3.8 2.1 12 ANNUAL REPORT 2012 Managing Director’s Financial Review CONTINUED Financing outflows During the year the Group paid dividends of £0.9 million and received £0.3 million from the proceeds of shares issued following the exercise of share options. Investment in fixed assets continued with £1.3 million of expenditure to strengthen the Group’s operating base (2011: £0.8 million); £0.6 million was invested in Stanley with further improvements to FIC’s general store at the MPA military base while at Momart four new vehicles were purchased. With net outflows from financing and investment of £3.9 million (2011: £2.5 million) the Group generated a net cash inflow for the year of £0.7 million (2011: £1.7 million outflow). Business drivers, risk factors and key performance indicators Business drivers All the Group’s businesses are consumer oriented operations and their success is linked to general economic conditions in their markets. Inflation, employment levels, interest rates and government spending programmes all have an effect on disposable incomes and consumer confidence. The Group’s businesses in the Falkland Islands and Gosport are linked to local demand for their goods and services. In addition, demand is boosted by tourist activity and both locations have been affected by a cyclical reduction in tourist numbers in recent years. In the Falkland Islands the strength of the economy has been closely linked to the fortunes of the fishing industry which accounts for over 60% of GDP. The variable factors have been the level of squid catches, in particular Illex, which has experienced very large variations, whereas Loligo, which has a substantial Falkland ownership, has had fewer fluctuations. Since the start of drilling in the north Falkland basin in 2010, offshore oil exploration activity has had a significant impact on the economy and this is expected to continue in the current year. If, oil exploration were to stop this stimulus would cease and activity would revert to pre 2010 levels, conversely if hydrocarbon exploitation progresses as expected the positive impact on the Falkland Islands economy will be very significant. For Momart, activity in the art market is correlated to the performance of the wider global economy with increasing influence attributable to emerging economies in the Middle East, China and India. Despite the continuing recession in the UK and Europe the global art market is still experiencing growth with the emergence of new buyers, patrons and artists. In the commercial art market, ultra high net worth individuals are a key driver, whereas in the museums sector government funding remains key in addition to corporate sponsorship and revenue raised from public admissions. Pressures on museum budgets in the UK, US and Europe have increased as Government subsidies have been cut and although in the longer term this will reverse, no recovery is anticipated in the near term. Income generated from cultural exports through travelling international exhibitions is an important source of revenue for museums and galleries and is attractive although in the near term privately sponsored exhibitions are likely to increase more than government funded exhibitions. Risk factors The PHFC and FIC businesses are sensitive to changes in local economic conditions. The level of local competition also affects their performance. In the Falkland Islands, FIC faces competition in almost every area of its operations but due to the company’s long history and accumulated expertise, in most sectors in which it operates FIC has a leading market position. Maintaining leadership depends on continued innovation, investment and a commitment to customer service. Argentina continues to claim sovereignty of the Falkland Islands. However, the people of the Falkland Islands and their Government have no doubt that the Falkland Islands are British. The British Government has re-affirmed its sovereignty in unequivocal terms and despite the fact that Argentina’s protests have made the development of commercial links with other South American countries difficult, the Islands’ key trade and logistic links with the UK are unaffected. Argentina’s military capacity has diminished since the conflict of 1982, whereas the Islands defences are much stronger. Argentina has expressly ruled out military action against the Falklands and the risk of such action is considered to be negligible. Diplomatic FALKLAND ISLANDS HOLDINGS PLC 13 At Momart, forward sales projections are monitored and updated and these are an important predictive indicator which facilitates forward planning. In addition, order intake and the conversion rate in bidding for contracts are reviewed on a regular basis. Direct costs and the gross contribution of individual contracts are monitored closely as are the level of indirect costs and the overall amount of overtime being worked. John Foster Managing Director 6 June 2012 efforts by Argentina are likely to continue but are not expected to have any impact on the status of the Falkland Islands for the foreseeable future. Although there is no other directly competing service to the Portsmouth Harbour Ferry between Gosport and Portsmouth, customers are able to travel by car or public transport round the harbour. Maintaining and promoting the relative attractions of using the ferry whether for commuting to work, shopping or for tourism is a key strategic focus. PHFC will continue to work closely with local authorities and other public transport providers to reinforce its advantages as the faster, more cost effective, and environmentally friendly alternative to travelling by car. For Momart the physical security of artworks is of paramount importance and the company goes to great lengths to guard against the risk of theft or damage to the works in its care. The other risks faced by Momart are those factors which might impact the global art market. For instance a reduction in the personal wealth of collectors and investors could result in a contraction of personal or institutional budgets which would lead to a reduction in the movement and display of art. The emergence of new competitors could also impact the business adversely. In addition, because much of Momart’s business involves working with overseas partners, volatility in the Sterling/Dollar and Sterling/Euro exchange rates has a direct effect on its cost base and profitability. Key performance indicators At Group level management attention is focussed on revenue, costs and the contribution generated by each sub group of businesses. In the Falkland Islands businesses like-for-like revenue growth is a key measure of performance, especially for the retail outlets which account for two thirds of revenues. In addition to sales trends, gross margins by product and general costs are also kept under close review. At PHFC, passenger numbers and the average fare yield are monitored on a weekly basis. Other key concerns are ferry reliability and passenger safety as well as a focus on costs and net profitability. 14 ANNUAL REPORT 2012 Board of Directors and Secretary David Hudd (67) Chairman David joined the Board as Chairman on 4 March 2002 and is also Chairman of the Nominations Committee. He is a Chartered Accountant and was a partner in Price Waterhouse until 1982. Since then, he has been Chairman or Chief Executive of a number of listed companies. He was a founder director of Falkland Oil and Gas Limited and remains a non-executive Director of that company. John Foster (54) Managing Director John joined the Board on 26 January 2005. He is a Chartered Accountant and previously served as Finance Director for software company Macro 4 plc and toy retailer, Hamleys plc. Prior to joining Hamleys, he spent three years in charge of acquisitions and disposals at FTSE 250 company Ascot plc and before that worked for nine years as a venture capitalist with a leading investment bank in the City. Mike Killingley (61) Non-executive Director Mike was appointed to the Board on 26 July 2005, having previously been appointed non-executive Chairman of the Portsmouth Harbour Ferry Company Limited, following the Company’s successful bid. He is a Chartered Accountant and was a partner of KPMG (and predecessor firms) from 1984 to 1998. He was previously non-executive Chairman of Beale plc a listed Company, and non-executive Chairman of Southern Vectis plc and Conder Environmental plc, both quoted on AIM. He is Chairman of the Audit Committee and a member of the Remuneration Committee. Jeremy Brade (50) Non-executive Director Jeremy joined the Board on 9 September 2009. He is a Director and Private Equity Partner at Harwood Capital, where he has worked since 2001. Jeremy had previously been with the Foreign and Commonwealth Office (FCO) where he served at the British High Commission in New Delhi and as the representative of Cyrus Vance and Lord Owen at the International Conference on the Former Yugoslavia. Prior to joining the Diplomatic Service, Jeremy was an Army Officer. He is Chairman of the Remuneration Committee. Carol Bishop (38) Company Secretary Carol Bishop joined the Company on 5 December 2011. She is a Chartered Accountant and has previously worked for London Mining plc, an AIM listed company as Group Reporting manager. Prior to this she spent three years at Hanson plc and six years at the Peninsular and Oriental Steam Navigation Company. Directors’ Report FALKLAND ISLANDS HOLDINGS PLC 15 The Directors present their Annual Report and the financial statements for the Company and for the Group for the year ended 31 March 2012. Results and dividend The Group’s result for the year is set out in the Group Income Statement. The Group profit for the year after taxation amounted to £2,256,000 (2011: £1,620,000). Basic earnings per share were 24.5p (2011: 17.7p). The Directors recommend a final dividend of 7.0p per share (2011: 5.5p) which, if approved by shareholders at the forthcoming Annual General Meeting, will be paid on 19 September 2012 to shareholders on the register at close of business on 31 August 2012. With the interim dividend of 4.0p paid in January 2012 (2011: 4.0p) this will take the total dividend for the year to 11.0p per share (2011: 9.5p). The proposed final dividend has not been included in creditors as it was not approved before the year end. Dividends paid during the year comprise a dividend of 5.5p per share in respect of the previous year ended 31 March 2011 and an interim dividend of 4.0p per share in respect of the current year. Principal activities and business review The business of the Group during the year ended 31 March 2012 was general trading in the Falkland Islands, the operation of a ferry across Portsmouth Harbour and the provision of international arts logistics and storage services. The principal activities of the Group are discussed in more detail in the Business Review and should be considered as part of the Directors’ Report for the purposes of the requirements of the enhanced Directors’ Report guidance. The principal activity of the Company is that of a holding company. Directors There have been no changes to the Board during the year. Directors’ interests The interests of the Directors in the issued shares and share options over the shares of the Company are set out below under the heading “Directors’ interests in shares”. During the year no Director had an interest in any significant contract relating to the business of the Company or its subsidiaries other than his own service contract. Health and safety The Group is committed to the health, safety and welfare of its employees and third parties who may be affected by the Group’s operations. The focus of the Group’s effort is to prevent accidents and incidents occurring by identifying risks and employing appropriate control strategies. This is supplemented by a policy of investigating and recording all incidents. Employees The Board is aware of the importance of good relationships and communication with employees. Where appropriate, employees are consulted about matters which affect the progress of the Group and which are of interest and concern to them as employees. Within this framework, emphasis is placed on developing greater awareness of the financial and economic factors which affect the performance of the Group. Employment policy and practices in the Group are based on non-discrimination and equal opportunity irrespective of age, race, religion, sex, colour and marital status. In particular, the Group recognises its responsibilities towards disabled persons and does not discriminate against them in terms of job offers, training or career development and prospects. If an existing employee were to become disabled during the course of employment, every practical effort would be made to retain the employee’s services with whatever retraining is appropriate. The Group’s pension arrangements for employees are summarised in note 24. Share capital and substantial interests in shares During the year 77,153 share options were exercised (2011: 123,236). Further information about the Company’s share capital is given in note 26 on page 59. Details of the Company’s executive share option scheme and employee ownership plan can be found on pages 57 and 58 and in note 25. 