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