16 ANNUAL REPORT 2012 Directors’ Report CONTINUED The Company has been notified of the following interests in 3% or more of the issued ordinary shares of the Company as at 31 March 2012: L S Licht Dolphin Fund plc Sir Harry Solomon Payments to suppliers Number of shares Percentage of shares in issue 734,750 350,109 333,677 7.90 3.77 3.59 The policy of the Company and each of its trading subsidiaries, in relation to all its suppliers, is to settle the terms of payment when agreeing the terms of the transaction and to abide by those terms, provided that it is satisfied that the supplier has provided the goods or services in accordance with agreed terms and conditions. The Group does not follow any code or standard payment practice. As a holding company, the Company had no trade creditors at either 31 March 2012 or 31 March 2011. Charitable and political donations Charitable donations made by the Group during the year amounted to £15,560 (2011: £17,223), largely to local community charities in Gosport and the Falkland Islands. There were no political donations in the year (2011: nil). Disclosure of information to auditors The Directors who held office at the date of this Directors’ Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditors are unaware; and each Director has taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. Auditors A resolution proposing the re-appointment of KPMG Audit plc will be put to shareholders at the Annual General Meeting. Annual General Meeting The Company’s Annual General Meeting will be held at the London offices of FTI Consulting, Holborn Gate, 26 Southampton Buildings, London WC2A 1PB at 11.00am on 21 August 2012. The Notice of the Annual General Meeting and a description of the special business to be put to the meeting are considered in a separate Circular to Shareholders which accompanies this document. Details of Directors’ remuneration and emoluments The remuneration of non-executive Directors consists only of annual fees for their services both as members of the Board and of Committees on which they serve. An analysis of the remuneration and taxable benefits in kind (excluding share options) provided for and received by each Director during the year to 31 March 2012 and in the preceding year follows: David Hudd John Foster Mike Killingley Jeremy Brade Salary £’000 100 163 30 25 318 Bonuses £’000 Pensions £’000 66 83 – – 149 – 26 – – 26 2012 Total £’000 166 272 30 25 493 2011 Total £’000 124 273 35 30 462 FALKLAND ISLANDS HOLDINGS PLC 17 Directors’ interests in shares As at 31 March 2012 and 31 March 2011, the share options of executive Directors may be summarised as follows: Number of shares Number of shares Date of grant 10 Feb 2005 14 Jun 2005 7 Aug 2007 15 Jul 2009 21 Dec 2010 D L Hudd – 49,411 – 44,550 20,000 J L Foster 57,692 14,117 27,517 44,550 20,000 Exercise price Exercisable from Expiry date £5.200 £4.250 £3.300 £2.900 £3.425 10 Feb 2008 9 Feb 2015 14 Jun 2008 13 Jun 2015 7 Aug 2010 15 Jul 2012 6 Aug 2017 14 Jul 2019 21 Dec 2013 20 Dec 2020 Total 113,961 163,876 The mid-market price of the Company’s shares on 31 March 2012 was 366.5 pence and the range in the year was 227.5 pence to 415.0 pence. The Directors’ options extant at 31 March 2012 totalled 277,837 and represented 3.0% of the Company’s issued share capital. Under the Company’s executive share option scheme, executive Directors and senior executives have been granted options to acquire ordinary shares in the Company after a period of three years from the date of the grant. All outstanding options have been granted at an option price of not less than market value at the date of the grant. The exercise of options is subject to various performance conditions, which have been determined by the remuneration committee after discussion with the Company’s advisors. In addition to the share options set out above, the interests of the Directors, their immediate families and related trusts in the shares of the Company according to the register kept pursuant to the Companies Act 2005 were as shown below: David Hudd John Foster Mike Killingley Jeremy Brade Ordinary shares Ordinary shares as at 31 March 2012 as at 31 March 2011 100,000 15,000 10,000 4,000 100,000 15,000 10,000 4,000 18 ANNUAL REPORT 2012 Directors’ Report CONTINUED Statement of Directors’ responsibilities in respect of the Directors’ Report and financial statements The Directors are responsible for preparing the Annual Report and the Group and Company financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and Company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with IFRSs as adopted by the European Union and applicable laws and have elected to prepare the Company financial statements on the same basis. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of their profit or loss for that period. In preparing each of the Group and Company financial statements, the Directors are required to: (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:115)(cid:0) (cid:0)(cid:83)(cid:69)(cid:76)(cid:69)(cid:67)(cid:84)(cid:0)(cid:83)(cid:85)(cid:73)(cid:84)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:80)(cid:79)(cid:76)(cid:73)(cid:67)(cid:73)(cid:69)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:78)(cid:0)(cid:65)(cid:80)(cid:80)(cid:76)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:77)(cid:0)(cid:67)(cid:79)(cid:78)(cid:83)(cid:73)(cid:83)(cid:84)(cid:69)(cid:78)(cid:84)(cid:76)(cid:89)(cid:27) (cid:0)(cid:77)(cid:65)(cid:75)(cid:69)(cid:0)(cid:74)(cid:85)(cid:68)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:69)(cid:83)(cid:84)(cid:73)(cid:77)(cid:65)(cid:84)(cid:69)(cid:83)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:82)(cid:69)(cid:65)(cid:83)(cid:79)(cid:78)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:80)(cid:82)(cid:85)(cid:68)(cid:69)(cid:78)(cid:84)(cid:27) (cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:0)(cid:87)(cid:72)(cid:69)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:84)(cid:72)(cid:69)(cid:89)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:66)(cid:69)(cid:69)(cid:78)(cid:0)(cid:80)(cid:82)(cid:69)(cid:80)(cid:65)(cid:82)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:82)(cid:68)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:41)(cid:38)(cid:50)(cid:51)(cid:83)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:68)(cid:79)(cid:80)(cid:84)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:37)(cid:53)(cid:27)(cid:0)(cid:65)(cid:78)(cid:68) (cid:0)(cid:80)(cid:82)(cid:69)(cid:80)(cid:65)(cid:82)(cid:69)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:70)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:71)(cid:79)(cid:73)(cid:78)(cid:71)(cid:0)(cid:67)(cid:79)(cid:78)(cid:67)(cid:69)(cid:82)(cid:78)(cid:0)(cid:66)(cid:65)(cid:83)(cid:73)(cid:83)(cid:0)(cid:85)(cid:78)(cid:76)(cid:69)(cid:83)(cid:83)(cid:0)(cid:73)(cid:84)(cid:0)(cid:73)(cid:83)(cid:0)(cid:73)(cid:78)(cid:65)(cid:80)(cid:80)(cid:82)(cid:79)(cid:80)(cid:82)(cid:73)(cid:65)(cid:84)(cid:69)(cid:0)(cid:84)(cid:79)(cid:0)(cid:80)(cid:82)(cid:69)(cid:83)(cid:85)(cid:77)(cid:69)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:0) will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have a general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations the Directors are also responsible for preparing a Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The Directors confirm, to the best of their knowledge that: (cid:115)(cid:0) (cid:0)(cid:84)(cid:72)(cid:69)(cid:83)(cid:69)(cid:0)(cid:70)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:12)(cid:0)(cid:80)(cid:82)(cid:69)(cid:80)(cid:65)(cid:82)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:82)(cid:68)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:41)(cid:38)(cid:50)(cid:51)(cid:12)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:68)(cid:79)(cid:80)(cid:84)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:37)(cid:85)(cid:82)(cid:79)(cid:80)(cid:69)(cid:65)(cid:78)(cid:0)(cid:53)(cid:78)(cid:73)(cid:79)(cid:78)(cid:12)(cid:0)(cid:71)(cid:73)(cid:86)(cid:69)(cid:0)(cid:65)(cid:0)(cid:84)(cid:82)(cid:85)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:70)(cid:65)(cid:73)(cid:82)(cid:0)(cid:86)(cid:73)(cid:69)(cid:87)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0) assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation as a whole; and (cid:115)(cid:0) (cid:0)(cid:84)(cid:72)(cid:69)(cid:0) (cid:77)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:82)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:12)(cid:0) (cid:87)(cid:72)(cid:73)(cid:67)(cid:72)(cid:0) (cid:67)(cid:79)(cid:77)(cid:80)(cid:82)(cid:73)(cid:83)(cid:69)(cid:83)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:35)(cid:72)(cid:65)(cid:73)(cid:82)(cid:77)(cid:65)(cid:78)(cid:7)(cid:83)(cid:0) (cid:51)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:34)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0) (cid:50)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:12)(cid:0) (cid:73)(cid:78)(cid:67)(cid:76)(cid:85)(cid:68)(cid:69)(cid:83)(cid:0) (cid:65)(cid:0) (cid:70)(cid:65)(cid:73)(cid:82)(cid:0) (cid:82)(cid:69)(cid:86)(cid:73)(cid:69)(cid:87)(cid:0) (cid:79)(cid:70)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) development and performance of the business and of the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. Approved by the Board and signed on its behalf by: Carol Bishop Company Secretary 6 June 2012 Kenburgh Court 133-137 South Street Bishop’s Stortford Hertfordshire CM23 3HX FALKLAND ISLANDS HOLDINGS PLC 19 Independent Auditor’s Report to the members of Falkland Islands Holdings plc We have audited the financial statements of Falkland Islands Holdings plc for the year ended 31 March 2012 set out on pages 20 to 67. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and auditors As explained more fully in the Directors’ Responsibilities Statement set out on page 18 the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/private.cfm. Opinion on financial statements In our opinion: (cid:115)(cid:0) (cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:70)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:71)(cid:73)(cid:86)(cid:69)(cid:0)(cid:65)(cid:0)(cid:84)(cid:82)(cid:85)(cid:69)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:70)(cid:65)(cid:73)(cid:82)(cid:0)(cid:86)(cid:73)(cid:69)(cid:87)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:7)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:48)(cid:65)(cid:82)(cid:69)(cid:78)(cid:84)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:7)(cid:83)(cid:0)(cid:65)(cid:70)(cid:70)(cid:65)(cid:73)(cid:82)(cid:83)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:84)(cid:0)(cid:19)(cid:17)(cid:0)(cid:45)(cid:65)(cid:82)(cid:67)(cid:72)(cid:0) 2012 and of the Group’s profit for the year then ended; (cid:115)(cid:0) (cid:115)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0)(cid:39)(cid:82)(cid:79)(cid:85)(cid:80)(cid:0)(cid:70)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:66)(cid:69)(cid:69)(cid:78)(cid:0)(cid:80)(cid:82)(cid:79)(cid:80)(cid:69)(cid:82)(cid:76)(cid:89)(cid:0)(cid:80)(cid:82)(cid:69)(cid:80)(cid:65)(cid:82)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:82)(cid:68)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:41)(cid:38)(cid:50)(cid:51)(cid:83)(cid:0)(cid:65)(cid:83)(cid:0)(cid:65)(cid:68)(cid:79)(cid:80)(cid:84)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:37)(cid:53)(cid:27)(cid:0) (cid:0)(cid:84)(cid:72)(cid:69)(cid:0) (cid:48)(cid:65)(cid:82)(cid:69)(cid:78)(cid:84)(cid:0) (cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:0) (cid:70)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0) (cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0) (cid:72)(cid:65)(cid:86)(cid:69)(cid:0) (cid:66)(cid:69)(cid:69)(cid:78)(cid:0) (cid:80)(cid:82)(cid:79)(cid:80)(cid:69)(cid:82)(cid:76)(cid:89)(cid:0) (cid:80)(cid:82)(cid:69)(cid:80)(cid:65)(cid:82)(cid:69)(cid:68)(cid:0) (cid:73)(cid:78)(cid:0) (cid:65)(cid:67)(cid:67)(cid:79)(cid:82)(cid:68)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0) (cid:87)(cid:73)(cid:84)(cid:72)(cid:0) (cid:41)(cid:38)(cid:50)(cid:51)(cid:83)(cid:0) (cid:65)(cid:83)(cid:0) (cid:65)(cid:68)(cid:79)(cid:80)(cid:84)(cid:69)(cid:68)(cid:0) (cid:66)(cid:89)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:37)(cid:53)(cid:0) (cid:65)(cid:78)(cid:68)(cid:0) (cid:65)(cid:83)(cid:0) applied in accordance with the provisions of the Companies Act 2006; and (cid:115)(cid:0) (cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:70)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:66)(cid:69)(cid:69)(cid:78)(cid:0)(cid:80)(cid:82)(cid:69)(cid:80)(cid:65)(cid:82)(cid:69)(cid:68)(cid:0)(cid:73)(cid:78)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:82)(cid:68)(cid:65)(cid:78)(cid:67)(cid:69)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:82)(cid:69)(cid:81)(cid:85)(cid:73)(cid:82)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:73)(cid:69)(cid:83)(cid:0)(cid:33)(cid:67)(cid:84)(cid:0)(cid:18)(cid:16)(cid:16)(cid:22)(cid:14)(cid:0) Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: (cid:115)(cid:0) (cid:0)(cid:65)(cid:68)(cid:69)(cid:81)(cid:85)(cid:65)(cid:84)(cid:69)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:82)(cid:68)(cid:83)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:66)(cid:69)(cid:69)(cid:78)(cid:0)(cid:75)(cid:69)(cid:80)(cid:84)(cid:0)(cid:66)(cid:89)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:48)(cid:65)(cid:82)(cid:69)(cid:78)(cid:84)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:12)(cid:0)(cid:79)(cid:82)(cid:0)(cid:82)(cid:69)(cid:84)(cid:85)(cid:82)(cid:78)(cid:83)(cid:0)(cid:65)(cid:68)(cid:69)(cid:81)(cid:85)(cid:65)(cid:84)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:79)(cid:85)(cid:82)(cid:0)(cid:65)(cid:85)(cid:68)(cid:73)(cid:84)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:66)(cid:69)(cid:69)(cid:78)(cid:0)(cid:82)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:68)(cid:0) from branches not visited by us; or (cid:115)(cid:0) (cid:115)(cid:0) (cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:48)(cid:65)(cid:82)(cid:69)(cid:78)(cid:84)(cid:0)(cid:35)(cid:79)(cid:77)(cid:80)(cid:65)(cid:78)(cid:89)(cid:0)(cid:70)(cid:73)(cid:78)(cid:65)(cid:78)(cid:67)(cid:73)(cid:65)(cid:76)(cid:0)(cid:83)(cid:84)(cid:65)(cid:84)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:73)(cid:78)(cid:0)(cid:65)(cid:71)(cid:82)(cid:69)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)(cid:0)(cid:87)(cid:73)(cid:84)(cid:72)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:82)(cid:68)(cid:83)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:82)(cid:69)(cid:84)(cid:85)(cid:82)(cid:78)(cid:83)(cid:27)(cid:0)(cid:79)(cid:82)(cid:0) (cid:0)(cid:67)(cid:69)(cid:82)(cid:84)(cid:65)(cid:73)(cid:78)(cid:0)(cid:68)(cid:73)(cid:83)(cid:67)(cid:76)(cid:79)(cid:83)(cid:85)(cid:82)(cid:69)(cid:83)(cid:0)(cid:79)(cid:70)(cid:0)(cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84)(cid:79)(cid:82)(cid:83)(cid:7)(cid:0)(cid:82)(cid:69)(cid:77)(cid:85)(cid:78)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:83)(cid:80)(cid:69)(cid:67)(cid:73)(cid:70)(cid:73)(cid:69)(cid:68)(cid:0)(cid:66)(cid:89)(cid:0)(cid:76)(cid:65)(cid:87)(cid:0)(cid:65)(cid:82)(cid:69)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:77)(cid:65)(cid:68)(cid:69)(cid:27)(cid:0)(cid:79)(cid:82)(cid:0) (cid:115)(cid:0) (cid:87)(cid:69)(cid:0)(cid:72)(cid:65)(cid:86)(cid:69)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:82)(cid:69)(cid:67)(cid:69)(cid:73)(cid:86)(cid:69)(cid:68)(cid:0)(cid:65)(cid:76)(cid:76)(cid:0)(cid:84)(cid:72)(cid:69)(cid:0)(cid:73)(cid:78)(cid:70)(cid:79)(cid:82)(cid:77)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:69)(cid:88)(cid:80)(cid:76)(cid:65)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)(cid:0)(cid:87)(cid:69)(cid:0)(cid:82)(cid:69)(cid:81)(cid:85)(cid:73)(cid:82)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:79)(cid:85)(cid:82)(cid:0)(cid:65)(cid:85)(cid:68)(cid:73)(cid:84)(cid:14) W Cox (Senior Statutory Auditor) For and on behalf of KPMG Audit Plc, Statutory Auditor Chartered Accountants St Nicholas House Park Row Nottingham NG1 6FQ 6 June 2012 20 ANNUAL REPORT 2012 Consolidated Income Statement FOR THE YEAR ENDED 31 MARCH 2012 Before Amortisation amortisation of intangibles of intangibles (note 5) Notes 4 Revenue Cost of sales Gross profit 2012 £’000 34,109 (20,131) 13,978 Other administrative expenses (10,410) Amortisation of intangible 2012 £’000 – – – – Before Amortisation amortisation of intangibles Total 2012 £’000 of intangibles 2011 £’000 (note 5) 2011 £’000 34,109 31,841 (20,131) (19,294) 13,978 12,547 (10,410) (9,612) – – – – Total 2011 £’000 31,841 (19,294) 12,547 (9,612) assets – (398) (398) – (398) (398) Operating expenses (10,410) (398) (10,808) (9,612) (398) (10,010) Operating profit 3,568 (398) 3,170 2,935 (398) 2,537 Finance income Finance expense 8 Net financing costs Profit / (loss) before tax 123 (457) (334) – – – 123 (457) 117 (324) (334) (207) – – – 117 (324) (207) from continuing operations 3,234 (398) 2,836 2,728 (398) 2,330 9 Taxation (817) 237 (580) (821) 111 (710) Profit / (loss) for the year attributable to equity holders of the Company 2,417 (161) 2,256 1,907 (287) 1,620 10 Earnings per share Basic Diluted 26.3p 26.2p 24.5p 24.4p 20.9p 20.6p 17.7p 17.5p Consolidated Statement of Comprehensive Income FOR THE YEAR ENDED 31 MARCH 2012 FALKLAND ISLANDS HOLDINGS PLC 21 Unrealised loss on revaluation of shares held in Falkland Oil and Gas Limited (2,540) (4,832) 2012 £’000 2011 £’000 PHFC actuarial loss on pension scheme FIC actuarial loss on pension scheme Movement on deferred tax asset relating to pension schemes Effect of tax rate changes on deferred tax asset relating to pension schemes Other comprehensive expense Profit for the year Total comprehensive expense (75) (289) 87 (42) (10) (82) 24 (43) (2,859) (4,943) 2,256 1,620 (603) (3,323) 22 ANNUAL REPORT 2012 Consolidated Balance Sheet AS AT 31 MARCH 2012 Notes 11 12 13 15 Non-current assets Intangible assets Property, plant and equipment Investment properties Shares held in Falkland Oil and Gas Limited 16 Non-current assets held-for-sale 17 Hire purchase debtors due in more than one year 18 Deferred tax assets Total non-current assets Current assets Trading inventories Property inventories Inventories Trade and other receivables 19 20 17 Hire purchase debtors due in less than one year 21 Cash and cash equivalents Total current assets TOTAL ASSETS Current liabilities 22 Interest-bearing loans and borrowings Income tax payable 23 Trade and other payables Total current liabilities Non-current liabilities Interest-bearing loans and borrowings Employee benefits 22 24 18 Deferred tax liabilities Total non-current liabilities TOTAL LIABILITIES Net assets 26 Capital and reserves Equity share capital Share premium account Other reserves Retained earnings Financial assets fair value reserve Total equity 2012 £’000 2011 £’000 12,713 12,911 1,452 9,030 20 150 593 13,111 7,489 1,721 10,710 20 60 554 36,869 33,665 3,991 1,010 5,001 5,620 385 2,751 4,215 1,204 5,419 5,811 252 2,062 13,757 13,544 50,626 47,209 (1,140) (508) (8,753) (10,401) (7,145) (2,470) (1,122) (10,737) (1,058) (569) (8,334) (9,961) (3,104) (2,130) (1,413) (6,647) (21,138) (16,608) 29,488 30,601 930 7,871 1,162 13,316 6,209 29,488 922 7,618 1,162 12,150 8,749 30,601 These financial statements were approved by the Board of Directors on 6 June 2012 and were signed on its behalf by: J L Foster Director Company Balance Sheet AS AT 31 MARCH 2012 Notes 14 20 18 Non-current assets Financial assets – investments in subsidiaries Other receivables Deferred tax Total non-current assets Current assets 20 Trade and other receivables Total current assets TOTAL ASSETS Current liabilities 22 21 Interest-bearing loans and borrowings Bank overdraft Corporation tax payable 23 Trade and other payables Total current liabilities Non-current liabilities 22 23 Interest-bearing loans and borrowings Other payables Total non-current liabilities TOTAL LIABILITIES Net assets 26 Capital and reserves Called up share capital Share premium account Other reserves Retained earnings Total equity FALKLAND ISLANDS HOLDINGS PLC 23 2012 £’000 2011 £’000 31,488 31,426 4,925 4,042 5 8 36,418 35,476 25 25 30 30 36,443 35,506 (800) (800) (1,409) (1,418) (18) (511) (27) (376) (2,738) (2,621) (1,553) (2,337) (556) (390) (2,109) (2,727) (4,847) (5,348) 31,596 30,158 930 7,871 6,910 922 7,618 6,910 15,885 14,708 31,596 30,158 These financial statements were approved by the Board of Directors on 6 June 2012 and were signed on its behalf by: J L Foster Director Registered company number: 03416346 24 ANNUAL REPORT 2012 Consolidated Cash Flow Statement FOR THE YEAR ENDED 31 MARCH 2012 Notes Cash flows from operating activities Profit for the year Adjusted for: (i) Non-cash items: Depreciation Amortisation Profit on disposal of fixed assets Amortisation of loan fees Expected return on pension scheme assets Interest cost on pension scheme liabilities Net settlement gain recognised on pension transfers Equity-settled share-based payment expenses Non-cash items adjustment (ii) Other items: Bank interest receivable Bank interest payable Profit on disposal of investment property Enhanced transfer value exercise payments Corporation and deferred tax expense Other adjustments 2012 £’000 2011 £’000 2,256 1,620 1,069 398 (2) 16 (29) 138 – 101 846 398 – 30 (29) 144 (10) 207 1,691 1,586 (5) 115 – – 580 690 (4) 138 (80) (140) 710 624 Operating cash flow before changes in working capital and provisions 4,637 3,830 Decrease / (increase) in trade and other receivables Decrease in property inventories Decrease / (increase) in other inventories Increase in trade and other payables Decrease in provisions and employee benefits Changes in working capital and provisions Cash generated from operations Corporation taxes paid Net cash flow from operating activities Cash flows from investing activities: Purchase of 2 million FOGL shares Purchase of property, plant and equipment Proceeds from the disposal of property, plant and equipment Interest received 127 194 224 419 (133) 831 5,468 (862) 4,606 (860) (1,277) 14 5 (1,276) 16 (726) 115 (134) (2,005) 1,825 (1,008) 817 – (815) 99 4 Net cash flow from investing activities (2,118) (712) Cash flow from financing activities: Increase in other financial assets Repayment of secured loan Financing loan draw downs Interest paid Proceeds from the issue of ordinary share capital Dividends paid Net cash flow from financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at start of year 21 Cash and cash equivalents at end of year (223) (1,110) 260 (115) 261 (872) (54) (1,141) – (138) 306 (826) (1,799) (1,853) 689 (1,748) 2,062 2,751 3,810 2,062 Company Cash Flow Statement FOR THE YEAR ENDED 31 MARCH 2012 Notes Cash flows from operating activities Profit for the year Adjusted for: Net financing costs Amortisation of loan fees Equity-settled share-based payment expenses Corporation and deferred tax expense FALKLAND ISLANDS HOLDINGS PLC 25 2012 £’000 2011 £’000 1,948 1,165 86 16 39 16 102 30 78 19 Operating cash flow before changes in working capital and provisions 2,105 1,394 Decrease / (increase) in trade and other receivables Increase / (decrease) in trade and other payables Cash generated from operations Corporation taxes (paid) / refunded Net cash flow from operating activities Cash flow from financing activities: Repayment of inter-company borrowing Repayment of secured loan Interest paid Proceeds from the issue of ordinary share capital Dividends paid Net cash flow from financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at start of year 21 Cash and cash equivalents at end of year 5 135 2,245 (22) 2,223 (717) (800) (86) 261 (872) (15) (37) 1,342 70 1,412 (1,607) (961) (102) 306 (826) (2,214) (3,190) 9 (1,778) (1,418) 360 (1,409) (1,418) 26 ANNUAL REPORT 2012 Consolidated Statement of Changes in Shareholders’ Equity FOR THE YEAR ENDED 31 MARCH 2012 Reconciliation of movement in capital and reserves – Group Financial assets fair value revaluation reserve £’000 Called up share capital £’000 Share premium account £’000 Other reserves £’000 Retained earnings £’000 Total equity £’000 Balance as at 1 April 2010 910 13,581 7,324 1,162 11,260 34,237 Total comprehensive income for the year Profit for the year Change in fair value of shares in Falkland Oil and Gas Limited Actuarial loss on pension, net of tax Effect of tax rate changes on deferred tax asset relating to pension schemes Total comprehensive income for the year Transactions with owners of the Company, recognised directly in equity Share-based payments Dividends Exercise of share schemes during the year Total contributions by and distributions to owners of the Company Balance as at 31 March 2011 Total comprehensive income for the year Profit for the year Change in fair value of shares in Falkland Oil and Gas Limited Actuarial loss on pension, net of tax Effect of tax rate changes on deferred tax asset relating to pension schemes Total comprehensive income for the year Transactions with owners of the Company, recognised directly in equity Share-based payments Dividends Exercise of share schemes during the year Total contributions by and distributions to owners of the Company – – – – – – – 12 12 922 – – – – – – – 8 8 – (4,832) – – (4,832) – – – – – – – – – – – 294 294 – – – – – – – – – 1,620 1,620 – (68) (43) (4,832) (68) (43) 1,509 (3,323) 207 (826) – 207 (826) 306 (619) (313) 8,749 7,618 1,162 12,150 30,601 – (2,540) – – (2,540) – – – – – – – – – – – 253 253 – – – – – – – – – 2,256 2,256 – (2,540) (277) (277) (42) 1,937 (42) (603) 101 (872) – 101 (872) 261 (771) (510) Balance as at 31 March 2012 930 6,209 7,871 1,162 13,316 29,488 FALKLAND ISLANDS HOLDINGS PLC 27 Company Statement of Changes in Shareholders’ Equity FOR THE YEAR ENDED 31 MARCH 2012 Reconciliation of movement in capital and reserves – Company Called up share capital £’000 Share premium account £’000 Other reserves £’000 Retained earnings £’000 Total equity £’000 Balance as at 1 April 2010 910 7,324 6,910 14,162 29,306 Total comprehensive income for the year Profit for the year Total comprehensive income for the year Transactions with owners of the Company, recognised directly in equity Share-based payments Dividends Exercise of share schemes during the year Total contributions by and distributions to owners of the Company Balance as at 31 March 2011 Total comprehensive income for the year Profit for the year Total comprehensive income for the year Transactions with owners of the Company, recognised directly in equity Share-based payments Dividends Exercise of share schemes during the year Total contributions by and distributions to owners of the Company – – – – 12 12 922 – – – – 8 8 – – – – 294 294 – – – – – – 1,165 1,165 1,165 1,165 207 (826) – 207 (826) 306 (619) (313) 7,618 6,910 14,708 30,158 – – – – 253 253 – – – – – – 1,948 1,948 1,948 1,948 101 (872) – 101 (872) 261 (771) (510) Balance as at 31 March 2012 930 7,871 6,910 15,885 31,596 A profit of £1,948,000 (2011 profit: £1,165,000) has been dealt with in the accounts of the Parent Company. As permitted by Section 408 of the Companies Act 2006, the Company has not presented its individual income statement. 28 ANNUAL REPORT 2012 Notes to the Financial Statements FOR THE YEAR ENDED 31 MARCH 2012 1 Accounting policies General information Falkland Islands Holdings plc (the “Company”) is a company incorporated and domiciled in the UK. Reporting entity The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the “Group”). The Parent Company financial statements present information about the Company as a separate entity and not about its group. Basis of preparation Both the Parent Company financial statements and the Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU (“Adopted IFRS”). On publishing the Parent Company financial statements here together with the Group financial statements, the Company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual income statement and related notes that form a part of these approved financial statements. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these consolidated financial statements. The management and development of the Group’s property portfolio in the Falkland Islands is a significant part of the Group’s trading activity. Associated gains and losses on the disposal of rental properties and property developments are accordingly recognised within gross profit. Judgements made by the Directors in the application of these accounting policies that have a significant effect on the financial statements and estimates with a significant risk of material adjustment next year are discussed in note 31. The financial statements are presented in pounds sterling, rounded to the nearest thousand. They are prepared on the historical cost basis except that available-for-sale financial instruments and derivative financial instruments are stated at their fair value. The Directors are responsible for ensuring that the Group has adequate financial resources to meet its projected liquidity requirements and also for ensuring forecast earnings are sufficient to meet the covenants associated with the Group’s banking facilities. As in prior years the Directors have reviewed the Group’s medium term forecasts and considered a number of possible trading scenarios and are satisfied the Group’s existing resources (including committed banking facilities) are sufficient to meet its needs. As a consequence the Directors believe the Group is well placed to manage its business risk. The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Managing Director’s Business Review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are also described in the Managing Director’s Financial Review. In addition, note 27 to the financial statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk. The Group has considerable financial resources. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook. After making enquiries the Directors have a reasonable expectation that the Company and Group have adequate reserves to continue in operational existence for the foreseeable future, and have continued to adopt the going concern basis in preparing the financial statements. Basis of consolidation The consolidated financial statements comprise the financial statements of Falkland Islands Holdings plc and its subsidiaries (the “Group”). A subsidiary is any entity Falkland Islands Holdings plc has the power to control the financial and operating policies of so as to obtain benefits from its activities. The financial statements of subsidiaries are prepared for the same reporting period as the Parent Company. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. FALKLAND ISLANDS HOLDINGS PLC 29 1 Accounting policies CONTINUED Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. All intra-company balances and transactions, including unrealised profits arising from intra-group transactions, are eliminated in full in preparing the consolidated financial statements. Unrealised losses are eliminated but only to the extent that there is no evidence of impairment. Investments in subsidiaries not classified as held-for-sale within the Company balance sheet are stated at cost. Presentation of income statement Due to the non-prescriptive nature under IFRS as to the format of the income statement, the format used by the Group is explained below. Operating profit is the pre-finance profit of continuing activities and acquisitions of the Group, and in order to achieve consistency and comparability, is analysed to show separately the results of normal trading performance (“underlying profit”), individually significant charges and credits, changes in the fair value of derivative financial instruments and amortisation of intangible assets on acquisition. Such items arise because of their size or nature, and in 2012 and 2011 comprise the amortisation of intangible assets. Foreign currencies Transactions in foreign currencies are translated to the functional currencies of Group entities at exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency using the relevant rates of exchange ruling at the balance sheet date and the gains or losses thereon are included in the income statement. Non-monetary assets and liabilities are translated using the exchange rate at the date of the initial transaction. Property, plant and equipment Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost comprises purchase price and directly attributable expenses. Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows: Freehold buildings Long leasehold land and buildings Vehicles, plant and equipment Ships 20 – 50 years 50 years 4 – 10 years 15 – 30 years The carrying value of assets and their useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. If an indication of impairment exists, the assets are written down to their recoverable amount and the impairment is charged to the income statement in the period in which it arises. Freehold land and assets-in-construction are not depreciated. Investment properties Investment properties are properties held either to earn rental income or for capital appreciation or for both. Investment properties are stated at cost less any accumulated depreciation (calculated on useful economic lives in line with accounting policy, property, plant and equipment above) and any impairment losses. Intangible assets Goodwill Goodwill arises on the acquisition of subsidiaries. 30 ANNUAL REPORT 2012 Notes to the Financial Statements CONTINUED 1 Accounting policies CONTINUED Acquisitions prior to 1 April 2006 In respect to acquisitions prior to transition to IFRS, goodwill is recorded on the basis of deemed cost, which represents the amount recorded under previous Generally Accepted Accounting Principles (“GAAP”) as at the date of transition. The classification and accounting treatment of business combinations which occurred prior to transition has not been reconsidered in preparing the Group’s opening IFRS balance sheet at 1 April 2006. Goodwill is not amortised but reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Acquisitions on or after 1 April 2006 Goodwill on acquisition is initially measured at cost, being the excess of the cost of the business combination over the acquirer’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities of the acquired business. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not amortised but reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows: Trade name Customer relationships Non-compete agreements Computer software 20 years 6 – 10 years 5 years Acquired computer software is capitalised as an intangible asset on the basis of the cost incurred to acquire and bring the specific software into use. Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The estimated useful life of computer software is five years. Impairment of non-financial assets At each reporting date the Group assesses whether there is any indication that an asset may be impaired. Goodwill and intangible assets with indefinite lives are tested for impairment annually. Where an indicator of impairment exists or the asset requires annual impairment testing, the Group makes a formal estimate of the recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount. Impairment losses are recognised in the income statement. Recoverable amount is the greater of an asset’s or cash-generating unit’s fair value less cost to sell or value in use. It is determined for an individual asset, unless the asset’s value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and risks specific to the asset. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses are reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. FALKLAND ISLANDS HOLDINGS PLC 31 1 Accounting policies CONTINUED Finance income and expense Net financing costs comprise interest payable, interest receivable, and foreign exchange gains and losses that are recognised in the income statement. Interest income and interest payable are recognised as a profit or loss as they accrue, using the effective interest method. Financial instruments Certain financial instruments held by the Group are classified as being available-for-sale and are stated at fair value, with any resultant gain or loss being recognised in other comprehensive income and presented in the fair value reserve in equity, except for impairment losses. When these items are derecognised, the cumulative gain or loss previously recognised directly in equity is recognised to profit and loss. Financial instruments classified as available-for-sale are initially recognised at fair value less directly attributable transaction costs. The Group does not use derivative financial instruments for speculative purposes. Derivative financial instruments are initially measured at fair value. Changes in the fair value of derivative financial instruments are recognised in the income statement as they arise. The Group has not applied hedge accounting to its derivative financial instruments. Employee share awards The Group provides benefits to certain employees (including Directors) in the form of share-based payment transactions, whereby the employee renders service in return for shares or rights over future shares (“equity settled transactions”). The cost of these equity settled transactions with employees is measured by reference to an estimate of their fair value at the date on which they were granted using an option input pricing model taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of share options that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payments is measured to reflect such conditions and there is no true up for differences between expected and actual outcomes. The cost of equity settled transactions is recognised, together with a corresponding increase in reserves, over the period in which the performance conditions are fulfilled, ending on the date that the option vests. Where the Company grants options over its own shares to the employees of subsidiaries, it recognises, in its individual financial statements, an increase in the cost of investment in its subsidiaries equal to the equity settled share-based payment charge recognised in its consolidated financial statements with the corresponding credit being recognised directly in equity. Inventories Inventories are stated at the lower of cost and net realisable value. Cost includes all costs incurred in bringing each product to its present location and condition, as follows: The cost of raw materials, consumables and goods for resale comprises purchase cost, on a first-in, first-out basis and where applicable includes expenditure incurred in transportation to the Falkland Islands. Work-in-progress and finished goods cost includes direct materials and labour plus attributable overheads based on a normal level of activity. Construction-in-progress and properties-held-for-sale relating to the Group’s property trading portfolio in the Falkland Islands are stated at the lower of cost and net realisable value. Net realisable value is estimated at selling price in the ordinary course of business less costs of disposal. 32 ANNUAL REPORT 2012 Notes to the Financial Statements CONTINUED 1 Accounting policies CONTINUED Revenue Revenue is measured at the fair value of the consideration received or receivable and represents the amount receivable by the Group for goods supplied and services rendered in the normal course of business, net of discounts and excluding VAT. Revenue principally arises from retail sales, the provision of ferry services and the provision of storage and transportation services for fine art works. In the Falkland Islands revenue also includes proceeds from property sales, property rental income, insurance commissions, revenues billed for shipping and agency activities and port services. Revenue from sale of goods is recognised at the point of sale or dispatch, whilst that of the ferry, fine art logistics and other services is recognised when the service is provided. Revenue from property sales is recognised on completion. For fine art exhibition logistical work undertaken the amount of profit attributable to the stage of completion of a contract is recognised when the outcome of the contract can be seen with reasonable certainty, typically upon successful opening. Turnover for such contracts is stated at the cost appropriate to their stage of completion plus attributable profit, less amounts already recognised. Provision is made for losses as soon as they are foreseeable. Pensions Defined contribution pension schemes The Group operates three defined contribution schemes. The assets of the schemes are held separately from those of the Group in independently administered funds. The amount charged to the income statement represents the contributions payable to the schemes in respect to the accounting period. Defined benefit pension schemes The Group also operates two pension schemes providing benefits based on final pensionable pay, one of which is unfunded. The assets of the funded scheme are held separately from those of the Group. The Group’s net obligation in respect of each defined benefit pension plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to its present value; and any unrecognised past service costs and the fair value of the plan assets (at bid price) are deducted. The liability discount rate is the yield at the balance sheet date on AA credit-rated bonds that have maturity dates approximating the terms of the Group’s obligations. The calculation is performed by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the asset recognised is limited to the net total of any unrecognised past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan. The current service cost and costs from settlements and curtailments are charged against operating profit. Past service costs are spread over the period until the benefit increases vest. Interest charged on the scheme liabilities and the expected return on scheme assets are included in other finance costs. Actuarial gains and losses are recognised in full in the period in which they arise in the statement of comprehensive income. Trade and other receivables Trade receivables are carried at amortised cost, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognised in the income statement. Trade and other payables Trade and other payables are stated at their cost less payments made. FALKLAND ISLANDS HOLDINGS PLC 33 1 Accounting policies CONTINUED Dividends on funds presented within shareholders’ funds Dividends unpaid at the balance sheet date are only recognised as liabilities at that date to the extent that they are appropriately authorised and are no longer at the discretion of the Company. Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less directly attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis. Tax Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement, except to the extent that it relates to items recognised directly in equity or in other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted, or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary timing differences are not recognised: (cid:115)(cid:0) (cid:39)(cid:79)(cid:79)(cid:68)(cid:87)(cid:73)(cid:76)(cid:76)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:68)(cid:69)(cid:68)(cid:85)(cid:67)(cid:84)(cid:73)(cid:66)(cid:76)(cid:69)(cid:0)(cid:70)(cid:79)(cid:82)(cid:0)(cid:84)(cid:65)(cid:88)(cid:0)(cid:80)(cid:85)(cid:82)(cid:80)(cid:79)(cid:83)(cid:69)(cid:83)(cid:27)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0) (cid:115)(cid:0) (cid:0)(cid:41)(cid:78)(cid:73)(cid:84)(cid:73)(cid:65)(cid:76)(cid:0)(cid:82)(cid:69)(cid:67)(cid:79)(cid:71)(cid:78)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:79)(cid:70)(cid:0)(cid:65)(cid:83)(cid:83)(cid:69)(cid:84)(cid:83)(cid:0)(cid:79)(cid:82)(cid:0)(cid:76)(cid:73)(cid:65)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:65)(cid:0)(cid:84)(cid:82)(cid:65)(cid:78)(cid:83)(cid:65)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:73)(cid:83)(cid:0)(cid:78)(cid:79)(cid:84)(cid:0)(cid:65)(cid:0)(cid:66)(cid:85)(cid:83)(cid:73)(cid:78)(cid:69)(cid:83)(cid:83)(cid:0)(cid:67)(cid:79)(cid:77)(cid:66)(cid:73)(cid:78)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:65)(cid:78)(cid:68)(cid:0)(cid:84)(cid:72)(cid:65)(cid:84)(cid:0)(cid:65)(cid:70)(cid:70)(cid:69)(cid:67)(cid:84)(cid:83)(cid:0)(cid:78)(cid:69)(cid:73)(cid:84)(cid:72)(cid:69)(cid:82)(cid:0)(cid:65)(cid:67)(cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:73)(cid:78)(cid:71)(cid:0)(cid:78)(cid:79)(cid:82)(cid:0) taxable profits. (cid:115)(cid:0) (cid:0)(cid:52)(cid:69)(cid:77)(cid:80)(cid:79)(cid:82)(cid:65)(cid:82)(cid:89)(cid:0) (cid:68)(cid:73)(cid:70)(cid:70)(cid:69)(cid:82)(cid:69)(cid:78)(cid:67)(cid:69)(cid:83)(cid:0) (cid:82)(cid:69)(cid:76)(cid:65)(cid:84)(cid:69)(cid:68)(cid:0) (cid:84)(cid:79)(cid:0) (cid:73)(cid:78)(cid:86)(cid:69)(cid:83)(cid:84)(cid:77)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0) (cid:73)(cid:78)(cid:0) (cid:83)(cid:85)(cid:66)(cid:83)(cid:73)(cid:68)(cid:73)(cid:65)(cid:82)(cid:73)(cid:69)(cid:83)(cid:12)(cid:0) (cid:84)(cid:79)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) (cid:69)(cid:88)(cid:84)(cid:69)(cid:78)(cid:84)(cid:0) (cid:84)(cid:72)(cid:65)(cid:84)(cid:0) (cid:73)(cid:84)(cid:0) (cid:73)(cid:83)(cid:0) (cid:80)(cid:82)(cid:79)(cid:66)(cid:65)(cid:66)(cid:76)(cid:69)(cid:0) (cid:84)(cid:72)(cid:65)(cid:84)(cid:0) (cid:84)(cid:72)(cid:69)(cid:89)(cid:0) (cid:87)(cid:73)(cid:76)(cid:76)(cid:0) (cid:78)(cid:79)(cid:84)(cid:0) (cid:82)(cid:69)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:0) (cid:73)(cid:78)(cid:0) (cid:84)(cid:72)(cid:69)(cid:0) foreseeable future. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax is recognised at the tax rates that are expected to be applied to the temporary differences when they reverse, based on rates that have been enacted or substantially enacted by the reporting date. Leased assets Leases in which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases. As lessee Rentals in respect of all operating leases are charged to the income statement on a straight-line basis over the lease term. 34 ANNUAL REPORT 2012 Notes to the Financial Statements CONTINUED 1 Accounting policies CONTINUED As lessor Assets under hire purchase agreements are shown in the balance sheet under current assets to the extent they are due within one year, and under non-current assets to the extent that they are due after more than one year, and are stated at the value of the net investment in the agreements. The income from such agreements is credited to the income statement each year so as to give a constant rate of return on the funds invested. Assets held for leasing out under operating leases are included in investment property (where they constitute land and buildings) or in property, plant and equipment (where they do not constitute land and buildings) at cost less accumulated depreciation and impairment losses. Rental income is recognised on a straight-line basis. Lease incentives granted are recognised as an integral part of the total rental income. Finance lease payments Minimum lease payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge is allocated to each period of the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Non-current assets held for sale and discontinued operations Non-current assets and discontinued operations are classified as held for sale when their carrying values will be recovered principally through sale. They are generally measured at the lower of carrying amount and fair value less costs to sell. Provisions Provisions are recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are determined by discounting the expected cash flows at an appropriate pre-tax risk free rate. New accounting standards and interpretations applied During the year the Group has adopted the following standards: IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments Amendments to IFRS 7 Financial Instruments: Disclosures Amendments to IAS 1 Presentation of Financial Statements – Presentation of statement of changes in equity New accounting standards and interpretations not applied During the year, the International Accounting Standards Board (“IASB”) and International Financial Reporting Interpretations Committee (“IFRIC”) have issued the following standards and interpretations with potential application to the Group with an effective date after the end of these financial statements: International Accounting Standards (IAS / IFRS) (accounting periods commencing on or after): Effective date Endorsed IFRS 9 Financial Instruments 1 January 2013 The Directors do not anticipate that the adoption of the standards and interpretations listed above will have a material impact on the Group’s or Company’s financial statements in the period of initial application, however additional disclosures will be required. FALKLAND ISLANDS HOLDINGS PLC 35 2 Segmental analysis The Group is organised into three operating segments, and information on these segments is reported to the chief operating decision maker (‘CODM’) for the purposes of resource allocation and assessment of performance. The CODM has been identified as the Board of Directors. The operating segments offer different products and services and are determined by business type: general trading in the Falkland Islands, the provision of ferry services and art logistics and storage. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment and intangible assets other than goodwill. 2012 Revenue Segment operating profit before tax and amortisation Amortisation Segment operating profit Interest income Interest expense Segment profit before tax Assets and liabilities Segment assets Segment liabilities Unallocated assets and liabilities Segment net assets Other segmental information Capital expenditure: Property, plant, equipment Depreciation – property, plant and equipment Depreciation – investment properties Amortisation Underlying profit before tax Segment operating profit before tax and amortisation Interest income Interest expense Underlying profit before tax General trading Ferry services Art logistics and storage (Falklands) (Portsmouth) £’000 £’000 14,979 1,510 – 4,160 1,094 – 1,510 1,094 86 (142) 1,454 33 (263) 864 (UK) £’000 14,970 964 (398) 566 4 (52) 518 12,302 (7,006) 12,967 (7,060) 13,550 (4,261) 5,296 5,907 9,289 632 425 10 – 1,510 86 (142) 1,454 5,080 303 – – 1,094 33 (263) 864 524 331 – 398 964 4 (52) 916 To tal £’000 34,109 3,568 (398) 3,170 123 (457) 2,836 38,819 (18,327) 8,996 29,488 6,236 1,059 10 398 3,568 123 (457) 3,234 36 ANNUAL REPORT 2012 Notes to the Financial Statements CONTINUED 2 Segmental analysis CONTINUED 2011 Revenue Segment operating profit before tax and amortisation Amortisation Segment operating profit Interest income Interest expense Segment profit before tax Assets and liabilities Segment assets Segment liabilities Unallocated assets and liabilities Segment net assets Other segmental information Capital expenditure: Property, plant, equipment Depreciation – property, plant and equipment Depreciation – investment properties Amortisation Underlying profit before tax Segment operating profit before tax and amortisation Interest income Interest expense Underlying profit before tax General trading Ferry services Art logistics and storage (Falklands) (Portsmouth) £’000 £’000 (UK) £’000 To tal £’000 14,921 1,613 – 1,613 88 (129) 1,572 12,856 (7,972) – 4,884 419 326 37 – 1,613 88 (129) 1,572 3,734 13,186 31,841 790 – 790 29 (70) 749 532 (398) 134 – (125) 9 2,935 (398) 2,537 117 (324) 2,330 8,029 (1,993) – 6,036 12,268 (4,519) – 7,749 33,153 (14,484) 11,932 30,601 69 215 – – 790 29 (70) 749 327 268 – 398 532 – (125) 407 815 809 37 398 2,935 117 (324) 2,728 3 Geographical analysis The tables below analyse revenue and other information by geography: 2012 Revenue Assets and liabilities Segment assets Other segment information Capital expenditure Assets acquired through finance leases Total fixed assets acquired 2011 Revenue Assets and liabilities Segment assets Other segment information Capital expenditure 4 Revenue Sale of goods Rendering of services Property sales in the Falkland Islands Total revenue FALKLAND ISLANDS HOLDINGS PLC 37 United Kingdom £’000 Falkland Islands £’000 Total £’000 19,130 14,979 34,109 26,517 12,302 38,819 647 4,957 5,604 632 – 632 United Kingdom £’000 Falkland Islands £’000 1,279 4,957 6,236 Total £’000 16,920 14,921 31,841 20,297 12,856 33,153 396 419 815 2012 £’000 11,055 22,829 225 2011 £’000 11,936 19,451 454 34,109 31,841 38 ANNUAL REPORT 2012 Notes to the Financial Statements CONTINUED 5 Amortisation of intangible assets Amortisation charge on Momart intangible assets acquired Amortisation charge Profit before tax as reported Adjusted for amortisation Underlying profit before tax 6 Expenses and auditors’ remuneration 2012 £’000 (398) (398) 2,836 398 3,234 2011 £’000 (398) (398) 2,330 398 2,728 Included in profit / loss are the following expenses / (income): Group Company Direct operating expenses arising from investment properties which generated rental income in the period Depreciation Amortisation of intangible assets Foreign currency differences Impairment loss on trade and other receivables Rents receivable from property rentals Cost of inventories recognised as an expense Operating lease payments Auditors’ remuneration: Audit of these financial statements and amounts receivable by auditors and their associates in respect of: Audit of subsidiaries’ financial statements pursuant to legislation Other services relating to taxation Total auditors’ remuneration 2012 £’000 114 1,069 398 (50) 82 (344) 8,061 670 2011 £’000 82 846 398 (23) 134 (242) 8,939 651 2012 £’000 2011 £’000 – – – – – – – – 2012 £’000 27 62 59 – – – – – – – – 2011 £’000 26 61 23 148 110 Amounts paid to the Company’s auditors and their associates in respect of services to the Company, other than the audit of the Company’s financial statements, have not been disclosed as the information is required instead to be disclosed on a consolidated basis. FALKLAND ISLANDS HOLDINGS PLC 39 7 Staff numbers and cost The average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows: Number of employees Number of employees Group Company Ferry services Falklands Islands: in Stanley Falklands Islands: in UK Art logistics and storage Head office Total average staff numbers The aggregate payroll cost of these persons was as follows: 2012 39 115 5 110 4 273 2011 41 107 5 109 3 265 Wages and salaries Share-based payments (see note 25) Social security costs Contributions to defined contribution plans Total employment costs Group Company 2012 £’000 2011 £’000 7,968 7,687 101 749 229 207 655 362 9,047 8,911 2012 £’000 500 39 71 31 641 2012 2011 – – – – 4 4 – – – – 3 3 2011 £’000 510 78 46 26 660 Details of Directors’ remuneration are provided in the Directors’ Report, under the heading “Details of Directors’ Remuneration and Emoluments”. 8 Finance income and expense Bank interest receivable Finance lease interest receivable Expected return on pension scheme assets Total financial income Interest payable on bank loans Interest cost on pension scheme liabilities Amortisation of loan fees Finance lease interest payable Other interest payable Total financial expense Net financing cost 2012 £’000 5 89 29 123 (115) (138) (16) (188) – (457) (334) 2011 £’000 4 84 29 117 (138) (144) (30) – (12) (324) (207) 40 ANNUAL REPORT 2012 Notes to the Financial Statements CONTINUED 8 Finance income and expense CONTINUED Bank interest receivable Interest payable on bank loans Net bank interest Other financing charges (from above) Net financing cost 9 Taxation Recognised in the income statement Current tax expense: Current year Adjustments for prior years Current tax expense Deferred tax expense: Origination and reversal of temporary differences Reduction in tax rate Adjustments for prior years Deferred tax credit Total tax expense Reconciliation of effective tax rate Profit on ordinary activities before tax Tax using the UK corporation tax rate of 26% (2011: 28%) Expenses not deductible for tax purposes Other timing differences Non taxable income on disposals Schedule 23 deduction Marginal relief Lower tax charges overseas Reduction in deferred tax rate Adjustments to tax charge in respect of previous years Total tax expense 2012 £’000 5 (115) (110) (224) (334) 2012 £’000 842 23 865 (2) (112) (171) (285) 580 2011 £’000 4 (138) (134) (73) (207) 2011 £’000 823 37 860 (75) (39) (36) (150) 710 2012 £’000 2011 £’000 2,836 2,330 737 119 – (1) (10) – (5) (112) (148) 580 652 134 10 13 (46) (2) (13) (39) 1 710 FALKLAND ISLANDS HOLDINGS PLC 41 9 Taxation CONTINUED Tax recognised directly in other comprehensive income Deferred tax recognised directly in other comprehensive income Total tax (credit)/expense recognised directly in other comprehensive income 2012 £’000 (45) (45) 2011 £’000 19 19 Factors affecting the future tax charges The 2012 budget on 21 March 2012 announced that the UK corporation tax rate will be reduced to 22% by 2014. A reduction in the rate of 26% to 24% (effective from 1 April 2012) was substantively enacted in March 2012. It has not yet been possible to quantify the full anticipated effect of the announced 2% rate reduction, although this will further reduce the Group and Company deferred tax assets and liabilities accordingly. 10 Earnings per share The calculation of basic earnings per share is based on profits on ordinary activities after taxation, and the weighted average number of shares in issue in the period, excluding shares held under the Employee Share Ownership Plan (“ESOP”) (see note 26). The calculation of diluted earnings per share is based on profits on ordinary activities after taxation, and the weighted average number of shares in issue in the period, excluding shares held under the ESOP, adjusted to assume the full issue of share options outstanding, to the extent that they are dilutive. Profit on ordinary activities after taxation Weighted average number of shares in issue Less: shares held under the ESOP Average number of shares in issue excluding the ESOP Maximum dilution with regards to share options Diluted weighted average number of shares Basic earnings per share Diluted earnings per share 2012 £’000 2011 £’000 2,256 1,620 2012 Number 2011 Number 9,227,351 9,176,612 (36,499) (36,499) 9,190,852 9,140,113 48,205 96,931 9,239,057 9,237,044 2012 2011 24.5p 24.4p 17.7p 17.5p 42 ANNUAL REPORT 2012 Notes to the Financial Statements CONTINUED 10 Earnings per share CONTINUED To provide a comparison of earnings per share on underlying performance, the calculation below sets out basic and diluted earnings per share based on profits before amortisation. Earnings per share on underlying profit Underlying profit before tax (see note 5) Taxation Profit after tax before amortisation Effective tax rate Weighted average number of shares in issue excluding ESOP (from above) Diluted weighted average number of shares (from above) Basic earnings per share on underlying profit Diluted earnings per share on underlying profit 11 Intangible assets 2012 £’000 3,234 (817) 2,417 2011 £’000 2,728 (821) 1,907 25.3% 30.1% 9,190,852 9,140,113 9,239,057 9,237,044 26.3p 26.2p 20.9p 20.6p Cost: At 1 April 2010 At 31 March 2011 and 31 March 2012 Accumulated amortisation: At 1 April 2010 Amortisation for the year At 31 March 2011 Amortisation for the year At 31 March 2012 Net book value: At 1 April 2010 At 31 March 2011 At 31 March 2012 Customer relationships £’000 1,882 1,882 503 243 746 243 989 1,379 1,136 893 Group Non-compete Agreements £’000 72 72 29 14 43 14 57 43 29 15 Brand names £’000 2,823 2,823 292 141 433 141 574 2,531 2,390 2,249 Goodwill £’000 Total £’000 11,539 11,539 16,316 16,316 1,983 – 1,983 – 1,983 9,556 9,556 9,556 2,807 398 3,205 398 3,603 13,509 13,111 12,713 Amortisation and impairment charges are recognised in operating expenses in the income statement. Customer relationships – are on-going relationships, both contractual and otherwise, with customers considered to be of future economic benefit to the Group with estimated economic lives of 6 – 10 years. Brand names – the Momart brand is considered to be of future economic value to the Group with an estimated useful economic life of 20 years. FALKLAND ISLANDS HOLDINGS PLC 43 11 Intangible assets CONTINUED Non-compete agreements – are contractually binding agreements with senior Momart personnel not to compete with the Group for five years in the event of their leaving the Group’s service. Goodwill Goodwill is allocated to the Group’s cash generating units (“CGUs”) which principally comprise its business segments. A segment level summary of goodwill is shown below: Balance at 1 April 2010 Balance at 31 March 2011 Balance at 31 March 2012 Impairment Art logistics and storage £’000 5,577 5,577 5,577 Ferry services (Portsmouth) £’000 3,979 3,979 3,979 Total £’000 9,556 9,556 9,556 The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. An impairment test is a comparison of the carrying value of the assets of a CGU, based on a value-in-use calculation, to their recoverable amounts. Where the recoverable amount is less than the carrying value an impairment results. During the year the goodwill for each CGU was separately assessed and tested for impairment, with no impairment charges resulting (2011: nil). As part of testing goodwill for impairment detailed forecasts of operating cash flows for the next five years are used, which are based on approved budgets and plans by the Board of Falkland Islands Holdings plc. These forecasts represent the best estimate of future performance of the CGUs based on past performance and expectations for the market development of the CGU. A number of key assumptions are used as part of impairment testing. These key assumptions are made by management reflecting past experience combined with their knowledge as to future performance and relevant external sources of information. Sensitivity analysis as at 31 March 2012 has indicated that no reasonably foreseeable change in the key assumptions used in the impairment model would result in a significant impairment charge being recorded in the financial statements. Discount rates Within impairment testing models cash flows of all CGUs are discounted using a pre tax discount rate of 13.6% (2011: 14.1%). Management have determined that this rate is appropriate as the risk adjustment applied within the discount rate reflects the risks and rewards inherent to each CGU, based on the industry and geographical location it is based within. Both Ferry Services and Art Logistics and Storage have stable core revenue streams and are considered to have a similar risk profile. Long term growth rates Long term growth rates of 2% have been used for all CGUs as part of the impairment testing models. This growth rate does not exceed the long term average growth rate for the UK, in which the CGUs operate. Other assumptions Other assumptions used within impairment testing models include an estimation of long term effective tax rate for the CGUs. The long-term effective rate of tax is consistent with the current UK tax rate. The terminal value is calculated based on the Gordon Growth model. Sensitivity to changes in assumptions Using a discounted cash flow methodology necessarily involves making numerous estimates and assumptions regarding growth, operating margins, tax rates, appropriate discount rates, capital expenditure levels and working capital requirements. These estimates will likely differ from future actual results of operations and cash flows, and it is possible that these differences could be material. In addition, judgements are applied by the Directors in determining the level of cash generating units and the criteria used to determine which assets should be aggregated. A difference in testing levels could further affect whether an impairment is recorded and the extent of impairment loss. 44 ANNUAL REPORT 2012 Notes to the Financial Statements CONTINUED 11 Intangible assets CONTINUED Assumptions specific to ferry services (Portsmouth) Value in use was determined by discounting future cash flows in line with the other assumptions discussed above. Management have forecast consistent growth in cash flows of 2% in both the short and long term. The value in use was determined to exceed the carrying amount and no impairment has been recognised. It is not considered that a reasonably possible change in any of these assumptions would generate a different impairment test outcome to the one included in this annual report. Assumptions specific to arts logistics and storage (UK) Value in use was determined by discounting future cash flows in line with the other assumptions as discussed above. Cash flows were projected based on approved budgets and plans which foresee growth rates in excess of 10% over the forecast period. The long term growth rate is projected to be 2% thereafter. The carrying value of the unit was determined to not be higher than its recoverable amount and no impairment was recognised (2011: nil). 12 Property, plant and equipment Cost: At 1 April 2010 Additions in year Disposals At 31 March 2011 Additions in year Transfer from investment properties Disposals At 31 March 2012 Accumulated depreciation: At 1 April 2010 Charge for the year Disposals At 31 March 2011 Charge for the year Transfer from investment properties Disposals At 31 March 2012 Net book value: At 1 April 2010 At 31 March 2011 At 31 March 2012 Freehold land and buildings £’000 Long leasehold land and buildings £’000 Group Ships £’000 Vehicles, plant and equipment £’000 Total £’000 3,996 964 3,309 5,052 13,321 179 (35) 4,140 40 – – – – 964 5,196 292 – – – 636 – 3,309 5,688 23 – – 977 – (42) 815 (35) 14,101 6,236 292 (42) 4,180 6,452 3,332 6,623 20,587 1,666 40 (35) 1,671 108 – – 1,779 2,330 2,469 2,401 215 100 – 315 181 35 – 531 678 133 – 811 143 – – 3,279 5,838 536 – 3,815 627 – (30) 809 (35) 6,612 1,059 35 (30) 954 4,412 7,676 749 649 5,921 2,631 2,498 2,378 1,773 1,873 2,211 7,483 7,489 12,911 The Company has no tangible fixed assets. At 31 March 2012 the net carrying amount of leased long leasehold land and buildings and vehicles, plant and equipment was £4,881,000 and £382,000 respectively (2011: £nil and £256,000). During the year to 31 March 2012 the Group acquired leased assets of £5,217,000 (2011: £102.000). 13 Investment properties At 1 April 2010 Disposals At 31 March 2011 Transfer to long leasehold Disposals At 31 March 2012 Accumulated depreciation: At 1 April 2010 Charge for the year Disposals At 31 March 2011 Charge for the year Transfer to long leasehold At 31 March 2012 Net book value: At 1 April 2010 At 31 March 2011 At 31 March 2012 FALKLAND ISLANDS HOLDINGS PLC 45 Residential and commercial property £’000 1,166 (65) 1,101 (292) – 809 109 37 (46) 100 10 (35) 75 1,057 1,001 734 Group Freehold land £’000 720 – 720 – (2) Total £’000 1,886 (65) 1,821 (292) (2) 718 1,527 – – – – – – – 109 37 (46) 100 10 (35) 75 720 720 718 1,777 1,721 1,452 Investment properties comprise residential and commercial property held for rental in the Falkland Islands. These together with the land have a fair value of approximately £3.9 million as at 31 March 2012 giving an unrecognised uplift of £2.4 million. This valuation was undertaken by a Director of the Falklands Islands Company Limited, who is resident in the Falkland Islands and is considered to have the relevant knowledge and experience to undertake the valuation. The valuation of land reflects the restricted and limited market for freehold land in the Falkland Islands. The Company does not own any investment properties. 46 ANNUAL REPORT 2012 Notes to the Financial Statements CONTINUED 14 Investments in subsidiaries The Group and Company have the following direct and indirect investments in subsidiaries: Country of incorporation Class of shares held Ownership % 2012 2011 The Falkland Islands Company Limited The Falkland Islands Trading Company Limited UK UK Ordinary shares of £1 Preference shares of £10 Ordinary shares of £1 Falkland Islands Shipping Limited* Falkland Islands Ordinary shares of £1 Erebus Limited* Falkland Islands Ordinary shares of £1 The Portsmouth Harbour Ferry Company Limited Portsea Harbour Company Limited* Clarence Marine Engineering Limited* Gosport Ferry Limited* Momart International Limited Momart Limited* Dadart Limited Preference shares of £1 Ordinary shares of £1 Ordinary shares of £1 Ordinary shares of £1 Ordinary shares of £1 Ordinary shares of £1 Ordinary shares of £1 Ordinary shares of £1 UK UK UK UK UK UK UK 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% * These investments are not held by the Company but are indirect investments held through a subsidiary of the Company. Company investments in Group undertakings Balance brought forward Cost of share-based payments recognised in subsidiaries Total investment in Group undertakings Company 2012 £’000 2011 £’000 31,426 31,297 62 129 31,488 31,426 The Company’s investment in Erebus Limited comprises the Group’s shareholding in Falkland Oil and Gas Limited (see note 15). 15 Shares held in Falkland Oil and Gas Limited – available-for-sale equity securities Group Company 2012 £’000 2011 £’000 2012 £’000 2011 £’000 Non-current: Available-for-sale equity securities 9,030 10,710 Falkland Oil and Gas Limited share price at 31 March 64.5p 89.3p – – – – Available-for-sale equity securities comprise the Group’s holding of 14,000,000 ordinary shares in Falkland Oil and Gas Limited (“FOGL”) which at 31 March 2012 represented a 4.4% interest (2011: 12,000,000 shares; 8.2%). The historic cost of the Group’s investment in FOGL is £2,823,000 (2011: £1,963,000) representing an average cost of 20p per share (12 million shares acquired at 16p per share and 2 million shares acquired in January 2012 for 43p per share). 16 Non-current assets held-for-sale Non-current assets held-for-sale FALKLAND ISLANDS HOLDINGS PLC 47 Group 2012 £’000 20 2011 £’000 20 Non-current assets held-for-sale comprise certain items of artwork accumulated by Momart International Limited prior to acquisition. The assets were recognised at estimated fair value on acquisition and as a result no gain or loss arose on their being classified as held-for-sale. 17 Other financial assets Rents receivable relate to finance leases on the sale of vehicles and customer goods. No allowances for uncollectible minimum lease payments have been deemed necessary. No contingent rents have been recognised as income in the period. No residual values accrue to the benefit of the lessor. Non-current: Finance lease debtors due after more than one year Current: Finance lease debtors due within one year Total other financial assets Group 2012 £’000 150 385 535 2011 £’000 60 252 312 The difference between the gross investment in the hire purchase leases and the present value of future lease payments due represents unearned finance income of £58,000 (2011: £60,000). The cost of assets acquired for the purpose of letting under hire purchase agreements by the Group during the period amounted to £675,000 (2011: £434,000). The aggregate rentals receivable during the year in respect of hire purchase agreements were £473,000 (2011: £415,000). Gross investment in hire purchase leases Present value of future lease payments due: within 1 year after more than 1 year within 5 years Group 2012 £’000 593 385 150 535 2011 £’000 372 252 60 312 48 ANNUAL REPORT 2012 Notes to the Financial Statements CONTINUED 18 Deferred tax assets and liabilities Recognised deferred tax assets and liabilities Property, plant and equipment Intangible assets Inventories Other financial liabilities Share-based payments Pension Tax assets / liabilities Net of tax assets Net tax liabilities Group Assets Liabilities 2012 £’000 34 – 75 83 66 593 851 2011 £’000 32 – 113 119 39 554 857 2012 £’000 622 758 – – – – 2011 £’000 721 995 – – – – 1,380 1,716 (851) 529 (857) 859 The deferred tax asset shown as a non-current asset in the balance sheet relates to the Group’s pension scheme liabilities (see note 24). All other deferred tax assets are shown net against the non-current deferred tax liability shown in the balance sheet. Other temporary differences Net tax asset Movement in deferred tax in the year Property, plant and equipment Intangible assets Inventories Other financial liabilities Share-based payments Pension Deferred tax movements Company Assets Liabilities 2012 £’000 5 5 1 April 2011 £’000 689 995 (113) (119) (39) (554) 859 2011 £’000 8 8 2012 £’000 – – 2011 £’000 – – Group Recognised in income £’000 (101) (237) 38 36 (27) 6 (285) Recognised 31 March in equity £’000 – – – – – (45) (45) 2012 £’000 588 758 (75) (83) (66) (593) 529 FALKLAND ISLANDS HOLDINGS PLC 49 18 Deferred tax assets and liabilities CONTINUED Unrecognised deferred tax assets A deferred tax asset of £132,000 (2011: £158,000) in respect of capital losses have not been recognised as it is not considered more likely than not that there will be suitable taxable profits in the foreseeable future from which the underlying capital losses will reverse. Other temporary differences Deferred tax movements Movement in deferred tax in the prior year Property, plant and equipment Intangible assets Inventories Other financial liabilities Share-based payments Pension Deferred tax movements Company 1 April 2011 £’000 8 8 Recognised in income £’000 (3) (3) Recognised 31 March in equity £’000 – – 2012 £’000 5 5 Group Recognised in income £’000 (48) (111) (43) (14) 18 48 (150) 1 April 2010 £’000 737 1,106 (70) (105) (57) (621) 990 Recognised 31 March in equity £’000 – – – – – 19 19 2011 £’000 689 995 (113) (119) (39) (554) 859 50 ANNUAL REPORT 2012 Notes to the Financial Statements CONTINUED 19 Inventories Work-in-progress Goods-in-transit Goods for resale Trading inventories Property held-for-sale Total inventories Goods-in-transit are retail goods in transit to the Falkland Islands. The Company has no inventories. 20 Trade and other receivables Non-current: Amount owed by subsidiary undertakings Current: Trade and other receivables Corporation tax Prepayments and accrued income Trade and other receivables 21 Cash and cash equivalents / bank overdrafts Group 2012 £’000 210 565 3,216 3,991 1,010 5,001 2011 £’000 250 646 3,319 4,215 1,204 5,419 Company 2012 £’000 2011 £’000 4,925 4,042 Group Company 2012 £’000 2011 £’000 2012 £’000 2011 £’000 4,512 – 1,108 5,620 4,368 64 1,379 5,811 – – 25 25 – – 30 30 Group Company 2012 £’000 2011 £’000 2012 £’000 2011 £’000 Cash and cash equivalents in the balance sheet and cash flow statement 2,751 2,062 (1,409) (1,418) FALKLAND ISLANDS HOLDINGS PLC 51 22 Interest-bearing loans and borrowings This note provides information about the contractual terms of the Group and Company’s interest-bearing loans and borrowings, which are stated at amortised cost. For more information regarding the maturity of the Group and Company’s interest-bearing loans and borrowings and about the Group and Company’s exposure to interest rate and foreign currency risk, see note 27. Non-current liabilities: Secured bank loans Finance lease liabilities Total non-current interest-bearing loans and borrowings Current liabilities: Current portfolio of secured bank loans Finance lease liabilities Total current interest-bearing loans and borrowings Net debt Total interest-bearing loans and borrowings Less: cash balances (see note 21) Net debt Finance lease liabilities Future minimum lease payments due: within one year After more than one year but within five years After five years Total minimum lease payments due Group Company 2012 £’000 2011 £’000 2012 £’000 2011 £’000 1,987 5,158 7,145 1,000 140 1,140 2,971 133 3,104 1,000 58 1,058 1,553 2,337 – – 1,553 2,337 800 – 800 800 – 800 Group Company 2012 £’000 8,285 (2,751) 5,534 2011 £’000 4,162 (2,062) 2,100 2012 £’000 2,353 1,409 3,762 2011 £’000 3,137 1,418 4,555 Group Company 2012 £’000 140 361 4,797 5,298 2011 £’000 58 133 – 191 2012 £’000 2011 £’000 – – – – – – – – 52 ANNUAL REPORT 2012 Notes to the Financial Statements CONTINUED 23 Trade and other payables Company 2012 £’000 2011 £’000 Non-current: Amount owed to subsidiary undertakings 556 390 Current: Trade payables Other creditors, including taxation and social security Accruals and deferred income Total trade and other payables Group Company 2012 £’000 2011 £’000 5,759 679 2,315 8,753 5,349 753 2,232 8,334 2012 £’000 – 74 437 511 2011 £’000 – 59 317 376 24 Employee benefits: pension plans The Group operates three defined contribution pension schemes. In addition it also operates two defined benefit pension schemes, both of which have been closed to new members and to future accrual. Defined contribution schemes The Group operates three defined contribution pension schemes. The pension cost charge for the year represents contributions payable by the Group to the schemes and amounted to £229,000 (2011: £362,000). The Group anticipates paying contributions amounting to £244,000 during the year ending 31 March 2013. There were no outstanding or prepaid contributions at either the beginning or end of the financial year. Defined benefit pension schemes A summary of the fair value of the net pension schemes deficit is set out below: Pension scheme deficit: Falkland Islands Company Limited Scheme Portsmouth Harbour Ferry Company Limited Scheme Deferred tax Net pension scheme deficit 2012 £’000 2011 £’000 (2,411) (2,107) (59) (23) (2,470) (2,130) 593 554 (1,877) (1,576) FALKLAND ISLANDS HOLDINGS PLC 53 24 Employee benefits: pension plans CONTINUED Falkland Islands Company Limited Scheme The Falkland Islands Company Limited operates a defined benefit pension scheme for certain employees which is unfunded and was closed to new members in 1988. This scheme was closed to further accrual on 31 March 2007. Benefits are payable on retirement at the normal retirement age. Actuarial reports for IAS 19 purposes as at 31 March 2012, 31 March 2011, 31 March 2010, 31 March 2009, and 31 March 2008 were prepared by a qualified independent actuary, Lane Clark & Peacock LLP. The major assumptions used in this valuation were: Rate of increase in salaries Rate of increase in pensions in payment and deferred pensions Discount rate applied to scheme liabilities Inflation assumption 2012 2011 2.5% 3.0% 4.7% 3.2% 2.6% 3.0% 5.5% 3.5% The assumptions used by the actuary are chosen from a range of possible actuarial assumptions which, due to the timescale covered, may not necessarily be borne out in practice. Scheme liabilities The present value of the scheme’s liabilities, which are derived from cash flow projections over long periods and thus inherently uncertain, were: Value at 2012 £’000 Value at 2011 £’000 Value at 2010 £’000 Value at 2009 £’000 Value at 2008 £’000 Present value of scheme liabilities (2,411) (2,107) (2,013) (1,797) (1,863) Related deferred tax asset Net pension liability 579 548 558 449 465 (1,832) (1,559) (1,455) (1,348) (1,398) Movement in deficit during the year: Deficit in scheme at beginning of the year Pensions paid Other finance costs Actuarial loss Deficit in scheme at end of the year 2012 £’000 2011 £’000 (2,107) (2,013) 98 (113) (289) 98 (110) (82) (2,411) (2,107) 54 ANNUAL REPORT 2012 Notes to the Financial Statements CONTINUED 24 Employee benefits: pension plans CONTINUED Analysis of amounts included in other finance costs: Interest on pension scheme liabilities Analysis of amount recognised in statement of comprehensive income: Experience losses Changes in assumptions underlying the present value of scheme liabilities Actuarial loss recognised in statement of comprehensive income History of experience gains and losses: 2012 £’000 (113) 2012 £’000 (30) (259) (289) 2011 £’000 (110) 2011 £’000 (7) (75) (82) 2012 2011 2010 2009 2008 Experience (losses) / gains on scheme liabilities: Amount (£’000) (30) (7) 89 (2) (18) Percentage of year end present value of scheme liabilities 1.2% 0.3% (4.4%) 0.1% 1.0% Total amount recognised in statement of comprehensive income: Amount (£’000) Percentage of year end present value of (289) (82) (195) 50 301 scheme liabilities 12.0% 3.9% 9.7% (2.8%) (16.2%) FALKLAND ISLANDS HOLDINGS PLC 55 24 Employee benefits: pension plans CONTINUED Portsmouth Harbour Ferry Company Plc (1975) Retirement Fund This Company operated a defined benefit scheme. The scheme has been closed for many years and none of the current employees are earning benefits under the scheme. Actuarial reports for IAS 19 purposes as at 31 March 2012, 31 March 2011, 31 March 2010, 31 March 2009, and 31 March 2008 were prepared by a qualified independent actuary, Alexander Forbes Limited. The major assumptions used in the valuations were: Rate of increase in pensions in payment and deferred pensions Discount rate applied to scheme liabilities Inflation assumption 2012 2011 3.2% 4.7% 3.2% 3.5% 5.5% 3.5% The assumptions used by the actuary are chosen from a range of possible actuarial assumptions which, due to the timescale covered, may not necessarily be borne out in practice. Scheme assets The fair value of the scheme’s assets, which are not intended to be realised in the short term and may be subject to significant change before they are realised, and the present value of the scheme’s liabilities, which are derived from cash flow projections over long periods and thus inherently uncertain, were: Equities Fixed interest Other Total market value of assets Value at 2012 £’000 286 145 29 460 Value at 2011 £’000 301 101 30 432 Present value of scheme liabilities (519) (455) Deficit in the scheme Related deferred tax asset Net pension liability (59) 14 (45) (23) 6 (17) The expected rates of return on the assets in the scheme were: Equities Fixed interest Other Value at 2010 £’000 Value at 2009 £’000 Value at 2008 £’000 328 64 18 410 (634) (224) 63 (161) 185 50 18 253 (492) (239) 67 (172) 207 37 36 280 (477) (197) 54 (143) Long term Long term rate of return rate of return 2012 2011 6.5% 4.7% 0.5% 7.2% 5.5% 4.0% 56 ANNUAL REPORT 2012 Notes to the Financial Statements CONTINUED 24 Employee benefits: pension plans CONTINUED Movement in deficit during the year: Projected benefit obligations: Opening projected benefit obligations Interest thereon Distributions Settlement gain Actuarial loss Projected benefit obligations at 31 March Plan assets: Opening plan assets Distributions Contributions Return on assets Actuarial loss Plan assets at 31 March Deficit in scheme at 31 March Analysis of amounts included in other finance costs: Expected return on pension scheme assets Interest on pension scheme liabilities Included in other finance costs Analysis of amount recognised in statement of comprehensive income: Actual return less expected return on scheme assets Changes in assumptions underlying the present value of scheme liabilities Actuarial loss recognised in statement of comprehensive income 2012 £’000 (455) (25) 13 – (52) (519) 432 (13) 35 29 (23) 460 (59) 2012 £’000 29 (25) 4 2012 £’000 (23) (52) (75) 2011 £’000 (634) (34) 65 150 (2) (455) 410 (65) 66 29 (8) 432 (23) 2011 £’000 29 (34) (5) 2011 £’000 (8) (2) (10) FALKLAND ISLANDS HOLDINGS PLC 57 24 Employee benefits: pension plans CONTINUED History of experience gains and losses: 2012 2011 2010 2009 2008 Difference between the expected and actual return on scheme assets: Amount (£’000) (23) (8) 86 (99) Percentage of year end scheme assets (5.0%) (1.9%) 21.0% (39.1%) Experience gains and losses on scheme liabilities: Amount (£’000) Percentage of year end present value of scheme liabilities Total amount recognised in statement of comprehensive income: Amount (£’000) Percentage of year end present value of – – – – (1) 0.2% – – 3 1.1% – – (75) (10) (55) (86) 147 scheme liabilities 14.5% 2.2% 8.7% 17.4% (30.8%) 25 Employee benefits: share-based payments Retained earnings are used to record the costs arising under IFRS2 for options issued to Directors and employees, and similar costs associated with share-based payments. The following options were outstanding at 31 March 2012: Date of issue 10 Feb 05 14 Jun 05 14 Jun 05 7 Aug 07 4 Dec 07 3 Apr 08 8 Apr 09 15 Jul 09 9 Dec 09 21 Dec 10 28 Apr 11 27 Jun 11 16 Dec 11 Number 57,692 47,500 63,528 27,517 17,500 7,562 100,853 99,100 25,000 100,000 6,390 30,678 147,190 730,510 Exercise price £ 5.200 4.250 4.250 3.300 3.190 3.650 2.075 2.900 3.900 3.425 3.130 3.025 2.675 Share price at grant date £ 5.200 4.250 4.250 3.325 3.400 3.750 2.075 2.900 3.975 3.375 3.130 3.035 2.615 Fair value per share £ 2.470 1.660 2.140 0.730 1.190 1.310 0.560 0.720 1.450 1.240 1.060 0.940 0.680 Total fair value £ Earliest exercise date Latest exercise date 142,499 10 Feb 08 9 Feb 15 78,850 14 Jun 08 13 Jun 15 135,950 14 Jun 08 13 Jun 15 20,087 20,825 9,906 56,478 71,352 36,250 7 Aug 10 6 Aug 17 4 Dec 10 3 Dec 17 3 Apr 11 8 Apr 12 2 Apr 18 7 Apr 19 15 Jul 12 14 Jul 19 9 Dec 12 8 Dec 19 124,000 21 Dec 13 20 Dec 20 6,773 28 Apr 14 28 Apr 21 28,837 27 Jun 14 27 Jun 21 100,089 16 Dec 14 16 Dec 21 831,896 58 ANNUAL REPORT 2012 Notes to the Financial Statements CONTINUED 25 Employee benefits: share-based payments CONTINUED The fair values of the options are estimated at the date of grant using appropriate option pricing models and are charged to the profit and loss account over the expected life of the options. The following table gives the assumptions made in determining the fair value of the options subject to the provisions of IFRS 2 currently in issue. Expected volatility is determined by reference to past performance of the Company’s share price. Expected volatility (%) Risk-free interest rate (%) Expected life of options (years) Dividend yield (%) Share price at grant date (£) Expected volatility (%) Risk-free interest rate (%) Expected life of options (years) Dividend yield (%) Share price at grant date (£) 7 Aug 07 4 Dec 07 3 Apr 08 8 Apr 09 15 Jul 09 33 5.30 6.5 2.10 33 4.50 6.5 2.10 34 4.20 6.5 2.10 37 2.90 6.5 3.90 38 3.40 6.5 2.80 3.325 3.400 3.750 2.075 2.900 9 Dec 09 21 Dec 10 28 Apr 11 27 Jun 11 16 Dec 11 40 3.14 6.5 2.00 44 2.90 6.5 2.40 40 2.94 6.5 2.60 40 2.53 6.5 3.10 39 1.42 6.5 3.60 3.975 3.375 3.130 3.035 2.615 Share options issued without share price conditions attached have been valued using the Black-Scholes model. Share price options issued with share price conditions attached have been valued using a Monte Carlo simulation model making explicit allowance for share price targets. During the year ended 31 March 2012, 77,153 options (2011: 123,236) were exercised over ordinary shares. The number and weighted average exercise prices of share options are as follows: Outstanding at the beginning of the year Forfeited during the year Exercised during the year Granted during the year Lapsed during the year Outstanding at the year end Vested options exercisable at the year end Weighted average exercise price (£) 2012 3.40 3.34 3.39 2.77 3.37 3.28 4.30 Number of options 2012 761,090 (61,069) (77,153) 195,828 (88,186) 730,510 221,299 Weighted average exercise price (£) 2011 Number of options 2011 3.24 827,833 – 2.49 3.43 3.18 3.40 4.05 – (123,236) 121,898 (65,405) 761,090 271,237 26 Capital and reserves Share capital Issued at 1 April Save as you earn and Share options exercised during the year Issued at 31 March – fully paid Allotted, called up and fully paid Ordinary shares of 10p each FALKLAND ISLANDS HOLDINGS PLC 59 Ordinary shares of 10p each 2012 2011 9,220,414 9,097,178 77,153 123,236 9,297,567 9,220,414 2012 £’000 2011 £’000 930 922 By special resolution at an Annual General Meeting on 9 September 2010 the Company adopted new articles of association principally to take account of the various changes in company law brought in by the Companies Act 2006. As a consequence the Company no longer has an authorised share capital. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. On 31 March 2000, an Employee Share Ownership Plan was established. At 31 March 2012 the plan held 36,499 (2011: 36,499) ordinary shares at a cost of £68,542 (2011: £68,542). The market value of the shares at 31 March 2012 was £133,769 (2011: £120,446). Shares held in the ESOP receive a nominal 0.01p per share in each dividend payment, as in prior years. For more information on share options please see note 25. The other reserves in the Group comprise: £5,389,000 of merger relief and £2,442,000 of premium on shares issued in the year to 31 March 2008 in connection with the acquisition of Momart International Limited. These have been offset by £4,686,000 of cumulative positive goodwill written off to reserves, and £1,983,000 impairment charge in relation to goodwill arising on the Momart acquisition. As a result of the Momart impairment, a transfer was made from other reserves to retained earnings. The transfer neutralised the impact of the impairment charge recognised on the retained earnings reserve. Dividends The following dividends were recognised in the period: Final: 5.5p (2011 Final: 5.0p) per qualifying ordinary share Interim: 4.0p (2011 Interim: 4.0p) per qualifying ordinary share 2012 £’000 505 367 872 2011 £’000 459 367 826 After the balance sheet date a final dividend of 7.0p (£648,000) per qualifying ordinary share (2011: 5.5p, £507,000) were proposed by the Directors. The dividend has not been provided for. 60 ANNUAL REPORT 2012 Notes to the Financial Statements CONTINUED 27 Financial instruments (i) Fair values of financial instruments Investments in equity securities The fair value of available-for-sale financial assets is determined by reference to their quoted bid price at the balance sheet date. Trade and other receivables The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material. Trade and other payables The fair value of trade and other payables is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material. Cash and cash equivalents The fair value of cash and cash equivalents is estimated as its carrying amount where the cash is repayable on demand. Where it is not repayable on demand then the fair value is estimated at the present value of future cash flows, discounted at the market rate of interest at the balance sheet date. Interest-bearing borrowings Fair value, which after initial recognition is determined for disclosure purposes only, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the balance sheet date. Derivative financial instruments The fair value of derivative financial instruments is determined by their market value at the reporting date. IAS 39 categories and fair values The fair values of financial assets and financial liabilities are not materially different to the carrying values shown in the consolidated balance sheet and Company balance sheet. The following table shows the carrying value for each category of financial instrument: Available-for-sale financial assets at fair value Financial liabilities at amortised cost Cash and cash equivalents Bank overdraft Hire purchase debtors Group Company 2012 £’000 9,030 (8,753) 2,751 – 535 2011 £’000 10,710 (8,334) 2,062 – 312 2012 £’000 – (511) – 2011 £’000 – (376) – (1,418) (1,409) – – Interest-bearing borrowings at amortised cost (8,285) (4,162) (2,353) (3,137) Trade and other receivables 4,512 4,368 25 30 (ii) Credit risk Financial risk management Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities. FALKLAND ISLANDS HOLDINGS PLC 61 27 Financial instruments CONTINUED Group The Group’s credit risk is primarily attributable to its trade receivables. The maximum credit risk exposure of the Group comprises the amounts presented in the balance sheet, which are stated net of provisions for doubtful debt. A provision is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of future cash flows. Management has credit policies in place to manage risk on an ongoing basis. These include the use of customer specific credit limits. Company The majority of the Company’s receivables are with subsidiaries. The Company does not consider these counter-parties to be a significant credit risk. Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. Therefore, the maximum exposure to credit risk at the balance sheet date was £7,798,000 (2011: £6,742,000) being the total trade receivables, other financial assets and cash and cash equivalents in the balance sheet. The maximum exposure to credit risk for trade receivables at the balance sheet date by geographic region was: Falkland Islands Europe North America United Kingdom Other Trade receivables The Company has no trade receivables. Credit quality of trade receivables and impairment losses Group Not past due Past due 0 – 30 days Past due 31 – 120 days More than 120 days Gross 2012 £’000 Impairment 2012 £’000 2,791 1,216 464 382 4,853 – – – (341) (341) Net 2012 £’000 2,791 1,216 464 41 Gross 2011 £’000 2,686 848 518 575 4,512 4,627 Impairment 2011 £’000 – – – (259) (259) Group 2012 £’000 2011 £’000 1,272 2,034 544 391 1,962 343 4,512 592 441 1,190 111 4,368 Net 2011 £’000 2,686 848 518 316 4,368 62 ANNUAL REPORT 2012 Notes to the Financial Statements CONTINUED 27 Financial instruments CONTINUED The movement in the allowances for impairment in respect of trade receivables during the year was: Balance as at 1 April 2011 Impairment loss recognised Impairment loss reversed Balance as at 31 March 2012 Group 2012 £’000 259 82 – 341 2011 £’000 125 238 (104) 259 The allowance account for trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible; at that point the amounts considered irrecoverable are written off against the trade receivables directly. No further analysis has been provided for cash and cash equivalents, trade receivables from Group companies, other receivables and other financial assets as there is limited exposure to credit risk and no provisions for impairment have been recognised. (iii) Liquidity risk Financial risk management Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Group and Company At the beginning of the period the Group had outstanding bank loans of £4.0 million. All payments due during the year with respect to these agreements were met as they fell due. The Group continues to maintain a £2.0 million Revolving Credit facility to fund working capital requirements which was undrawn at the year end. The Group manages its cash balances centrally at head office and prepares rolling cash flow forecasts to ensure funds are available to meet its secured and unsecured commitments as and when they fall due. Liquidity risk – Group The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the effects of netting agreements: 2012 Non-derivative financial instruments: Secured bank loans Finance leases Trade and other payables Carrying amount £’000 2,987 5,298 8,753 Contractual cash flows 1 year or less 1 to 2 years 2 to 5 years £’000 £’000 £’000 £’000 3,080 5,298 8,753 1,031 140 8,753 9,924 1,015 1,034 142 – 219 – 17,038 17,131 1,157 1,253 4,797 5 years and over £’000 – 4,797 – FALKLAND ISLANDS HOLDINGS PLC 63 Contractual cash flows 1 year or less 1 to 2 years 2 to 5 years £’000 £’000 £’000 £’000 5 years and over £’000 4,147 191 8,334 1,058 58 8,334 9,450 1,038 2,051 133 – – – 1,171 2,051 – – – – 12,496 12,672 27 Financial instruments CONTINUED Liquidity risk – Group 2011 Non-derivative financial instruments: Secured bank loans Finance leases Trade and other payables Carrying amount £’000 3,971 191 8,334 Liquidity risk – Company The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the effects of netting agreements: Carrying amount £’000 2,353 1,409 3,762 Carrying amount £’000 3,137 1,418 4,555 Contractual cash flows 1 year or less 1 to 2 years 2 to 5 years £’000 £’000 £’000 £’000 2,445 1,409 3,854 831 1,409 2,240 815 – 815 799 – 799 Contractual cash flows 1 year or less 1 to 2 years 2 to 5 years £’000 £’000 £’000 £’000 3,314 1,418 4,732 858 1,418 2,276 838 – 838 1,618 – 1,618 5 years and over £’000 – – – 5 years and over £’000 – – – 2012 Non-derivative financial instruments: Secured bank loans Bank overdraft 2011 Non-derivative financial instruments: Secured bank loans Bank overdraft (iv) Market risk Financial risk management Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. 64 ANNUAL REPORT 2012 Notes to the Financial Statements CONTINUED 27 Financial instruments CONTINUED Market risk – Foreign currency risk The Group has exposure to foreign currency risk arising from trade and other payables which are denominated in foreign currencies. The Group is not, however, exposed to any significant transactional foreign currency risk. The Group’s exposure to foreign currency risk is as follows and is based on carrying amounts for monetary financial instruments. As at 31 March 2012 Cash and cash equivalents Debtors Trade and other payables Balance sheet exposure As at 31 March 2011 Cash and cash equivalents Trade and other payables Balance sheet exposure EUR £’000 25 – (206) (181) EUR £’000 48 (347) (299) Group Group USD £’000 214 55 (437) (168) USD £’000 90 (274) (184) Other £’000 2 – (134) (132) Other £’000 1 (85) (84) Total £’000 241 55 (777) (481) Total £’000 139 (706) (567) The Company has no exposure to foreign currency risk. Sensitivity analysis Group A 10% weakening of the following currencies against pound sterling at 31 March would have increased/(decreased) equity and profit or loss by the amounts shown below. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures existing at that date. This analysis assumes that all other variables, in particular other exchange rates and interest rates, remain constant and is performed on the same basis for the year ended 31 March 2011. EUR USD Equity Profit or loss 2012 £’000 18 17 2011 £’000 40 36 2012 £’000 18 17 2011 £’000 40 36 A 10% strengthening of the above currencies against pound sterling at 31 March would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant. FALKLAND ISLANDS HOLDINGS PLC 65 27 Financial instruments CONTINUED Market risk – interest rate risk Profile At the balance sheet date the interest rate profile for the Group’s interest-bearing financial instruments was: Fixed rate financial instruments: Finance leases receivable Finance leases payable Variable rate financial instruments: Financial liabilities Group Company 2012 £’000 535 (5,298) (4,763) (2,987) (2,987) 2011 £’000 312 (191) 121 2012 £’000 2011 £’000 – – – – – – (3,971) (3,971) (2,353) (2,353) (3,137) (3,137) The Group has a loan of £0.6 million (2011: £0.8 million) in respect of the ferry delivered in 2005. The loan is repayable over a 10 year period from June 2005 and bears interest at 1.10% above the HSBC base rate, with a minimum base rate of 2.75%. The Group has a further loan of £2.4 million (2011: £3.2 million) in respect of the acquisition of Momart International Limited. The loan is repayable over five years from June 2010 and bears interest at 1.5% above the Bank of England base rate. Sensitivity analysis An increase of 100 basis points in interest rates at the balance sheet date would have decreased equity and profit or loss by the amounts shown below. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures existing at that date. This analysis assumes that all other variables, in particular foreign currency rates, remain constant and considers the effect of financial instruments with variable interest rates and financial instruments at fair value through profit or loss or available-for-sale with fixed interest rates. The analysis is performed on the same basis for 31 March 2011. Equity: Decrease Profit or loss: Decrease Group Company 2012 £’000 2011 £’000 2012 £’000 2011 £’000 (30) (40) (24) (31) (30) (40) (24) (31) Market risk – equity price risk The Group’s and Company’s exposure to equity price risk arises from its investments in equity securities which are classified in the balance sheet as shares held in Falkland Oil and Gas Limited (see note 15). 66 ANNUAL REPORT 2012 Notes to the Financial Statements CONTINUED 27 Financial instruments CONTINUED Sensitivity analysis The Group’s available-for-sale financial assets comprise its investment in FOGL. During the year ended 31 March 2012 FOGL shares traded on the AIM market of the London Stock Exchange at an average price of 57.66p with a high of 87.30p and a low of 42.92p. Based upon this share price history the value of available-for-sale financial assets held at the balance sheet date could have varied between a low of £6,008,800 (2011: £9,120,000) and a high of £12,222,000 (2011: £29,280,000). (v) Capital Management The Group’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can continue to provide returns to shareholders and benefits to other stakeholders. 28 Operating leases Non-cancellable operating lease rentals are payable as follows: Less than one year Between one and five years More than five years Group 2012 £’000 700 2,630 5,905 9,235 2011 £’000 651 2,464 6,225 9,340 The Group leases three office premises and a number of storage warehouses under operating leases. Office leases typically run for a period of three years, with an option to renew the lease after that date. Warehouse leases typically run for a period of 25 years, with an option to renew the lease after that date. Group During the year £670,000 was recognised as an expense in the income statement in respect of operating leases (2011: £651,000). The Company had no operating lease commitments. 29 Capital commitments At the end of the year the Group had no capital commitments not provided for in these financial statements. FALKLAND ISLANDS HOLDINGS PLC 67 30 Related parties The Company has a related party relationship with its subsidiaries (see note 14) and with its Directors and executive officers. Directors of the Company and their immediate relatives control 1.4% per cent of the voting shares of the Company. The compensation of key management personnel (including Directors) is as follows: Group Company 2012 £’000 2011 £’000 Key management emoluments including social security costs 1,244 1,266 Company contributions to defined contribution pension plans Share-related awards 100 46 229 95 Total key management personnel compensation 1,390 1,590 2012 £’000 488 26 – 514 2011 £’000 531 26 50 607 31 Accounting estimates and judgements The preparation of financial statements in conformity with adopted IFRS requires management to make judgements, estimates and assumptions that effect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based upon historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of the judgements as to asset and liability carrying values which are not readily apparent from other sources. Actual results may vary from these estimates, and taken into account in periodic reviews of the application of such estimates and assumptions. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods. Actuarial assumptions have been used to value the defined benefit pension liabilities. Management have selected these assumptions from a range of possible options following consultations with independent actuarial advisors. Impairment tests have been undertaken with respect to intangible assets (see note 11 for further details) using commercial judgement and a number of assumptions and estimates have been made to support their carrying amounts. In determining the fair value of intangible assets recognised on the acquisition of Momart International Limited management acted after consultation with independent intangible asset valuation advisors. 68 ANNUAL REPORT 2012 Directors and Corporate Information Directors David Hudd Chairman Registered Office Kenburgh Court, John Foster Managing Director 133-137 South Street, Bishop’s Stortford, Hertfordshire CM23 3HX Telephone: 01279 461630 Fax: 01279 461631 Email: admin@fihplc.com Registered number 03416346 Website: www.fihplc.com Auditor KPMG Audit Plc St. Nicholas House, Park Row, Nottingham NG1 6FQ Financial PR FTI Consulting Holborn Gate, 26 Southampton Buildings, London WC2A 1PB Mike Killingley* Jeremy Brade* *Non-executive Directors Company Secretary Carol Bishop Corporate Information Stockbroker and Nominated Adviser W.H. Ireland Limited 24 Martin Lane, London EC4R 0DR Solicitors Bircham Bell and Dyson LLP 50 Broadway, Westminster, London SW1H 0BL Banker HSBC Bank plc 18 North Street, Bishop’s Stortford, Hertfordshire CM23 2LP Registrar Capita Registrars The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU Divisional Management Portsmouth Harbour Ferry Company Momart Limited The Falkland Islands Company Keith Edwards Director and General Manager Kenneth Burgon Director Roger Spink Director and General Manager Telephone: 023 9252 4551 Anna Maris Director Telephone: 00 500 27600 Email: fic@horizon.co.uk Email: admin@gosportferry.co.uk Telephone: 020 7426 3000 Website: www.gosportferry.co.uk Email: enquiries@momart.co.uk Website: www.the-falkland-islands-co.com Website: www.momart.co.uk www.fihplc.com 

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